Alexandra Avdeenko, Maximilian Kaiser, Krisztina Kis-Katos, 19 May 2022

Whether economic sanctions against Russia have real effects has been increasingly called into question. This column suggests that changes in e-commerce can demonstrate whether and how the 2022 Western sanctions contributed to de-linking Russia from the West. An analysis of trends in cross-border international online retail based on digitally recorded daily transactions data from 2,288 international and Russian companies shows substantial declines in Russia’s e-commerce transactions. About five weeks after the war started, revenues from e-commerce imports to Russia had fallen by half, with no signs of compensation by Russian retailers in the sample studied.

Youngmin Baek, Kazunobu Hayakawa, 09 May 2022

What can explain the small or even negative effects of regional trade agreements on trade? Using trade data between Japan and other 68 countries from 2002 to 2018, this column argues that RTAs reduce fixed costs for foreign direct investment more than exporters. This could have a negative effect on trade. A simulation exercise indicates that introducing RTA between Japan and China would incentivise Japanese firms to set up production in China and sell locally rather than export from Japan.

Holger Breinlich, Elsa Leromain, Dennis Novy, Thomas Sampson, 11 April 2022

Import liberalisation brings down import costs and increases competition. But with scale economies, import liberalisation can also reduce the productivity of domestic industry by shrinking its scale, leading to lower exports.  As this column shows, evidence from the permanent normalisation of US trade relations with China in the early 2000s reveals that increased Chinese import competition indeed reduced US exports through this channel, implying the presence of industry-level scale economies in the US. Nevertheless, aggregate US openness still increased and the liberalisation raised US welfare.

Valentina Bruno, Hyun Song Shin, 27 July 2021

The strength of the US dollar in currency markets has drawn the attention of researchers, policymakers, and businesses for decades. This column examines the effects of the dollar on international trade, with a particular focus on exports. A strong dollar dampens trade volumes through the financial channel, outweighing any improvement in trade competitiveness. Trade activity is strong when the dollar is weak, but global trade suffers when the dollar is strong.

Alessandra Bonfiglioli, Federica De Pace, 25 June 2021

The rise in income inequality and, more prominently, in the wage gap between men and women has been one of the major concerns among policymakers and the public in recent years. This column presents new evidence from Germany on the impact of exports on the gender wage gap which shows that an increase in a plant’s exports significantly reduces the wage gap between male and female co-workers in white-collar occupations, but widens it for employees in blue-collar occupations. The findings suggest that designing policies that support women taking part in trade, especially in positions in which they would benefit from their comparative advantage, is crucial to maximise the potential benefits from globalisation.    

James Fetzer, Tina Highfill, Kassu Hossiso, Tom F. Howells III, Erich H. Strassner, Jeffrey A. Young, 23 June 2021

Research has shown that multinational enterprises located in the US account for roughly 90% of US exports of goods and for over 90% of exports of selected services. While these estimates show that multinationals clearly dominate trading activity of gross exports, they overstate the role of multinationals in US exports since non-multinationals are an important part of the production supply chain and make significant contributions to the value embodied in these exports. This column uses experimental Trade in Value Added statistics estimated from extended supply-use tables for the US for 2005 and 2012 to show that both multinational and non-multinational firms contribute significant amounts of content embodied in US exports.

Matthieu Crozet, Julian Hinz, Amrei Stammann, Joschka Wanner, 05 March 2021

Sanctions are imposed on a target country to exert political and economic pressure. But there is little evidence on how exporting firms regard trade with the sanctioned country. This column uses detailed monthly customs data from French firms to investigate the extensive margin of trade in episodes of sanctions-use against Iran, Russia, Cuba, and Myanmar. It finds the impact of sanctions is heterogeneous along firm dimensions and advises caution in the use of a policy tool with imprecise and unpredictable results.

Florin Maican, Matilda Orth, Mark Roberts, Van Anh Vuong, 26 January 2021

Firms’ incentives to undertake innovation investments can be affected by their activities in domestic and international markets. This column uses a structural framework to estimate the returns to innovation investments and analyse the impact of trade on those returns. It shows that a firm’s R&D investments raise its future productivity in both domestic and export markets, with a larger impact in the export market. Furthermore, it shows that public efforts to stimulate innovation investments can be offset by trade restrictions limiting access to world markets. These findings are important for policymakers to recognise when fostering innovation. 

