Joseph F. Francois

Institutions, Infrastructure, and Trade

The authors examine the influence of infrastructure, institutional quality, colonial and geographic context, and trade preferences on the pattern of bilateral trade. They are interested in threshold effects, and so emphasize those cases where bilateral country pairs do not actually trade. The authors depart from the institutions and infrastructure literature in this respect, using selection-based gravity modeling of trade flows. They also depart from this literature by mixing principal components (to condense the institutional and infrastructure measures) with a focus on deviations in the resulting indexes from expected values for given income cohorts to control for multicollinearity. The authors work with a panel of 284,049 bilateral trade flows from 1988 to 2002. Matching bilateral trade and tariff data and controlling for tariff preferences, level of development, and standard distance measures, they find that infrastructure and institutional quality are significant determinants not only of export levels, but also of the likelihood exports will take place at all. Their results support the notion that export performance, and the propensity to take part in the trading system at all, depends on institutional quality and access to well-developed transport and communications infrastructure. Indeed, this dependence is far more important, empirically, than variations in tariffs in explaining sample variations in North-South trade.

Applied methods for trade policy analysis : a handbook

List of tables List of figures Acknowledgements List of contributors A note to readers Part I. Introduction: 1. Applied methods for trade policy analysis: an overview Joseph F. Francois and Kenneth A. Reinert Part II. Basic Frameworks: 2. Quantifying commercial policies Samuel Laird 3. Measuring welfare changes with distortions William J. Martin 4. Social accounting matrices Kenneth A. Reinert and David W. Roland-Holst 5. Partial equilibrium modeling Joseph F. Francois and H. Keith Hall 6. Simple general equilibrium modeling Shantayanan Devarajan, Delfin S. Go, Jeffrey D. Lewis, Sherman Robinson and Pekka Sinko Part III. Standard Applications: 7. Sector-focused general equilibrium modeling Bruce A. Blonigen, Joseph E. Flynn and Kenneth A. Reinert 8. Multi-market, multi-region partial equilibrium modeling Vernon O. Roningen 9. Multi-region general equilibrium modeling Thomas W. Hertel, Elena Ianchovichina and Bradley J. McDonald 10. Household disaggregation Farida C. Khan Part IV. Extensions: 11. Scale economies and imperfect competition Joseph F. Francois and David W. Roland-Holst 12. Capital accumulation in applied trade models Joseph F. Francois, Bradley J. McDonald and Hakan Nordstrom 13. Dynamics of trade liberalization Christian Keuschnigg and Wilhelm Kohler 14. Trade and labour market behaviour Karen E. Thierfelder and Clinton R. Shiells 15. Labour market structure and conduct Andrea M. Maechler and David W. Roland-Holst 16. Trade and the environment Hiro Lee and David W. Roland-Holst Author index Subject index.

Trade in International Transport Services: The Role of Competition

This paper is concerned with trade in international transport, logistics, and related services. It is also concerned with trade in transport services and the importance of competition and market structure in the sector. It examines implications of liberalization for profits, trade, and national gains from trade. Issues raised in the analytical section are illustrated through a computational example, to provide a rough sense of orders of magnitude and the importance of the issues raised for basic gains from improved market access.

Trade in Producer Services and Returns Due to Specialization under Monopolistic Competition

This paper demonstrates that liberalizing trade in services, while yielding efficiency gains associated with comparative advantage, may yield additional gains for both importing and exporting countries because of an increased division of labor. A model is developed in which producer services coordinate and control the specialized members of complex production processes. The model is used to analyze trade in services and its effect on the division of labor and the realization of returns from specialization. This differs from the recent literature on traded services and specialization because of the explicit role introduced for services in the specialization process.

Producer Services, Manufacturing Linkages, and Trade

Working with a mix of panel data on goods and services trade for the OECD for 1994-2004, combined with social accounts data (i.e. data on intermediate linkages) for 78 countries benchmarked to the panel midpoint, we examine the role of services as inputs in manufacturing, with a particular focus on indirect exports of services through merchandise exports, and also on the related interaction between service sector openness and the overall pattern of manufacturing exports. From the cross-section, we also develop a set of stylized facts linking services to level of development and the density of intermediate linkages. We find significant and strong positive effects from increased business service openness (i.e. greater levels of imports) on industries like machinery, motor vehicles, chemicals and electric equipment, supporting the notion that off-shoring of business services may promote the competitiveness of the most skill and technology intensive industries in the OECD. Conversely, we find evidence of negative general equilibrium effects for sectors that are less service intensive.

