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The International Trade research programme of CEPR was inaugurated at a Workshop on Recent Developments in International Trade Theory held in the Centre and Chatham House on 9 December 1983. The Workshop was attended by about 20 participants from the academic and policy analysis communities. Following introductory remarks by Richard Portes and Peter Neary, who chaired the sessions, three papers were presented: "Natural oligopolies and international
trade" "Size, technology and international trade in differentiated products"Tony Venables "The European Economic Community: General
equilibrium computations and the economic implications of
membership" The Workshop concluded with a round-table discussion on research priorities in international trade. Opened by Peter Neary, the session included invited contributions from Alasdair Smith, Ravi Kanbur, and Martin Wolf. The paper by John Sutton (co-authored with Avner Shaked) surveys recent work on the effects of international trade in markets where there is a hierarchy of product quality. The paper shows that under certain conditions (for example, where the main burden of quality improvement falls on fixed costs such as research and development rather than on variable costs), there is an upper bound to the equilibrium number of firms. In this 'natural oligopoly' case, the opening up of trade leads to fewer firms, enhanced economies of scale and higher quality, and as a result may make all consumers better off. In his presentation, Sutton also noted some of the implications of this literature for industrial and trade policies. Tony Venables presented a model of international trade in differentiated products between many countries which differ not only in size but also in technology and consumer preferences. The model predicts that differentiated products will tend to be exported on balance by large countries as well as by those with lower-cost technology in their production. The effects of endowment growth and technical change on trade patterns and welfare are also analysed. For example, it is shown that increased productivity in a country's competitive sector may reduce the size of its monopolistically competitive industry and thereby lower national welfare - an example of immiserising de- industrialisation. John Spencer's paper sets out a computable general equilibrium of the European Economic Community, which pays special attention to the budgetary arrangements associated with the Common Agricultural Policy. The effects of alternative policies on outputs, the terms of trade and income distribution are examined. Among the paper's findings is that Ireland would have most to lose (of EEC members) from a general swing towards free trade and Belgium and the United Kingdom most to gain. The final session of the Workshop identified areas where CEPR's research programmes might fruitfully develop. Although not all suggestions were mutually consistent, general agreement emerged on a number of priority areas. First was the interface between industrial economics and trade, with emphasis on the implications of new work in this field for industrial policy. Second was the economics of trade discrimination and tariff bargaining, especially with reference to Customs Unions. Third was the interaction of structural change and shifts in comparative advantage, including the evolution of trade patterns in particular commodity groups such as energy. |