From the Editor

The International Trade Journal, Vol. 31, No. 3 (July–August 2017)

Dear Readers,

Welcome to the third issue of The International Trade Journal (ITJ)’s thirty-first volume. The four articles in this issue discuss parallel imports, the relationship between innovation and the extensive margin of exports, the relationship between foreign direct investment (FDI) and exports, and the effect of a regional trade agreement in the Gulf on food exports within the region.

The first article in this issue, by Sungho Yun, presents a theoretical model of parallel imports—genuine products protected by copyright, trademarks, or patents that are legally sold in one country and are then exported to a second country, where they are sold on the grey market. Parallel imports can potentially stop firms from setting different prices in different countries for the same good. If firms try to sell their products at a higher price in one country than in another, entrepreneurs can buy the good in the lower-price country and then export it to the higher-price country. This article shows that when the firm can provide value-added services, such as warranties or service agreements, only to people who have purchased the authorized product in each country, parallel imports are not necessarily harmful to the firm. In particular, when the cost of providing these additional services is neither too high nor too low, the firm can benefit by encouraging parallel imports.

The second article in the issue, by Joachim Wagner, looks at the link between research and development and exporting in Germany.¹ The article shows that innovative German firms export more goods to more countries than less innovative firms do. Wagner argues that this is reasonable; more innovative firms will have an advantage over their competitors in both local and international markets, and innovative activities do not generally affect only one product line.

The third article, by Rosa Forte and Vera Silva, surveys the large literature on how FDI affects exports. The authors note that the theoretical literature allows FDI and exports to be either complements or substitutes. The empirical literature is similarly mixed, with the majority of studies finding a complementary relationship, but with many finding the opposite or no relationship. The authors argue that future research should focus on more disaggregated data at the firm and product level.

Several recent articles in the ITJ have looked at how regional trade agreements have affected trade and investment.² The final article in the issue, by Simeon Kaitibie and Manitra A. Rakotoarisoa, contributes to this literature using a gravity model to explore how the Gulf Cooperation Council (GCC) customs union affected food exports within the customs union and to the rest of the world. They find that the custom union reduced exports of food from the GCC to the rest of the world but did not have a significant impact on food exports within the customs union.

As usual, we would like to acknowledge the people without whom the ITJ would not succeed. We would like to thank the authors for their contributions, the anonymous referees for the detailed and timely comments they provide, the team in the International Trade Institute at Texas A&M International University that ensures that submissions are processed quickly and efficiently, our Editorial Board for their expert guidance, and our publisher, Taylor and Francis, for ensuring the high quality of the ITJ.

Notes

¹ An earlier article, Wagner (2015), looks at the link between firm age and exporting.

² See, for example, Ciuriak et al. (2015), Nguyen (2014), and Wang (2016).