Toward “Trade Policy Analysis 2.0”: From National Comparative Advantage to Firm-Level Trade Data
TL;DR: In this article, the authors make the case for the need to "upgrade" current analytical tools used for trade policy analysis and complement them with more detailed firm-level data.
Abstract: This chapter makes the case for the need to “upgrade” current analytical tools used for trade policy analysis and complement them with more detailed firm-level data. Such an upgrade should be based on the latest intellectual advancements in trade theories and the latest firm-level trade statistics that are now becoming widely available. An upgraded “Trade Policy Analysis 2.0” could contribute to several trade policy priorities and to a better understanding of the benefits from international trade for firm competitiveness, job creation, and consumer welfare.
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01 Mar 2015
TL;DR: In this article, the authors focus on the economic studies of international trade in agricultural and food products that has been an expanding area of specialisation in the agricultural economics profession in Europe since 1984 and the contributions of agricultural economists have been particularly significant in Europe by assessing the compatibility of agricultural policies with the multilateral trade rules and the macroeconomic impacts of agricultural trade agreements on Northern agricultures and on market access of developed and developing countries.
Abstract: This survey focuses on the economic studies of international trade in agricultural and food products that has been an expanding area of specialisation in the agricultural economics profession in Europe since 1984. The contributions of agricultural economists have been particularly significant in Europe by assessing (i) the compatibility of agricultural policies with the multilateral trade rules and (ii) the macroeconomic impacts of agricultural trade agreements on Northern agricultures and on market access of developed and developing countries. Recent developments have shifted the focus of the international trade from countries and food industries towards food firms and products. The future research agenda will be driven by the needs of policy makers to find solutions to new and pressing issues and in particular growing societal concerns over the environmental, public health, diet composition, animal welfare and climate impacts of food production, and re-emerging food security concerns for developing countries.
39 citations
01 Mar 2017
Abstract: Abstract The goal of this chapter is to summarize the state of the art in research in international trade and global production, and discuss issues relevant to European policymakers. Much of recent research on globalization is primarily empirical, owing to the proliferation of available data. We begin by discussing recent advances in measuring the causes and effects of globalization, and discussing the particular data challenges that have emerged. We then turn to theories of trade and global production, first summarizing the conclusions on which there is a broad consensus in the field. We discuss new insights that may be relevant for policy-makers, and open research questions. Introduction The fortune of workers, consumers and firms increasingly depends on other countries. This global interdependence is driven by the flow of goods, capital, ideas and people across countries. This chapter summarizes research about two aspects of globalization: international trade in goods and services, and the international fragmentation of production. We first summarize the overarching themes that are common to both topics. We conclude with a set of open questions, and propose an agenda for better connecting academic research with the needs of policy-making. We also discuss data challenges facing economists and policy-makers alike. The primary motivation of theories of globalization is to explain how international interactions differ from domestic interactions, and why they occur in the first place. Why do countries trade goods with one another? Why do some companies locate part of their production abroad? Canonical models of trade and globalization explain the magnitude and patterns of cross-country movements, and their welfare implications. An almost tautological conclusion of these models is that if countries choose to interact with one another, they must be better off than being in isolation. Models may differ in the magnitude of the gains from trade they predict, but these gains are almost uniformly positive. A central theme is that globalization benefits some more than others. In fact, some may even become worse off as their country becomes more open to the flow of goods, ideas, and people. For example, workers in import-competing industries stand to lose when countries open up to trade. These distributional effects of globalization are widely studied both theoretically and empirically.
11 citations
TL;DR: In this article, the authors focus on how new trade growth can be unlocked and productivity improved by facilitating, rather than hindering, resource reallocation, and do so flexible and quickly in response to changing circumstances in the global economy.
