Nakgyoon Choi

Measurement and Determinants of Trade in Value Added

This study measures the trade in value added using the World Input Output Tables and the socio-economic accounts of 40 countries and 35 industries from 1996 to 2009. Specifically, this study analyzes the effects of trade on the value added, based on Meng et al. (2006), WTO and IDE-JETRO (2011), Stehrer (2012), Stehrer et al. (2012). The measurement results indicate that export and import values in value added turned out to be smaller than the values in gross value. However, the trade balance in terms of value added does not necessarily shrink compared to the bilateral trade balance in terms of gross value. This study also investigates the determinants of trade in value added, incorporating the gravity model, the Heckscher-Ohlin model, and the Ricardian model. When we use the data on trade in value added, the explanatory power of the gravity model turned out to be relatively small compared to the pooled data on trade in gross value, but that of the Heckscher-Ohlin model turned out to be stronger while the Ricardian model revealed mixed results. Interestingly in our investigations, the elasticities of the Heckscher-Ohlin as well as the Ricardian parameters have been increasing while that of the gravity model has remained stable during the period 1996-2009. This result implies that trade patterns can be better explained by factor endowment and technological differences during the 2000s compared to the 1990s.

Determinants of Staging Categories for Tariff Elimination in Chinese, Japanese, and Korean Negotiations of Free Trade Agreements-super-∗

China, Japan, and Korea have signed free trade agreement (FTA) negotiations with many countries since the late 1990s. This study analyzes the determinants of staging categories for tariff elimination in FTA negotiations of these East Asian countries by using an ordered probit model. The two key findings are (a) each country had set up a product scope for tariff elimination and exclusion list efficiently to maximize its national economic interests, and (b) the staging categories were determined by product-level competitiveness, industrial characteristics, and political factors.

Determinants of Value Added in Exports and Their Implications

This study decomposes the value added in gross exports into its components, including domestic value added and foreign value added. In contrast to previous studies, we exclude transaction costs such as net taxes on products for this study, which accounted for about 3 percent of total gross world exports from 1995 to 2011 on average. The share of Korean domestic value added in exports to exports in gross value turned out to decrease from 69.9 percent in 1995 to 55.4 percent in 2011, comparable to the shrinkage in the world average from 83.5 percent to 78.3 percent during the same period. This result reveals that Korean exports of parts and raw material have been utilized in a relatively small degree, while foreign components imported to Korea have been utilized for Korean exports in a relatively large degree. This study also investigates the determinants of value added in exports by estimating the expanded multi-sector gravity model, with panel data covering 13 countries and 18 sectors for 17 years from 1995 to 2011. Empirical evidence shows that trade costs such as tax and transportation costs reduce value added in exports, implying that trade facilitation measures and tax policy lowering trade costs are vital for the promotion of value added in exports. We also find that material and service offshoring have a significant positive effect on value added in exports, supporting the notion that efficient offshoring of material and services inputs raises productivity and competitiveness in manufacturing as well as services industries.

East Asian Value Chains and Economic Effects of Free Trade Agreements

The rise of global value chains has changed the trade and investment patterns in East Asia. The intra-regional trade of intermediate goods in East Asia turned out to increase compared to the EU and the US, and East Asian value chains have grown rapidly in recent years. This paper calculates the indicators to show how the global value chains have deepened in each region by using the World Input-Output Tables which cover 41 countries and 35 sectors during 1996-2009. The results from this study provide some policy recommendations as follows. Global trade liberalization is needed to maximize the positive effects expected from the global value chains. East Asian countries also need to harmonize the border measures including standards, SPS, and TBT which are expected to facilitate global value chains in the region. The liberalization of services such as distribution, finance, and business services among others are also expected to contribute to efficient movement of goods and materials in the intra- and inter-region trade. Specifically, the East Asian countries need to harmonize the intra-regional bilateral FTAs to reduce the so-called noodle bowl effects.

Determinants of Staging Categories for the Tariff Elimination in the FTA Negotiations

Abstract The East Asian countries including Korea, China, and Japan were latecomers in FTA negotiations, beginning to consider the FTA policies since the late 1990s. This study analyzes the determinants of staging categories for the tariff elimination in FTA negotiations of East Asian countries, using a probit model. It is crucial for the successful completion of the FTA negotiations for goods to set up the product scope for tariff elimination and the exclusion list in the tariff schedule in order to maximize the national economic welfare. The empirical results indicate that the East Asian countries were not losers in determining the staging categories consistent with the pre-negotiation expectations.

