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Abstract: We examine the impacts of the 2018–2019 US import tariff increases on US exports through the lens of supply chain linkages. Using 2016 confidential firm-trade linked data, we identify exporters who were importing products that eventually faced tariff increases to construct product-level exposure to import tariffs. We find that the most exposed products had lower exports in 2018–2019, with the largest effects in 2019. The decline in exports in 2019 is equivalent to an ad valorem tariff on US exports of 2 percent to 4 percent. (...)
Abstract: This article examines the future of international trade as envisioned by the European Union (EU) through the lens of the European Economic Security Strategy (‘EESS’). The international political landscape, reshaped by recent major events such as the war in Ukraine, the definitive rupture in relations between the G7 nations and Russia and the intensifying rivalry between the United States (US) and China – along with the resulting so-called ‘decoupling’ of their economies – has led to new security challenges for the EU. The EESS aims to define EU strategies to meet these challenges, achieving not only economic, but also social and national security. The Union strategy is based on three main pillars: (1) enhancing the competitiveness of its economy by strengthening the Single Market through significant investments in strategic sectors; (2) protecting its economic security by implementing measures to safeguard its market and intellectual capital, while enhancing its supply chains; and (3) reinforcing its international relations, bearing in mind that the world is increasingly shifting towards a ‘small yard, high fence’ dynamic. The ultimate goal is to strike the right balance between EU strategic autonomy and free trade.
Abstract: Addressing global carbon inequality constitutes an important task for both international negotiations on climate-change mitigation and the achievement of sustainable development goals. Soaring international trade might become a vigorous modifier for reducing global carbon inequality through production reallocation and economic boosts in different countries. However, this effect remains largely unexplored, not only because of little awareness of the windfall benefits from international trade but also because of debates on quantifying global carbon inequality from both production- and consumption-based perspectives. (…)
Abstract: The growing importance of services trade in the global economy contrasts with the scarcity of timely data on this part of international trade. This paper develops models to nowcast aggregate services imports and exports, as measured by monthly services trade data, for the G7 countries. The methodology relies on machine‐learning techniques and dynamic factor models and combines traditional high‐frequency data with the use of Google Trends search data. The estimated services trade nowcasting models display a higher out‐of‐sample predictive power than a simple benchmark model. However, there does not seem to be one approach that outperforms other model specifications. Rather, a weighted average of the best models, combining machine‐learning with dynamic factor models, seems to be a promising avenue. The best models improve one step ahead predictive performance relative to a simple benchmark by 30%–35% on average across the G7 countries and across trade flows. Models capture approximately 67% of the fall in services exports following the COVID‐19 shock and 60% of the fall in imports on average across G7 economies.
Abstract: In recent decades a growing number of analytic political philosophers have started to pay attention to the ethics or morality of international economic integration. In this paper we offer an overview of the normative questions related to international trade. The paper has eight parts and focuses on these topics starting from a conceptual definition of trade: the legal, institutional and governance dimensions of international economic exchange and related ethical questions; the idea that trade has distributive effects within participating countries; the distinction between the ethics of production and consumption; two specific international markets, the market for natural resources and that for weapons.
Abstract: Global linkages are changing amidst elevated geopolitical tensions and a surge in policies directed at increasing supply chain resilience and national security. Using granular bilateral data, we provide new evidence of trade and investment fragmentation along geopolitical lines and compare it to the early years of the Cold War. Gravity model estimates point to significant declines in trade, FDI, and portfolio flows between countries in geopolitically distant blocs since the onset of the war in Ukraine, relative to flows between countries in the same bloc. While the extent of fragmentation is still relatively small, the decoupling between the rival geopolitical blocs during the Cold War suggests it could worsen considerably should geopolitical tensions persist and trade restrictive policies intensify. Different from the early years of the Cold War, a set of nonaligned ‘connector’ countries are rapidly gaining importance and serving as a bridge between blocs.
Abstract: We model trade policy as a Markov process. Using a dynamic exporting model, we estimate how expectations about U.S. tariffs on China have changed around the U.S.-China trade war. We find (i) no increase in the likelihood of a trade war before 2018; (ii) the trade war was initially expected to end quickly but its expected duration grew substantially after 2020; and (iii) the trade war reduced the likelihood that China would face Non-Normal Trade Relations tariffs in the future. Our findings imply the expected mean future U.S. tariff on China rose more under President Biden than under President Trump.
