Political Geography: Global Focus / Publication Year: within 5 Years / Topic: International Trade and Finance

1. Can the World Trade Organization be saved? Should it?

Author:: Alan Wm. Wolff
Publication Date:: 05-2023
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Heads of state, trade ministers, and academics have repeatedly called for reforming the World Trade Organization (WTO), the institution charged with the stewardship of the global trading system. The durability and worth of the WTO are being increasingly questioned despite the fact that by almost all objective measures, it has been a great success, with world trade growing much faster than global GDP over the last 75 years. However, past success does not guarantee future performance. This Policy Brief examines the institution’s most serious defects and the multitude of challenges it faces. It suggests the institution needs to evolve to reach broad-based international trade agreements, adding much needed new rules to the world trade rulebook and developing effective means to settle disputes that would render the rules of the system enforceable once again.
Topic:: Economics, International Trade and Finance, Treaties and Agreements, and World Trade Organization
Political Geography:: Global Focus

2. Saving the WTO from the national security exception

Author:: Warren Maruyama and Alan Wm. Wolff
Publication Date:: 05-2023
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: For any member of the World Trade Organization (WTO) not making alternative arrangements, enforceability of the rules of the global trading system, a distinguishing feature of the WTO, ceased to exist on December 11, 2019, because the United States blocked appointments to the Appellate Body of the WTO dispute settlement mechanism. A major obstacle to the United States accepting any resolution of this impasse—thus permitting dispute settlement to once again be binding on all WTO members—is settling the issue of whether claims of national security to legitimize trade measures are reviewable. This is a red line for the United States, which argues this claim is nonreviewable. In the emerging area of great power competition, the United States is unlikely to accept a return to fully effective WTO dispute settlement absent a compromise that finds determinations of national security nonjusticiable. This paper offers a compromise: There would be no adjudication of whether a trade measure was justified under the WTO’s national security exception, but those WTO members adversely affected would have an immediate right to rebalance trade concessions themselves by imposing retaliatory trade measures against the WTO member invoking the exception.
Topic:: Economics, International Trade and Finance, National Security, and World Trade Organization
Political Geography:: Global Focus

3. Regulatory Convergence within Technical Barriers to Trade

Author:: Mahdi Ghodsi
Publication Date:: 09-2023
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: This paper analyses how regulatory convergence in different categories of technical barriers to trade (TBTs) imposed on imports of goods in information and communications technology (ICT) globally affected the values, volumes, and unit values of imported goods during the period 1996-2019. Keywords cited in TBTs that are notified to the World Trade Organization (WTO) give an indication of the regulatory objectives behind the imposition of TBTs. MAST also classifies TBTs based on their applicability, procedural and administrative uses, factors which will also be taken into consideration in the analysis. However, objectives of TBTs may provide better insights to policymakers. TBTs are non-discriminatory measures that are imposed unilaterally on all trading partners and on domestic producers. It is not feasible to analyse unilateral TBTs in a gravity setting, as they are excluded by the introduction of country-product-time fixed effects that control for multilateral resistances. However, regulatory convergence in TBT categories is a bilateral time-varying variable that is analysed in a gravity model in this paper. The empirical results suggest that regulatory convergence between trading partners in some TBT categories stimulates import values and volumes. However, the impact is very heterogeneous across TBT objectives and classes and across ICT product categories.
Topic:: International Trade and Finance, Communications, World Trade Organization, Foreign Direct Investment, Regulation, Information Technology, and Competition
Political Geography:: Global Focus

4. Export impact on dividend policy for big Colombian exporting firms, 2006–2014

Author:: Federico Merchan
Publication Date:: 03-2023
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: This paper studies the impact of exogenous export demand shocks on firms’ dividend policy using firm specific real exchange rate variation as instrumental variable. IV exclusion restriction is plausibly satisfied because real exchange rate shocks were unanticipated -partly explained because of international oil price fluctuation-, and first stage results confirm relevance condition fulfillment. The results indicate that big private Colombian exporting firms decree dividends as a way to mitigate the agency cost generated by exogeneous exports variation via higher free cash flow and cash flow volatility, especially in poor managerial quality firms. Evidence supports agency cost theory and denies signaling.
Topic:: Development, Emerging Markets, Globalization, International Trade and Finance, and Exports
Political Geography:: Global Focus

5. Mitigating Global Fragmentation in Digital Trade Governance: A Case Study

Author:: Douglas Lippoldt
Publication Date:: 01-2023
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: Digital trade is growing rapidly, and regulators are trying to keep up. Concerns about privacy, consumer protection and national security demand regulatory attention, but too much regulation risks stifling digital trade. Current-generation trade agreements need to find the right balance between regulatory and liberal approaches to e-commerce. This paper looks at how five leading digital economies (Canada, the European Union, Japan, Singapore and the United States) are using regional trade agreements to address concerns while enhancing trade.
Topic:: Economics, International Cooperation, International Trade and Finance, Governance, and Digitalization
Political Geography:: Global Focus

6. CONTAINMENT 2.0: SANCTIONS FOR THE LONG HAUL

Author:: David A. Lake
Publication Date:: 03-2022
Content Type:: Commentary and Analysis
Institution:: Political Violence @ A Glance
Abstract:: The West is not imposing coercive sanctions on Russia to stop its current aggression. No one seriously expects that the sanctions will cause President Putin to withdraw from Ukraine. NATO made clear before the war that its members will not defend Ukraine with military force. The European members have also, as expected, carved out exceptions to the sanctions regime for oil and gas so as not to impose too much pain on their own economies. Putin anticipated the general scope of the sanctions likely to be imposed on Russia and decided it was worth invading Ukraine anyways. While he may have been surprised by the extent of the sanctions and unity of NATO so far, this is not enough to alter his calculus. Indeed, he is doubling down on the original plan. He also knows that he has other weapons and forms of coercion against the West up his sleeve. Rather, we are seeing the birth of a possible Containment 2.0, a forced decoupling of Russia from the Western international economy. This is a long-term, not a short-term, strategy. The point is to undermine the Russian economy, stifle its technological progress, deny Russians a standard of living comparable to that of the West, and break support for the regime over time. In doing so, the West undermines Russia’s ability to compete militarily, aiming to forestall further Ukraines, and weakens Putin’s hand at home and abroad.
Topic:: NATO, International Trade and Finance, Sanctions, Economy, and Containment
Political Geography:: Russia, Europe, Ukraine, Global Focus, and United States of America

7. Have trade agreements been bad for America?

Author:: Alan Wm. Wolff, Robert Z. Lawrence, and Gary Clyde Hufbauer
Publication Date:: 12-2022
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Many Americans are persuaded that trade agreements of the last 40 years have been a costly mistake. To be sure, open markets leave some people behind, and promises to help those hurt were broken. But on balance, expanding trade has greatly benefited the US economy, and policy approaches taken need to be built on rather than abandoned. Alan Wm. Wolff, Gary Clyde Hufbauer, and Robert Z. Lawrence say more must be done to help those harmed, but protectionism is not the solution. The international trading system needs more outspoken US support and leadership if it is to be maintained and improved.
Topic:: International Trade and Finance, Treaties and Agreements, Economy, and Trade
Political Geography:: Global Focus and United States of America

8. How to save the WTO with more flexible trading rules

Author:: Robert Z. Lawrence
Publication Date:: 12-2022
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The clash between the Western and Chinese economic systems is threatening the world trading system, with countries increasingly using trade as a tool to coerce other countries. It is imperative to return to an inclusive, rules-based international trading order before the problems in trade spill over into the other geopolitical frictions that plague the world. This Policy Brief argues for a system that steers between two extremes that have emerged: “deep integration,” a single undertaking in which all members of the World Trade Organization (WTO) are expected to adhere to all rules regardless of their preferences and circumstances, and “decoupling,” in which groups of countries centered on the United States or China limit trade with each other. Instead, Lawrence says, the world trading system should have a “variable geometry” that allows open plurilateral agreements among self-selected members that desire deeper integration on particular issues while allowing members that prefer to implement distinctive domestic policies to remain outside some of these agreements and follow a set of more limited rules. The universal rules would permit diversity but still promote trade between all countries through measures such as safeguards that would deal mainly with the most harmful systemic frictions. If the multilateral system is not up to the task of creating such an approach, it is likely to lose its relevance as differentiated regional or topic groupings become increasingly dominant.
Topic:: Economics, International Trade and Finance, World Trade Organization, Reform, and Trade
Political Geography:: Global Focus

9. The IMF should enhance the role of SDRs to strengthen the international monetary system

Author:: Edwin M. Truman
Publication Date:: 12-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: The special drawing right (SDR), issued by the International Monetary Fund (IMF), has the potential to strengthen dramatically the international monetary system. Established in 1969 and allocated twice during its first decade, the SDR was in the institutional closet from 1980 until 2009, when $250 billion in SDRs was allocated to members of the IMF to help address the global financial crisis. In 2021 another $650 billion in SDRs was allocated to help address the coronavirus pandemic. The SDR has proved itself as a crisis instrument. This paper addresses critically the arguments against SDR allocations. It proposes regular annual SDR allocations, along with measures to make the SDR more attractive to critics and measures to build out the SDR system in support of the international monetary system. The paper includes an appendix on the history of the SDR. A second appendix analyzes SDR use following the 2009 and 2021 allocations and finds that contrary to the popular myth, many countries other than low-income members of the IMF benefited directly in multiple ways from those allocations.
Topic:: International Trade and Finance, Financial Crisis, Finance, and IMF
Political Geography:: Global Focus

10. The WTO and vaccine supply chain resilience during a pandemic

Author:: Chad P. Bown
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Cross-border supply chains and international trade enabled the manufacturing and delivery of billions of vaccine doses to inoculate the world against COVID-19. At the same time, the pandemic revealed how the World Trade Organization (WTO) must change to become more useful in the face of a public health emergency. This paper describes the market failures—especially on the supply side—justifying the domestic subsidies and contracting arrangements used to accelerate vaccine research and development and to increase the scale of vaccine production to save lives, livelihoods, and economic activity during a pandemic. It highlights tradeoffs associated with the US subsidies and the priority-rated contracts written through the Defense Production Act under Operation Warp Speed. This case study reveals a rich environment in which cross-border supply chains exacerbate input shortages in ways that constrain vaccine production, highlighting the need for the WTO to embrace new forms of international policy coordination for pandemic preparedness and response. As part of a pandemic treaty, the paper proposes a plurilateral agreement on vaccine supply chain resilience that would include novel and enforceable disciplines for export restrictions, provisions to trigger coordinated subsidies across countries to jointly scale up vaccine output- and input-production capacity, and market surveillance initiatives on supply chain transparency.
Topic:: International Trade and Finance, Vaccine, COVID-19, WTO, and Supply Chains
Political Geography:: Global Focus

11. The Black Hole of National Security: Striking the Right Balance for the National Security Exception in International Trade

Author:: James Bacchus
Publication Date:: 11-2022
Content Type:: Policy Brief
Institution:: The Cato Institute
Abstract:: Article XXI of the General Agreement on Tariffs and Trade (GATT) reserves for members of the World Trade Organization (WTO) the legal authority to restrict trade in goods to protect members’ “essential” security interests. Similar exceptions to WTO trade obligations exist in other WTO agreements. For more than seven decades, WTO members exercised self‐restraint in invoking these exceptions, doing so only for narrow purposes and in truly exceptional circumstances to avoid pushing the boundaries of the law too far and thereby upending the delicate balance between members’ legitimate pursuit of their security interests and their obligations to reduce barriers to trade. Yet, trade restrictions justified on national security grounds have proliferated in recent years and are increasingly subject to litigation in WTO dispute settlement. As a result, the national security provisions contained within the WTO agreements, as well as fundamental questions about the nexus between trade and national security, are set to be tested and clarified by WTO jurists—a less than ideal outcome that could lead to the further undermining of WTO dispute settlement and the rules‐based international trading system more broadly. This paper explains the origins of the national security exceptions in the GATT and the WTO agreements and the history of their invocation, summarizes recent litigation that has clarified these exceptions, discusses current developments and upcoming litigation that could prove pivotal to our understanding of the trade‐security nexus and the future of the world trading system, and offers some concluding thoughts on the options available to WTO members for striking a balance between trade liberalization and the defense of national security.
Topic:: International Trade and Finance, National Security, World Trade Organization, and Tariffs
Political Geography:: Global Focus

12. Bilateral trade and conflict heterogeneity

Author:: Katrin Kamin
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: Although the number of interstate disputes has fallen in the past 30 years, rising geopolitical competition is challenging the foundation of the absence of great power war. Additionally, the number of internal conflicts is surging. At the same time, globalisation has spun a net of global trade connections and has thus created dependencies, making everyone more vulnerable to the repercussions of conflict. In this context, this paper analyses the relationship between trade and conflict from a trade perspective: Using data from UCDP and COMTRADE this paper studies the effects of five different conflict types on international trade flows in the period 1992 - 2011, including interstate and internal conflicts as well as other types of violence.Applying the gravity equation of international trade and the ppml high-dimensional fixed effects estimator, this paper finds that the heterogeneity of conflict types and their distinct characteristics matter for the magnitude and direction of their influence on trade.
Topic:: Globalization, International Trade and Finance, Conflict, and Trade
Political Geography:: Global Focus

13. The impact of trade and trade policy on the environment and the climate: A review

Author:: Gabriel Felbermayr and Sonja Peterson
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: While international trade can offer gains from specialization and access to a wider range of products, it is also closely interlinked with global environmental problems, above all, anthropogenic climate change. This survey provides a structured overview of the economic literature on the interaction between environmental outcomes, trade, environmental policy and trade policy. In this endeavor, it covers approaches reaching from descriptive data analysis based on Input‐Output tables, over quantitative trade models and econometric studies to game‐theoretic analyses. Addressed issues are in particular the emission content of trade and emissions along value chains, the relocation of dirty firms and environmental impacts abroad, impacts of specific trade polices (such as trade agreements or tariffs) or environmental policy (such as Border Carbon Adjustment), transportation emissions, as well as the role of firms. Across the different topics covered, the paper also tries to identify avenues for future research, with a particular focus on extending quantitative trade and environment models.
Topic:: Climate Change, Environment, International Trade and Finance, Trade, and Carbon Emissions
Political Geography:: Global Focus

