international coordination of trade and domestic policies the past half century has seen a dramatic multilateral reduction in tariff barriers under general agreement on tariffs and trade gatt negotiations however as tariff barriers have fallen attention has shifted to the use of domestic policies as secondary trade barriers a primary concern is that as countries sign trade agreements that constrain their ability to pursue trade goals through trade policy there will be unilateral incentives for governments to distort their domestic policies as a secondary means of protection 1 increasingly international trade disputes revolve around a country s use of internal regulations as a means of restricting trade the united states has successfully challenged the system of liquor taxes in both japan and korea as discriminating against imported liquor while venezuela and brazil have challenged american standards for reformulated and conventional gasoline as trade protection masquerading as environmentalism gatt contains several articles concerning the international regulation of domestic policies but the question of how to fully incorporate domestic policies within gatt negotiations and other international trade agreements remains contentious indeed at both the ministerial meeting in 1994 at the close of the uruguay round and the recent unsuccessful ministerial conference in seattle many gatt delegates renewed demands for the relationship between trade and various domestic policies e g environmental policy labor standards or competition policy to be examined despite the importance that has recently been placed on international cooperation over domestic policies no theoretical basis exists for considering how to cooperate over both trade and domestic policies within an international agreement previous papers on negotiation over two instruments of protection e g copeland 1989 1990 thomas l hungerford 1991 have assumed asymmetric limitations on cooperation i e they assume that one of the two instruments is either nonobservable or nonnegotiable this paper extends such work by investigating cooperation over two negotiable instruments of protection under symmetric limitations on cooperation and provides insight into the design of international trade agreements that incorporate cooperation over domestic policies i adopt the view that enforcement issues are central to the understanding of international cooperation one of the challenges of international cooperation is the absence of a central authority to enforce the terms of an agreement without access to an external enforcement mechanism international agreements are viable only as long as member countries view continued cooperation to be in their own self interest i e the benefits from cooperating outweigh the potential gains from cheating 2 while the gatt department of economics university of miami p o box 248126 coral gables fl 33124 e mail ederington miami edu i would like to thank bob staiger bob baldwin wolfgang keller phillip mccalman jenny minier seminar participants at the nber conference on trade the environment and natural resources and two anonymous referees for comments on earlier versions of this paper any remaining errors are of course my own for example brian r copeland 1990 examined negotiation over one trade barrier leaving a secondary trade barrier e g nontariff barriers domestic legislation etc to be set noncooperatively he shows that trade liberalization will induce substitution toward the less efficient nonnegotiable instrument of protection due to the unilateral incentives to maintain trade protection facing countries thus within a cooperative framework the two types of barriers serve as imperfect substitutes for each other 2 as stated by kenneth w dam in his review of the gatt institution the best guarantee that a commitment of any kind will be kept particularly in an international setting where courts are of limited importance and even more important marshals and jails are nonexistent is that the parties continue to view adherence to their agreement in their mutual interest thus the gatt system unlike most legal systems is not designed to exclude self help in the form of retaliation rather retaliation subjected to established procedures and kept within prescribed bounds is made the heart of the gatt system dam 1970 pp 80 81

permit trading merely an efficiency neutral redistribution away from climate change victims in this paper we present a climate policy game with international emissions trading where governments first select their amounts of emissions permits these permits are transferred to firms and then traded competitively on an international market compared with a game without trading we find that the potential efficiency gains from permit trading which have been identified in other studies are totally undone if governments also employ a tax or subsidy on domestic emissions the only effect of permit trading in this case is a redistribution of income away from those most affected by climate change

policies and international trade agreements on technical compatibility for industries with network externalities abstract the paper considers a country home in which consumers have heterogeneous preferences over ex ante incompatible domestic and imported products and benefit from a network externality we analyze the cases with trade under perfect competition and the international duopoly in which both governments strategically use policies toward compatibility but cannot use conventional trade policies in both cases the equilibrium outcome of the non cooperative game depends upon the strength of the network externality effect and involves either an excessively high equilibrium level of compatibility in combination with either too much or too little trade or very low equilibrium levels of both compatibility and trade the paper concludes with the analysis of the international agreements on policies toward compatibility and evaluates the existing provisions in the wto legal system aimed at minimizing the trade inhibiting impact of standards and regulations in the area of technical compatibility

international evidence on crude oil price dynamics applications of arima garch models abstract we examine the usefulness of several arima garch models for modeling and forecasting the conditional mean and volatility of weekly crude oil spot prices in eleven international markets over the 1 2 1997 10 3 2009 period in particular we investigate the out of sample forecasting performance of four volatility models garch egarch and aparch and figarch over january 2009 to october 2009 forecasting results are somewhat mixed but in most cases the aparch model outperforms the others also conditional standard deviation captures the volatility in oil returns better than the traditional conditional variance finally shocks to conditional volatility dissipate at an exponential rate which is consistent with the covariance stationary garch models than the slow hyperbolic rate implied by the figarch alternative

backward stealing and forward manipulation in the wto abstract motivated by the structure of wto negotiations we analyze a bargaining environment in which negotiations proceed bilaterally and sequentially under the most favored nation mfn principle we identify backward stealing and forward manipulation problems that arise when governments bargain under the mfn principle in a sequential fashion we show that these problems impede governments from achieving the multilateral efficiency frontier unless further rules of negotiation are imposed we identify the wto nullification or impairment and renegotiation provisions and its reciprocity norm as rules that are capable of providing solutions to these problems in this way we suggest that wto rules can facilitate the negotiation of efficient multilateral trade agreements in a world in which the addition of new and economically significant countries to the world trading system is an ongoing process

