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11. A Global Race for Free Trade Agreements

Author:
Arne Melchior
Publication Date:
11-2003
Content Type:
Working Paper
Institution:
Norwegian Institute of International Affairs
Abstract:
The article examines the currently expanding worldwide network of bilateral free trade agreements. Following regional integration in Europe and later the Americas, the process if East Asia has accelerated from 2002. A Distinctive feature of the current stage in the expansion of FTAs beyond geographical regions and into global space, hence challenging WTOs supremacy on inter-continental trade rules. Setbacks in the WTO Doha Round may stimulate a further move towards «global bilateralism». The more such agreements in place, the greater is the incentive for new ones. Even if political obstacles hinder some agreements, the process is currently accelerating. While it is rational for countries to pursue such agreements, they should in parallel work for multilateral trade liberalisation in order to reduce the discriminatory impact of FTAs. This is needed if we are to avoid that «Most Favoured Nation» treatment under the WTO actually becomes «Least Favoured Nation» treatment: Rules that only apply to countries that are left outside the «free trade race».
Topic:
Economics, Globalization, International Trade and Finance, and Politics
Political Geography:
America, Europe, and East Asia

12. Industrial heterogeneity of the ICT industry—An exploratory survey on Norwegian firms

Author:
Arne Melchior
Publication Date:
04-2003
Content Type:
Working Paper
Institution:
Norwegian Institute of International Affairs
Abstract:
The paper presents evidence from a limited survey undertaken among Norwegian ICT firms in 2001, supplemented with other statistical evidence. Corresponding to the limited production of ICT hardware in Norway, the hardware firms covered by the survey were dominated by sales outlets of foreign firms. While these firms are on average small and with a modest skill requirement, some of them are larger and more skill-intensive due to the provision of related software and services. Within-firm learning, higher education as well as sector- and industry-wide knowledge externalities generally matter to IT firms. Education is ranked third, and is more important for software and services than for hardware. Knowledge externalities are less important for foreign-owned firms. 2/3 of the firms surveyed produce various combinations of hardware, software and services, with software+services as the most frequent combination, composed by firms that are on average clearly larger than the sample average. Such firms rely more on learning within the firms and less on sectorwide knowledge externalities than other IT firms. Adaptation of products to individual customers is important for many IT goods, and implies that e.g. imported software frequently generates substantial domestic employment in related services. The survey tentatively suggests that such complementarities in production may be an important aspect of IT production. Norwegian IT exports are generally small, but pure software producers in the sample had larger exports.
Topic:
Economics, Education, Industrial Policy, and International Trade and Finance
Political Geography:
Norway

13. Sunk costs in the exporting activity: Implications for international trade and specialisation

Author:
Arne Melchior
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
Norwegian Institute of International Affairs
Abstract:
International trade costs may be sunk and not proportional to sales. The paper explores this theoretically, by allowing firms to invest in sales channels or marketing in order to increase demand in each market. The returns to such investments will, ceteris paribus, be higher in markets with lower variable trade costs (e.g. transport costs). Firms will therefore invest and sell more at home than in foreign markets, and more in foreign markets with low variable trade costs. Sunk export costs will therefore amplify the trade-reducing impact of other trade barriers, and dampen the «home market effect» whereby large countries tend to be net exporters of differentiated goods.
Topic:
Economics, Emerging Markets, Industrial Policy, and International Trade and Finance

14. Globalisation and industrial location: The impact of trade policy when geography matters

Author:
Arne Melchior
Publication Date:
12-2000
Content Type:
Working Paper
Institution:
Norwegian Institute of International Affairs
Abstract:
The paper shows how industrial location and welfare depends on “most-favoured nation” (MFN) versus distance-related trade barriers, using a monopolistic competition model with regions located along a “Hotelling” line or on a square plain. Manufacturing production will cluster close to the periphery if transport costs are relatively high, but in central areas if MFN barriers are relatively high. The peripheries will be at a disadvantage, which increases when trade barriers are reduced. When countries or trading blocs are formed, a core-periphery pattern emerges within each of them. While lower transport costs create more centralisation within countries, lower MFN barriers between countries have the opposite effect.
Topic:
Economics, Globalization, Industrial Policy, and International Trade and Finance