Abstracts - Papers by Robert C. Shelburne

Division of Foreign Economic Research
U.S. Department of Labor

ABSTRACTS of papers by Robert C. Shelburne of the Division of Foreign Economic Research, in the Office of International Labor Affairs, U.S. Department of Labor. The full text of these papers are available by calling 202-693-4914 or by e-mailing to Shelburne-Robert@DOL.GOV

A Utilitarian Welfare Analysis of Trade Liberalization, by Robert C. Shelburne. Presented at the ASSA in Washington, DC, January 2003.

This paper argues that the current practice of using the compensation principle as the welfare criterion in analyzing trade liberalizations gives conclusions that are deceptively misleading. Actual compensation rarely takes place. Instead a social welfare function is specified along with a utility function that allows one to determine how trade actually affects welfare. A brief history of utilitarianism and Cambridge welfare economics is provided. It is demonstrated that in most trade models liberalization primarily redistributes income while the efficiency gains are of only second order importance. The conditions under which liberalization improves welfare are derived.

The Role of Intra-Industry Trade In the Service Sector, by Robert C. Shelburne and Jorge G. Gonzalez. Presented at a Conference on Empirical Methods in International Trade: Essays in Honor of Mordechai Kreinin, John Hopkins School of Advanced International Studies, Washington, DC, January 2003.

The role of intra-industry trade (IIT) in the service sector is examined. Methodological issues in calculating IIT indexes for the service sectors are discussed. A new generalized index for dealing with the negative numbers that are often present in the data is provided. The different hierarchical structure of the services data provided by the OECD and the US BEA are discussed. The factors that explain the level of services IIT across countries is explored, as well as the factors that affect the level of IIT in U.S. bilateral trade with other nations.

Trade and Employment Effects of the Andean Trade Preference Act: 2002 Congressional Report, by Robert C. Shelburne.

This Congressional report analyzes the trade and employment implications for the United States resulting from the trade preferences provided by the Andean Trade Preference Act. The report also contains numerous tables describing the trade flows between the United States and the Andean nations.

Improving the Economic Performance of the Global Economy: The Challenges Ahead, by Robert C. Shelburne, in the Global Economy Quarterly, Volume 3, No. 2, 2002. Presented as the Presidential Address to the International Trade and Finance Association, Ramkhamhaeng University, Bangkok, Thailand, May 2002.

The basic theme of this paper is that a well-functioning market economic system requires a complex set of accompanying institutuions. A global economic system requires some institutions of global scope, and domestic institutions appropriately adjusted for the international dimension. The failure to appreciate the need for this complimentary institutional infrastructure explains to a significant degree the large variation in economic outcomes that countries have experienced from globalization and has reduced the overall economic performance of the world economy. This absence of appropriate institutions, instead of globalization in the abstract, also explains why there is so much populist opposition to the current global economic system.

The economic benefits from increased openness have been disappointing for many of the developing nations because they lack the appropriate complimentary institutions. The current international financial system is inherently unstable and requires an IMF with significantly more resources so that it can act as a global lender of last resort. The global distribution of income, although probably not worsened by globalization, nevertheless presents the world with a number of moral and economic challenges. The distributional shifts from increased openness in the United States are so large that the benefits from further globalization can be seriously questioned. Institutions of global scope are needed to deal with an increasing number of problems; a more comprehensive and pro-active approach towards global goverance is needed. The push to establish universal standards, whether they be for products or labor are eroding nations' ability to achieve their idiosyncratic interests.

Bilateral Intra-Industry Trade in a Multi-Country Helpman-Krugman Model, by Robert C. Shelburne, International Economic Journal, Volume 16, Number4, Winter 2002, pp.53-74. Presented at the Ecole Superieure de Commerce de Montpellier, France, June 2000.

The country characteristics that affect the volume of trade, the volume of intra-industry trade (IIT) and the share of intra-industry trade (SIIT) in the bilateral trade flows of the multi-country Helpman-Krugman-Chamberlin model are derived. This paper argues that the role of similarity in endowments and relative country size have been misinterpreted and that empirical models to test for the importance of these two factors have been misspecified. A new diagrammatical device is introduced that illustrates the relationship between trade volume and similarity in country size.

Wage Differentials, Monopsony Labor Markets, and the International Labor Standards Debate, by Robert C. Shelburne. Forthcoming, Journal of Economic Integration, 2003. Presented at the ASSA in Atlanta, January, 2002.

This paper uses a simple theoretical model (a H-O core with technological differences and tariffs) confined to reasonable parameters to investigate the implications of improved labor rights and benefits in the export sectors of the developing nations. It is argued that any trade-labor linkage is likely to significantly impact only the export sectors of the developing countries. The effects of increased standards vary depending on a number of factors, including whether a standard creates a new wage differential or eliminates an existing wage differential and whether that differential is due to monopsony power. A new procedure for modelling monopsony labor markets in general equilibrium is introduced.

Trade Liberalization and Intra-Industry Trade: The Case of the United States and Mexico, by Robert C. Shelburne, in the Global Economy Quarterly, Volume 2, No. 3, pp. 215-234, 2001.

This paper investigates how U.S.-Mexican intra-industry trade (IIT) has evolved since the creation of the NAFTA beginning in 1994. These empirical findings are of value not only for the study of the U.S.-Mexican trading relationship, but they also contain several important conclusions applicable more generally to the study of the theoretical basis for intra-industry trade and its empirical estimation. The basic conclusions of this study are: 1) Unlike the European experience after the creation of the European Common Market, and most other regional trade arrangements, trade between the U.S. and Mexico has remained mostly inter- industry trade, and the growth of trade has been largely inter-industry as measured by both IIT indexes and marginal intra-industry trade (MIIT) indexes. 2) Also, unlike most studies of IIT using European countries, the IIT and the MIIT indexes are highly correlated across sectors. 3)The fall in the IIT indexes since NAFTA is due significantly to Mexico's trade surplus with the U.S. 4) The IIT and MIIT indexes at a sectoral level are significantly related to the duty treatment of U.S. imports; the higher the percentage of imports entering duty-free, the higher the IIT and MIIT indexes, and the higher the actual ad valorem duty rate, the lower the IIT and MIIT indexes. 5) There is significant "smoking gun" evidence that the U.S.- Mexico IIT that does exist is not typical IIT but is significantly composed of the U.S. re-import of U.S. components within the same sector; the percentage of U.S. components in the value of U.S. imports by product, is significantly related to the IIT and MIIT indexes even at the most extensive level of product disaggregation. In addition, a new graphical measure for IIT is proposed which is better able to describe the level of IIT.

