In recent debates, trade preference erosion has been viewed by some as damaging to developing cou... more In recent debates, trade preference erosion has been viewed by some as damaging to developing countries, and by others as insignificant, except in a few cases. However, little data have been available to back either view. The objective of this paper is to improve our measures of the size, utilization and value of all US non-reciprocal trade preference programs, in order to shed some light on this debate. Highly disaggregated data are used to quantify the margins, coverage, utilization and value of nonagricultural and agricultural tariff preferences, for all beneficiary countries in the US regional programs and in the GSP. Results show that US regional tariff preference programs are generally characterized by high coverage of beneficiary countries' exports, high utilization by beneficiary countries, and low tariff preference margins (except on apparel). For 29 countries, the value of US tariff preferences was 5% or more of 2003 dutiable exports to the US, even after incorporating actual utilization. Most of this value is attributable to non-agricultural tariff preferences, and to apparel preferences in particular. These results suggest that preference erosion may be significant for more countries than many had thought.
The relationship between environment and inter/intra national trade has attracted the attention o... more The relationship between environment and inter/intra national trade has attracted the attention of most of the scientific community, also because of the great risks and consequences that climate change will cause in the coming years if temperature and CO2 emissions are not reduced. In this paper, the main models explaining this relationship are presented, first between international trade and the environment, with the introduction of the environmental Kuznet curve, the Pollution Haven Hypothesis and the Factor Endowment Theory. The link between a new scheme, i.e. intra-industry trade and the environment, is then explored. Using the same scheme for assessing international trade as a framework of analysis; the scale, technical and composition effect (in addition the selection effect). Finally, considering the positive effect of intra-industrial trade even more than international trade, some instruments that can facilitate the reduction of emissions are presented, such as International Environmental Agreements (IEA) and the Boarder Carbon Adjustment tool to facilitate the creation and accession of countries to trade agreements. In addition, the effect of a trade closure versus a trade opening situation is studied, assessing welfare from both an environmental and socioeconomic perspective. 10 2.1 Why intra-industry trade effect is so important? ………….. 2.2 Determinants of Intra-industry Trade……………………… 2.3 Intra-industry trade and environment……………………… pag.
If you bought an Apple iPod in 2005, it would likely have been imported from China. But China wou... more If you bought an Apple iPod in 2005, it would likely have been imported from China. But China would have contributed less than 3% of the value in that iPod. Most of its value would have been produced in Japan and the United States (Linden, Dedrick and Kraemer, 2009). This is because the iPod is produced in a global supply chain. While most of the R&D and design is done in the United States, firms in many other countries are involved in different stages of the production of the iPod. Among those countries are Japan, Thailand, Taiwan, Korea, Philippines, Singapore, and China (Linden, et al, 2009). This is not unique to the iPod. Dean, Fung and Wang (2011), for example, estimate that foreign content accounted for between 63% and 95% of the value of China's IT-related exports in 2002. Such "global supply chain" production is becoming increasingly prominent. "Instead of carrying out everything from …R&D to delivery and retail within a single country, many industries are slicing up this process into stages or tasks (or "fragments") that are then undertaken in many countries" (USITC, 2011a). The ability to split the production process into tasks that can be done in different locations implies a change in the nature of specialization. Firms in different countries are now able to specialize in stages or tasks within the production of a good, based on comparative advantage. This strengthens all countries' gains from trade, since goods can be produced more efficiently than if the entire process had to take place in a single location. This also changes the pattern of trade. Trade flows will increasingly be comprised of trade in intermediate goods, and reflect the sequential nature of these production chains. The volume of trade between industrial and developing countries is also likely to grow, since global supply chains make use of differences in comparative advantage when allocating tasks (Arndt and Kierzkowski, 2001). The international fragmentation of production is particularly important for understanding China's trade. Chinese Official Customs data records its supply chain trade-known as "processing trade"-separately from its normal trade. Based on these data, about half of China's remarkable trade growth between 1995 and 2008 is attributable to processing trade (Dean, et al., 2011). On average, about 85% of this global supply chain manufacturing has been done through foreign multinational subsidiaries or joint ventures (Dean, Lovely, and Mora, 2009). Recent work by U.S. and Chinese researchers provides evidence that China is typically at the "end of the value chain," engaged in low-skilled labor intensive activities in hightech industries, such as pharmaceuticals and electronics (USITC, 2011b). Because of the importance of these global supply chain relationships in China's trade, conventional trade statistics will misattribute much of the value of a product to China, which is in fact produced elsewhere. Conventional trade statistics will also mask the interdependence between countries in carrying out global production. In contrast, value added (VA) trade measures can contribute greatly to a clearer understanding of global supply chain trade. In this testimony, I focus on two such contributions. VA trade measures can: (1) provide a more accurate view of the flow of value-added between countries; (2) reveal the interdependence of countries involved in global production processes. I then illustrate how these two insights can help contribute to sound trade policy.
