Part 7 - Export promotion

Question 1

Historical development of Export Promotion Agencies (EPAs):

Answer 1

• Foundation of first EPA in Finland in 1919.
• Famous example: In 1985, the Bolivian President saw increased exporting activity and the establishment of an EPA as policy to stabilize the Bolivian economy, suffering from hyperinflation  “export or die.”
• Today, EPAs in over 100 developing and developed countries.

Question 2

Export promotion agencies (EPAs) usually offer:

Answer 2

export promotion programs, i.e., a set of activities to help firms overcome internationalization obstacles.

Question 3

The main objective of EPAs is to

Answer 3

help exporters to understand and find foreign markets for their products.

Question 4

Four broad categories of services:

Answer 4

• Country image building
• Export support services
• Marketing (e.g., trade fairs, exporter and importer missions, follow-up services offered by representatives abroad).
• Market research and publications

Question 5

Example Country image building

Answer 5

(e.g., advertising and promotional events).

Question 6

Example Export support services

Answer 6

(e.g., exporter training, technical assistance, capacity building, including regulatory compliance, information on trade finance, logistics, customs, packaging, pricing).

Question 7

Example Marketing

Answer 7

(e.g., trade fairs, exporter and importer missions, follow-up services offered by representatives abroad).

Question 8

Example Market research and publications

Answer 8

(general, sector, and firm level information, such as market surveys, on-line information on export markets, publications encouraging firms to export, importer and exporter contact data bases).

Question 9

There are two main economic rationales for EPAs:

Answer 9

• EPAs assist domestic firms to overcome asymmetric information. Note that firms would not have an incentive to share costly gathered information about a foreign market with other competing firms (e.g., gather information, cultivating contacts, establish distribution chains).
• EPAs lower the fixed costs of entering a foreign market for domestic firms.

Question 10

How governments use general economic diplomacy?

Answer 10

Governments use general economic diplomacy, relying on international relations through permanent foreign missions such as embassies and consulates or state visits in order to promote international trade abroad

Question 11

Should state visits foster trade, what would we expect ?

Answer 11

we would expect a positive β4-coefficient(e.g., because firm and industry representatives join)

Question 12

Main explanatory variable of interest:

Answer 12

Visit ijt is a dummy variable being one, if a head of state of country I has paid an official visit to country jin year t, or zero otherwise.

Question 13

Conclusion of Visits by Heads of States (Nitsch, 2007)

Answer 13

• not all visits are alike, state visits are more formal and more likely to build bilateral relationships for trading
• overtime the oficial visits became more frequent
• some countries have more visits than others, for example France has more visits.

Question 14

Rose (2007) - main explanatory variable of interest:

Answer 14

Embassies ij is the number of embassies, consulates and foreign missions that country I has in country j.

Question 15

Data gathered by Rose on foreign missions:

Answer 15

• some countries have more missions abroad than other countries

Question 16

Ferrguson and Forslid (2019) return to the trade-effect of embassies:

Answer 16

• It has a couple advantages over the other 2 studies. Best study in the area right now.
• Compare firm-level export activity of Swedish and Norwegian firms.
• Exploit opening and closure of embassies, which usually happens for budgetary reasons, geopolitical reasons and, to some extent, bilateral economic relationships.
• Sweden: 15% of staff employed with explicit task of export promotion.

Question 17

What effect the studies tend to find regarding international trade? explain each study.

Answer 17

The studies on general economic diplomacy tend to find positive effects on international trade:
• Nitsch (2007): Official state visits are on average associated with higher exports between 8 and 10 percent.
• Rose (2007): The first embassy more than doubles exports and every additional embassy increases exports by 6 to 10 percent.
• Ferguson and Forslid (2019): The number of exporters increases by 4 to 6 percent due to a new embassy (except for first quartile of exporters, not for smallest exporters)

Question 18

What Head and Reis study documents?

Answer 18

Head and Ries (2010) document that more important trading partners receive more often high-profile Canadian trade mission, but trade volumes are not further boosted by these visits (insignificant effect of the Canadian trade missions).

Question 19

What can we conclude about general economic diplomacy based on the studies we analyzed?

Answer 19

There is at least a very robust positive co-relationship between these sources of General Economic Diplomacy and international trade for many of these sources of ecumenic diplomacy.

Question 20

Are diplomatic means used to promote international trade?

Answer 20

It is not unusual that diplomatic means are also used to promote international trade.

Question 21

Do embassies or state visits influence trade flows between countries?

Answer 21

Recall that embassies or state visits might influence the bilateral trade flows between countries.