Trade and Employment Effects of the Andean Trade Preference Act: 2001 Report to Congress, and Background Trade and Employment Information for ATPA Report by Robert C. Shelburne, Springfield, Virginia: National Technical Information Service, 2001.

The main finding of this report is: Preferential tariff treatment under the ATPA does not appear to have had an adverse impact on, or have constituted a significant threat to, U.S. employment. While declines in production and possibly employment in some sectors of the cut flower industry (standard carnations, standard and pompon chrysanthemums, and roses) may have been affected to some extent by the tariff preferences granted under the ATPA program, other factors may also have contributed to production and employment declines.

During 2000, $2.0 billion in U.S. imports from the four ATPA beneficiary countries entered the United States duty-free under provisions in the ATPA; however, a significant portion of these duty-free entries (34 percent or $669 million) probably would have qualified for duty-free entry under other existing U.S. trade preference programs such as the Generalized System of Preferences. Thus, approximately 66 percent ($1.3 billion) of these duty-free entries represent the unique benefits of the ATPA to the ATPA-beneficiary nations. These unique ATPA benefits represented 11.6 percent of total U.S. imports subject to duty from the ATPA beneficiary nations and 0.1 percent of total U.S. imports from all nations in 2000. Almost 99 percent of the items eligible for ATPA duty-free treatment, actually entered duty-free.

Generally, the current level and composition of ATPA beneficiary exports to the United States do not appear to pose a threat to U.S. employment. As the Andean region develops, it is anticipated that it will attract increasing levels of U.S. exports which will generate additional job opportunities in the United States. On the other hand, the duty-free benefits of the ATPA offer an incentive for diversification of production and development of exports to the U.S. market. Thus, the ATPA could create a more significant impact on U.S. employment in the future.

U.S. -- Mexico Intra-Industry Trade: Not the European Experience, by Robert C. Shelburne, in The Papers and Proceedings of the International Trade and Finance Association, San Diego State University, 2001. Presented at the ITFA Meetings in Washington, DC, May 2001.

Intra-Industry Trade in the Service Sector: Measurement and Implications, by Robert C. Shelburne and Jorge G. Gonzalez, in The Papers and Proceedings of the International Trade and Finance Association, San Diego State University, 2001. Presented at the ITFA Meetings in Washington, DC, May 2001.

During 1999, $1.7 billion in U.S. imports from the four ATPA beneficiary countries entered the United States duty-free under provisions in the ATPA; however, a significant portion of these duty-free entries (47 percent or $811 million) probably would have qualified for duty-free entry under other existing U.S. trade preference programs such as the Generalized System of Preferences. Thus, approximately 53 percent ($915 million) of these duty-free entries represent the unique benefits of the ATPA to the ATPA-beneficiary nations. These unique ATPA benefits represented 10.6 percent of total U.S. imports subject to duty from the ATPA beneficiary nations and 0.09 percent of total U.S. imports from all nations in 1999.

An Explanation of the International Variation in the Prevalence of Child Labor, by Robert C. Shelburne, in The World Economy , Volume 24, No. 3 (March), pp.359-378, 2001.

It is hypothesized using a public choice framework that societies establish social institutions or promote social customs that benefit those that control the political process. Using this framework, it is suggested that the institutional acceptability and therefore the actual practice of child labor will be more prevalent when the other members of a society gain from the use of child labor. Child labor will not be tolerated when the other members of a society are harmed by it. Therefore, in order to explain the cross-country variation in the prevalence of child labor, it is necessary to understand the conditions under which child labor either harms or improves the welfare of the remaining members of a society.

It is demonstrated theoretically using a standard neoclassical production model that the non-child-labor factors gain from child labor when the economy is closed. This gain is not the result of exploitation of the children, since the children are assumed to receive their marginal products; nor is the described gain due to the parents appropriating some of the child's income. As an economy becomes more open to international trade, those gains (from child labor) diminish and even turn negative as the size of the economy increases.

The model also suggest that child labor will be restricted to the poorer unskilled labor abundant countries as the non-child-labor factors are made worse off by child labor in capital abundant countries.

It is shown empirically, using regression analysis, that the cross-country prevalence of child labor falls with increases in a nation's per capita income, its openness to trade, and its economic size. A history of communism is also shown to be significant in reducing the incidence of child labor. All of these variables are found to be highly significant (at the 99 percent level or above); the Box-Cox procedure is used to determine the optimal functional form for the regression. All the data are for 1996 and were obtained from the World Bank's 1998 World Development Indicators.

Given that an open economy reduces the benefits of child labor to the other members of a society, an open economy thereby reduces the society's incentive to allow child labor. Therefore, it is argued that trade sanctions, as a remedy for child labor, may be counter-productive; however, sanctions (incentives) could be effective if they sufficiently harm (benefit) the non-child-labor factors.

These results also suggest that as nations become more democratic, the process sets in motion economic changes that will undermine the practice of child labor. Beginning with an oligarchy or a capitalist dictatorship, the rulers would choose (in the sense that their economic gains would be the greatest) to have a closed economy with child labor. As a nation becomes more democratic, there will be pressure to open the (labor-abundant) economy since the masses (largely unskilled workers) benefit from increased trade due to Stolper-Samuelson effects. Once the economy becomes sufficiently open, there are no longer any gains to the other factors of production of having child labor, and thus the implicit support for or tolerance of child labor will decline.