The few empirical studies which examine the effects of preferential trade liberalization on growt... more The few empirical studies which examine the effects of preferential trade liberalization on growth find no direct relationship between membership in a PTA and growth across countries. This is somewhat surprising, given the large literature which argues that trade liberalization is likely to encourage more rapid growth. However, sensitivity analysis has shown that this link between freer trade and growth may be indirect, as freer trade strongly increases investment, and higher investment strongly increases growth. This paper tests for both direct and indirect effects of preferential trade liberalization on growth and investment, by examining the impact of the Caribbean Basin Economic Recovery Act-a non-reciprocal PTA implemented by the U.S. in 1984 to encourage growth and development in Caribbean and Central American countries. A two-equation simultaneous system is estimated, using pooled data on twelve beneficiary countries, from 1970-1998. Results suggest that CBERA did not result in any "trade-induced investment-led growth." It may have had a direct impact on growth in the region, but the effect was small, and significant only when combined with trade and foreign exchange reforms on the part of the beneficiary countries themselves. However, preferential trade liberalization through the production-sharing program, and unilateral and regional trade reforms in beneficiary countries and in the US did lead to investment-led growth, and to higher growth directly, in the CBERA countries.
The author is with the Office of Economics of the U.S. International Trade Commission. Office of ... more The author is with the Office of Economics of the U.S. International Trade Commission. Office of Economics working papers are the result of the ongoing professional research of USITC Staff and are solely meant to represent the opinions and professional research of individual authors. These papers are not meant to represent in any way the views of the U.S. International Trade Commission or any of its individual Commissioners. Working papers are circulated to promote the active exchange of ideas between USITC Staff and recognized experts outside the USITC, and to promote professional development of Office staff by encouraging outside professional critique of staff research.
We thank Dylan Carson and Fred Distefano for assistance with compilation of data. We also benefit... more We thank Dylan Carson and Fred Distefano for assistance with compilation of data. We also benefited from comments by Michael Plummer, Ryuhei Wakasugi, and the other participants in the China-Japan-US: Deeper Integration Pre-Conference in January 2009 and Conference in May 2009. *The views expressed here are those of the authors. They do not necessarily represent the views of the USITC or the views of any of the individual Commissioners.
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.
One of the most contentious debates today is whether pollution-intensive industries from rich cou... more One of the most contentious debates today is whether pollution-intensive industries from rich countries relocate to poor countries with weaker environmental standards, turning them into "pollution havens." Empirical studies to date show little evidence to support the pollution haven hypothesis, but suffer potentially from omitted variable bias, specification, and measurement errors. This paper estimates the strength of pollution-haven behavior by examining the location choices of equity joint venture (EJV) projects in China. We derive a location choice model from a theoretical framework that incorporates the firm's production and abatement decision, agglomeration and factor abundance. We estimate conditional logit and nested logit models using new data sets containing information on a sample of EJV projects, effective environmental levies on water pollution, and estimates of Chinese pollution-intensity for 3-digit ISIC industries. Results from 2,886 manufacturing joint venture projects during 1993-96 show EJVs from all source countries go into provinces with high concentrations of foreign investment, relatively abundant stocks of skilled workers, concentrations of potential local suppliers, special incentives, and less state ownership. Environmental stringency does affect location choice, but not as expected. Low environmental levies are a significant attraction only for joint ventures in highly-polluting industries with partners from Hong Kong, Macao, and Taiwan. In contrast, joint ventures with partners from OECD sources are not attracted by low environmental levies, regardless of the pollution intensity of the industry. We discuss the likely role of technological differences in explaining these results.
helpful comments on a preliminary draft. The views expressed herein are those of the author(s) an... more helpful comments on a preliminary draft. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the USITC, the views of any of the individual Commissioners, or those of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
429 11.1 Introduction China often receives attention both for its rapidly growing trade and its s... more 429 11.1 Introduction China often receives attention both for its rapidly growing trade and its serious environmental degradation. China's trade with the world has risen dramatically between 1995 and 2005. In current dollars, the value of China's exports plus imports rose from $280.9 billion in 1995 to $1422.1 billion in 2005-a growth of about 406 percent. While improvements have been made in water and air quality over the same period, China's Ministry of Environmental Protection (MEP) stated that "[t]he confl ict between environment and development is becoming ever more prominent. Relative shortage of resources, a fragile ecological environment and insufficient environmental capacity are becoming critical problems hindering China's development" (MEP 2006).