14. The Consequences of Unilateral Withdrawals from the Paris Agreement

Author:: Mario Larch and Joschka Wanner
Publication Date:: 11-2022
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: International cooperation is at the core of multilateral climate policy. How is its effectiveness harmed by individual countries dropping out of the global mitigation effort? We develop a multisector structural trade model with emissions from production and a constant elasticity of fossil fuel supply function to simulate the consequences of unilateral withdrawals from the Paris Agreement. Taking into account both direct and leakage effects, we őnd that a US withdrawal would eliminate more than a third of the world emissions reduction (31.8% direct effect and 6.4% leakage effect), while a potential Chinese withdrawal lowers the world emission reduction by 24.1% (11.9% direct effect and 12.2% leakage effect). The substantial leakage is primarily driven by technique effects induced by falling international fossil fuel prices.
Topic:: Climate Change, International Trade and Finance, Fossil Fuels, Carbon Emissions, and Paris Agreement
Political Geography:: Global Focus and United States of America

15. Regulating the International Digital Economy, with Trade and Innovation in Mind

Author:: Douglas Lippoldt
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: The international digital economy is growing rapidly, and the fragmented governance framework is struggling to keep pace. Global entities such as the World Trade Organization and regional trade agreements offer a patchwork approach to governance. This paper illustrates the importance of governance in relation to private-sector innovation and recommends next steps to enhance governance, close gaps and promote further innovation. Better definition and international alignment of the framework for governance of digital trade and data could lead to greater privacy, trust and security.
Topic:: International Cooperation, International Trade and Finance, Regulation, Digital Economy, and Innovation
Political Geography:: Global Focus

16. Impact of the Regional Comprehensive Economic Partnership (RCEP): A Global Computable General Equilibrium (CGE) Simulation

Author:: Ken Itakura
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This study estimates the potential economic effects of the Regional Comprehensive Economic Partnership (RCEP) by using a recursively dynamic computable general equilibrium (CGE) model, which incorporates the global supply chains (GSCs) structure, also referred as the global value chains (GVCs). The tariff reduction schedules for the RCEP agreement are incorporated in addition to other large FTAs, such as the CPTPP. Second, the structure of GSCs is included in the CGE model to take into account the importance of trade in intermediate goods and services. This study implements the RCEP simulation scenarios for tariff reductions, services trade liberalization, logistic improvements, and investment commitments. Results show that the real GDP of RCEP members increases by $675 billion in total, of which ASEAN grows by $160 billion
Topic:: Economics, International Trade and Finance, Tariffs, and Supply Chains
Political Geography:: Global Focus

17. Multilateral Trade Arrangements and Climate Provisions

Author:: Emily Benson, Sparsha Janardhan, and William Alan Reinsch
Publication Date:: 04-2022
Content Type:: Special Report
Institution:: Center for Strategic and International Studies
Abstract:: This new paper from the CSIS Scholl Chair in International Business assesses sectoral standards bodies, evaluates environmental provisions in trade agreements, and explores opportunities for addressing climate concerns in newer trade arrangements, such as the recent announcement to negotiate a deal on green steel and aluminum between the European Union and the United States. As this paper seeks to demonstrate, binding agreements with clear enforcement mechanisms are best suited for ensuring that parties meet their climate change obligations as outlined in various bilateral or multilateral agreements. Since concluding agreements that are both binding and have clear enforcement capabilities are not always possible or politically desirable, pursuing a mixed approach—one based on best practices from a diverse set of trade architectures—may be the most viable approach that produces the most tangible outcomes. This paper evaluates climate provisions in trade architectures and makes recommendations for including climate provisions, including sectoral standards, in trade arrangements in a way that encourages increased multilateral collaboration in a WTO-compliant manner.
Topic:: Climate Change, International Cooperation, International Trade and Finance, and Multilateralism
Political Geography:: Global Focus

18. Convergence and Divergence: Multilateral Trade and Climate Agendas

Author:: William Alan Reinsch and Emily Benson
Publication Date:: 03-2022
Content Type:: Special Report
Institution:: Center for Strategic and International Studies
Abstract:: If the international community wants to make meaningful progress ahead of the 2030 deadline—which critics argue is still too late to avert global catastrophe—major global players should work together to reduce emissions at home and abroad. This paper discusses the politics of climate policy in the United States and how it is influenced by relationships with the European Union and China. It analyzes these international relationships through specific policies, namely subsidies, and assesses their reduction or removal in some cases and their reallocations in others. It also evaluates the politics and policy implications of carbon border adjustments, including their compliance with existing WTO rules. These trade policies allude to domestic industrial policies and how they can be adjusted to better combat climate change while complying with existing trade rules. In outlining policy options for the United States’ trade agenda, including how the European Union and China factor into these options, the paper assesses the probability that certain climate policies will ultimately materialize. The paper argues that unilateralism is insufficient and counterproductive in both trade and climate and that only through multilateral, legally compliant policy convergence can countries stave off environmental and economic collapse.
Topic:: Climate Change, Environment, International Trade and Finance, Multilateral Relations, and Multilateralism
Political Geography:: Global Focus

19. Measuring illicit financial flows: A gravity model approach to estimate international trade misinvoicing

Author:: Lourenço S. Paz
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: United Nations University
Abstract:: Illicit financial flows have recently attracted the attention of academia, practitioners, and multilateral organizations who consider them harmful to economic development. Some observers suggest that many of these flows occur via the misinvoicing of international trade transactions. This study develops a novel methodology based on the gravity model of international trade to estimate illicit financial flows using publicly available product-level international trade data. It contributes to the literature by estimating product-level transportation and insurance costs and providing, for the first time, an estimation for all countries of an upper bound of the values of export and of import over- and under-misinvoicing separately, without resorting to assumptions about trade statistics reliability. Application of the methodology is illustrated using six-digit product-level UN Comtrade data for 2013–16. The results indicate that misinvoicing is not confined to a few products or countries but is a widespread phenomenon that deserves future research.
Topic:: International Trade and Finance, Transportation, Illicit Financial Flows, and Misinvoicing
Political Geography:: Global Focus

20. The Strategic Implications of the Tashkent Conference

Author:: Urs Unkauf
Publication Date:: 01-2022
Content Type:: Journal Article
Journal:: Baku Dialogues
Institution:: ADA University
Abstract:: This essay is devoted to a consideration of a matter of fundamental geopolitical importance that has gone largely unnoticed in the West, to its detriment. The trigger event, so to speak, was a remarkable conference that took place not in Washington, Brussels, or Moscow—but in Tashkent. On 15‑16 July 2021, Uzbekistan’s capital hosted delegations from nearly 50 countries, among them China, Russia, India, Turkey, Azerbaijan, and all the Central Asia countries, at the level of foreign ministers or above. To understand the issues at play and the consequences thereof, we will need to spend some time discussing what actually took place during the conference itself, which was entitled “Central and South Asia: Regional Connectivity: Challenges and Opportunities.” In addition to relating the explicit agenda of the conference, we will also examine its broader agenda (whether intended or not) and conclude with an examination of its potentially far‑reaching geostrategic implications. The Tashkent conference was geared not only to government officials, but also towards leading scholars, experts, and media representatives from all over the world who follow developments in at least one of these two regions. In his opening address, Uzbekistan’s President Shavkat Mirziyoyev affirmed his country’s readiness to take up new leadership responsibilities in the region, which aligns with the domestic economic and social reform agenda he launched upon coming to power following the death of his predecessor, Islam Karimov, in September The Strategic Implications of the Tashkent Conference 2016. The host’s speech was followed by opening statements from Afghanistan’s President Ashraf Ghani and Pakistan’s Prime Minister Imran Khan, whose delegations also exchanged informal views during the conference. Here a somewhat digressive remark is in order. When the conference was in its planning stage, the fall of the Ghani government in Afghanistan had not been anticipated. Still, one of the conference’s working group sessions was devoted to the devolving situation in Afghanistan. By that stage, the conference’s more astute participants were seeing the writing on the wall. Those who could not, of course, came to their senses less than a month later. Either way, the Taliban’s takeover of the country has put both Central and South Asia more firmly on the international geopolitical agenda— the recent events in Kazakhstan, which began as this issue of Baku Dialogues was being finalized, have also played a role in drawing attention back to the Silk Road region. But to come back to Mirziyoyev’s opening address. In the context of announcing a new, open foreign policy strategy for the country, Uzbekistan’s President made it clear that his country is centrally focused on strengthening regional connectivity. His announcement stressed that the focus would be on further deepening economic and cultural cooperation between Central Asia and South Asia—two regions that are linked historically as well as economically yet have not so far been able to transform this inherited potential towards proper policymaking in recent years. The Tashkent conference was advertised as being about enhancing regional interconnectivity, trade, and cooperation between Central Asia and South Asia—as well as presenting the host country’s new cross‑regional foreign policy strategy. But as Edward Lemon wrote in the Fall 2021 edition of Baku Dialogues, the conference also served to demonstrate that the emerging regionalism—a topic raised by the concerning countries themselves and not from outside—will be a leitmotif for future geostrategic developments in the Silk Road region.
Topic:: Diplomacy, International Trade and Finance, Infrastructure, Geopolitics, and Silk Road
Political Geography:: Global Focus

21. The Role of Storage in Commodity Markets: Indirect Inference Based on Grains Data

Author:: Christophe Gouel and Nicolas Legrand
Publication Date:: 07-2022
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: Understanding commodity prices dynamics is of crucial importance for assessing the persistence of cost-push costs or for countries dependent on commodity exports. Unfortunately, despite decades of research, the workhorse theoretical model in the field, the rational expectations storage model, is yet to be empirically validated. This paper provides the first full empirical test of the storage model. We first build a new storage model featuring a supply response, long-run demand and cost trends, and four structural shocks. We then develop a flexible empirical approach which relies on the indirect inference method and exploits the joint dynamics of prices and quantities unlike previous estimations which only use price information. The information contained in quantities is essential to relax restrictive identifying assumptions and empirically assess the overall consistency of the model's new features. Finally, we carry out a structural estimation on the aggregate index of the world most important staple food products: maize, rice, soybeans, and wheat. The results show that our extended storage model is consistent with most of the moments in the data, including the high price autocorrelation of which up to 42% can be explained by the transfer of inventories over time. They also show that, although for these commodities supply shocks are the main drivers of market dynamics, over the past 60 years all price spikes have been associated with large positive demand shocks.
Topic:: Agriculture, International Trade and Finance, Commodities, and Price
Political Geography:: Global Focus

22. The Culture-Promotion Effect of Multinationals on Trade: the IKEA case

Author:: Dylan Bourny, Daniel Mirza, and Jamel Saadaoui
Publication Date:: 07-2022
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: In this paper, we investigate how some MNEs which spread their home culture over time and space to the rest of the world are affecting, in turn, trade flows from home. By selling products embodying cultural information related to their country of origin, those MNEs embrace the role of ambassadors of their home country. We argue that IKEA offers an ideal case to identify a multinational's culture-promotion effect on trade. We build a dataset on IKEA's presence in foreign markets between 1995 and 2015 and merge it with disaggregated product level trade between pairs of countries. We find solid evidence of an externality linked to IKEA: a setting of an IKEA new store in a destination increases trade flows by around 2% from Sweden for products that resemble to what the multinational offers (despite being completely unrelated to that multinational). This result is driven primarily by the products identified to encompass a high-cultural content. Other robustness checks and tests seem to be very much consistent with the hypothesis of IKEA promoting the Swedish culture to the world.
Topic:: Globalization, International Trade and Finance, Culture, and Multinational Corporations
Political Geography:: Global Focus

23. The Nature of Money and the Theory of International Trade: Thornton and Ricardo

Author:: Isabella Weber
Publication Date:: 10-2021
Content Type:: Working Paper
Institution:: Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:: A rich recent literature reinvestigates the nature of money, but little attention has been paid to the ramifications of the ways in which we theorize money for the theory of international trade. This paper examines the logical relationship between the neutrality of money and self-balancing trade based on Henry Thornton and David Ricardo as two foundational contributions to credit and commodity money theories respectively. I show that both authors theorize trade as self-balancing whenever money is conceptualized as neutral. I distinguish two notions of the neutrality of money: ex ante and ex post neutrality. In Thornton’s Paper Credit money is not neutral ex ante: there can be temporary trade imbalances. But in the long-run money is neutral ex post and international trade boils down to self-balancing barter. In Ricardo money is neutral both ex ante and ex post and international trade is always balanced unless central bank policy undermines monetary neutrality.
Topic:: International Trade and Finance, Economy, Money, and Trade
Political Geography:: Global Focus

24. Global Trade Today is Global Value Chains

Author:: David Henig
Publication Date:: 01-2021
Content Type:: Policy Brief
Institution:: European Centre for International Political Economy (ECIPE)
Abstract:: In the last 25 years global value chains have come to dominate global trade in a way surprisingly little discussed or understood. To meet the policy challenges of today and the future we need to understand the key characteristics of this new global trade and how they came about. The OECD estimate around 70% of total trade takes place in global value chains. Using their definition as where “the different stages of the production process are located across different countries”, and considering both goods and services inputs, this may be an understatement. The example most commonly used is the automotive sector, with 30,000 parts and associated services like satellite navigation going into one car. However there are many others. Modern primary commodity production is optimised by technology developed in other countries, diverse services and goods are frequently combined to create new product offerings, and most international business to consumer transactions are facilitated by leading global platforms. Positively this new globalization has provided consumers with an unprecedented choice of products at affordable prices. More challengingly it has seen governments struggle with the question of how they can best influence modern trade, amid signs of a backlash and simple demands for ‘more domestic manufacturing’. The popular global narrative that feeds such demands is one that has a traditional view of trade as a set of simple primary or manufactured goods transactions. Policymakers must move on from this narrative, making their choices, and explaining them clearly, on the basis of global value chains.
Topic:: International Political Economy, International Trade and Finance, Trade, and Global Value Chains
Political Geography:: Global Focus