Commercial Policy Variability, Bindings and Market Access

Protection unconstrained by rules often varies substantially over time. Rules-based disciplines, such as WTO tariff bindings and bindings on market access in services, constrain this variability. We examine the theoretical effects of such constraints on the expected cost of protection and offer a formalization of the concept of “market access,” emphasizing both the first and second moments of the distribution of protection. As an illustration, we provide a stylized examination of Uruguay Round bindings on wheat.

Modeling Trade Policy: Applied General Equilibrium Assessments of North American Free Trade

Part I. Introduction: 1. Age models of North American free trade: an introduction Joseph F. Francois and Clinton R. Shiells Part II. Multisector Models: 2. A general equilibrium analysis of North American economic integration David W. Roland-Holst, Kenneth A. Reinert, and Clinton R. Shiells 3. The gains for Mexico from a North American free trade agreement - an applied general equilibrium assessment 4. Some applied general equilibrium estimates of the impact of a North American free trade area on Canada David J. Cox 5. Properties of applied general equilibrium trade models with monopolistic competition and foreign direct investment Drusilla K. Brown Part III. Sector-Focused Models: 6. Agriculture in the Mexico-US free trade agreement: a general equilibrium analysis Santiago Levy and Sweder van Wijnbergen 7. Wage changes in a U.S.-Mexico free trade area: migration versus Stolper-Samuelson effects Mary E. Burfisher, Sherman Robinson and Karen E. Thierfelder 8. The auto industry and the North American free-trade agreement Florencio Lopez-de-Silanes, James R. Markusen and Thomas F. Rutherford 9. Bilateral trade liberalization in quota restricted items: U.S. and Mexico in textiles and steel Irene Trela and John Whalley Part IV. Dynamic Models: 10. A dynamic dual model of the North American free trade agreement Leslie Young and Jose Romero 11. Towards a dynamic general equilibrium model of North American trade Timothy J. Kehoe

Aggregate Demand Shifts, Income Distribution, and the Linder Hypothesis

The intraindustry trade literature emphasizes nonhomothetic preferences and incomes as important determinants of aggregate demand and trade patterns. The authors provide evidence for such preferences, particularly that the structure of income-driven demand shifts is related to indices of Linder-type product characteristics, and that income distribution is a significant factor in determining aggregate expenditures. These results imply that, as general income levels rise, the relative volume of trade in manufactured consumer goods should rise, and the total volume of trade should rise, independent of changes in the intercountry difference between income levels. Copyright 1996 by MIT Press.

Trade, Technology, and Wages: General Equilibrium Mechanics

This paper highlights analytical reasons why we believe trade and technology are linked to wage movements in general, and how we should organize our examination of the recent episode of wage and employment erosion in the OECD countries. We start with a graphic tour through the mechanics of general equilibrium theory on trade and wages. This provides a set of implied relationships between wages and factor intensity trends that, together, provide a casual test of the consistency of posited relationships with actual trends. Numeric analysis and a review of the general equilibrium empirical literature follow the theoretical overview.

Economic Implications of Asian Integration

The Asian countries are once again focused on options for large, comprehensive regional integration schemes. In this paper we explore the implications of such broad-based regional trade initiatives in Asia, highlighting the bridging of the East and South Asian economies. We place emphasis on the alternative prospects for insider and outsider countries. We work with a global general equilibrium model of the world economy, benchmarked to a projected 2017 sets of trade and production patterns. We also work with gravity-model based estimates of trade costs linked to infrastructure, and of barriers to trade in services. Taking these estimates, along with tariffs, into our CGE model, we examine regionally narrow and broad agreements, all centered on extending the reach of ASEAN to include free trade agreements with combinations of the northeast Asian economies (PRC, Japan, Korea) and also the South Asian economies. We focus on a stylized FTA that includes goods, services, and some aspects of trade cost reduction through trade facilitation and related infrastructure improvements. What matters most for East Asia is that China, Japan, and Korea be brought into any scheme for deeper regional integration. This matter alone drives most of the income and trade effects in the East Asia region across all of our scenarios. The inclusion of the South Asian economies in a broader regional agreement sees gains for the East Asian and South Asian economies. Most of the East Asian gains follow directly from Indian participation. The other South Asian players thus stand to benefit if India looks East and they are a part of the program, and to lose if they are not. Interestingly, we find that with the widest of agreements, the insiders benefit substantively in terms of trade and income while the aggregate impact on outside countries is negligible. Broadly speaking, a pan-Asian regional agreement would appear to cover enough countries, with a great enough diversity in production and incomes, to actually allow for regional gains without substantive third-country losses. However, realizing such potential requires overcoming a proven regional tendency to circumscribe trade concessions with rules of origin, NTBs, and exclusion lists. The more likely outcome, a spider web of bilateral agreements, carries with it the prospect of significant outsider costs (i.e. losses) both within and outside the region.