an econometric analysis of the european commission s merger decisions abstract using a sample of 96 mergers notified to the european commission and logit regression techniques we analyse the commission s decision process we find that the probability of a phase 2 investigation and of a prohibition of the merger increases with the parties market shares the probabilities increase also when the commission finds high entry barriers or that the post merger market structure is conducive to collusion we do not find significant effects of political variables such as the nationality of the merging firms

disguised protectionism global trade rules and alien invasive species current international law strongly favors policies designed to make imports safer e g in terms of invasive species over policies explicitly designed to discourage imports we show that this preference may be counterproductive a externality in trade is incorporated into a political economy model of policy formation nations can address the externality by inspecting cargo and imposing a fine on contaminated imports we compare the equilibrium when inspection is the only policy option relative to the equilibrium that emerging when nations may also manipulate the tariff ruling out the tariff causes socially excessive stringency in general social welfare losses if domestic supply is highly inelastic and in some circumstances an increase in the real tariff measured as the difference between world and domestic prices

nontrade concerns reconciling domestic policy objectives with freer trade in agricultural products since the conclusion of the uruguay round of trade negotiations in 1994 there has been increasing debate about the implications of freer trade for domestic or nontrade objectives in agriculture these range from traditional concerns such as food security and rural development to more recent issues such as the relationship between agriculture and the environment and the effects of agricultural practices on human health and animal welfare for countries reluctant to reduce agricultural protection a key issue is the extent to which domestic policy objectives would need to be sacrificed under freer trade for countries espousing trade liberalization the issue is whether domestic policy objectives will be used as a guise to undermine freer trade in agricultural products in this paper we focus on two areas of concern that are stressed by rich developed countries the linkage between agriculture and the environment and animal welfare environmental issues are prominent in asia europe and increasingly in north america while animal welfare is a major issue in europe it is generally acknowledged that agricultural support provided through implicit consumer taxes and direct subsidies in developed countries generates much of the distortion in global agricultural trade the more than 300 billion of agricultural support that is provided annually by oecd countries disadvantages developing country exporters and causes distortions in importers ensuring that there are effective disciplines on trade distorting forms of support will be vital to the suc

domestic support and border measures for processed horticultural products in horticultural markets trade barriers often apply to the processed products whereas domestic support applies to farm produced raw commodities here we assess the effects of such trade barriers and domestic support by simulating the effects of policy reform on global processing tomato markets which are faced with modest processed product tariffs and high domestic support in the european union eu both protection and eu subsidy drive down world welfare but we find that reducing import tariffs for tomato products would yield greater effects on markets and larger welfare impacts outside europe than would reductions in eu domestic support copyright 2008 oxford university press

volatility forecasting with range based egarch models we provide a simple yet highly effective framework for forecasting return volatility by combining exponential generalized autoregressive conditional heteroscedasticity models with data on the range using standard and poor s 500 index data for 1983 2004 we demonstrate the importance of a long memory specification based on either a two factor structure or fractional integration that allows for some asymmetry between market returns and volatility innovations out of sample forecasts reinforce the value of both this specification and the use of range data in the estimation we find substantial forecastability of volatility as far as 1 year from the end of the estimation period contradicting the return based conclusions of west and cho and of christoffersen and diebold that predicting volatility is possible only for short horizons

north south trade and industry specific pollutants abstract this paper investigates the production and pollution patterns arising from trade between high and low income countries when firms discharge industry specific pollutants we extend the common pollutant model of copeland and taylor north south trade and the environment quart j econ 109 1994 755 787 to incorporate industry specific pollutants and obtained a diversified equilibrium which differs markedly from the complete specialization equilibrium obtained in the original model with diversified production individual countries shares of production and emissions change in a flexible manner reflecting the competitiveness of their products in the world market this result makes it easier for empirical studies to test the theoretical relationships between industrial production emissions and the different attributes of countries including income and factor endowment despite the striking difference in the equilibrium patterns of production and emissions the prediction of the pollution haven hypothesis is retained and pollution intensive industries relocate to south finally a composite of pollutants weighted by disutilities increases in south and decreases in north

is the wto passe the wto has delivered policy outcomes that are very different from those likely to emerge out of the recent wave of preferential trade agreements ptas should economists see this as an efficient institutional hand off where the wto has carried trade liberalization as far as it can manage and is now passing the baton to ptas to finish the job this paper surveys a growing economics literature on international trade agreements and argues on this basis that the wto is not passe rather and subject to some caveats this survey of research to date suggests that the wto warrants strong support while a more cautious view of ptas seems appropriate

how important are tariffs and nontariff barriers in international markets for fresh fruit international markets for agricultural products are often subject to a range of trade barriers and horticultural products are no exception this article examines the economic implications of tariffs and sanitary and phytosanitary sps regulations that are applied to global markets for fresh apples and fresh oranges we calculate regional level tariff rates and ad valorem equivalents for sps barriers following the price wedge approach a simulation model is developed and used to assess the price quantity and welfare implications of reducing tariffs removing sps barriers and removing sps barriers that have been identified as a specific trade concern stc by the world trade organization results suggest that a 36 reduction in global tariffs would lead to greater welfare gains than would the elimination of sps measures in apple markets however in orange markets we find that sps measures have much larger economic implications for producers and consumers here a 36 reduction in tariffs would lead to smaller overall welfare effects compared to removal of all sps measures and only slightly larger effects than those from removal of stcs alone

