From the editor

Dear Readers,

Welcome to the first issue of The International Trade Journal (ITJ)’s thirty-third volume, our annual special issue containing selected papers from the Western Hemispheric Trade Conference. The annual conference, which was held in Laredo, Texas, on April 11– 13, 2018, 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 Facultad de Comercio, Administración y Ciencias Sociales.

Peter H. Lindert, a Distinguished Professor of Economics at the University of California, Davis, opened the Conference. In his IBC Bank Keynote Speaker Series presentation, “What is Government Doing about Inequality since the 1970s,” Dr. Lindert talked about the recent increase in inequality. He claimed the increase was mostly due to market forces—technological change, import competition, and immigration. But he also argued that the US government could do more to relieve inequality; the US government redistributes less than most European governments. Moreover, he suggested that one of its favorite redistributive tools—trade protection—is ineffective. Finally, he contended that more redistribution would not lead to slower growth, arguing that there is little evidence of a trade-off between the two. This special issue contains a review of Unequal Gains: American Growth and Inequality since 1700, which Dr. Lindert coauthored with Jeffrey Williamson (Lindert and Williamson 2016).

The conference also featured two other keynote presentations. During lunch on Thursday, April 12, Ambassador Maria del Carmen Dominguez, Chile’s Deputy Permanent Representative to the United Nations, talked about “Trade Policy in Practice.” She discussed her experience representing Chile during the Doha Round of WTO negotiations, negotiations over the Trans-Pacific Partnership (TPP), and many other free trade agreement negotiations. She noted that trade was not as controversial in Chile as in the United States, and argued that most Chileans believe the country has benefited from trade as it has grown into a middle-income economy.

During lunch on Friday, April 13, in a presentation entitled “Mexico between Elections and Uncertainty,” Dr. Luis Rubio, the Chairman of the Mexican Council on Foreign Relations, discussed the July 2018 elections in Mexico. He argued that Mexico was at an important crossroads, choosing between continued liberalization or moving backwards.

The conference also featured a panel discussion on “Inequality in International Trade.” Dr. Stephen Meardon, Director of the Center for the Study of Western Hemispheric Trade at Texas A&M International University, moderated the panel, and Hans-Michael Trautwein and Phillip Magness presented their work. Both presenters agreed to include papers based on their talks in this special issue.

Many observers have argued that increased globalization has led to greater inequality in the United States and Europe since the 1970s.¹ Trautwein, however, argues that standard trade theory fails to explain this increase. He then discusses how classical writers, such as Adam Smith, Joseph Schumpeter, David Ricardo, and Karl Marx, can complement standard trade theory in understanding the link between the two.

In the second article from the panel discussion, Phillip W. Magness discusses the link between inequality and marginal tax rates. He argues that the link between the two is weaker than it appears because of problems measuring effective tax rates and rich households’ incomes. First, he notes that effective tax rates were far less progressive before the 1980s than marginal tax rates would suggest. Second, he argues that income measures that account for changes in reporting, and tax evasion and avoidance suggest a more modest increase in inequality than unadjusted measures do.

In addition to the keynote and panel presentations, there were also 28 parallel sessions over the conference’s two days. The ITJ’s editorial board invited the presenters of the best papers from these sessions to submit the papers to the special issue, either as full papers or as research notes. We are happy that many agreed to do this.

In the first article from the parallel sessions, Ali Ari, Raif Cergibozan, and Emre Cevik look for evidence that currency depreciations cause a long-run improvement in the trade balance after an initial deterioration (i.e., that depreciations have a J-curve effect).² Their study focuses on bilateral trade between Turkey and 18 members of the European Union. Before allowing depreciations and appreciations to have asymmetrical effects, the results do not support the J-curve model. When the authors use a nonlinear ARDL model to allow for asymmetric effects, however, they find a J-curve effect for five of the 18 countries.

The second article from the parallel sessions, by David Hudgins and Patrick M. Crowley, uses a wavelet-analysis to model the effects of different fiscal and monetary policies in South Africa. They find that greater emphasis on real exchange rate stability would allow policymakers to keep inflation in the lower part of the government’s target range. They note that this would require fiscal expansion.