Trade Commission. Office of Economics working papers are the result of the ongoing professional r... more Trade Commission. Office of Economics working papers are the result of the ongoing professional research of USITC Staff and are solely meant to represent the opinions and professional research of individual authors. These papers are not meant to represent in any way the views of the U.S. International Trade Commission or any of its individual Commissioners. Working papers are circulated to promote the active exchange of ideas between USITC Staff and recognized experts outside the USITC, and to promote professional development of Office staff by encouraging outside professional critique of staff research.
World Scientific Studies in International Economics, Mar 8, 2017
China's ongoing transitions, from bureaucratic socialism to market economy and from a rural to an... more China's ongoing transitions, from bureaucratic socialism to market economy and from a rural to an urban society, have transformed the country into a global economic power. 2 This transition has affected virtually every aspect of the world economy-which goods are made, what they cost, and the wages earned by those engaged in their production. The impact of China's economic emergence on its trading partners, however, goes well beyond the textbook treatment of liberalization of trade in final goods. Widely recognized is China's unique mode of entry, characterized by unprecedented foreign direct investment inflows and heavy reliance on processing inputs as the fuel for explosive trade growth. 3 These unique features of China's global engagement suggest that rather than simply changing where goods are made, China's opening permitted shifts in how goods are made. Trade theorists have emphasized two aspects of these shifts in the organization of production-the fragmentation of the production process and the internalization decisions of multinational
One of the most contentious debates today is whether pollution-intensive industries from rich cou... more One of the most contentious debates today is whether pollution-intensive industries from rich countries relocate to poor countries with weaker environmental standards, turning them into "pollution havens." Empirical studies to date show little evidence to support the pollution haven hypothesis, but suffer potentially from omitted variable bias, specification, and measurement errors. This paper estimates the strength of pollution-haven behavior by examining the location choices of equity joint venture (EJV) projects in China. We derive a location choice model from a theoretical framework that incorporates the firm's production and abatement decision, agglomeration and factor abundance. We estimate conditional logit and nested logit models using new data sets containing information on a sample of EJV projects, effective environmental levies on water pollution, and estimates of Chinese pollution-intensity for 3-digit ISIC industries. Results from 2,886 manufacturing joint venture projects during 1993-96 show EJVs from all source countries go into provinces with high concentrations of foreign investment, relatively abundant stocks of skilled workers, concentrations of potential local suppliers, special incentives, and less state ownership. Environmental stringency does affect location choice, but not as expected. Low environmental levies are a significant attraction only for joint ventures in highly-polluting industries with partners from Hong Kong, Macao, and Taiwan. In contrast, joint ventures with partners from OECD sources are not attracted by low environmental levies, regardless of the pollution intensity of the industry. We discuss the likely role of technological differences in explaining these results.
ABSTRACT In this decade, China's foreign trade has increased rapidly and the share of hig... more ABSTRACT In this decade, China's foreign trade has increased rapidly and the share of high-technology goods in China's exports has become outstanding. These developments are partly related to processing trade that reflects the global production fragmentation. This paper discusses the role of processing trade in China by using a concept of vertical specialization (VS). The paper explains approaches to estimate vertical specialization and evaluates the findings of recent research in this field. It seems evident that processing trade has played a major role behind the fast growth of Chinese exports and the increase of high-tech goods in its exports. Moreover, recent research seems to imply that China's and much of Asia's exports are still heavily dependent on American and European consumers and, consequently, exports are not de-coupled from the final demands in the United States or Europe.
429 11.1 Introduction China often receives attention both for its rapidly growing trade and its s... more 429 11.1 Introduction China often receives attention both for its rapidly growing trade and its serious environmental degradation. China's trade with the world has risen dramatically between 1995 and 2005. In current dollars, the value of China's exports plus imports rose from $280.9 billion in 1995 to $1422.1 billion in 2005-a growth of about 406 percent. While improvements have been made in water and air quality over the same period, China's Ministry of Environmental Protection (MEP) stated that "[t]he confl ict between environment and development is becoming ever more prominent. Relative shortage of resources, a fragile ecological environment and insufficient environmental capacity are becoming critical problems hindering China's development" (MEP 2006).
