Showing papers on "Free trade published in 2020"

The Return to Protectionism

Abstract: After decades of supporting free trade, in 2018 the United States raised import tariffs and major trade partners retaliated. We analyze the short-run impact of this return to protectionism on the U.S. economy. Import and retaliatory tariffs caused large declines in imports and exports. Prices of imports targeted by tariffs did not fall, implying complete pass-through of tariffs to duty-inclusive prices. The resulting losses to U.S. consumers and firms that buy imports was $51 billion, or 0.27% of GDP. We embed the estimated trade elasticities in a general-equilibrium model of the U.S. economy. After accounting for tariff revenue and gains to domestic producers, the aggregate real income loss was $7.2 billion, or 0.04% of GDP. Import tariffs favored sectors concentrated in politically competitive counties, and the model implies that tradeable-sector workers in heavily Republican counties were the most negatively affected due to the retaliatory tariffs. JEL Code: F1.

An empirical investigation between CO2 emission, energy consumption, trade liberalization and economic growth: A case of Kuwait

Abstract: The purpose of the present study is to investigate the link among CO2 emissions, energy consumption, gross domestic product, and trade liberalization as related to Kuwait. The study used annual data, starting from 1971 to 2017, which was obtained from a world development indicator of the World Bank. For the empirical analysis, the study adopted Augmented Dicky Fuller and Phillips-Perron methods to review stationarity among the data sets. Their results explained a mixed trend, some variables followed the I (1) process, and few are I (0). Based on the findings, a well-defined Autoregressive Distributed Lag Model was applied to the data sets and the outcome was in support of the long and short-run relationship between variables. Carbon dioxide and energy consumption accelerate economic growth; an increase in CO2 emission also plays a significant role in increasing energy consumption. Furthermore, the Granger Causality test shows evidence of bi-directional causality existing between CO2 emissions and energy consumption. A unidirectional causality is running from the gross domestic product to CO2 emissions and energy consumption to trade liberalization.

The African Continental Free Trade Area

Abstract: Monopolies continue to dominate world trade by controlling global production and distribution chains. Neither free trade nor fair trade has transformed this system; the recent rise in nativism and pseudo‐protectionism has not, and cannot, address these problems either. The African Continental Free Trade Area (AfCFTA), the largest free trade area in the world, promises to be different. AfCFTA rejects classical, neoclassical, and Marxist theories of trade, appealing, instead, to non‐aligned pan‐Africanism. It advocates continental free trade as a way to overcome the lingering effects of slavery, colonialism, and neocolonialism. However, its exclusive focus on continental Africa, its disinterest in systemic redistribution, and encouragement of the private appropriation of socially created land rents prevents AfCFTA from achieving its goals. In fact, AfCFTA might actually foster inequality—progress alongside of poverty—and in so doing, undermine the very essence of this trade regime. What Henry George (1886) called “true free trade,” a theory based on making land common by socializing land rent, offers a more promising and powerful model through which to achieve the pan‐African agenda. Indeed, only true free trade can definitively decolonize global trade.

Governing Labour Standards through Free Trade Agreements: Limits of the European Union’s Trade and Sustainable Development Chapters

Abstract: The EU has established a new architecture of international labour standards governance within the Trade and Sustainable Development (TSD) chapters of its Free Trade Agreements (FTAs). To examine the operationalization of this framework, we draw upon 121 interviews undertaken with key informants in three FTAs signed with the Caribbean, South Korea and Moldova. We engage with wider debates over external governance and the projection of EU power by showing how operational failings, including a lack of legal and political prioritization of TSD chapters and shortcomings in the implementation of key provisions, have hindered the impact of the FTAs upon labour standards. We also identify significant limitations to the EU's ‘common formulation’ approach when applied to different trading partner contexts, alongside ambiguities about the underlying purpose of the trade–labour linkage. Reflection about the function and purpose of labour standards provisions in EU trade policy is therefore required.

The Environmental Impacts of Agricultural Trade: A Systematic Literature Review

Abstract: In line with the development of international trade, environmental concerns have arisen as a global problem. International trade has the potential to increase environmental externalities such as transboundary pollution, deforestation, transportation and production relocation avoiding environmental standards. The share of agricultural goods in total export reached 15% in 2017. Since 2002, the proportion of unprocessed agricultural products have more than doubled, while the volume of processed goods in global trade has tripled. Despite the importance of agricultural trade worldwide, the number of studies exploring the trade-agriculture-environment nexus has so far been limited. This paper aims to provide an overview of the environmental impacts of agricultural trade based on the international economics literature published in recent years by way of a systematic literature review. Results suggest that most recent environmental studies do not view extended trade or trade liberalization in agriculture favourably. Only a limited number of papers state that a country or countries’ environment could benefit from agricultural trade, and only a few researchers have found that agricultural trade did not have any significant influence at all, or have instead found the effects on the environment to be ambiguous. Finally, the research reveals the most important consequences of pollution and offers potential solutions.

Impact of Tariffs on Global Supply Chain Network Configuration: Models, Predictions, and Future Research

Abstract: The past three decades have witnessed tremendous growth of supply chain activities around the globe thanks to the lowered trade barriers and free trade agreements among countries. The global supply...

Does Free Trade Increase Deforestation? The Effects of Regional Trade Agreements

Abstract: This paper provides new, global evidence on the relationship between trade liberalization and deforestation. Using event studies around the enactment of regional trade agreements (RTAs) on ...

