From the Editor

Abstract

Dear Readers, Welcome to the second issue of The International Trade Journal (ITJ)’s thirty-sixth volume. The articles in this issue focus on trade policy; the first two studying trade facilitation and the last two focusing on other policies. The first article looks at trade facilitation and foreign direct investment (FDI) in Africa. The second article also examines trade facilitation using a theoretical model. The third article presents a game theoretical model of customs unions. The final article studies the role that commercial diplomacy plays in encouraging trade. The first article in this issue, by Ridwan Lanre Ibrahim and Kazeem Bello Ajide, looks at whether improving trade facilitation could increase FDI into Africa. Using data from 26 sub-Saharan African countries, the authors find that reducing the time and cost of importing and exporting could increase FDI. They note that given that the cost of importing and exporting is particularly high in Africa, the benefits of improving trade facilitation through steps such as adopting electronic procedures or adopting the World Customs Organization’s single-window system could benefit the region greatly. The second article, by Nasreen Nawaz, also looks at trade facilitation. The study sets up a theoretical model with a foreign and a domestic producer, a middleman who sells the product to consumers, utility maximizing consumers, and a government that formulates the trade facilitation policy. Changes in trade facilitation policy affect the foreign producer’s costs and, therefore, imports. This pushes the market away from its equilibrium, where it remains until the price reaches its new equilibrium level. During the transition to the new equilibrium, there are efficiency losses. The article then derives the optimal trade facilitation policy to minimize the losses during the transition. The third article, by Sunandan Ghosh, looks at whether customs unions can form when consumers have different tastes for imported goods. Differences in taste diversity between countries in a customs union will make forming the union more complicated than forming a free-trade area because customs union members need to set common external tariffs. Ghosh sets up a model where a foreign monopolist chooses the quality of a single differentiated good to export to the customs union. Ghosh then shows that customs unions can form but will only do so when conditions related to taste diversity and relative