25. Exploring ‘Non-Tariff Measures Black Box’: Whose Regulative NTMs on Which Products Improve the Imported Quality?

Author:: Mahdi Ghodsi
Publication Date:: 02-2021
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: Regulative non-tariff measures (NTMs), such as technical barriers to trade (TBTs) and sanitary and phytosanitary (SPS) measures, have frequently been imposed to regulate the quality of imported goods when the market fails to address some issues of concern regarding harmful products with low standards. The impact of NTMs on trade values and trade volumes has been extensively modelled and analysed in the literature, while their quality impact has usually been studied using the unit values of imports. In this paper a monopolistic competition framework is presented, in which firms choose both the quality and the price of their exports subject to the compliance costs of NTMs behind the border and a fixed cost of technological change. Using the solutions of this model including NTMs, the quality of products at the six-digit level of the harmonised system (HS) traded globally and bilaterally during the period 1996–2017 is estimated. Using these estimates, the impacts of TBTs and SPS measures on trade values, volume, unit value and quality are estimated. On average and across all global bilateral trade, TBTs restrict imports while improving quality significantly. SPS measures stimulate trade and improve the average imported quality. Then, by estimating the importer-specific impact of NTMs on traded value, quantity, unit value, quality, and quality-adjusted price for each product, the ‘NTM Black Box’ is opened and analysed. This provides evidence of whether the quality of traded goods to an importing country has been upgraded despite the trade restrictiveness of NTMs.
Topic:: Economics, International Political Economy, International Trade and Finance, and Non-Tariff Measures
Political Geography:: Global Focus

26. Assessing national laws for the implementation of CITES

Author:: Pascal Blickle, Angela Min Yi Hou, and Laura Störi
Publication Date:: 03-2021
Content Type:: Working Paper
Institution:: Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
Abstract:: This TradeLab project analyses the domestic legislation of 14 developing countries in implementing the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). The present memo summarises the main findings across the 14 Parties. This memo finds that most assessed Parties have implemented the CITES' core requirements, and recommendations provided in the resolutions of the Conference of the Parties (CoP). The project identifies a minority of three African countries for which the CITES Secretariat may wish to review their Category 1 status. These Parties fall short of all or several of the following elements: they failed to appropriately designate Management and Scientific Authorities by law, circumscribe the Authorities' tasks and responsibilities, or – by exclusively regulating native species – appear not to comprehensively cover species listed in the Convention's three Appendices.
Topic:: Environment, International Trade and Finance, Science and Technology, Trade, Ecology, and Biology
Political Geography:: Africa and Global Focus

27. Social clauses in trade agreements: implications and action points for the private sector in developing countries

Author:: Anna Liz Thomas, Jarrod Suda, and Gaia Grasselli
Publication Date:: 02-2021
Content Type:: Working Paper
Institution:: Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
Abstract:: Since the 1990s, more free trade agreements have come to include social clauses, which make reference to domestic and international labour standards. As this international legal web continues to grow, so too will the questions and concerns from employers and businesses. This Tradelab report, for the International Organisation of Employers, provides practical guidance for those employers and businesses. It does so by taking the diverse array of actors, the tensions within, and the opportunities set forth by free trade agreements and elaborating upon them using three case studies.
Topic:: International Political Economy, International Trade and Finance, Treaties and Agreements, Labor Issues, Free Trade, Trade, International Business, and Labor Market
Political Geography:: Global Focus

28. How to rein in fossil fuel subsidies ? Towards a New WTO Regime

Author:: Simon Happersberger, Eleanor Mateo, and Selcukhan Ünekbas
Publication Date:: 08-2021
Content Type:: Working Paper
Institution:: Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
Abstract:: Fossil fuel subsidies have negative consequences on the climate change, public budgets and and the transition to an environmentally friendly economy. Nevertheless, governments do not keep up with their commitments to phase out fossil fuel subsidies but misallocate again COVID-19 recovery funds in fossil fuel subsidies. This article provides an analysis of the current obstacles for phasing out fossil fuel subsidies and the potential of the WTO to advance a reform on fossil fuel subsidies. It argues that the WTO can contribute to a fossil fuel subsidies reform by its technical expertise in regulating subsidies, by its broad membership and by its institutional setting. Under the current framework of the ASCM, WTO member can use existing mechanisms, such as the TPRM, to increase transparency in the short term and facilitate discussions on the scope of subsidies while mitigating impacts on vulnerable groups or sectors. This would provide the ground for governments to work towards a new and ambitious agreement to stop producer fossil fuels subsidies and phase out consumer fossil fuels subsidies in the mid-to-long-term. However, the phase out of consumer subsidies needs to be carefully designed and embedded, to avoid unintended consequences on energy access and vulnerable households.
Topic:: Climate Change, Environment, International Trade and Finance, Natural Resources, Trade, Fossil Fuels, COVID-19, WTO, and Ecology
Political Geography:: Global Focus

29. TRIPS-Past to TRIPS-Plus: Upholding the Balance between Exclusivity and Access

Author:: James Bacchus
Publication Date:: 06-2021
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: A deadly global pandemic and other unique circumstances have combined to present the World Trade Organization (WTO) with an opportunity to modernize its rules for the trade-related aspects of intellectual property (IP) rights. The best place to begin is with a full realization of the negotiated balance between exclusivity and access in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). There is the need to turn the “TRIPS-past” of WTO IP rules agreed in 1995 into the “TRIPS-plus” of improved rules more fit to purpose for the twenty-first century. New rules are needed to help spark new innovations of all kinds and the rapid spread of those innovations worldwide, including rules relating to intangible assets and especially to digital expressions of IP. Continuing questions over the extent to which the TRIPS Agreement protects the exclusivity of IP rights in COVID-19 vaccines underscore how much uncertainty remains about where the line of this balance is in this multilateral trade agreement, and also how much doubt still exists about whether that line is in the right place.
Topic:: International Cooperation, International Trade and Finance, Intellectual Property/Copyright, Multilateralism, Pandemic, COVID-19, and WTO
Political Geography:: Global Focus

30. Could Trade Agreements Help Address the Wicked Problem of Cross-Border Disinformation?

Author:: Susan Ariel Aaronson
Publication Date:: 07-2021
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: Whether produced domestically or internationally, disinformation is a “wicked” problem that has global impacts. Although trade agreements contain measures that address cross-border disinformation, domestically created disinformation remains out of their reach. This paper looks at how policy makers can use trade agreements to mitigate disinformation and spam while implementing financial and trade sanctions against entities and countries that engage in disseminating cross-border disinformation. Developed and developing countries will need to work together to solve this global problem.
Topic:: International Cooperation, International Trade and Finance, Borders, and Disinformation
Political Geography:: Global Focus

31. The Digital Decide: How to Agree on WTO Rules for Digital Trade

Author:: James Bacchus
Publication Date:: 08-2021
Content Type:: Special Report
Institution:: Centre for International Governance Innovation
Abstract:: After more than 20 years of unsuccessful negotiations, WTO member countries may be able to agree on global digital trade rules if they look to the new Digital Economy Partnership Agreement (DEPA) among Chile, New Zealand and Singapore as a model. As the first “digital only” trade agreement, the DEPA offers a modular approach that allows members to pick and choose which modules work best for them today while enabling them to adopt more legal commitments on digital trade in the future. As cross-border trade becomes increasingly digital, especially during the COVID-19 pandemic, ensuring the free movement of goods and services is essential to the global economy.
Topic:: International Cooperation, International Trade and Finance, World Trade Organization, and Digital Economy
Political Geography:: Global Focus

32. The Impact of Unilateral Trade Policy on International Trade Structure

Author:: Moonhee Cho
Publication Date:: 09-2021
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: Uncertainty grows with the diffusion of unilateral trade policies. In particular, the average value of the World Uncertainty Index increased by four to fivefold compared to 1990. Recently, unilateral trade policies are spreading internationally. Non-tariff measures including anti-dumping, countervailing measures, SPS and TBT are increasing. Moreover, both developing and developed countries are adopting trade-disruptive measures and these are rapidly increasing. This report analyzes the widespread diffusion of unilateral trade policies and changes in trade structures.
Topic:: International Trade and Finance, Trade Policy, and Unilateralism
Political Geography:: Global Focus

33. The Carbon-Neutral LNG Market: Creating a Framework for Real Emissions Reductions

Author:: Erin Blanton and Samer Mosis
Publication Date:: 07-2021
Content Type:: Commentary and Analysis
Institution:: Center on Global Energy Policy (CGEP), Columbia University
Abstract:: As governments and companies consider options to decarbonize their energy systems, addressing greenhouse gas emissions from natural gas and liquified natural gas (LNG) will inevitably become a greater concern. Natural gas is viewed by some as potentially providing a bridge in a broad energy transition from dependence on fossil fuels to lower-emission sources. Even with advancements in renewable energy, many forecasts show natural gas will remain core to meeting global energy demand for some time, including as a backup fuel source for renewables.[1] But as the emissions profile of the natural gas value chain has become clearer, estimates of its footprint have increased, raising questions about natural gas’s transitory function. While gas will continue to have a prominent role in the energy mix,[2] without action to better account for, reduce, and offset natural gas and LNG emissions, the breadth and length of its use will increasingly come into question—including by countries with growing energy demand who see diminishing incentive to favor natural gas over high-emitting but fiscally cheap fuel sources, such as coal. Amid these considerations, discussions of value chain carbon intensity and greenhouse gas (GHG) accounting are becoming an important component of LNG trade, giving rise to the concept of “carbon-neutral LNG.” In the trade of carbon-neutral LNG, GHG emissions from supply and/or consumption are accounted for and offset by procuring and retiring carbon credits generated through GHG abatement projects, such as afforestation, farm/soil management, and methane collection.[3] Currently, carbon-neutral LNG makes up a slim portion of global LNG trade, with just 14 cargoes traded transparently since the first was sold in 2019, compared to over 5,000 cargoes of LNG being delivered globally in 2020 alone.[4] By examining the efficacy of the market at this early stage, as this commentary does, areas for improvement in the carbon-neutral LNG trade are highlighted. Procurement of carbon credits does not negate the emissions from natural gas and LNG, and accordingly, adoption of offsets should be paired with a broader and deeper reduction in the emissions intensity of these fossil fuels to ensure they remain conducive to meeting growing energy demand without needlessly jeopardizing global, national, and corporate efforts to reduce emissions. When considering this alongside the important role LNG and natural gas are likely to continue to play in meeting energy demand in key parts of the world during the transition period, it becomes clear that efforts must be made to scale GHG emissions mitigation throughout the value chain, such as through leakage reduction and employment of less carbon-intensive liquefaction technology, as well as to offset remaining emissions through the procurement and retirement of high-quality carbon credits. Serious questions remain about scaling the carbon-neutral LNG trade, including which emissions are accounted for, what methodology is employed in the emissions measurement and verification, and how the emissions are priced—either through a carbon credit or a carbon tax. If these questions are sufficiently addressed, natural gas and LNG may align better with global policy direction and emissions requirements. That is to say, GHG verification and mitigation will be critical to the sustainability of LNG in the decarbonizing global energy stack in the coming decade, with knock-on impacts on long-term LNG contract structure, trade flows, and market pricing. While this commentary does not prescribe policy to meet carbon neutrality or Paris Agreement goals specifically, it does examine an existing and growing market trade behavior that has the potential to assist countries dependent on natural gas in meeting their climate targets during this transitory period for the global energy system. Section 1 outlines the current state of the carbon-neutral LNG trade, while section 2 suggests a structure for LNG GHG accounting based on existing accounting methodologies. Section 3 discusses the different forms through which emissions mitigation can be integrated into the LNG trade, including a discussion on the risks of greenwashing. Section 4 highlights the implications of the growing carbon-neutral LNG market and provides recommendations to market participants and policy makers.
Topic:: Energy Policy, International Trade and Finance, Natural Resources, Carbon Emissions, and Decarbonization
Political Geography:: Global Focus

34. Do Evolving Digital Trade Rules Create an Uneven Playing Field? Understanding Global Perspectives

Author:: Michael Pisa and Ugonma Nwankwo
Publication Date:: 08-2021
Content Type:: Policy Brief
Institution:: Center for Global Development
Abstract:: This brief is based on a roundtable hosted by CGD as part of the Governing Data for Development project, which explores how governments can use data to support innovation, development, and inclusive growth while protecting citizens and communities against harm.
Topic:: Development, Economics, International Trade and Finance, and Digital Economy
Political Geography:: Global Focus

35. Oil Pipelines in the Silk Road Region Coordination and Collaboration Amidst Competition and Confrontation

Author:: Rodrigo Labardini
Publication Date:: 04-2021
Content Type:: Journal Article
Journal:: Baku Dialogues
Institution:: ADA University
Abstract:: For centuries, numerous projects have wanted to connect the Caspian Sea to its main markets in the East (China) and the West (Europe). All vie to link energy sources (oil and gas) and goods (commodities and manufactured products) with consumers. Contemporary pipelines and transport corridors are presented as cost‑efficient, faster, and profitable, and thus sound economical alternatives to traditional hauling via tankers. Reviewing the political map, continental pathways between East and West must traverse two regional “choke‑points,” each with three alternative routes. First, the “Eastern Gap” at the Caspian Sea: Russia, Iran, and the Caspian Sea. The Caspian Sea region also includes Azerbaijan, of course, since it is the only state (together with Russia and Iran) located on its western bank, with routing options via the Caucasus to reach the Black Sea and Anatolia on to Europe. Second, the “Western Gap” at the Black Sea: Russia (again), the Black Sea, and Anatolia. The South Caucasus’ unique geographical location between East and West as well as between Russia and Iran place it at a strategic crossroads of key geopolitical interest. Furthermore, the Caucasus‑Caspian Sea‑Central Asia region (CCCA) today—this corresponds more or less to what the editors of Baku Dialogues have called the “Silk Road region”—is merging ever closer with Eurasian and Middle East politics. The politicization of energy and transport—with pipeline politics often dealing with opposing economic and partisan interests—as well as sanctions against Russia and Iran, also raises the importance of sanctions‑free routes. Compounding these issues is the fact that several countries in the region are landlocked, dependent on transit states, and vulnerable to the latter’s maneuvers.
Topic:: International Trade and Finance, Oil, Natural Resources, and Silk Road
Political Geography:: Global Focus

36. The Global Economic Impact of the COVID-19 Pandemic: The Second Wave and Policy Implications

Author:: Gyeong Lyeob Cho, Minsuk Kim, and Yun Kyung Kim
Publication Date:: 09-2021
Content Type:: Research Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper examines the macroeconomic impact of the COVID-19 pandemic through the Computable General Equilibrium model. Due to a second wave and a subsequent delay in economic recovery, the pandemic could lead to a permanent shock in capital accumulation and productivity. This implies that the shock may not merely affect the short-term growth rate but also negatively impact the future economic growth path from its pre-pandemic trend. Through simulations, in the mild scenario, countries lose 0.10% to 0.31% of their future economic growth rates; in the severe scenario, they lose 0.21% to 0.69%.
Topic:: Economics, Globalization, International Trade and Finance, Public Health, Pandemic, and COVID-19
Political Geography:: Global Focus

