Industrial policy and productivity: The case of import quota removal during post-war Japan
Kozo Kiyota, Tetsuji Okazaki 06 January 2014
The presumed success of Japanese post-war industrial policy has been used to advocate similar policies in other countries. Key to such arguments then is the empirical demonstration of the policies’ effects. This column presents research making use of a novel dataset that allows controlling for industry heterogeneity across many disaggregated industries. The effects of the quota removal on productivity were significantly positive, while the effects of tariffs on labour productivity were insignificant.
Quantifying the effects of industrial policies is one of the most important research issues in various fields of economics.1 One of the most controversial industrial policies is the Japanese policy during the post-war period.2 The controversy arises because the success of some of the Japanese industrial policies has been used to justify targeting policies in other countries, including the US.3 Accordingly, several studies have attempted to quantify the effects of Japanese industrial policy (e.g., Beason a
Industrial organisation International trade
tariffs, Japan, industrial policy, quotas
AGOA rules: The intended and unintended consequences of special fabric provisions
Lawrence Edwards, Robert Z. Lawrence 20 November 2013
Preferential import policies that allow developing markets to export to advanced economies are intended to dynamically promote development rather than just provide basic gains from trade. This column argues that the Africa Growth and Opportunities Act achieves the latter but not the former, distorting incentives along the value-added chain. While beneficial, preferential trade deals are not a panacea and are certainly not a replacement for pro-development policies.
The US and EU often claim credit for granting duty-free quota-free access to products from the least developed countries. Such preferential treatment is of interest not only because it might provide one-time benefits in the form of higher incomes and increased employment, but also because trade is often associated with dynamic benefits that lead to faster growth and development.
Development International trade
development, Africa, tariffs, quotas
Will the WTO Bali conference advance the Doha Round and Asia?
Matthias Helble, Ganeshan Wignaraja 13 November 2013
Intensifying negotiations leading to the December WTO Ministerial Conference in Bali have renewed optimism for concluding the beleaguered Doha Round and boosting Asia’s trade. Agreement in Bali on tariff-quota administration, trade facilitation, and food security would improve the prospects for a Doha deal and WTO credibility. Failure at Bali, however, would spur the rise of mega-regional trade agreements – to the detriment of countries outside these agreements.
Trade negotiators from Asia and elsewhere are locked in intense negotiations to lay the platform for a Doha trade deal at the WTO Ministerial Conference in Bali, Indonesia, 3–6 December 2013. A new WTO Director-General, a ministerial venue in an influential Asian country, the risk of eroding WTO credibility, and the advent of mega-regional trade agreements have all enthused and motivated trade negotiators. This article assesses what the Bali Ministerial Conference might reasonably deliver, and how this may advance the Doha Round and Asia’s trade.
Global governance International trade
WTO, trade, tariffs, Doha, Asia, trade facilitation, food security, Bali, tariff-quota administration
‘No gain without pain’: Antidumping protection hurts exports
Hylke Vandenbussche, Jozef Konings 30 January 2013
The rise of international production sharing – ‘global value chains’ – has transformed international commerce and pushed economists into new territory. This column argues that there is evidence to suggest that old-fashioned protection can have an unexpected negative effect on firms that are part of a global value chain. In an increasingly globalised world, exporters’ success seems to positively depend on the free entry of imports rather than the other way round.
Protection is often viewed as a powerful instrument to help domestic firms to raise their sales at the expense of foreign importers. But this view is now being challenged by recent research showing that the effects of protection really depend on the international orientation of the firms i.e. whether they are exporters or not. Protected firms that are well integrated in global value chains may actually lose sales whenever the imports of inputs are subject to protection.
France, EU, trade, tariffs, protectionism, global value chains
Effects of exchange-rate misalignments on tariffs
Vera Thorstensen, Lucas Ferraz, Emerson Marçal 04 December 2011
Persistent exchange-rate misalignments have created trade frictions worldwide. This column argues that the WTO should adopt trade rules that allow nations to neutralise the effects of exchange-rate misalignments. Otherwise, the WTO might become a diplomatic-juridical fiction.
