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on International Trade |
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Issue of 2025–06–30
sixteen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Rikard FORSLID; Toshihiro OKUBO |
| Abstract: | This paper explores how firm’s internalization strategies - specifically exporting and foreign direct investment (FDI) - relate to their product scope. We develop a model incorporating firm heterogeneity and multi-product firms. The most productive firms engage in FDI and produce the broadest range of products. Firms with intermediate productivity levels tend to export, offering fewer product varieties than FDI firms. In contrast, low-productivity firms typically operate domestically and have the smallest product scope. The model also predicts that the ratio of the product scope of exporters and domestic firms and the ratio of FDI firms and exporters should decline as the difficulty of expanding the product scope increases. The Japanese firm-level data support the theoretical predictions. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25053 |
| By: | Chiara Castelli (The Vienna Institute for International Economic Studies, wiiw); Ronald B. Davies; Javier Flórez Mendoza (The Vienna Institute for International Economic Studies, wiiw); Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | This study examines the interplay between trade policy, in particular non-tariff measures (NTMs), and revealed technological comparative advantage (RTA) at the NUTS 2 level as drivers of foreign direct investment (FDI) over time. Combining data from the Orbis database (Bureau Van Dijk), the NTMs database (WTO I-TIP) and the European Patent Office (EPO PATStat), we construct a comprehensive panel database of European firms owned by foreign-owned EU and non-EU firms. This database includes financial information for both parent companies and their subsidiaries as well as detailed country- and sector-specific trade barriers from the perspective of both the home and host economies. Furthermore, this database allows us to compute tailored RTA variables reflecting firm-specific technological interests proxied by firms’ patent production across technology classes. Using a Poisson pseudo-maximum likelihood (PPML) estimator, our analysis reveals a heterogeneous impact of NTMs and RTAs on FDI investment in the EU regions. Specifically, while increasing the regulatory distance (RD) of technical barriers to trade (TBTs) and sanitary-and-phytosanitary-standard (SPS) measures hampers FDI investment from extra-EU companies, the results on tariffs support the regulatory jumping motive. Furthermore, local technological capabilities significantly support FDI, especially when RTAs reflect the technological interests of the foreign-owned subsidiary, while the effect is reversed when accounting for the innovation portfolio of the parent company. |
| Keywords: | FDI, tariff and non-tariff measures, revealed technological advantage |
| JEL: | F23 O24 O34 R58 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:wii:wpaper:264 |
| By: | Fernando Broner; Alberto Martin; Josefin Meyer; Christoph Trebesch |
| Abstract: | How do shifts in the global balance of power shape the world economy? We propose a theory of alignment-based “hegemonic globalization, ” built on two central premises: countries differ in their preferences over policies (such as the rule of law or regulatory frameworks) and trade between any two countries increases with the degree of alignment in these policies. Hegemons promote policy alignment and thereby facilitate deeper trade integration. A unipolar world, dominated by a single hegemon, tends to support globalization. However, the transition to a multipolar world can trigger fragmentation, which is particularly costly for the declining hegemon and its closest allies. To test the theory, we use nternational treaties as a proxy for alignment and compile a novel “Global Treaties Database, ” covering 77, 000 international agreements signed between 1800 and 2020. Consistent with the theory, we find that hegemons account for a disproportionate share of global treaty activity and that treaty-signing is a leading indicator of increasing bilateral trade. |
| Keywords: | hegemon, globalization, trade integration, international coercion, international treaties, cooperation, multipolar world |
| JEL: | F02 F15 F50 F51 F55 F60 P45 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11951 |
| By: | Chen CHEN; Nimesh SALIKE; Willem THORBECKE |
| Abstract: | China’s information and communication technology (ICT) exports have faced intense trade friction. To investigate why China’s ICT industry has been targeted, this paper examines it before the Sino-U.S. trade war erupted. We first investigate whether changes in exchange rates and tariffs affect China’s ICT exports differently depending on their sophistication levels. We estimate the exchange rate and tariff effects for 44 ICT HS 4-digit export categories included in Attachment A for the WTO Information Technology Agreement by employing high-dimensional fixed effects on bilateral trade data between China and 196 trading partners between 2003 and 2018. The results indicate that renminbi appreciations reduce ICT exports and that exchange rate elasticities are lower for more sophisticated products. Tariffs reduce exports much more than appreciations do, especially for highly sophisticated ICT exports. We also report product-level exchange rate elasticities for important ICT products and present an industrial development strategy. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25054 |
| By: | Pardy, Martina; Rodríguez-Pose, Andrés |
| Abstract: | This paper analyses how trade influences intra‐regional income inequality across Europe's NUTS‐2 regions. Drawing on newly compiled datasets capturing both inter‐regional trade and local‐level inequality for all EU member states plus the UK, we employ an econometric framework—complete with Instrumental Variable estimations and robust sensitivity analyses—to gauge the impact of trade on regional interpersonal inequality. In addition to examining aggregate trade, we distinguish between various trade channels, including exchanges within the EU versus those with the rest of the world, links to neighbouring regions versus non‐neighbours and domestic versus international flows. Our findings reveal that higher levels of trade are positively associated with changes in regional income inequality, as measured by the Gini coefficient. Crucially, this link depends on trading partners: trade within a single country, within the EU and with non‐neighbouring regions correlates with rising inequality, whereas international trade, trade with non‐EU partners or trade with neighbouring regions shows no statistically significant effect. These conclusions withstand a battery of robustness checks, including new control variables and a population‐weighted approach, further underscoring the role that particular types of trade play in shaping regional income disparities. |