The third article from the parallel sessions, by Chu V. Nguyen, presents a modified Solow growth model to explore how corruption and foreign direct investment affect steady-state capital and income.³ Nguyen argues that corruption reduces the effective savings rate because corrupt officials will not invest the proceeds from corruption in domestic businesses. Instead, they either invest overseas or hold foreign currency outside of the domestic banking sector. This, in turn, lowers the capital to labor ratio and, hence, per capita income.

The fourth article, by Sultanuzzaman Md. Reza, Hongzhong Fan, Banban Wang, Miraj Ahmed Bhuiyan, and Adnan K.M. Mehedi, looks at the relationship between exports and growth in Bangladesh using a vector error correction model (VECM).⁴ The authors find that exports increase growth in both the short and long run.

The fifth article, by Doreen Hanke, looks at how managers’ use of motivating language can help expatriate employees adapt and thrive in international assignments. She argues that managers can use motivating language to increase employees’ cultural self-efficacy and their cross-cultural intrinsic motivation. She argues that this will help expatriate employees’ effectiveness.

The final article in this special issue, by Jesse Astrid Orozco Soto, is a research note that looks at how two hypothetical changes to NAFTA would affect two firms producing cars for the US market in Mexico. The first scenario is a tightening of NAFTA’s rule of origin requirements that would require firms to increase the share of regional content by 10 percentage points. The author estimates that this would increase costs by about 5%. To maintain profits, the firm would have to increase prices by about $2,600 per vehicle. The second scenario is a reversion to most-favored nation tariffs if the United States left NAFTA. The firm would need to increase the price of trucks by about $16,400 to maintain profits.

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 another successful conference. As with any conference, it would not succeed without the participants who presented papers and chaired sessions. We would therefore like to thank all of them for their participation. We would also like to thank Stephen J. Meardon, Director of the Center for the Study of Western Hemispheric Trade, who organized the conference and provided intellectual leadership. We also thank the program committee and chairs who read and assessed the submissions to the conference: Steve Sears, Jorge Brusa, Geoffrey Hubona, Ken Hung, Balaji Janamanchi, Ned Kock, Adan Lopez Mendoza, Sofia Mitre Camacho, Victor Manuel Munoz Brandi, Silvia Patricia Munoz Castellanos, Gabriela Ortega Cervantes, Lionel Prieto, Tony Rodriguez, and Constant Yayi.

We would also like to thank the hard-working staff who worked behind the scenes to ensure that the conference ran smoothly. Jacqueline Benavides, Baldomero Garcia, Jr., Vanessa Garcia, Heleodoro Lozano, Jessica M. Rubio, and Federico Schaffler served as program coordinators. With support from Valeria Arce, Sabrina Dudziak, and Pedro Gallegos, Jr., they ensured that sessions ran smoothly and participants were cared for. Finally, we would like to especially thank Amy Palacios, 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 organized sessions, arranged keynote speeches, coordinated the speakers’ travel arrangements, helped participants register, managed the program staff, and ensured that everything ran without any problems.

We would like to invite all ITJ readers to attend next year’s conference in Laredo, Texas, on April 3–5, 2019. As we did in 2018, we will invite the authors of the best papers to submit them to a special issue of The International Trade Journal. Additional participants will be invited to submit short summary notes of their work. We look forward to seeing you in Laredo in April 2019!

Notes

¹ See, for example, Lindert and Williamson (2016) and Alden (2017). The book by Lindert and Williamson (2016) is reviewed in this special issue, while Alden (2017) was reviewed in last year’s special issue of the ITJ (Clarke 2018). Several recent articles in the ITJ have discussed issues related to globalization and trade (Braymen and Lam 2014; Kratou and Goaied 2016; Majeed 2015).

² Bahmani-Oskooee and Harvey (2018) find similar partner specific asymmetric effects for Malaysia. Several other articles in the ITJ have also looked for evidence of J-curve effects (Bahmani-Oskooee and Harvey 2015; Cergibozan and Ari 2018).

³ Another recent article in the ITJ looks at how corruption affects international business and trade (Kouznetsova, Kim, and Pierce 2018).

⁴ Several other recent articles in the ITJ have explored the relationship between economic growth and exports in China and Pakistan (Ali and Li 2018), Sub-Saharan Africa (Zahonogo 2018), and the European Union (Ribeiro, Carvalho, and Santos 2016).