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  • Author: Douglas A. Irwin
  • Publication Date: 07-2008
  • Content Type: Working Paper
  • Institution: Council on Foreign Relations
  • Abstract: The news from Geneva of the breakdown of the Doha Round after seven years of effort has generated a great deal of pessimism about the future of multilateral trade agreements. America's troubles with the World Trade Organization (WTO) are of course only the beginning. There are also domestic problems when it comes to trade policy, an issue that ties together America's economic prosperity and its global political influence. Recent public opinion polls in the United States reveal increased skepticism about the benefits of globalization and diminished support for free trade policies. The post–World War II bipartisan consensus in favor of open trade has broken up, leading to gr eater resistance to new trade agreements in Congress, as reflected in the House's recent decision to postpone consideration of the Colombia free trade agreement (FTA). Despite efforts in the Doha Round to limit agricultural subsidies, Congress recently showered domestic farmers with more cash in the recently passed Farm Bill, even at a time when commodity prices are soaring.
  • Topic: Economics, International Trade and Finance, Markets
  • Political Geography: Geneva, United States, America, Colombia
  • Author: Matthew Adler, Gary Clyde Hufbauer
  • Publication Date: 08-2008
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: Over the last three decades the global economy has expanded in a remarkable fashion. While nominal world GDP has increased four times, world bilateral trade flows have grown more than six-fold, and the stock of foreign direct investment (FDI) has grown by roughly 20 times since 1980. The sources of global trade and investment growth are well known—general economic expansion, policy liberalization, and better communications and technology—but the impact of each source is unclear. In this paper we attempt to uncover the contribution of policy liberalization to the rising ratios of US inward and outward FDI stocks to GDP over the last three decades.
  • Topic: Economics, Globalization, International Political Economy, International Trade and Finance, Markets, Political Economy
  • Political Geography: United States
  • Author: Lori G. Kletzer, J . Bradford Jensen
  • Publication Date: 01-2008
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: While the uproar over offshoring has largely subsided since the 2004 presidential campaign, there continues to be concern and anxiety regarding the potential impact of offshoring in general and services offshoring in particular. With the economy softening and potentially headed for a recession in the midst of the current presidential campaign, worries about jobs and globalization seem likely to reemerge.
  • Topic: Development, Economics, International Trade and Finance
  • Political Geography: United States
  • Author: Howard F. Rosen
  • Publication Date: 01-2008
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: In 1962, when the United States was running a trade surplus, imports were barely noticeable, and manufacturing employment was increasing, Congress made a commitment to assist American workers, firms, and communities hurt by international trade, by establishing the Trade Adjustment Assistance (TAA) program. This commitment was based on an appreciation that despite their large benefits, widely distributed throughout the economy, international trade and investment could also be associated with severe economic dislocations.
  • Topic: Development, Economics, International Trade and Finance
  • Political Geography: United States
  • Author: Arvind Subramanian, Aaditya Mattoo
  • Publication Date: 10-2008
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: A fundamental shift is taking place in the world economy to which the multilateral trading system has failed to adapt. The Doha process focused on issues of limited significance while the burning issues of the day were not even on the negotiating agenda. The paper advances five propositions: (1) the traditional negotiating dynamic, driven by private-sector interests largely in the rich countries, is running out of steam; (2) the world economy is moving broadly from conditions of relative abundance to relative scarcity, and so economic security has become a paramount concern for consumers, workers, and ordinary citizens; (3) international economic integration can contribute to enhanced security; (4) addressing these new concerns-relating to food, energy, and economic security-requires a wider agenda of multilateral cooperation, involving not just the World Trade Organization but other multilateral institutions as well; and (5) despite shifts in economic power across countries, the commonality of interests and scope for give-and-take on these new issues make multilateral cooperation worth attempting.
  • Topic: Security, Economics, International Trade and Finance, Treaties and Agreements, World Trade Organization
  • Political Geography: United States, China, Europe
  • Author: Jacob Funk Kirkegaard
  • Publication Date: 10-2008
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This paper evaluates the statistical strengths and weaknesses of available data on US computer and information services trade and estimates the scope of delivery through GATS modes 1, 3, and 4. Trade values are estimated using a new methodology that adheres, to the greatest extent possible, to the definitions of modes of supply in the 2002 Manual on Statistics of International Trade in Services. This paper finds that US trade (particularly exports) in computer and information services are overwhelmingly and increasingly delivered through mode 3. The United States is found to have experienced declining overall revealed comparative advantage (RCA) in traditional mode 1 cross-border computer and information services trade from 1986 to 2006, while having a stable, positive RCA in mode-3 trade. A new methodology for tentatively estimating US imports of computer and information services in GATS mode 4 suggests that the IT services sector dominates US mode-4 imports, and that these are several times larger than US traditional mode-1, cross-border imports of computer and information services.
  • Topic: Economics, International Trade and Finance, Science and Technology
  • Political Geography: United States
  • Author: Edwin M. Truman
  • Publication Date: 12-2008
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: In the first decade of the 21st century the International Monetary Fund (IMF) faced crises of legitimacy, relevance, and budgetary finance. It now confronts what likely will be the worst global recession since World War II, potentially huge demands for its financial assistance with limited resources, and calls for it to play a more central role in the international financial and regulatory systems. At the same time, the incoming Barack Obama administration must decide what to do about the modest package of IMF reforms that was completed in the spring of 2008. The package requires US congressional approval to go into effect. This paper reviews the recent, slow progress on IMF reform and makes recommendations to the Obama administration against the background of that record, the emerging global recession, and continuing financial turmoil. I recommend that the IMF package be reopened to include a doubling of IMF quotas and an amendment that will permit the Fund to swap special drawing rights (SDR) with major central banks to finance its short-term lending facility. I also recommend a special allocation of 50 billion SDR. If these proposals are turned down by the G-20 at its meeting in April 2009, I reluctantly recommend that the Obama administration seek congressional approval of the IMF package as it now stands because a failure to do so would seriously undermine the Fund as a central multilateral institution.