37. Better Two Eyes than One: A Synthesis Classification of Exchange Rate Regimes

Author:: Cécile Couharde and Carl Grekou
Publication Date:: 10-2021
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: This paper proposes a new de facto classification of exchange rate regimes, the synthesis classification. The proposed framework has several advantages over existing de facto classifications. First, it offers a unified framework based on the most divergent classifications, the RR and LYS classifications, leading not only to a broader coverage but also to encompass a broad spectrum of exchange systems. Second, it fits better with the known history of exchange rate regimes developments in the post-Bretton Woods era. Among others, it brings an interesting nuance to the so-called hollowing-out hypothesis by showing that the evolution of de facto regimes —especially in emerging economies since the late 1990s— has essentially involved movement toward more tightly “managed” intermediate regimes and not a shift away from such regimes. As an illustration of the insightfulness of our classification, we empirically revisit the nexus between currency crises and exchange rate regimes. In addition to associate a higher probability of currency crisis to both intermediate and floating regimes, our classification, also displays better statistical performances than other classifications in predicting currency crises.
Topic:: Economics, International Cooperation, International Trade and Finance, Exchange Rate Policy, and Currency
Political Geography:: Global Focus

38. Love of Variety and Gains from Trade

Author:: Christophe Gouel and Sébastien Jean
Publication Date:: 12-2021
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: This paper shows how gains from trade are conditioned by love of variety, defined as the extent to which an additional product variety generates benefits in either final or intermediate consumption. We develop a multi-country, multisector gravity trade model where love of variety is parameterized separately from product substitutability using a generalized CES demand function, and show analytically how gains from trade depend on love of variety through different channels that we identify and interpret. In this context, except for very specific parameterizations, gains from trade differ between a heterogeneous- and a homogeneous-firm model. Counterfactual simulations based on a calibrated version of this model show that, all other things being equal, the assessed gains from trade commonly vary by a proportion of one to three depending on the value of the love-of-variety elasticity, in a way that differs significantly across countries. Trade war simulations also point to the strong sensitivity of the assessed impacts. We conclude that love of variety is a key determinant of the gains from trade, an aspect that has so far been overlooked for the sake of convenience in the modeling framework and due to lack of empirical estimates.
Topic:: International Cooperation, International Trade and Finance, Trade Wars, and Models
Political Geography:: Global Focus

39. Free Trade Agreements and the Movement of Business People

Author:: Thierry Mayer, Hillel Rapoport, and Camilo Umana Dajud
Publication Date:: 12-2021
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: Many of the measures to contain Covid-19 severely reduced business travel. Using provisions to ease the movement of business visitors in trade agreements, we show that removing barriers to the movement of business people promotes trade. To do this, we first document the increasing complexity of Free Trade Agreements. We then develop an algorithm that combines machine learning and text analysis techniques to examine the content of FTAs. We use the algorithm to determine which FTAs include provisions to facilitate the movement of business people and whether those provisions are included in dispute settlement mechanisms. Using these data and accounting for the overall depth of FTAs, we show that provisions facilitating business travel indeed facilitate business travel (but not permanent migration) and, eventually, increase bilateral trade flows.
Topic:: International Cooperation, International Trade and Finance, Migration, Business, Free Trade, Pandemic, and COVID-19
Political Geography:: Global Focus

40. Long-Term Macroeconomic Projections of the World Economy

Author:: Lionel Fontagné, Erica Perego, and Gianluca Santoni
Publication Date:: 12-2021
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: What will the global economy look like in a generation? The answer depends on the multiple forces driving long-term growth (demography, education, diffusion of technical progress, energy costs, investment and saving behaviour, international capital mobility) and requires a comprehensive framework to conceptualise them. We re-estimate the three-factor (capital, energy, labour) MAcro-econometric model of the Global Economy (MaGE), initially developed by Fouré et al. (2013), with a database covering 170 countries using state-of-the-art methods. We thus establish the long-term structural relationships that drive the dynamics of the World economy. The model projections to 2050 illustrate the expected changes in the World economy and their driving forces. In light of the projected volume of energy consumption, making these projections compatible with climate imperatives calls for increased technology sharing at the international level in order to decouple economic growth from energy use.
Topic:: Economics, Energy Policy, International Trade and Finance, and Macroeconomics
Political Geography:: Global Focus

41. Ambivalence About International Trade in Open- and Closed-ended Survey Responses

Author:: Arturo Chang, Thomas Ferguson, Jacob Rothschild, and Benjamin I. Page
Publication Date:: 09-2021
Content Type:: Working Paper
Institution:: Institute for New Economic Thinking (INET)
Abstract:: Spontaneous, open-ended survey responses can sometimes better reveal what is actually on people’s minds than small sets of forced-choice, closed questions. Our analysis of closed questions and trade-related open-ended responses to 2016 ANES “likes” and “dislikes” prompts indicate that Americans held considerably more complex, more ambivalent, and – in many cases – more negative views of international trade than has been apparent in studies that focus only on closed-ended responses. This paper suggests that contrast between open- and closed-question data may help explain why the effectiveness of Donald Trump’s appeals to trade resentments surprised many observers.
Topic:: International Trade and Finance, Public Opinion, Free Trade, Donald Trump, and Data
Political Geography:: Global Focus and United States of America

42. Economic impact of the global ferry industry

Author:: Oxford Economics
Publication Date:: 10-2021
Content Type:: Working Paper
Institution:: Oxford Economics
Abstract:: The global ferry industry comprises companies that own or operate vessels that transport passengers, goods and vehicles over short sea and inland routes. Ferries provide vital connections which enable all types of journey, whether that be local trips to work, study, visit others, or access amenities, or longer trips for business or tourism. Ferries also facilitate trade within and across national borders. Ferries therefore play a pivotal role as an economic and social enabler. As they do so, they sustain significant economic activity in their own right, both directly through the income and employment they support, and through wider supply chain and worker spending effects which benefit other parts of the economy. In this study, commissioned by Interferry, we assess the economic footprint of the global ferry industry. Our modelling suggests the global ferry industry could have supported $60 billion in GDP and 1.1 million jobs globally in 2019.
Topic:: International Trade and Finance, Maritime Commerce, Labor Issues, Maritime, and Travel
Political Geography:: Global Focus

43. Interactions Between Global Value Chains and Foreign Direct Investment: A Network Approach

Author:: Amat Adarov
Publication Date:: 07-2021
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: The world economy is increasingly shaped by cross-border production and investment activity. The paper uses complex network analysis along with panel data econometric techniques to study the structure and interactions between the networks of global value chains (GVC) and foreign direct investment (FDI). The analysis reveals that both FDI and GVC networks have a distinct core-periphery structure dominated by a relatively small number of countries with the USA constituting the global hub interlinked with regional European and Asian clusters, which, in turn, are centered around regional hub countries like China and Germany. Simultaneous equation model regressions using three-stage least squares suggest that FDI centrality facilitates GVC centrality of countries. However, FDI centrality is driven to a large extent by the FDI statutory restrictions and tax oﬀshore regulations, rather than GVC connectivity.
Topic:: International Trade and Finance, Foreign Direct Investment, Borders, Networks, Macroeconomics, and Global Value Chains
Political Geography:: Global Focus

44. Labour Taxes and International Trade: The Role of Domestic Labour Value Added

Author:: Amat Adarov, Mario Holzner, Branimir Jovanovic, and Goran Vukšić
Publication Date:: 08-2021
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: This paper revisits the relationship between labour taxation and international trade, focusing on the role of domestic labour value added. Using sectoral data from 41 EU and OECD economies over the period 2005-2014, we assess how labour taxes affect exports and imports and how domestic labour value added shapes this relationship. We find that higher labour taxes reduce exports but that the effect depends to a large extent on the share of domestic labour value added, which differs by industries, countries and time periods. Imports do not seem to be affected. This implies that changes in labour taxes will not affect all sectors and countries in the same way and that policy makers should be aware of this when deciding on labour taxes. We also calculate the contribution of labour tax changes to the export dynamics in the analysed period and sample of countries, finding that in general the contribution is small.
Topic:: International Trade and Finance, Labor Issues, Tax Systems, Exports, and Imports
Political Geography:: Global Focus

45. Impact of Technical Barriers to Trade on the Trade in Goods in the Information and Communications Technology Sector: Differentiating by Aim of the Regulatory Measure

Author:: Mahdi Ghodsi
Publication Date:: 09-2021
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: In this modern digital world, goods from the information and communications technology (ICT) sector are the engine of the global economy. While tariffs levied on ICT goods have been eliminated or significantly reduced since the conclusion in December 1996 of the Information Technology Agreement of the World Trade Organization (WTO), non-tariff measure (NTMs) have come to be used more frequently with regard to imports of these goods. Technical barriers to trade (TBTs), as the most important trade policy measure imposed on imports of ICT goods, form the focus of this study. This paper analyses how different types of TBTs imposed on imports of ICT goods globally affected the values and volumes of imported goods at the six-digit level of the Harmonised System (HS) during the period 1996-2018. Keywords cited in the TBTs notified to the WTO give an indication of the aims behind the imposition of TBTs. Therefore, this study digs deeper into the impact of 30 types of TBT, using the keywords cited. The methodology used in this paper controls for zero trade flows using the Pseudo Poisson Maximum Likelihood (PPML) technique; and it controls for endogeneity bias using the exogenous instrumental variable approach. Furthermore, the paper provides more detailed analysis of the impact of TBTs across five ICT product categories that are defined by the United Nations Conference on Trade and Development (UNCTAD). The results indicate that TBTs have a generally strong positive impact on the value of imports of ICT goods. While many keywords cited in TBTs notified to the WTO affect the values and volumes of imports in a positive way, certain other TBTs function as trade barriers that reduce their values and volumes.
Topic:: International Trade and Finance, Communications, World Trade Organization, Tariffs, and Information Technology
Political Geography:: Global Focus

46. Source – Assembly – Sink: Value Added Flows in the Global Economy

Author:: Robert Stehrer
Publication Date:: 09-2021
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: In this paper we provide a method to characterise global value chains and a related decomposition of bilateral gross exports by distinguishing three diﬀerent stages of the value-added ﬂows: (i) the source of value added, (ii) the ﬁnal assembly stage of a product, and (iii) the ﬁnal absorption (sink) of this product. Methodologically this is embedded in a simple framework using matrix algebra allowing for intuitive interpretations of the individual decomposition terms and results. The approach leads to a novel decomposition of bilateral gross export ﬂows and related value-added trade indicators. It is shown how these correspond to existing measures using the property of inverse matrices. Speciﬁcally, the paper sheds light on the nature of the double-counting terms discussed in the literature. Finally, the approach outlined is extended by incorporating insights from the hypothetical extraction method. We argue that this is a complementary approach which however can be used to ﬂexibly deﬁne the value chains of interest and characterise the respective ﬂows that are considered part of this deﬁned value chain, again carefully diﬀerentiating the source, assembly, and sink dimensions.
Topic:: International Trade and Finance, Economy, Exports, Global Value Chains, and Decomposition
Political Geography:: Global Focus

47. Heterogeneous Effects of Non-tariff Measures on Cross-border Investments: Bilateral Firm-level Analysis

Author:: Amat Adarov and Mahdi Ghodsi
Publication Date:: 09-2021
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: We analyse the heterogeneous effects of technical regulations and safety standards embodied in non-tariff measures on foreign direct investment using global firm-level panel data of bilateral cross-border ownership relationships over the period 2008-2018. To this end, we develop a novel measure of time-varying bilateral ad valorem equivalents of sectoral non-tariff measures, which reveals that technical barriers to trade (TBTs) played a much greater role as a trade-inhibiting factor in comparison with import tariffs and sanitary and phytosanitary (SPS) measures over the period 1996-2018, with their relative importance increasing in the post-Great Recession period. Estimations using the Poisson pseudo-maximum likelihood framework reveal the importance of non-tariff measures as a driver of foreign direct investment, with heterogeneous effects observed for the measures imposed by the host and the home country, as well as across sectors and types of non-tariff measures. Among other results, we find that an increase in the stringency of technical barriers to trade imposed by the host country is associated with higher investment in the foreign subsidiaries operating in this country, pointing to the regulatory barrier-jumping motive of foreign direct investment. The effect is much stronger for the multinational corporations operating in the information and communications technology sector.
Topic:: International Trade and Finance, Foreign Direct Investment, Economy, and Business
Political Geography:: Global Focus

48. How do Corporate Taxes affect International Trade?

Author:: Mario Holzner, Branimir Jovanovic, and Goran Vukšić
Publication Date:: 11-2021
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: This paper investigates how corporate income taxes affect international trade, and identifies the underlying channel. Using data on 33 NACE sectors, for 34 EU and OECD economies, over the period 2005-2014, we find that corporate income taxes reduce exports and imports only when the stock of foreign direct investment (FDI) is high. The effect is present primarily in the service sector and in countries with low corporate taxes. We interpret these findings as evidence that multinational enterprises reduce their operations in countries that raise their corporate taxes. The effect has been found to be small on aggregate, implying that the expected increase in corporate taxes in the future, arising from the global minimum tax, is unlikely to hurt international trade.
Topic:: International Trade and Finance, Foreign Direct Investment, Tax Systems, Exports, Profit, Imports, and Corporations
Political Geography:: Global Focus

49. El comercio internacional de armamento y las ventajas comparativas

Author:: Victoria Alonso
Publication Date:: 11-2021
Content Type:: Journal Article
Journal:: Journal on International Security Studies (RESI)
Institution:: International Security Studies Group (GESI) at the University of Granada
Abstract:: En este artículo se pretende explicar la adecuación de los modelos que explican el comercio internacional en términos generales al ámbito del comercio internacional de material de defensa. Estudiaremos la evolución de los modelos explicativos del comercio para ver en quémedida servirán o no para explicar el comercio en seguridad y defensa, particularmente en el modelo Heckscher-Ohlin. Con el objeto a entender el comercio de material de uso militar recurrimos a un análisis de la composición de la industria,estudiando casos de los principales exportadores e importadores, así como los motivos que llevan adar el salto de la mera producción de bienes al comercio internacional teniendo en cuenta las distintas maneras de exportar y las regulaciones a las que se puede enfrentar la industria cuando decide lanzarse al comercio internacional.
Topic:: Defense Policy, International Trade and Finance, Trade, and Industry
Political Geography:: Global Focus