time consistent export quotas in an oligopolistic world market abstract we investigate the strategic behavior between exporting countries that face endogenous terms of trade on the world market in a non cooperative setting if production decisions occur before consumption decisions the ex ante optimal export quota is not time consistent as the ex post elasticity of the residual foreign import demand curve is lower than the ex ante elasticity however we show that the exporters inability to irrevocably commit to their quota may be welfare superior to the precommitment solution if exporters can sell forward a proportion of their exports before production decisions are made they will do so even though in equilibrium it may decrease welfare compared to a situation in which forward markets do not exist moreover the equilibrium with forward markets is welfare inferior to the commitment equilibrium for exporters

trade policy cross border externalities and lobbies do linked agreements enforce more cooperative outcomes abstract we analyze whether linking international cooperation in trade policy to environmental policy or other issues with nonpecuniary externalities promotes more cooperation in both policies or whether cooperation in one is strengthened at the expense of the other in the context of self enforcing agreements we show that if the policies are independent in the government s objective function then linkage promotes cooperation in one policy at the expense of the policy that is easier to enforce under no linkage however if the linked policies are not independent and if these policies are strategic complements then linkage can sustain more cooperation in both issues than no linkage the policies are strategic complements only if i the production externality has cross border effects ii the weight on the externality cost is high iii import competing lobbies are not powerful

globalisation and values this paper discusses a central element in globalisation debate little addressed by economists namely the interactions at global national and community levels between globalisation and societally based values social values refer to wider notions of collective identity religious values attitudes towards materialism moral beliefs and a sense of collective awareness and are a broader and more encompassing concept than social capital discussed in recent economics and sociology literature social capital relates to trust honesty and the social fabric of accepted norms central to the successful implementation of individual optimising decisions and denotes a communal asset reflecting strength of joint collective commitment whose amount can be increased or improved upon through investment of time and resources social values are much discussed in sociological literature going back to comte durkheim parsons and others the issues taken up here are how different social values might interact and change as societies and their economies integrate globalise processes of value competition displacement and joint assimilation occur naturally to economists but seem little studied by sociologists who seemingly place less stress on analytical comparative statics scenarios for how values can interact under globalisation are discussed in the text

modelling oil price volatility with structural breaks in this paper we provide two main innovations i we analyze oil prices of two prominent markets namely west texas intermediate wti and brent using the two recently developed tests by narayan and popp 2010 and liu and narayan 2010 both of which allow for two structural breaks in the data series and ii the latter method is modified to include both symmetric and asymmetric volatility models we identify two structural breaks that occur in 1990 and 2008 which coincidentally correspond to the iraqi kuwait conflict and the global financial crisis respectively we find evidence of persistence and leverage effects in the oil price volatility while further extensions can be pursued the consideration of asymmetric effects as well as structural breaks should not be jettisoned when modelling oil price volatility

tariffs and the adoption of clean technology under asymmetric information this paper examines the effect of a tariff on the decision of a foreign monopolist to adopt clean technology which reduces the flow of a negative cross border externality the clean technology increases the marginal cost of production relative to the dirty technology but only the firm knows the extent of the increase under complete information despite its protectionist motivation the importing country s optimal tariff induces the firm to adopt the clean technology if and only if it is globally efficient to do so under incomplete information this efficiency property is disrupted and the firm biases its choice in favour of dirty technology jel classification f13 f18 ce memoire examine l effet d un tarif douanier sur la decision d un monopoleur etranger d adopter une technologie qui reduise le flux d effets externes negatifs a travers la frontiere la technologie propre accroit le cout marginal de production par rapport a ce qu il serait avec une technologie salissante mais seule l entreprise connait la taille de cet accroissement en regime d information complete malgre ses motivations protectionnistes le tarif optimal du pays importateur entraine l entreprise a adopter la technologie propre si et seulement si c est globalement efficient de le faire en regime d information incomplete cette propriete est perturbee et l entreprise tend a faire ses choix en faveur de la technologie salissante

investigating dynamic conditional correlation between crude oil and fuels in non linear framework the financial and economic role of structural breaks abstract to understand the crude oil volatility has been a challenge the non linear behavior the skewed and leptokurtic returns the presence of structural breaks and the constant political instability in suppliers countries evidence the necessity of complex models to capture the market volatility at the same time crude oil is the raw material for several fuels such as jet fuel gasoline diesel and others having a strong influence over their prices thus this study aims to verify the presence of structural breaks in the volatility series and in the correlations between wti return and the returns of gasoline kerosene jet fuel diesel heating oil propane and natural gas to reach this objective we identified which model presents the best fit to estimate the conditional mean between wti and each fuel and we used a copula dcc garch model to estimate the conditional volatility avoiding the frequently unrealistic presumptions of normality our main results indicate the necessity of a different model for each analyzed pair and the presence of at least one structural break in the conditional volatility and in the correlation between wti and each fuel usually preceded by a structural break in wti return series

