Directorate-General for Trade

Abstract This paper shows that improved trade facilitation can help promote export diversification in developing countries. We find that 10 per cent reductions in the costs of international transport and domestic exporting costs (documentation, inland transport, port and customs charges) are associated with export diversification gains of 4 and 3 per cent, respectively, in a sample of 118 developing countries. Customs costs play a particularly important role in these results. Lower market entry costs can also promote diversification, but the effect is weaker (1 per cent). We also find evidence that trade facilitation has stronger effects on diversification in poorer countries. Our results are highly robust to estimation using alternative dependent and independent variables, different country samples, and alternative econometric techniques. We link these findings to recent advances in trade theory that emphasise firm heterogeneity, and trade growth at the extensive margin.

The gravity model is a workhorse tool applicable in a wide range of empirical fields. It is regularly used to
\nestimate the impact of reciprocal trade agreements (RTAs) on trade flows between partners. The studies
\nreport very different estimates since there is a significant difference in datasets, sample sizes, and independent
\nvariables. This paper combines, explains, and summarizes a large number of results using a meta-analysis
\napproach. We provide pooled estimates, obtained from fixed and random effects models of the RTAs’ effect
\nsize on bilateral trade: the hypothesis that there is no effect of RTAs on trade is robustly rejected at standard
\nsignificance levels. The information collected on each estimate allows us to test the sensitivity of the results
\nto alternative specifications and differences in the control variables considered, as well as the impact of the
\npublication selection process.

AIMS: The purpose of this study was to update global estimates of the illicit cigarette trade, based on recent data, and estimate how many lives could be saved by eliminating it and how much revenue governments would gain. DATA SOURCES AND METHODS: Our estimates of illicit market share are based on formal and informal sources. Our method for estimating the effect of eliminating the illicit trade on tobacco related deaths is based on West et al. with some minor modifications, and involves calculating the size of the illicit cigarette trade; the effect of eliminating it on the price of cigarettes and thus on consumption; the revenue governments are losing because of it; and the number of tobacco-related premature deaths that would be avoided if this illicit trade were eliminated. RESULTS: According to available estimates, the size of the illicit trade varies between countries from 1% to about 40-50% of the market, 11.6% globally, 16.8% in low-income and 9.8% in high-income countries. The total lost revenue is about $40.5 billion a year. If this illicit trade were eliminated governments would gain at least $31.3 billion a year, and from 2030 onwards more than 164,000 premature deaths a year would be avoided, the vast majority in middle- and low-income countries. CONCLUSIONS: The burden of deaths and lost revenue caused by the illicit cigarette trade falls disproportionately on low- and middle-income countries. Eliminating this trade would avoid millions of premature deaths, and recover billions of dollars for governments.

The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper evaluates empirically four types of cost that may result from an international sovereign default: reputational costs, international trade exclusion costs, costs to the domestic economy through the financial system, and political costs to the authorities. It finds that the economic costs are generally significant but short-lived, and sometimes do not operate through conventional channels. The political consequences of a debt crisis, by contrast, seem to be particularly dire for incumbent governments and finance ministers, broadly in line with what happens in currency crises.

Abstract This paper examines the impact of globalization of production on the Italian footwear sector and investigates the structural changes taking place in some shoe districts as they join international production networks. The following questions are discussed: Are Italian footwear districts specializing in particular phases of the production cycle? Is there a trend towards the reduction of activities carried out within districts? Or are different patterns emerging according to the districts' main market segment and to the value chains (e.g. luxury fashion market or mass market) they belong to? The study explores these issues using data on outward processing trade (OPT) collected by Associazione Nazionale Calzaturieri Italiani (ANCI) to analyse the fragmentation of production in the footwear sector at “provincia” level. The available disaggregation of data allows an investigation of the different outsourcing strategies and emerging trends within the district. Two case studies are presented; one on Riviera del Brenta in Veneto and the other on Barletta in Puglia. In the footwear districts investigated, evidence of different international delocalization strategies is found. It is argued that these different patterns of specialization are closely related to the clusters' market position and suggest that these patterns influence the clusters' potential for future competitiveness.