50. This Time is Different. The "COVID-Shock" and Future of the Global Oil Market

Author:: Giuliano Garavini
Publication Date:: 04-2020
Content Type:: Commentary and Analysis
Institution:: Istituto Affari Internazionali
Abstract:: Oil markets are facing a perfect storm. The scissors of supply and demand are moving against one another, generating increasing pain on the oil industry and the political and financial stability of oil-producing countries. Global oil demand is dropping due to the recession induced by the COVID-19 shut down of economic activity and transport in the most industrialized countries. Goldman Sachs predicts that global demand could drop from 100 million barrels per day (mdb) in 2019 to nearly 80 mdb in 2020.1 If confirmed, this would be single biggest demand shock since petroleum started its race to become the most important energy source in the world.
Topic:: International Trade and Finance, Oil, Global Markets, and Economy
Political Geography:: Russia, Saudi Arabia, and Global Focus

51. The Geopolitics of Food Security: Barriers to the Sustainable Development Goal of Zero Hunger

Author:: Jiayi Zhou, Lisa Marie Dellmuth, Kevin M. Adams, Tina-Simone Neset, and Nina von Uexkull
Publication Date:: 11-2020
Content Type:: Working Paper
Institution:: Stockholm International Peace Research Institute
Abstract:: Assessing the prospects for Zero Hunger—Sustainable Development Goal 2—requires an understanding of food security that goes beyond developmental or humanitarian issues, to include linkages with geopolitics. Geopolitical challenges cut across areas such as natural resources, trade, armed conflict and climate change where unilateralism and zero-sum approaches to security directly hamper efforts to eradicate hunger and undermine the frameworks that govern those efforts. The report provides an overview of how geopolitics interacts with these areas. Competition for agricultural resources can be both a cause and a consequence of geopolitical rivalry. International trade, while essential for food security, also creates vulnerabilities through supply disruptions—sometimes politically motivated. Armed conflict is a driver of food insecurity, which can itself feed into social unrest and violence. Climate change interacts with all three phenomena, reshaping both the physical landscape and political calculus. These overlapping linkages require further integrated policy engagement and analysis.
Topic:: Climate Change, Development, International Trade and Finance, Governance, Food Security, Geopolitics, and Peace
Political Geography:: Global Focus

52. Global value chains and the removal of trade protection

Author:: Chad P. Bown, Aksel Erbahar, and Maurizio Zanardi
Publication Date:: 02-2020
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This paper examines how trade protection is affected by changes in the value-added content of production arising through global value chains (GVCs). Exploiting a new set of World Trade Organization (WTO) rules adopted in 1995 that impose an exogenously timed requirement for countries to reevaluate their previously imposed trade protection, the authors adopt an instrumental variables strategy and identify the causal effect of GVC integration on the likelihood that a trade barrier is removed. Using a newly constructed dataset of protection removal decisions involving 10 countries, 41 trading partners, and 18 industries over 1995–2013, they find that bilateral industry-specific domestic value-added growth in foreign production significantly raises the probability of removing a duty. The results are not limited to imports from China but are only found for the protection decisions of high-income countries. Back-of-the-envelope calculations indicate that rapid GVC growth in the 2000s freed almost a third of the trade flows subject to the most common temporary restrictions (i.e., antidumping) applied by high-income countries in 2006.
Topic:: Economics, International Trade and Finance, Global Markets, Finance, and Trade
Political Geography:: Global Focus

53. COVID-19: Global Trade and Supply Chains after the Pandemic

Author:: David Ramirez
Publication Date:: 08-2020
Content Type:: Working Paper
Institution:: International Institute for Strategic Studies
Abstract:: The COVID-19 outbreak has shaken international trade and supply chains to their very foundations. This paper presents possible trade and supply scenarios, examining in particular the future of China’s pre-COVID-19 role as ‘the world’s factory’. Although disruptions such as the Japan earthquake and tsunami of 2011 and the recent trade war between the United States and China have strained global trade and supply chains in the past, particularly in Asia, COVID-19 has had historically devastating effects. While high levels of uncertainty currently make it hard to foresee exactly how global trade and supply chains will look in the post-COVID-19 era, it is inevitable that they will be reshaped.
Topic:: International Trade and Finance, Public Health, Pandemic, and COVID-19
Political Geography:: Global Focus

54. Globalization Isn’t in Decline: It’s Changing

Author:: Erik van der Marel
Publication Date:: 08-2020
Content Type:: Policy Brief
Institution:: European Centre for International Political Economy (ECIPE)
Abstract:: Globalization isn’t in decline; it is simply changing. Although the COVID-19 crisis has seen a dramatic decline in goods trade, investments and the movement of people, a new type of globalization is emerging. This “new globalization” is based on digital services, research and development, data, ideas, and other intangibles. This development has been going on for a while and has evolved more rapidly after the previous global financial crisis (GFC) in 2008-9. For instance, the GFC caused digital services trade to significantly “de-link” from goods-related services trade. This pattern illustrates that the COVID-19 crisis will likely mark another break in trade patterns and that future growth in globalization will depend crucially on digital trade and cross-border exchange in intangibles.
Topic:: Globalization, International Political Economy, International Trade and Finance, Digital Economy, R&D, Data, and COVID-19
Political Geography:: Global Focus

55. Shifting into Digital Services: Does a Crisis Matter and for Who?

Author:: Erik van der Marel
Publication Date:: 08-2020
Content Type:: Working Paper
Institution:: European Centre for International Political Economy (ECIPE)
Abstract:: How do trade patterns change after an external shock such as an economic crisis, and is this shift structural? This paper uses a Difference-in-Difference (DID) approach to investigate whether services trade became more digital after the Global Financial Crisis (GFC) in 2008. It finds that the GFC formed an independent break from the previous period that turned services trade to become more digital – although there are signs that this somewhat already happened before 2008. Software-intense services such as R&D services, information services, computer services and charges for Intellectual Property Rights (IPR) saw on average a 6 percent higher increase in global exports compared to other non-digital sectors post-2008. Countries with higher internet usage and with already comparative advantage in these sectors saw this higher increase in digital trade. More striking is that in particular upper-middle income countries and countries with high manufacturing activity saw the sharpest shift into digital services trade after the GFC. These significant outcomes forecast a direction into which patterns of services trade are likely to turn after the current economic crisis resulting from COVID-19.
Topic:: International Political Economy, International Trade and Finance, Digital Economy, Global Financial Crisis, Exports, and Digital Policy
Political Geography:: Global Focus

56. Learning to Love Trade Again

Author:: Frank Lavin and Oscar Guinea
Publication Date:: 06-2020
Content Type:: Research Paper
Institution:: European Centre for International Political Economy (ECIPE)
Abstract:: We are at the moment, the first in seventy-five years, where there is no international consensus in support of trade. Indeed, trade is unloved, unsupported, and even unwanted. There is no shortage of topics in the rhetoric of trade complaints: from the rapid rise of China to Coronavirus as a metaphor for the evils of greater connectivity. Regardless of the validity of these complaints, none of them negate the central truth of trade: countries that engage in trade move ahead, and those that do not, stagnate. Our political leaders disagree. Anti-trade positions are held by leaders across the political spectrum, from Donald Trump to Bernie Sanders. And yet, the public is increasingly warm to the idea of trade. When Gallup asks Americans, “Do you see foreign trade more as an opportunity for economic growth through increased U.S. exports or a threat to the economy from foreign imports?” a record high of 79% see trade as an opportunity, with 18% viewing it as a threat. How did the world arrive at this moment where the benefits of trade are clearly evidenced while trade has become politically toxic? We identify four main factors: (i) U.S. absenteeism from the leadership role; (ii) detachment between trade and security architecture; (iii) no alternative leadership in Europe or elsewhere; and (iv) the cumbersome WTO process. Against this background we put forward five initiatives that will be big enough to count but unobjectionable enough to be adopted. The Big Three. The U.S., EU, and Japan, should establish a consultative body on trade to forge a new approach that allows trade to move ahead in the absence of universal consensus. No harm, no foul. Each of the Big Three should commit to zero tariffs on any item not produced in each particular market. A de minimis strategy. Tariffs should be eliminated on all products where the current tariff is less than 2%. At that level tariffs are simply a nuisance fee. Mind the social costs. Expand the Nairobi Protocols to include health products and green tech. Scrapping import tariffs on medical and green goods would not only encourage additional trade but will also provide health and environmental benefits. Harmonize down. The Big Three should commit that on every tariff line each of the three will be no worse than the next worse. In other words, each of the Big Three will agree to reduce its tariff on every product where it has the highest tariff of the three. These actions will spur the WTO, not undermine it. The measures we propose can be set up on a plurilateral basis that would allow other trading powers to participate. By breaking away from the tyranny of universal consensus, these actions will encourage the trading community – including the WTO – to get back in forward motion. In some respect, convergence between the Big Three is already happening. The EU and Japan signed an FTA that lowers import tariffs between these two economies, while the U.S. and Japan agreed to negotiate a comprehensive FTA. And if China is willing to step up? China should be welcomed into this group if it supports the four initiatives, changing the Big Three to the Big Four.
Topic:: International Political Economy, International Trade and Finance, Global Markets, Trade, and WTO
Political Geography:: United States, Japan, China, Europe, and Global Focus

57. The Role of Trade Policy in Promoting Sustainable Agriculture

Author:: Philipp Lamprecht and Fredrik Erixon
Publication Date:: 01-2020
Content Type:: Research Paper
Institution:: European Centre for International Political Economy (ECIPE)
Abstract:: There is now a long history of countries improving sustainability standards in most parts of the economy while at the same time pursuing the ambitions of rules-based international trade and economic integration with other countries. It is not surprising that countries at the vanguard of sustainability also tend to be the countries that are most open to trade. This Report looks closer at the interplay between the formulation of domestic standards and provisions in Free Trade Agreements that either acknowledge domestic standards or establish standards in a direct way. This interplay is crucial for two reasons: first to establish market access arrangements that help to promote sustainability standards, second to provide the policy basis to make standards and possible market access restrictions conducive to basic trade rules. It lays a focus particularly on the growing importance of sustainability standards in international trade agreements, or Free Trade Agreements (FTAs) – in particular for the food sector. Such standards are relevant for all new high-ambition Free Trade Agreements – from the EU-Japan Economic Partnership Agreement to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership between eleven trans-pacific nations. The Report considers especially nine modern FTAs. The purpose of the Report is to investigate how governments with high sustainability ambitions approach the issue of trade and sustainability – in particular how they work with, on the one hand, specific provisions in FTAs and, on the other hand, the development of domestic standards and their linkage to trade. The Report also looks directly at how these standards are designed, and what lessons that can be learned for governments that want to raise sustainability ambitions. It puts the results of the analysis in the context of Norwegian ambitions to improve its sustainability standards for food placed on the Norwegian market. The analysis of how trade and sustainability have been made compatible starts with the rules of the World Trade Organisation (WTO). These rules are important in their own right, but they also carry political significance. WTO-rules form the basis of the bilateral free trade agreements that countries sign with each other – and that now make up the main plank of international trade negotiations. In the language of the WTO, basic trade rules serve to protect the principles of national treatment and non-discrimination. Sustainability policies that are grounded on solid evidence and that follow international scientific norms will be compatible with WTO rules. Sustainability policies that confer advantages to domestic producers or that are arbitrary will get a harsh treatment. Consequently, the bilateral free trade deals that the European Union or the European Free Trade Area (EFTA) have concluded with other parts of the world are not just compatible with WTO rules, they rely on these rules as the foundation stone. Moreover, these rules inform governments how they should organise their sustainability policy if they also want the opportunity to take part in modern trade agreements. If countries aren’t willing to play by these rules, they should also accept that they won’t be able to enjoy the benefits of trade agreements. What member countries of the WTO have agreed in past multilateral trade accords are not a blockage of sustainability policy, but they bar countries from pursuing such policies in a way that would lead to unequal application of trade rules – between home and foreign producers, or between different foreign producers. In addition, it is of interest – also to the Norwegian policy discussion – to consider how EU policies are likely to change in the forceable future. The analysis provides a discussion of issues that are likely to remain very high on the agenda of the next European Commission. These include possible improvements in the TSD Chapters of trade agreements in particular with regard to enforcement mechanisms, the engagement of civil society, and climate action. Further policy highlights include a possible introduction of a carbon border tax, as well as the discussions related to due diligence of supply chains, and multilateralism. In terms of conclusions, the Report identifies four main observations that should inform future policy development in Norway: First, there is clearly a case to be made for aligning Norwegian trade policy to EU trade policy when it comes to provisions on trade and sustainability in Free Trade Agreements. Second, there is a substantial body of scientific evidence, risk assessments and international experience of standards in areas that are related to sanitary and phyto-sanitary standards and to environmental standards which any government that want to raise sustainability standards can draw on. Third, many countries struggle to formulate their domestic sustainability standards in a structured way. Arguably, this is a critical point for governments that are considering to introduce higher standards with consequence for market access for foreign producers. To avoid confusion or accusation of standards being a disguised trade restrictions, countries like Norway would have to structure and systematise its standards if the ambitions were to be raised and formed part of market access policy. A first step for a policy that seeks to condition import on the compliance with a stand is to make the standard clear and explicit. Fourth, there are direct and indirect relations between domestic standards and provisions in FTAs. FTAs often deal with policies that cannot be directly formulated in a domestic standard, like some aspects of labour laws. They also deal with other forms of standards that need policy convergence in order to guarantee smooth trade between the contracting parties. Generally, it cannot be said that the EU or other entities use FTAs to “regulate” or to establish the standard. That rather happens bottom-up – through domestic regulations that later get reflected in trade agreements.
Topic:: International Political Economy, International Trade and Finance, Partnerships, Global Markets, Free Trade, Trade, and Sustainability
Political Geography:: Europe and Global Focus

