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Regionalism, Multilateralism, and Globalization. Jeffrey Bergstrand University of Notre Dame April 30, 2005. The Survey of Workers. Question 1 (Questions 1-16):

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regionalism multilateralism and globalization

Regionalism, Multilateralism, and Globalization

Jeffrey Bergstrand

University of Notre Dame

April 30, 2005

the survey of workers
The Survey of Workers
  • Question 1 (Questions 1-16):

In general, do you strongly favor, weakly favor, weakly oppose, strongly oppose policies aimed at increasing trade with Canada?

…… with France?

…… with China?

the survey of workers3
The Survey of Workers
  • Question 2 (Questions 17-32):

In general, do you strongly favor, weakly favor, weakly oppose, strongly oppose policies aimed at increasing investment with Canada?

…… with France?

…… with China?

the survey of workers4
The Survey of Workers
  • Question 3 (Questions 33-48):

In general, do you strongly favor, weakly favor, weakly oppose, strongly oppose policies aimed at increasing immigration with Canada?

…… with France?

…… with China?

the survey of firms
The Survey of Firms
  • Question 1 (Questions 1-16):

In general, do you strongly favor, weakly favor, weakly oppose, strongly oppose policies aimed at increasing trade with Canada?

…… with France?

…… with China?

the survey of firms6
The Survey of Firms
  • Question 2 (Questions 17-32):

In general, do you strongly favor, weakly favor, weakly oppose, strongly oppose policies aimed at increasing investment with Canada?

…… with France?

…… with China?

the survey of firms7
The Survey of Firms
  • Question 3 (Questions 33-48):

In general, do you strongly favor, weakly favor, weakly oppose, strongly oppose policies aimed at increasing immigration with Canada?

…… with France?

…… with China?

slide10
Create a Survey Instrument that is “Based on Theory.”
  • However, such a theory should reflect how consumers and firm leaders think.
slide11
Create a Survey Instrument that is “Based on Theory.”
  • However, such a theory should reflect how consumers and firm leaders think.
  • GE:

1. Market Access

2. Relative Costs

3. Trade and Investment Costs

theoretical model outline
Theoretical Model Outline

Goods

  • Differentiated final good
  • Homogeneous final good
  • Differentiated intermediates

Firm Structure

  • 3-plant and 2-plant HMNEs
  • 1-plant VMNEs
  • 1-plant NEs

Cost Structure

  • Plant vs. headquarters set-up costs (capital vs. skilled L)
  • Transaction costs (investment and trade)
key differences
Key Differences
  • Three Factors: Add Physical Capital
  • Three “Goods”: Add Intermediates (or Outsourcing)
  • Three Countries: Add ROW (in order to understand Bilateral Flows in a Multilateral World)
key implications
Key Implications

The implications from a three-dimension theory can be vastly different than that from a two-dimension theory.

Bilateral information provides much more heterogeneity of information than multilateral information.

ii goods and services regionalism and multilateralism
II. Goods and Services, Regionalism, and Multilateralism

Robert Lawrence (1996, p. 5):

The postwar experience with both multilateralism and regionalism has been mixed. On the one hand, the multilateral trading system has enjoyed spectacular success in lowering trade barriers on industrial products . . . . As the focus has shifted away from the relatively easy task of reducing barriers protecting industrial products, achieving agreement has become more difficult . . . . In many important areas, such as services and agriculture, liberalization has remained fairly limited.

the dilemma
The Dilemma
  • “Multilateralism” has effectively been a “second-best” policy. It has achieved wide breadth of country coverage, but more limited sectoral breadth (e.g., industrial goods).
  • “Regionalism,” of course, is also a second-best policy. Major regional trade accords (e.g., EU) have much less breadth of country coverage, but in many cases have achieved greater sectoral breadth (e.g., goods and services.)
why regionalism
Why Regionalism?
  • Ed Mansfield (2005, p. 2):

“More generally, greater attention needs to be focused on why state leaders have displayed a particular preference for entering preferential trade arrangements. One possibility is that they do so to liberalize trade when faced with domestic obstacles to reducing trade barriers on a unilateral or multilateral basis.”

goods vs services
Goods vs. Services
  • Services, historically, are more costly to trade than goods.
  • Services, historically, have been protected by governments from international competition more than goods.
key implications23
Key Implications
  • Economic Geography is not just critical to trade flows, investment flows, and migration flows. It is critical to the benefits and costs of trade policies.
iii panel data
III. Panel Data
  • Labor micro-econometrics has generated many insights into refining estimation of average treatment effects of policies on outcomes. The same problems likely exist for trade policies and consumer/firms’ trade attitudes. In the absence of a budget constraint, a panel approach could yield econometric estimates less obfuscated by omitted variables and selection bias issues.
iv various and sundry issues
IV. Various and Sundry Issues

1. Quantity vs. Quality

(Bemoaning politicians’ arguments that trade creates “more jobs.”)

2. Trade Liberalization vs. Technological Change

3. Short-Run Adjustment Costs vs. Long-Run Benefits of Trade