Parallels are often drawn between the Great Recession of the past decade and the economic turmoil of the interwar period. In terms of global trade, these comparisons are based on obsolete and incomplete data. This column re-estimates world trade since the beginning of the 19th century using a new database. The effect of the Great Recession on trade growth is sizeable but fairly small compared with the joint effect of the two world wars and the Great Depression. However, the effects will become more and more comparable if the current trade stagnation continues.
Giovanni Federico, Antonio Tena-Junguito, 07 February 2016
Yin-Wong Cheung , Sven Steinkamp, Frank Westermann, 27 January 2016
Since the beginning of the Global Crisis, illicit capital flows out of China have been in decline. This column argues that a key factor behind this is the relative money supply between China and the US. China’s rapidly increasing money supply, combined with the Fed’s expansionary monetary policy, prompted investors to reallocate their portfolios between the two countries. Another contributing factor is China’s gradual process of capital account liberalisation. The Fed’s interest rate hike in December may see a resurgence in China’s capital flight.
Pierre-Louis Vézina, David von Below, 20 January 2016
The price of oil rose to unprecedented highs in the 2000s, and its recent plunge took many by surprise. Although there are many consequences of such price fluctuations on the world economy, they are notoriously difficult to pin down. This column examines the trade consequences of varying shipping costs caused by oil price fluctuations. High oil prices are found to increase the distance elasticity of trade, making trade less global. The recent drop in oil prices could thus be a boon for globalisation.
Italo Colantone, Rosario Crinò, Laura Ogliari, 04 December 2015
Influential studies have shown that trade liberalisation is associated with substantial adjustment costs for workers in import-competing jobs. This column uses UK data to shed light on one such cost that has not been considered to date – subjective well-being. Import competition is found to substantially raise mental distress, through worsened labour market conditions and increased stress on the job. These findings provide evidence of an important hidden cost of globalisation.
Angus Armstrong, Francesco Caselli, Jagjit Chadha, Wouter den Haan, 27 November 2015
Economists often disagree on China’s prospects. This column provides the results from a survey of top UK-based macroeconomists by the Centre for Macroeconomics (CFM). It turns out that three quarters of the experts believe that China’s annual growth rate will be less than 6% over the next ten years or so. But the panel is divided on whether the slowdown will have a significant impact on the UK economy.
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.
Gianmarco I.P. Ottaviano, Giovanni Peri, Greg C. Wright, 17 June 2015
International trade in services and immigration are among the fastest growing aspects of globalisation. Using UK data, this column explores the links between these phenomena. Immigrants promote exports of final services to their home countries, while also reducing imports for some intermediate services, and bringing productivity gains to the labour market. In designing immigration policies, it is important that the potential impact on exports and offshoring activities are carefully considered.
Juan Carluccio, Denis Fougère, Erwan Gautier, 14 April 2015
International trade has significant effects on domestic labour demand. It opens up new markets for export, but also creates opportunities for off-shoring. This column presents the results of a study on trade, wages and collective bargaining using data on French manufacturing firms. Both exporting and offshoring are found to have positive effects on wages, with collective bargaining agreements, particularly those at the firm-level, seeing greater wage gains for all types of worker.
Mario Mariniello, 09 November 2013
Since the adoption of the Anti-Monopoly law in 2007, the Chinese competition authorities have stepped up enforcement of mergers and anti-competitive practices. The Chinese Ministry of Commerce has relied heavily on behavioural remedies in merger cases (as opposed to the more efficient structural remedies favoured by the European Commission). Furthermore, merger policy has been used to protect domestic industries from competition. In contrast, Chinese fines for cartels have shown no foreign bias, and if anything have been too low.
Hector R. Torres, 21 September 2013
'Special and differential treatment' was justified on the basis that developing countries lacked the fiscal resources to smooth the transition to free trade. However, despite improved fiscal circumstances, exceptions to WTO rules remain in place. Establishing an independent watchdog for the WTO could help it to address these issues.
Ursula Fritsch, Holger Görg, 23 September 2013
Outsourcing is a controversial practice. This column looks at its effects on firm-level innovation in emerging markets. The authors find robust evidence that outsourcing is positively related to various innovation measures. However, outsourcing only leads to increased R&D spending in countries where intellectual-property rights are well-protected.
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.
J. Bradford Jensen, 19 November 2012
Should developed countries fear trade in services? Won’t high skilled jobs be lost to cheaper, developing country service workers? This column argues that trade in services represents a profitable opportunity as long as international trade in services is liberalised. The US and other developed countries should aggressively pursue fairer and thus more favourable terms under the WTO’s Government Procurement Agreement.
Jorge Andrade da Silva, Lucian Cernat, 09 February 2012
Natural disasters often hit developing countries hardest. To add to the devastating death toll, trade and development can be knocked off course. This column suggests that exports of small developing countries fall by nearly a quarter, and that this effect can be felt for up to three years. Exports of larger developing countries, on the other hand, are not significantly affected.
Chad P. Bown, 29 August 2011
While the Great Recession has not led to a massive global resort to protectionism, governments have nevertheless been active with their trade policy during the crisis. This column explores how governments adjusted the scale and composition of their temporary trade barriers – antidumping, safeguard, and countervailing-duty policies –during the crisis, as well as how policy use fits recent historical context and creates the need for post-crisis policy reform.
Robert Johnson, Guillermo Noguera, 07 June 2011
Roughly two-thirds of international trade is in intermediate goods. As a result, measures of trade flows that tally the gross value of goods at each border crossing lead to a distorted view of world trade. Using a value-added measure, this column finds that the controversial US-China imbalance is in fact around 40% smaller than many people think.
Uri Dadush, Shimelse Ali, Rachel Esplin Odell, 07 June 2011
The limited resort to protectionism during the financial crisis is often attributed to the WTO or to sensible macroeconomic policy. This column argues that there is more to the story. The combination of national laws, regional agreements, and powerful interest groups has worked to stop protectionism in its tracks.
Peter Sutherland, 27 May 2011
Peter Sutherland talks to Viv Davies about the final report of the high-level trade experts group, published this week, on 'World Trade and the Doha Round'. The report traces the imminent failure of the Doha Round back to what the authors consider to be "a deficit of political leadership"; they also make the case for why the WTO matters. The interview was recorded in London on 24 May 2011. [Also read the transcript.]
Michael Bordo, Peter L Rousseau, 26 May 2011
How interconnected are finance, trade, and economic growth? This column looks to the past in search of an answer. Examining economies that traded across the Atlantic, it finds that finance and trade reinforced one another between 1880 and 1914 but these links were absent in the post-war period. Financial development has been strongly related to growth throughout the last 130 years, whereas trade had a direct effect on growth only after 1945.
Filippo di Mauro, Benjamin R. Mandel, 05 May 2011
Has the global crisis changed international trade forever? This column presents a Q&A on global trade taken from a new eBook from the European Central Bank: “Recovery and Beyond”.