58. Grey Zones in Global Finance: the Distorted Geography of Cross-Border Investments

Author:: Vincent Vicard, Amélie Guillin, and Anne-Laure Delatte
Publication Date:: 05-2020
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: Tax avoidance schemes generate artificially complex cross-border financial structures inflating measured international investment stocks in tax havens. Using a standard gravity framework, we estimate that about 40% of global assets (FDI, portfolio equity and debt) are `abnormal' – unexplained – stocks. Abnormal stocks are increasing over time and concentrated in a limited number of jurisdictions. Six jurisdictions including three European countries are the largest contributors: Cayman, Bermuda, Luxembourg, Hong Kong, Ireland and the Netherlands. Interestingly, the Luxleaks in 2014 do not appear to have diverted cross-border investments away.
Topic:: Economics, International Political Economy, International Trade and Finance, Finance, Borders, Investment, and Stock Markets
Political Geography:: Global Focus

59. Refugees’ Integration into the Austrian Labour Market: Dynamics of Occupational Mobility and Job-Skills Mismatch

Author:: Mahdi Ghodsi and Robert Stehrer
Publication Date:: 10-2020
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: Eight multilateral rounds of negotiations under the General Agreement on Tariffs and Trade (GATT) and international agreements under the World Trade Organisation (WTO) have contributed significantly to the reduction of tariffs among WTO members. However, over the years legitimate reasons for the imposition of non-tariff measures (NTMs) within regulations have triggered their extensive use. Among these measures, technical barriers to trade (TBTs) and sanitary and phytosanitary (SPS) measures allow countries to impose restrictions on the import of low-quality products suspected of harming domestic consumers’ health, plant life or the environment. Such trade policy instruments may lead to higher standards in the import market, in addition to improving market efficiency through information requirements such as mandatory labelling. This paper analyses two types of regulative and standard-like NTMs – TBTs and SPS measures – and the quality improvement of traded products that is driven by their imposition, which might be a general underlying motive for the adoption of such regulations. Based on a model framework involving both the supply and the demand side of trade and using four types of measures of these NTMs, this paper assesses the impact of TBTs and SPS measures on the quality of traded products. A dummy variable measuring the existence of these NTMs and a count variable indicating their stringency are used in the analysis. Moreover, two other variables indicate flows of NTMs imposed in each year and stocks of these NTMs accumulated over years. The results indicate that TBTs and SPS measures do indeed imply a higher quality of traded products, which is also consistent with the model when NTMs enter as a specific trade cost. Stringent TBTs with more regulations imposed in each year (i.e. flows of count TBTs) have the largest impact on the quality of traded products. However, for SPS measures only the existence of a regulation (i.e. the dummy variable on flows of SPS measures) on a traded product has the strongest impact on its quality.
Topic:: Economics, International Political Economy, International Trade and Finance, WTO, Non-Tariff Measures, and GATT
Political Geography:: Europe and Global Focus

60. The World Trade Organization: An Optimistic Pre-Mortem in Hopes of Resurrection

Author:: Dmitry Grozoubinski
Publication Date:: 08-2020
Content Type:: Working Paper
Institution:: Lowy Institute for International Policy
Abstract:: In the midst of a pandemic and escalating global protectionism, the WTO's paralysed dispute settlement system, largely immobilised negotiations, and chronically underutilised monitoring and compliance function, are groaning under the weight of trade tensions, unilateralism, and neglect. Technical work in Geneva is part of the solution, but is insufficient on its own to resolve the Organization’s short- and long-term problems. Political leaders who still believe in the wisdom of predictable, rules-based trade must build coalitions to expand that structure, while forcing the difficult conversations about what a WTO acceptable to the major powers looks like, and investing in the painstaking rebuilding of business and civil society engagement with trade policy.
Topic:: International Trade and Finance, World Trade Organization, COVID-19, and Financial Stability
Political Geography:: Global Focus

61. Financial Innovation For Energy Innovation

Author:: Ashby Monk and Soh Young In
Publication Date:: 06-2020
Content Type:: Research Paper
Institution:: Brown Journal of World Affairs
Abstract:: The move toward a global energy transition is underpinned by the collective need to limit the most severe impacts of climate change as well as to foster more sustainable economic growth. Floating photovoltaic power stations on Chinese lakes, integrated carbon capture technology on large-scale power plants in Canada, and decentralized urban wind turbines on Singaporean rooftops are just a few examples of how radical innovations in clean energy technology are fueling the global energy transition.1 Bringing cutting-edge technology from the lab to the global energy market requires a supportive ecosystem. Innovation must be matched by market readiness to adopt disruptive technologies, local capacities to scale up new energy projects, energy policies with climate objectives, technological development, and sufficient and “aligned” investment capital.
Topic:: Climate Change, Energy Policy, International Trade and Finance, Finance, Innovation, and Renewable Energy
Political Geography:: China, Canada, and Global Focus

62. The Future Of Microfinance

Author:: Muhammad Yunus
Publication Date:: 06-2020
Content Type:: Commentary and Analysis
Institution:: Brown Journal of World Affairs
Abstract:: Muhammad Yunus is an economist and the founder of Grameen Bank, which provides microcredit to the impoverished without requiring collateral. Yunus and Grameen were awarded the Noble Peace Prize in 2006.
Topic:: Development, International Trade and Finance, Capitalism, Finance, and Microcredit
Political Geography:: Global Focus

63. Central Bank Digital Currencies: Tools for an Inclusive Future?

Author:: Eve Lee
Publication Date:: 09-2020
Content Type:: Policy Brief
Institution:: Belfer Center for Science and International Affairs, Harvard University
Abstract:: Central Bank Digital Currencies (CBDCs) have rapidly evolved from a sci-fi concept to a plausible alternative to cash that is being studied by central banks all over the world. According to a Belfer Center tracker, over 50 central banks have pursued or are engaging in CBDC work as of August 2020. However, while 10 central banks have already piloted or announced plans to pilot a CBDC in the near term, most are in the early stages of research and experimentation. In this brief, we outline the common motivations driving central bank work on CBDCs. We then explore CBDCs’ potential impacts on financial inclusion, a primary motivation in developing and emerging markets that has also gained significant traction in developed economies during the COVID-19 related global recession. We conclude that for CBDCs to achieve its financial inclusion goals, more technical advancement in offline adaptability and policy deliberations around issues of identity and traceability are needed.
Topic:: Diplomacy, Economics, International Trade and Finance, International Affairs, and Monetary Policy
Political Geography:: Global Focus

64. Global Trade Cooperation after COVID-19: What is the WTO's Future?

Author:: Peter Draper
Publication Date:: 02-2020
Content Type:: Commentary and Analysis
Institution:: Institute for Development and Peace
Abstract:: International trade cooperation has been under growing strains since at least the turn of the twenty-first century. Forces promoting global trade integration were in the ascendancy for most of the first decade. They were anchored on com- plex production specialisation mediated through cross-border value chains, underpinned by con- sumer demand for a variety of cost-effective prod- ucts, and cemented through regional and bilateral trade agreements. However, since 2008, succes- sive shocks unleashed cumulative disintegrative forces that counter-balanced and now threaten to overwhelm the forces of integration. These com- prise rising nationalism, associated desires for sovereignty, growing concerns over uneven distri- bution of the benefits of economic globalisation, shifting international power balances and associ- ated security concerns. These disintegrative forces threaten to unravel the World Trade Organization (WTO). COVID-19 mostly accelerates this trajec- tory, rendering WTO reform and restoration to its central role at the apex of the global trading sys- tem increasingly challenging. But all is not lost, as the forces of global trade integration have not dissipated and every crisis also presents reform opportunities.
Topic:: International Cooperation, International Trade and Finance, World Trade Organization, Public Health, Pandemic, and COVID-19
Political Geography:: Global Focus

65. The Components of Free Trade Agreements and Their Effects on International Trade

Author:: Moonhee Cho, Young Gui Kim, Kyong Hyun Koo, Hyeri Park, and Hyeyoon Keum
Publication Date:: 06-2020
Content Type:: Policy Brief
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: We analyzes the effects that the components of FTA have on international trade. According to the empirical results, the more free trade agreements contain WTO+ and WTO-X provisions and the more legally enforceable these provisions are, the more bilateral trade increases. We also find that the effects of FTA's provisions on trade depend on the economic level of FTA partner countries.
Topic:: International Trade and Finance, Bilateral Relations, Free Trade, and WTO
Political Geography:: Global Focus

66. Society 5.0 and the Future Economies

Author:: Hesham Dinana
Publication Date:: 03-2020
Content Type:: Journal Article
Journal:: Cairo Review of Global Affairs
Institution:: School of Global Affairs and Public Policy, American University in Cairo
Abstract:: We’re better-connected today than ever before—but has modern innovation created a new society altogether?
Topic:: Economics, Globalization, International Cooperation, International Trade and Finance, and Innovation
Political Geography:: Global Focus

67. Deeper Regional Integration and Global Value Chains

Author:: Nakgyoon Choi
Publication Date:: 07-2019
Content Type:: Working Paper
Institution:: Korea Institute for International Economic Policy (KIEP)
Abstract:: Recently, international trade has become regional rather than global. This paper aims to test if deeper regional integration contributes to the organization of global value chains along the regional clusters including Asia, Europe, and America. We estimate the impacts of deep regional integrations on global value chains by region, investigating the implications of mega FTAs for global value chains by scenario. We use not only data on trade in value added but also global value chains participation indexes which reflect the global value chains better than domestic value added in goods and services exports. The estimation results reveal that a deep regional trade agreement has heterogeneous effects on global value chains depending on the regional clusters. In particular, Asia turns out to import more intermediate goods than Europe and America while RTA member countries tend to import more intermediate goods from Europe than Asia and America.
Topic:: International Trade and Finance, Regional Integration, Economic Policy, and Exports
Political Geography:: Europe, Asia, Global Focus, and North America

68. Does Participation in Global Value Chains Increase Productivity? An Analysis of Trade in Value Added Data

Author:: Shujiro Urata and Youngmin Baek
Publication Date:: 11-2019
Content Type:: Working Paper
Institution:: Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:: This paper examines the impact of global value chain (GVC) participation on productivity by considering both backward and forward participation. Conducting a panel estimation covering 47 countries and 13 manufacturing sectors for 1995–2011, we found that both backward and forward GVC participation contributes to an increase in the productivity of the countries involved in GVCs. In particular, benefits in the form of improved productivity are larger in cases where developing countries procure intermediate goods from developed countries, or backward participation. Our analysis indicates the importance of GVC participation for improving productivity. We argue that, in order for a country to increase GVC participation, an open, free, and transparent trade and foreign direct investment environment (which is provided by regional trade agreements); well-developed soft infrastructure (e.g. educational and legal systems); hard infrastructure (e.g. transportation and communication systems); and the availability of capable human resources are important.
Topic:: International Trade and Finance, Foreign Direct Investment, and Global Value Chains
Political Geography:: Global Focus

69. Putting Global Governance in its Place

Author:: Dani Rodrik
Publication Date:: 08-2019
Content Type:: Working Paper
Institution:: The John F. Kennedy School of Government at Harvard University
Abstract:: In a world economy that is highly integrated, most policies produce effects across the border. This is often believed to be an argument for greater global governance, but the logic requires scrutiny. There remains strong revealed demand for policy and institutional diversity among nations, rooted in differences in historical, cultural, or development trajectories. The canonical case for global governance is based on two set of circumstances. The first occurs when there is global public good (GPG) and the second under “beggar-thy-neighbor” (BTN) policies. However, the world economy is not a global commons, and virtually no economic policy has the nature of a global public good (or bad). And while there are some important BTN policies, much of our current discussions deal with policies that are not true BTNs. The policy failures that exist arise not from weaknesses of global governance, but from distortions of domestic governance. As a general rule, these domestic failures cannot be fixed through international agreements or multilateral cooperation. The paper closes by discussing an alternative model of global governance called “democracy-enhancing global governance.”
Topic:: International Trade and Finance, Governance, Global Political Economy, and Trade Wars
Political Geography:: Global Focus and Global Markets

70. How ETFs Amplify the Global Financial Cycle in Emerging Markets

Author:: Nathan Converse, Eduardo Levy Yeyati, and Tomas Williams
Publication Date:: 05-2019
Content Type:: Working Paper
Institution:: The John F. Kennedy School of Government at Harvard University
Abstract:: Since the early 2000s exchange-traded funds (ETFs) have grown to become an important in- vestment vehicle worldwide. In this paper, we study how their growth affects the sensitivity of international capital flows to the global financial cycle. We combine comprehensive fund- level data on investor flows with a novel identification strategy that controls for unobservable time-varying economic conditions at the investment destination. For dedicated emerging mar- ket funds, we find that the sensitivity of investor flows to global financial conditions for equity (bond) ETFs is 2.5 (2.25) times higher than for equity (bond) mutual funds. In turn, we show that in countries where ETFs hold a larger share of financial assets, total cross-border equity flows and prices are significantly more sensitive to global financial conditions. We conclude that the growing role of ETFs as a channel for international capital flows amplifies the global financial cycle in emerging markets.
Topic:: Emerging Markets, International Trade and Finance, Global Political Economy, Capital Flows, and Mutual Funds
Political Geography:: Global Focus and Global Markets

71. The Evolution and Current Status of De Facto Stare Decisis in International Trade and Investment Tribunals: How to Understand the Present by Looking into the Past

Author:: Chanya Punyakumpol
Publication Date:: 02-2019
Content Type:: Working Paper
Institution:: Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
Abstract:: Is there a doctrine of 'stare decisis' in international trade and international investment law? From a positive law perspective, the answer is a definite no. However, as many scholars have observed, in practice, there has been a strong level of deference from the Appellate Body to its previous rulings, but less so from investment tribunals. Using social network analysis to assess actual citations from the Appellate Body Reports and investment arbitrations from the inception to the current time, this paper examines the evolution and 'status quo' of citation networks in international trade and international investment arbitrations. It asks, not only whether there is a 'de facto' rule of precedent in the two regimes, but also when it occurs and how the development links with the institutional design of dispute settlement. The results show how the doctrine of 'stare decisis' diverges in international trade and international investment, as well as the importance of institutional design in shaping and constraining the behaviors of tribunals.
Topic:: Economics, Globalization, International Trade and Finance, Law, Finance, and Global Political Economy
Political Geography:: Global Focus