Abstract : •The welfare effects of industrial and trade policy in open economies stem from the interplay between terms of trade and misallocation motives. •In a world characterized by sectoral economies of scale, trade policy alone cannot achieve a first-best outcome; industrial policy is also essential. •In this context, international cooperation is crucial to achieve a first-best outcome.•The paper represents an important step forward in the quantitative analysis of the welfare effects of trade and industrial policies, viewed through the lens of recent changes in the trade and industrial policies of the United States and China.
Abstract: The literatures on global commodity chains and global value chains rest on an unquestioned assumption: the continual expansion of globalization. The Trump Administration's trade wars challenged this foundational assumption and even today the new Biden regime also hints at the shift away from global supply chains. We find that the prior administration’s efforts caused continued disruption of long-established commodity chains in steel, aluminum, automobiles, and other manufactured products. Flows of raw materials, intermediate products and components, and finished goods now confront higher costs. Firms continue efforts to restructure commodity chains in ways that will require the disarticulation of some nodes and the creation of new nodes. We claim that these trade wars and breakdown of global commodity chains (GCCs) may in fact mark the start of the breakdown of the U.S.-led world order. This shift harkens the onset of a new era of economic and geopolitical conflict. A key question: has this disruption of old patterns and rise of new ones continued in the post-Trump era? Does the familiar pattern of globalization continue – or is competition, contestation and disarticulation leading to sectoral economic changes that drive larger patterns of economic ascent, dominance, and decline in the world economy?
Abstract: In recent years, the world’s largest economies and traders – the United States, China, and Japan – have chosen to use measures affecting international trade as a means to achieve political objectives in contravention of the rules of international economic law and the practices of international trade established over several decades. Since the end of World War II, the world economy and international trade have rapidly expanded and prospered by achieving a degree of separation between international trade and political struggles under the rule-based international trading system, the General Agreement on Tariffs and Trade and its successor, the World Trade Organization. Thus, the recent misuses of trade measures by the world’s largest traders are alarming, because they undermine the stability of the world trading system, which has been maintained for the past several decades. This article accounts politically-motivated trade measures (‘PTMs’) recently invoked by the United States, China, and Japan, assesses their incompatibilities with the rules of international economic law, and also examines the risks that these PTMs pose to the world trading system
Abstract: This article compares the EU and China’s approaches to negotiating free trade agreements (FTAs). We show how China’s approach is more gradualist with regards to coverage of issues, and argue that this gives China advantages, which it leverages in later deals. While there are important differences in the scope and approach of EU trade negotiations, we argue that the EU could gain similar advantages by incorporating more Chinese-style gradualism to how it negotiates FTAs. Paradoxically, we argue that mirroring Chinese strategy in this regard could be used by the EU to secure very different ends from China’s such as normative reforms in the areas of human rights, the rule of law, and democratic government. More gradualism would allow the EU to scale up trade cooperation and regulatory convergence in an incremental manner while autocratic partner countries make democratic reforms, and would also enlarge the scope of more coherent positive conditionality.
Abstract : In this paper, we explore the role of trade in the evolution of labor share in Latin American countries (LAC). We use trade agreements with large economies (US, EU, and China) to capture the effect of sharp changes in trade. During the last two decades, the countries that signed these trade agreements experienced a negative trend in labor share, while in the remaining countries there is an average increase in this share, generating a gap of 7 percentage points. We apply synthetic control methods, combined with regression analysis, to estimate the average causal impact of trade agreements on labor share. While effects are heterogeneous in our eight case studies, the average impact is negative between 2 to 4 percentage points of GDP four years after the entry into force of the trade agreements. This result is robust to the specification used and to the set of countries in the donor pool. We find that trade agreements with more labor-abundant counterparts affect labor share more, in line with traditional Heckscher–Ohlin forces. We also find that, after trade agreements, exports of manufactured goods and the share of industry to GDP increase on average, most notably in the case studies where negative effects on labor share are significant, a fact compatible with enhanced participation in Global Value Chains. Finally, a decomposition shows that all the reduction in labor share is explained by a negative impact on real wages.