  • Topic: Development, International Organization, International Political Economy, International Trade and Finance, Global Recession
  • Political Geography: United States
  • Author: Thomas L Brewer
  • Publication Date: 06-2008
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Climate change, international trade, investment and technology transfer are all issues that have intersected in diverse institutional contexts and at several levels of governmental activity to form a new joint agenda. The purpose of this paper is to advance understanding of this joint agenda by identifying the specific issues that have emerged, the policies that have been adopted, especially in the EU and US, and the options that are available for further policy-making.
  • Topic: Government, International Political Economy, International Trade and Finance
  • Political Geography: United States
  • Author: Selen Sarisoy Guerin, Chris Napoli
  • Publication Date: 07-2008
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: This paper argues that there are significant potential economic gains to be obtained from an EU-Canada Free Trade Agreement. The evolution of trade between the US and Canada following the signing of CUSFTA in 1989 offers a good illustration of how trade might increase after an EU-Canada FTA, as the patterns and levels of protection between the EU and Canada today are very similar to the protection that existed between the US and Canada in 1989. Although many empirical studies fail to find support for 'trade diversion' created by NAFTA (or CUSFTA) at the expense of the EU and to the benefit of the US, there is some evidence of trade diversion when detailed regional trade is examined. If indeed trade diversion has occurred due to NAFTA, then an EU-Canada FTA is welfare-enhancing for Canada. For the EU, a potential FTA can level the playing field with the US and increase the competitiveness of European firms in the Canadian market.
  • Topic: International Trade and Finance, Markets
  • Political Geography: United States, Europe, Canada
  • Author: Thomas L Brewer
  • Publication Date: 06-2008
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: Climate change, international trade, investment and technology transfer are all issues that have intersected in diverse institutional contexts and at several levels of governmental activity to form a new joint agenda. The purpose of this paper is to advance understanding of this joint agenda by identifying the specific issues that have emerged, the policies that have been adopted, especially in the EU and US, and the options that are available for further policy-making.
  • Topic: Climate Change, International Cooperation, International Political Economy, International Trade and Finance
  • Political Geography: United States, Europe
  • Author: Lael Brainard
  • Publication Date: 02-2008
  • Content Type: Working Paper
  • Institution: The Brookings Institution
  • Abstract: Compiled by Brookings Institution experts, this chart is part of a series of issue indices to be published during the 2008 Presidential election cycle. The policy issues included in this series were chosen by Brookings staff and represent the most critical topics facing America's next President. Available voting records and statements vary based on time in office. For candidates who have not been a Member of Congress, public statements are noted when available.
  • Topic: Economics, International Trade and Finance, Politics
  • Political Geography: United States, America
  • Author: Lael Brainard, David Lipton
  • Publication Date: 08-2008
  • Content Type: Working Paper
  • Institution: The Brookings Institution
  • Abstract: From the vantage point of 2008, some of the most memorable initiatives of U.S. international economic leadership—the Paris and Louvre Accords, the support for Poland and Russia after the fall of communism, the Uruguay Round, and the Mexican Financing Loan—seem like quaint reminders of a simpler time. In the coming years, the exercise of international economic leadership will surely prove more complex than in the past. The very success of the American vision of a global spread of vibrant and competitive markets has created a huge, rapidly integrating private economy of trade and finance much less amenable to guidance, let alone control, by governments. Unlike in diplomacy and defense, where non state actors are growing in importance but still a side show, in inter- national economics, households, corporations, labor unions, and non-profits are now the dominant players in most parts of the world. While they respond to national laws and policies, their interests are varied and their operations often span borders.
  • Topic: Economics, International Political Economy, International Trade and Finance, Markets
  • Political Geography: Russia, United States, Paris, Poland, Uruguay, Mexico
  • Author: Christoph Deutschmann
  • Publication Date: 05-2008
  • Content Type: Working Paper
  • Institution: Max Planck Institute for the Study of Societies
  • Abstract: The paper views the current financial crisis in light of long-term structural socioeconomic changes in advanced industrial societies. In Western Europe, the United States and Japan, the period of economic prosperity after the Second World War led to a remarkable accumulation of wealth among the middle class that had surprisingly little effect on the substantial fortunes of the wealthiest upper class. This affluence gave rise to pension and investment funds emerging as a new type of collective actor in global financial markets, while the economy was marked by increasing instability, declining growth rates and financial crises. The paper tries to clarify the interconnections between these phenomena using the framework of a multilevel analysis that culminates in a model I call the “collective Buddenbrooks effect” (“Buddenbrooks” being a family saga by Thomas Mann): Structural upward social mobility will lead to an increasing imbalance in capital markets, since the volume of financial assets looking for profitable investment will rise as the social reservoir of solvent debtors and promising investment opportunities decline. Advanced industrial economies are thus characterized by a bias towards capital export and excessive financial liquidity, with the well-known consequences of low economic growth rates and the danger of speculative bubbles on global capital markets. The middle class that originally benefitted from postwar prosperity is negatively affected, too. I argue that the current crisis cannot be understood sufficiently without taking this structural socioeconomic background into account.
  • Topic: Economics, International Political Economy, International Trade and Finance, Political Economy, Political Theory
  • Political Geography: United States, Japan, Europe
  • Author: Stephanie E. Curcuru, Tomas Dvorak, Francis E. Warnock
  • Publication Date: 02-2008
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: Were the U.S. to persistently earn substantially more on its foreign investments ("U.S. claims") than foreigners earn on their U.S. investments ("U.S. liabilities"), the likelihood that the current environment of sizeable global imbalances will evolve in a benign manner increases. However, using a monthly dataset on the foreign equity and bond portfolios of U.S. investors and the U.S. equity and bond portfolios of foreign investors, we find that the returns differential for portfolio securities is near zero, far smaller than previously reported. Examining all U.S. claims and liabilities (portfolio securities as well as direct investment and banking), we find that previous estimates of large differentials are biased upward. The bias owes to computing implied returns from an internally inconsistent dataset of revised data; original data produce a much smaller differential. We also attempt to reconcile our finding of a near zero returns differential with observed patterns of cumulated current account deficits, the net international investment position, and the net income balance. Overall, we find no evidence that the U.S. can count on earning substantially more on its claims than it pays on its liabilities.