Abstract We present a new dataset of international trade costs in services sectors. Using a theory-based methodology combined with data on domestic shipments and cross-border trade, we find that trade costs in services are much higher than in goods sectors: a multiple of two to three times in many cases. Trade costs in services have remained relatively steady over the last ten years, whereas trade costs in goods have fallen overall at an impressive rate. We show that even in a regional grouping that has done much to promote a single market in services–the EU–there remains considerable heterogeneity in trade costs across countries. Our findings generally suggest an important role for future policy reforms to reduce the regulatory burdens facing services sectors and facilitate trade in services.

The complexity of the EU carbon neutrality policy is addressed by evaluating the impacts of the interaction among different policy instruments. An energy-economic dynamic CGE model based on GTAP utilities is developed for simulating different policy scenarios starting from a business as usual case where the economic impacts related to the COVID-19 pandemic and recovery measures are included. The instruments tested as part of the EU climate strategy are the removal of fossil-fuel consumption subsidies, a carbon pricing mechanism and the public support to clean energy technologies. The modelling approach is based on a revenue recycling mechanism to finance clean energy technologies. We find that the simultaneous implementation of all instruments under the EU climate strategy including the removal of subsidies to fossil fuels and the reuse of revenues to foster the technological transition of the energy system is a win-win solution for a sustainable and decarbonised EU economy.

The ornamental aquatic industry involves the global commercial trade of live aquatic organisms such as fish, invertebrates and plants. It comprises a range of businesses including collectors, breeders, exporters, importers and retailers. Together, these form a supply chain through which aquatic organisms pass from their point of origin to the end point e.g., domestic aquaria and ponds. On a worldwide basis, the legal and legitimate ornamental aquatic trade is subject to regulation and monitoring throughout the majority of its supply chain. Approximately 90% of ornamental freshwater fish species traded are captive-bred, but, due to their complex breeding cycles, 90-95% of ornamental marine fish species are wild-caught. The ornamental aquatic industry and consumers therefore have a responsibility to ensure that wild-caught species are sourced sustainably, legally and to good welfare standards. Such good practice should be considered a necessity for the longevity, not only of the ornamental aquatic industry, but of the livelihoods which depend on it and the future of ecosystems dependent on such communities.

Intralobular (granular) salivary ducts were purified by isopycnic centrifugation after collagenase/hyaluronidase digestion of the rat submandibular gland. The resulting ductal fraction (density, 1.056 +/- 0.003) was highly enriched in kallikrein (a ductal cell marker) and contained little amylase activity (an acinar cell marker). The resting intracellular calcium level in the ductal preparation was 103 +/- 4 nM. Increased intracellular calcium concentrations (2-3 times resting levels) were observed in response to muscarinic (carbachol) and alpha-adrenergic (epinephrine) agonists, but little response was observed to substance P, suggesting the absence of substance P peptidergic receptors on rat submandibular ducts. Intracellular adenosine 3',5'-cyclic monophosphate levels were increased 35-fold in response to beta-adrenergic stimulation (isoproterenol) and forskolin. The ducts secreted kallikrein in response to epinephrine, carbachol, and isoproterenol but not in response to substance P. Epinephrine was the most potent inducer of kallikrein release with a K0.5 of approximately 3 microM and a maximal secretory rate approximately nine times unstimulated levels. Taken together, these results provide strong evidence for the functional integrity of the ductal preparation. This preparation should prove useful for the further elucidation of the properties of intralobular salivary ducts structures which heretofore have only been studied indirectly.

