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Abstract

This article quantifies the effects of the Latin American Integration Association (LAIA) and the Southern Common Market (Mercosur) on the trade of intermediate goods and also on the trade of final goods. It is the first article to investigate whether increasing imports of intermediate goods from different regions to Latin America have led to higher exports of final and intermediate goods. The article uses sectoral data for trade in goods between 11 LAIA members over the period 1991-2008. The main results indicate evidence of increasing regional production networks, which have strengthened in the 2000s. Moreover, the findings show evidence of the emergence of global production networks, especially with respect to intermediate imports from China.

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... The authors highlight the increasing importance of a Pan-Pacific link and a possible creation of a China-Brazil-Mexico production network. Florensa et al. (2015) produced the first paper that used a quantitative framework to analyze economic integration and production fragmentation in Latin America. Using trade data classified according to the Broad Economic Categories (BEC), the authors analyzed the impact that changes in import of intermediate goods from different world regions had in the development of Latin America's regional trade. ...
... Second, different from the previous papers on Latin American production networks that use aggregated intermediate manufacture data, we focus our analysis on a specific industry and use disaggregated data. Third, in this paper we adopt a model similar to Florensa et al. (2015), but estimate it using the PPML method instead of the ordinary least squares (OLS) to control the zero trade values and the data heteroscedasticity. ...
... To quantify the impact that changes in the structural composition of parts and components suppliers had on the development of the intra-bloc machinery trade, we follow the methodology proposed by Florensa et al. (2015), an augmented gravity model that accounts for the effect of the import of intermediate products. The adoption of such a framework is justified by the fact that, different from the standard gravity framework, this version accounts for the effect that the import of parts and components of a given sector from a given supplier have on the Latin American intra-bloc exports. ...
Article
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This paper investigates the effects that the increase in the importation of machinery parts and components and the changes in the supplier composition had in the trade of final products and parts and components inside Latin America. In our analysis, we consider these effects according to two dimensions: a quantity one that captures whether there was an intensification of trade and a quality one that captures changes in the sophistication of the traded goods. The research employs disaggregated trade data obtained from UN Comtrade for 17 Latin American countries between 1996 and 2011. We find evidence that an increase in the importation of parts and components from Latin America had positive impacts on both the quantity and quality dimensions. Subregional heterogeneities revealed that, in general, imports from East Asia had positive effects on the quantity dimension, nurturing the expansion of machinery production networks inside Latin America, and on the quality dimension, increasing the sophistication of the products traded inside Latin America, especially for Mercosur member exports. Imports from North America had positive quantity effects, especially for exports of countries from the Andean Community, Central America, Chile, and Mexico.
... First, this is the first empirical analysis examining the effects of trade continuity on global production sharing at the disaggregated level. The previous empirical works have used the lagged imports of intermediate goods to account for global production sharing at the aggregate level (Choong and Khalifah 2019;Florensa et al. 2015;Martinez-Zarzoso, Voicu, and Vidovic 2015). Even 3 We provide the list of countries used in the sample in Appendix AI. ...
... Hence, in the second stage of analysis, we have two variables of interest. Florensa et al. (2015) argued that regional integration and production networks enhance intermediate goods imports at the regional level. However, this study does not address the cross-country nature of production networks. ...
Article
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This article examines the effect of trade continuity, measured by the lagged imports of intermediate goods, on global production sharing in emerging economies. We estimate an augmented gravity model using the Poisson pseudo maximum likelihood method with a panel dataset of bilateral exports of 29 emerging economies from 2004 to 2017. Our results show that trade continuity positively affects global production sharing. We provide n­ew empirical evide­ce that trade con­tin­uity is process-specific a­nd may vary betwee­n parts a­nd compon­e­nts an­d fi­nal assembly stages. Our fi­ndings have policy implicatio­s o­n the process-specific ­ature of global production­ shari­ng. KEYWORDS: Global production sharing; parts and components; trade continuity; gravity model; Poisson pseudo maximum likelihood; emerging economies
... en artículos de consumo. En Florensa et al. (2015a) se demuestra, por tanto, que la creación de redes productivas ha sido escasa y de poca importancia si se la compara con lo alcanzado en otros procesos de integración como la Unión Europea o la Asociación de Naciones del Sudeste Asiático. ...