72. Private Standards in the WTO: A Multiple Streams Analysis of Resisting Forces in Multilateral Trade Negotiations

Author:: Yi Shin Tang and Bruno Youssef Yunen Alves de Lima
Publication Date:: 12-2019
Content Type:: Journal Article
Journal:: Contexto Internacional
Institution:: Institute of International Relations, Pontifical Catholic University of Rio de Janeiro
Abstract:: The international trade system has been facing a relative decrease in the relevance of tariffs in favour of non-tariff, regulatory requirements (technical, sanitary and phytosanitary standards). The proliferation of these measures, which essentially consist of rules on product labelling and on production processes and methods, may be explained by the growing influence of private agents, such as corporations and business associations. Although these players are willing to develop and enforce a competing regulatory framework such as this on a broader range of topics, this may also generate more fragmented trade rules at both geographic and substantive levels, thus leading to a significant resistance among governments to integrate private standards into the multilateral trade system. Therefore, a mounting debate emerges on the ways in which private standards have been stonewalled in the current negotiation processes of the World Trade Organization (WTO). By relying on Kingdon’s Multiple Streams Framework (MSF), we address this question with a particular focus on the current efforts and struggles within the WTO to incorporate private regulations into the international trade agenda.
Topic:: Globalization, International Cooperation, International Trade and Finance, World Trade Organization, and Free Trade
Political Geography:: Global Focus

73. From Third World Theory to Belt and Road Initiative: International Aid as a Chinese Foreign Policy Tool

Author:: Victor Carneiro Corrêa Vieira
Publication Date:: 12-2019
Content Type:: Journal Article
Journal:: Contexto Internacional
Institution:: Institute of International Relations, Pontifical Catholic University of Rio de Janeiro
Abstract:: In 1946, Mao Zedong began to elaborate his theory of the Third World from the perception that there would be an ‘intermediate zone’ of countries between the two superpowers. From there, he concluded that Africa, Latin America, and Asia, except for Japan, would compose the revolutionary forces capable of defeating imperialism, colonialism, and hegemonism. The start of international aid from the People’s Republic of China to developing countries dates back to the period immediately after the Bandung Conference of 1955, extending to the present. Through a bibliographical and documentary analysis, the article starts with the following research question: What role did domestic and international factors play in China’s foreign aid drivers over the years? To answer the question, the evolution of Chinese international assistance was studied from Mao to the Belt and Road Initiative, which is the complete expression of the country’s ‘quaternity’ model of co-operation, combining aid, trade, investment, and technical assistance.
Topic:: Foreign Policy, International Trade and Finance, International Affairs, and Foreign Aid
Political Geography:: China, Asia, and Global Focus

74. A World Dividing: The International Implications of the Sino-American Rift

Author:: Chas W. Freeman Jr.
Publication Date:: 11-2019
Content Type:: Policy Brief
Institution:: Quincy Institute for Responsible Statecraft
Abstract:: The Trump administration has declared economic war on China. The United States has raised taxes on Chinese imports to levels not seen since the Smoot–Hawley tariffs of the Great Depression. Over the course of this year, Chinese imports of American goods have decreased by 26.4 percent, while China’s exports to the United States are down 10.7 percent. Washington has embargoed exports to China of a constantly expanding list of high-tech manufactures. It seeks to block Chinese telecommunications companies from third-country markets. The United States has mounted a vigorous campaign to persuade other countries to reject Chinese investments in their infrastructure, notably in the case of 5G telecommunications networks.
Topic:: International Trade and Finance, Global Political Economy, Trade Wars, International Community, and Exports
Political Geography:: United States, China, Asia, and Global Focus

75. Digitization and the Future of Trade A Conversation with Martin Labbé

Author:: Martin Labbé
Publication Date:: 07-2019
Content Type:: Journal Article
Journal:: Fletcher Security Review
Institution:: The Fletcher School, Tufts University
Abstract:: Martin Labbé is the Tech-Sector Development Coordinator at the International Trade Centre and the Program Manager for Netherlands Trust Fund IV (NTF IV), a USD 10 million Export Sector Competitiveness Program. He manages NTF IV Uganda and NT IV Senegal tech-sector development projects, working closely with IT sector associations & tech hubs, SMEs and tech startups to support the internationalization of the local digital economy. He has been actively involved in designing and managing several online and offline B2B business-development and marketing activities in developing countries and transition economies as well as training small- and medium-sized enterprises (SME) on technology and trade, with a focus on e-commerce.
Topic:: International Trade and Finance, Science and Technology, Economy, and Trade
Political Geography:: United Nations and Global Focus

76. Gossip, Corporate Reputation, and the 1905 Life Insurance Scandal in New York

Author:: Oenone Kubie, Rebecca Orr, Mara Keire, and Christopher McKenna
Publication Date:: 12-2019
Content Type:: Case Study
Institution:: Oxford Centre for Global History
Abstract:: On the evening of 31 January 1905, six hundred of the richest and most powerful members of New York society descended on Sherry’s Hotel dressed in extravagant costumes designed to resemble the court of the French King, Louis XV. The wealth on display was astounding. Pearls, emeralds, turquoise, and diamonds abounded. Mrs Potter Palmer, the queen of Chicago society, appeared dressed in a diamond tiara, diamond choker, and diamond breastplates. Mrs Clarence Mackay, wife of the chairman of the Postal Telegraph Company and a suffragist, wore a gold and turquoise crown and the train of her dress was so long, that despite the help of her two pages, she was forced to sit out the dancing.
Topic:: International Trade and Finance, History, Capitalism, and Multinational Corporations
Political Geography:: United States, New York, France, and Global Focus

77. Nestlé’s Corporate Reputation and the Long History of Infant Formula

Author:: Lola Wilhelm, Oenone Kubie, and Christopher McKenna
Publication Date:: 11-2019
Content Type:: Case Study
Institution:: Oxford Centre for Global History
Abstract:: The demand for infant formula in Australia is insatiable. Bare shelves have led supermarkets and chemists to ration sales, limiting the quantity customers can buy in a single transaction. But it’s not Australian parents fuelling the formula shortages. A high proportion, between fifty and ninety percent, of all Australian infant formula is exported to China. The situation has created tensions between the two countries. Australian shoppers complain of Chinese daigou (personal shoppers) buying formula before it is even stacked on shelves and stripping supermarkets in teams of people. In April 2019, eight people were arrested in Australia for stealing over a million dollars of infant formula in Sydney to sell in China. Two months later, Chinese military personnel were photographed loading boxes of formula onto a Chinese warship before departing Sydney Harbour.
Topic:: Economics, Globalization, International Trade and Finance, History, Capitalism, and Multinational Corporations
Political Geography:: China, Australia, and Global Focus

78. The Hudson's Bay Company: Royal Charters, Rivalries and Luxury Hats in the North American Fur Trade

Author:: Jason Saldanha, James Haworth, and Christopher McKenna
Publication Date:: 03-2019
Content Type:: Case Study
Institution:: Oxford Centre for Global History
Abstract:: French fur traders Médard Chouart des Groseilliers and Pierre-Esprit Radisson sensed an opportunity in the mid-1650s. During their travels within a North American trade network stretching from Montreal to the Great Lakes, the pair had heard rumours from indigenous Cree communities of a “frozen sea”: a region rich in beaver furs further to the north. The resourceful traders, aware of the European demand for luxury felt hats made from these furs, set out to explore. The two traders were not disappointed upon their arrival at the vast inland sea of Hudson Bay, discovering an abundance of high-quality furs. They quickly identified numerous rivers running from the basin that offered valuable access to the continent’s interior: if a shipping route could be forged from these locations, across the Atlantic and finally to European markets, the Hudson Bay region could re-centre the entire North American fur trade. After failing to obtain French support to establish a trading post in the area – and getting arrested upon their return to Montreal for trading without a licence – Des Groseilliers and Radisson found themselves courting English favour for their venture.
Topic:: International Trade and Finance, History, Capitalism, Commodities, and Trade Liberalization
Political Geography:: United States, New York, Canada, Quebec City, and Global Focus

79. China’s Quest for Gas Supply Security: The Global Implications

Author:: Sylvie Cornot-Gandolphe
Publication Date:: 09-2019
Content Type:: Special Report
Institution:: Institut français des relations internationales (IFRI)
Abstract:: The major transformations that are occurring on the Chinese gas market have profound repercussions on the global gas and LNG markets, especially on trade, investment and prices. In just two years, China has become the world’s first gas importer and is on track to become the largest importer of Liquefied natural gas (LNG). China alone explained 63% of the net global LNG demand growth in 2018 and now accounts for 17% of global LNG imports. The pace and scale of China’s LNG imports have reshaped the global LNG market. Over the past two years, fears of an LNG supply glut have largely been replaced by warnings that the lack of investments in new LNG capacity would lead to a supply shortage in the mid-2020s unless more LNG production project commitments are made soon. There is now a bullish outlook for future global LNG demand which has encouraged companies to sanction additional LNG projects, based on the anticipated supply shortage. China’s gas imports can be expected to continue to grow strongly, from 120 billion cubic meters (bcm) in 2018 to up to 300 bcm by 2030.
Topic:: Security, Energy Policy, International Trade and Finance, and Gas
Political Geography:: China, Europe, Asia, Global Focus, and United States of America

80. World Trade Organization 2.0: Reforming Multilateral Trade Rules for the Digital Age

Author:: Dan Ciuriak
Publication Date:: 07-2019
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: The rules-based framework, as instantiated in rules established under the World Trade Organization (WTO), is not equipped to address the issues that are emerging under the technological conditions generated by the digital transformation. The emerging knowledge-based and data-driven economy features incentives for strategic trade and investment policy and a confluence of factors contributing to market failure at a global scale; digital social media and platform business models have raised concerns with calls for regulation affecting cross-border data flows; and newfound security issues raised by the vulnerabilities in the infrastructure of the digitized economy have precipitated a potential decoupling of global production networks along geopolitical fault lines. To date, the response has been fragmented, incomplete and, in large part, conducted outside the WTO. A new WTO digital round is required to create a multilateral framework that is fit for purpose for the digital age.
Topic:: International Trade and Finance, World Trade Organization, Digital Economy, and Multilateralism
Political Geography:: Global Focus

81. What Is a Climate Response Measure? Breaking the Trade Taboo in Confronting Climate Change

Author:: James Bacchus
Publication Date:: 07-2019
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: Trade has become a taboo topic in climate negotiations on the implementation of the Paris climate agreement. This must change. The nexus between trade and climate change must be addressed in the climate regime. In particular, a definition is needed that will clarify the meaning of a climate “response measure.” Without a definition provided by climate negotiators, the task of defining which national climate measures are permissible and which are not when they restrict trade while pursuing climate mitigation and adaptation will be left to the judges of the World Trade Organization. To avoid a collision between the climate and trade regimes that will potentially be harmful to both, the ongoing deliberation on response measures in the climate regime must be reframed by ending the climate taboo on trade.
Topic:: Climate Change, Environment, International Trade and Finance, and World Trade Organization
Political Geography:: Global Focus

82. CIGI Expert Consultation on WTO Reform

Author:: Centre for International Governance Innovation
Publication Date:: 09-2019
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: The Centre for International Governance Innovation conducted consultations in the spring of 2019 with trade experts and stakeholders about options for modernizing the trade rules and strengthening the World Trade Organization (WTO). The consultations focused on the three themes of improving the WTO through monitoring of existing rules, strengthening and safeguarding the dispute settlement function, and modernizing the trade rules for the twenty-first century. This report synthesizes the results of the consultations.
Topic:: International Cooperation, International Trade and Finance, World Trade Organization, and Modernization
Political Geography:: Global Focus

83. Emerging Countries in Global Financial Regulatory Standard Setting: What Is to Be Done?

Author:: Andrew Walter
Publication Date:: 10-2019
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: This paper explores the role of emerging-country members in the Basel process, a key aspect of the global financial standard-setting process. It argues that this process has been significantly more politically resilient than adjacent aspects of global economic governance, in part because major emerging countries obtain continuing “intra-club” benefits from participation within it. The most important of these are learning benefits, but status and sometimes influence over standard-setting outcomes can also be valuable. The paper outlines how these benefits could be enhanced to secure the ongoing resilience of global financial regulatory governance. It recommends some modest reforms to further improve the position of emerging countries in the process and to bolster its perceived legitimacy among members and non-member countries.
Topic:: Economics, International Trade and Finance, Governance, and Regulation
Political Geography:: Global Focus

84. The Global Interplay between Trade, Geopolitical and Commodity Shocks

Author:: Idris Ademuyiwa and Pierre Siklos
Publication Date:: 10-2019
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: Recent events have the potential to reverse the positive macroeconomic performance of the global economy and trigger a slowdown in both global growth and international trade. In particular, the implications of ongoing trade disputes that have undermined trust in the existing multilateral cooperation system and the incentive for countries to align with ongoing global policy coordination efforts. A compelling case for a mutually beneficial resolution of these tensions can be made by emphasizing the interdependence of the Group of Twenty (G20) economies — the G20 being the premier repository of international cooperation in economic and political matters. This study also considers the state of trade globalization, with an emphasis on the performance of the G20. The emergence of geopolitical risks (GPRs), that is, events that heighten tensions between countries and therefore threaten global economic performance, is an attempt to quantify the potential economic impact of the nexus between politics and economics. In the presence of heightened political risks, negative economic effects become more likely. Nevertheless, there is no empirical evidence investigating the links between the real economy, trade, the state of the financial sector, commodity prices and GPRs. Moreover, there is no evidence on these links that has a sample of countries that make up the G20. This paper begins to fill this gap. Relying on descriptive and statistical evidence, the conclusion is drawn that GPRs represent a significant factor that threatens global economic growth and economic performance, in the G20 countries in particular. Ultimately, however, GPRs reflect other factors, including threats stemming from trade tensions and large swings in commodity prices.
Topic:: International Cooperation, International Trade and Finance, Economic Growth, and Multilateralism
Political Geography:: Europe, Asia, South America, North America, and Global Focus

85. Emerging Countries in Global Financial Standard Setting: Explaining Relative Resilience and Its Implications

Author:: Andrew Walter
Publication Date:: 11-2019
Content Type:: Working Paper
Institution:: Centre for International Governance Innovation
Abstract:: This special report explores the role of emerging-country members in the Basel process, a key aspect of global financial standard setting. It argues that this process has been significantly more politically resilient than adjacent aspects of global economic governance, in part because major emerging countries have perceived continuing “intra-club” benefits from participation within it. Most important among these are learning benefits for key actors within these countries, including incumbent political leaders. Although some emerging countries perceive growing influence over the international financial standard-setting process, many implicitly accept limited influence in return for learning benefits, which are valuable because of the complexity of contemporary financial systems and the sustained policy challenges it creates for advanced and emerging countries alike. The importance of learning benefits also differentiates the Basel process from other international economic organizations in which agenda control and influence over outcomes are more important for emerging-country governments. This helps to explain the relative resilience of the Basel process in the context of continued influence asymmetries and the wider fragmentation of global economic governance. The report also considers some reforms that could further improve the position of emerging countries in the process and bolster its perceived legitimacy among them.
Topic:: International Trade and Finance, Financial Markets, Global Political Economy, and Emerging States
Political Geography:: Africa, Europe, Asia, South America, Australia, North America, and Global Focus