The environmental effect of trade liberalization: Evidence from China's manufacturing firms

Abstract: While prior literature on trade liberalisation and the environment has mostly focused on the macroeconomic ramifications, this study explores at the firm level whether and how changes of trade barriers brought about by China's accession to the WTO may impact on its manufacturing firms’ environmental performance. Adopting a difference‐in‐differences (DID) methodology, we document the effects of tariff reductions on improving firm‐level SO2 emission intensity, and the key corporate strategic decisions responsible for delivering the observed results, with robustness tests covering other major pollutants. In response to trade liberalisation, firms are found to increase labour resources for environmental protection and to improve their production processes to reduce emission intensity. This study contributes to the literature by investigating at the level of the operating firm how output and input tariff reductions may impact on environmental performance and uncovering for the first time the specific actions responsible for the results.

Do the international economic endeavors affect CO2 emissions in open economies of South Asia? An empirical examination under nonlinearity

Abstract: The purpose of this paper to investigate whether trade liberalization and the financial crisis have contributed to altering the pollution level in selected open economies of South Asia in the long run.,The study has adopted the panel data framework where results are tested using the generalized method of moments (GMM). The data of five South Asian countries from 1980–2015 have been used for computing results.,Owing to the globalization endeavors, the scope of energy consumption and foreign direct investment (FDI) inflows has increased significantly. The outcomes of the study reveal that globalization has significantly intensified the level of carbon emissions in the selected countries. However, the impact of financial crisis on carbon emission is found insignificant in the long run. Therefore, the study reveals that the level of environmental pollution in South Asia economies is more sensitive to positive economic variations than negative.,Earlier studies have ignored the parallel effect of globalization and financial meltdown on carbon emissions in a country or region. Stating differently, the present study intends to capture the impact of positive (globalization) and negative (financial crisis) global economic movements on carbon emissions in the five open economies. The majority of studies in the past have focused on the relationship between positive economic endeavors and environmental pollution. Furthermore, the study recommends that while framing a trade policy, its possible impact on environmental pollution also needs to be considered.

The role of R&D and input trade in productivity growth: innovation and technology spillovers

Abstract: Productivity improvements generally are driven by technology innovation and its spillovers. This study explores the role of R&D investment and intermediate input trade in productivity growth using country-industry-level data for 25 advanced and emerging economies. This paper confirms that R&D investment and intermediate input import/export (both intra- and inter-industry) with technologically advanced economies play important roles in productivity growth in non-frontier countries. We further find that the productivity gains of technology spillovers via input trade channels are likely larger for countries/industries where technology converges to the frontier. These findings imply that the recent slowdown in R&D investment and intermediate input trade in some advanced economies may contribute to declining productivity growth. The potential productivity improvements from R&D investment and free trade as well as the importance of domestic capacity in facilitating technology spillovers should be recognized.

Voting Rights, Deindustrialization, and Republican Ascendancy in the South

Abstract: The Voting Rights Act of 1965 revolutionized politics in the American South. These changes also had economic consequences, generating gains for white as well as Black southerners. Contrary to the widespread belief that the region turned Republican in direct response to the Civil Rights Revolution, expanded voting rights led to twenty-five years of competitive two-party politics, featuring strong biracial coalitions in the Democratic Party. These coalitions remained competitive in most states until the Republican Revolution of the 1990s. This abrupt rightward shift had many causes, but critical for southern voters were the trade liberalization measures of 1994, specifically NAFTA and the phase-out of the Multi-Fiber Arrangement which had protected the textiles and apparel industries for decades. The consequences of Republican state regimes have been severe, including intensified racial polarization, loss of support for public schools and higher education, and harsh policies toward low-income populations.

Trade, transboundary impacts and the implementation of SDG 12

Abstract: The 2015 Sustainable Development Goals (SDGs) were developed to ‘transform our world’. Yet critics argue that the concept of sustainable development serves to maintain an unsustainable status quo, or provide a positive gloss on a terminal conflict between its ‘pillars’: environmental protection, economic growth and social welfare. In this article, we examine this tension with respect to the implementation of SDG 12 in the European Union. SDG 12 calls for responsible consumption and production, which necessitates reconciling, or ‘decoupling’, economic growth and environmental degradation: the core of sustainable development. Initial examination reveals that the largest implementation gap is among high-consuming countries, including those of the EU, the focus of our article, who are failing to account for transboundary impacts of products consumed domestically. This shortcoming, facilitated by the flexibility of the SDG ‘global target, national action’ approach, undermines the achievement of other environmental SDGs relating to biodiversity and climate, among others. Yet, as compared to other EU approaches to addressing transboundary environmental harm from trade in existing Free Trade Agreements (FTAs) and Multilateral Environmental Agreements (MEAs), which we examine, the global focus and breadth of SDG 12 offers transformative potential. Ultimately, even if the three pillars of sustainable development are not ‘rebalanced’ toward environmental conservation, they can provide a construct for examining interactions and trade-offs between goals. Simply taking account of transboundary consumption, as SDG 12 indicators call for, would encourage more effective cooperation to help producing countries address environmental problems that result from production for export through impact assessment and enforcement.

Using Equity Market Reactions to Infer Exposure to Trade Liberalization

Abstract: We develop a new method for identifying firm exposure to changes in policy using asset prices that has several advantages over standard measures: it is natively firm level, it encompasses the net impact of all avenues of exposure, it yields estimates for firms in all sectors of the economy, and it captures aspects of policy change that can be difficult to quantify using standard approaches. We provide guidelines on how our method can be used in a wide range of settings and, applying it to two well-studied US trade liberalizations, find that it offers new insight into those policies’ distributional implications. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.