In this paper we combine the tariff evasion analysis of Fisman and Wei (2004) with Rauch and Trindade’s (2002) study of Chinese trade networks. Chinese networks are known to act as trade catalysts by enforcing contracts and providing market information. As tariff evasion occurs outside the law, market information is scant and formal institutions inexistent, rendering networks the more important. We find robust evidence that Chinese networks, proxied by ethnic Chinese migrant populations, increase tariff evasion, i.e. the tariff semi-elasticity of Chinese missing imports. We suggest the effects takes place through matching of illicit-minded traders, identification of corrupt customs agents and enforcement of informal contracts.
This paper provides new evidence on the rise of the dollar as an international currency, focusing on its role in the conduct of trade and the provision of trade credit. We show that the shift to the dollar occurred much earlier than conventionally supposed: during and immediately after World War I. Not just market forces but also policy support – the Fed in its role as market maker – was important for the dollar’s overtaking of sterling as the leading international currency. On balance, this experience challenges the popular notion of international currency status as being determined mainly by market size. It suggests that the popular image of strongly increasing returns and pervasive network externalities leaving room for only one monetary technology is misleading.
This paper offers a theory of conditionality lending in 19th century international capital markets. We argue that ownership of reputation signals by prestigious banks rendered them able and willing to monitor government borrowing. Monitoring was a source of rent, and it led bankers to support countries facing liquidity crises in a manner similar to modern descriptions of “relationship” lending to corporate clients by “parent” banks. Prestigious bankers’ ability to implement conditionality loans and monitor countries’ financial policies also enabled them to deal with solvency. We find that, compared with prestigious bankers, bondholders’ committees had neither the tools nor the prestige required for effectively dealing with defaulters. Hence such committees were far less important than previous research has claimed.
This paper investigates whether the India-Sri Lanka Free Trade Agreement (ISLFTA) has had trade creation or trade diversion effects on the rest of the World. The method used resembles the one used by Romalis (2005) to study NAFTA. In order to use the variations in tariff at the product level, we use six digit HS classification of products. We construct seven panel data sets for the period 1996 to 2006. We use the commodity and time variation in the tariff preferences allowed under ISLFTA, to identify its effect on sourcing of different products from ‗control country‘ to ISLFTA region. Using fixed effects model we find that the ISLFTA has been minimally trade creating for control countries.
We analyse the impact of relaxing rules of origin (ROOs) in a simple setting with heterogeneous firms that buy intermediate inputs from domestic and foreign sources. In particular, we consider the impact of switching from bilateral to diagonal cumulation when using preferences (instead of paying the MFN tariff) involving the respect of rules of origin. We find that relaxing the restrictiveness of the ROOs leads the least productive exporters to stop exporting. The empirical part confirms these results. We use the most recent techniques developed by Helpman, Melitz and Rubinstein (2007) on highly disaggregated data (HS6 digit) to analyse the effects of the introduction of the Pan-European Cumulation System (PECS). We find that PECS reverses the negative impact of strict ROOs on intermediate trade which turns positive as a consequence of introducing diagonal rules of cumulation (ROCs).