Child Labor, Openness, and Country Size by Robert C. Shelburne, in Khosrow Fatemi and Susan E.W. Nichols (Eds.), International Business at the Turn of the Century, Volume II, Calexico, CA: ITFA, pp.443-464, 2000. Presented at the ASSA Meetings, Boston, MA, January 2000.

A statistical and theoretical examination of the relationship between the prevalence of child labor and the nation's openness to international trade and its economic size. These relationships are shown to be highly significant using several different functional forms for the regression equations.

Trade and Employment Effects of the Andean Trade Preference Act: 1999 Report to Congress, and Background Trade and Employment Information for ATPA Report by Robert C. Shelburne, Springfield, Virginia: National Technical Information Service, 1999.

During 1998, $1.6 billion in U.S. imports from the four ATPA beneficiary countries entered the United States duty-free under provisions in the ATPA; however, a significant portion of these duty-free entries (45 percent or $731 million) probably would have qualified for duty-free entry under other existing U.S. trade preference programs such as the Generalized System of Preferences. Thus, approximately 55 percent ($887 million) of these duty-free entries represent the unique benefits of the ATPA to the ATPA-beneficiary nations. These unique ATPA benefits represented 10.6 percent of total U.S. imports subject to duty from the ATPA beneficiary nations and 0.1 percent of total U.S. imports from all nations in 1998.

Trade and Employment Effects of the Caribbean Basin Economic Recovery Act: 1999 Report to Congress, and Background Trade and Employment Information for CBERA Report by Robert C. Shelburne, Springfield, Virginia: National Technical Information Service, 1999.

The main finding of this report is: Preferential tariff treatment under the CBERA does not appear to have had an adverse impact on, or have constituted a significant threat to, U.S. employment generally. There are several smaller domestic industrial sectors (e.g., leather cut for shoes and cigars and cheroots) that have been subject to significant, long-term domestic employment declines and significant increases in CBERA duty-free imports. The extent to which declines in employment in these sectors may have been affected by the tariff preferences granted under the CBERA -- as opposed to other factors -- is not clear; however, during 1997 and 1998, trade and employment developments in these industries tended to moderate any adjustment problems.

During 1998, $3.4 billion in U.S. imports from the 24 CBERA beneficiaries entered the United States duty-free under provisions in the CBERA; however, a significant portion of these duty-free entries probably would have qualified for duty-free entry under other existing U.S. trade preference programs such as the Generalized System of Preferences. Approximately 48 percent ($1.6 billion) of these duty-free entries probably would not have qualified for duty-free entry under other available U.S. trade preference programs and represent the unique benefits of the CBERA to the CBERA beneficiaries. These unique benefits represented 9.5 percent of total U.S. imports from the CBERA beneficiaries, but accounted for only 0.2 percent of total U.S. imports from all nations.

Generally, the current level and composition of U.S. imports from the CBERA beneficiaries do not appear to pose a threat to U.S. employment. Most CBERA beneficiaries are small and have few resources. Traditionally, these beneficiaries have relied on exports of natural resources and agricultural products. While the world demand and prices for these have declined, the development of assembly operations has created new job opportunities in the CBERA beneficiaries and helped foster skills needed for further economic development and industrialization. With the current lack of an industrial infrastructure, the potential exists for more extensive industrial investment, much of which would use U.S.-produced capital goods. As the Caribbean Basin region develops, it is anticipated that it will attract increasing levels of U.S. exports which will generate additional job opportunities in the United States. On the other hand, the duty-free benefits of the CBERA offer an incentive for diversification of production and development of exports to the U.S. market. Thus, the CBERA could create a more significant impact on U.S. employment in the future.

Globalization and the U.S. Labor Market, by Robert C. Shelburne, Presented at the Eastern Economic Association, Boston, MA, March 1999.

The focus of this paper concerns the role of increased global economic integration in affecting labor market outcomes (wages and unemployment) in the United States. Section I discusses at a general level the role of international trade in the U.S. economy; calculations of trade's impact on labor directly involved in exporting or displaced by imports are presented. Next the economy-wide effects of globalization on labor markets are explored. Section II concentrates on the degree to which globalization can account for the slowdown in wage growth which has occurred since 1973 and section III looks at the role of trade in explaining the increase in wage inequality that has occurred since 1979 within the neoclassical framework while section IV considers more institutional arguments. How globalization and it's labor market impacts are likely to evolve in the future are explored in section V and section VI discusses how labor policies may be impacted by globalization. Section VII provides a summary.

The Inadequacy of the Current International Monetary System, by Robert C. Shelburne, in Khosrow Fatemi (ed.), International Public Policy and Regionalism at the Turn of the Century, Oxford, UK: Elsevier Science, pp. 337-352 (chapter 22), 2001. Also in The Papers and Proceedings of the International Trade and Finance Association, San Diego State University, 1999, chapter 4, pp. 49-62. Presented at the ITFA in Casablanca, Morocco, May 1999.

The poor economic performance of the global economy over the last several years is due significantly to shortcomings in the current design of the international monetary system (IMS). The economic crisis of the Asian emerging markets has been the most visible and obvious manifestation of the design defects, but the problems are much more systemic in nature. The current system 1) fails to adequately distribute global saving in a globally efficient manner, 2) is prone to "irrational" speculative attacks which wrecks fundamentally sound economies, and 3) has, at a global level, a deflationary bias which keeps global growth below its optimal. These design defects have been central factors in a significant number of global economic problems since the breakdown of the international gold standard during the First World War; these include the Great Depression, the breakdown of the inter-war gold standard as well as the Bretton Woods fixed exchange rate system, the inflation of the 1970s, the high unemployment rates throughout Europe in the 1990s, and now the current emerging market economic crises, and the recession in Japan. Global economic integration will ultimately require a global central bank. However, the public's desire for national autonomy will now only allow for marginal reforms in current institutions. Section I begins with a discussion of the "Japanese problem" which has as its source the international financial system's inability to adequately distribute world savings; the resulting Asian currency crises which have been created by "irrational" speculation are discussed in Section II. Section III proposes that the current system has a deflationary bias once disequilibriums occur. Section IV provides a summary.

