Year 2011, Issue III

The following articles were published in the third issue of the Aussenwirtschaft 2011.

Future-Proofing World Trade in Technology: Turning the WTO IT Agreement (ITA) into the International Digital Economy Agreement (IDEA)
Hosuk Lee-Makiyama

Although the Information Technology Agreement (ITA) in the World Trade Organization (WTO) is a sector agreement tailored for the fast-moving ICT industry, the signatories have failed to re-negotiate its scope since 1996. In the meantime, the digital economy has reshaped the industry with emergence of Internet and a range of new products, where many of them are dependent on network services. Supply chain fragmentation has integrated the developing economies in the ICT trade, and they stand to enjoy most of its trade, welfare and efficiency gains. Despite proliferation of bilateral free trade agreements (FTAs) in recent years, they cannot replace a plurilateral ‘critical mass’ agreement under the auspices of the WTO. This article proposes the creation of an International Digital Economy Agreement (IDEA) by augmenting the ITA through full coverage on trade in goods; including non-tariff barriers (NTBs) and trade in telecommunication and computer and related services in all modes of delivery (including mode 4); and six priority economies that are currently not signatories of the ITA – Argentina, Brazil, Chile, Mexico, South Africa and the pending WTO accession of the Russian Federation. Under its new and full scope, IDEA would achieve a trade coverage that exceeds 40% of the current trade under the ITA, making both developed and developing economies as key beneficiaries.

Industry Composition and the Effects of Exchange Rates on Exports - Why Switzerland is Special?
Raphael Auer and Philip Sauré

We identify the role of industrial composition on the elasticity of aggregate export volume with respect to the exchange rate. In an annual panel covering the time from 1972 to 2000, 865 sectors, and bilateral trade flows between 24 OECD economies, we estimate sectoral elasticities of export volume with respect to the exchange rate. We then combine the resulting 865 elasticity estimates with the weight of each sector in each of the countries’ export basket. The resulting country-specific average exchange rate elasticity varies substantially as countries specialize in very different sectors. It ranges from 0.83 for Switzerland to 1.06 in Turkey, with the average being 0.94. Consequently, our results demonstrate that the low response of Swiss export performance to the strong real appreciation of the Swiss Franc observed during 2008 to 2011 can partly be explained by the unique industrial composition of the Swiss economy.

How the iPhone Widens the United States Trade Deficit with the People's Republic of China
Yuqing Xing and Neal Detert

In this paper, we use the iPhone as a case to show that even high-tech products invented by the United States (US) companies will not increase US exports, but on the contrary exacerbate the US trade deficit. The iPhone contributed US$1.9 billion to the US trade deficit with the People’s Republic of China (PRC). Unprecedented globalization, well organized global production networks, the development of cross-country production fragmentation, and low transportation costs all contributed to rational firms such as Apple making business decisions that contributed directly to the US trade deficit. Global production networks and highly specialized production processes apparently reverse trade patterns: developing countries such as the PRC export high-tech goods like the iPhone while industrialized countries such as the US import the high-tech goods they invented themselves. In addition, conventional trade statistics greatly inflate bilateral trade deficits between a country used as export-platform by multinational firms, and its destination countries.