The WTO signed a mini-package of trade initiatives in Bali last week. This column argues that the ‘Bali package’ is welcome but not enough. Without some new initiative or direction, the WTO looks set to drift for the next few years. The WTO cannot move ahead until the trans-Pacific and trans-Atlantic ‘mega-regionals’ are done or dead. In the meantime, the WTO should promote research and discussion on how 21st-century trade issues could be brought into the WTO when the time is ripe.
An expansion in the scope of foreign direct investment in sub-Saharan Africa promises to promote development in one of the poorest regions of the world. This column investigates the extent to which working with foreign multinationals enhances the capabilities of African firms. Acting as a supplier to a multinational enterprise improves a firm’s labour productivity, product and process innovation, while buying from a multinational improves only labour productivity. Governments should take advantage of these spillovers by promoting trade.
Existing data show that the historically well-documented relationship between growth, competitiveness, and trade protectionism does not hold in the context of the recent financial crisis. This column presents new evidence that this relationship, in fact, holds. G20 governments continue to pursue trade-restrictive policies in a recession, or when their competitiveness deteriorates. This holds for a wide array of trade policies, including ‘murky’ protectionism.
While quality upgrading is always viewed positively in both policy and academic circles, little is known about the macro implications for countries of specialising in high-end varieties. This column presents evidence that high-end variety exporters are less sensitive to trade costs. This implies a greater geographic diversification of exports, which compensates for their higher sensitivity to demand shocks and smoothes aggregate volatility. It also increases export growth when business opportunities arise in distant markets.
Fixed and sunk costs are widely accepted as important determinants of export behaviour. This column argues that such costs may be shared by agglomerated collections of firms, and presents evidence of agglomeration’s effects on exporting in China. Agglomeration is more effective in low-tech sectors and land-locked areas. Surprisingly, the effect of agglomeration is different for indigenous and foreign firms.
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