From the Editor

The International Trade Journal, Vol. 32, No. 1 (January–March 2018)

Dear Readers,

Welcome to the first issue of The International Trade Journal (ITJ)’s thirty-second volume. This issue is our annual special issue containing selected papers presented at the 21st Annual Western Hemispheric Trade Conference. The annual conference, which was held in Laredo, Texas, on April 5–7, 2017, was sponsored by Texas A&M International University, the A. R. Sanchez, Jr. School of Business, and the Center for the Study of Western Hemispheric Trade, in partnership with the Universidad Autónoma de Tamaulipas’s Facultad de Comercio, Administración y Ciencias Sociales. We received an exceptional number of high-quality submissions in 2017, making it even more challenging than usual to select the articles for the special issue.

The Conference opened on the evening of Wednesday, April 5, with a keynote speech by Edward Alden, the Bernard L. Schwartz Senior Fellow at the Council on Foreign Relations in Washington, DC. Mr. Alden discussed his recent book, Failure to Adjust: How Americans Got Left Behind in the Global Economy. He described how and why the US has fallen behind other countries in terms of competitiveness. He argued that this has resulted in large trade deficits and reduced wages for workers in sectors that have had to compete with foreign competitors. He also proposed ways that the US government can reverse these trends and improve US workers’ positions without losing all of the benefits of open markets and free trade. This special issue includes a review of Mr. Alden’s book.

In addition, the Conference featured two luncheon keynote presentations. On April 6, Dr. Fausto Hernández-Trillo, the editor-in-chief of El Trimestre Económico and a former dean at the Centro de Investigación y Docencia Económicas (CIDE) in Mexico City, discussed how the policies of the new US administration might affect Mexico’s economy. He argued that although NAFTA has benefitted Mexico, growth has only averaged about 2.5% since the NAFTA agreement—far below Mexico’s potential growth rate.¹ Dr. Hernández-Trillo kindly agreed to include an article based on his presentation in this special issue.

On April 7, Dr. I. M. “Mac” Destler, the Saul I. Stern Professor of Civic Engagement at the University of Maryland’s School of Public Policy, discussed the future of the US free trade system as it faces growing political pressure. Dr. Destler noted that although support for trade and globalization has been steady over the past decade, some groups have become increasingly disenchanted by trade. In particular, he noted that older White men, especially in the rural South and Midwest, have become increasingly less supportive of free trade. He argued that although the new administration is less positive about trade than previous administrations, it is unclear how this will affect US trade policy.

The Conference also featured a panel discussion on the “Implications of Prospective US Trade Policy Changes for Hemispheric Economies.” The panel, which was chaired by Dr. Stephen Meardon, Director of the Center for the Study of Western Hemispheric Trade at Texas A&M International University, included presentations by three experts. Two of the panelists also provided articles based on their presentation for inclusion in this special issue.

The first article from the panel presentation and the second in this issue, by José Carlos Ramirez, Cuauhtémoc Calderón, and Sarahí Sánchez León, discusses how NAFTA affected the Mexican economy. The authors argue that, despite Mexico’s trade surplus with the United States, Mexico has not benefitted significantly from NAFTA. Based on their analysis, they argue that Mexico has seen its export competitiveness deteriorate since 1994. They also argue that Mexico’s bilateral trade surplus with the United States does not provide any evidence that Mexico has benefited from NAFTA. In the presence of intra-industry trade and indirect trade with third countries, they argue that it is difficult to interpret Mexico’s trade surplus with the United States.

In the second article from the panel presentation, Juan Felipe Mejía, Leonardo-Fabio Morales, and Daniel Medina look at how trade liberalization, which saw tariffs reduced by about 50%, affected labor markets in Colombia. They find that firms in better-protected sectors created more jobs after 2014 than firms in less well-protected sectors.

In addition to the keynote and panel presentations, the Conference also included 30 parallel sessions over two days. The editorial board of the ITJ invited the presenters of the best papers from these sessions to submit their articles to the special issue, either as full papers or as research notes. We are pleased that many of the invited authors chose to do this.

China’s entry into the global economy has affected many countries over the past 30 years.² The fourth article in this special issue, by Lourenco S. Paz, looks at how China’s exports affected Brazilian workers. Between 2000 and 2012, China’s share of manufacturing imports grew from 3% of Brazilian imports to 20%. Over the same period, manufacturing’s share of GDP fell by more than 20% in Brazil. Using household-level data, Paz finds that competition from Chinese imports reduced employment in competing sectors in Brazil and resulted in the reallocation of workers across industries. He also finds that competition from Chinese firms did not affect workers in the informal sector.

