US votes on trade and migration
Paola Conconi, Giovanni Facchini, Max Friedrich Steinhardt, Maurizio Zanardi, 7 January 2013
As populations in rich nations continue to age and skill shortages begin to emerge, concern over getting immigration policy right is set to intensify. This column discusses new research on US policymaking, showing that many of the determinants of policymakers’ attitudes towards trade are also in operation when it comes to migration. Using the Heckscher-Ohlin model, it finds that US House members from districts where skilled labour is abundant are more likely to support both trade liberalisation and a more open policy for unskilled immigration.
In the recent US presidential election, Latino voters rewarded President Obama and punished Republicans for their positions on immigration.
Topics: International trade, Labour markets, Migration
Tags: migration, skilled labour, trade, unskilled labour, US
China’s pure exporter subsidies: Protectionism by exporting
Fabrice Defever, Alejandro Riaño, 4 January 2013
The West perennially complains about China subsidising industry geared towards its domestic market. But what will happen when China enacts its latest Five Year Plan’s emphasis on domestic growth? This column argues that ending ‘pure-exporter subsidies’ – subsidies that boost Chinese exports while simultaneously protecting the least efficient, domestically oriented firms – will benefit Chinese consumers, but will cost the rest of the world.
On 17 September last year, the US requested consultations with China concerning a wide range of export-contingent measures – grants, tax preferences and interest-rate subsidies, totalling at least $1 billion – in apparent violation of the WTO’s Agreement on Subsidies and Countervailing Measures, China’s accession protocol and article XVI of the GATT.
Topics: International trade
Tags: China, trade, welfare, WTO
Global imbalances: What role for the WTO?
Juan A. Marchetti, Michele Ruta, Robert Teh, 2 January 2013
Globally, large current account imbalances prevail. This column argues that they also continue to represent a systemic risk for the world economy. The WTO has a clear-cut role in the institutional effort to address these imbalances. However, this role has more to do with opening services and government procurement markets than with the often invoked trade sanctions in response to exchange rate misalignments.
The world witnessed a large build-up of current account and merchandise trade imbalances, both in absolute and relative terms, prior to the global financial and economic crisis (see Table 1 and Figure 1). Current account/merchandise trade surpluses were most pronounced among the East Asian economies (e.g. China), oil exporters (e.g.
Topics: International trade
Tags: current account imbalances, liberalisation, trade, WTO
Can trade policy set information free?
Susan Ariel Aaronson, 22 December 2012
The internet is an expanding opportunity for growth. This column argues that in recent years, however, policymakers and market actors have been undermining its potential. Governments and market actors are reducing both access to information and freedom of expression, as well as moving towards a splintered, non-global internet. Commitment to an open, free and global internet will be hard, but if bilateral, regional or multilateral trade agreements encourage interoperability, we might see some harmony among signatories’ privacy, online piracy, and security policies.
Although the internet is creating a virtuous circle of expanding global growth, opportunity, and information flows (Lendle et al. 2012), policymakers and market actors are taking steps that undermine access to information, reduce freedom of expression and splinter the internet (Herald 2012).
Topics: Frontiers of economic research, International trade
Tags: globalisation, internet, technology, trade
Value-added exchange rates
Rudolfs Bems, Robert Johnson, 6 December 2012
With the rise of complex, globalised supply chains is the real effective exchange rate (REER), the most commonly used measure of competitiveness, now outdated? If it is, what should replace it? This column presents a ‘Value-Added REER’ and shows that it differs substantially from the conventional REER. Because it is possible to construct a new Value-Added REER from existing data, policymakers interested in improving their understanding of competitiveness might well consider including it in their toolbox.
Real effective exchange rates (REERs) are widely used to gauge competitiveness. Yet conventional REERs, based on gross trade flows and consumer price indexes (CPIs), are not well suited to that role when imports are used to produce exports – i.e., with vertical specialisation in trade.