Abstract: Canada sits at a risky crossroads. Our economic prosperity depends on international trade and investment, but new global realities are calling into question long-standing policy goals and approaches in these critical areas. A big existential threat to the global trading system lies on our southern border, with President Trump intent on fundamentally altering US trade policy. The noisy signals of negotiating tactics may change from day-to-day, but even if the Americans’ exact position remains unclear, the broader stated objectives are known, and the ripple effects of any significant retreat from a rules-based trading system could bring considerable collateral damage for Canada. Unfortunately, but somewhat understandably at this critical time, much of the recent talk in Canada is based on short-term calculations, essentially trying to predict what Trump might do on the topic of interest that day. What Canada desperately needs now is a calm, evidence-based discussion that seeks to better understand recent developments — including the factors that are driving anti-trade sentiment — to explore potential responses, and to think hard to define our longer-term policy priorities, which as part of a global view, can help guide us through the current turmoil. The global economy is complex and changing rapidly. Productivity, innovation and growth at home depend on both exports and imports. Instead of producing goods and services within a single country, businesses collaborate in global supply chains, and use foreign affiliates to serve foreign consumers directly in their markets. Small firms and big firms face different trading opportunities and constraints, and use different channels to internationalize. Emerging markets, such as China and India, have fast become important players in the global economy, leading to a shift in global economic power that is one reason multilateral trade negotiations under the World Trade Organization have stalled. Diminished growth prospects, especially since the financial crisis of 2008-09, have led to economic anxiety in many developed countries, including Canada. This changing context calls for a renewed, deliberate approach to Canada’s global commerce policies. The broad-based weakness in our international economic performance over the past 15 years suggests that a concerted, comprehensive and long-term approach is required. To help Canadians keep their focus on these key objectives, even as they attempt to manage the risks in the short term, we propose four key areas for attention and action. First and foremost, we must develop more inclusive policies that helps more Canadians share in the benefits of globalization and technological progress. An inclusive trade agenda — as a key contributor to broader efforts to deliver more inclusive growth — is vital to maintain public support for trade and trade agreements. If Canadians believe that the benefits are too narrowly concentrated at the top, then efforts to use more open trade to promote economic prosperity will face resistance. An important part of this package of reforms is strengthening the social safety net to better protect workers whose jobs are negatively affected by a variety of economic dislocations (not only those that are trade-related), by emphasizing skill development and retraining. Second, we must focus on how new trade growth can be unlocked and productivity improved by facilitating, rather than hindering, resource reallocation. Our policies need to allow capital and labour to flow to their best uses, and do so flexibly and quickly in response to changing circumstances in the global economy. Third, we need to enable international connectivity by enhancing the ability of Canadian firms and workers to engage with foreign partners and markets. The productivity of our firms and workers reflects not only their own actions, but also their connections, networks and ability to collaborate with the strongest partners, regardless of where they are located. Fourth, Canada must play a leading role in building a more robust, rules-based global trade and investment system. Given the global nature of production, trade and investment, we need to think “multilateral first”, one of the best ways to deepen our links to fast-rising emerging markets, and thereby diversify Canada’s trade and investment. Middle powers such as Canada will not become stronger by going it alone. As we shape our strategy for renegotiating NAFTA, and for bilateral negotiations aimed at learning how to further integrate China into the global trading system, we should keep these longer-term priorities in view. Canadians need an inclusive trade policy agenda that facilitates resource reallocation and enables international connectivity. At this critical juncture we should keep our eyes on the forest not the trees.
4 citations
01 Jan 2015
4 citations
TL;DR: In this article, the authors argue that a convincing communication strategy in support of trade policy is key for trade policy legitimacy and give the example of the European Commission's #FTAcomes2Town platform based on firm level data.
Abstract: EU trade policy initiatives since 1995 offer better products at lower prices with estimated annual savings of up to €60 billion annually, which is especially beneficial for low‐income households who spend a larger share of income on basic commodities. If trade is so beneficial, why is there so much discontent? The paper argues that a convincing communication strategy in support of trade policy is key for trade policy legitimacy and gives the example of the European Commission's #FTAcomes2town platform based on firm‐level data. Politicians can zoom in across all EU members to find examples of small companies in their constituency exporting and creating jobs due to a trade measure.
