International trade

Jeffrey Frankel, 19 October 2017

Financial markets have done little, if anything, to moderate the impact of commodity price volatility on the exporting countries. This column reviews four proposals to make exporters less vulnerable to volatility – two attempts at appropriate financial engineering, and two attempts at countercyclical macroeconomic policy. One in each category is tried and tested; the other two have hardly been tried.

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.

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