The Trade-Labor Standards Linkage: Issues and Prospects, by Robert C. Shelburne, Presented at the ASSA Meetings, New York, NY, January 1999.

This paper discusses the prospects for progress towards raising labor standards in the developing nations. In order to understand the political economy of the issue, the economic implications of raising labor standards in the developing nations are summarized and the likely spillover effects of these policies for the developed economies are explored. The final section discusses how four recent developments are likely to influence the prospects for a future linkage between trade and labor standards; these four developments are the 1998 elections in Europe and the United States, the Asian economic crisis, and the shotgun approach to integrating standards into a wide spectrum of international institutions and activities.

Those Ever Changing and Unexplainable Mexican Exports to the United States, by Robert C. Shelburne, in Papers and Proceedings of the International Trade and Finance Association, June 1998.

This paper provides an updated overview of U.S. imports from Mexico with an emphasis on determining how these imports have changed since the implementation of NAFTA. Some researchers have suggested that the Mexican trade pattern has changed little since NAFTA; the results presented here suggest the opposite conclusion. The changes that have occurred in the sectoral distribution of U.S. imports from Mexico are explored with an emphasis on the role of the NAFTA tariff changes, the historical sectoral growth trend, the share of Mexican imports of total imports, and growth trends in U.S. imports from other nations.Overall U.S. imports from Mexico have grown faster in the post-NAFTA period compared to the pre-NAFTA period. However, some previous studies by other authors have asserted that the liberalized sectors have not grown faster than the nonliberalized sectors and have therefore concluded that the NAFTA tariff reductions can not be the explanation for what has happened.

This paper shows that there are some significant theoretical problems with this interpretation of these trends, but more importantly shows that these studies used inappropriate data in obtaining this result. This paper redoes this approach using the correct data. In addition, the liberalized - nonliberalized distinction does not allow the magnitudes of the tariff liberalization to be considered so an alternative approach is used to determine if the tariff reductions have altered the growth of U.S. imports from Mexico by sector. It is shown that U.S. imports from Mexico have grown the fastest since 1994 in those sectors which have experienced the largest duty reductions under NAFTA and in those sectors where U.S. imports from other nations have increased the fastest. U.S. imports from Mexico have grown the slowest in those sectors which were experiencing the fastest growth prior to NAFTA and in those sectors where Mexico already had a significant share of total U.S. imports. Thus, generally, the "successful" sectors before NAFTA have been the "unsuccessful" sectors after NAFTA. Although all of these factors are statistically significant in explaining the sectoral changes with have occurred since NAFTA, these sectoral changes remain largely unexplained.

The Mexican Economy in the 1990s: Boom or Bust?, by Robert C. Shelburne, in Farok J. Contractor, (ed.), Economic Transformation In Emerging Countries: The Role of Investment, Trade and Finance, Oxford, UK: Elsevier Science, pp.167-186 (chapter 13), 1998.

This chapter discusses the Mexican economy before and after the creation of NAFTA with an emphasis on how its macro-economy and its trade accounts, especially the structure of U.S.-Mexican trade, responded to both the implementation of NAFTA and the currency collapse that followed. In anticipation of NAFTA, the Mexican economy attracted significant capital inflows and returned to economic growth after years of stagnation. During the first year after implementation in 1994, bilateral trade between Mexico and the United States increased significantly. At the end of 1994, Mexico experienced an exchange rate crisis due to massive capital outflows; as a result, the peso depreciated by 40 percent and a serious recession followed. Mexican imports collapsed while their exports increased dramatically. This currency crisis was due to speculative capital flows and a risky economic strategy by the Mexican government in the years prior to the crisis. Also, once non-economic developments altered investor sentiments, the government failed to react appropriately. Mexico's recovery from crisis and future prospects are discussed.

Trade and Employment Effects of the Andean Trade Preference Act: 1998 Report to Congress, by Robert C. Shelburne, Springfield, Virginia: National Technical Information Service, 1998.

Although a definitive evaluation of the domestic employment impact of the ATPA cannot be made since the effects of duty-free provisions of the ATPA on U.S. imports cannot be completely isolated from the effects of other trade preference programs such as the GSP and HTS item 9802.00.80, it is unlikely that the ATPA has had a significant effect on overall U.S. employment. In addition, U.S. trade flows with the ATPA beneficiary countries have been small, representing 1.0 percent of total U.S. imports.

During 1997, $1.3 billion in U.S. imports from the four Andean Trade Preference Act (ATPA) beneficiary countries entered the United States duty-free under provisions in the ATPA; however, a significant portion of these duty-free entries (54 percent or $717 million) probably would have qualified for duty-free entry under other existing U.S. trade preference programs such as the Generalized System of Preferences. Thus, approximately 46 percent ($600 million) of these duty-free entries represent the unique benefits of the ATPA to the ATPA-beneficiary nations. These unique ATPA benefits represented 6.9 percent of total U.S. imports from the ATPA beneficiary nations and 0.07 percent of total U.S. imports from all nations in 1997.

Neither the dollar amount nor the rate of increase in U.S. imports from the ATPA nations has been extraordinary or threatening. The share of total U.S. imports subject to duty from the ATPA beneficiaries that received duty-free treatment has risen from 22 percent in 1991 to 38 percent in 1997. This is largely due to increased utilization of the duty-free benefits under the ATPA--especially for products not eligible for GSP duty-free treatment. Nevertheless, the amounts entered duty-free have remained quite modest, and the ATPA program does not appear to have had a significant effect in altering the production or export structure of the ATPA nations.

