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  • Author: Gary Clyde Hufbauer, Jeffrey J. Schott, Yee Wong
  • Publication Date: 12-2004
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: The NAFTA agreement on agricultural trade consists of three bilateral agreements—between the United States and Mexico, the United States and Cana da, and Canada and Mexico. The US-Canada agreement largely carried into NAFTA the tariff and nontariff barrier rules that had been adopted in the Canada-US Free Trade Agreement (CUSFTA). Under CUSFTA, most agriculture tariffs between the United States and Canada were to be phased out by January 1998, and this schedule was adopted by NAFTA for US-Canada agricultural trade. However, Canada was allowed to maintain permanent tariff-rate-quota (TRQ) restrictions on imports of dairy, poultry, and eggs; and the United States was allowed to maintain TRQs on imports of sugar, dairy products, and peanuts from Canada (see table 1). Although a tariff snapback provision remains in effect until 2008, it has rarely been used by Canada. Agricultural trade between Mexico and Canada was limited by virtually the same restrictions. As might be expected, some agriculture trade associations favored NAFTA and others opposed. Box 1 summarizes the lineup of important trade associations.
  • Topic: Agriculture, Economics, International Trade and Finance
  • Political Geography: United States, Canada, North America, Mexico
  • Author: Gary Clyde Hufbauer, Jeffrey J. Schott, Yee Wong
  • Publication Date: 11-2004
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Building on the 1989 Canada-US Free Trade Agreement (CUSFTA), the NAFTA contains dispute settlement provisions in six separate areas. NAFTA Chapter 11 is designed to resolve investor-state disputes over property rights; Chapter 14 creates special provisions for handling disputes in the financial sector via the Chapter 20 dispute settlement process (DSP); Chapter 19 establishes a review mechanism to determine whether final antidumping and countervailing duty decisions made in domestic tribunals are consistent with national laws; and Chapter 20 provides government-to-government consultation, at the ministerial level, to resolve high-level disputes. In addition, the NAFTA partners created interstate dispute mechanisms regarding domestic environmental and labor laws under the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC), respectively. This chapter examines the first four dispute settlement systems; the NAAEC and NAALC systems are evaluated in the environment and labor chapters of this book.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States, Canada
  • Author: Adam S. Posen
  • Publication Date: 09-2004
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Japan's recovery is strong. Real GDP growth will exceed 4 percent this year and likely be 3 percent or higher in 2005 and perhaps even 2006. The Japanese economy has been growing solidly for the last five quarters (average real 3.2 percent annualized rate), and the pace is sustainable, given Japan's underlying potential growth rate (which has risen to 2 to 2.5 percent per year) and the combination of catch-up growth closing the current output gap and some reforms that will raise the growth rate for quarters to come (though not permanently). Indicators of domestic demand beyond capital investment are increasingly positive, including housing starts bottoming out, inventories drawing down, and diminished deflation. Moreover, on the external side, while China was the main source of export growth in 2003, the composition of exports has become more balanced this year and is widening beyond that seen in other recoveries. Just as in the United States and other developed economies, a sharp slowdown in Chinese growth and a sustained further increase in energy prices represent the primary risks to the outlook.
  • Topic: Development, Economics
  • Political Geography: United States, Japan, China, Israel, East Asia, Asia
  • Author: Morris Goldstein
  • Publication Date: 06-2004
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: During the past year, there has been considerable debate about, and much international criticism of, China's exchange rate and its currency regime. Yes, criticism of China in the United States would likely be more muted if the ongoing recovery were not so “jobless,” if employment in the US manufacturing sector had not (mainly for other reasons) declined so much in the three-year run-up to this presidential elect ion year, if so much attention were not focused on the very large bilateral US trade deficit with China instead of China's economically—more meaningful overall balance-of-payments position, and if the United States had not done such a poor job of improving its saving-investment imbalance—particularly in the public sector.
  • Topic: Economics, International Trade and Finance
  • Political Geography: United States, China, Asia
  • Author: Catherine L. Mann
  • Publication Date: 01-2004
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This essay considers the implications for sustainability of the US current account of widespread uptake of new economy services around the world. The main contribution of this paper is to estimate new income elasticities for US exports and imports of services that have become increasingly internationally tradable on account of the networked information technologies characteristic of the new economy. These elasticity estimates are then incorporated into a simple model of the US current account. Assumptions on the increase in global growth coming from widespread uptake of new economy services around the world are taken from other sources. The new estimates of income elasticities and the assumptions on global growth yield a trajectory for the US current account deficit that is compared to a base case without increased integration of new economy services in international trade and around the world. The paper concludes that although new economy services reduce the asymmetry in estimated income elasticities and contribute to raising global growth, reasonable estimates of these two structural improvements are not sufficient to stabilize the US current account deficit, in part because the share of new economy services in trade is still small.
