International trade

Laura Alfaro, Pol Antràs, Davin Chor, Paola Conconi, 14 November 2015

Trade in intermediate inputs now accounts for as much as two-thirds of international trade. Firms must decide which segments of their production processes to own and which to outsource. Using global plant-level data, this column empirically examines firms’ organisational choices along value chains. Decisions to integrate or outsource upstream and downstream functions are found to depend on demand elasticity relative to the substitutability of inputs. These results provide strong evidence that integration decisions are driven by contractual frictions.

Simon J Evenett, Johannes Fritz, 12 November 2015

The value of world trade is falling. This column, which introduces the 18th Global Trade Alert report, shows that the manufactures that account for a large share of the fall are those where G20 nations have imposed the most trade restrictions since 2014. G20 leaders should request that the Chinese G20 Presidency support initiatives to revive global trade and avoid more trade distortions.

Keith Head, Thierry Mayer, 10 November 2015

There seems to be a general consensus that the Trans-Pacific Partnership is not a pure trade agreement. This column presents evidence suggesting that for at least one major sector – the auto industry – the agreement will make a huge difference, bringing considerable disruption to the industry but offering sizeable gains for car buyers.

Kerem Cosar, Paul L. E. Grieco, Shengyu Li, Felix Tintelnot, 07 November 2015

Despite low levels of formal trade barriers and recent reductions in global communication and shipping costs, firms still command a disproportionately large market share in their home countries. This column examines home market advantage in the car industry. The results suggest that preference for own-country brands is an important feature of trade and multinational production that is underappreciated in the academic literature.

Daniel Leigh, Weicheng Lian, Marcos Poplawski-Ribeiro, Viktor Tsyrennikov, 30 October 2015

A number of studies argue that exchange rates matter far less than they used to for trade, or even that they have disconnected altogether. This column presents new research suggesting that, in fact, there is little sign of a disconnect in the relationship between exchange rates and exports and imports; exchange rates still matter for trade. The findings indicate that 10% real effective exchange rate depreciation implies, on average, a 1.5% of GDP increase in real net exports.

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