Competing successfully in a globalising world: Lessons from Lancashire
Nicholas Crafts, Nikolaus Wolf, 22 October 2013
Europeans worry about competition from low-wage economies. This column looks at the basis of the success of the 19th-century Lancashire cotton industry faced with a similar situation. The message is that the productivity benefits of a successful agglomeration can underpin both high wages and competitive advantage in world trade. Policymakers can support such agglomerations by easing land-use restrictions, promoting investments in transport, and providing local public goods.
The ‘first globalisation’ of the 19th century – driven by the substantial falls in trade costs associated with the age of steam – saw the ‘First Unbundling’ (Baldwin 2006), in which industrial production and consumption became spatially separated, often by large distances.
Topics: Economic history, International trade
Tags: agglomeration, cities, cotton, globalisation, Industrial Revolution, industrialisation, Lancashire, trade, wages
Doing Business – less icing, more cake!
Thorsten Beck, 6 June 2013
The World Bank’s ‘Doing Business’ data collection project is under threat from large nations who score poorly, especially China. This column argues that although there are problems with country rankings, the underlying data is very valuable for empirical researchers. The Doing Business project should continue quantifying different dimensions of the business environment, but reduce its focus on country rankings.
The World Bank Group’s Doing Business data collection and ranking exercise is again in the headlines, allegedly following China’s protest against it being ranked 91.
Topics: Development, Frontiers of economic research
Tags: Doing Business, trade
The transatlantic trade talks and economic policy research: Time to re-tool
Simon J Evenett, Robert M. Stern, 21 March 2013
The US and the EU have announced their intentions to launch trade talks – the Transatlantic Trade and Investment Partnership. This column argues that this should not be thought of as a standard tariff-lowering deal with a few extras thrown in for good measure. Rather, we don’t really know what it will do because trade economists have failed to develop the necessary tools for understanding its impact. It is time for policy analysts to re-tool.
“And tonight, I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union – because trade that is free and fair across the Atlantic supports millions of good-paying American jobs”.
Topics: International trade
Tags: EU, trade, Transatlantic Trade and Investment Partnership, US
Growth dynamics and policy choices facing Indonesia
Ganeshan Wignaraja , 21 February 2013
Until 2012, the past decade saw Indonesia’s growth maintain a respectable momentum. This column argues that recent hints of political dirigisme presents Indonesia with a stark development choice. Policymakers can continue their tightening of political control – staving off the trade effects of a global crisis in the run up to elections next year – or they can orient the economy outward, with complementary policies to sustain long-term growth.
Growth slowed in Indonesia in 2012, indicating that the global financial crisis and economic slowdown had indeed had an effect on ASEAN’s biggest economy. Indonesia grew at 6.2% in 2012, down slightly from 6.5% in 2011. Overall, this remains a respectable figure. Bear in mind that Indonesia's annual average growth in the previous decade was below 6% (see Figure 1).
Topics: Development, Politics and economics
Tags: East Asia, natural resources, state capitalism, trade
‘No gain without pain’: Antidumping protection hurts exports
Hylke Vandenbussche, Jozef Konings, 30 January 2013
The rise of international production sharing – ‘global value chains’ – has transformed international commerce and pushed economists into new territory. This column argues that there is evidence to suggest that old-fashioned protection can have an unexpected negative effect on firms that are part of a global value chain. In an increasingly globalised world, exporters’ success seems to positively depend on the free entry of imports rather than the other way round.
Protection is often viewed as a powerful instrument to help domestic firms to raise their sales at the expense of foreign importers. But this view is now being challenged by recent research showing that the effects of protection really depend on the international orientation of the firms i.e. whether they are exporters or not.
Topics: International trade
Tags: EU, France, global value chains, protectionism, tariffs, trade
Exchange-rate volatility is a problem for trade … especially when financial development is low
Jérôme Héricourt, Sandra Poncet, 19 January 2013
The increasing volatility of exchange rates after the fall of the Bretton Woods agreements has been a constant source of concern for both policymakers and academics. Does exchange-rate risk dangerously increase transaction costs and reduce gains to international trade? This column uses recent research to argue that there is indeed a negative impact of exchange-rate volatility on firms’ exporting behaviour, magnified for financially vulnerable firms and dampened by financial development. Thus, emerging countries should be careful when relaxing their exchange-rate regime.
The increasing volatility of exchange rates after the fall of the Bretton Woods agreements has been a constant source of concern for both policymakers and academics.
Topics: Exchange rates, International trade
Tags: China, exchange-rate volatility, trade
Moving to Greenland in the face of global warming
Klaus Desmet, Esteban Rossi-Hansberg , 16 January 2013
There are two ways to deal with climate change: mitigation and adaptation. This column argues that in order to adapt, we need to take another look at an age-old coping mechanism: migration. Indeed, if overall hotter temperatures lower productivity in hot regions but raise productivity in what are currently cooler regions, the negative economic effects of climate change are likely to stem from frictions preventing the movement of people and goods. Without these frictions, adapting to climate change becomes that much easier. Climate change policy ought to aim at alleviating mobility frictions.
If populations don’t move, global warming is likely to have disastrous consequences.
Topics: Environment, Migration
Tags: climate change, migration, trade
Africa can help feed Africa: Removing barriers to regional trade in food staples
Paul Brenton, 8 January 2013
Africa is not achieving its potential in food trade, increasing the risk of widespread hunger and malnutrition. This column argues that the most serious problems for the continent are problems of political economy and barriers along the value chain. The good news is that, despite demand for food throughout Africa predicted to double over the next decade, governments can act now to overcome these problems. With a regional approach to food security, African governments can spur on benefits to farmers and consumers as well as job creation along the value chain of staples.
Africa is not achieving its potential in food trade.
Growing demand for food in Africa is increasingly being met by imports from the global market. This, coupled with rising global food prices, is leading to ever mounting food import bills. Clearly something has to change. Business as usual with regard to food staples in Africa is not sustainable.
Topics: International trade
Tags: Africa, food, trade
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