3 citations
References
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TL;DR: This paper developed a dynamic industry model with heterogeneous firms to analyze the intra-industry effects of international trade and showed how the exposure to trade will induce only the more productive firms to enter the export market (while some less productive firms continue to produce only for the domestic market).
Abstract: This paper develops a dynamic industry model with heterogeneous firms to analyze the intra-industry effects of international trade. The model shows how the exposure to trade will induce only the more productive firms to enter the export market (while some less productive firms continue to produce only for the domestic market) and will simultaneously force the least productive firms to exit. It then shows how further increases in the industry's exposure to trade lead to additional inter-firm reallocations towards more productive firms. The paper also shows how the aggregate industry productivity growth generated by the reallocations contributes to a welfare gain, thus highlighting a benefit from trade that has not been examined theoretically before. The paper adapts Hopenhayn's (1992a) dynamic industry model to monopolistic competition in a general equilibrium setting. In so doing, the paper provides an extension of Krugman's (1980) trade model that incorporates firm level productivity differences. Firms with different productivity levels coexist in an industry because each firm faces initial uncertainty concerning its productivity before making an irreversible investment to enter the industry. Entry into the export market is also costly, but the firm's decision to export occurs after it gains knowledge of its productivity.
9,036 citations
TL;DR: The authors developed a simple, general equilibrium model of non-comparative advantage trade and showed that trade and gains from trade will occur, even between countries with identical tastes, technology, and factor endowments.
3,756 citations
Posted Content•
TL;DR: In this article, the authors build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix and show how tougher competition in an export market induces a firm to skew its export sales towards its best performing products.
Abstract: We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales towards its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large.
612 citations
Book•
01 Mar 2006
TL;DR: In this paper, the authors described the world the box made and the Gridlock on the Docks and the Trucker's Trucker 36 and the Shippers' Revenge in New York's Port.
Abstract: Acknowledgments ix Chapter 1: The World the Box Made 1 Chapter 2: Gridlock on the Docks 16 Chapter 3: The Trucker 36 Chapter 4: The System 54 Chapter 5: The Battle for New York's Port 76 Chapter 6: Union Disunion 101 Chapter 7: Setting the Standard 127 Chapter 8: Takeoff 150 Chapter 9: Vietnam 171 Chapter 10: Ports in a Storm 189 Chapter 11: Boom and Bust 212 Chapter 12: The Bigness Complex 231 Chapter 13: The Shippers' Revenge 245 Chapter 14: Just in Time 264 Abbreviations 279 Notes 281 Bibliography 343 Index 365
552 citations
Posted Content•
TL;DR: In this article, the authors developed an open economy model with heterogeneous final goods producers who simultaneously choose whether to export their goods and whether to use imported intermediates, highlighting mechanisms whereby import policies affect aggregate productivity, resource allocation, and industry export activity along both the extensive and intensive margins.
Abstract: This paper develops an open economy model with heterogeneous final goods producers who simultaneously choose whether to export their goods and whether to use imported intermediates. The model highlights mechanisms whereby import policies affect aggregate productivity, resource allocation, and industry export activity along both the extensive and intensive margins. Using the theoretical model, we develop and estimate a structural empirical model that incorporates heterogeneity in productivity and shipping costs using Chilean plant-level data for a set of manufacturing industries. The estimated model is consistent with the key features of the data regarding productivity, exporting, and importing. We perform a variety of counterfactual experiments to assess quantitatively the positive and normative effects of barriers to trade in import and export markets. These experiments suggest that there are substantial aggregate productivity and welfare gains due to trade. Furthermore, because of import and export complementarities, policies which inhibit the importation of foreign intermediates can have a large adverse effect on the exportation of final goods.
495 citations