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JONG-EUN LEE
OECD, Economic Department
(SEJONG UNIVERSITY, Seoul, KOREA)
Trade disputes and Macroeconomics
Questions I want to answer
Macroeconomic factors matter in initiation of Trade Disputes?
Protectionism vs. case-specific reasonHigh/Middle/Low income countriesWorld vs. national variables
Why is it interesting?
Provide a useful policy perspectives (not dragged by cliché or bored with
theories) Deeper understanding for trade disputes
Coverage
History
Great Depression/ Smoot-Hawley Tariff Act1970s oil crisis/creeping protectionism1980s ArgentinaAsian Financial CrisisDemocrat and RepublicanFinancial crisis in 2008/ tariff, anti-dumping,
subsidies and bailout packages Time to re-embrace globalism
WTO Dispute Settlement Mechanism
Fairness and EnforcementTwo tiersSub-Saharan countries
Real GDP per capita
Complainant countries
Total number
of initiation
s
High income
y11456
Antigua and Barbuda[1] , Australia[7],Canada[29], Czech Republic[1],EC[79],Hong Kong, China[1],
Hungary[5],Japan[13],Korea[13],
New Zealand[7],Norway[3],Singapore[1],Switzerland[4], Chinese Taipei[3],United States[90]
[257]
Middle income
11455936 y
Argentina[14],Brazil[24],Chile[11],
Costa Rica[4],Malaysia[1], Mexico[19],Panama[5],Poland[3], Turkey[2],Uruguay[1],Venezuela[1]
[85]
Low income
935y
Bangladesh[1],China[3],Colombia[4],Ecuador[3],Guatemala[6], Honduras[6],India[18],Indonesia[4],Nicaragua[1],Pakistan[3],Peru[2]
, Philippines[5],Sri Lanka[1],Thailand[13] [68]
High incomey11456
Middle income11455936 y
Low income935y
Complainant countriesTotal number
ofInitiations
Antigua and Barbuda[1],Australia[7],Canada[29], Czech Republic[1],EC[79],Hong Kong, China[1],
Hungary[5],Japan[13],Korea[13],New Zealand[7],Norway[3],Singapore[1],
Switzerland[4],Chinese Taipei[3],United States[90]
[257]
Argentina[14],Brazil[24],Chile[11],Costa Rica[4],Malaysia[1], Mexico[19],
Panama[5], Poland[3], Turkey[2],Uruguay[1],Venezuela[1]
[85]
Bangladesh[1],China[3],Colombia[4],Ecuador[3],Guatemala[6], Honduras[6],
India[18],Indonesia[4],Nicaragua[1],Pakistan[3],Peru[2],Philippines[5],
Sri Lanka[1],Thailand[13]
[68]
Year Trade dispute initiations
% change OECD total
real GDP growth%
1995 25 2.5
1996 39 56 3
1997 50 28.20513 3.6
1998 41 -18 2.6
1999 30 -26.8293 3.3
2000 34 13.33333 3.9
2001 23 -32.3529 1.2
2002 37 60.86957 1.6
2003 26 -29.7297 1.9
2004 19 -26.9231 3.2
2005 12 -36.8421 2.5
2006 20 66.66667 2.9
2007 13 -35 2.7
2008 17 30.76923 1.4
total 386
As of 17 December 2008
International Macroeconomic Theory
The Mundell Fleming ModelThe Dornbusch-Fischer ModelComputable General EquilibriumDynamic Stochastic General Equilibrium - New Keynesian DSGE - Real Business Cycle
Previous studies
Grossman and Helpman(1994): political equilibrium where elected gov’t and interest groups interact in trade policy-making
Gawande and Bandyopadhyay(2000) Jallab(2007): Anti-dumping cases with
industry specific variables. ProbitMah and Kim(2006) Jensen(2007)
Probit
titiN
ntitti XXWMDispute ,1,1,1
2110, (1)
High-income Middle-income Low-income
Explanatory variables Change in the probability (p-value)
World Import -2.25e-8(0.104) 6e-10(0.47) 8.62e-9(0.07)*
GDP 4.16e-11(0.01)** -3.36e-12(0.05)* -1.03e-11(0.38)
Production 2.35e-6(0.01)** -5.88e-8(0.41) -1.28e-6(0.01)**
Unemployment 2.79e-6(0.46) -4.82e-7(0.05)* 1.21e-6(0.42)
Real effective exchange rate 6.3e-6(0.00)*** -3.73e-7(0.00)*** -2.68e-8(0.96)
CPI -5.6e-7(0.44) 2.95e-8(0.51) 1.52e-7(0.64)
Balance on goods and services
% of GDP 0.002(0.00)*** -0.00006(0.004)*** -0.0007(0.00)***
Overall balance
% of GDP 0.0007(0.34) -0.00004(0.28) -0.0003(0.27)
R-squared 0.77 0.59 0.67
Conclusion
Macroeconomic environments matter.
High/Middle/Low show different patterns
Nation-wide macro variables more significant than world-wide macro variables.