Given the increasing number of regional trade agreements, economists have been estimating their effects on a wide range of outcomes. This column looks at stock market reactions to the implementation of the Canada-US free trade agreement to evaluate its effects on firms’ profits. Firm profits seem to be hurt by lower tariffs, but increase with cheaper access to intermediates and – for large firms – better access to the US market. The author estimates that CUSFTA increased the yearly profits of Canadian manufacturing by 1.2%.
Holger Breinlich, 10 March 2016
John Whalley, Chunding Li, 05 March 2014
After joining the WTO in 2001, China has entered into a number of trade agreements. Those currently in consideration are substantially larger than the initial ones. China, more than any other large economy, needs to attempt to enhance its export growth, which has turned negative in 2013. This column discusses some of China’s trade agreements and summarizes the implemented negotiation strategy. The impact of these trade agreements on China’s economic growth also deserves attention.
Holger Breinlich, Alejandro Cuñat, 07 September 2013
Recent development of heterogeneous firm models in international trade were built on the observation that extensive margin effects are important in explaining the trade and productivity effects of trade liberalisation. This columns adds that if we want to use the current generation of heterogeneous firm models for the purpose of forecasting the effects of trade agreements, we need to allow not only for sources of within-industry but also within-firm productivity increases.
Simon Lester, 20 January 2013
Trade agreements have become ‘deeper’ over recent years, and there are initiatives in the pipeline to globalise deeper trade governance through mega-regional agreements (such as the Trans-Pacific Partnership). This column argues that trade agreements in general – and the WTO in particular – should focus on what they do best, reducing protectionist barriers. Broader issues such as intellectual property and regulatory expropriation should be left to governments to deal with on their own. Governments that handle these issues most effectively will be the winners in the new world of supply-chain trade.