In recent debates, trade preference erosion has been viewed by some as damaging to developing cou... more In recent debates, trade preference erosion has been viewed by some as damaging to developing countries, and by others as insignificant, except in a few cases. However, little data have been available to back either view. The objective of this paper is to improve our measures of the size, utilization and value of all US non-reciprocal trade preference programs, in order to shed some light on this debate. Highly disaggregated data are used to quantify the margins, coverage, utilization and value of nonagricultural and agricultural tariff preferences, for all beneficiary countries in the US regional programs and in the GSP. Results show that US regional tariff preference programs are generally characterized by high coverage of beneficiary countries' exports, high utilization by beneficiary countries, and low tariff preference margins (except on apparel). For 29 countries, the value of US tariff preferences was 5% or more of 2003 dutiable exports to the US, even after incorporating actual utilization. Most of this value is attributable to non-agricultural tariff preferences, and to apparel preferences in particular. These results suggest that preference erosion may be significant for more countries than many had thought.
The relationship between environment and inter/intra national trade has attracted the attention o... more The relationship between environment and inter/intra national trade has attracted the attention of most of the scientific community, also because of the great risks and consequences that climate change will cause in the coming years if temperature and CO2 emissions are not reduced. In this paper, the main models explaining this relationship are presented, first between international trade and the environment, with the introduction of the environmental Kuznet curve, the Pollution Haven Hypothesis and the Factor Endowment Theory. The link between a new scheme, i.e. intra-industry trade and the environment, is then explored. Using the same scheme for assessing international trade as a framework of analysis; the scale, technical and composition effect (in addition the selection effect). Finally, considering the positive effect of intra-industrial trade even more than international trade, some instruments that can facilitate the reduction of emissions are presented, such as International Environmental Agreements (IEA) and the Boarder Carbon Adjustment tool to facilitate the creation and accession of countries to trade agreements. In addition, the effect of a trade closure versus a trade opening situation is studied, assessing welfare from both an environmental and socioeconomic perspective. 10 2.1 Why intra-industry trade effect is so important? ………….. 2.2 Determinants of Intra-industry Trade……………………… 2.3 Intra-industry trade and environment……………………… pag.
If you bought an Apple iPod in 2005, it would likely have been imported from China. But China wou... more If you bought an Apple iPod in 2005, it would likely have been imported from China. But China would have contributed less than 3% of the value in that iPod. Most of its value would have been produced in Japan and the United States (Linden, Dedrick and Kraemer, 2009). This is because the iPod is produced in a global supply chain. While most of the R&D and design is done in the United States, firms in many other countries are involved in different stages of the production of the iPod. Among those countries are Japan, Thailand, Taiwan, Korea, Philippines, Singapore, and China (Linden, et al, 2009). This is not unique to the iPod. Dean, Fung and Wang (2011), for example, estimate that foreign content accounted for between 63% and 95% of the value of China's IT-related exports in 2002. Such "global supply chain" production is becoming increasingly prominent. "Instead of carrying out everything from …R&D to delivery and retail within a single country, many industries are slicing up this process into stages or tasks (or "fragments") that are then undertaken in many countries" (USITC, 2011a). The ability to split the production process into tasks that can be done in different locations implies a change in the nature of specialization. Firms in different countries are now able to specialize in stages or tasks within the production of a good, based on comparative advantage. This strengthens all countries' gains from trade, since goods can be produced more efficiently than if the entire process had to take place in a single location. This also changes the pattern of trade. Trade flows will increasingly be comprised of trade in intermediate goods, and reflect the sequential nature of these production chains. The volume of trade between industrial and developing countries is also likely to grow, since global supply chains make use of differences in comparative advantage when allocating tasks (Arndt and Kierzkowski, 2001). The international fragmentation of production is particularly important for understanding China's trade. Chinese Official Customs data records its supply chain trade-known as "processing trade"-separately from its normal trade. Based on these data, about half of China's remarkable trade growth between 1995 and 2008 is attributable to processing trade (Dean, et al., 2011). On average, about 85% of this global supply chain manufacturing has been done through foreign multinational subsidiaries or joint ventures (Dean, Lovely, and Mora, 2009). Recent work by U.S. and Chinese researchers provides evidence that China is typically at the "end of the value chain," engaged in low-skilled labor intensive activities in hightech industries, such as pharmaceuticals and electronics (USITC, 2011b). Because of the importance of these global supply chain relationships in China's trade, conventional trade statistics will misattribute much of the value of a product to China, which is in fact produced elsewhere. Conventional trade statistics will also mask the interdependence between countries in carrying out global production. In contrast, value added (VA) trade measures can contribute greatly to a clearer understanding of global supply chain trade. In this testimony, I focus on two such contributions. VA trade measures can: (1) provide a more accurate view of the flow of value-added between countries; (2) reveal the interdependence of countries involved in global production processes. I then illustrate how these two insights can help contribute to sound trade policy.