Five groups of products, two agricultural product groups (vegetables and melons--in particular, asparagus; and horticultural specialties--in particular, fresh cut chrysanthemums, standard carnations, and roses), and three metal-related manufactures (industrial inorganic chemicals -- primarily gold compounds; primary nonferrous metals --refined copper cathodes; and nonferrous rolled and drawn products--semi-manufactured gold) received substantial benefits in 1997 from duty-free treatment under the ATPA.

Trade and Employment Effects of the Caribbean Basin Economic Recovery Act: 1998 Report to Congress, by Robert C. Shelburne, Springfield, Virginia: National Technical Information Service, 1998.

Although a definitive evaluation of the domestic employment impact of the CBERA cannot be made since the effects of duty-free provisions of the CBERA on U.S. imports cannot be completely isolated from the effects of other trade preference programs such as the GSP and HTS items 9802.00.60 and 9802.00.80, it is unlikely that the CBERA has had a significant effect on overall U.S. employment. In addition, U.S. trade flows with the CBERA beneficiaries have been small, representing 1.9 percent of total U.S. imports.

During 1997, $3.5 billion in U.S. imports from the 24 Caribbean Basin Economic Recovery Act (CBERA) beneficiaries entered the United States duty-free under provisions in the CBERA; however, a significant portion of these duty-free entries probably would have qualified for duty-free entry under other existing U.S. trade preference programs such as the Generalized System of Preferences. Approximately 43 percent ($1.5 billion) of these duty-free entries probably would not have qualified for duty-free entry under other available U.S. trade preference programs and represent the unique benefits of the CBERA to the CBERA beneficiaries. These unique benefits represented 9.0 percent of total U.S. imports from the CBERA beneficiaries, but accounted for only 0.2 percent of total U.S. imports from all nations. Almost one half of the duty-free imports provided uniquely by the CBERA are imports from the Dominican Republic.

The amount of U.S. imports from the CBERA beneficiaries that has received duty-free treatment has increased by more than 558 percent since 1983--the year prior to the implementation of the CBERA program--due partly to increased utilization of CBERA benefits, although one-half of this increase was due to increased use of the 9802 provisions. During 1983, only 6.7 percent of U.S. imports from the CBERA beneficiaries entered duty free under the GSP program while 22.5 percent entered duty free under either the GSP or CBERA programs during 1997.

During 1997, there were significant increases in CBERA duty-free imports which also accounted for a significant share of total U.S. imports in several categories of manufactured products such as prepared fruits and vegetables, sugar and confectionery products, cigars and cheroots, leather cut for shoes, and electric distribution equipment. For each of these products, except electric distribution equipment, a substantial portion of the duty-free benefits provided by the CBERA was not available under GSP. In addition, there was a significant increase CBERA duty-free imports of medical and dental instruments that were due to provisions unique to the CBERA, however, overall imports of these items from the CBERA beneficiaries only increased slightly. For most of the U.S. industries that produce items similar to those receiving substantial benefits under the CBERA, it is difficult to identify any adverse U.S. employment effects directly resulting from the CBERA benefits since either the U.S. market share of CBERA-beneficiary products is so small or U.S. employment growth in the industry has been relatively healthy.

The main finding of this report is: Preferential tariff treatment under the CBERA does not appear to have had an adverse impact on, or have constituted a significant threat to, U.S. employment generally. Neither the dollar amount nor the rate of increase in U.S. imports from the CBERA beneficiaries has been extraordinary or threatening. There are several smaller domestic industrial sectors (e.g., leather cut for shoes and cigars and cheroots) that have been subject to significant, long-term (secular) domestic employment declines and significant increases in CBERA duty-free imports. The extent to which declines in employment in these sectors may have been affected by the tariff preferences granted under the CBERA -- as opposed to other factors -- is not clear; during 1997, employment developments in these industries tended to moderate any adjustment problems.

Labor Standards as a Trade Issue, by Robert C. Shelburne, in Khosrow Fatemi (ed.), The New World Order: Internationalism and Multinational Corporations, London, UK, Pergamon Press, 2000.

The current attempts by the United States to introduce core labor standards into its bilateral and regional trade agreements and into the World Trade Organization (WTO) are discussed. Labor standards are already an important aspect of several international organizations and agreements. The role of labor standards in the ILO, EU, U.S. trade law, and the OECD are discussed. The rationale and arguments against labor standards are evaluated. Models attempting to determine the economic implications of imposing minimum labor standards on low-standard nations are reviewed; assumptions as to whether capital and technology inflows are affected by labor standards are critical to these results. Generally, it appears that Southern nations have more of an incentive to establish labor standards as part of a global agreement rather than implementing them unilaterally. The political economy of this issue both within the Southern and industrial nations is considered, as well as the global political economy of getting standards introduced into the WTO.

Trade and Employment Effects of the Caribbean Basin Economic Recovery Act: 1997 Report to Congress, by Robert C. Shelburne, Springfield, Virginia: National Technical Information Service, 1997.

This annual report to Congress investigates the trade and employment effects of the Caribbean Basin Economic Recovery Act (CBERA). The summary report which is submitted to Congress is available online as the Trade and Employment Effects of the Caribbean Basin Economic Recovery Act. A more detailed analysis with many additional tables of data covering 1983 to 1996 is available as Economic Discussion Paper 52, of the Bureau of International Labor Affairs, of the U.S. Department of Labor.

The main finding of this report is: Preferential tariff treatment under the CBERA does not appear to have had an adverse impact on, or have constituted a significant threat to, U.S. employment generally. There are several smaller domestic industrial sectors (e.g., leather cut for shoes and cigars and cheroots) that have been subject to significant, long-term (secular) domestic employment declines and significant increases in CBERA duty-free imports. The extent to which declines in employment in these sectors may have been affected by the tariff preferences granted under the CBERA -- as opposed to other factors -- is not clear; during 1996, trade and employment developments in these industries tended to moderate any adjustment problems.

