International trade

Alejandro Cuñat, Robert Zymek, 15 October 2017

A large portion of international income differences remains poorly understood. It is traditionally attributed to cross-country differences in total factor productivity, which cannot be measured directly. This column argues that the importance of total factor productivity has been overstated because differences in countries’ patterns of international linkages have been overlooked. Using input-output data for 40 countries, it shows how the assumption that economies are closed has led traditional development accounting to overestimate total factor productivity.

Aaditya Mattoo, Alen Mulabdic, Michele Ruta, 12 October 2017

Trade agreements have extended their reach well beyond tariff reduction, to policy areas such as investment and competition policy. This column shows that the deepening of trade agreements has contributed to trade growth among members and had a positive spillover effect on trade with non-members. The reason is that, differently from tariffs, these new provisions are often non-discriminatory and, hence, have a public good aspect. Undoing deep agreements is likely to be painful for all.

Lorenzo Caliendo, Luca David Opromolla, Fernando Parro, Alessandro Sforza, 10 October 2017

The effects of international trade and of international migration have been central to the recent debate on economic integration. Evaluating trade and migration policies is challenging, however, because they often take place at the same time and reinforce each other, making it hard to distinguish their effects. This column uses a general equilibrium approach to quantify the effects of the 2004 EU enlargement. It finds that all EU countries gained from enlargement, but that the largest winners were the new member states, and in particular their low-skilled workers.

Yuqing Xing, 28 September 2017

The last few decades have seen the US running its largest ever trade deficit. This column uses the case of Apple to demonstrate that the failure of trade statistics to capture flows of intellectual property embedded in exports explains a significant share of this deficit. Reforming trade statistics by including the value added of intellectual property embedded in products manufactured abroad is an essential step towards a better understanding of how trade benefits all countries involved, in particular countries specialising in exporting intangible intellectual property.

Francisco Costa, Jason Garred, João Pessoa, 24 September 2017

In addition to being a competitor for other countries’ industries, China has also become an increasingly important consumer of goods produced elsewhere. This column looks at how the steep rise in ‘commodities-for-manufactures’ trade with China has affected workers in Brazil. While the analysis confirms a negative effect of Chinese import competition on employees of manufacturing firms, it also suggests that growth in trade with China has created some winners in Brazil, with wages rising more quickly in parts of the country benefiting more from increasing Chinese demand.

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