  • Topic: Economics, International Trade and Finance
  • Political Geography: United States
  • Author: Joseph W. Gruber, Steven B. Kamin
  • Publication Date: 03-2008
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: This paper addresses the popular view that differences in financial development explain the pattern of global current account imbalances. One strain of thinking explains the net flow of capital from developing to industrial economies on the basis of the industrial economies' more advanced financial systems and correspondingly more attractive assets. A related view addresses why the United States has attracted the lion's share of capital flows from developing to industrial economies; it stresses the exceptional depth, breadth, and safety of U.S. financial markets.
  • Topic: Economics, International Trade and Finance, Markets
  • Political Geography: United States
  • Author: Ricardo Correa
  • Publication Date: 03-2008
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: This paper uses data on publicly-traded firms in the U.S. to analyze the effect of interstate bank integration on the financial constraints borrowers face. A firm-level investment equation is estimated in order to test if bank integration reduces the sensitivity of capital expenditures to the level of internal funds. The staggered deregulation of cross-state bank acquisitions that took place in the U.S. between 1978 and 1994 helps estimate the model. Integration decreases financing constraints for bank-dependent firms. The change in firms' access to external finance is explained by an increase in the share of locally headquartered geographically diversified banks.
  • Topic: Economics, International Trade and Finance
  • Political Geography: United States
  • Author: Francis E. Warnock, John Ammer, Sara B. Holland, David C. Smith
  • Publication Date: 05-2008
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: This paper investigates the underlying determinants of home bias using a comprehensive sample of U.S. investor holdings of foreign stocks. We document that U.S. cross-listings are economically important, as U.S. ownership in a foreign firm roughly doubles upon cross-listing in the United States. We explore the cross-sectional variation in this "cross-listing effect" and show that increases in U.S. investment are largest in firms from weak accounting backgrounds and in firms that are otherwise informationally opaque, indicating that U.S. investors value the improvements in disclosure associated with cross-listing. We confirm that relative equity valuations rise for cross-listed stocks, and provide evidence suggesting that valuation increases are due in part to increases in U.S. shareholder demand and in part to the fact that the equities become more attractive to non-U.S. shareholders.
  • Topic: Economics, International Trade and Finance, Markets
  • Political Geography: United States
  • Author: Luca Guerrieri, Christopher Gust, David López-Salido
  • Publication Date: 01-2008
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: We develop and estimate an open economy New Keynesian Phillips curve (NKPC) in which variable demand elasticities give rise to changes in desired markups in response to changes in competitive pressure from abroad. A parametric restriction on our specification yields the standard NKPC, in which the elasticity is constant, and there is no role for foreign competition to influence domestic inflation. By comparing the unrestricted and restricted specifications, we provide evidence that foreign competition plays an important role in accounting for the behavior of inflation in the traded goods sector. Our estimates suggest that foreign competition has lowered domestic goods inflation about 1 percentage point over the 2000-2006 period. Our results also provide evidence against demand curves with a constant elasticity in the context of models of monopolistic competition.
  • Topic: Economics, International Trade and Finance, Markets
  • Political Geography: United States
  • Author: Charles P. Thomas, Jaime Marquez, Sean Fahle
  • Publication Date: 01-2008
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: In this paper we construct a new measure of U.S. prices relative to those of its trading partners and use it to reexamine the behavior of U.S. net exports. Our measure differs from existing measures of the dollar's real effective exchange rate (REER) in that it explicitly incorporates both the difference in price levels between the United States and developing economies and the growing importance of these developing economies in world trade. Unlike existing REERs, our measure shows that relative U.S. prices have increased significantly over the past 15 years. In terms of simple correlations, the relationship between our measure of relative prices and U.S. net exports is much more coherent than that between existing REERs and net exports. To explore this relationship further, we use our measure to construct an index of foreign prices relevant for U.S. export volumes and reexamine several export equations. We find that export equations with the new index dominate those with previous measures in terms of in-sample fit, outof- sample fit, and parameter constancy. In addition, we find that with the new index of foreign prices the estimated elasticity of U.S. exports with respect to foreign income is a good bit higher than the unitary elasticity found in previous studies using other price measures. This has implications for U.S. current account adjustment.
  • Topic: Economics, Foreign Exchange, International Trade and Finance, Markets
  • Political Geography: United States
  • Publication Date: 04-2008
  • Content Type: Working Paper
  • Institution: Asia Society
  • Abstract: Coming in the midst of a very heated U.S. presidential election campaign, where the U.S. is faced with numerous foreign policy challenges in the Asia-Pacific region and at a critical juncture in Islam's relationship with the rest of the world, the Asia Society convened over 50 Asian and American leaders at a very opportune time in Bali, Indonesia from April 3-6, 2008. Delegates discussed the characteristics of Islam in Asian countries with multiethnic or multireligious populations like India, Indonesia, Malaysia, and the Philippines. They also suggested ways of tackling radicalism and extremism by alleviating poverty, improving education, and reforming prisons and rehabilitation Centres, to name a few. During the second half of the conference, delegates engaged in a conversation about the evolving U.S. role in Asia. Contemporary affairs like the protests in Myanmar and Tibet, engagement with North Korea, and the impact of the Iraq war on U.S. foreign policy towards Asia were analyzed in light of the coming presidential election. Asian leaders were invited to give advice to the new U.S. president. Finally, young leaders from the Asia Pacific region shared their thoughts on what kinds of leadership and values are needed in the future.
  • Topic: Foreign Policy, International Trade and Finance, Islam, Post Colonialism, Terrorism
  • Political Geography: United States, South Asia, Indonesia, India, Israel, Asia, Southeast Asia
  • Author: Min Gong, Wenpu Li
  • Publication Date: 10-2008
  • Content Type: Working Paper
  • Institution: Centre for International Governance Innovation
  • Abstract: To understand China's trade relations with the US, Japan, and South Korea, we estimate a vector autoregressive model (VAR) model to investigate the trade interactions among these four countries using data from the period of the first quarter of 1993 to the fourth quarter of 2005. We find substantial Foreign Direct Investment (FDI)-induced indirect trade from Japan and Korea to the US through China, and between Japan and Korea through China. These indirect trade flows lead to increases in China's trade deficit with Japan and Korea as well as China's trade surplus with the US. The indirect trade flows through China also indicate the importance of China's role as a trade bridge. From the viewpoint of world trade growth, as a trade bridge, China contributes to the stable growth of the regional and world economies. However, China's role as a trade bridge may negatively affect its long-run economic growth.