The fifth article, by Chu V. Nguyen, looks at how commercial banks in Mexico adjust interest rates in response to the Central Bank’s monetary policy. Using data from January 2008 through November 2016, Chu finds that when the Central Bank adjusts its policy rate, there is high short-run pass-through and almost complete long-run pass-through to lending rates. Chu argues that the Central Bank’s monetary policy is highly credible.

The sixth article, by Jack Cathey, Keejae P. Hong, and Simon J. Pak, assesses the extent to which exports from the Democratic Republic of Congo (DRC) to the European Union (EU) and the United States are undervalued. Rather than relying on the partner-country method, the authors use the price filter method proposed in Hong and Pak (2017). They estimate that exports to the EU are undervalued by $9.95 billion—more than the exports’ declared value of $8.06 billion. The two goods that account for most of the underpricing are diamond exports to Belgium and cobalt exports to Finland.

The seventh article in this issue, by Michael Yoder, looks at transportation and economic development in the Chihuahua-Albuquerque corridor. The author argues that the region, which runs from Chihuahua, through Ciudad Juarez and El Paso, to Albuquerque, is becoming a “megapolitan area” as transportation and logistical links bind these cities together economically. He argues that this has and will continue to benefit people and firms on both sides of the border. He also argues that if NAFTA is renegotiated, this could undermine the success of this corridor, potentially resulting in real economic costs for both US and Mexican firms and consumers in this area.

The eighth article in this issue, by Da Hou, Ken Hung, Haibo Wang, and Xu Xiaoli, looks at the online promotion of food products to Chinese consumers. They find that cultural differences, as measured by Hofstede’s cultural dimensions, are associated with weight, number of units in promotional packages, prices, and discounts.

The final article in this issue, by Rita Barrera and Jessica Bustamante, was the winner of the Best Student Paper Award by Master’s Students at the Conference. The article discusses the European Commission’s finding that Apple had received preferential tax treatment worth $14.5 billion from the Government of Ireland. The authors argue that although Apple’s tax avoidance, which involved its use of shell companies and tax havens in Ireland, was not ethical, forcing Apple to pay the $14.5 billion back to the Government of Ireland would be problematic.

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 at the International Trade Institute at Texas A&M International University for processing submissions quickly and efficiently, our Editorial Board for their expert guidance, and our publisher, Taylor and Francis, for ensuring the high quality of the ITJ.

We would also like to thank everyone who contributed to the Conference. In addition to the participants and the session chairs, we would like to thank Dr. Stephen J. Meardon, the new director of the Center for the Study of Western Hemispheric Trade, who was responsible for organizing the Conference and providing intellectual leadership. We would also like to thank the program committee and chairs who read and assessed the submissions to the Conference: Chris Boudreaux, Jorge Brusa, Ken Hung, Balaji Janamanchi, Ned Kock, Lionel Prieto, Tony Rodriguez, and Steve Sears. In addition, we would like to thank the hard-working staff who served as program coordinators: Jacqueline Benavides, Baldomero G. Garcia, Jr., Vanessa A. Garcia, Heleodoro Lozano, Jessica M. Rubio, and Federico Schaffler. With support from Jose D. Alvarado Silva, Jose G. Manrique, Pedro Gallegos, Jr., and Raul M. Moreno, the program coordinators worked tirelessly throughout the Conference to ensure that sessions ran smoothly and participants were cared for. We would like to especially thank Amy Palacios, the Associate Director of the Center for the Study of Western Hemispheric Trade. In addition to serving as a member of the program committee, Ms. Palacios did much hard work organizing sessions, arranging keynote speakers and coordinating their travel arrangements, helping participants to register, managing the Center’s and program staff, and ensuring that everything at the Conference ran without any problems.

We would like to invite all ITJ readers to attend next year’s conference in Laredo, TX, on April 11–13, 2018. As we did this year, we intend to invite the authors of the best papers at the conference to submit their papers to a special issue of The International Trade Journal. We also intend to encourage additional participants to submit short summary notes of their work for the special issue. We look forward to seeing you in Laredo in April 2018!

Notes

¹ Several recent articles in The International Trade Journal have also looked at Mexico’s recent economic performance. See Chiquiar and Tobal (2015), Negroponte (2015), and Nguyen (2016).

² Several recent articles in The International Trade Journal have looked at how China’s increasing economic power has affected firms and households in the United States. See Kim (2014) and Hartman and Whooley (2016). In addition, Paul (2016) discusses China’s rise more broadly.