The subject of currency wars and trade wars is gradually gathering interest among scholars and public opinion. In the face of the magnitude of present misalignments and their clear impacts on trade, one may wonder why and how this issue is absent from trade rules and multilateral trade negotiations at the WTO in Geneva.
Exchange rates International trade
WTO, tariffs, exchange-rate misalignment
Determinants of trade-policy responses to the 2008 financial crisis
Kishore Gawande, Bernard Hoekman, Yue Cui 10 November 2011
The Great Trade Collapse of 2008–09 did not give rise to rampant protectionism. This column examines the determinants of the observed pattern of trade-policy responses to the 2008 crisis, using data for seven large emerging markets that have a history of active use of trade policy. Vertical specialisation is found to be the most powerful economic factor determining trade-policy responses.
The “Great Trade Collapse” that occurred between the second quarter of 2008 and the third quarter of 2009 was the steepest fall of world trade in recorded world history. Despite the trade collapse, the 2008 crisis and its recessionary aftermath did not fuel widespread protectionism.
tariffs, protectionism, vertical specialisation
Corruption and its impact on trade: Extortion or evasion?
Pushan Dutt, Daniel Traça 25 June 2009
Would reducing corruption increase trade? While corrupt customs officials extorting bribes from exporters may impede trade, those who take bribes to circumvent formal trade barriers may help it. This column estimates that when tariffs exceed 25%, the pro-trade effects of corruption may dominate.
In 2008, the World Bank allocated $4.4 billion for improving public sector governance in various countries and projects across the world. This equals an impressive 18.8% of total World Bank lending.
Corruption, tariffs, extortion, evasion
The Doha Round: A safety net in stormy weather
David Laborde Debucquet, Antoine Bouët 14 May 2009
The current financial crisis has fostered a demand for protectionism and put the Doha Round at the back of the agenda. This column argues that a failed Doha Development Agenda would send the wrong signal in terms of global governance and could lead to an unravelling of the past 15 years of trade liberalisation.
The current financial crisis has fostered a demand for protectionism, and could lead to new trade barriers as occurred after the October 1929 crisis. A parallel can easily be drawn between the current situation and the one that existed then. In the early 1930s, unemployment was rising, a fear of deflation was prevailing, and a lack of public resources (especially in countries that paid war reparations) prevented governments from remedying the economic crisis.
Doha Round, tariffs, protectionism
Trade protection: Incipient but worrisome trends
Richard Newfarmer, Elisa Gamberoni 04 March 2009
Trade protection is on the rise around the world and risks pushing the economy into prolonged contraction. Officials have proposed more than 60 new trade restrictions since the beginning of the financial crisis. While a serious outbreak of protectionism has yet to occur, vigilance and leadership are required.
With the global economy teetering on the abyss of severe recession, political pressures demanding import protection to protect employment are surfacing with increasing intensity around the world. However, if there is one lesson from the experience of the 1930s, it is that raising trade barriers merely compounds recessionary forces – and risks pushing the economy into prolonged contraction.
tariffs, non-tariff barriers, subsidies, protectionism, anti-dumping
Many trade barriers remain high in the EU
Natalie Chen, Dennis Novy 27 January 2009
This column assesses trade costs for manufacturing industries in the EU. It demonstrates that, although tariffs on trade within the EU were abolished decades ago, significant barriers remain, and countries continue to integrate. Today, the most substantial policy-induced costs are technical barriers to trade, such as packaging and labelling requirements.
Establishing why some countries trade considerably less than others is one of the most important items on the agenda of international economists. A deeper understanding of the factors that impede international trade is important because it would enable a better evaluation of their welfare costs. Those are suspected to be large – on their own, policy-related trade barriers may be worth more than 10% of national income (Anderson and van Wincoop 2002).
EU 50th anniversary, tariffs, gravity model, technical barriers to trade