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.
climate change, trade, migration
Africa can help feed Africa: Removing barriers to regional trade in food staples
Paul Brenton 08 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.
Figure 1. All regions in Africa are increasingly importing food (volume of net exports of food staples: 1,000 tons)
Africa, trade, food
US votes on trade and migration
Paola Conconi, Giovanni Facchini, Max Friedrich Steinhardt, Maurizio Zanardi 07 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. In reaction, the Republican House Leader announced that he was ready for a “comprehensive approach” to immigration reform and that he was confident that Congress and President Obama could find “common ground to take care of this issue once and for all” (The New York Times, 2012).
International trade Labour markets Migration
US, trade, migration, skilled labour, unskilled labour
China’s pure exporter subsidies: Protectionism by exporting
Fabrice Defever, Alejandro Riaño 04 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. The EU joined the consultations shortly after on 28 September.
China, WTO, trade, welfare
Global imbalances: What role for the WTO?
Juan A. Marchetti, Michele Ruta, Robert Teh 02 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. Saudi Arabia) and the ‘core’ Eurozone countries (e.g. Germany). The US and the Eurozone periphery countries had large and persistent deficits. While imbalances contracted after the crisis, they remained large both in absolute terms and in relation to GDP.
WTO, trade, liberalisation, current account imbalances
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). Almost every country has adopted policies to protect privacy, enforce intellectual property rights, protect national security, or thwart cyber-theft, hacking, and spam.
Frontiers of economic research International trade
globalisation, trade, technology, internet
Value-added exchange rates
Rudolfs Bems, Robert Johnson 06 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.
Competition policy Global economy International trade
competitiveness, Germany, global imbalances, China, globalisation, trade, supply chains, iPhone
Why does finance matter for trade? Evidence from new data
Marc Auboin, Martina Engemann 03 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).
trade, international trade, financial crisis, Trade finance, Great Recession, trade credit, trade insurance
Firm organisation: What we know and why we should care
Laura Alfaro, Paola Conconi, Harald Fadinger, Patrick Legros, Andrew Newman 02 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. Enron, Worldcom); for plane crashes in the US, lead-painted toys from China1, and, most devastatingly of all, the global crisis. These outcomes are increasingly ascribed to unaccountable managers, misaligned ownership structures, outsourcing and other internal organisation issues.
Industrial organisation International trade
trade, protectionism, firms, firm organisation
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 progress in so many countries around the world, and instead offer the benefits of the ‘brain gain’”.
Global economy International trade Migration
immigration, trade, emigration, IPR, diasporas