Theresa M. Greaney

Reverse importing and asymmetric trade and FDI: a networks explanation

This paper considers the impact of business and social networks on international trade and foreign direct investment (FDI). I propose that differences in the strength of network effects across countries can produce asymmetric trade and investment flows that may lead to trade friction. This proposition is examined using a model of multi-product producers of a differentiated product. A firm from a country with strong network effects has a cost advantage in selling to buyers from its own country. This advantage results in lower inward FDI, lower total imports but larger volumes of reverse imports (i.e., imports from overseas affiliates of that country’s own firms) into the country with strong network effects. The model’s predictions match observed asymmetric trade and investment flows that sometimes lead to US-Japan trade friction in industries such as automobiles.

Assessing the Impacts of US-Japan Bilateral Trade Agreements, 1980–1995

The paper presents three different viewpoints on the effects of US-Japan bilateral trade agreements and finds some evidence to support each one using trade data from 1980-1995. For most of the 25 industry-agreement cases, the data do not support a conclusion of significant positive impacts of the agreements on Japans imports of targeted manufactured products from either the US or non-US sources. In at least one high-profile case involving autos, I find evidence suggesting positive impacts on imports from the US, but in this case the data suggests trade diversion benefiting US0based producers at the expense of European ones. I also find a few cases where the agreements may have produced positive effects on Japans imports from non-US sources. Copyright Blackwell Publishers Ltd 2001.