During 1996, $3.1 billion in U.S. imports from the 24 CBERA beneficiaries entered the United States duty-free under provisions in the CBERA; however, a significant portion of these duty-free entries probably would have qualified for duty-free entry under other existing U.S. trade preference programs such as the Generalized System of Preferences. Approximately 37 percent ($1.1 billion) of these duty-free entries probably would not have qualified for duty-free entry under other available U.S. trade preference programs and represent the unique benefits of the CBERA to the CBERA beneficiaries. These unique benefits represented 7.9 percent of total U.S. imports from the CBERA beneficiaries, but accounted for only 0.1 percent of total U.S. imports from all nations.

Trade and Employment Effects of the Andean Trade Preference Act: 1997 Report to Congress, by Robert C. Shelburne, Springfield, Virginia: National Technical Information Service, 1997.

This annual report to Congress investigates the trade and employment effects of the Andean Trade Preference Act (ATPA). The summary report which is submitted to Congress is available online as the Trade and Employment Effects of the Andean Trade Preference Act. A more detailed analysis with many additional tables of data covering 1991 to 1996 is available as Economic Discussion Paper 53, of the Bureau of International Labor Affairs, of the U.S. Department of Labor.

The main finding of this report is: Preferential tariff treatment under the ATPA does not appear to have had an adverse impact on, or have constituted a significant threat to, U.S. employment. While declines in production and possibly employment in some cut flower industries (standard carnations, pompon chrysanthemums, and roses) may have been affected to some extent by the tariff preferences granted under the ATPA program, other factors may also have contributed to production and employment declines.

During 1996, $1.2 billion in U.S. imports from the four ATPA beneficiary countries entered the United States duty-free under provisions in the ATPA; however, a significant portion of these duty-free entries (62 percent or $787 million) probably would have qualified for duty-free entry under other existing U.S. trade preference programs such as the Generalized System of Preferences. Thus, approximately 38 percent ($458 million) of these duty-free entries represent the unique benefits of the ATPA to the ATPA-beneficiary nations. These unique ATPA benefits represented 9.3 percent of total U.S. imports subject to duty from the ATPA beneficiary nations and 0.06 percent of total U.S. imports from all nations in 1996.

Government Export Promotion Expenditures: Some Cost Estimates and Practical Considerations, by Robert C. Shelburne, in The International Trade Journal, Volume 11, No.1, Spring 1997, pp. 69-83.

This article describes U.S. Government expenditures for export promotion activity. Estimates are presented by agency within the U.S. government and also by three types of activity-trade liberalizations, fixed costs public good market failures, and variable cost subsidies. The theoretical justifications for these programs are discussed and some problems in evaluating their cost effectiveness are examined.

The Macroeconomics of Commercial Policy and The Trade Balance: A Policy Perspective, by Robert C. Shelburne, in The International Trade Journal, Volume 10, No. 1, Spring 1996, pp. 63-84. Reprinted as chapter 18 in Khosrow Fatemi, (ed.), International Trade in the 21st Century, London: Pergamon Press, 1997.

The possibility of using commercial policy as a tool for correcting trade imbalances is examined. Using the macroeconomic identity where the trade deficit is equal to net national savings, the theoretical channels through which commercial policy could impact the trade balance are investigated. Although there are numerous possible channels, there is presently little theoretical consensus or empirical evidence to suggest that commercial policy can have a permanent and significant impact on national savings or the trade balance. In macroeconomic models with unemployment, commercial policy has more potential in this regard; however, the practical policy relevance of this finding is of limited importance. The desirability of correcting a trade imbalance considering the alternatives and consequences is discussed.

U.S.- Mexico Trade under NAFTA: Two Different Years, Two Different Stories, by Robert C. Shelburne, in Denise Dimon, Irene Tomlinson, and Susan Nichols, (eds.), Competitiveness in International Business and Trade, Volume III, Laredo,TX: Texas A&M International University, May 1996, pp.665-680.

Trade and economic conditions in the first two years since the implementation of the NAFTA are discussed. The two years have been vastly different in terms of U.S.-Mexican trade. During the first year after implementation, 1994, bilateral trade between the two nations increased significantly. At the end of 1994, Mexico experienced an exchange rate crisis due to massive capital outflows; as a result, U.S. imports from Mexico increased dramatically while U.S. exports to Mexico collapsed. This paper analyses these two developments and their effects on the structure of U.S.-Mexican trade.

The Staging Pattern of U.S. Tariff Reductions Under NAFTA, by Robert C. Shelburne, in Mordechai Kreinin, (ed.), Contemporary Issues in Commercial Policy, London, UK: Pergamon Press, 1995, (chapter 8).

The industry staging pattern of U.S. tariff reductions under the NAFTA is explained and analyzed. A trade weighted tariff for Mexican imports is calculated for each SIC category for each year between 1994 and 2007. Industry characteristics are investigated to see which ones may explain the pattern of pre-NAFTA as well as the staging pattern of the duty reductions under NAFTA. The tariff structure during the NAFTA phase-in is highly correlated to the pre-NAFTA tariff structure. Low industry employment growth, low industry wages, a high percentage of production workers, a large industry, a high import price elasticity, and agricultural products are associated with higher tariffs. Once the pre-NAFTA tariffs are controlled for, NAFTA-transition tariffs appear higher in industries with high wages, a low percentage of imports entering under the HTS Section 9802 provision, and a high percentage of production workers.

Andean Trade Preferences: An Alternative to Coca?, by Robert C. Shelburne, in Papers and Proceedings of the International Trade and Finance Association, Laredo, TX: Texas A&M International University, May 1995.

The provisions of the Andean Trade Preference Act (ATPA) of 1991 are reviewed and trade flows between the beneficiaries and the United States over the 1991-93 period are analyzed. The difficulties in isolating the effects of the ATPA from those already available under the Generalized System of Preferences (GSP) and the off-shore assembly provisions (HTS 9802) are discussed. During the 1992-3 period, the ATPA program does not appear to have had a significant effect in altering the production or export structure of the ATPA nations. However, the amount of beneficiary exports to the U.S. that received duty-free treatment increased 52 percent between 1991 and 1993 due largely to the provisions of the ATPA program. Horticultural specialties account for over 90 percent of the items receiving duty-free treatment not available under the GSP. The duty-free benefits of the ATPA program are quite marginal and should not be viewed as significant factor in the U.S. war on drugs.