  • Topic: Globalization, International Political Economy, International Trade and Finance
  • Political Geography: United States, Japan, China, Asia, South Korea, Korea
  • Author: Jonathan B. Tucker
  • Publication Date: 11-2008
  • Content Type: Working Paper
  • Institution: James Martin Center for Nonproliferation Studies
  • Abstract: States seeking to produce chemical weapons (CW) typically rely on the importation of intermediate chemicals called “precursors,” which have legitimate industrial applications but can also be converted into military-grade CW agents, such as mustard gas or sarin. The dual-use nature of precursor chemicals poses challenges for policy makers seeking to prevent CW proliferation. Under U.S. Department of Commerce regulations, manufacturers planning to export CW precursors to certain countries must obtain prior government authorization in the form of an export license. Yet despite significant improvements over the past decade in the export-control systems of the United States and other industrialized countries, trafficking in precursors and other dual-use items relevant to CW production has continued.
  • Topic: Crime, International Law, International Trade and Finance, Weapons of Mass Destruction
  • Political Geography: United States, Iraq, Iran
  • Author: Kelly Hugger
  • Publication Date: 07-2008
  • Content Type: Working Paper
  • Institution: Department of Economics and Business, Colorado College
  • Abstract: The recent emergence of the Euro, combined with the completion of a decade of North American Free Trade Agreement (NAFTA) has sparked interest in adopting a common currency for North America. This study examines the likelihood that Canada, Mexico, and the United States will adopt a common currency under fixed exchange rate regimes. The benefits and costs of a common currency are explored using the theory of optimum currency areas (OCA). Empirical research focuses on several variables including intra-regional and intra-industry trade, trade openness, gross domestic product, inflation rates, interest rates, economic growth rates, business cycle synchronization, factor mobility, fiscal policy and monetary policy coordination. The analysis also presents a comparative analysis of NAFTA with Economic and Monetary Union (EMU) nations on different economic criteria. Finally, correlation and regression analysis further explores the likelihood that members of NAFTA will economically integrate. Though this research concludes that it is economically feasible for NAFTA members to move towards a common currency, this venture depends on the political readiness of the nations.
  • Topic: International Trade and Finance, Regional Cooperation, Treaties and Agreements, Monetary Policy
  • Political Geography: United States, Canada, North America, Mexico
  • Author: Karine Lisbonne-de Vergeron
  • Publication Date: 11-2007
  • Content Type: Working Paper
  • Institution: Chatham House
  • Abstract: Undoubtedly, the Chinese currently think of Europe, and of the European Union, primarily in economic terms. Since 2004, the EU has been China's first trading partner, accounting for 15% of its overall external trade in 2006, with a bilateral increase of 25% from 2005. Overall, bilateral trade between China and the EU has increased more than sixty-fold since 1978 to reach nearly €255 billion in 2006. In return, China is the EU's second largest trading partner, after the United States, and in 2006 became the largest source of EU imports, amounting to approximately €192 billion, or 14.4% of the total, a 21% increase from 2005. Over the same period, EU exports to China increased by 23% to approximately €63 billion.
  • Topic: Civil Society, International Political Economy, International Trade and Finance
  • Political Geography: United States, China, Europe, Asia
  • Author: Richard Reeve
  • Publication Date: 06-2007
  • Content Type: Working Paper
  • Institution: Chatham House
  • Abstract: In March 2005 the report of the Commission for Africa called for a sea change in the way the business community engaged in the development process in Africa. The G8 Gleneagles summit that July made a series of commitments on boosting African development, while in London a new international network was launched to bring G8 and African business leaders together to build on the momentum of the Commission and the UK's dual G8 and EU presidencies. Business Action for Africa (BAA) declared its aims as: to present a clear African and international business voice to promote growth and poverty reduction; to promote more positive, balanced perceptions of Africa; and to develop and showcase good business practice.
  • Topic: International Trade and Finance
  • Political Geography: Africa, Russia, United States, Japan, United Kingdom, Europe, Asia, Germany
  • Author: Robert Z. Lawrence
  • Publication Date: 03-2007
  • Content Type: Working Paper
  • Institution: Council on Foreign Relations
  • Abstract: The United States likes to think of itself as a nation that abides by its treaties and commitments. Successive U.S. administrations have taken the obligations implied by international agreements seriously: They have opted out of parts of many agreements for fear that compliance would be contrary to U.S. interests, and have refused outright to sign some treaties on the grounds of potential legal exposure. But U.S. behavior toward the World Trade Organization is different; in this case, the United States has been quite willing to accept binding multilateral rules. Yet, the United States has also been repeatedly judged to be in violation of its WTO commitments by the organization's dispute settlement panels, and although some violations could be ascribed to uncertainties about the meaning of the rules, the United States is also guilty of disregarding the rules deliberately. Opinion in Congress sometimes encourages this behavior; legislators are less likely to question the legitimacy of U.S. conduct than to question the WTO's authority to pass judgment over the United States. Moreover, these tensions are likely to escalate if the Doha Round of global trade negotiations breaks down. If the diplomatic route to market access is blocked, trading partners will seek access to U.S. consumers by bringing more cases before the WTO's tribunals. A surge in such cases could increase resentment of the WTO in the United States, weakening America's commitment to its traditional postwar role as the bulwark of the international trading system. This would be unfortunate, because even without changes in the behavior of its trading partners, the rules of the WTO improve the performance of the U.S. economy.
  • Topic: International Relations, International Trade and Finance, Treaties and Agreements
  • Political Geography: United States, America
  • Author: Randall Henning
  • Publication Date: 09-2007
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: The controversy within the United States over Chinese exchange rate policy has generated a series of legislative proposals to restrict the discretion of the Treasury Department in determining currency manipulation and to reform the department's accountability to Congress. This paper reviews Treasury's reports to Congress on exchange rate policy—introduced by the 1988 Trade Act—and Congress's treatment of them. It finds that the accountability process has often not worked well in practice: The reports provide only a partial basis for effective congressional oversight. For its part, Congress held hearings on less than half of the reports and overlooked some important substantive issues. Several recommendations can improve guidance to the Treasury, standards for assessment, and congressional oversight. These include (1) refining the criteria used to determine currency manipulation and writing them into law, (2) explicitly harnessing US decisions on manipulation to the International Monetary Fund's rules on exchange rates, (3) clarifying the general objectives of US exchange rate policy, (4) reaffirming the mandate to seek international macroeconomic and currency cooperation, (5) requiring Treasury to lead an executivewide policy review, and (6) institutionalizing multicommittee oversight of exchange rate policy by Congress. Legislators should strengthen reporting and oversight of broader exchange rate policy in addition to strengthening the provisions targeting manipulation.