the profitability concentration relation market power or efficiency industrial economists have been studying the relationship between profitability and concentration using cross industry samples for many years now however as sometimes happens once it appeared that some consensus had been achieved with few exceptions market concentration and industry profitability are positively correlated peltzman i977 p 229 people began to question the interpretation of those results in particular demsetz e g i973 i974 and others suggested that rather than concentration market power leading to higher prices and profits the causal direction in fact ran from greater efficiency to both higher profits and incidentally to higher concentration our purpose here is to subject these conflicting hypotheses to cross industry empirical test using u k data in order to do this we first develop a model which is sufficiently general to allow for both alternative explanations of a positive concentration profitability correlation in the light of this model we then examine the implications for the within industry relation between market share and firm level profitability more specifically we explore demsetz s claim that the empirical form of this relationship should signal which of the alternative hypotheses is consistent with the between industry profitability concentration correlation our model suggests that in certain special circumstances this claim is partly justified in that it should be possible to assess the relative strengths of the market power and efficiency effects from the within industry relation more generally however factors such as product differentiation and scale economies may seriously impair the information content of the relation with at least a strong suspicion that the estimates will tend to exaggerate the evidence in favour of the efficiency hypothesis in the event our results tend to confirm that for most industries the within industry data offer little conclusive support for either hypothesis but for a not insignificant minority of industries the evidence suggests some support for the view that both efficiency and market power are at work simultaneously our model is detailed in section ii and estimated on u k data in section iii after which we offer a few comments in section iv first however we drovide a backcloth to the later analysis

domestic policies in self enforcing trade agreements abstract if all cross country externalities travel through the terms of trade efficient trade agreements may simply target the terms of trade and ignore domestic policies this argument has been advanced by several prominent studies simply put it reads terms of trade agreements are efficient i show that this result breaks down if the following two standard conditions are met first a self enforcement requirement constrains the agreement and second production possibilities are intertemporally linked these conditions imply that a country s current policy mix affects future production possibilities and thus impacts payoffs under potential defection since a terms of trade agreement does not specify a country s policy mix it effectively invites countries to manipulate their own defection temptation to be self enforcing terms of trade agreement must ensure that no country while optimizing its policies on the iso terms of trade schedule will abandon its zone of voluntary cooperation this requirement implies that terms of trade agreements are inefficient and can be improved upon by agreements that target policies directly

a comparative institutional analysis of agreements on product standards abstract the wto and the eu have chosen two different agreements on product standards while the wto s approach is primarily based on a national treatment nt principle the eu s approach crucially relies on a principle of mutual recognition mr this paper offers a first look at the comparative performance of these two principles we show that standards are imposed for levels of externalities that are too low under nt and too high under mr this suggests that nt should be preferred to mr when the amount of trade in goods characterized by high levels of externalities is large

the copula garch model of conditional dependencies an international stock market application abstract modeling the dependency between stock market returns is a difficult task when returns follow a complicated dynamics when returns are non normal it is often simply impossible to specify the multivariate distribution relating two or more return series in this context we propose a new methodology based on copula functions which consists in estimating first the univariate distributions and then the joining distribution in such a context the dependency parameter can easily be rendered conditional and time varying we apply this methodology to the daily returns of four major stock markets our results suggest that conditional dependency depends on past realizations for european market pairs only for these markets dependency is found to be more widely affected when returns move in the same direction than when they move in opposite directions modeling the dynamics of the dependency parameter also suggests that dependency is higher and more persistent between european stock markets

volatility transmission and volatility impulse response functions in crude oil markets abstract using daily data from july 2005 to february 2011 for wti dubai and brent futures contracts we employ a var bekk model to investigate crude oil markets integration on the second moment we also quantify the size and persistence of these connections through the analysis of volatility impulse response functions virf for two historical shocks namely the 2008 financial crisis and the bp deepwater horizon oil spill we observe that brent and dubai crude are highly responsive to market shocks whereas wti crude shows the least responsiveness of the three benchmarks which creates questions about its predominance as a benchmark crude oil furthermore we fit the density of the virf at different forecast horizons these fitted distributions are asymmetric showing that the probability of observing a large impact of a shock is lower while the probability of a relatively smaller impact is much higher finally we simulate the virf for a given probability of a random shock the virf shows that only a large shock derived from a smaller probability will result in an increase in expected conditional volatilities these results provide useful insights into the volatility transmission mechanism in crude oil markets and their associated risk estimation and may have significant implications for various market participants and regulators

wto tariff commitments and temporary protection complements or substitutes abstract there is a long held notion in the trade policy literature that traditional tariff instruments and temporary protection tp measures are substitutes despite this prediction there is only mixed empirical evidence for a link between tariff reductions and the usage pattern of antidumping safeguard and countervailing duties based on recent theoretical advances i argue in this paper that the relevant trade policy margin for implementing tp measures is instead tariff overhangs the difference between wto bound and applied tariffs lower tariff overhangs constrain countries to raise their mfn applied rates without legal repercussions independent of past tariff changes using detailed sectoral data for a sample of 30 wto member countries during the period 1996 2014 i find strong evidence for an inverse link between tariff overhangs and tp activity this result implies that tariff overhangs and tp measures are substitutes vindicating the importance of existing tariff commitments as a key determinant of alternative protection instruments

the race to the bottom from the bottom the dominant perspective in discussions of labour and environmental standards and globalization is that of north south competition and its impact on northern standards this paper presents an alternative perspective that of south south competition to export to the north and its impact on southern standards it develops a simple model of southern competition and demonstrates that whether a southern race to the bottom is possible depends intricately on the northern demand curve the size of large exporters relative to each other and the relative size of the competitive fringe of small exporters the possibility that northern trade protectionism may undermine southern standards is also examined

