International trade

Benny Kleinman, Ernest Liu, Stephen Redding, 17 September 2020

The increasingly prominent role of China in the world economy has led to widespread discussions concerning the balance of power, trade relations, and economic development. This column presents a new ‘friends and enemies’ model which is used to show that significant growth and welfare effects have stemmed from China’s shifting role, and that changes in trading clusters have varied across different sectors. The findings also suggest that as countries become less economically friendly in terms of the welfare effects of their productivity growth, they also become less politically friendly in terms of foreign policy. 

Michal Gradzewicz, Jakub Mućk, 17 September 2020

There has been a lively debate concerning the dynamics of markups. This column contributes to this debate by studying the relationship between globalisation and monopolistic markups in Poland. It highlights important non-linearities leading to an uneven  distribution of the effects of global value chains for participating firms, with lowest benefits found for firms in the middle of the production chain where goods are highly standardised and substitutable. It also documents a fall in markups for Poland which can be explained by rising dependence on imported intermediates in export-oriented production and fiercer competition of domestic firms on export markets.

Andreas Fuchs, Lennart Kaplan, Krisztina Kis-Katos, Sebastian S. Schmidt, Felix Turbanisch, Feicheng Wang, 16 September 2020

China assumed an important role during the worldwide outbreak of COVID-19 as the main exporter of critical medical goods such as face masks and disinfectants. However, shipments of medical goods have been turned into propaganda campaigns by Chinese state media, raising the question if access to medical goods is granted upon political goodwill. This column uses official monthly trade data from Chinese Customs to investigate the emerging trade patterns, both for commercial exports and donations of medical goods. It shows that both existing trade linkages and political ties to Chinese provinces can help to attract Chinese medical goods.

Yuxian Chen, Yannis Ioannides, 15 September 2020

With the COVID-19 pandemic raging at the beginning of the summer of 2020, countries that depend heavily on international tourism were confronted with the dilemma of whether or not to let travel restart. This column uses international data to explore the relationship between tourism specialisation and short-run economic growth. The results suggest that a 1% increase in tourism specialisation is associated with 0.01 percentage point increase in the growth rate of GDP per capita for OECD countries. This is in line with previous findings but is based on up-to-date panel data.

Mitsuo Inada, Naoto Jinji, 10 September 2020

Policy uncertainty is believed to affect foreign direct investment significantly, but, empirical evidence on the impact is scarce. This column proposes a unique empirical strategy for identifying the impact of a change in policy uncertainty on FDI at the sector level by utilising information about reservations of certain obligations contained in international investment agreements. It provides evidence that policy uncertainty discourages FDI. Policy uncertainty will continue to rise in the post-COVID-19 era, and the results highlight the importance of aligning globalisation with the mitigation of public health threats by implementing policies to reduce uncertainty.

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