Alejandro Cuñat, Robert Zymek, 17 February 2020

Most countries exhibit large variation in bilateral trade balances across their trade partners. This column argues that it is possible to use gravity trade models to describe the sources of this variation with greater clarity, but that a large portion of the variation still remains poorly understood. It also shows that tariffs imposed during the US-China trade war will reduce the US-China trade deficit in the long run, but only by worsening the US trade balance with other trade partners almost one-for-one.

Gunes Gokmen, Wessel Vermeulen, Pierre-Louis Vézina, 01 February 2020

Throughout history, empires have facilitated trade within their territories by building and securing trade and migration routes, and by imposing common norms, languages, religions, and legal systems, all of which led to the accumulation of imperial capital. This column, based on novel data on the rise and fall of empires over the last 5,000 years, shows that imperial capital has a positive effect on current trade beyond historical legacies such as sharing a language or a religion. This suggests a persistent and previously unexplored influence of long-gone empires on current trade.

Cristina Constantinescu, Michele Ruta, Aaditya Mattoo, 23 December 2019

Francis Kramarz, Julien Martin, Isabelle Mejean, 11 December 2019

Economists continue to disagree about whether international trade exacerbates or diminishes volatility. This column presents firm-level evidence from French exporters and their European trading partners over 15 years to show that firm-level volatility increases individual-level and aggregate-level volatility. High concentration among buyers as well as suppliers can amplify these shocks.

Natasha Agarwal, Magnus Lodefalk, Majken Stenberg, Aili Tang, Sofia Tano, Zheng Wang, 11 December 2019

Export credit guarantees turned 100 this year, yet they have been sparsely studied. This column examines the causal effects of export credit guarantees on firm performance. It concludes by considering whether the provision of guarantees should be rebalanced in favour of small and medium-sized enterprises and by calling for governments to urgently integrate all major countries into a regulated system for export credit guarantees.

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. 

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