national treatment in the gatt the national treatment nt clause is the first line defense in the gatt and in most other trade agreements against opportunistic exploitation of the inevitable incompleteness of the agreement this paper examines the role of nt as it applies to internal taxation under the gatt it is shown that despite severely restricting the freedom to set internal taxes nt may improve government welfare but it will not completely solve the incomplete contract problem it is meant to remedy furthermore it requires a high degree of economic sophistication on behalf of trade negotiators in order for this beneficial effect to materialize

trade agreements with domestic policies as disguised protection abstract wto rules prohibit disguised protection in the form of domestic policies how then do governments cooperate over trade and domestic policies when none can verify whether a nation s domestic tax reduction is a protective measure or a reaction to a production externality in this paper each government privately observes whether a production externality associated with its import competing good is high or low this paper finds that in an optimal agreement disguised protection with domestic policies is never used by governments with a high externality and is never commonly realized moreover in an optimal agreement tariffs may be conditional on domestic policies

optimal international agreement and restriction on domestic efficiency the wto s strict treatment of domestic subsidies has not been well received in the existing literature an essential reason is that the consequent restriction on domestic efficiency is hardly compatible with the existing theory of government intervention under which the primary objective of using domestic subsidies domestic efficiency is not sacrificed for another objective we develop a trade agreement model in which the magnitude of a legitimate domestic subsidy with which to address a production externality is private information we find that an optimal agreement substantially restricts domestic efficiency for the international objective of expanding market access

have oil and gas prices got separated abstract this paper applies vector error correction models that show that oil and natural gas prices decoupled around 2009 before 2009 us and uk gas prices had a long term equilibrium with crude prices to which gas prices always reverted after exogenous shocks both us and uk gas prices adjusted to the crude oil price individually and departure from the equilibrium gas price on one continent resulted in a similar departure on the other after an exogenous shock the adjustment between us and uk gas prices took approximately 20 weeks on average and the convergence was mediated mainly by crude oil with a necessary condition that arbitrage across the atlantic was possible after 2009 however the uk gas price has remained integrated with oil price but the us gas price decoupled from crude oil price and the european gas price as the atlantic arbitrage has halted the oversupply from shale gas production has not been mitigated by north american export as there has been no liquefying and export capacity

profit shifting and trade agreements in imperfectly competitive markets profit shifting and trade agreements in imperfectly competitive markets do new rationales for trade agreements arise once imperfectly competitive markets are allowed we consider several trade models that feature imperfectly competitive markets and argue that the basic rationale for a trade agreement is in fact the same rationale that arises in perfectly competitive markets in all of the models that we consider and whether or not governments have political economic objectives the only rationale for a trade agreement is to remedy the inefficient terms of trade driven restrictions in trade volume we also show that the principles of reciprocity and nondiscrimination continue to be efficiency enhancing in these settings

merger policy and competition an analysis of the monopolies and mergers commission s decisions the way in which the monopolies and mergers commission views effective competition when reaching decisions involving referred merger bids is examined the objective is to identify issues which the commission has highlighted as important and hence is concerned with subjective rather than objective characteristics it is argued that an expected decrease in competition was a critical reason for having a bid disallowed whereas bids which were expected to either increase competition or leave it unaffected were likely to be allowed the analysis then examines the cause of these differing competition conclusions in particular those relating to avoiding the commission concluding that competition was likely to decrease probit analysis was used to estimate the relationships and it was found that for the increase decrease competition sample the important variables were market share and price in the decrease no change in competition sample the significant variables were efficiency the balance of payments pr

trade liberalization in the presence of domestic regulations public policies applied to eu and u s wine markets abstractwine is the highest valued product in the agricultural food and beverage sector traded between the united states and the european union eu and wine faces a range of tariffs that are differentiated by country and product category in addition the production of wine grapes is heavily regulated within the eu and there are complicated state level policies in the united states designed to limit the retail availability of wine there continues to be economic and political pressure for reform to the tariffs between the united states and the eu and to the domestic regulations in each region we carefully develop parameters to characterize the effects of tariffs and domestic regulations that affect production and consumption of wine in the two regions simulation results show that reductions in tariffs would have relatively small effects in eu and u s wine markets whereas reductions in eu domestic policies that affect wine grape production would have much larger trade and welfare implications

a dynamic theory of resource wars we develop a dynamic theory of resource wars and study the conditions under which such wars can be prevented our focus is on the interaction between the scarcity of resources and the incentives for war in the presence of limited commitment we show that a key parameter determining the incentives for war is the elasticity of demand our first result identifies a novel externality that can precipitate war price taking firms fail to internalize the impact of their extraction on military action in the case of inelastic resource demand war incentives increase over time and war may become inevitable our second result shows that in some situations regulation of prices and quantities by the resource rich country can prevent war and when this is the case there will also be slower resource extraction than the hotelling benchmark with inelastic demand our third result is that because of limited commitment and its implications for armament incentives regulation of prices and quantities might actually precipitate war even in some circumstances where wars would not have arisen under competitive markets copyright 2012 oxford university press