Abstract: This article examines imports by Swedish firms and the utilization of the tariff preferences offered by the EU–South Korea Free Trade Agreement. To benefit from tariff preferences, the importer must make a formal request to use the preferences and also document the origin of the imported products (with a certificate of origin provided by the foreign exporter). This may be costly, and some importers choose to pay import tariffs even when tariff preferences are available. Hence, the preferences are not fully utilized. Using a detailed firm–transaction level data set on Swedish imports from South Korea, we analyse the determinants of preference utilization and how firms learn to use preferences. The results show that preference utilization is strongly correlated with potential duty savings, which depend on the preference margin and the size of the import transaction. From a learning perspective, we find that preference utilization is closely related to the number of import transactions undertaken by the firm, suggesting a learning-by-doing mechanism. The length of time the firm has been involved in importing activities plays a smaller role.
Abstract: In an era marked by rapid technological advancement and an intensifying imperative for sustainability, the concept of agile regulation has emerged as a new paradigm in regulatory governance. Agile regulation champions a flexible approach essential for regulatory frameworks to evolve alongside changing circumstances. International regulatory cooperation (IRC) is of importance in fostering knowledge sharing and evidence dissemination between states while mitigating regulatory disparities that stifle cross-border innovation, impede collective action against shared risks, and increase trade costs. Against this backdrop, the article delves into the role of free trade agreements (FTAs) in advancing the agile regulation agenda. It discusses how FTAs facilitate regulatory processes and cross-border partnerships that embody agility in their legal and institutional frameworks. As many recent FTAs endorse regulatory policies and practices, including those grounded in good regulatory practices and IRC, they stand poised to reinforce agile regulation by embracing flexibility and adaptability in response to evolving circumstances. However, the article also examines the political legitimacy implications of the trade-(agile)- regulation nexus, including concerns, such as corporate capture and the potential loss of regulatory specificities at the national level.
Abstract: This study evaluates the trade creation and diversion effects of regional trade agreements (RTAs) in sub-Saharan Africa, focusing on both aggregate and sectoral levels, while accounting for unobserved heterogeneities. Using the Poisson pseudo-maximum likelihood estimation method, we analysed a 22-year panel dataset (ranging from 2000 to 2021) comprising trade relations between 43 exporting and 127 destination countries. Our findings indicate that RTAs in this region vary in their effectiveness; all agreements, except for the Economic Community of Central African States in total trade and the Community of Sahel–Saharan States concerning primary and manufactured goods, positively boost intra-RTA trade. Furthermore, except for the East African Community, increased intra-regional trade correlates with increased exports to non-member countries. Notably, the net impact of RTAs differs significantly between primary and manufactured commodities, with more favourable outcomes for manufactured goods. These insights suggest that governments in sub-Saharan Africa must strengthen RTAs because regional economic integration can be used as a tool to promote intra-regional manufactured exports leading to industrialisation.
Abstract: Since 1999, the EU and the Mercosur countries have negotiated an Association Agreement (AA) which will include a trade pillar, the Free Trade Agreement (FTA). The latter aims at increasing the amount of goods crossing borders, including products associated with high greenhouse gas emissions or having adverse impacts on forests and other valuable ecosystems. This article assesses whether the adoption of the FTA would contravene the EU’s obligations under international law and EU primary law – with a focus on climate protection.
Abstract: Trade has been closely intertwined with sustainable development since the early 1990s. From its inception, the World Trade Organization has served as an active agent for advancing trade while also promoting sustainable development. Several contemporary developments within the WTO system reflect the centrality of sustainable development in trade discussions. The conclusion of the multilateral fisheries subsidies agreement in 2021 is one example of a major accomplishment with sustainability at its core. The structured discussions on trade and environmental sustainability are focused on four key issues: trade in environmental goods and services, trade-related climate measures, circular economy, and subsidies. These discussions shine a welcome light on these linkages. In parallel, the WTO is host to the dialogues on 'Plastics Pollution and Environmentally Sustainable Plastics Trade' and 'Fossil Fuel Subsidies Reform'. This article catalogues these developments, their priorities and their outcomes.
