An alternative to reduction of surface pressure to sea level

The pitfalls of the present method of reducing surface pressure to sea level are reviewed, and an alternative, adjusted pressure, P, is proposed. P is obtained from solution of a Poisson equation over a continental region, using the simplest boundary condition along the perimeter or coastline where P equals the sea level pressure. The use of P would avoid the empiricisms and disadvantages of pressure reduction to sea level, and would produce surface pressure charts which depict the true geostrophic wind at the surface

Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?

This paper derives bilateral trade from two cases of the Heckscher-Ohlin Model, both also representing a variety of other models as well. First is frictionless trade, in which the absence of all impediments to trade in homogeneous products causes producers and consumers to be indifferent among trading partners. Resolving this indifference randomly, expected trade flows correspond exactly to the simple frictionless gravity equation if preferences are identical and homothetic, or if demands are uncorrelated with supplies, and they depart from the gravity equation systematically when there are such correlations. In the second case, countries produce distinct goods, as in the H-O Model with complete specialization or a variety of other models, and preferences are either Cobb-Douglas or CES. Here trade tends to the standard gravity equation with trade declining in distance, with departures from it that depend on relative transport costs. Conclusions are, first, that even a simple gravity equation can be derived from standard trade theories, and second, that because the gravity equation characterizes many models, its use to test any of them is suspect.

How Robust is Comparative Advantage?

This paper reviews the theoretical development of the concept of comparative advantage, starting with the two-good model of Ricardo and the two-good extension and reinterpretation by Haberler. In both, the presence of comparative advantage provides the scope for countries to gain from trade by specializing, and the pattern of that trade is explained by the pattern of comparative advantage. These strong results of the two-good model can be extended under certain circumstances to multiple goods and countries, but under more general assumptions such strong results no longer are assured. Instead one can derive much weaker results, usually in the form of correlations between comparative advantage and trade, and these weaker results hold in a much wider variety of circumstances. The paper examines those assumptions that permit such generalizations, but then also examines when those assumptions are most likely to fail, and what happens as a result.

Trade and location: A moving example motivated by Japan

If trade costs matter for trade, and if distance matters for at least some trade costs, then location matters for trade. This may be especially important for Japan, given its distance from other developed countries and proximity to a number of developing countries. This paper explores the relationship between location and trade in a simple partial equilibrium model of a single homogeneous good that may be produced and traded by three countries located on a plane. Six equilibrium regimes arise in this model, depending on trade costs compared to differences in autarky prices. The results are the following: For a country whose autarky price lies between those of the other countries, it will export the good if it is close to the high-cost country, import it if it is close to the low-cost country, and not trade it at all if it is too far from both. The location of such a country is also important for the trade of the other countries. Finally, although a fall in trade costs increases, up to a point, the geographic scope for a country to trade, beyond that point it cannot make trade possible for an intermediate-cost country that is too remote to trade. The results suggest that Japan, with factor endowments similar to other developed countries but located closer to many developing countries, should dominate trade with its developing-country neighbors.Trade costs, Location

A Trade Theorist’s Take on Skilled-Labor Outsourcing

Recent concern has attended the phenomenon of skilled-labor outsourcing, in which firms in the U.S. and other advanced countries have drawn upon the services of skilled workers in developing countries for activities that they used to do at home. Motivated by this and the fact that such outsourcing would be hard to explain without technological differences, this paper explores theoretically a simple story of outsourcing in which factor proportions and technology interact across activities performed within industries or firms. The model has a single sector in which a final output is produced from two activities that differ in their intensity of use of skilled and unskilled labor. In one activity, the developed world (North) has a technical advantage. In the other it does not, but a new regime makes it possible to outsource it to the developing world (South). The paper shows that this outsourcing, if the countries continue to diversify, causes the wage of unskilled labor in North to fall below that in South. However, if factor endowments differ enough to lead to specialization, then it becomes possible for both factors in North to gain.Neoclassical Trade Models

International provision of trade services, trade, and fragmentation

The author examines the special role that trade liberalization in services industries can play in stimulating trade in both services, and goods. International trade in goods requires inputs from such trade services as transportation, insurance, and finance, for example. Restrictions on services across borders, and within foreign countries add costs, and barriers to international trade. Liberalizing trade in services could also facilitate trade in goods, providing more benefits than one might expect from analysis merely of the services trade. To emphasize the point, the author notes that the benefits for trade are arguably enhanced by the phenomenon of fragmentation. The more that production processes become split across locations, with the fragments tied together, and coordinated by various trade services, the greater the gains from reductions in the costs of services. The incentives for such fragmentation can be greater across countries, than within countries, because of the greater differences in factor prices, and technologies. But the service costs of international fragmentation can also be larger, especially if regulations, and restrictions impede the international provision of services. As a result, trade liberalization in services can stimulate the fragmentation of production of both goods, and services, thus increasing international trade, and the gains from trade even further. Since fragmentation seems to characterize an increasing portion of world specialization, the importance of service liberalization is growing apace.Economic Theory&Research,Environmental Economics&Policies,Trade and Services,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Common Carriers Industry

Some Reflections on Nurkse's "Patterns of Trade and Development"

We will never know how Nurkse'd5s views of trade and development would have evolved, had he been able to observe the contrasting experiences of developing countries over subsequent years. However, with the benefit of hindsight, we can ask how well the policies and the performances of developing countries corresponded to the expectations that Nurkse laid out in his essay.

Tariffication in Services

In this paper I lay out the case, as I see it, for tariffication of services. I argue that the prospects for achieving significant liberalization of the international provision of services will be greatly improved if something like this proposal is followed. By amending the GATS to permit countries to tax foreign providers of services in a manner that is roughly analogous to tariffs on imported goods, countries will be encouraged to bring most categories of services under GATS discipline. Of course, that discipline will be much weakened by doing this, since the taxes may be set so high that little if any trade will occur. However, once this is done, it will become possible for countries to negotiate reductions in these service tariffs in exactly the same way that they have done for goods over the last fifty years. Considering the amount of time it has taken to achieve significant liberalization of trade in goods, we should not expect to achieve it in services any time soon. However, by starting the process with tariffication, we place services upon the same well-traveled road that has been followed before, and we can be more confident that the future negotiating process will take us where we want to go, even if we cannot know how soon we will get there.

Who Makes the Rules of Globalization?

In this paper I argue that profit-maximizing firms, even though they contribute to social welfare when they compete in the market, may not do so when they influence the political process. In particular, I suggest, through several examples from both the real world and from economic theory, that corporations have played a significant role in the formulation of the rules of the international trading system. They did this in the formation of the WTO, where they were responsible for the expansion to cover both intellectual property and services. And they do this in preferential trading arrangements such as the NAFTA, where they inserted the notorious Chapter 11 and specified rules of origin for automotive products. All of this is quite consistent with economic theory, including the literature on the political economy of trade policy. I also use a simple duopoly model to illustrate a domestic firm’s interest in setting rules of origin. The corporate influence on rules need not be bad, but there is no reason why it should be good either, as these examples illustrate.political economy of trade, trade institutions, globalisation, globalization