The Effects of the NAFTA and ATPA on the Caribbean Basin Countries, by Robert C. Shelburne, in Khosrow Fatemi and Dominick Salvatore, (eds.), The North American Free Trade Agreement, London: Pergamon Press, 1994, pages 31-54 (chapter 3).

The degree to which the duty-free provisions of the North American Free Trade Agreement (NAFTA) and the Andean Trade Preference Act (ATPA) might erode the trade preferences given to the beneficiaries covered under the Caribbean Basin Economic Recovery Act (CBERA) are explored. The degree to which the beneficiaries have benefited from the provisions of the CBERA are discussed. The potential for trade and investment division are discussed, and the trade structures of the CBERA, ATPA and Mexico are compared. The exports to the United States from these three areas share a common concentration in three SIC groups - agricultural products, crude petroleum, and apparel; the ATPA and CBERA have a more similar trade structure than does Mexico and the CBERA. However, there are only a few items whose competitiveness is likely to be altered by the ATPA, thus the ATPA is unlikely to adversely affect the CBERA nations. The NAFTA is likely to increase Mexico's competitiveness relative to the CBERA nations in 111 8-digit HTS items which represent 52.6 percent of CBERA exports to the United States. Over half of these items are apparel items for which Mexico will receive duty-free treatment while exports from the CBERA nations will be subject to duty. Mexico will also get duty-free treatment for petroleum while the CBERA nations do not. There are a number of agricultural products which are eligible for duty-free treatment from the CBERA nations which are not currently duty-free from Mexico but will be duty-free for Mexico under the NAFTA. Several proposals to reduce the negative consequences of the NAFTA for the CBERA nations are discussed.

Changing Trade Patterns and the Intra-Industry Trade Index, by Robert C. Shelburne, in Weltwirtschaftliches Archiv, Volume 129, Heft 4 (December) 1993.

Differences between intra-industry trade (IIT) indexes calculated at two difference points in time and an IIT index of the changes in the trade between these two points in time are discussed. Several authors have incorrectly assumed that if a IIT index has increased over time that the increases in exports and imports during this time must have been in similar products. However it is shown that even if all of the increase in exports are in different sectors than the increase in imports, it is possible for the IIT index to increase. Thus one can not make an assessment about the degree of IIT in the change in trade flows by simply observing how the IIT index has changed through time. The adjustment costs associated with changing trade patterns are best proxied by a marginal IIT index calculated using the change in trade flows, not by observing how the traditional IIT index changes through time. A new formula is suggested for measuring the level of marginal IIT. As an application of this principle, it is shown that although the NAFTA is likely to increase the IIT index of U.S.-Mexico trade, the actual trade growth will be largely inter-sectoral and could therefore entail high adjustment costs.

Geographic Concentration of Trade-Sensitive Employment, by Robert C. Shelburne and Robert Bednarzik, in Monthly Labor Review, Volume 116, No. 6, June 1993.

Gini coefficients are calculated for the geographic concentration of employment in U.S. manufacturing industries. The theoretical reasons for clustering are discussed. It is found that manufacturing industries that are greatly involved in international trade are more geographically concentrated than those that are not, with export-sensitive industries generally located in different regions than import-sensitive industries. Export-sensitive industries are concentrated in the Pacific region while import-sensitive industries are concentrated in the Atlantic region; industries that are both import and export sensitive are in the Great Lakes region. Geographic concentration is also positively related to average establishment size and negatively related to the overall number of establishments. It is also found that trade-related displacements are more geographically concentrated than manufacturing employment.

The North American Free Trade Agreement: Comparison with Southern EC Enlargement, by Robert C. Shelburne, in Khosrow Fatemi, (ed.), The North American Free Trade Agreement: Opportunities and Challenges, London: MacMillian Press, 1993. Another version is in Khosrow Fatemi, (ed.), International Trade and Finance in a Rapidly Changing Environment, Laredo, Texas: International Trade and Finance Association, 1992.

This study compares how Mexico's addition to the U.S.-Canadian Free Trade Agreement compares to the southern enlargement (Spain, Portugal, and Greece) of the European Community (EC). Comparisons are made of incomes, populations, trade volumes, trade structures, intra-industry components, trade barriers, capital and labor mobility, and macroeconomic conditions. The major institutional differences between the two cases is developed emphasizing how the proposed free trade area will differ from the customs union, common market, and economic union aspects of the EC.

Although there are many differences between the southern enlargement of the EC and the creation of the NAFTA, there are sufficient similarities to make a comparison useful. The major difference between the two cases is the difference in the per capita income of Mexico relative to the EC-3. The two cases are surprisingly similar in terms of the relative size and structure of their trade flows, their historical growth patterns and their openness to trade. Of the three nations to join the EC, the Spanish case appears to provide the scenario most likely to be followed by Mexico.

The actual experience of the EC after accession is reviewed; the EC-9 did not appear to experience any significant adjustment problems due to the accession of the EC-3. Investment in the EC-9 was not significantly affected.

The implications for the U.S. and Mexico based on the EC's experience are discussed. Changes in trade and production in the two countries will evolve slowly; there will be no rapid increase in Mexican productivity nor convergence to U.S. wage levels. In order for Mexico to benefit substantially, Mexico must create and maintain a stable macroeconomic climate with prudent fiscal and monetary policy. Significant foreign investment will be required for Mexico to grow rapidly.

The Effects of Relative Country Size and Endowment Similarity in Influencing Trade Volume and Composition in General Equilibrium Monopolistically Competitive Markets, by Robert C. Shelburne, in The International Trade Journal, Volume V, No. 3, Spring 1991, pages 361-401.