Applied general equilibrium (AGE) models have received considerable attention and scrutiny in the public debate over the North American Free Trade Agreement (NAFTA). This collection brings together the leading AGE models that have been constructed to analyse NAFTA. A variety of approaches to modelling trade liberalization are taken in these studies, including multi-country and multi-sectoral models, models that focus on institutional features of particular sectors (agricultural, autos, steel, textiles and apparel) affecting multinational firms and rules of origin, and models with some inter-temporal structure. Further, by constructing stylized models, theoretical linkages have been identified that drive numerical results in the larger AGE models. The volume also assesses what can be learned about the likely economic effects of NAFTA from the collection of studies taken as a whole. Areas in need of further study have been highlighted.

Since economic transition started, a close relationship has developed between privatization and foreign direct investment. It has nevertheless been an unequal relationship: while privatization has undoubtedly dominated foreign-directinvestment inflows, in most Central and Eastern European countries, foreign direct investment has not been the dominant form of privatization, although, according to the findings of a number of previous studies and a recent survey carried out by UNCTAD, foreign direct investment seems to have made a positive contribution to the improvement of efficiency and corporate governance in the framework of economic transition. These findings are particularly important in the light of the expectations that, in the near future, privatization remains the mainstay for an important part of the potential investment inflows of several (but not all) Central and Eastern European countries. At the end of the 1990s, policy makers in the region seem to recognize that not only is privatization important, but also the way it is carried out matters, as restructuring and the establishment of strong corporate governance may be more important than the disposal of former State-owned assets. A strong presence of foreign-owned firms allows a fast restructuring, on condition that, at the same time, host Governments follow sound, efficiency-oriented and internationally competitive economic policies. The impact of privatization-related foreign direct investment depends largely on the follow-up investments and on the restructuring efforts of the new owner. The role of government policies in the future can be seen in maximizing the positive effects and stimulating spillovers to the rest of the economy.

This paper reviews the literature on the fallacy of composition with an emphasis on labour‐intensive manufactures. It briefly addresses the protectionist and the partial‐equilibrium versions of the argument before focusing on general‐equilibrium considerations and the debate on the manufactures terms of trade of developing countries. The review indicates a potential fallacy of composition problem in labour‐intensive manufactures, where competition among different groups of developing countries for export market shares may constitute a new form of the fallacy of composition. The likelihood of a country that exports labour‐intensive manufactures to become subject to the fallacy of composition rises with the increasing integration of several strongly populated low‐income countries into world markets, while it declines with continuous structural change and favourable aggregate demand conditions particularly in developed and the advanced developing countries.

More than 400 blue diamonds were studied at the GIA Gem Trade Laboratory over several years to reveal additional information about the relationships between their color, clarity, and other gemological properties.

The nature of the international trade in secondhand clothes is such that the Igbo importer in West Africa cannot know what specific items of clothing are packed in the bales supplied to him from Britain. Since he is not there to pick and select at the sorting factory of his supplier, how is he assured of the quality of the clothes he is importing? The question of information asymmetry is at the heart of this article. An empirical description is provided here of what goes on within an international network of traders in secondhand clothes in relation to quality assurance on items of clothing that cannot be viewed by the importer until the bales are opened up in West Africa. Such assurance is shown to depend on certain practices in the trade, especially the seconding of an apprentice from the shop of the Igbo importer to the sorting factory of the British supplier. The article also explores how the commercial problem of quality assurance is resolved through relationships of trust and cooperation. Importers jostle to establish such relationships with suppliers that understand the subjective as well as pragmatic factors determining the quality of secondhand clothing imported into the West African market from Britain.

The North American Free Trade Agreement (NAFTA) has been the subject of a protracted and acrimonious public debate in the United States about its overall economic benefits as well as its impact on labor and the environment. In the context of this debate, applied general equilibrium (AGE) models of trade liberalization between Canada, Mexico, and the United States have emerged as the tools of choice for analyzing NAFTA.