  • Topic: Economics, Foreign Exchange, International Trade and Finance
  • Political Geography: United States, China
  • Author: Anna Wong
  • Publication Date: 07-2007
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This paper analyzes international reserve diversification by examining changes in quantity shares of currencies held in foreign exchange reserves. It discusses alternative methodologies for constructing quantity shares and applies the preferred methodology to three sets of data on the currency composition of foreign exchange reserves: quarterly aggregate International Monetary Fund's Composition of Foreign Exchange Reserves (IMF COFER) data, quarterly IMF COFER data for industrial- and developing-country groups, and annual data for 23 individual countries that disclose the currency composition of their foreign exchange reserve holdings. What can one infer from available data about the diversification of foreign exchange reserves since 1999? The analysis suggests four conclusions: (1) The behavior of the quantity shares of the US dollar and the euro in total reserves is consistent with net stabilizing intervention; their quantity shares tend to rise when these currencies are declining and vice versa. (2) The principal driver of this stabilizing diversification over the period 1999Q1–2005Q4 is Japan. (3) The industrial countries as a group but excluding Japan do not indicate stabilizing diversification. (4) The nonindustrial countries as a group display stabilizing diversification over short periods of only a few quarters. In summary, the aggregate data conceal much diversity in the practices of individual countries.
  • Topic: Economics, Foreign Exchange, International Trade and Finance
  • Political Geography: United States, Japan, Asia
  • Author: Jikun Huang, Mark Rosengrant, Rosamond Naylor, Walter P. Falcon, David Victor, Kenneth Cassman, Scott Rozelle
  • Publication Date: 02-2007
  • Content Type: Working Paper
  • Institution: Walter H. Shorenstein Asia-Pacific Research Center
  • Abstract: The recent global expansion of biofuels production is an intense topic of discussion in both the popular and academic press. Much of the debate surrounding biofuels has focused on narrow issues of energy efficiency and fossil fuel substitution, to the exclusion of broader questions concerning the effects of large-scale biofuels development on commodity markets, land use patterns, and the global poor. There is reason to think these effects will be very large. The majority of poor people living in chronic hunger are net consumers of staple food crops; poor households spend a large share of their budget on starchy staples; and as a result, price hikes for staple agricultural commodities have the largest impact on poor consumers. For example, the rapidly growing use of corn for ethanol in the U.S. has recently sent corn prices soaring, boosting farmer incomes domestically but causing riots in the streets of Mexico City over tortilla prices. Preliminary analysis suggests that such price movements, which directly threaten hundreds of millions of households around the world, could be more than a passing phenomenon. Rapid biofuels development is occurring throughout the developed and developing world, transforming commodity markets and increasingly linking food prices to a volatile energy sector. Yet there remains little understanding of how these changes will affect global poverty and food security, and an apprehension on the part of many governments as to whether and how to participate in the biofuels revolution.
  • Topic: Agriculture, Development, Economics, Globalization, Government, International Political Economy, International Trade and Finance, Poverty
  • Political Geography: United States, Mexico
  • Author: Beth Anne Wilson, Jane T. Haltmaier, Shaghil Ahmed, Brahima Coulibaly, Ross Knippenberg, Sylvain Leduc, Mario Marazzi
  • Publication Date: 09-2007
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: This paper assesses China's role in Asia as an independent engine of growth, as a conduit of demand from the industrial countries, and as a competitor for export markets. We provide both macroeconomic and microeconomic evidence. The macroeconomic analysis focuses on the impact of U.S. and Chinese demand on the output of the Asian economies by estimating growth comovements and VARs. The results suggest an increasing role of China as an independent source of growth. The microeconomic analysis decomposes trade into basic products, parts and components, and finished goods. We find a large role for parts and components trade consistent with China playing an important and increasing role as a conduit. We also estimate some regressions that show that China's increasing presence in export markets has had a negative effect on exports of some products for some other Asian economies, but not for other products, including those of the important electronic high-technology industry.
  • Topic: Development, Economics, International Trade and Finance, Markets
  • Political Geography: United States, China, Asia
  • Author: Robert Vigfusson, Nathan Sheets, Joseph Gagnon
  • Publication Date: 09-2007
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: A growing body of empirical work has found evidence of a decline in exchange rate pass-through to import prices in a number of industrial countries. Our paper complements this work by examining pass-through from the other side of the transaction; that is, we assess the exchange rate sensitivity of export prices (denominated in the exporter's currency). We first sketch out a streamlined analytical model that highlights some key factors that determine pass-through. Using this model as reference, we find that the prices charged on exports to the United States are more responsive to the exchange rate than is the case for export prices to other destinations, which is consistent with results in the literature suggesting that import price pass-through in the U.S. market is relatively low. We also find that moves in the exchange rate sensitivity of export prices over time have been significantly affected by country and region-specific factors, including the Asian financial crisis (for emerging Asia), deepening integration with the United States (for Canada), and the effects of the 1992 ERM crisis (for the United Kingdom).
  • Topic: Economics, Foreign Exchange, International Trade and Finance, Markets
  • Political Geography: United States, United Kingdom, Canada, Asia
  • Author: Steven B. Kamin, Trevor A. Reeve
  • Publication Date: 04-2007
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: In recent years, a number of studies have analyzed the experiences of a broad range of industrial economies during periods when their current account deficits have narrowed. Such studies identified systematic aspects of external adjustment, but it is unclear how good a guide the experience of other countries may be to the effects of a future narrowing of the U.S. external imbalance. In contrast, this paper focuses in depth on the historical experience of external adjustment in the United States. Using data from the past thirty-five years, we compare economic performance in episodes during which the U.S. trade balance deteriorated and episodes during which it adjusted. We find trade balance adjustment to have been generally benign: U.S. real GDP growth tended to fall, but not to a statistically significant extent; housing construction slumped; inflation generally rose modestly; and although nominal interest rates tended to rise, real interest rates fell. The paper then compares these outcomes to those in foreign industrial economies. We find that the economic performance of the United States during periods of external adjustment is remarkably similar to the foreign experience. Finally, we also examine the performance of the foreign industrial economies during the periods of U.S. deterioration and adjustment. Contrary to concerns that U.S. adjustment will prove injurious to foreign economies, our analysis suggests that the foreign economies fared reasonably well during past periods when the U.S. trade deficit narrowed: the growth of domestic demand and real GDP abroad generally strengthened during such episodes, although inflation and interest rates tended to rise as well.