... Lo anterior puede traducirse en un incremento de la participación de las empresas en los mercados internacionales.La firma de un acuerdo de integración regional puede provocar la fragmentación del proceso productivo, también conocido como redes de producción regional y global. EnFlorensa et al. (2015a) se testearon dos hipótesis principales. En relación con los procesos de integración comercial más importantes de Latinoamérica, el Mercosur y el ALADI, la hipótesis 1 (H1), representada en la parte inferior del Gráfico 2, considera que la liberalización comercial en los países de Latinoamérica (LA) tiene un impacto positivo sobre el desarrollo de las redes de producción regional. ...
Article
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The central issue to be addressed in this article is the measurement of the causes and effects of integration agreements in Latin America. The role of integration of two trade agreements, LAIA and Mercosur, in value chains or production networks, in exports of goods, as well as the degree of depth and institutional quality of these trade agreements are studied. In this analysis, a distinction is made between the intensive margin and the extensive margin of trade. Finally, the factors contributing to creating or strengthening trade agreements in Latin America, by distinguishing between economic, geographic, political and institutional determinants, are analyzed. JEL Code: F14; F15; F50. (In Spanish)
... 9 We expect a negative sign for TC. Next, following Florensa et al. (2015), we include the real bilateral exchange rate (RER) to capture the price fluctuations in the domestic and international markets and measure international competitiveness. Specifically, we expect RER to have a weaker link in intermediate goods exports (Athukorala et al., 2017). ...
... Following Florensa et al. (2015), we expect that an increase in this variable is indicative of depreciation in the exchange rate and improvement in the exports. ...
Article
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This study examines the trade effects of the Eurasian Economic Union on global production sharing. We use a panel dataset of bilateral exports of intermediate goods, parts and components and final assembly for 12 Eurasian countries with 28 partners for 2000–18. We estimate a gravity model using the Poisson Pseudo Maximum Likelihood method to mitigate zero trade values and heteroskedasticity issues. Our analysis provides new empirical evidence on significant net trade creation effects of 111% in intermediate goods exports due to EAEU formation. Our findings also highlight that a substantial share of the increase in intermediate goods exports originates from trade creation in final assembly exports while parts and components show net trade diversion effects. Further, a country-level analysis reveals that the trade effects of EAEU are heterogeneous across all the members, with Armenia and the Russian Federation benefiting the most and the Kyrgyz Republic benefiting the least from the EAEU formation. Our study has important policy implications on promoting production sharing in the Eurasian region and hence remains of interest to policymakers.
... However, a number of authors (e.g., Baier & Bergstrand, 2007) claim that in a panel data setting, multilateral resistance is time-varying because the factors that affect international prices change over time and recommend adding time-variant MRT to the gravity model. We could think of adding origin-and-time and destination-and-time dummy variables that vary every 5 years and account for MRT (e.g., in the spirit of Gylfason et al., 2015 andFlorensa, M arquez-Ramos, Mart ınez-Zarzoso, &Recalde, 2015). The main reason for this choice is that the governance indicators vary by country and year, and in order to account for their effects on trade, we would like to retain its short-run variability, while controlling for other factors that are more persistent such as tastes, cultural factors and business cycles. ...
... However, a number of authors (e.g., Baier & Bergstrand, 2007) claim that in a panel data setting, multilateral resistance is time-varying because the factors that affect international prices change over time and recommend adding time-variant MRT to the gravity model. We could think of adding origin-and-time and destination-and-time dummy variables that vary every 5 years and account for MRT (e.g., in the spirit of Gylfason et al., 2015 andFlorensa, M arquez-Ramos, Mart ınez-Zarzoso, &Recalde, 2015). The main reason for this choice is that the governance indicators vary by country and year, and in order to account for their effects on trade, we would like to retain its short-run variability, while controlling for other factors that are more persistent such as tastes, cultural factors and business cycles. ...
