Andrea Ariu, Katariina Nilsson Hakkala , J. Bradford Jensen, Saara Tamminen, 22 November 2019

Global trade in services increased six-fold between 1990-2017, representing a threat for workers but a growth opportunity for firms that source these services at lowest cost. This column examines the changes in employment composition and performance of Finnish service importers. Firms that increased imports of service inputs reduced employment of low-skill service workers but increased employment of managers. They also improved their sales, assets, and service exports, and were more likely to survive.

Céline Carrère, Anja Grujovic, Frédéric Robert-Nicoud, 13 November 2019

Unemployment is absent from most quantitative trade models in the academic literature. Using a trade model that also includes unemployment and data between 2001 and 2008, this column shows that repealing NAFTA and the imposition of 20% bilateral tariffs between the US and Mexico in all sectors would reduce welfare by 0.31% in the US and by 6.6% in Mexico. An US increase of trade barriers on motor vehicles against imports from all countries bar Mexico and Canada would lead to a decrease in long-run welfare and employment in both Mexico and the US as well as in major car-producing countries. 

Eric Golson, 11 November 2019

Neutrality has long been viewed as impartiality in war. This column, part of the Vox debate on World War II, asserts that neutral states in the war were realist in approaching their defence to ensure their survival. Neutrals such as Portugal, Spain, Sweden, and Switzerland maintained independence by offering economic concessions to the belligerents to make up for their relative military weakness. Economic concessions took the form of merchandise trade, services, labour, and capital flows. Depending on their position and the changing fortunes of war, neutral countries could also extract concessions from the belligerents, if their situation permitted.

Caroline Freund, Alen Mulabdic, Michele Ruta, 28 October 2019

The conventional wisdom is that 3D printing will shorten supply chains and reduce world trade. This column examines the trade effects of the shift to 3D printing in the production of hearing aids. It shows that adopting the new technology in production increased trade by roughly 60% as production costs came down. An analysis of 35 other products that are increasingly produced using 3D printing also finds positive effects but suggests that product characteristics such as bulkiness can affect the relationship between 3D printing and trade. 

Jayant Menon, 27 September 2019

The impact of a simple 25% trade tariff can go far beyond the costs of directly impacted goods. This column shows that seemingly small tariffs can substantially disrupt global value chains, both through the difference between nominal and effective tariff rates and the relative costs of relocation and transhipment, and also because of how the trade dispute is being perceived. If it is seen as a symptom of an enduring geopolitical struggle for global economic dominance, then it could recur. 

Daniel Gros, 09 September 2019

Traditional analysis of tariffs in a partial equilibrium setting can tell us much about the welfare consequences of the US-China trade war. The column argues that, as tariffs ratchet up, welfare costs for both sides increase disproportionately. The cost of trade diversion in the US to less-efficient suppliers likely overwhelms any terms-of-trade gain the US might enjoy. In all cases, exporters in the rest of the world benefit.

Matthias Flückiger, Erik Hornung, Mario Larch, Markus Ludwig, Allard Mees, 28 August 2019

Against the backdrop of megaprojects such as the TEN-T Core Network or the Belt and Road initiative, assessing the role of transport infrastructure in fostering economic integration has gained renewed interest. While there is clear evidence that reducing transport costs increases economic integration in the short run, this column emphasises that we should be aware of the profound and lasting effects that past infrastructure investments have on economic and cultural integration.

Giancarlo Corsetti, Meredith A. Crowley, Lu Han, 26 August 2019

An immediate impact of the Brexit referendum in 2016 was the large, rapid depreciation of the sterling against all other currencies.The weak pound did not boost UK export volumes, but less clear is whether UK firms lowered their export prices in line with the weaker pound. This column shows that the UK export price response to depreciation depends on the currency in which UK firms invoice their cross-border transactions. Firms invoicing in sterling gained competitiveness by passing the sterling’s weakness through to prices, unlike firms invoicing in vehicle or destination currencies,which adjusted their mark-ups.

Zhen Huo, Andrei Levchenko, Nitya Pandalai-Nayar, 17 August 2019

The international co-movements of business cycles is a key determinant of trade and monetary policy, but the ways in which it is affected by technology, TFP, and trade openness are not fully understood. This column shows how such co-movements are affected by trade linkages and technology. It finds that non-technology shocks contribute more to international co-movement than TFP shocks, and that transmission plays a notable but small part in co-movements.