  • Topic: Economics, Foreign Exchange, International Trade and Finance, Markets
  • Political Geography: United States
  • Author: Simon Evenett
  • Publication Date: 04-2007
  • Content Type: Working Paper
  • Institution: Centre for International Governance Innovation
  • Abstract: In recent years, the bipolar multilateral trading system of the post-war years has given way to a multipolar alternative. Although many specifics have yet to be determined, some contours of this new trade policy landscape are coming into focus and in this short paper I examine their implications for the European Union's external commercial policy. Particular attention is given to both the state of business-government relations and the propensity to liberalise under the auspices of reciprocal trade agreements by Brazil, India, and China; the potential new poles of the world trading system. I consider the likely consequences of these developments, plus factors internal to both the European Union and the United States, for the possible con-tent of future multilateral trade initiatives.
  • Topic: Development, Government, International Trade and Finance
  • Political Geography: United States, China, Europe, India, Brazil
  • Author: Bessma Momani, Eric Helleiner
  • Publication Date: 02-2007
  • Content Type: Working Paper
  • Institution: Centre for International Governance Innovation
  • Abstract: Top policymakers worry today that the International Monetary Fund (IMF) risks 'slipping into obscurity'. What explains the IMF's declining influence? Two significant developments have been the declining demand for IMF loans from middle-income borrowers, and the emergence of a more critical view towards the institution from US policymakers in recent years. In this new political context, a range of reform proposals has been put forward by Fund management, key shareholders, and the concerned policy community with the goal of restoring and preserving the IMF's significance. Advocates of change have focused particular attention on the need for process-oriented reforms that would change the nature of IMF governance as a means of restoring its legitimacy among many member governments. Also prominent have been more outcome-oriented reforms that propose various changes in IMF activities and performance. Are-invigorated IMF is unlikely to emerge from the current situation without the implementation of governance-related reforms.
  • Topic: Foreign Policy, Economics, Emerging Markets, International Trade and Finance
  • Political Geography: United States
  • Author: Salvador Rivera
  • Publication Date: 08-2007
  • Content Type: Working Paper
  • Institution: Independent Institute
  • Abstract: Since the end of the Second World War the United States has zealously pursued internationalism, the policy of establishing a new economic and political order based on free trade. Internationalism views the world as one community. It seeks to create a common body of political, economic and social values with an emphasis on human rights, environmentalism and the expansion of democracy.
  • Topic: Economics, International Trade and Finance, Regional Cooperation
  • Political Geography: United States, Latin America
  • Publication Date: 02-2007
  • Content Type: Working Paper
  • Institution: The National Academy of Public Administration
  • Abstract: The impact of shifting U.S. business operations to foreign countries on the nation's workforce and economy is not a new or unstudied issue. For decades, it has been central to the debate about the benefits and costs of economic growth and trade expansion. However, this debate has not produced consensus on the magnitude and significance of off-shoring, which occurs when companies contract out activities abroad, either to their own affiliates or to other firms.
  • Topic: Economics, International Trade and Finance, Labor Issues
  • Political Geography: United States
  • Author: Yuji Genda, Ayako Kondo, Souichi Ohta
  • Publication Date: 12-2007
  • Content Type: Working Paper
  • Institution: Institute for Social and Economic Research and Policy at Columbia University
  • Abstract: We examine effects of entering the labor market during a recession on subsequent earnings and employment for Japanese and American men, using comparable household labor force surveys. Previous analyses focus on search theoretic and implicit-contract arguments, which have their strongest effects on more educated workers. We argue that, in a country like Japan which has a dual labor market, there is an additional mechanism that affects mainly less educated workers. Namely, these workers are more likely to be trapped in the secondary sector if they graduate during a recession. We find a persistent, strong negative effect on earnings for less educated Japanese men, in contrast to no long-term effect for less educated American men; also, a substantial part of the effect for less educated Japanese men is attributed to the decreased probability of regular employment. The effect for the more educated group is more or less similar in both countries.
  • Topic: Economics, International Trade and Finance, Markets
  • Political Geography: United States, Japan, America, Israel, Asia
  • Author: Matthew Ocheltree, Sherman Katz
  • Publication Date: 10-2006
  • Content Type: Working Paper
  • Institution: Carnegie Endowment for International Peace
  • Abstract: Russia has been in the process of seeking membership in the World Trade Organization (WTO) since June 1993. Currently, the United States is the only major economic power that has yet to finalize a bilateral market access agreement with the Russian Federation. Most observers of the situation concur that the enforcement of intellectual property rights laws remains, along with agriculture, one of the two major hurdles to Russian accession to the World Trade Organization.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: Russia, United States, Europe, Asia
  • Author: Tony Addison
  • Publication Date: 02-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: Much has changed in international finance in the twenty years since UNU-WIDER was founded. This paper identifies five broad contours of what we might expect in the next twenty years: the flow of capital from ageing societies to the more youthful economies of the South; the growth in the financial services industry in emerging economies and the consequences for their capital flows; the current strength in emerging market debt, and whether this represents a change in fundamentals or merely the effect of low global interest rates; the impact of globalization in goods markets in lowering inflation expectations, and therefore global bond yields; and the implications of the adjustment in global imbalances between Asia (in particular China) and the United States for emerging bond markets as a whole. The paper ends by noting the paradox that today we see ever larger amounts of capital flowing across the globe in search of superior investment returns, and yet the financing needs of the poorer countries are still largely unmet.
