James D. Gaisford

Labour and Environmental Standards: The 'Lemons Problem' in International Trade Policy

Environmental and labour standards have become an important international trade issue. This article examines and ranks alternative trade policy responses available to an importing country with concerns over such standards. While a full import embargo may sometimes be preferable to allowing unrestricted access to unlabeled noconforming imports, a partial embargo that allows imports which demonstrably conform to the standard is always a better policy; and labeling solutions, which separate conforming and non-conforming imports, are typically better still. Consequently, full import embargoes based on non-conformity with labour or environmental standards are poor policy choices and should generally remain prohibited by WTO rules. Copyright Blackwell Publishers Ltd 2002.

An Inquiry Into the Rationale for Economic Espionage

Economic espionage can yield desirable strategic effects as well as cost savings for firms in a spying country. The spying country will typically gain even though counter-espionage operations will often be conducted by target countries. When two producing countries spy on each other, it is possible that both will be better off because of the technology transfer which is implicit in espionage. Economic espionage is generally beneficial to consumers. [F12, O031]

Intra‐Industry Trade Liberalization: Why Skilled Workers are More Likely to Support Free Trade

This paper presents a theoretical model and empirical analysis that connects the prevalence of intra‐industry trade with increased wage inequality from trade liberalization in both skilled and unskilled labor abundant countries. The Stolper–Samuelson effect is incorporated into an intra‐industry trade liberalization (intra‐ITL) hypothesis where skilled labor opposes protectionism in all countries engaged in intra‐industry trade because skilled workers gain at the expense of unskilled workers from multilateral trade liberalization within the skill‐intensive sector. We examine empirical evidence on whether skilled individuals are more supportive of trade liberalization than unskilled individuals across 31 countries with different levels of intra‐industry trade and skill endowments. We find that the extent to which countries engage in intra‐industry trade in high‐tech commodities is strongly linked with the intensity of opposition to protection by skilled labor. Regression results strongly support our hypothesis that skilled workers, almost everywhere, are more likely to support free trade.

Terms-of-Trade Shocks, Labor-Market Adjustment, and Safeguard Measures

This paper explores a simple model of labor-market adjustment where intersectoral transfer in response to terms-of-trade shocks involves both sector-specific skill acquisition and workplace disruption. Externalities arise because the marginal migrant does not consider the congestion costs imposed on intramarginal migrants or the disruption costs imposed on the incumbent workers in both sectors. While these externalities give rise to a case for temporary adjustment assistance, the analysis does not support the use of trade measures such as tariffs. Copyright 2000 by Blackwell Publishing Ltd.

Export-promoting production subsidies and the dynamic gains from experience

This paper examines export-promoting production subsidies in a dynamic product-cycle model with learning by doing and spillovers from experience. History dictates that the South is less experienced than the North and, thus, produces less advanced goods. Non-uniform Southern export promoting production subsidies applied to a small set of marginal industries that are on the verge of being internationally competitive, generate conventional static benefits for the South and costs for the North. Since such an industrial policy expands the Souths range of production, it ultimately enhances Southern learning. The Souths rate of production and technology transfer and the Norths rate of innovation both increase, creating dynamic benefits for each country. While the South must gain overall, the North will also gain if the dynamic benefits outweigh the static costs.

Economies of Scale, International Capital Mobility, and North-South Inequality

This paper develops a model of North-South trade with a continuum of goods, external economies of scale and international capital mobility. The North-South wage gap must exceed any difference in labor quality for South to overcome the established external economies in North. In equilibrium North retains the goods with the largest external economies and South specializes in the remaining goods. While Northern product innovation leads to the production of additional goods in South, it is possible for South to experience a terms-of-trade deterioration, a reduction in foreign investment, and an increase in wage and income inequality. Copyright 1997 by Blackwell Publishing Ltd.

Should Smaller Countries Be More Protectionist? The Diversification Motive for Tariffs

This paper examines the diversification motive for tariffs under trade-related uncertainty when there is incomplete international and domestic risk sharing. In the context of a two-country Ricardian continuum-of-sectors model with shocks to foreign technologies or preferences, tariffs allow a country to mitigate external risk by diversifying across sectors. Given sufficiently high risk and risk aversion, the optimality of tariffs depends primarily on a countrys ability to diversify, rather than its market power, such that small countries gain most.

International capital mobility, the factor content of trade and Leontief paradoxes

Abstract In a world where capital is internationally mobile, care is required in interpreting data on the factor content of trade. US data for the 1960s seems to suggest that the US should have been abundantly endowed with labour relative to capital in comparison with the world as a whole. Ethier and Svenssons (1986, J. International Economics 20, pp.21–42) work on international factor mobility provides the basis for an interesting re-examination of such Leontief paradoxes. Given that the US exports capital services directly, its exports of goods would, on average, be intensive in its relatively abundant internationally immobile factors and, thus, need not be capital intensive.

A Multi-Product Framework Generating Waves of Mergers and Divestitures

Recent waves of corporate mergers followed by divestitures have sparked new interest in economic analyses of these issues. We take the merger paradox from the standard oligopoly literature as a starting point and show that in the absence of any cost-synergies of merger activities, firms do have an incentive to divest further instead of joining mergers. We then analyze conditions where mergers may emerge endogenously as a result of a market game. Due to the nature of the interaction of market-share and market-concentration effects in Cournot oligopolies, a stable internal equilibrium where mergers arise endogenously and simultaneously requires both cost synergies and cost dissynergies. Endogenous merger size is then a function of market parameters as well as cost synergy parameters. Hence anticipated changes in market size or cost synergies attainable through mergers lead to reconfigurations of merger sizes. If ex-ante expectations about merger-promoting changes are not fully realized ex-post, merger waves will be followed by divestiture waves. Firm valuation - based on ex-ante expectation - may increase while actual profits and efficiency of the merged entity - according to the ex-post realization - may fall.

Trade Creation and Trade Diversion: Analyzing the Impact of Regional Trade Agreements

6. Why are there trade agreements? 57 James Gaisford and Annette Hester 7. Overview of trade agreements: the multilateral system 71 Tim Josling 8. Overview of trade agreements: regional trade agreements 82 Nicholas Perdikis 9. The breadth of integration arising from trade agreements 94 Peter W. B. Phillips 10. Trade agreements: depth of integration 106 Nicholas Perdikis 11. Trade creation and trade diversion: analyzing the impact of regional trade agreements 120 Lindsay Kendall and James Gaisford 12. Rules of origin and tariff circumvention 131 Sarah Lang and James Gaisford 13. Economies of scale, imperfect competition and market size 141 Michael Benarroch 14. Trade in services 150 Eugene Beaulieu