Alvaro Espitia, Aaditya Mattoo, Nadia Rocha, Michele Ruta, Deborah Winkler, 18 January 2021

As COVID-19 spread across countries, many saw global value chains as transmitters of shocks. Using disaggregated export data for multiple countries, this column shows that participation in global value chains increased exporters’ vulnerability to foreign shocks, but it also reduced vulnerability to domestic shocks. Sourcing inputs from abroad is an example of beneficial diversification through trade when domestic production is disrupted. This evidence corroborates the view that nationalising value chains is not the way to improve resilience. 

Michal Gradzewicz, Jakub Mućk, 17 September 2020

There has been a lively debate concerning the dynamics of markups. This column contributes to this debate by studying the relationship between globalisation and monopolistic markups in Poland. It highlights important non-linearities leading to an uneven  distribution of the effects of global value chains for participating firms, with lowest benefits found for firms in the middle of the production chain where goods are highly standardised and substitutable. It also documents a fall in markups for Poland which can be explained by rising dependence on imported intermediates in export-oriented production and fiercer competition of domestic firms on export markets.

Kym Anderson, 16 February 2020

Global alcoholic beverage markets have changed dramatically in recent years due to globalisation, income growth in emerging economies, changes in individual preferences, policy initiatives to curb socially harmful drinking, and, in particular, the dual trade policy shocks of Brexit and the US’s unilaterally imposed discriminatory tariffs. This column provides an overview of the major trends and projects the possible effects of Brexit and the US tariffs on the global alcohol market. It concludes that both shocks would reduce world trade in wine. Even countries not targeted by US tariffs can be worse off if those tariffs sufficiently reduce global consumption. 

Andrea Ariu, Florian Mayneris, Mathieu Parenti, 06 February 2020

Many large and successful firms sell both goods and services; yet economists and policymakers continue to consider the two as distinct sectors subject to their own market adjustments and specific policies. Based on Belgian data, this column argues that the most successful manufacturing firms thrive through selling services that are associated with their goods. Services increase the appeal of a firm’s products, thus allowing it to sell more and at higher prices in international markets. Considering goods and services separately in trade agreement negotiations is likely to miss part of the business and welfare gains and losses. 

Dany Bahar, Andreas Hauptmann, Cem Özgüzel, Hillel Rapoport, 22 November 2019

The economic debate on immigration has focused on migration’s short-term labour market and fiscal effects. Less attention has been given to the long-run economic opportunities linked to migration. This column uses the case of refugees returning to the former Yugoslavia from Germany after the end of the Yugoslav wars to explore the role that returning migrants play in shaping the industrial development of their home country. The findings support the idea that migrants are drivers of knowhow and technology transfers between countries.

Yuqing Xing, 11 November 2019

In order to pursue ‘fair trade’, the Trump administration has imposed a punitive 25% tariff on $250 billion’s worth of Chinese goods. However, conventional trade statistics greatly exaggerate the US trade deficit with China. This column uses the iPhone as an example to demonstrate how the trade deficit is inflated and why value-added should be used to assess the bilateral trade balance. If multinational enterprises, including Apple, shift part of their value chains out of China, China may no longer play a central role in global value chains targeting the US market. Depreciation of the yuan will be insufficient to counter the effect. 

Willem Thorbecke, 06 November 2019

As the trade surpluses of East Asian countries have continued to exist in regional value chains despite the US-China trade war, one possible tool such economies could employ are currency appreciations. This column shows how exchange rates in upstream countries affect China’s exports. No single economy wants to appreciate its currency against the US dollar for fear of losing competitiveness, but a concerted effort to prioritise regional currencies could benefit the set of countries as a whole.

Stefania Garetto, Lindsay Oldenski, Natalia Ramondo, 08 October 2019

Multinational enterprises play an important role in coordinating production around the globe. This column presents a dynamic quantitative model of multinational enterprise expansion that can be used to analyse the effects of policies that affect the cost of the operations of such firms. It uses this model to estaimte the impact of potential implementations of Brexit.

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.

Tomoya Mori, Jens Wrona, 16 August 2019

The gravity equation has often been used to explain trade between regions or cities within countries. But it assumes that the distribution of industries is exogenous. This column explains how trade estimates are affected if we assume that large, centrally located cities attract more industries whose firms are more likely to export to other cities. Japanese data show exports from these cities are systematically underpredicted by aggregate gravity estimations, as the theory predicts.

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.

Reda Cherif, Fuad Hasanov, 16 June 2019

The 'Asian miracles' and their industrial policies are often considered as statistical accidents that cannot be replicated. The column argues that we can learn more about sustained growth from these miracles than from the large pool of failures, and that industrial policy is instrumental in achieving sustained growth. Successful policy uses state intervention for early entry into sophisticated sectors, strong export orientation, and fierce competition with strict accountability.

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