trade negotiations domestic policies and the most favored nation clause this paper illustrates how restricting trade instruments to non discrimination links trade agreements to non trade agreements and under certain conditions helps governments further lower tariffs and or domestic standards policies these conditions are i governments objective functions are sufficiently concave with respect to domestic standards policies ii domestic standards are sufficiently valued and iii policies are strategic complements these can then be used as a rationale for restricting safeguard measures to non discrimination ce texte montre comment le fait de restreindre les instruments de politique commerciale a la seule poursuite de liens commerciaux libres de discrimination relie accords commerciaux et non commerciaux et a certaines conditions aide les gouvernements a reduire encore davantage les tarifs douaniers et ou les normes politiques nationales ces conditions sont que i les fonctions objectives soient suffisamment concaves par rapport aux normes politiques nationales ii les normes nationales soient suffisamment valorisees et iii les politiques soient des complements strategiques ces arguments fournissent le rationale pour limiter les mesures de protection a la seule non discrimination

trade agreements and the nature of price determination the terms of trade theory of trade agreements holds that governments are attracted to trade agreements as a means of escape from a terms of trade driven prisoner s dilemma see bagwell and staiger 1999 one of the termsof trade theory s most striking predictions is about the treatment of behind the border policy measures in trade agreements according to this prediction in the noncooperative nash equilibrium from which countries would begin in the absence of a trade agreement tariffs are set inefficiently high but behind the border policies are set at efficient levels hence even in the context of a complex policy environment there is no need for member governments of a trade agreement to negotiate directly over the levels of their behind the border policies rather according to the terms of trade theory the fundamental problem for a trade agreement to solve is to prevent terms of trade manipulation and to thereby reduce tariffs and raise trade volumes without introducing distortions into the unilateral choices of domestic tax subsidy and regulatory policies as a result of the negotiated constraints on tariffs see bagwell and staiger 2001 importantly this result holds for a wide variety of government preferences and has also been shown to hold in imperfectly competitive environments the terms of trade theory of trade agreements therefore provides strong support for shallow integration as the most direct means to solve the policy inefficiencies that would arise absent a trade agreement simply put according to the terms of trade theory negotiations over tariffs alone coupled with an effective market access preservation rule that prevents governments

multilateral trade negotiations bilateral opportunism and the rules of gatt wto abstract trade negotiations occur through time and between the governments of many countries an important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party we identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation our main finding is that the two central principles of gatt wto nondiscrimination mfn and reciprocity preserve the welfare of nonparticipating governments and therefore offer a first line of defense against bilateral opportunism

market structure and price cost margins in a paper that has become a standard reference in the structure conductperformance approach to industrial economics cowling and waterson 1976 developed a theoretical rationale for expecting industry profitability to be positively correlated with the level of concentration their model based on a simple algebraic description of oligopoly behaviour has been interpreted as providing a justification for the common empirical practice of cross industry regression analysis of price cost margins in terms of concentration levels in the present paper we show that on further examination this model implies a joint determination of margins and concentration this provides some interesting comparative static results of relevance to inter industry differences in concentration levels equally however it leads to various cautionary insights concerning the meaning of price cost margin versus concentration regressions

domestic policies national sovereignty and international economic institutions to what extent must nations cede control over their economic and social policies if global efe ciency is to be achieved in an interdependent world this question is at the center of the debate over the future role of the wto formerly gatt in the realm of labor and environmental standards in this paper we establish that the market access focus of current wto rules is well equipped to handle the problems associated with choices over labor and environmental standards in principle with relatively modest changes that grant governments more sovereignty not less these rules can deliver globally efe cient outcomes i introduction to what extent must nations cede control over their economic and social policies if global efe ciency is to be achieved in an interdependent world at a broad level this question probes the limits of any international economic institution whether geared toward real or e nancial concerns that is designed to promote global efe ciency while respecting national sovereignty naturally the answer depends upon the particular problem that the institution is meant to solve in other words the answer depends upon the inefe ciency that would arise under unilateral policy choices at a more specie c level this question is at the center of the debate concerning the appropriate scope of the world trade organization wto formerly gatt recently member countries have considered ways to broaden the wto s orientation beyond conventional trade policy measures to include labor and environmental standards there are now initiatives to introduce the issue of labor standards directly onto the negotiating agenda of the wto with the purpose of creating a wto social clause the social clause would specify a set of minimum international labor standards and then permit restrictions to be placed against imports from countries not complying with these minimum standards with regard to environmental policies a wto committee on trade and environment has been established to identify the relationships between trade and environmental measures and to

the wto as a mechanism for securing market access property rights implications for global labor and environmental issues can the world trade organization wto contribute to the attainment of sound labor and environmental policies an answer requires an understanding of wto rules we argue that the purpose of wto rules is to create a negotiating forum where governments can exchange secure market access commitments from this perspective we argue that supporters of sound trade labor and environmental policies can benefit from a well functioning wto because facilitating trade liberalization and preventing race to the bottom regulatory chill problems go hand in hand and each is accomplished by maintaining secure property rights over negotiated market access commitments

strategic interaction among nations negotiable and non negotiable trade barriers trade policy is modelled as a two stage game between governments governments choose a negotiable trade barrier in the first stage of the game which is co operative the level of this barrier is treated as a binding commitment in the second stage of the game where the non negotiable trade barrier is chosen non co operatively hence governments choose trade barriers during negotiations with a view to influencing the equilibrium of the non co operative game to follow this proves to be a convenient framework in which to analyse the idea that trade agreements contain loopholes which can be exploited by protectionist governments trade negotiations induce substitution toward less efficient instruments of protection but are nevertheless welfare improving as long as the negotiations are relevant i e the negotiable barrier is actually in use and the two instruments are not perfect substitutes