Question 22

When and for which case was that statement given?

“We will take corresponding measures to make the relevant countries realize their mistakes.”

Answer 22

Official press statement by a high Chinese public representative in the forerun of a potential reception of the Dalai Lama by U.S. President Obama in 2010.

Question 23

Dalai Lama Background:

Answer 23

• The “Tibet Question” relates to the political status and potential independence of Tibet from China, which is perceived by China as an internal affair.
• The leader of the Tibetan community, the 14th Dalai Lama, travels frequently internationally.
• If a country grants the Dalai Lama an official meeting with a high representative, China clearly voices its displeasure about that.

Question 24

Study about Dalai Lama Effect was done by:

Answer 24

Fuchs and Klann (2013)

Question 25

If the Chinese government really follows upon its threats, we would expect that our empirical estimations yield …

Answer 25

a negative β3-coefficient

Question 26

Fuchs and Klann (2013) document that Dalai Lama meetings with political leaders vary across countries. TRUE or FAlSE?

Answer 26

TRUE&raquo_space; Fuchs and Klann (2013) document that Dalai Lama meetings with political leaders vary across countries.

Question 27

Main findings of Fuchs and Klann (2013):

Answer 27

• There is indeed a negative “Dalai Lama” effect on exports to China.
• Exports to China fall, if the Dalai Lama meets with the heads of state or government.
• This negative effect only exists during the years 2002 to 2008, namely the tenure of Hu Jintao.
• The drop in exports is economically large and in amount of 16.9 percent on average, but only short-term (for one year).
• Main negative effect is for the machinery and transport equipment so the manufacturing sector

Question 28

Pandas info:

Answer 28

• Improvements in counting panda bears or increase in population.
• International Union for Conservation of Nature downgraded the giant panda from “endangered” to “vulnerable” in 2016.
• Logo of World Wide Fund for Nature (formerly World Wildlife Fund), WWF, inspired by Chi-Chi, a giant panda, in 1961.

Question 29

Buckingham et al. (2013) provide further insights:

Answer 29

• The habitat of giant pandas (“Ailuropoda melanoleuca“) is restricted to Southwest China.
• Wild life [captive] population estimated at 1,600 [350] in 2012.
• Reproduction in zoos difficult: Bamboo constitutes 99% of panda diets, female pandas are fertile for only 1-3 days per year and courting ritual involves chasing each other over long distances.

Question 30

Panda diplomacy goes back to

Answer 30

the Tang dynasty (624-705), when two pandas were presented to the Japanese.

Question 31

Phase 1 of panda diplomacy:

Answer 31

During the Mao Era starting in the 1950s, pandas were given away as goodwill gifts to political allies like Russia.

Question 32

Phase 2 of panda diplomacy:

Answer 32

In 1984, the International Union for Conservation of Nature started to list the giant panda as an endangered specie. China started to loan pandas to international zoos for a fee of USD 50,000 per month.

Question 33

Phase 3 of panda diplomacy:

Answer 33

Massive earthquake in the habitat of pandas led to an extension of some existing gift loans and to offers of panda gift-loans to a new group of countries with whom China was negotiating trade agreements.

Question 34

Graph on population of pandas:

Answer 34

• large amount of pandas are still living in southwest of china
• captive pandas population have increased in the past years - the state has changed from endangered to vulnerable

Question 35

Buckingham et al. (2013) argue that trade negotiations and the panda status are not associated with each other.

TRUE OR FALSE?

Answer 35

FALSE&raquo_space; Buckingham et al. (2013) argue that trade negotiations and the panda status are associated with each other.

Question 36

The Financial Times (2017) reports in an interesting article that the

Answer 36

“standard agreement is $1m per pair of pandas, per year to China for ‘conservation’”.

Question 37

Is there a relation between countries that trade more with china and panda location worldwide?

Answer 37

There is a relation between China trading partners and number of pandas in those locations.

“Many of the loans extended in recent years have coincided with major trade deals between China and the recipient country. For example, Australia, France and Canada all received pandas after agreeing to sell nuclear technology and uranium to China”

Question 38

Pandas are also used by China as a threat, true or false?

Answer 38

TRUE

In 2010, just two days after China warned President Obama not to meet the Dalai Lama, the exiled spiritual leader of Tibet, the first-ever surviving panda cubs born in Zoo Atlanta and the National Zoo in Washington DC were repatriated on China’s orders. This punishment was possible because a clause in all panda-loan agreements stipulates that any cub born while abroad remains the property of China, as does any biological material from the animals such as blood, fur and semen” (FT 2017).