Abstract: Recent US statements calling for restoring a fully functioning World Trade Organization (WTO) dispute settlement system by 2024 have triggered a wave of optimism that the US blockade of the dispute system may finally be coming to an end. Due to US opposition, the WTO dispute system has been crippled since 2019 and unable to enforce WTO obligations, leaving the WTO in a crisis. These optimistic sentiments are misplaced. Despite its reassuring rhetoric, the United States has no intention of restoring the dispute system to its full powers. The Biden administration boasts that it has adopted a new and transformative modern American industrial policy based on hundreds of billions of dollars in subsidies paid to the US semiconductor, electric vehicle, renewable energy, and other high technology industries. Key elements of this US industrial policy and US trade policies towards China violate US WTO obligations. A fully restored WTO dispute system will allow China, the European Union (EU) and other competitors to attack and overturn current US industrial and trade policies or subject the United States to massive financial penalties. To immunize US policies from attack, the United States wants and needs a WTO dispute system that remains disabled for the indefinite future, if not permanently.
Abstract: The WTO dispute settlement mechanism is the crown jewel of the multilateral trading system, essential to enforcing global trade rules. However, the United States disabled the Appellate Body in 2019 by blocking all judicial appointments. Five years since the Appellate Body collapse, there has yet to be a concrete assessment of its impact on the multilateral trading system. This policy paper draws on available data to analyse the effects of the Appellate Body blockage on the WTO dispute settlement system. It shows that many states—not just the US—are increasingly taking advantage of the absence of a functional Appellate Body to block WTO panel rulings by appealing into the void. (...)
Abstract: This article examines the Joint Statement Initiative on Electronic Commerce (E-Commerce JSI), which is being negotiated at the World Trade Organization (WTO) and aims to harmonize international digital trade rules. The E-Commerce JSI is a concrete opportunity for the WTO to demonstrate the ongoing value of its rule-making function at a time when it is under increasing pressure on a range of fronts. However, it also faces several challenges to its conclusion, including resolving differences on key rules (such as on data flows and localization), clarifying the development dimension of the rules being negotiated, and finding a path to include the ultimate agreement in the WTO architecture. This article examines the early successes and promises of the E-Commerce JSI, before assessing three key challenges it now faces. It concludes that the timely finalization of the E-Commerce JSI will be a major win for the WTO, both in terms of substantive rules and in highlighting the relevance of the multilateral institution to the modern development of international trade law. It explains the key obstacles to the conclusion of the negotiation likely rest on the interlinked issues of better communicating the JSI's development dimension, finding an acceptable compromise on the level of ambition for the rules, and integrating the JSI into the WTO architecture.
Abstract: This paper analyses the interplay between climate change provisions in European Union (EU) Free Trade Agreements (FTAs) with Global South nations, with a focus on Latin American countries, and the principles outlined in the Paris Agreement. It aims to provide recommendations on how to better harmonize the obligations under the Paris Agreement and EU FTAs to enhance climate ambition among trading partners. More critically, the paper seeks to foster a harmonious coexistence between binding and enforceable commitments on climate change included in FTAs and the flexible framework of the Paris Agreement. The paper proposes that hard commitments and strict enforcement procedures with regards to climate change may not be compatible with the spirit of the Paris Agreement and its principles. More distinctively, such strict and inflexible options may constitute a major disincentive to EU trade partners to negotiate more ambitious commitments and implement them at the domestic level. The paper concludes by suggesting post-implementation options for parties to steer up the engagement within the FTA institutions and progressively introduce more ambitious climate friendly FTA disciplines centred on cooperation.
Abstract: This paper aimed at measuring the effect of labour provisions in free trade agreements on level of labour standards. After the failure of WTO negotiations, we observed a rapid development of preferential trade agreements, including different types of labour clauses. We exploit such changes to assess their effect on ratifications of ILO conventions and reported violations of ILO labour standards. We use a difference‐in‐difference approach taking into account the potential endogeneity of social clauses. Overall, we find that these social clauses have heterogenous effects on both de facto and de jure labour standards.