monopolies and mergers commission merger reports and the public interest a probit analysis the extent to which specific elements of the public interest appear to influence the monopolies and mergers commission in its dealings with referred merger bids is examined using 77 merger reports covering the period 1974 1990 it was found that relatively few public interest issues had a significant impact on the commission s decisions these included competition price and balance of payments effects the results also show that apart from sucessfully arguing that competition will increase raider firms do not further their ambitions by concentrating on the positive aspects of proposed mergers

short term forecasting of electricity prices for miso hubs evidence from arima egarch models this study estimates three time series models arima arima egarch and arima egarch m for hourly real time electricity prices for each of the five hubs of the midwest independent system operator miso and examines the in and out of sample forecasting performance of the respective models the results from the arima models reveal the presence of autoregressive conditional heteroskedasticity recognizing the possibility of asymmetric time varying volatility the egarch specification for the variance equation demonstrates the presence of an inverse leverage effect in electricity prices for each hub with respect to forecasts no one model clearly dominates the others in terms of in sample forecasting performance based on four forecast evaluation statistics however the arima egarch m model outperforms the other models michigan hub is the exception in terms of the out of sample forecasting performance

asymmetric tax policy responses in large economies with cross border pollution we build a model of cross border pollution between two large open economies one importing the polluting good and the other exporting it and derive their non cooperative trade and environmental tax policies we show among other things that 1 in response to a bilateral reduction in trade taxes by both countries the former country s optimal policy is to lower its nash emissions tax while the latter s is to raise it and 2 in response to an increase in emissions tax rates by both countries the former country s optimal reaction is to raise its nash import tariff while the latter s is to reduce its nash export tax that is in the present context freer trade leads the exporting country to adopt stricter while the importing country laxer environmental tax policies

national treatment and the optimal regulation of environmental externalities we analyze the role of national treatment in the regulation of environmental product standards for an open economy a social planner uses product standards to control emissions from the consumption of a traded good we show that whether national treatment of standards interferes with welfare maximizing policy depends on the instruments available to the policy maker consumption or emissions tax and differences in the cost of complying with the standard we also highlight the asymmetric incidence of the domestic and import product standard when taxes are suboptimal this asymmetric incidence can also cause welfare maximizing policy to violate national treatment on analyse le role du principe de traitement identique des entites domestiques ou importees dans la reglementation des normes environnementales dans une economie ouverte un gouvernement utilise des normes pour controler les emissions decoulant de la consommation d un produit transige internationalement on montre que le fait que le traitement identique des normes va ou non interferer avec l objectif poursuivi qui est de maximiser le niveau de bien etre va dependre de l ensemble des instruments disponibles pour l architecte des politiques une taxe sur la consommation ou sur les emissions et des differences dans les couts a encourir pour se conformer aux normes on souligne aussi l incidence asymetrique des normes sur les produits domestiques et importes quand les taxes sont sous optimales cette incidence asymetrique peut faire que la politique qui vise la maximisation du bien etre soit en violation du principe de traitement identique

will international rules on subsidies disrupt the world trading system international disputes over subsidies have become a prominent feature of the world trading system the creation of the world trade organization wto as a successor to the general agreement on tariffs and trade gatt was nearly prevented by disputes in the uruguay round of gatt negotiations over the issue of negotiating disciplines on agricultural subsidies an issue which continues to plague the ongoing doha round of wto negotiations and ongoing disputes over subsidies that violate existing wto rules have led to the largest amount of authorized retaliation in gatt wto history yet despite their evident importance the international rules that govern subsidies have received little formal attention

trade and labour standards will there be a race to the bottom the objective of this paper is to investigate whether international rivalry will lead to a race to the bottom rtb in labour standards we derive the equilibrium levels of labour standards in an environment that is most conducive to a rtb specifically the brander and spencer 1985 model of strategic trade in which each government has an incentive to lower the cost of a domestic firm our analysis suggests that strategic trade considerations do not lead to a rtb in labour standards to the contrary equilibrium labour standards are higher than those in the absence of government intervention in the case where governments are free to choose the rate of an export subsidy labour standards are inefficiently high binding global trade rules that reduce the subsidy rate would move the equilibrium labour standards closer to their efficient level and a prohibition of the subsidy would eliminate the efficiency loss in labour markets

the political economy of non tariff measures over the last decades non tari measures ntms have seen an important upsurge how ever little research has focused on the political economy of non tariff protection and the existing studies are mainly based on a single country or a specific type of measures this paper seeks to fill the gap by empirically evaluating the determinants of ntms in several countries both developed and developing overall results show certain protectionist purposes behind the adoption of ntms this conclusion is reinforced for restrictive measures i e subject to trade concerns but does not hold for non restrictive measures suggesting the legitimate goal of several ntms furthermore transnational lobbying defined as the influence exerted by national business groups during the ministerial conferences the highest authority of the world trade organization wto increases the probability of adopting ntms in both developed and developing countries

on the economic success of gatt wto dispute settlement what features of the dispute settlement process help governments live up to their trade liberalization commitments exploiting data on gatt wto trade disputes initiated and completed between 1973 and 1998 this paper identifies economic and institutional determinants that help defendant governments commit to liberalizing trade we find substantial evidence consistent with the theory that power measures including threat of retaliation by the plaintiff yield credibility to allow defendant governments to live up to their commitments we find only limited evidence however that particular procedural or institutional features beyond the basic gatt wto dispute settlement forum itself contributed to the successful economic resolution of trade disputes