Structural Factors of Global Trade Slowdown and Their Implications)

Korean Abstract: 본 연구는 세계무역�?� 현황�?� 살펴보고 세계무역 변화�?� 구조�?�?� 요�?��?� 분�?하여 우리나�?� 무역�?� 안정�? 성장�?� 위한 정책�? 시사�?�?� �?�출하기 위해 추진하였다. �?�를 위해 세계투입산출 �?��?�터베�?�스를 �?�용하여 세계무역�?� 구조 변화를 분�?하고, 부가가치무역�?� 변�?��?� 항목별로 분해하였다. 제2장�?서는 2000년대 중반 �?�래�?� 세계무역 추�?�와 GDP 비중 등�?� 살펴보고 주요국별 �? 주요 산업별 수출�?가율�?� 변화를 살펴보았다. 제3장�?서는 세계무역�?� 구조가 어떻게 변화하고 있는지를 살펴보았다. 제4장�?서는 세계�? 무역둔화 요�?��?� 분해하기 위해 세계투입산출표를 �?�용하여 수출부가가치(VAX: value added exports)�?� 변화를 분해하였다. 제5장�?서는 2017년 세계무역�?� 회복 요�?��?� �?�가하고 앞서�?� 분�? 결과를 토대로 우리나�?� 무역�? 대한 정책시사�?�?� �?�출하였다. 본 연구�?� 분�?결과는 수출부가가치�?� 제고와 국내산업�?� 핵심역량 강화를 위한 정책 마련�? 활용�?� 것으로 기대�?�다. English Abstract: The global trade slowdown since 2012 is reputed to be very astonishing in that it was unpredictable in terms of the magnitude. This trade slowdown was cyclical in that it mainly resulted from the global economic recessions especially in China and Europe. Also, this phenomena can be explained by structural reasons such as the fall in the income elasticity of trade, that is, the rise in income does not contribute to the trade expansion as it used to. This study aims to investigate the structural change in global trade mainly using the world input-output database and to decompose the change in value added exports into three relevant factors. This study reveals that the composition of global commodity demand has changed in recent years and the share of intermediate goods to the total import has declined as the low economic growth rate, low price level, high interest rate, and high unemployment rate have dominated the global economy since 2012. Chinese re-balancing turns out to have reduced the demand for import from the world as China, the global factory, transitioned from an export-oriented development strategy to policy focusing on domestic demand. The global value chain turns out to have diminished since the global financial crisis, thereby contributing to the global trade slowdown. The non-tariff barriers such as anti-dumping duties, TBT, and SPS, among others, have been more prevalent in recent years while the average tariff rates in most of the countries have been falling since the mid-1990s. On the other hand, this paper estimated value added exports (VAX) by using the World Input-Output Database released in 2016, in order to analyze causes of the recent global trade slowdown. We also decomposed the change in value added exports into the three factors of value-added coefficients, change in input structure, and change in final demands. According to the results, the change in value added exports in Korea are largely explained by the change in input structure, and change in value-added coefficients. Since 2012, the increase in final demands has played a major role in the recovery of value added exports at world level, while in Korea, increase in input structure explains more of rise in value added exports. That is to say, the change in value added export is cyclical at the world level, while structural in the case of Korea. The findings of this study indicate that it is crucial for Korea to reinforce the core competence of domestic industries in line with the following. First, Korean industries need to diversify their export products and gear up for standardization of parts and materials, thereby pursuing preemptive industrial restructuring. Second, Korean industries need to strengthen the knowledge intensity of high-skilled labor and make the best of global value chains. Third, the Korean government needs to support processes to improve transaction practices and incentive systems for large companies and small- and medium-sized companies, thereby establishing a fair market mechanism. Finally, the Korean government will need to contribute to multilateral as well as regional trade liberalization.