Abstract: In the face of ongoing disruptions to the multilateral trade regime, from deadlock at the WTO to the rise in unilateralism, this contribution examines the role that free trade agreements (FTAs) can play in supporting the adoption of common standards for sustainable development. It does this in three moves: first, it reframes the role of FTAs from sources of obligation and mechanisms of compliance to sites of economic diplomacy where governments can shape international standards through FTA structures; second, it unpacks the relationship between regulation and standards through three case studies (dolphin-safe labelling, automotive standards, and nutrient profiling), identifying means through which FTAs can be leveraged by trade policy actors; third, it draws on these lessons to examine how FTAs can support the uptake of key new standards and quasi-standards for sustainability, in this case, the ISO Net Zero Guidelines. Finally, this contribution reflects on the implications of reappraising the development of world trade law as part of the practice of economic diplomacy.
Abstract: The extent to which official development assistance (ODA) conforms to internationally agreed goals and principles of aid effectiveness may be influenced by donors’ national interests. Disentangling the extent to which national ODA is motivated by development goals vs. commercial self-interest is difficult. European Union (EU) member states provide external aid through EU-level institutions and independently through national aid programs. Theory suggests pooled EU-level aid facilitates satisfying development effectiveness principles while bilateral ODA is more likely to reflect national interests. We investigate this hypothesis for a subset of ODA, aid for trade (AfT), provided by donors to recipient countries between 2002 and 2018. We find a strong, statistically significant positive relationship between AfT provided by EU donors and their exports to recipient countries. In contrast, AfT provided by EU institutions and non-European states enhances merchandise imports from recipient countries.
Abstract: At a time when policymakers of the European Union (EU) are pivoting towards a more assertive use of economic power in external relations, this article discusses the merits of situating the much-debated use of economic sanctions and other economic power-based instruments in the broader terminology of EU diplomatic capabilities. Pointing out a number of shortcomings in traditional literature on geoeconomics and economic statecraft, the article applies the concept of “geoeconomic diplomacy” to demonstrate how the EU’s geoeconomic success will heavily depend on the abilities of diplomats and civil servants from institutions and member states to engage in viable relationships with relevant public and private actors in the state-market realm. Based hereon, it identifies institutional and context-specific challenges that could affect the comprehensive realisation of recent EU policy reforms relevant to the geoeconomic agenda: (a) institutional measures to ensure a more robust enforcement of sanctions, (b) a new anti-coercion instrument to counter coercive trade practices by third countries, and (c) a more efficient, focused, and strategic utilisation of EU development funds for purposes of stability and peace. The article concludes by discussing the prospects for bringing such instruments closer together at the level of practical implementation through the establishment of stronger relationships between practitioners working across the EU’s various geoeconomic intervention areas.
Abstract: In the wake of unsettling conflicts and democratic backsliding, states and organisations increasingly respond with sanctions. The European Union (EU) is one of them: Brussels makes use of the entire toolbox in its foreign policy, and its sanctions appear in different forms—diplomatic measures, travel bans, financial bans, or various forms of economic restrictions. Yet, there is little debate between different strands in the literature on EU sanctions, in particular concerning measures under the Common Foreign and Security Policy and those pertaining to the development and trade policy fields. Our thematic issue addresses this research gap by assembling a collection of articles investigating the design, impact, and implementation of EU sanctions used in different realms of its external affairs. Expanding the definition of EU sanctions to measures produced under different guises in the development, trade, and foreign policy fields, the collection overcomes the compartmentalised approach characterising EU scholarship.
Abstract: How is wealth distributed when the economy grows? I study this question in the context of African countries and ethnic groups. If wealth is distributed proportional to population, larger ethnic groups should benefit more when economic activity increases. Using nighttime light and individual level data to geographically locate wealth, I find the exact opposite: Smaller ethnic groups, particularly those in political power, benefit more from increased economic activity than larger ones. The results indicate that political elites in power redistribute wealth from larger ethnic groups. As a result, people’s satisfaction with democracy and trust in institutions reduces, casting a shadow on the implementation of trade liberalization policies in developing countries. Instrumental variables estimating exploiting exogenous variation in trading activity confirm initial results. •How is wealth distributed when the economy grows?•This Paper provides evidence that political elite capture the gains from trade.•Elite capture has negative consequences for individuals’ satisfaction with democracy and trust in institutions.•Results cast a shadow on trade policies’ impact on (democratic) development.
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