Showing posts with label North-South trade. Show all posts
Showing posts with label North-South trade. Show all posts

Saturday, January 3, 2015

3/1/2015: Trade Protectionism Since the Global Financial Crisis


A year ago, ECB paper by Georgiadis, Georgios and Gräb, Johannes, titled "Growth, Real Exchange Rates and Trade Protectionism Since the Financial Crisis" (ECB Working Paper No. 1618. http://ssrn.com/abstract=2358483) looked at whether the current evidence does indeed support the thesis that "…the historically well-documented relationship between growth, real exchange rates and trade protectionism has broken down."

Looking at the evidence from 2009, the authors found that "the specter of protectionism has not been banished: Countries continue to pursue more trade-restrictive policies when they experience recessions and/or when their competitiveness deteriorates through an appreciation of the real exchange rate; and this finding holds for a wide array of contemporary trade policies, including “murky” measures. We also find differences in the recourse to trade protectionism across countries: trade policies of G20 advanced economies respond more strongly to changes in domestic growth and real exchange rates than those of G20 emerging market economies. Moreover, G20 economies’ trade policies vis-à-vis other G20 economies are less responsive to changes in real exchange rates than those pursued vis-à-vis non-G20 economies. Our results suggest that — especially in light of the sluggish recovery — the global economy continues to be exposed to the risk of a creeping return of trade protectionism."

One thing to add: the above does not deal with trade-restrictive policies relating directly to financial repression, such as outright regulatory protectionism of incumbent domestic banks and asset managers, or direct and indirect subsidies pumped into the incumbent banking system.

Sunday, June 15, 2014

15/6/2014: Ifo on Russia: 'Make Trade to Avoid War'...

A very interesting set of points on EU/U.S. policy on Russia from the Ifo's President, Hans-Werner Sinn (Ifo Viewpoint Nr. 155, "Why We Should Give Putin a Chance" link here)

Some quotes, my comments in italics:

“The annexation of Crimea was definitely a violation of international law. …A redrawing of borders decided upon by only one party cannot be accepted in Europe. However, it must be borne in mind that the present crisis was triggered by the West. The overtures made by NATO to Georgia, Moldova and Ukraine in recent years effectively threatened to encircle Russia's Black Sea Fleet in the only ice-free port at its disposal.”

“If U.S. President Barack Obama believes that Russia is just a regional power that will have to put up with this, he is wrong…” [Even if Russia were a regional power, the region in which it co-exists with other powers is immense and directly borders three superpowers – U.S. via Pacific, EU and China. Security considerations, in Russia’s case directly link to the fact that it is literally surrounded by the Nato or Nato-related (via E.U. membership) powers on three sides. It would be exceptionally naïve, or more likely careless and callous, to assume that Nato and aligned states are not a threat to Russian security, no matter how benign the alliance is and no matter how many cooperative councils Nato has with Russia].

“…some hardliners in Washington, Brussels and Moscow obviously have their own agenda. NATO can chafe at the bit once again, and the powers-that-be in the Kremlin are not the only ones to have noticed that international conflicts are an effective way of distracting attention away from domestic problems. It is good that the German federal government is trying to exercise a moderating influence, while exercising care not to endanger the solidarity of the West's alliance.” [A logical conclusion. On both sides. Including the obvious one: Russia, but also the less discussed one: the U.S. where domestic problems for the Administration – relating to a set of policies that have effectively rendered the current Administration ineffective and necessitated ‘toughening’ by the White House of the foreign policies stance to counter rising strengths of the U.S. Republican Party. Ukraine is being de facto caught between three pressure points: (1) Russia’s growing insecurity and concerns about the geopolitical position of the country in its own neighbourhood; (2) White House’s growing weakness in domestic affairs; and (3) EU’s complete loss of raison d’etre during the Global Financial Crisis. Add to this internal collapse of the Ukrainian political and business elites and we have the current situation.]

“… we need to proceed carefully: No reasonable party can be in favour of the economic destabilization of Russia and a trade war.” [However, beyond being undesirable, such destabilisation is actually contrary to the solution needed in order to normalise the region:] “How can the cost of any further annexations be raised for Russia and the chances of finding a peaceful solution be strengthened, without doing any damage to Russia, Ukraine or the EU? The answer lies in the offer of a free trade agreement with Russia and the Ukraine as part of a new international agreement on Ukraine's future.”

[Such an agreement is neither new, nor alien idea. In fact it was proposed by President Putin himself:] “In 2010, Russian President Vladimir Putin proposed a free trade area stretching to Vladivostok from Lisbon. What happened? The EU worked on a free-trade agreement with Georgia, Moldova, Ukraine and Armenia instead. This only increased Moscow's nervousness, because it implicitly posed the threat of customs barriers for Russia.” [Again, European position of raising barriers against external partners in order to secure gains from trade to the members of the Union or the Associate Members is the problem. Russia witnessed this in the cases of 2004 EU Accession].

[Free trade is a win-win for all parties concerned.] “Free trade with a country specialized in commodities, such as Russia, that complements the West's specialization in manufacturing, promises major trade gains that would be much greater than the benefits of trade between similar economies alone. EU politicians are currently negotiating a free-trade deal with the U.S., which would bring benefits to the countries involved. But the inclusion of Russia in a free-trade agreement could turn out to be a real gold mine for all parties.”

“In the event of political stabilization, offering Russia free trade with the West would preserve peace, bring economic advantages to Europe and effectively push forward the policy of “change through rapprochement” first implemented successfully by Willy Brandt with East Germany.”

Sunday, March 31, 2013

31/3/2013: World Trade Drivers: policy or simple innovation?


A very important issue of logistics and transport innovation effect on trade flows is tackled in the study by Bernhofen, Daniel M., El-Sahli, Zouheir and Kneller, Richard, titled "Estimating the Effects of the Container Revolution on World Trade" CESifo Working Paper Series No. 4136, February 2013.

[Note: Italics are mine]

From the abstract: "The introduction of containerization triggered complementary technological and organizational changes that revolutionized global freight transport. Despite numerous claims about the importance of containerization in stimulating international trade, econometric estimates on the effects of containerization on trade appear to be missing. Our paper fills this gap in the literature. Our key idea is to exploit time and cross-sectional variation in countries’ adoption of port or railway container facilities to construct a time-varying bilateral technology variable and estimate its effect on explaining variations in bilateral product level trade flows in a large panel for the period 1962-1990."

Per findings: "Our estimates suggest that containerization did not only stimulate trade in containerizable products (like auto parts) but also had complementary effects on non-containerizables (like automobiles). As expected, we find larger effects on North-North trade than on North-South or South-South trade and much smaller effects when ignoring railway containerization. Regarding North-North trade, the cumulative average treatment effects of containerization over a 20 year time period amount to about 700%, can be interpreted as causal, and are much larger than the effects of free trade agreements or the GATT. In a nutshell, we provide the first econometric evidence for containerization to be a driver of 20th century economic globalization."

Now, 700% over 20 years is a massive uplift in what was already a much-advanced trade system (North-North). With South-South and North-South trade flows now rapidly converging in terms of volumes and type of goods traded to those of North-North, I would suspect we will see an equally massive positive impact on these trade flows as well, and as a result on global trade.

The evidence presented in the study is of huge importance. It shows just how impactful can a simple, non-formal-R&D driven innovation can be and it also puts into the context the scope for policy intervention vs organic business-led innovation intervention in delivering market outcomes.