Kangni Kpodar, Patrick Imam, 08 May 2017

The debate over regional trade agreements is ongoing. It has been argued that they can heighten exposure to shocks as they lead to more specialisation, and conversely that they can alleviate volatility by improving policy coordination within the anchors of a formal trade contract. This column suggests that the benefits from lowering long-term growth volatility tend to dominate potential costs, with the magnitude of this effect depending on the depth of the regional integration and the development stage of trade partners. 

Kazunobu Hayakawa, Shujiro Urata, Taiyo Yoshimi, 08 March 2017

The emergence of mega-regional trade agreements is likely to complicate the trading environment as the ‘noodle bowl’ of overlapping trade agreements gets bigger. This column argues that when multiple preferential tariff schemes are available, exporters' choice of scheme depends on the coverage of products, the extent of tariff reduction, and the ease of complying with rules of origin. These dimensions should all be taken into account when designing mega-regional trade agreements to encourage their utilisation. 

Holger Breinlich, 10 March 2016

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%.

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.