Did Anti-Dumping Duties Really Restrict Import?: Empirical Evidence from the US, the EU, China, and India

This paper studied the effects of anti-dumping measures on the imports to investigate whether the trade restriction effect of an anti-dumping duty is dominant. Our results indicate that a 1% increase in the anti-dumping duties decreases the import of the targeted product by about 0.43~0.51%. The actual statistics, however, show that the total import of the targeted products increased by about 30 percent while an anti-dumping duty was in force. That indicates that an anti-dumping duty is just a temporary import relief. This paper also investigated whether an anti-dumping duty is terminated in the case that the injury would not be likely to continue or recur if the duty were removed. The hazards model estimates show that increase in market share, MFN tariff rate, and dumping margin decrease the hazard of termination of an anti-dumping duty, but the increase in value added increases the hazard of termination. Generally speaking, this result indicates that the WTO member countries have regulated the overuse of an anti-dumping measure. The findings of this paper show that there is a country- and industry-wise heterogeneous characteristic in the effect as well as termination of an anti-dumping duty.

Comparative Advantage of Value Added in Exports: The Role of Offshoring and Transaction Costs

This study tests whether Ricardian comparative advantage is valid for value added in exports that does not include intermediate inputs imported from various industries in a number of countries. Using a panel data on valued added contents of bilateral exports, we find that changes in the labor productivity lead to growth of value added in exports. This implies that Ricardian comparative advantage is an important determinant of exports in longitudinal changes. The estimated coefficients of the observed productivity turn out to be larger than those of CDK (2012), implying that Ricardian comparative advantage has greater influence on determining the patterns of trade in a world with global value chains. This study also investigates the role of offshoring and transaction costs in comparative advantage. We use data on value added in exports, offshoring in materials and services, and transaction costs at the country and industry-level for the period 1995-2009 calculated from World Input-Output Table which covers 40 countries and 14 manufacturing industries. Employing a system GMM estimator to alleviate the potential endogeneity problem, we find that services offshoring has positive effects on comparative advantage while material offshoring affects it negatively. We also find that transaction costs have a negative effect on comparative advantage. Moreover, it turned out that there is a magnification effect of transaction costs on the induced value added in exports.

Economic Effects of Anti-Dumping Duties: Protectionist Measures or Trade Remedies?

This paper studied the effects of anti-dumping measures on the imports to investigate whether the trade restriction effect of an anti-dumping duty is dominant in the US, the EU, China, and India from 1996 to 2015. Our results indicate that a 1% increase in the anti-dumping duties decreases the import of the targeted product by about 0.43~0.51%. The actual statistics, however, show that the total import of the targeted products increased by about 30 percent while an anti-dumping duty was in force. That indicates that an anti-dumping duty is just a temporary import relief. This paper also investigated whether an anti-dumping duty is terminated in the case that the injury would not be likely to continue or recur if the duty were removed. The increase in market share, MFN tariff rate, and dumping margin turns out to decrease the hazard of termination of an anti-dumping duty, but the increase in value added increases the hazard of termination. Generally speaking, this result indicates that the WTO member countries have regulated the overuse of an anti-dumping measure. It also implies that anti-dumping duties have been used as a tool for trade remedy. The findings of this paper show that there is a country- and industry-wise heterogeneous characteristic in the effect as well as termination of an anti-dumping duty. To conclude, an anti-dumping duty is not necessarily a protectionist measure if it is effectively controlled by the WTO rules. In this sense, the WTO member countries need to introduce a more transparent mechanism and due process.

Impacts of Free Trade Agreements on Structural Adjustment in the OECD: Panel Data Analysis

This paper examines the effects of FTAs such as the EU, the NAFTA, and the CER on production, employment, and industrial structure in the OECD. Specifically, this study implements the following two-stage approach. First, it applies an unbalanced nested error components model to the pooled data for the full 30 country, 16 industry, and 24 year sample. Second, it implements both one-way and two-way error component regression models to handle fixed effects and random effects along with country-specific and time-specific characteristics. This paper demonstrates that the coefficient on FTAs is statistically significant and positive, when we apply the nested error components model to the pooled data on the full 16 industries in the OECD, meaning that FTAs tend to enhance production and employment structures. When we analyze the country-specific and time-specific effects using the fixed effects model as well as the random effects model for the six industries, the coefficient on FTAs turned out to have different signs depending on the industry. The FTAs tend to increase the production share of agriculture, metal, and transport industries, while having opposite effects in the case of food, textile, and business services industries. On the other hand, the FTAs tend to increase the employment share of metal and transport industries, but decrease that of agriculture, food, textile, and business services industries.