  • Topic: Development, Economics, International Trade and Finance
  • Political Geography: United States, China, Asia
  • Author: David M. Marchick, Alan P. Larson
  • Publication Date: 07-2006
  • Content Type: Working Paper
  • Institution: Council on Foreign Relations
  • Abstract: Despite the significant benefits that foreign investment brings to the U.S. economy, a recent poll by the Pew Research Center for the People and the Press found that 53 percent of Americans believe foreign ownership of U.S. companies is “bad for America,” a sentiment that reached a boiling point with the proposed acquisition of the U.S. port operations of P Steam Navigation Company by Dubai Ports World (DPW). The DPW case brought to the public's attention the little-known executive committee charged with reviewing the security risks of foreign investment—the Committee on Foreign Investment in the United States (CFIUS)—and ignited a flurry of congressional activity to change its mandate and operations under the Exon-Florio Amendment to the Defense Production Act of 1950.
  • Topic: Security, International Political Economy, International Trade and Finance
  • Political Geography: United States, America, Dubai
  • Author: John Ravenhill, Lorraine Elliott, Helen E.S. Nesadurai, Nick Bisley
  • Publication Date: 11-2006
  • Content Type: Working Paper
  • Institution: Australian National University Department of International Relations
  • Abstract: In September 2007, Australia will host the annual Economic Leaders' Meeting of the Asia–Pacific Economic Cooperation (APEC) forum. This will be the culmination of over 100 days of ministerial, official and business group meetings, working groups and dialogues that will be held in various Australian cities from January to August. Fifteen federal government departments will be involved along with a range of other interested actors, predominantly in the private sector. The Australian government will spend considerable sums of money on the leaders' meeting itself, not least to ensure the security of those attending. This will include, if all goes according to plan, the heads of government of 21 countries—member economies in APEC-speak—including the United States, Russia, Japan and China. Security may well be the least of the government's worries. Few would argue that APEC is 'going strong' as a regional economic forum and recent reviews have suggested that at best it faces an uncertain future and that at worst it could be in a state of terminal decline. The forum is argued to have lost its relevance and to have generally been unsuccessful in attaining any of its more ambitious goals such as regional trade liberalisation.
  • Topic: Security, Development, Economics, International Trade and Finance
  • Political Geography: Russia, United States, Japan, China, Australia, Australia/Pacific
  • Author: Robert Z. Lawrence
  • Publication Date: 12-2006
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: This paper evaluates the US initiative to establish a Free Trade Agreement with countries in the Middle East by signing bilateral agreements with the countries individually and then combining them into a single arrangement. These agreements present new opportunities for Arab countries, but to take full advantage, they will have to complement the agreements with additional policy measures, both individually, and together. The promise comes from the ability to use the agreements as a catalyst for improving regulatory rules and systems at home and facilitating integration with the rest of the region and the world. But the agreements also present problems for Arab countries, first in relating these US agreements to agreements with other trading partners – most importantly the EU; second in creating political difficulties associated with closer relations with the USA given problems in the region, and third, in undertaking the necessary economic and political policies that are necessary to realize the benefits.
  • Topic: International Relations, Development, Globalization, International Trade and Finance
  • Political Geography: United States, Middle East, Arabia
  • Author: David Roodman, Scott Standley
  • Publication Date: 02-2006
  • Content Type: Working Paper
  • Institution: Center for Global Development
  • Abstract: Researchers have written hundreds of papers on the causes and consequences of official foreign aid, while paying almost no attention to private overseas giving, by individuals, universities, foundations, and corporations. Yet private giving is significant—some $15.5 billion/year, compared to more than $60 billion/year in public giving—and is in no small part an outcome of public policy. In most rich countries, tax deductions and credits lower the “price” of charity to donors. And governments with low tax revenue/GDP ratios leave more money in private pockets for private charity. To correct the near-complete lack of information on this de facto aid policy, we survey officials of 21 donor nations on the use of tax incentives to promote private charity. From the results, we develop an index of the overall incentive for private charity, expressed as a percentage increase over the hypothetical giving level absent incentives. France's tax code creates the largest price incentive while those of Austria, Finland, and Sweden offer none. Factoring in the income effect of the tax ratio, Australia, Ireland, Germany, and the United States move to the top, with combined price and income effects sufficient to double private giving. As a result, tax policy appears to have nearly doubled private overseas giving from donor countries in 2003, from a counterfactual $8.0 billion. Two-thirds of the $7.5 billion increase occurred in the United States. Of that, nearly 40% appears to be U.S. charity to Israel. According to 21-country scatter plots, countries with lower church attendance and more faith in the national legislature have lower taxes (stronger income effect), but average levels of targeted tax incentives. Income (GDP/capita) does correlate with private overseas aid/capita, but also with public aid/capita, so that the two aid flows are complementary in magnitude.
  • Topic: Debt, Economics, Humanitarian Aid, International Trade and Finance
  • Political Geography: United States, Finland, Germany, Australia, Sweden, Ireland, Austria
  • Author: Daniel Gros
  • Publication Date: 04-2006
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The US international investment position today should in principle be equal to the sum of past current account balances (mostly deficits). However, this is by far not the case even taking into account the balancing item 'errors and omissions'. Between 1982 and 2004, the US has accumulated a grand total of around $4.5 trillion (thousand billion). (The sum of current account deficits has been about $1 trillion smaller than the amount of net sales of US assets to the rest of the world because of the anomaly in reinvested earning.) Despite this accumulation of deficits the US net international debtor position (IIP) has deteriorated 'only' by $2.7 billion (and is now estimated – at the end of 2004, end 2005 figures are not yet available for the US IIP – at 'only' around $2.5 trillion). This implies a total of 'unearned' gains to the US of around $1.8 trillion during 22 years. The quite detailed data available for a somewhat shorter period (1989-2004) show that only a very small part of this sum, around 10-20%, can be explained by exchange rate and stock market changes.</p
  • Topic: International Relations, International Trade and Finance
  • Political Geography: United States
  • Author: Daniel Gros
  • Publication Date: 04-2006
  • Content Type: Working Paper
  • Institution: Centre for European Policy Studies
  • Abstract: The income account of the US balance of payments has so far remained in surplus because of a very large differential in reported earnings on direct investment – US firms seem to enjoy a much higher rate of return than foreign firms in the US. There is little difference in terms of the rate of dividend payments; the difference is due to what is called 'reinvested earnings' (earnings minus dividends). Foreign firms report almost no reinvested earnings on their direct investment in the US whereas US firms report substantial reinvested earnings from their direct investment abroad, on average over $100 billion more p.a. than foreign firms report on their US investment. This anomaly is probably due to the desire of foreign firms to minimise their US taxes, whereas US firms do not face tax liabilities if they report high foreign profits to the US authorities. The procedure used to generate the data for reinvested earnings thus has a built-in bias to improve the US current account and – over time – its international investment position. The true picture is likely to be much worse.</p
  • Topic: International Relations, International Trade and Finance
  • Political Geography: United States
  • Author: Torben G. Andersen, Tim Bollerslev, Francis X. Diebold, Clara Vega
  • Publication Date: 09-2006
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: Using a unique high-frequency futures dataset, we characterize the response of U.S., German and British stock, bond and foreign exchange markets to real-time U.S. macroeconomic news. We find that news produces conditional mean jumps; hence high-frequency stock, bond and exchange rate dynamics are linked to fundamentals. Equity markets, moreover, react differently to news depending on the stage of the business cycle, which explains the low correlation between stock and bond returns when averaged over the cycle. Hence our results qualify earlier work suggesting that bond markets react most strongly to macroeconomic news; in particular, when conditioning on the state of the economy, the equity and foreign exchange markets appear equally responsive. Finally, we also document important contemporaneous links across all markets and countries, even after controlling for the effects of macroeconomic news.
