TRADE INTEGRATION UNDER ASYMMETRY OF COUNTRIES
Keywords:
country size, size of economy, economic integration, trade integration, trade liberalization
Abstract
The article provides a review of research on the effect of economy size asymmetries on international trade integration. Size of economy influences economic and political stimuli and effects of trade integration for small and large economies. Positive effects of trade integration for small countries include elimination of price distortions, more equal conditions for businesses, wider range of products available, economic openness. Factors restraining integration include trade with distant countries, dependence of government revenue on foreign trade, trade diversion effect, rent relations, technical barriers for market entry, increasing economic volatility, political dependence, and weaker negotiation power. Large countries have less economic stimuli for trade integration, but obtain political benefits and increase their big business power. Also larger countries can face the risks of home market effect erosion and separatism. Therefore it also affects the composition of trade blocs’ member-states. Size of economy is a factor of costs and efficiency of negotiations within regional and global trade integration. Incompleteness of integration provides advantages for large economies, which benefit from the economies of scale. These effects are extrapolated to Ukraine to assess its prospects for participation in integration processes. Considering economic stimuli it is more beneficial for Ukraine to integrate with large countries. But considering political influence and negotiation power integration with the economies of similar or smaller size is preferable. The risks of decreasing government revenues are smaller than before, but the risks of informal or technical barriers and import substitution disinvestments remain.
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References
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2. Balassa B. Country Size and Trade Patterns: Comment / B. Balassa // The American Economic Review. – 1969. – Vol. 59. – № 1. – P. 201–204.
3. Nyamtseren L. Challenges and Opportunities of Small Countries for Integration into the Global Economy, as a Case of Mongolia : Dresden Discussion Paper in Economics, № 13/04 / L. Nyamtseren. – Dresden: Dresden University of Technology, 2004. – 45 p.
4. Casella A. Large Countries, Small Countries and the Enlargement of Trade Blocs : Working paper № 5365 / A. Casella. – Cambridge, MA: National Bureau of Economic Research, 1995. – 30 p.
5. Tharakan J. Revisiting “On Nations’ Size and Transportation Costs” : CORE Discussion Paper № 2001032 / J. Tharakan. – Louvain: Universit´e Catholique de Louvain, Center for Operations Research and Econometrics, 2001. – 24 p.
6. Kose M. A. Small Countries and Preferential Trade Agreements “How Severe is the Innocent Bystander Problem?” : Working Paper № 253/ M. Ayhan Kose, Raymond Riezman. – Munich: CESifo, 2000. – 28 p.
7. Anklesaria Aiyar S. S. Small States: Not Handicapped and Under-Aided, but Advantaged and Over-Aided / Swaminathan S. Anklesaria Aiyar // Cato Journal. – 2008. – Vol. 28. – № 3. – P. 449–478.
8. Price A. Small Is Cute, Sexy, and Successful: Why Independence for Wales and Other Countries Makes Economic Sense / A. Price // Harvard Kennedy School Review. – 2010–2011. – Vol. 11. – P. 132–139.
9. Forslid R. Does a Wait and See Approach to European Integration Shelter the Industrial Base of Small Countries? : Research Paper in Economics [Electronic resource] / R. Forslid. – Stockholm: Stockholm University, Department of Economics, 2004. – 16 p. – Way of access : http://www2.ne.su.se/paper/wp04_02.pdf.
10. Chou Y.-M. Economic Integration in Less Developed Countries. The Case of Small Countries / Yu-Min Chou // Journal of Development Studies. – 1967. – №. 3 (4). – P. 352–373.
11. Chen M. Third-Country Effects on the Formation of Free Trade Agreements : Paper № 23507 [Electronic Resource] / M. Chen, S. Joshi. – Munich: Munich Personal RePEc Archive, June 2010. – Way of access : http://mpra.ub.uni-muenchen.de/23507/.
12. Readiness of Small Countries to Participate in the Free Trade Area of the Americas (FTAA). – Mexico: United Nations Economic Commission for Latin America and the Caribbean, 1996. – 93 p.
13. Schiff M. Small Is Beautiful. Preferential Trade Agreements and the Impact of Country Size, Market Share, Efficiency, and Trade Policy : Policy Research Working Paper № 1668 / M. Schiff. – Washington D.C.: The World Bank, International Economics Department, International Trade Division, 1996. – 36 p.