In order to explain two-way trade, the standard H-O model has recently been modified by assuming a market structure with monopolistic competition. The factors that affect the volume of total trade and its intra-industry component in the 2 x 2 model have been specified in these papers. This paper generalizes these results to the N-good, M-country case. Although endowment similarity increases the intra-industry component in the 2 x 2 case, this proposition does not strictly hold for bilateral trade in the N x M case. Similarity of relative income size (GNP) does increase intra-industry trade in the 2 x 2 case, but does not increase the intra-industry share as assumed by several authors. In the N x M case, similarity of relative income size does not affect the bilateral volume of intra-industry trade nor its intra-industry share. This article thus shows that ceteris paribus comparative static changes in income size in a 2-country model are not equivalent to changes in that variable across a cross-section of a multi-country model.

A Research Summary of Industrial Effects of a Free Trade Agreement Between Mexico and the U.S. by INFORUM, by Clint Shiells and Robert C. Shelburne, in Economy-Wide Modeling of the Economic Implications of a FTA with Mexico and a NAFTA with Canada and Mexico, USITC Publication 2508, U.S. International Trade Commission: Washington, D.C., May 1992.

This paper provides a summary and analysis of the effort to model the implications of a free trade agreement between the United States and Mexico which was undertaken by Interindustry Forecasting of the University of Maryland (INFORM) and the Centro de Investigationes Matematicas at the University of Guanajuato (CIMAT). A 78-sector U.S. model was linked with a 74-sector Mexican model through trade flows with each model determining employment, prices, exports, and imports in all sectors. Results of this model were cited by U.S. Trade Representative Carla Hills in testimony before the U.S. Congress as to the likely impact of NAFTA.

The European Community 1992 Program and U.S. Workers, by Robert C. Shelburne and Gregory Schoepfle, in Monthly Labor Review, Volume 113, Number 11, November 1990.

This paper provides a summary and analysis of the papers presented at a conference sponsored by the Bureau of International Labor Affairs and the Center for Strategic and International Studies concerning the impact of the single market (EC 1992) on U.S. workers. The aggregate effects of EC 1992 are considered as well as sector analysis of the automobile, electronics, and entertainment sectors. The Social Dimension of the single market and its potential impact on U.S. workers is also discussed. A major theme explored relates to the consequences of industrial enterprises becoming transnational while labor markets and labor organizations remain national.

Employment Aspects of the Uruguay GATT Round, by Robert C. Shelburne, U.S. Department of Labor, 1990.

The major employment issues concerning the Uruguay Round of the GATT are outlined. The trade liberalizations will result in more exports and imports but aggregate employment and the long-term trade balance are unlikely to be affected. Although much of the emphasis of the current GATT discussions concentrate on the new areas of services, investment and intellectual property, the significant employment issues concern liberalization of tariffs and quotas in product markets. The most reasonable trade policy is to seek liberalization in foreign markets in which the U.S. is currently export competitive and liberalization in the U.S. import-competing sectors with the lowest wages. Trade protectionism should be reserved for the highest paying import-competing industries and those where employment has been decreasing most rapidly in depressed geographical areas. The emphasis should be on adjustment assistance and retraining, not protectionism; without assistance however, the unskilled may suffer income losses from further trade liberalization. In altering the rules of international commerce, the U.S. should seek to establish a set of efficient rules; attempts to achieve advantages for specific industries should be minimized since economic circumstances and comparative advantages change through time. The welfare costs of U.S. quotas on textiles and apparel account for 90 percent of the total costs of all U.S. trade restrictions. The trade liberalizations in the Uruguay Round are likely to increase U.S. GNP by less than one percent.

The Implications of EC-1992 for the United States, by Robert C. Shelburne, U.S. Department of Labor, 1989.

The twelve members of the European Community are implementing a program to fully integrate themselves economically by 1992; the result will be one market without internal border restrictions for goods, capital, and people which will also have harmonized product standards, regulations, taxes, and government procurement procedures. The EC-1992 program will ultimately increase the growth rate of EC members and make their firms more competitive in global markets. In the long-run this development is likely to benefit the United States; however, in the short-run the EC-1992 program could impose some costs on the United States. Trade diversion is a real possibility as U.S. imports and exports to the EC could be reduced below what they would be otherwise. The EC-1992 program will create changes in comparative advantage which will impose sectoral adjustment costs on both the EC and U.S. in the form of structural and frictional unemployment. Although the U.S. trade balance could be affected temporarily it is unlikely to be affected in the long term. It is possible that the adjustments required in the EC economies could make the EC less willing to make concessions in the GATT in order to avoid additional adjustment costs.

A Ratio Test of Trade Intensity and Per-Capita Income Similarity, by Robert C. Shelburne, in Weltwirtschaftliches Archiv, Volume 123, Heft 3 (September) 1987, pages 474-87.

There have been a number of empirical tests of the Linder hypothesis concerning how bilateral trade intensity is related to the per capita income similarity of two trading nations. However, due to the problem of multicollinearity which results from the high correlation between per capita income similarity and geographical proximity, it has been difficult to assess the significance of income similarity due to the overwhelming significance of geographical proximity. An alternative empirical test is proposed in this paper which allows the omitted variables and the correlated variables to be eliminated from the regression analysis. This test basically considers how the ratio of exports from two side-by-side nations with differ incomes varies to a large set of importing nations equidistant from this pair of exporter nations. The model is formalized using the gravity model framework. The regressions use differ sets of exporters including West Germany and Italy, Switzerland and Austria, Sweden and Greece, Japan and Korea, Sweden and Spain, and Australia and India. Different levels of commodity detail are also considered. Although overall support for the Linder hypothesis is weak, commodity characteristics generally associated with the Linder explanation such as the degree of product differentiation, human capital intensity, price responsiveness, income elasticity, and scale economies tend to be associated with Linder effects. One surprise is that the Linder effect is much more significant for capital goods than consumer goods; thus the modeling approach which focuses on consumer preferences appears misplaced since the emphasis should be on how a nation's income level affects the types of capital equipment desired.