Category Archives: International Trade

New evidence on WTO membership after the Uruguay Round: an analysis at the sectoral level.

Magnus dos Reis (Unisinos), André Filipe Zago de Azevedo (CNPq), and I have a forthcoming paper at Open Economies Review that examines the effects of WTO membership on trade flows, with a special focus on sectoral trade flows. The full paper is available upon request.

Abstract

The creation of the World Trade Organization in 1995 brought several changes to the world trade system, including more stringent accession commitments, separate agreements for agricultural products and for textiles and garment. This study examines the effects of WTO membership on disaggregated sectoral trade flows and their extensive and intensive margins by means of a gravity model estimated by Poisson pseudo-maximum likelihood. We employ a panel dataset on bilateral imports for agriculture, textile, and manufacturing sectors for the 1995–2017 period. Our estimates suggest that WTO membership has succeeded in expanding trade flows for new members. Nevertheless, this growth occurred asymmetrically between developed and developing countries, and among the different types of products. In the period under review, developing countries benefited most from this WTO-promoted increase in world trade, in stark contrast to the findings of the extant literature for 1950–2000. The largest trade growth occurred in the agriculture sector, which is also at odds with earlier findings of growth in manufacturing products only. Furthermore, our results show that the increase in trade due to WTO liberalization took place exclusively in the extensive margin of trade, most of which also happened in the agricultural sector.

 

New Database on Trade Facilitation

The World Trade Organization (WTO) promoted the Agreement on Trade Facilitation (TFA) in order to foster international trade by simplifying cross-border trade procedures, which reduced not only transit time but also costs.  When fully implemented, the TFA is expected to substantially reduce trade costs by 10%-18% (OECD, 2018 ) and at the same time to increase exports by more than 3 trillion dollars per year (WTO, 2015).

UNCTAD just released a real-time database that comprises standardized data from national trade facilitation committees (NTFCs). This allows scholars and practitioners to follow and study the implementation of the commitments made by each country  under the TFA agreement. The video below provides more details on this interesting and promising database.

Labor Provisions in Trade Agreements

A very important question for those concerned with job precarization is whether and how this phenomenon is impacted by globalization and more specifically by international trade. A key hurdle has been the absence of a well organized dataset of the labor provisions included in trade agreements. This would allow not only for a cleaner identification of the effects of trade but also for an estimation of the impact of the labor provisions. Fortunately, the International Labour Organization recently made available a dataset of this type.  It covers more than 100 trade agreements and 140 countries! You can find more about the typology used here, about the dataset here,  and in the video below.

EU and Brexit

The bulk of the negotiations regarding the United Kingdom withdrawal from the European Union were concluded on December 24, 2020. The details are available here: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2531 .At a first glance, this seems to be a reasonable agreement that avoids most of the doomsday scenarios portrayed by many observers. Although there are several details to be worked on, the most important aspect of this agreement, in my opinion, is the creation of a Free Trade Area between the UK and the EU. This FTA should pose little friction on trade flows, unless significant red tape is created. An interesting question is whether this FTA agreement with the EU will facilitate or hamper the other trade agreements that are being negotiated by the UK.

The infancy of Mercosul (or Mercosur)

There are two very interesting books in pdf format about Mercosur by Paulo Roberto Almeida that can be downloaded for free.

The first book is titled “O Mercosul no Contexto Regional e Internacional ” (Edições Aduaneiras, 1993).  It provides some background information about the foreign affairs in the Southern Cone of South America. And it goes over the fundamentals of the Mercosur. This book was written between the conclusion of the main negotiations of Mercosur and the implementation of the Mercosur. Thus, it provides an interesting perspective on the crucial issues and expected impacts of Mercosur, see for instance chapter 10.

The second book was published in 1998, three years after the the implementation of Mercosur. It is titled “Mercosul: Fundamentos e Perspectivas” (São Paulo: Editora LTr, 1998, 160 p.; ISBN: 85-7322-548-3). This book puts the Mercosur in the context of the century-old idea of Latin American Integration. Also, it goes over the implementation of the Mercosur and the first issues experienced by the member countries. Finally, in chapter 9, the author discusses the relationship between Mercosur and the (now defunct) FTAA-Free Trade Area of the Americas.

I strongly recommend these two books for scholars interested in learning more about the ambitious albeit problematic integration agreement that is the Mercosur (or Mercosul…).