14. Burfisher M. E. Small Countries and the Case for Regionalism vs. Multilateralism : TMD Discussion Paper № 54 / M. E. Burfisher, S. Robinson, K. Thierfelder. – Washington, D.C.: Trade and Macroeconomics Division International Food Policy Research Institute, 2000. – 41 p.
15. Bhagwati J. Preferential Trading Areas and Multilateralism – Strangers, Friends, or Foes? [Electronic Resource] / J. Bhagwati, A Panagariya. – Way of access : http://www.columbia.edu/cu/libraries/inside/working/Econ/ldpd_econ_9596_004.pdf.
16. Toulemonde E. Home Market Effect versus Multinationals : IZA Discussion Paper № 2829 / E. Toulemonde. – Bonn: Institute for the Study of Labor, 2007. – 27 p.
17. di Giovanni J. International Trade and Aggregate Fluctuations in Granular Economies : 2009 Meeting paper № 491[Electronic resource] / J. di Giovanni, A A. Levchenko. – Society for Economic Dynamics, 2008. – 44 p. – Way of access : https://www.economicdynamics.org/meetpapers/2009/paper_491.pdf
18. Viner J. The Customs Union Issue / Jacob Viner. – Oxford, New-York: Oxford University Press, 2014. – 207 p.
19. World Economic Outlook Databases. October 2015 Edition [Electronic Resource] // International Monetary Fund. – Accessed mode : http://www.imf.org/external/pubs/ft/weo/2015/02/weodata/index.aspx.
20. Alesina A. On the Number and Size of Nations : Working paper № 5050 / A. Alesina, E. Spolaore. – Cambridge, MA: National Bureau of Economic Research, 1995. – 48 p.
21. Alesina A. Economic Integration and Political Disintegration : Working paper № 6163 / A. Alesina, E. Spolaore, R. Wacziarg. – Cambridge, MA: National Bureau of Economic Research, 1997. – 45 p.
22. Yilmazkuday D. Bilateral versus Multilateral Free Trade Agreements: A Welfare Analysis : Economics Research Working Paper № 1 [Electronic Resource] / Demet Yilmazkuday, Hakan Yilmazkuday. – Miami: Florida International University, 2014. – 27 p. – Way of access : http://digitalcommons.fiu.edu/economics_wps/1.
23. Soo K. T. Intra-industry Trade: A Krugman-Ricardo Model and Data : Economics Working Paper № 2013/006 / Kwok Tong Soo. – Lancaster: Lancaster University, 2013. – 26 p.
24. Small States: Meeting Challenges in the Global Economy: Report of the Commonwealth Secretariat. – London, Washington, D.C.: Commonwealth Secretariat, World Bank, 2000. – 127 p.
25. Shepotylo O. Impact of WTO Accession and the Customs Union on the Bound and Applied Tariff Rates of the Russian Federation : Policy Research Working Paper № 6161 / O. Shepotylo, D. G. Tarr. – Washington, D.C.: The World Bank Development Research Group, Trade and Integration Team & Europe and Central Asia Region Poverty Reduction and Economic Management Unit, August 2012. – 32 р.
26. Shapiro I. Asymmetric Capabilities in Trade Negotiations: Suggestions for Helping the Smaller Economies in the FTAA Process [Electronic resource] / I. Shapiro, R. Cassidy. – Washington D.C. Inter-American Development Bank, 2002. – Way of access : http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=604912.
27. Coughlin C. C. Is the International Border Effect Larger than the Domestic Border Effect?: Evidence from US Trade [Electronic Resource] / C. C. Coughlin, D. Novy – London: London School of Economics and Political Science, LSE Research Online, 2012. – 27 p. – Accessed mode : http://eprints.lse.ac.uk/57358/.
28. Foad H. Europe Without Borders? The Effect of the EMU on Relative Prices [Electronic resource] / H. Foad, 2005. – 33 p. – Way of access: http://economics.emory.edu/home/documents/workingpapers/foad_05_15_paper.pdf.
29. Becker G. S. Why So Many Mice are Roaring [Electronic resource] / Gary S. Becker // Businessweek. – 1994. – November 7. – Way of access : http://www.bloomberg.com/bw/stories/1994-11-06/why-so-many-mice-are-roaring.
Published
2016-09-08
How to Cite
Чугаєв, О. А. (2016). TRADE INTEGRATION UNDER ASYMMETRY OF COUNTRIES. Bulletin of V. N. Karazin Kharkiv National University Economic Series, (90), 164-172. Retrieved from https://periodicals.karazin.ua/economy/article/view/6346
Issue
Section
International Economics