Article
This paper aims to analyse whether better governance rewards economic performance and facilitates the integration of the Middle East and North Africa (MENA) region into the world economy. In comparison with other regions in the world economy, MENA countries suffer from important institutional deficiencies, which generate insecurity and difficult international transactions. Despite this fact, the relationship between trade and institutional quality in MENA countries remains unexplored. A gravity model of trade augmented with governance indicators is estimated for the exports of 19 MENA countries, their 189 trading partners and for all exporters in the period from 1996 to 2013. The main results indicate that improvements in five of the six governance indicators increase exports from MENA countries, whereas better governance in destination countries does not affect MENA exports. Instead, each of the six governance indicators used has a positive effect on bilateral trade for the entire sample of exporters (189). Moreover, the effect of country-pair similarity in governance indicators suggests that a similar level of regulatory quality and rule of law in exporting and importing countries increases exports from MENA countries. Similarities in voice and accountability also foster exports for the average exporter, but not for MENA exporters.
... Sanjeev Vasudevan http://orcid.org/0000-0001-7977-2748 According to Florensa et al. (2015), an increase in RER indicates depreciation in the exchange rate and a positive impact on exports. Robust standard errors are in parentheses. ...
... We constructed the RER followingFlorensa et al. (2015). The construction is detailed at the appendix. ...
Article
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This study examines the effects of the Eurasian Economic Union (EAEU) on global production sharing and trade in parts and components. With a panel dataset of disaggregated bilateral exports of EAEU members and 28 partners, we estimate an augmented gravity model for 2010–2017. To mitigate endogeneity issues, we employ the Hausman and Taylor Estimator. The study has two important findings. First, there are significant trade diversion effects on the exports of parts and components. Second, the formation of EAEU has resulted in a reduction in intra-bloc exports. In addition to these, we find that market size, inter-country differentials of income, business-friendly climate, and cultural similarities are the other significant determinants of bilateral trade. Based on the empirical analysis, we propose that the EAEU normalise the Common External Tariff below the current level to minimise trade diversion.
... Goldberg, Khandelwal, Pavcnik, and Topalova (2010) indicate that new products should be introduced by domestic firms at an average lower input tariff of 31%. Several discussions on tariff changes in exported or imported volumes (Amiti & Konings, 2007;Debaere & Mostashari, 2010;Hayakawa, 2013) and the reduction of tariffs in production networks (Florensa, Márquez-Ramos, Martínez-Zarzoso, & Recalde, 2015;Hayakawa, 2014) are studied. Yet, in practice, we still lack reliable estimates of the effect of tariff liberalization on trade relationships, and this article attempts to fill this gap. ...
... 16 The log of the tariff is presented as ln (1 + Tariff ). See Hayakawa (2013) and Florensa et al. (2015). 17 To compare the differences in survival rates for distinct types of products, we use the log-rank test to verify whether significant differences exist; our tests are statistically significant and robust. ...
... This, in turn has fostered the participation of firms in regional and global value chains. The bulk of this research has looked at the EU (Blázquez et al. 2013;Curran et al. 2019), or OECD countries more broadly (Gereffi 1999;Sturgeon et al. 2008), although there is increasing scholarship in the Americas (Arndt 2004;Florensa et al. 2015) and Asia (Kimura and Obashi 2011 ; . Analysis highlights the importance of GVCs to trade globally. ...