the development trinity how regional integration impacts growth inequality and poverty developing countries today have become more active participants in regional trade agreements this raises questions about how the benefits of integration are distributed and the extent to which lower income countries are able to capture development gains historically such impacts have been difficult to identify with precision this paper seeks to address this gap by empirically analysing the impact of regional integration on development particularly the effects on growth and welfare using both bilateral and regional integration measures we show that the ability to capture gains from integration varies across developing country regional groups with developing asia benefiting on par with developed countries the findings in the paper indicate that trade and trade policy play an important role in reducing inequality and poverty in developing countries it also shows that regionalism can function as a channel to make multilateralism a more adept way of addressing national challenges

internal capital market controls and financial performance in multidivisional firms it is proposed that within the population of m form firms the control systems necessary to realize economic benefits from interrelationships between subunits o f a firm are incompatible with the systems necessary to realize benef its from an m form type internal capital market this hypothesis is t ested on 156 large u k firms questionnaire data are used to classif y the firms according to their internal control characteristics the findings provide tentative support for the hypothesis copyright 1988 by blackwell publishing ltd

trade disputes and settlement we develop a model of trade agreements with renegotiation and imperfectly verifiable information in equilibrium trade disputes can occur and can be resolved in a variety of ways governments may settle early or trigger a court ruling and in the latter case they may implement the ruling or reach a post ruling settlement the model yields predictions on how the dispute outcome depends on the contracting environment and how it correlates with the optimal contract form we find support for a key prediction of our model using data on the outcomes of actual trade disputes in the general agreement on tariffs and trade world trade organization

how do crude oil prices co move a copula approach abstract this paper examines the dependence structure between crude oil benchmark prices using copulas by considering several copula models with different conditional dependence structures and time varying dependence parameters we find evidence of significant symmetric upper and lower tail dependence between crude oil prices these findings suggest that crude oil prices are linked with the same intensity during bull and bear markets thus supporting the hypothesis that the oil market is one great pool in contrast with the hypothesis that states that the oil market is regionalized our findings on crude oil price co movements also have implications for risk management hedging strategies and asset pricing

participation and duration of environmental agreements we analyze participation in international environmental agreements in a dynamic game in which countries pollute and invest in green technologies if complete contracts are feasible participants eliminate the holdup problem associated with their investments however most countries prefer to free ride rather than participate if investments are noncontractible countries face a holdup problem every time they negotiate but the free rider problem can be mitigated and significant participation is feasible participation becomes attractive because only large coalitions commit to long term agreements that circumvent the holdup problem under well specified conditions even the first best outcome is possible when the contract is incomplete

erratum to multilateral trade negotiations bilateral opportunism and the rules of gatt wto abstract trade negotiations occur through time and between the governments of many countries an important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party we identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation our main finding is that the two central principles of gatt wto nondiscrimination mfn and reciprocity preserve the welfare of nonparticipating governments and therefore offer a first line of defense against bilateral opportunism

internal organization and firm performance an analysis of large uk firms under conditions of economic uncertainty the relationship between firm performance and internal characteristics is examined in a sample of large uk firms the way in which organizational form internal control mechanisms and transitional costs affect profitability is examined performance is measured relative to the industry average with firms earning in excess of this being identified as being profit driven a sensitivity analysis is undertaken using two and three times industry average profits as alternative dependent variables logit analysis was used to estimate the relationships it was found that organisational form had no significant effect on profitability the separation of decision management from decision control increased the probability of earning more than twice industry average profits however for firms which had undertaken a structural reorganization within the three previous years the probability of earning more than twice industry average profits is reduced it was also found that firms which had a majority of executive direc

tariff bindings and bilateral cooperation on export cartels abstract despite the negative international externalities that they generate export cartels are legal in many countries we use a repeated game approach to analyze cooperation between a low income country lic and its high income country hic trade partner where the hic agrees to prevent its industry from organizing as an export cartel in return for a combination of improved market access i e a tariff reduction and a transfer from the lic if the lic is subject to a tariff binding say because of an existing trade agreement the transfer it pays to the hic increases and the scope for bilateral cooperation declines

the dynamics of crude oil price differentials abstract crude oil price differentials are modelled as a two regime threshold autoregressive tar process using the method proposed by caner and hansen caner m hansen b e threshold autoregression with a unit root econometrica 2001 69 1555 1596 while standard unit root tests suggest that the prices of crude oil of different varieties move closely together such that their price differential is stationary the tar results indicate strong evidence of threshold effects in the adjustment process to the long run equilibrium these findings suggest that crude oil prices are linked and thus at the very general level the oil market is one great pool adelman m a international oil agreements the energy journal 1984 5 1 9 however differences in the dynamics of adjustment suggest that within this one pool oil markets are not necessarily integrated in every time period and hence the dynamics of crude oil price differentials may not follow a stationary process at all times although the development of a liquid futures market around the crude oil benchmarks has helped make some distant markets more unified arbitrage is not costless or risk free and temporary breakdowns in the benchmarks can lead to decoupling of crude oil prices

a hitch hiker s guide to post brexit trade negotiations options and principles brexit will require the uk to negotiate new trade arrangements with the eu after summarizing the main options for future uk eu trade relations this article reviews the purpose of trade agreements we highlight that trade negotiations are a bargaining game between countries seeking to reap the gains from international coordination while conceding as little as possible to their negotiating partners this leads us to propose four principles the uk should adopt to guide its trade negotiating strategy i you get what you give ii where negotiations start from matters iii bargain from a position of power and iv invest in negotiating capacity