Israel's open-secret tradeLorenzo Rotunno et Pierre-Louis Vézina, Review of World Economics (Weltwirtschaftliches Archiv), Volume 153, Issue 2, pp. 233-248, 2017

Abstract This paper uncovers and quantifies Israel's exports to countries that ban trade with Israel. Israel exported a total of $6.4 billion worth of merchandise to boycott countries between 1962 and 2012, and most of this trade is illicit, i.e. not recorded by the importers. We find that electronic exports to Malaysia account for the lion's share of this trade but it also includes a wide array of products from footwear to fruit and vegetables. Our estimates suggest Israel's exports to these countries would be 10 times larger without the boycott. On top of providing further evidence on the unintended consequences of unilateral trade bans, this paper provides a case study on the role of politics in international trade.

Heckscher-Ohlin: Evidence from Virtual Trade in Value AddedTadashi Ito, Lorenzo Rotunno et Pierre-Louis Vézina, Review of International Economics, Volume 25, Issue 3, pp. 427-446, 2017

The fragmentation of production chains across borders has been one of the most distinctive features of globalization since the 1980s. Nonetheless, our understanding of its implications for trade theory and policy is only in its infancy. We suggest that trade in value added should follow theories of comparative advantage more closely than gross trade, as value-added flows capture where factors of production, e.g. skilled and unskilled labor, are used along the global value chain. We find empirical evidence that Heckscher–Ohlin theory does predict manufacturing trade in value-added, and it does so better than for gross shipment flows. While countries export across a broad range of sectors, they contribute more value-added in techniques using their abundant factor intensively.

Political stability and trade agreements: Evidence for ‘endgame FTAs’Lorenzo Rotunno, European Journal of Political Economy, Volume 45, Issue C, pp. 133-148, 2016

This paper empirically examines the idea that Free Trade Agreements (FTAs) are more likely to be signed by governments playing ‘endgames’; that is, when governments are about to lose power. Two empirical strategies shed light on this hypothesis. One relies on events that increase the probability of political turnover, the other on term limits. I find that countries are more likely to sign FTAs after the unexpected exit of their leaders, when political instability is high. The key finding is partly confirmed in the term-limits strategy as governments are found to form more FTAs during their last term in office.

Quota-Hopping In-Bond DiversionLorenzo Rotunno et Pierre-Louis Vézina, Economic Inquiry, Volume 53, Issue 1, pp. 34-48, 2015

type="main" xml:id="ecin12128-abs-0001"> We show that the U.S. in-bond system of imports may be used by firms to illegally avoid trade barriers, a practice known as in-bond diversion. The illicit scheme involves declaring Chinese exports bound for Mexico but diverting them to the U.S. market while in transit, thus creating a gap between Chinese and Mexican reports. Using the phaseout and removal of U.S. quotas at the end of the Multifiber Agreement as a policy experiment, as well as variation in quota bindingness across products, we show that quota-bound products were associated with larger trade gaps which shrunk following the quota removals. ( JEL F13, O17, O19)

The rise and fall of (Chinese) African apparel exportsLorenzo Rotunno, Pierre-Louis Vézina et Zheng Wang, Journal of Development Economics, Volume 105, Issue C, pp. 152-163, 2013

During the final years of the Multifiber Agreement (2001–2005) the US imposed quotas on Chinese apparel while it gave African apparel duty- and quota-free access. We argue that the combination of these policies led to a rapid but ephemeral rise of African exports that can be explained in part by ethnic-Chinese firms using Africa as a quota-hopping export platform. We first provide a large body of anecdotal evidence on the ethnic-Chinese apparel wave in Africa. Second, we show that Chinese exports to Africa predict US imports from the same countries and in the same apparel categories but only where transhipment incentives are present, i.e. for products facing US quotas and in countries with preferential access to the US unconstrained by rules of origin. Our estimates indicate that direct transhipment may account for around 22% of Africa's apparel exports during 2001–2008.

Chinese Networks and Tariff EvasionLorenzo Rotunno et Pierre-Louis Vézina, The World Economy, Volume 35, Issue 12, pp. 1772-1794, 2012

In this paper we combine the tariff evasion analysis of Fisman and Wei (2004) with Rauch and Trindade’s (2002) study of Chinese trade networks. Chinese networks are known to act as trade catalysts by enforcing contracts and providing market information. As tariff evasion occurs outside the law, market information is scant and formal institutions inexistent, rendering networks the more important. We find robust evidence that Chinese networks, proxied by ethnic Chinese migrant populations, increase tariff evasion, i.e. the tariff semi-elasticity of Chinese missing imports. We suggest the effects takes place through matching of illicit-minded traders, identification of corrupt customs agents and enforcement of informal contracts. (This abstract was borrowed from another version of this item.)