The erratic Brazilian trade policy

The recent elections in South America indicate a major change in course for the Southern Cone countries and also for Bolivia. This change is not uniform across countries, and in some cases can be in opposite directions like the cases of Brazil and Argentina. Interestingly, the Brazilian trade policy experienced large changes over time, in part due to balance of payments constraints. Since the 2000s, Brazil did not pay much attention to Mercosur because of its large trade surpluses from the China-induced commodity boom. Nevertheless, the current government in Brazil sees Mercosur as a stumbling block to trade negotiations with other countries. The fundamental question is what are the goals of the current Brazilian trade policy? A key ingredient of any answer to this question is contained in an interesting article by Paulo Roberto Almeida that revisits the history of the Brazilian trade policy. This is a very nice and succinct paper that I recommend to everybody interested in learning more about Brazilian trade policy.

The past of Mercosur (or Mercosul)

The recent presidential elections in South America have raised concerns about the future of Mercosur, or Mercosul for Portuguese speakers. Although it is too early to make any reasonable prediction, it is interesting to note that Mercosur since its inception has been always more than just a trade agreement. This point has been overlooked by many analysts. And perhaps, this is the reason behind the survival of this agreement. An excellent starting point for those interested in learning more about Mercosur is a paper by Paulo Roberto Almeida titled “Regional Integration in Latin America: Historical Developments, Current Challenges, Especially in Mercosur”. This nice paper examines the evolution of the Southern Cone countries’ foreign policies since the early eighties. It goes over the foundation of the Mercosur in 1991 and the conflicts between member countries that that have taken place after 1999.

How to plot step functions in Mathematica

Those interested in representing graphically  the Relative Supply (RS) curve of a simple 2 x 2 Ricardian model of international trade in Mathematica will find that this task requires the use of Plot[] and Piecewise[]. Below you can find an example to illustrate this:

Plot[{Piecewise[{{0,x<=0},{1.5,0<x<1}, {2,x>= 1}}]},{x,0,12},Exclusions->None, PlotStyle->{Thickness[0.01]}, Axes->True,AxesOrigin->{0,0}]

Each portion of the curve is defined in Piecewise as {function, range}. So Piecewise[{15, x<=5}, {3x, x>5}] is for a function that takes the value 15 if x is smaller than or equal to 5 and the value 3x if x is greater than 5. Note also that in the example above I utilized several options of the command Plot[]. You can find more information about these options at https://reference.wolfram.com/language/tutorial/Options.html .

New book about the Brazilian economy

The International Monetary Fund published a new book about the Brazilian economy. It first provides an overview of the Brazilian economy, and then cover  the following important topics: Economic Growth, Social Progress, Fiscal Framework, Challenges to the Monetary and Financial Framework, and Fighting Corruption. This book can be downloaded for free here.

The third chapter (Current Constraints on Growth) is of interest for those trying to understand some of the reasons for the poor performance of productivity growth in Brazil, which many observers suggest to be the key structural problem of the Brazilian economy.

Tutorials for learning Tableau

Some students asked me about a tutorial to learn the basics of Tableau.

Although there are many tutorials available,  I found the following videos to be the most straightforward ones.

More specifically, for those wanting to learn how to create a dashboard in Tableau, I recommend the following tutorial:

New book about Brazil’s Foreign Policy

A very interesting book about Brazil’s foreign policy edited by Funag and Ipea is available for download here. This book covers Brazil’s foreign policies after the 2008 crisis. Chapters 5 through 9 are of special interest for international economists. I strongly recommend this book for anyone interested in learning more about Brazil’s foreign affairs.

New Trade Agreement between Brazil and Chile

On November 21, 2018 Brazil and Chile signed a new trade agreement in Santiago, Chile.  This new treaty expands the original agreement of 1996 that focused solely on the reduction of tariff barriers. Chile is the second largest trade partner of Brazil in South America, and in 2017 Brazil and Chile traded approximately 8.5 billion dollars in goods and services.

The new agreement is about 24 topics related to non-tariff barriers to trade in goods and services including electronic commerce, and intellectual property rights. Both countries agreed to exchange electronic customs paperwork and to recognize each other’s Operadores Economicos Autorizados. These measures will considerably expedite the customs procedures and reduce the customs clearing time. Another interesting item of the new treaty is the commitment to eliminate roaming charges for cell phone and data transmission. Additional information about this initiative can be found at Brazil’s MDIC webpage.

Trade Facilitation Agreement between Brazil and Peru

Today (11/27/2018) Brazil signed a trade facilitation agreement with Peru. Such agreement is related to the Operador Econômico Autorizado (OEA) program regulated in Brazil by the Instrução Normativa RFB nº 1.598/2015. The purposes of this type of agreement are a reduction in red tape and in the number and frequency of import and export shipment inspections, and therefore to foster international trade. Similar agreements have been  signed between Brazil and other countries, like Bolivia in 2017. You can find more information about the Brazilian OEA program in the following link.