Edith Laget, Alberto Osnago, Nadia Rocha, Michele Ruta, 14 July 2018

The making and unmaking of trade agreements affects global production. This column reveals how deeper agreements have boosted countries’ participation in global value chains and helped them integrate in industries with higher levels of value added. Investment and competition now drive global value chain participation in North-South relationships, while removing traditional barriers remains important for South-South relationships.

Brian Varian, 23 June 2018

Brexit has sparked interest in trade agreements between Britain and the Commonwealth. This has a precedent in the Edwardian era, when the Dominions adopted policies of imperial preference toward imports from Britain. This column argues that New Zealand’s policy of imperial preference, enacted in 1903, was ineffective in diverting trade toward Britain, suggesting that trade policies within the British Empire or Commonwealth do not always achieve what they intend. 

Lionel Fontagné, Gianluca Santoni, 30 April 2018

Country-pairs self-select in regional trade agreements, and this endogeneity biases the estimation of the impact of such agreements within a gravity framework. This column uses a framework for predicting which countries should engage in RTAs based solely on economic determinants, including global value chains, and compares this ‘natural’ geography of agreements with the actual geography. The results suggest that the endogenous geography of RTAs is shaped by the development of GVCs.

Stéphanie Brunelin, Jaime de Melo, Alberto Portugal-Perez, 27 April 2018

Rules of origin play a crucial role in preferential trade agreements, and they can also deny intended market access for preference receivers. This column examines a relaxation by the EU of the origin requirements for selected products from Jordan, which is intended to create 200,000 job opportunities for Syrian refugees. While the relaxation decision may have an effect on the refugee crisis in Jordan, further simplifications in RoO requirements are called for.

Jerónimo Carballo, Kyle Handley, Nuno Limão, 16 March 2018

Economic downturns can be both a cause and an effect of uncertainty. This column argues that uncertainty has international spillovers that can be mitigated via credible international trade agreements such as NAFTA, which provided US firms with valuable insurance against the widespread threat of a global trade war during the 2008 crisis. However, the credibility and insurance value of these agreements is being trumped by events such as Brexit, the renegotiation of NAFTA, and US threats of a trade war, which mark the start of a ‘trade cold war’.

Giuseppe Berlingieri, Holger Breinlich, Swati Dhingra, 12 March 2018

There has been a surge in the number of trade agreements over the past two decades. This column investigates the impact of trade agreements implemented by the EU between 1993 and 2013 and asks how consumers benefit from such agreements. The evidence shows that trade agreements increased quality by 7% on average but did not affect prices or variety. This translates into a cumulative reduction in consumer prices of 0.24%, equivalent to savings of €24 billion per year for EU consumers. Higher-income EU countries enjoyed much stronger quality increases and larger overall consumer benefits.

Céline Carrère, Marcelo Olarreaga, Damian Raess, 15 December 2017

Protecting workers through the inclusion of labour clauses in trade agreements has become more common since the first such causes were included in NAFTA, but some argue that by increasing labour costs in developing countries, they represent a form of protectionism. This column uses new data to argue that there is no evidence for adverse effects on trade from labour clauses. When such clauses are strong, and if they emphasise cooperation in their implementation, they have a positive effect on the commercial interests of developing countries.

Scott Baier, Yoto Yotov, Thomas Zylkin, 28 April 2017

There is a large empirical literature examining the effects of free trade agreements. However, most studies to date have focused on a common average effect across all agreements or have assumed that the effects are common across similar types of agreements. This column examines heterogeneity in the effects of free trade agreements. Along with across-agreement heterogeneity, substantial within-agreement heterogeneity is observed. The effects of a specific agreement can be starkly different for two trading partners.

Chang-Tai Hsieh, Nicholas Li, Ralph Ossa, Mu-Jeung Yang, 26 March 2017

Trade economists typically believe that in addition to lower prices for imported goods, trade liberalisation also brings import variety and domestic productivity gains. This column accounts for these ‘new’ gains in a careful reconsideration of the Canada-US Free Trade Agreement. Although the agreement did see improvements in Canadian income associated with import variety and domestic productivity, these were far outweighed by the welfare loss associated with the reduction in domestic variety. Nonetheless, Canadian welfare did improve overall when one takes into account the ‘traditional’ gains associated with lower import prices.