Topics: Competition policy, Global economy, International trade
Tags: China, competitiveness, Germany, global imbalances, globalisation, iPhone, supply chains, trade
Why does finance matter for trade? Evidence from new data
Marc Auboin, Martina Engemann, 3 December 2012
What effect does trade finance have on international trade? This column uses new data to stress the importance of trade finance for international trade both in crisis and in non-crisis periods. The major policy lesson is that there must be high levels of market incentives for supplying trade credit, particularly during a period of ‘deleveraging’ of the financial system. That said, trade credit statistics could be vastly improved if we wish to continue comparing global trade finance transactions against global trade.
Academic interest in the role of trade finance has grown in the context of the financial crisis of 2008-09 and the subsequent economic downturn, just as policymakers’ interest was once caught by the Asian financial crisis (IMF 2003).
Topics: International trade
Tags: financial crisis, Great Recession, international trade, trade, trade credit, Trade finance, trade insurance
Firm organisation: What we know and why we should care
Laura Alfaro, Paola Conconi, Harald Fadinger, Patrick Legros, Andrew Newman, 2 December 2012
Increasingly, people are pointing the finger of blame for economic woe at large firms. This column argues that organisation design is often affected by government trade policy. If firm organisation design has implications for consumer welfare (in terms of prices and quality of product), evidence suggests that governments should make sure that in future, trade policy and corporate governance policy are more complementary.
A series of corporate calamities in the 2000s has helped to arouse suspicion amongst policymakers and the public that corporate organisation matters. Internal organisation issues are blamed for lost jobs, lost pensions and lost fortunes (e.g.
Topics: Industrial organisation, International trade
Tags: firm organisation, firms, protectionism, trade
Sparking off the magic of diasporas
Alireza Naghavi, Chiara Strozzi, 18 November 2012
Does emigration create a brain drain or – as commentators have recently been suggesting – do diasporas in fact represent a net brain gain? This column argues that if sending countries can protect intellectual property rights, they will foster the necessary diaspora knowledge networks to significantly help economic development in sending countries.
In a keynote address at the second annual Global Diaspora Forum in Washington, DC, this summer, Hillary Clinton, the US Secretary of State, said she believes that diaspora communities could help solve problems back in their home countries: “By tapping into the experiences, the energy, the expertise of diaspora communities, we can reverse the so-called ‘brain drain’ that slows
Topics: Global economy, International trade, Migration
Tags: diasporas, emigration, immigration, IPR, trade
Can the EU mobilise resources for peace in its neighbourhood?
Thorvaldur Gylfason, Per Magnus Wijkman, 4 November 2012
Today, most of Europe is free from dictatorships and conflict. Yet, these spectres loom in neighbouring states and nearby regions. This column suggests that this year’s Nobel Peace Prize, awarded to the EU, was perhaps a call to action. Can the EU, preoccupied as it is with a growing Eurozone crisis, encourage peace and democracy in its neighbourhood? And what are the lessons we can learn from recent EU policy history?
Since its formation more than 60 years ago, the EU has played a major role in post-war reconciliation and reconstruction1. Ever-closer economic integration, supported by common institutions, has been the EU’s means to preventing conflicts among democratic European states.
Topics: Development, EU policies, Europe's nations and regions, Politics and economics
Tags: Balkans, Conflict, EU, MENA, Middle East, North Africa, trade
Africa gets hit by Eurozone crisis
Monica Eaton, Michael J Ferrantino, 4 September 2012
The Eurozone debt crisis is not simply a problem for industrialised countries. This column shows how its effects are being felt throughout Africa.
There is currently an asymmetric contraction in merchandise trade focused on Europe. Data from CPB World Trade Monitor show real Eurozone imports declining by 7.7% in the 12 months ending May 2012, at a time when real world trade has expanded by 3.0%.
Topics: Development, Europe's nations and regions, International trade
Tags: Africa, Eurozone crisis, trade