Chapter
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A key change in the field of international trade in recent decades is the growing interconnectedness of geographically dispersed trade and production patterns, which increasingly take place within so-called global value chains (GVCs). In this Chapter we discuss these changes in international trade and production, why they occurred and what role GVCs have played. We then show how GVCs have also changed the politics of trade and, as such, the nature and outcomes of trade disputes. Firstly, the position of firms within GVCs has often become a more important determinant of their trade preferences than their nationality. In addition, as GVC structures can be adjusted in response to trade restrictions, trade wars have become more difficult to 'win'. We also discuss how GVC trade has become increasingly controversial and that this backlash against GVCs and globalization more broadly, has played a key role in the fuelling of trade wars.
... This is because falsified prices of differentiated products are difficult for competent customs officials to 4 Jones et al. (2005), Athukorala and Yamashita (2006) Ando and Kimura (2013), and Obashi and Kimura (2017) mainly emphasize that parts and components are crucial factors in the formation of production networks. Hayakawa (2014), Florensa et al. (2015), and Lin (2015) have investigated the effect of tariff rates on production networks and have indicated that the reduction of tariffs would not only increase trade flow but also strengthen the trade relationship closely. 5 Athukorala (2011) indicate that East Asia is the most striking example of international production and distribution networks because of more extensive and wider trade and a magnitude of production unmatched elsewhere in the world. ...
... Secondly, PTAs offer firms the opportunity to move (stages of) production across borders and, as such, to take advantage of cross-national differences in factor endowments (Arndt 2004;Florensa et al. 2015). ...
... La creación de nuevos acuerdos podría no derivar en el modelo de apertura al mundo esperado, y en el consiguiente aumento del comercio internacional y del crecimiento económico, si no se tiene en cuenta la necesidad de una correcta coordinación en materia de integración económica en la región.13 Para un análisis sobre la producción en red de América Latina, véaseFlorensa et al, 2015b. ...
Article
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This paper studies the dynamics of the economic integration process in Latin America and analyzes its determinants in different points of time during 1962-2009. A discrete choice model is estimated, in which the dependent variable is the existence of an integration agreement between two countries, while the explanatory variables are classified into economic, geographic, political and institutional factors. The main findings show that economic and geographical factors are important in explaining why countries sign trade integration agreements, although this importance is time sensitive. In addition, results suggest that political and institutional factors play an important role in integration strategies. (In Spanish)
... Si miramos, por ejemplo, la literatura sobre los países en desarrollo de Latinoamérica, ha sido evidente la inclinación en las últimas décadas por la adopción del marco conceptual de CGV (Giuliani et al., 2005a;Pietrobelli y Rabellotti, 2007;Kosakoff y López, 2008;López et al., 2009;Prochnik, 2010;Hernández et al., 2014;Gereffi, 2015), pero los aportes desde el enfoque de RGP han pasado mayormente desapercibidos hasta ahora, lo cual en cierta medida ha tendido a limitar su aplicación específica al análisis de las desigualdades territoriales. Aunque en algunos trabajos recientes aparecen menciones a las redes globales de producción, no se presenta un planteo claro que diferencie al enfoque de RGP del de CGV, o bien se alterna el uso de la terminología como si representasen exactamente lo mismo (ver Pozas et al., 2010;Blandón López, 2015;Florensa et al., 2015). Por otro lado, varios autores han destacado la necesidad de compatibilizar, enriquecer e integrar eclécticamente los marcos analíticos de CGV y RGP (Parrilli et al., 2013;Fold, 2014;Neilson et al., 2014). ...
Article
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En paralelo a la globalización han aumentado tanto la desigualdad en general como, en particular, las disparidades territoriales en los países en desarrollo. Frente a estos nuevos retos, el presente artículo ofrece una (re)visión integradora de los enfoques de cadenas globales de valor y redes globales de producción, a modo de contribución para el análisis de las desigualdades regionales. Mediante un balance de sus fortalezas y debilidades, sostenemos que ambos enfoques pueden complementarse y enriquecerse mutuamente, de forma tal de desentrañar los distintos factores que median la compleja relación entre globalización y desarrollo regional desigual.
