Trade preferences as catalytic aid
Ivan Cherkashin, Svetlana Demidova, Hiau Looi Kee, Kala Krishna 19 February 2011
Trade preferences, such as those removing restrictions on Madagascar’s exports to the US, have long been a controversial policy. Some argue that it removes incentives for firms to become more competitive as they simply divert their trade to the preferred market. This column argues using counterfactual simulations that trade preferences can increase trade for the provider country, the receiver country, and other trading partners as well.
When the US granted duty free/quota free access to Madagascar under the African Growth and Opportunity Act 2000, exports from Madagascar exploded, from $170 million in 2000 to $500 million in 2004. Over the same period, Madagascar’s export to the rest of the world also increased, from $750 million to $875 million (Figure 1). Similarly, when the EU granted duty free/quota free access to Bangladesh under the Everything But Arms Initiative in 2001, knitwear exports from Bangladesh to the EU more than doubled, from $1.3 billion in 2000 to $3 billion in 2004.
US, EU, trade preferences, protectionism, Madagascar, Bangladesh
Trade in intermediates and economic policy
Shimelse Ali, Uri Dadush 09 February 2011
Intermediate inputs – the parts and materials imported to make products for consumption domestically and abroad – are a growing force in world trade. This column argues that without better measurement of intermediate imports we run the risk of overestimating the growth effects of exports and severely underestimating the cost of protection and the crucial role that inputs play in enhancing efficiency.
Intermediate inputs – the parts and materials imported to make products for consumption domestically and abroad – are a growing force in world trade. Catalysed by the globalisation of production, the large and rapidly increasing use of imported inputs for exports has important policy implications. Bilateral trade balances are not appropriately measured, the costs of protection are higher than often understood, trade is more volatile, and the importance of exports as drivers of short-term demand is overestimated.
protectionism, Intermediate inputs
Entry regulation: Still costly
Markus Poschke 29 January 2011
Despite recent progress, the cost of complying with entry regulation is still higher in continental Europe compared to Anglo-Saxon or Northern European countries. This column illustrates this point using data from the World Bank and presents some recent research on the negative effect of these entry costs on output and productivity.
For most affected countries, the recent European debt crisis at its root is also a growth crisis. It is then only appropriate that structural reforms and deregulation be still on the agenda. For instance, costs due to entry regulation are still relatively high in some continental European countries, with large knock-on effects on aggregate output and productivity.
International trade Microeconomic regulation
barriers to trade, protectionism
Are capital controls effective?
Eduardo Levy Yeyati 20 January 2011
The global crisis has reignited debate on the desirability of capital controls. This column examines evidence from Argentina and Chile and argues that capital controls can be effective, but that their effectiveness and efficiency varies. It adds that controls need to be considered as part of a macro-prudential toolkit to prevent asset inflation and overvaluation that is costly to revert in the down cycle.
“Not only are they ineffective but, in addition, they raise domestic interest rates.” This type of internally inconsistent commentary is not unusual when discussing capital controls – a subject marked with strong beliefs and weak data. Now that the G20 has sanctioned capital controls in Seoul under the umbrella of macro-prudential policies, it is a good time to revisit the subject of controls in a dispassionate way (G20 2010).1
US, protectionism, capital controls, Chile, Argentina
Argentina’s border emergency-kit in times of global crisis: In case of fire, break the glass
Demián Dalle, Federico Lavopa 11 January 2011
Since the breakout of the global crisis and the combined pledge to refrain from protectionism, the Global Trade Alert – among others – has documented numerous examples of countries breaking their promises. This column revises a paper from the 7th Global Trade Alert, providing analysis of Argentina’s unique policy responses and their surprising consequences.
After the outbreak of the global financial and economic crisis in mid-2008, unilateral and discriminatory trade measures multiplied in number. Developed countries put in place gigantic stimulus packages, some high- and middle-income countries set up catchall tariff and non-tariff measures, while those that had been applying import-duty rates below bound levels raised them up to bound ceilings.
protectionism, Global Trade Alert, Argentina
Crisis protectionism: The observed trade impact
Brad McDonald, Christian Henn 22 December 2010
The independent Global Trade Alert has identified hundreds of protectionist measures since its launch in 2008. This column argues that the protectionist measures are associated with substantial changes in bilateral trade flows. It adds that border measures and behind-the-border measures, including bailouts and subsidies, contribute equally to an annual aggregate trade distortion of at least $35 billion.
The global financial crisis brought with it fear. No small amount of it was focused on the possibility of extreme 1930s-style protectionism. Thanks to an ambitious macroeconomic policy response and strong global trade institutions, the worst fears have been avoided, at least for the time being (Eichengreen and Irwin 2009).
Global crisis International trade
international trade, protectionism, Global Trade Alert
What can we realistically expect from the G20?
Simon J Evenett 12 November 2010
The Seoul summit marks the end of the second year of the G20's crisis-related activities. This column takes stock of the G20's accomplishments and methods of operation, identifying what can reasonably be expected of the G20 over the medium term. It argues that a series of evolving accommodations – articulated imprecisely to outsiders – is the most that governments and analysts should expect.
US President George W Bush called the first crisis-related Heads of Government meeting in November 2008. The current incarnation of the G20 is entitled, therefore, to celebrate its second birthday at the forthcoming summit in Seoul. Over the past month, however, concerns have been raised about the health of this infant. Alternatively, parents may recognise the phrase ‘the terrible two’s” suggesting a more vibrant, if not necessarily easygoing, way ahead. What then should analysts realistically expect of the G20?
G20, protectionism, global governance
Chinese firm and industry reactions to antidumping
Chunding Li, John Whalley 11 November 2010
Over the last decade, China has been the target of more antidumping measures than any country in the world. This column examines the impacts and argues that China should be paying more attention to measures that come from its main trading partners.
Over the last decade, China has been the target for the largest number of antidumping measures of any country in the world. With the onset of the global crisis, antidumping has becomes even more in vogue (Bown 2010). How China reacts to these measures and the knock-on effects for other countries is becoming increasingly important.
China, antidumping, protectionism
The state of protectionism on the eve of the Seoul G20 summit
Simon J Evenett 08 November 2010
The Korean hosts of this week's G20 summit are apparently keen to raise the profile of protectionism and to develop a development-friendly trade initiative. With these possible goals in mind the Eighth Report of the Global Trade Alert, published today, assesses the global state of protectionism, the quality of G20 leadership on trade, and the harm done to the most vulnerable developing countries by other country's beggar-thy-neighbour policies.
If media coverage is anything to go by, October 2010 saw a resurgence of fears about protectionism. Concerns that unheeded complaints about the Chinese exchange-rate regime would ultimately provoke other countries to resort to competitive devaluations and more traditional forms of trade protectionism came to the fore. Protectionism has not received this much attention in the press since the first quarter of 2009.
G20, protectionism, Global Trade Alert, currency dispute