The few empirical studies which examine the effects of preferential trade liberalization on growt... more The few empirical studies which examine the effects of preferential trade liberalization on growth find no direct relationship between membership in a PTA and growth across countries. This is somewhat surprising, given the large literature which argues that trade liberalization is likely to encourage more rapid growth. However, sensitivity analysis has shown that this link between freer trade and growth may be indirect, as freer trade strongly increases investment, and higher investment strongly increases growth. This paper tests for both direct and indirect effects of preferential trade liberalization on growth and investment, by examining the impact of the Caribbean Basin Economic Recovery Act-a non-reciprocal PTA implemented by the U.S. in 1984 to encourage growth and development in Caribbean and Central American countries. A two-equation simultaneous system is estimated, using pooled data on twelve beneficiary countries, from 1970-1998. Results suggest that CBERA did not result in any "trade-induced investment-led growth." It may have had a direct impact on growth in the region, but the effect was small, and significant only when combined with trade and foreign exchange reforms on the part of the beneficiary countries themselves. However, preferential trade liberalization through the production-sharing program, and unilateral and regional trade reforms in beneficiary countries and in the US did lead to investment-led growth, and to higher growth directly, in the CBERA countries.
The author is with the Office of Economics of the U.S. International Trade Commission. Office of ... more The author is with the Office of Economics of the U.S. International Trade Commission. Office of Economics working papers are the result of the ongoing professional research of USITC Staff and are solely meant to represent the opinions and professional research of individual authors. These papers are not meant to represent in any way the views of the U.S. International Trade Commission or any of its individual Commissioners. Working papers are circulated to promote the active exchange of ideas between USITC Staff and recognized experts outside the USITC, and to promote professional development of Office staff by encouraging outside professional critique of staff research.
We thank Dylan Carson and Fred Distefano for assistance with compilation of data. We also benefit... more We thank Dylan Carson and Fred Distefano for assistance with compilation of data. We also benefited from comments by Michael Plummer, Ryuhei Wakasugi, and the other participants in the China-Japan-US: Deeper Integration Pre-Conference in January 2009 and Conference in May 2009. *The views expressed here are those of the authors. They do not necessarily represent the views of the USITC or the views of any of the individual Commissioners.
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.
One of the most contentious debates today is whether pollution-intensive industries from rich cou... more One of the most contentious debates today is whether pollution-intensive industries from rich countries relocate to poor countries with weaker environmental standards, turning them into "pollution havens." Empirical studies to date show little evidence to support the pollution haven hypothesis, but suffer potentially from omitted variable bias, specification, and measurement errors. This paper estimates the strength of pollution-haven behavior by examining the location choices of equity joint venture (EJV) projects in China. We derive a location choice model from a theoretical framework that incorporates the firm's production and abatement decision, agglomeration and factor abundance. We estimate conditional logit and nested logit models using new data sets containing information on a sample of EJV projects, effective environmental levies on water pollution, and estimates of Chinese pollution-intensity for 3-digit ISIC industries. Results from 2,886 manufacturing joint venture projects during 1993-96 show EJVs from all source countries go into provinces with high concentrations of foreign investment, relatively abundant stocks of skilled workers, concentrations of potential local suppliers, special incentives, and less state ownership. Environmental stringency does affect location choice, but not as expected. Low environmental levies are a significant attraction only for joint ventures in highly-polluting industries with partners from Hong Kong, Macao, and Taiwan. In contrast, joint ventures with partners from OECD sources are not attracted by low environmental levies, regardless of the pollution intensity of the industry. We discuss the likely role of technological differences in explaining these results.
helpful comments on a preliminary draft. The views expressed herein are those of the author(s) an... more helpful comments on a preliminary draft. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the USITC, the views of any of the individual Commissioners, or those of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
429 11.1 Introduction China often receives attention both for its rapidly growing trade and its s... more 429 11.1 Introduction China often receives attention both for its rapidly growing trade and its serious environmental degradation. China's trade with the world has risen dramatically between 1995 and 2005. In current dollars, the value of China's exports plus imports rose from $280.9 billion in 1995 to $1422.1 billion in 2005-a growth of about 406 percent. While improvements have been made in water and air quality over the same period, China's Ministry of Environmental Protection (MEP) stated that "[t]he confl ict between environment and development is becoming ever more prominent. Relative shortage of resources, a fragile ecological environment and insufficient environmental capacity are becoming critical problems hindering China's development" (MEP 2006).