  • Topic: Economics, Foreign Exchange, International Trade and Finance, Markets
  • Political Geography: United States
  • Author: John H. Rogers, Charles Engel
  • Publication Date: 04-2006
  • Content Type: Working Paper
  • Institution: Board of Governors of the Federal Reserve System
  • Abstract: We investigate the possibility that the large current account deficits of the U.S. are the outcome of optimizing behavior. We develop a simple long-run world equilibrium model in which a country's current account is determined by the expected discounted present value of its future share of world GDP relative to its current share of world GDP. The model suggests that under some reasonable assumptions about future U.S. GDP growth relative to the rest of the advanced countries – more modest than the growth over the past 20 years – the current account deficit is near optimal levels. We then explore the implications for the real exchange rate. Under some plausible assumptions, the model implies little change in the real exchange rate over the adjustment path, though the conclusion is sensitive to assumptions about tastes and technology. Then we turn to empirical evidence. Two empirical analyses of current account sustainability using actual data suggest that the U.S. is not keeping on a long-run sustainable path. One is a direct test of our model, which finds that the dynamics of the U.S. current account – the increasing deficits over the past decade – are difficult to explain under a particular statistical model (Markov-switching) of expectations of future U.S. growth. But, if we use survey data on forecasted GDP growth in the G7, our very simple model appears to explain the evolution of the U.S. current account remarkably well. We conclude that expectations of robust performance of the U.S. economy relative to the rest of the advanced countries is a contender – though not the only legitimate contender – for explaining the U.S. current account deficit.
  • Topic: Economics, Foreign Exchange, International Trade and Finance, Markets
  • Political Geography: United States
  • Author: John Whalley
  • Publication Date: 09-2006
  • Content Type: Working Paper
  • Institution: Centre for International Governance Innovation
  • Abstract: Recent years have witnessed a sharp increase in the number of regional trade agreements (RTAs) both concluded and under negotiation. This paper attempts to document and discuss this growth focusing on the United States (US), the European Union (EU), China, India and the agreements of other countries. The form, coverage, and content of these agreements vary considerably from case to case. This paper poses the following questions: why so many, why the variation, and why the recent increase in RTAs? Implications for the trading system are discussed in a final section.
  • Topic: Development, International Trade and Finance, Regional Cooperation, Treaties and Agreements
  • Political Geography: United States, China, India
  • Author: John Whalley
  • Publication Date: 08-2006
  • Content Type: Working Paper
  • Institution: Centre for International Governance Innovation
  • Abstract: This paper discusses the broad orientation of Canada's trade policy relative to two major historical phases of development based on a secure national market behind the National Policy from 1879 until the 1930s, and progressive integration with the United States (US) through Bilateral Agreements (1930s), the Auto Pact (1965), the Canada-US Free Trade Agreement (1987) and the North American Free Trade Agreement (NAFTA) (1994). Currently, Canada exports approximately 85% to the US, but imports from China account for 8% and are growing at over 20% a year. Sharply unbalanced (surplus) trade with the US is counterbalanced by unbalanced deficit trade with China. A scenario of elevated growth in Asia (principally China, India, and the Association of Southeast Asian Nations or ASEAN) poses challenges of relative disintegration from North America and growing global integration centered on Asia. Seemingly a series of implications follow; including positioning Canada within the emerging network of regional agreements in Asia, more resourcebased and Western Canada focused trade and infrastructure development, and responding to capital market integration with Asia. Broader issues include the potential adjustments facing Central Canada as Asian imports of manufactures displace both imported manufactures from the US and domestic production are raised.
  • Topic: Economics, International Trade and Finance
  • Political Geography: United States, China, Canada, Asia, North America
  • Author: Rachel Massey, Frank Ackerman, Liz Stanton
  • Publication Date: 09-2006
  • Content Type: Working Paper
  • Institution: Global Development and Environment Institute at Tufts University
  • Abstract: The European Union is moving toward adoption of its new Registration, Evaluation and Authorization of Chemicals (REACH) policy, an innovative system of chemicals regulation that will provide crucial information on the safety profile of chemicals used in industry. Chemicals produced elsewhere, such as in the United States, and exported to Europe will have to meet the same standards as chemicals produced within the European Union. What is at stake for the U.S. is substantial: we estimate that chemical exports to Europe that are subject to REACH amount to about $14 billion per year, and are directly and indirectly responsible for 54,000 jobs. Revenues and employment of this magnitude dwarf the costs of compliance with REACH, which will amount to no more than $14 million per year. Even if, as the U.S. chemicals industry has argued, REACH is a needless mistake, it will be far more profitable to pay the modest compliance costs than to lose access to the enormous European market.
  • Topic: Government, Industrial Policy, International Trade and Finance
  • Political Geography: United States, Europe