Simeon Djankov, Eva (Yiwen) Zhang, 04 December 2020

Foreign direct investment flows to the US have seen a sharp decline in the past two years, despite a cut in the corporate tax rate from 35% to 21% in 2017. Previous research suggests that such a tax cut should have resulted in increased investor appetite. This column argues that countervailing forces, in particular the shift in investment sentiment driven by the corrosion of US openness to trade and global cooperation, have played the dominant role in reducing flows.  

Jean Imbs, Laurent Pauwels, 26 June 2020

Exposure to foreign shocks is often thought to be highly dependent on foreign trade and measures of openness usually build exclusively on measures of direct trade. This column argues that in a world of global value chains, focusing on direct trade gives a distorted view of the exposure to foreign shocks. It proposes a new measure of openness which computes the fraction of gross output sold to downstream customers located abroad. This measure finds most sectors to be more open and this increased openness is estimated to cause rises in productivity and contagion, without observable effects on growth.

Ingo Borchert, Joscelyn Magdeleine, Juan Marchetti, Aaditya Mattoo, 20 June 2020

Despite the growing importance of services in output and trade, there has been relatively little information on how services policies have evolved over the past decades. This column presents evidence on services trade policies from a new database created by the World Bank and WTO. It reveals that higher income economies are more open on average than developing economies, but the chronology of reform varies across sectors. In addition, while explicit restrictions are being lowered, regulatory scrutiny is increasing in most sectors, especially in higher income economies.

Matthew Bevington, Jonathan Portes, 27 June 2019

Three years on from the referendum, it seems like a good time to take stock of whether the Brexit process so far has been good or bad for the UK, and its likely future impacts. This column does so based on four tests covering the economy, fairness, openness, and control. While the apocalyptic predictions of the Remain campaign have failed to materialise, the economic damage has nevertheless been significant. And although the UK may end up with considerably more control over a range of policies – trade, regulation, and migration – than at present, the difficult issue remains of what future governments will do to address the underlying discontent that, at least in part, drove the Brexit vote.

Giovanni Federico, Antonio Tena-Junguito, 18 April 2016

The slowdown of global trade growth since the Global Crisis has raised concerns across the world. This column puts recent changes into perspective by presenting evidence on the export/GDP ratio and a rough measure of the gains from trade back to 1830. It shows that the interwar period was marked by a reversal of globalisation that makes recent trends look like a small blip. 

Francesco Caselli, Miklós Koren, Milan Lisicky, Silvana Tenreyro, 14 October 2015

A widely held view in academic and policy circles is that openness to international trade and specialisation leads to higher GDP volatility. This column argues that openness to international trade can also lower a country’s GDP volatility by allowing it to diversify its sources of demand and supply, and hence reduce its exposure to domestic shocks.

Otaviano Canuto, Cornelius Fleischhaker, Philip Schellekens, 11 January 2015

While Brazil has become one of the largest economies in the world, it remains among the most closed economies as measured by the share of exports and imports in GDP. This column argues that this cannot be explained simply by the size of Brazil’s economy. Rather it is due to a reliance on domestic value chain integration as opposed to participation in global production networks. Greater trade openness could produce efficiency gains and help Brazil address its productivity and competitiveness challenges.

Patricia Ellen, Jaana Remes, 12 July 2014

Brazil has grown rapidly and reduced poverty over the past decade, but it has grown more slowly than other emerging economies and its income per capita remains relatively low by global standards. This column points out that sectors of the Brazilian economy that have been opened up to international competition have outperformed those that remain heavily protected. Deeper integration into global markets and value chains could provide competitive pressures that would improve Brazil’s productivity and living standards.

Gary Hufbauer, Martin Vieiro, John Wilson, 14 September 2012

Economists celebrate trade not only because they love watching ships cross the Pacific and cargo planes land at Paris Charles-de-Gaulle but also because increased trade demonstrably raises income and improves living standards. This column argues that a powerful way to boost trade is by focusing on trade facilitation, i.e. improving both hard infrastructure like ports and railways, and soft infrastructure such as shipping logistics.

Markus Brückner, Daniel Lederman, 02 May 2012

The recent growth performance in sub-Saharan Africa has been remarkable given that, for over four decades since 1960, real GDP per capita growth had been dismal, averaging less than 0.5% per annum. This column, using within-country variation and instrumental variables, argues that increases in openness to trade are behind this performance.

Timothy Kehoe, Kim Ruhl, 19 November 2011

In 1985, Mexico opened itself to trade and investment. In recent years, China has followed the same path with much more impressive results. But this column argues that the slow growth and crises that Mexico experienced after the initial boom should act as a warning to those optimistic about China.

Giuseppe Bertola, Anna Lo Prete, 20 May 2010

Financial interconnectedness across countries has reached unprecedented levels – but what has driven this change? This column finds that financial deregulation is responsible for 16 percentage points of the increase in financial development, but openness to trade and the size of government off-set one another. This is because the structural association between trade openness and financial development is mildly negative.

Mona Haddad , Jamus Lim, Christian Saborowski, 21 March 2010

Does openness increase volatility? This column argues that it doesn’t when countries are sufficiently diversified. These results amount to a powerful argument in favour of export differentiation policies as a means of deriving larger benefits from trade openness and shielding against global shocks.

Gino Gancia, Paolo Epifani, 28 March 2009

This column argues that more open countries have larger public sectors because greater involvement in foreign trade allows a government to shift more of the cost of providing a public good onto foreign consumers. Globalisation may actually protect or even promote public inefficiency.

CEPR Policy Research