Alen Mulabdic, Alberto Osnago, Michele Ruta, 23 January 2017

The British government and the EU face a difficult negotiation over the terms of Brexit. This column uses new data on the content of trade agreements to assess the trade impact of Brexit, identifying a tradeoff between the depth of the post-Brexit agreement and the intensity of future UK-EU trade. A ‘harder’ Brexit may have a stronger negative impact on the UK’s services trade and supply chain integration, which have relied more on the depth of the EU. This tradeoff will likely delimit future policy choices. 

Chad Bown, 29 November 2016

Trade agreements involving the US could be the first economic casualty of the 2016 election. The existing US trade agreements rose from the ashes of WWII and the Great Depression. This column argues that understanding how they protect the US economy, American workers, and consumers is critical to avoiding a repeat of the policy mistakes of earlier eras.

Gary Hufbauer, Euijin Jung, 29 September 2016

Donald Trump has consistently made headlines with unusual and potentially dangerous economic policy proposals, including threatening to pull out of the WTO, renegotiating trade agreements, and imposing tariffs on imports from Mexico and China. This column explores the legal and economic dimensions of these proposals. Old and modern legal statutes could allow a US president to implement such policies, and the repercussions for the US economy could be severely negative.

Sergey Nigai, 04 September 2016

Trade economists routinely evaluate changes in consumer welfare due to trade based on the assumption of a representative consumer. This column argues that this assumption often disguises much of the heterogeneity in gains across the income distribution, which leads to an overestimation of the gains for the poor and underestimation for the rich, especially for developing countries. This could help explain the lack of public consensus on the benefits of recent free trade agreements.

Fabio Ghironi, 03 July 2016

Debate surrounding the Trans-Pacific Partnership (TPP) is raging. Economists on different sides of the debate have used different arguments and tools to support their positions. This column surveys several recent studies and the strategies they employ in modelling the potential effects of TPP. It argues that structural models need to start from micro foundations, and need to incorporate trade and macro dynamics. The general results of these studies lend support to those who think that TPP will be beneficial.

Swarnali Ahmed Hannan, 01 July 2016

The Trans-Pacific Partnership has renewed interest in understanding the impact of trade agreements. This column employs a new approach – synthetic controls– to understand the impact of past trade agreements. The results show that trade agreements can generate substantial gains: on average, an increase of exports by 80 percentage points over ten years. The export gains are higher when emerging markets have trade agreements with advanced markets. Interestingly, all the countries in NAFTA have gained substantially due to the agreement.

Emanuel Ornelas, 14 May 2016

For over half a century, one pillar of the world trading system has been the principle of ‘special and differential treatment’ (SDT) for developing countries. This column explores how SDT has impacted trade policy around the world. Although this strategy aims to help developing countries, in design and practice it seems to be biased against them. While there is no support for SDT as a growth-promoting strategy, there is a clear need for further research that explicitly tackles the empirical challenges that it presents. 

Gabriel Felbermayr, Jasmin Gröschl, Thomas Steinwachs, 27 April 2016

The refugee crisis has placed Europe’s Schengen Agreement under stress, with some calling for the reintroduction of identity checks and other border controls. This column presents new estimates of the potential costs of such controls. On average, the removal of controls at one border acts like the removal of a 0.7% tariff. The controls currently notified to the EU Commission could lower EU GDP by around €12.5 billion. The full demise of Schengen would be about three times as costly.

Yasuyuki Todo, 24 December 2015

The Trans-Pacific Partnership (TPP) agreement was reached in October following seven years of negotiations. This column examines how Japan can maximise the TPP’s effect on its economy, identifying several additional policies that will be necessary. These include support for Japanese small and medium enterprises seeking to expand operations overseas, and policies that encourage and ease incoming foreign direct investment.

Jayant Menon, 29 November 2015

After more than five years, negotiations surrounding the Trans-Pacific Partnership (TPP) have finally been concluded. Yet, there is a lot that needs to be done before the agreement comes into force, and there is no certainty that it will. This column examines what TPP has achieved so far, what it has still not achieved, and the next steps involved, including the likely fate of the agreement itself.

Lionel Fontagné, Sébastien Jean, 16 November 2014

The TransAtlantic Trade and Investment Partnership (TTIP) has become a full-blown political issue as the two largest economic entities in the world are negotiating a deep integration agreement, going beyond what has been done previously in any agreement except the EU’s Single Market. This column estimates that a phasing-out of tariffs accompanied by a 25% cut in the trade restrictiveness of non-tariff measures would increase trade in goods and services between the two regions by 50%.

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