  • Topic: Economics, International Trade and Finance, Political Economy
  • Political Geography: United States
  • Author: C. Fred Bergsten
  • Publication Date: 06-2003
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: The United States and Japan are the two largest national economies in the world. Since the early 1990s, they have been moving in opposite directions. The United States enjoyed an expansion of record duration from the end of the Gulf War in 1991 until early 2001, growing much faster than any other G-7 country and much faster than it had at any time since the Second World War. Japan's economy, by contrast, has been virtually stagnant since its financial bubble burst in the early 1990s and has clearly experienced its worst performance since its recovery from the ravages of the Pacific War.
  • Topic: Economics, International Trade and Finance
  • Political Geography: United States, Japan, Israel, East Asia
  • Author: Gary Hufbauer, Jeffrey J. Schott
  • Publication Date: 06-2003
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Drawing on the 1989 Canada-US Free Trade Agreement (CUSFTA), the North American Free Trade Agreement (NAFTA) extended dispute settlement provisions to cover more ground. In fact, within NAFTA there are six dispute settlement systems. NAFTA Chapter 11 is designed to resolve investor-state disputes over property rights; Chapter 14 creates special provisions for handling disputes in the financial sector via the Chapter 20 dispute settlement process (DSP); Chapter 19 establishes a review mechanism to determine whether final antidumping (AD) and countervailing duty (CVD) decisions made in domestic tribunals are consistent with national laws; and Chapter 20 provides government-to-government consultation, at the ministerial level, to resolve high-level disputes. In addition, the NAFTA partners created interstate dispute mechanisms regarding domestic environmental and labor laws under the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAAL C), respectively. This chapter examines the first four dispute settlement systems; the NAAEC and NAALC systems are evaluated elsewhere in this book.
  • Topic: Economics, International Trade and Finance
  • Political Geography: United States, Latin America, North America
  • Author: J. Bradford Jensen, Andrew B. Bernard, Peter K. Schott
  • Publication Date: 05-2003
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This paper examines the role of international trade in the reallocation of U.S. manufacturing activity within and across industries from 1977 to 1997. It introduces a new measure of industry exposure to international trade, motivated by the Heckscher-Ohlin model, which focuses on where imports originate rather than their overall level. Results demonstrate that plant survival as well as output and employment growth are negatively associated with the share of industry imports sourced from the world's lowest-wage countries. Within industries, activity is reallocated towards capital-intensive plants. Plants are also more likely to alter their product mix (i.e. switch industries) in response to trade with low-wage countries. Plants altering their product mix switch to industries that are more capital-and skill-intensive.
  • Topic: Economics, Government, International Trade and Finance
  • Political Geography: United States
  • Author: J. Bradford Jensen, Andrew B. Bernard, Peter K. Schott
  • Publication Date: 05-2003
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This paper examines the response of industries and firms to changes in trade costs. Several new firm-level models of international trade with heterogeneous firms predict that industry productivity will rise as trade costs fall due to the reallocation of activity across plants within an industry. Using disaggregated U.S. import data, we create a new measure of trade costs over time and industries. As the models predict, productivity growth is faster in industries with falling trade costs. We also find evidence supporting the major hypotheses of the heterogenous- firm models. Plants in industries with falling trade costs are more likely to die or become exporters. Existing exporters increase their shipments abroad. The results do not apply equally across all sectors but are strongest for industries most likely to be producing horizontally-differentiated tradeable goods.
  • Topic: Economics, Government, International Trade and Finance
  • Political Geography: United States
  • Author: Edward M. Graham
  • Publication Date: 11-2002
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This working paper examines, from an economic perspective, the treatment of takings (property rights) under NAFTA Chapter 11. To be more precise, the paper examines the treatment of takings as environmental groups fear might be established as the result of investor dispute settlement under this chapter; as of the date of this writing, most of the cases that have the potential to be precedent-setting have not been finally decided, albeit one—the Metalclad case—has been decided in a way that is unsettling to environmentalists. The author attempts to determine whether requiring public compensation of private investors for diminishment of value resulting from government regulatory action has the potential of achieving anything close to an “optimal” outcome from a societal cost-benefit point of view (defined below). This determination makes use of tools of economic analysis and, in particular, Coase's theorem regarding achieving optimal outcomes where negative externalities are present. The overall conclusion is that, although Coase's theorem can be invoked to argue that such an outcome can be achieved either via a “polluter pays” approach or a “public pays” (or “public must compensate”) approach, as a matter of practical application, the first approach is preferable to the second for a number of reasons, including government “fiscal illusion” and “moral hazard.”
  • Topic: Economics, International Organization
  • Political Geography: United States, Latin America, North America