... La creación de nuevos acuerdos podría no derivar en el modelo de apertura al mundo esperado, y en el consiguiente aumento del comercio internacional y del crecimiento económico, si no se tiene en cuenta la necesidad de una correcta coordinación en materia de integración económica en la región.13 Para un análisis sobre la producción en red de América Latina, véaseFlorensa et al, 2015b. ...
Article
Este artículo estudia la dinámica del proceso de integración económica de América Latina y analiza cuáles han sido sus determinantes en distintos momentos del tiempo durante el período 1962-2009. Se estima un modelo de elección discreta en el que la variable explicada es la existencia de un acuerdo de integración entre dos países, mientras que las variables explicativas se clasifican en económicas, geográficas,políticas e institucionales. Las principales conclusiones determinan que los factores económicos y geográficos son importantes a la hora de explicar por qué los países firman acuerdos de integración comercial, pero su importancia es sensible al momento del tiempo considerado. Además, se encuentra que los factores políticos e institucionales juegan un papel relevante sobre la estrategia de integración.
... The selection of the model is based on the Hausman test. Data is without log* [25][26][27][28][29][30][31][32][33][34][35][36][37][38][39][40][41]. The tariff may raise the cost of the product directly and indirectly and influence customers to purchase the local products. ...
... jei Vol.30 No.2, June 2015, 269~299 Laura Márquez-Ramos, Luis Marcelo Florensa, and María Luisa Recalde http://dx.doi.org/10.11130/jei.2015.30.2.269 more within other integration agreements, such as the NAFTA and the EU, than within LAIA (Florensa et al. 2011; Florensa et al. 2015b). Mexico is also worth highlighting for having signed a number of important bilateral agreements. ...
Article
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The present paper aims to determine the effects of different levels of economic integration on the intensive and the extensive margins of trade. Specifically, the analysis focuses on the case of Latin America. It is of great importance for development policies in the region since the extensive margin can be defined as those exports that provide new market entrants, while the intensive margin is due to continued growth in sales of old exporters to the same destinations. Therefore, obtained results have important policy implications related to diversification strategies. The long-term period considered will allow us to determine whether different effects on trade margins might arise in the following two sub-periods: 1962~1989 and from 1990 onwards, i.e. before and after the spread of regional integration agreements and the deepening of the liberalization process in the region. Finally, we focus on those specific sectors in which Latin American countries present a higher relative participation of trade. The obtained results show that the effect of economic integration is both time and period sensitive. The main positive effects are found to be reflected in the intensive margin for all different types of agreements. Moreover, we find that deeper economic integration agreements have the greatest effect on trade margins. © 2015-Center for Economic Integration, Sejong Institution, Sejong University, All Rights Reserved.
Article
This paper examines the link between trade and economic growth by emphasizing on recent progress of global value chains (GVCs) for a sample of 58 countries over the period 2005–2015. The findings show that trade and in particular trade linked to GVCs spurs economic growth. However, the impact of GVC engagement on economic growth is diverse as we broaden our analysis to sectoral level. The study also notes that the benefits associated with regional value chains are higher. Furthermore, functional specialization in trade also plays a key role in improving growth. Therefore, policies to promote the GVC engagement and strengthening the domestic fundamentals should be the aim for countries to further benefit from trade.
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Trade policies, in combination with rapid globalization, have the potential to stimulate or alter the specialized production undertakings in all countries that constitute an international production network. The literature shows that a change in the export of parts and components, and final products reflects the development of the machinery production network. Using export data at the disaggregated product level between China and 99 of its trading partners from 2010 to 2017, we examined the impact of the “Belt and Road Initiative” (BRI) on machinery production networks by employing a difference-in-differences method within the gravity framework. The empirical results demonstrated that the Chinese economy was deeply integrated into machinery production networks in BRI countries. The increase in the export of final products was twice that of the parts and components. Furthermore, we established that the export increases in BRI countries in Europe, Asia, and Africa were heterogeneous.