Trade Commission. Office of Economics working papers are the result of the ongoing professional r... more Trade Commission. Office of Economics working papers are the result of the ongoing professional research of USITC Staff and are solely meant to represent the opinions and professional research of individual authors. These papers are not meant to represent in any way the views of the U.S. International Trade Commission or any of its individual Commissioners. Working papers are circulated to promote the active exchange of ideas between USITC Staff and recognized experts outside the USITC, and to promote professional development of Office staff by encouraging outside professional critique of staff research.
World Scientific Studies in International Economics, Mar 8, 2017
China's ongoing transitions, from bureaucratic socialism to market economy and from a rural to an... more China's ongoing transitions, from bureaucratic socialism to market economy and from a rural to an urban society, have transformed the country into a global economic power. 2 This transition has affected virtually every aspect of the world economy-which goods are made, what they cost, and the wages earned by those engaged in their production. The impact of China's economic emergence on its trading partners, however, goes well beyond the textbook treatment of liberalization of trade in final goods. Widely recognized is China's unique mode of entry, characterized by unprecedented foreign direct investment inflows and heavy reliance on processing inputs as the fuel for explosive trade growth. 3 These unique features of China's global engagement suggest that rather than simply changing where goods are made, China's opening permitted shifts in how goods are made. Trade theorists have emphasized two aspects of these shifts in the organization of production-the fragmentation of the production process and the internalization decisions of multinational
One of the most contentious debates today is whether pollution-intensive industries from rich cou... more One of the most contentious debates today is whether pollution-intensive industries from rich countries relocate to poor countries with weaker environmental standards, turning them into "pollution havens." Empirical studies to date show little evidence to support the pollution haven hypothesis, but suffer potentially from omitted variable bias, specification, and measurement errors. This paper estimates the strength of pollution-haven behavior by examining the location choices of equity joint venture (EJV) projects in China. We derive a location choice model from a theoretical framework that incorporates the firm's production and abatement decision, agglomeration and factor abundance. We estimate conditional logit and nested logit models using new data sets containing information on a sample of EJV projects, effective environmental levies on water pollution, and estimates of Chinese pollution-intensity for 3-digit ISIC industries. Results from 2,886 manufacturing joint venture projects during 1993-96 show EJVs from all source countries go into provinces with high concentrations of foreign investment, relatively abundant stocks of skilled workers, concentrations of potential local suppliers, special incentives, and less state ownership. Environmental stringency does affect location choice, but not as expected. Low environmental levies are a significant attraction only for joint ventures in highly-polluting industries with partners from Hong Kong, Macao, and Taiwan. In contrast, joint ventures with partners from OECD sources are not attracted by low environmental levies, regardless of the pollution intensity of the industry. We discuss the likely role of technological differences in explaining these results.
ABSTRACT In this decade, China's foreign trade has increased rapidly and the share of hig... more ABSTRACT In this decade, China's foreign trade has increased rapidly and the share of high-technology goods in China's exports has become outstanding. These developments are partly related to processing trade that reflects the global production fragmentation. This paper discusses the role of processing trade in China by using a concept of vertical specialization (VS). The paper explains approaches to estimate vertical specialization and evaluates the findings of recent research in this field. It seems evident that processing trade has played a major role behind the fast growth of Chinese exports and the increase of high-tech goods in its exports. Moreover, recent research seems to imply that China's and much of Asia's exports are still heavily dependent on American and European consumers and, consequently, exports are not de-coupled from the final demands in the United States or Europe.
429 11.1 Introduction China often receives attention both for its rapidly growing trade and its s... more 429 11.1 Introduction China often receives attention both for its rapidly growing trade and its serious environmental degradation. China's trade with the world has risen dramatically between 1995 and 2005. In current dollars, the value of China's exports plus imports rose from $280.9 billion in 1995 to $1422.1 billion in 2005-a growth of about 406 percent. While improvements have been made in water and air quality over the same period, China's Ministry of Environmental Protection (MEP) stated that "[t]he confl ict between environment and development is becoming ever more prominent. Relative shortage of resources, a fragile ecological environment and insufficient environmental capacity are becoming critical problems hindering China's development" (MEP 2006).
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