Jacques Melitz, Farid Toubal, 01 August 2019

Artificial intelligence has made spectacular progress in recent years. One particular source of high expectations is automatic translation and whether it will finally bring about the long-predicted death of distance in trade. This column examines the impact of a common language on bilateral trade and finds that the net result of reducing linguistic frictions with a set of trading partners is not apparent.The potential impact of machine translation on foreign trade remains up in the air.

Francois de Soyres, Alen Mulabdic, Michele Ruta, 12 July 2019

Common transport infrastructure can improve welfare for participating countries, but they are costly undertakings with potentially asymmetric effects on trade and income of individual countries. This column uses new data on China’s Belt and Road transport projects to quantify the economic impact of the initiative. Welfare in participating countries could increase by 2.8% if all projects are implemented, but some countries have a negative welfare effect because of the high cost of the infrastructure. 

Alvaro Espitia, Aaditya Mattoo, Mondher Mimouni, Xavier Pichot, Nadia Rocha, 10 July 2019

Preferential trade agreements cover more than half of world trade. This column argues that while the 280 preferential trade agreements in existence have substantially widened the scope of free trade and reduced average applied tariffs, they have struggled against traditional bastions of protection in poorer countries and have not been able to eliminate the high levels of protection for a handful of sensitive products. While preference margins offered to partners in such agreements seem large, their significance shrinks when competition from both preferential and non-preferential sources is considered.

Hites Ahir, Nicholas Bloom, Davide Furceri, 04 July 2019

Recent developments have inspired efforts to measure trade uncertainty. This column presents a new index of world trade uncertainty for 143 countries, measured on a quarterly basis from 1996 onwards, using the Economist Intelligence Unit country reports. The index shows that uncertainty in trade is rising sharply. This has important implications for global economic prospects.

Marco Buti, István Székely, 28 June 2019

The EU11 economies are among the most open economies globally. The process of trade integration and the creation of GVCs have also drove a significant inflow of FDI into these countries. This column shows that while integration in the EU and FDI have enhanced their growth potential, these developments have also made them more vulnerable to external shocks. Domestic and EU-level reforms in the EU11 should focus on increasing economic and social resilience. 

Weicheng Lian, Natalija Novta, Evgenia Pugacheva, Yannick Timmer, Petia Topalova, 07 June 2019

The dramatic decline in the relative price of capital goods has been an important – but overlooked – driver of real investment. This column analyses cross-country price data to establish that deepening trade integration and productivity growth have both contributed to this decline. The erosion of support for international trade and sluggish productivity growth may limit further declines in relative prices of capital goods, which could negatively affect real investment rates. 

Sergi Basco, Martí Mestieri, 19 May 2019

Trade in intermediates (or ‘unbundling of production') and trade in capital have become increasingly important in last 25 years. This column shows that trade in intermediates generates a reallocation of capital across countries that exacerbates world inequality in both income and welfare. Unbundling of production hurts middle-income countries but helps those with high productivity. Trade in intermediates also increases within-country inequality, and this increase is U-shaped in the aggregate productivity level of the country. 

Hites Ahir, Nicholas Bloom, Davide Furceri, 11 May 2019

According to the latest IMF projections, the global economy is now projected to grow at 3.3% in 2019, down from 3.6% in 2018. This is partly due to rising uncertainty in many parts of the world. This column shows how these statements are in line with the latest reading of the World Uncertainty Index, which shows a sharp increase in the first quarter of 2019. The increase in uncertainty observed in the first quarter could be enough to knock up to 0.5% of global growth over the course of the year. 

Chad Bown, 10 May 2019

Who will be the biggest loser in this trade war? Chad Bown tells Tim Phillips why it could be the WTO's dispute resolution system, and why we should worry if this happens.

David M. Higgins, Brian Varian, 27 April 2019

In the late 1920s and early 1930s, Britain tried to reorient its trade towards the Empire via an advertising campaign led by the Empire Marketing Board. As this column shows, in economic terms, the initiative was a complete failure, producing no increase in the Empire’s share of Britain’s imports. Imperial sentiment conflicted with economic reality: Britain was the biggest global importer of produce from the late 19th century to the interwar period, and the EMB’s activities were constrained by entrenched consumer preferences for non-Empire foodstuffs, such as Argentine beef and Danish butter.

Thilo Huning, Nikolaus Wolf, 12 April 2019

State borders can change due to both political and economic disputes. This column shows how the formation of the German state can be traced back to British political intervention at the end of the Napoleonic War. In preventing Russia from gaining territory westwards, Britain set in motion a series of events that gave Prussia strategic trade advantages. This led to the formation of Europe's first customs union (the Zollverein) and prepared the political unification of Germany.

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