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We study the effect on trade in intermediates and final goods of the Central East European Countries’ (CEECs) accession into the European Union (EU) for the period 1999-2009. In doing so, we estimate a gravity model that incorporates the extensive margin of trade and accounts for firm heterogeneity. We capture the importance of production networks by including imports of intermediates as a determinant of a country’s exports of final goods. We find a positive and significant effect of the CEECs accession on EU trade in intermediate and final goods. Once the extensive margin of trade is accounted for, the effect of the CEECs accession into the EU is higher on trade in intermediate goods than on trade in final goods.
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RESUMEN El MERCOSUR ha mostrado un creciente interés por utilizar la integración regional como base para aumentar su competitividad internacional aludiendo a la complementariedad y especialización productiva entre sus socios. Este trabajo pretende realizar una contribución metodológica a la medición de este fenómeno, reagregando productos para conformar cadenas productivas de valor, al mismo tiempo que realiza una primera medición de esta nueva metodología para el MERCOSUR durante el período 2003-2012. Los resultados arrojan algunos casos incipientes de integración productiva, fundamentalmente para los socios de mayor tamaño, y varias potencialidades interesantes para la aplicación de una política productiva para el bloque. SUMMARY MERCOSUR has shown a growing interest to consider regional integration as a basis for strengthening its international competitiveness, mainly through productive complementarity and specialization. This study tries to make a methodological contribution to the measurement of the mentioned phenomena by disaggregating products to then re-build productive value chains categories. Secondly, we present a preliminary measure for MERCOSUR countries over the period 2003-2012. Our results show that there is evidence of some productive integration (mostly between the largest members of the bloc) and some interesting potentialities for productive policy for the bloc.
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In this paper, the two way relationship between deep integration and production networks trade is investigated. Deep integration is captured by a set of indices constructed in terms of policy areas covered in preferential trade agreements. An augmented gravity equation is estimated to investigate the impact of deep integration on production networks. The results show that on average, signing deeper agreements increases production networks trade between member countries by almost 35 percentage points. In addition, the impact of deep integration is higher for trade in automobile parts and information and technology products compared with textiles products. To analyze whether higher levels of network trade increase the likelihood of signing deeper agreements the literature on the determinants of preferential trade agreements is followed. The estimation results show that, after taking into account other PTAs determinants, a ten per cent increase in the share of production network trade over total trade increases the depth of an agreement by approximately 6 percentage points. In addition, the probability of signing deeper agreements is higher for country pairs involved in North-South production sharing and for countries belonging to the Asia region.
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: An attempt is made to lay a corner-stone for a general theory of customs unions in less-developed countries. No attempt is made to examine the conditions under which a protectionist policy makes good sense; rather industrialization is accepted as a legitimate policy goal, and membership in a customs union is considered as a means toward a desirable economic end.
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This paper examines the implications of cross-border production fragmentation in the context of regional integration, using both general- and partial-equilibrium approaches. It shows the conditions under which fragmentation converts a trade-diverting FTA into a trade creating one. It assesses the effect of fragmentation on the balance of payments and the sensitivity of trade flows to exchange-rate changes.
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Notes: The table includes effectively applied tariffs (simple averages) and imports of total, intermediate, consumer and other goods (value in 1000s of US dollars) from the world, NAFTA, EU, LAIA and Mercosur to reporting countries (LAIA members) in 1994 and 2008. Percentage change is greater than 0 if there is an increase and lower than 0 if there is a decrease. Due to data availability, 2007 was the last year considered for trade data in Argentina, Bolivia, Chile, Colombia, Paraguay, Uruguay and Venezuela. The first year considered for Mexico, Peru, Uruguay and Venezuela was 1995, whereas it was 1993 in the case of tariffs and imports from Mercosur to Argentina. UNCTAD and the World Bank have computed ad valorem equivalents (AVEs) of non-ad valorem tariffs, which are included when average tariff rates are computed. Source: Own elaboration with data from WITS (2011) for tariff rates and trade data, as per Baldwin and Taglioni (2011) for product groups.