Most conventional research methodologies both in consumer and business‐to‐business marketing are modernist in nature, but their applicability in an increasingly postmodern business setting is decaying. Postmodern conditions are particularly prevalent in the business‐to‐business arena but, although new postmodern research methods are slowly growing in popularity in consumer markets, their use by business‐to‐business market researchers is still almost nonexistent. The article contributes to filling the existing vacuum in the business‐to‐business marketing literature and provides a framework for the use of postmodern research methods in industrial markets. A short case is used as illustration of this use.

This paper analyses the co-movements between the US stock market and several commodity futures between 1998 and 2011. It computes dynamic conditional correlations at (i) 1-hour, (ii) 5-minute, (iii) 10-second, and (iv) 1-second frequencies and documents a synchronized structural break, characterized by correlations that have significantly departed from zero to positive territories, since late September 2008. Our results support the idea that high frequency trading and algorithmic strategies have an effect on the behaviour of commodity prices.

Abstract A significant number of preference eligible goods are imported into the European Union (EU) from developing countries at relatively low values. In 2008, more than 90% of the number of preferential import flows (at eight‐digit level) represented together about 5% of the value of EU preferential imports from developing countries. While the overall utilisation of EU trade preferences is high, preference utilisation rates of these low‐value imports are markedly lower. This fact is unobserved in the aggregate figures, and thus rarely noticed. This paper examines the extent and the importance of this phenomenon. It attempts to identify exporting countries and products that are particularly affected, and relate these findings to the preferential margin offered on the EU market as well as to the requirements of rules of origin.

OBJECTIVE: To analyse cigarette smuggling practices in central and eastern Africa. METHODS: Primary data were gathered during long-term qualitative field research in which about 400 interviews were conducted. Analysis of secondary sources included academic literature and reports from non-government organisations, multilateral organisations and the press. RESULTS: Our research suggests that the following factors play an important role in cigarette smuggling in eastern and central Africa: (1) government officials encounter difficulties monitoring the long and porous borders; (2) there is a general problem of corrupt government officials and particularly those who allow large-scale smugglers to operate; (3) criminal elements also play an important role in smuggling--cigarette smuggling has helped rebel groups to finance their activities, something illustrated through examples from the war economy in the eastern part of the Democratic Republic of Congo. CONCLUSIONS: Our research suggests that cigarette smuggling in this region is not primarily the result of different taxation levels in neighbouring states, but rather the outcome of weak state capacity, high levels of corruption and the activities of rebel groups. Under these conditions smuggling cigarettes becomes an attractive option as taxation is so easily avoided. This explains why in the low-income countries in this study there are high levels of smuggling in spite of low cigarette prices. Comprehensive supply control and enforcement legislation, and cooperation at national, regional and global level are needed to tackle fraudulent practices facilitated by corruption at state level, and to effectively punish interaction between cigarette traders and rebel groups.

The beta-adrenergic agonist isoproterenol induced an increase in intracellular calcium concentration ([Ca2+]i) in rat submandibular granular ducts that was blocked by beta-adrenergic but not by alpha-adrenergic or muscarinic antagonists. This effect was only partially inhibited by the selective beta 1- and beta 2-adrenergic antagonists atenolol and ICI-118,551, but was completely blocked by the combination of the two, suggesting the involvement of multiple (or atypical) beta-adrenergic receptor subtypes. The response to isoproterenol was mimicked by forskolin, 3-isobutyl-1-methylxanthine, and dibutyryl adenosine 3',5'-cyclic monophosphate, but it was blocked by protein kinase inhibitors. The response of [Ca2+]i to isoproterenol was sustained in Ca(2+)-replete replete medium but transient in Ca(2+)-free medium, indicating the involvement of both Ca2+ entry and release from intracellular stores. However, isoproterenol stimulation produced no increase in ductal inositol phosphate levels. In addition, isoproterenol was still able to increase [Ca2+]i after the carbachol-induced depletion of inositol 1,4,5-trisphosphate (IP3)-sensitive calcium stores. We conclude that isoproterenol, acting through cAMP, releases Ca2+ from an IP3-insensitive intracellular store in salivary granular ducts.