International trade

Wolfgang Keller, Carol Shiue, 05 December 2021

There is little consensus about the impact that the Western colonialism had on China’s economy. This column revisits a period that saw China end centuries of relative isolation and open dozens of ‘treaty ports’ to Western traders, which shifted the focus of capital markets from inland areas to the coast. Western influence also increased the number of banks, firm investment, as well as the adoption of steam engines and industrial machinery, and significantly lowered local interest rates.

Davin Chor, Bingjing Li, 25 November 2021

Tariffs initiated by the Trump administration in 2018 raised duties on China’s exports to the US, sparking a ‘tariff war’. This column uses satellite readings of night-time luminosity to show that that locations within China that were more exposed to the US tariffs experienced a larger decrease in night light intensity, pointing to a contraction in local economic activity. By contrast, exposure to China’s retaliatory tariffs appeared to have no significant effect on grid-level night lights. 

Heli Simola, 24 November 2021

The collapse of global trade during the COVID-19 crisis was stunning in its magnitude, but was milder in relative terms than during the Global Crisis. Based on data from 40 different countries, this column suggests that the key lies in the composition of demand. The contributions of consumption and services sector demand to the import contraction were notably larger during the COVID-19 crisis. This may have led to a relatively milder import contraction, as consumption and services production are less import-intensive than investment and manufacturing production.

Sébastien Miroudot, Davide Rigo, 23 November 2021

What is the impact of trade agreements on the activities of multinational enterprises? How does the accession of countries to regional trade agreements affect multinationals’ decision to set up affiliates and produce in global value chains? Using a novel database on multinational production, this column investigates the impact of preferential trade agreements on foreign affiliates’ production activities. The findings suggest that investment provisions increase multinational production by facilitating multinationals’ operations in foreign markets, especially for activities requiring the proximity of suppliers and consumers, and by helping multinationals joining global value chains.

Konstantin Egorov, Dmitry Mukhin, 19 November 2021

Recent evidence shows that most international prices are set in dollars, leading to highly asymmetric spillovers between the US and other economies. This column discusses the normative implications of this fact. The authors argue that inflation targeting is optimal in non-US economies, while the use of capital controls is not. A depreciation of the dollar is unlikely to cause a currency war, but US policy does not fully internalise global spillovers. The US benefits from the dominant status of its currency.      

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