86. Capital Controls and International Trade: An Industry Financial Vulnerability Perspective

Author:: Kevin Lai, Tao Wang, and David Xu
Publication Date:: 12-2019
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Capital controls—or measures that governments take to restrict the amount of money that flows into and out of countries—pose significant challenges for firms that rely heavily on foreign financing to conduct business. This paper empirically evaluates effects of capital controls on trade across industries with varying levels of dependence on foreign capital. Mobilizing data on 99 countries from 1995 to 2014 across 27 industries, the authors find that industries more reliant on foreign capital tend to export much less in response to tightening of capital controls by exporting countries. Exports decline uniformly across all industries in response to tightening of capital controls by importing countries. The negative effects of capital controls on trade are less pronounced in countries with more advanced financial systems.
Topic:: Government, International Trade and Finance, Capital Flows, and Capital Controls
Political Geography:: Global Focus

87. Measuring the Rise of Economic Nationalism

Author:: Monica de Bolle and Jeromin Zettelmeyer
Publication Date:: 08-2019
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: Since the mid-2000s, the platforms of major political parties in both advanced and emerging-market economies have increasingly emphasized policies that stress national sovereignty, reject multilateralism, and seek to advance national interests through measures that come at the expense of foreign interests. This paper documents this shift by evaluating the policy platforms of the largest political parties (about 55 in total) in the Group of Twenty (G-20) countries with regard to trade policy, foreign direct investment (FDI), immigration, and multilateral organizations. Preference shifts with respect to industrial policy, competition policy, and macroeconomic populism are also examined. In advanced economies, the biggest shifts were toward restrictions on immigration and trade and toward macroeconomic populism. In emerging-market economies, the largest preference shifts were toward industrial policies favoring specific sectors, macroeconomic populism, and industrial concentration. Trade protectionism and skepticism toward multilateral organizations and agreements have increased in both advanced and emerging-market economies. As of 2018, economic policy preferences in emerging-market economies were more nationalist and less liberal than in advanced countries, but the gap has narrowed. Right-wing parties tend to be more nationalist than left-wing parties in the areas of immigration restrictions, FDI restrictions, and antimultilateralism, but there is no significant difference with respect to trade protectionism.
Topic:: Economics, International Trade and Finance, Nationalism, Politics, Populism, and Macroeconomics
Political Geography:: Global Focus

88. The Rise of Global Innovation by US Multinationals Poses Risks and Opportunities

Author:: Lee G. Branstetter, Britta Glennon, and J. Bradford Jensen
Publication Date:: 06-2019
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: For decades, US multinational corporations (MNCs) conducted nearly all their research and development (R&D) within the United States. Their focus on R&D at home helped establish the United States as the unrivaled leader of innovation and technology advances in the world economy. Since the late 1990s, however, the amount of R&D conducted overseas by US MNCs has grown nearly fourfold and its geographic distribution has expanded from a few advanced industrial countries to many parts of the developing world, creating an innovation system that spans the globe. Like many aspects of globalization, including the offshoring of manufacturing over recent decades, the globalization of R&D raises concerns about US competitiveness and loss of technological leadership. At the same time, the spreading geographic location of innovation presents opportunities for US-based companies if the right policies are adopted to seize them. The research presented in this Policy Brief demonstrates that US innovators continue to remain involved in important ways in US MNCs' global R&D activities, and fears of a hollowing out of US capacity to innovate—based probably on previous fears about the hollowing out of US-based manufacturing—may be overstated. Indeed, the large and growing pool of highly educated scientists and engineers in the developing world could increase the rate of global productivity growth, to the advantage of US-based companies and the world in general. The authors conclude that a productive way to capitalize on the globalization of MNC R&D is not to oppose it but to combine emerging-market talent with MNC experience so that innovation can flourish to improve global living standards and fuel economic progress.
Topic:: International Trade and Finance, Science and Technology, Multinational Corporations, Risk, and Private Sector
Political Geography:: North America, Global Focus, and United States of America

89. Survival of the International Monetary Fund and Global Economic Cooperation

Author:: Edwin M. Truman
Publication Date:: 04-2019
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The International Monetary Fund (IMF)—a quota-based institution—faces a test of its survival as the linchpin of the global financial safety net. Its roughly $1.4 trillion in total financial resources is scheduled to begin to shrink in 2020. In 2015, IMF members committed to strengthening IMF financial resources in the 15th General Review of Quotas, which will end in December 2019. Over the past 25 years, the United States has led the way for a gradual redistribution of IMF quota shares toward faster-growing emerging-market and developing countries. Any significant redistribution of quota shares requires an increase in total quotas. Because of its share of votes in the IMF, the United States must agree to any change in quotas. The Trump administration, however, has signaled that it favors no such change. If the United States does not reverse its stance, IMF members will lose an opportunity to strengthen the institution at a time of global financial uncertainty. Truman says the United States could still change its position and recommends how other member countries should press it to do so.
Topic:: International Trade and Finance, Politics, International Monetary Fund, Global Political Economy, Donald Trump, and Economic Cooperation
Political Geography:: North America, Global Focus, and United States of America

90. Assessing Global Financial Stability

Author:: Tobias Adrian
Publication Date:: 06-2019
Content Type:: Journal Article
Journal:: The Cato Journal
Institution:: The Cato Institute
Abstract:: In the decade since the global financial crisis, there has understandably been great concern about potential threats to global financial stability, and policymakers have wisely remained vigilant in watching for warning signs of possible economic risk. At the International Monetary Fund (IMF), we remain committed to providing our 189 member countries with farsighted analyses of trends in the financial markets, thus guiding them toward sound policy choices that help maintain economic stability.
Topic:: International Trade and Finance, Global Recession, Financial Crisis, Economy, Economic Growth, Risk, IMF, and Financial Stability
Political Geography:: Global Focus

91. The WTO at a Crossroad

Author:: Jack Caporal, William Alan Reinsch, Madeleine Waddoups, and Catherine Tassin de Montaigu
Publication Date:: 09-2019
Content Type:: Working Paper
Institution:: Center for Strategic and International Studies
Abstract:: The World Trade Organization (WTO) is at a crossroad. Each of WTO’s three main functions—monitoring and transparency, negotiation, and dispute settlement—is under stress. There is no single source for that stress. Some pressure flows from individual members, and other pressure flows from members’ inability to reach consensus on long-standing irritants. Pressure has also come from the rise of China and its state-driven economy, the rapid pace of technological change and its impact on the global economy, persistent economic inequality, and a recent tilt towards nationalism in the recent decade in countries that have otherwise consistently advocated for free trade. How will this essential institution navigate these challenges? In its latest report, the CSIS Scholl Chair in International Business provides a roadmap of three possible future scenarios for the WTO—continuation of status quo gridlock, U.S. withdrawal from the WTO, and successful reform—and examines what happens to the global trading order in each. In addition to the report, the Scholl Chair has assembled two resources to chart the future of the WTO: a database to track WTO reform proposals and a series of flowcharts that map future scenarios for the WTO
Topic:: International Cooperation, International Trade and Finance, Trade Policy, and WTO
Political Geography:: Global Focus

92. The Economic Losses from Ending the WTO Moratorium on Electronic Transmissions

Author:: Hosuk Lee-Makiyama and Badri Narayanan Gopalakrishnan
Publication Date:: 08-2019
Content Type:: Policy Brief
Institution:: European Centre for International Political Economy (ECIPE)
Abstract:: This paper is co-authored with Badri Narayanan, PhD, Associate Professor at University of Washington, Consultant at McKinsey Global Institute, UN ESCWA, FAO, Commonwealth Secretariat and GTAP Research Centre. Since 1998, the WTO Members have applied a moratorium against tariffs on international electronic transmissions (commonly referred to as the WTO ‘E-Commerce’ Moratorium). However, some WTO Members have recently debated whether the moratorium remains in their economic interest, given the potential revenues that might be generated by imposing tariffs on electronic transmissions. The study examines the impact on India, Indonesia, South Africa and China (and the general case for developing countries) and concludes that imposing such tariffs would be fiscally counter-productive. Putting aside any legal questions, a country that opted out of the moratorium may apply tariffs affecting a wide range of cross-border business activities. Our research shows that if countries ceased to uphold the moratorium and levied import duties on digital goods and services, they would suffer negative economic consequences in the form of higher prices and reduced consumption, which would in turn slow GDP growth and shrink tax revenues. Yet our research indicates that the payoff in tariff revenues would ultimately be minimal relative to the scale of economic damage that would result from import duties on electronic transmissions.
Topic:: Globalization, International Political Economy, International Trade and Finance, Digital Economy, Tariffs, Trade, and WTO
Political Geography:: Europe and Global Focus

93. Are Your Labor Shares Set in Beijing? The View through the Lens of Global Value Chains

Author:: Ariell Reshef and Gianluca Santoni
Publication Date:: 12-2019
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: We study the evolution of labor shares in 1995-2014 while taking into account international trade based on value added concepts. On average, the decline in labor shares (starting around 1980) accelerates in 2001-2007, after which labor shares recover somewhat. In contrast, skilled labor shares consistently increase. The acceleration in the decline in labor shares is associated with increased intensity of intermediate input exporting; this manifests in a sharp increase in the foreign component in upstreamness of industries and countries in global value chains (GVCs). China's global integration accounts for much of this. Declines in the price of investment together with capital-skill complementarity can explain both the consistent increase in skilled labor shares and the reversal of trend in overall labor shares. Compared to shares in GDP, labor shares in gross national product (GNP) are higher in countries with positive net FDI positions; the uneven spread of multinational activity contributes to greater inequality through this channel.
Topic:: Economics, International Political Economy, International Trade and Finance, Labor Issues, Trade, Global Value Chains, and Skilled Labor
Political Geography:: China and Global Focus

94. Are global value chains receding? The jury is still out. Key findings from the analysis of deflated world trade in parts and components

Author:: Guillaume Gaulier, Aude Sztulman, and Deniz Ünal
Publication Date:: 01-2019
Content Type:: Working Paper
Institution:: Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:: In this article, we examine the dynamics of Global Value Chains (GVCs) since the 2000s. Did it show a marked expansion up to the Great Recession and did GVCs begin a downturn in the 2010s? To better understand the evolution of GVCs at the world level, we use very detailed trade data for 2000 to 2016, which distinguishes different production stages along the GVC. In particular, among intermediate goods, we focus on Parts and Components (P&C) rather than semi-finished products since the manufacture of P&C corresponds to activities more embedded in GVCs. We control, also, for the global business cycle and price effects using an original production stages deflator based on detailed bilateral trade unit-values. This new GVC indicator shows moderate growth over the study period with no trend reversal. In the electronics sector, where GVCs are particularly well-developed, we observe contrasting effects: the share in P&C trade for office machinery and computers has decreased, while it has increased in the case of telecommunications equipment, the flagship IT revolution industry. Also, counts of clients or suppliers by stages of production indicate higher and growing geographical diversity for P&C.
Topic:: Economics, International Political Economy, International Trade and Finance, and Global Value Chains
Political Geography:: Global Focus

95. Record Number of Americans Say International Trade Is Good for the US Economy

Author:: Brendan Helm, Dina Smeltz, and Alexander Hitch
Publication Date:: 10-2019
Content Type:: Special Report
Institution:: Chicago Council on Global Affairs
Abstract:: President Donald Trump has embarked on an ambitious and disruptive trade agenda, driven by his belief that the United States has lost “many billions of dollars” to trading partners and that “trade wars are good, and easy to win.”[1] During his term, the president has escalated trade tensions with China; has renegotiated trade agreements with countries such as Mexico, Canada, and South Korea; and has withdrawn US involvement in trade deals such as the Trans-Pacific Partnership. The 2019 Chicago Council Survey finds that though Republicans and Democrats differ on whether President Trump’s strategy is an effective approach to trade policy, the American public is more likely than ever to say that international trade benefits the United States.
Topic:: International Trade and Finance, Economy, and WTO
Political Geography:: Canada, South Korea, North America, Mexico, Global Focus, and United States of America

96. Subverting the Idea(l) of Equal Opportunity in Global Trade: The Paradoxes of Differentiation for Peripheral States

Author:: Antonio Salvador Alcazar III
Publication Date:: 01-2019
Content Type:: Journal Article
Journal:: Polish Political Science Yearbook
Institution:: Polish Political Science Association (PPSA)
Abstract:: The existing multilateral trade regime is often beleaguered for unfairly privileging its Western guarantors. Since not all countries command the same opportunity sets to compete in global markets, world trade rules sanction über-rich markets to extend autonomous trade concessions to capital-poor countries without demanding any reciprocal treatment. Given the entanglements of trade in the thorny issues of international development and distributive justice, this paper joins a crowded trade as/and fairness debate by judging how the present global economic order (dis)favors developing and least developed countries on the basis of equal opportunity. In a Roemerian-Rawlsian reading of economic fairness, I start by elevating the demands of diffuse reciprocity over the misguided minimalism of mutual reciprocity in a twin attempt to morally defend asymmetric exchanges between asymmetric trading partners and to redress background inequalities in access to the merits of commerce. While the notion and praxis of altruism in international trade generally allude to northern democracies in modern political thought, this article also unmasks parallel models of special and differential treatment projects lorded over by two seemingly unusual suspects: the Eurasian Economic Union and the People’s Republic of China. In juxtaposing weak and strong conceptions of equal opportunity vis-à-vis leading compensatory measures presently open to needy nations, I articulate how the strong standard of equal opportunity is partially cantilevered by existing level-playing-field structures and yet brutally bulldozed at once by the politics of donor discretion. Finally, although a diluted form of diffuse reciprocity grows more fashionable among affluent and emerging economies, unlocking the strong standard of equal opportunity still insists on a solidaristic system of preferences to diffuse both opportunities and obligations arising from a less tilted trading order as widely and deeply as possible.
Topic:: Development, Globalization, International Trade and Finance, and Equality
Political Geography:: Global Focus

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COLUMBIA UNIVERSITY PRESS