| Keywords: | trade; interpersonal inequality; regions; Europe |
| JEL: | D63 F14 R13 |
| Date: | 2025–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128063 |
| By: | Mario Larch (University of Bayreuth); Philipp Meinen (Deutsche Bundesbank); Arne Nagengast (Deutsche Bundesbank); Yoto Yotov (School of Economics, Drexel University) |
| Abstract: | We develop and test a theory of efficient international trade. Efficiency gains arise through lower trade costs faced by "trade specialists", whose superiority over "common traders" manifests itself through lower trade costs. To test our theory, we construct and deploy a novel dataset based on firm-level merchanting data. Our estimates reveal that, on average, the trade costs for the "trade specialists" are about four times lower than for non-specialists. The corresponding welfare effects from globally efficient trade amount to a remarkable gain of 80%, on average, which sends an encouraging message for the potential gains from trade that are missing in the existing literature. |
| Keywords: | Efficiency, International Trade, Trade Costs, Gains from Trade |
| JEL: | D60 D61 F10 F14 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:drx:wpaper:202528 |
| By: | Howe, Martin; Lesh, Matthew |
| Abstract: | Parallel imports are genuine products imported into the United Kingdom without the consent of the intellectual property (IP) rights holder, often taking place when there is a price or availability difference between markets. Parallel import restrictions (PIRs) allow producers to control distribution across borders and price-discriminate between different national markets. The UK historically allowed parallel imports based on a principle of international exhaustion of rights. This changed following the harmonisation of EU trademark rules in the late 20th century, with the European Court of Justice (ECJ) requiring member states to block imports of genuine goods from outside the EU without rights holder permission. Brexit has provided an opportunity to diverge from the EU approach and abolish an effective trade barrier. The previous government consulted on the future parallel import regime in 2021 but did not make a final decision prior to the election. There is therefore an opportunity for the new government to take action. Since Brexit, the UK has continued allowing parallel imports from the EU/EEA while restricting imports from the rest of the world. This approach is arbitrary, inconsistent, and may violate World Trade Organization (WTO) obligations. Removing PIRs would intensify competition, lower consumer prices, expand consumer choice and improve supply chain flexibility. Academic evidence from Australia, New Zealand and within the EU suggests benefits to consumers from allowing parallel imports. The NHS, for example, is estimated to save hundreds of millions of pounds each year as a result of parallel imports from the EU. Arguments from rights holders against removing restrictions - such as harming domestic creative industries, reducing investment incentives, impacting product quality, distorting retail competition, and environmental/ethical concerns - are not well supported by evidence. There may be limited exceptional cases, such as low-cost pharmaceuticals for developing countries, warranting continued restriction. The UK should revert to its historical stance by allowing parallel imports from all countries with narrow exceptions as needed. This would be consistent with the approach taken by many other nations globally. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ieadps:314033 |
| By: | Ridha Nouira; Leila Ben Salem; Sami Saafi; Christophe Rault |
| Abstract: | This study explores the connection between renewable energy consumption and international trade, with a particular focus on the influence of climate policy. We argue that this relationship is nonlinear and subject to threshold effects. Using a dynamic threshold model developed by Seo and Shin (2016), we analyze data from 1990 to 2023 for a panel of 29 developed and developing countries. Our findings reveal that climate policy plays a crucial role in shaping the renewable energy–trade nexus, with effects varying according to policy stringency and a country's development level. In developing countries, renewable energy consumption consistently enhances exports, regardless of policy stringency. In contrast, in developed countries, strict policies reduce import dependence, indicating a move toward energy independence, but they may also dampen the positive trade effects of renewable energy due to higher compliance costs and regulatory barriers. These results underscore the need for tailored policy strategies: developed countries should balance ambitious environmental goals with trade efficiency by streamlining regulations and fostering international policy harmonization, while developing countries can leverage renewable energy adoption as a tool to enhance exports, attract investment, and strengthen technological capabilities. |
| Keywords: | renewable energy consumption, international trade, climate policy stringency, dynamic threshold model, sustainable development |
| JEL: | C5 F1 Q4 Q5 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11934 |
| By: | Marina Ngoma Mavungu |
| Abstract: | The rise of China in the global economy has been linked with negative impacts on employment across many high- and middle-income countries. However, evidence for African countries is limited. This paper investigates the causal relationship between Chinese imports and manufacturing employment in Ethiopia. Imports may harm domestic firms through a revenue effect (lower market shares) or benefit them, indirectly if competition spurs innovation or directly through access to better quality or cheaper inputs. The analysis shows that a one unit increase in import penetration leads to a 15.2 percent increase in industry employment. The inputs effect is disentangled from the other two effects by decomposing total Chinese imports by their end-use category using input-output tables. The evidence shows that imported intermediate inputs are driving the employment gains. The findings are consistent with the idea that employment gains are a result of productivity gains and increases in capacity utilization. These employment gains appear to benefit large firms and labor-intensive industries disproportionately. |
| Date: | 2025–05–12 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11118 |
| By: | Glauber, Joseph W.; Mamun, Abdullah |
| Abstract: | Rice is a major food crop supplying, on average, 516 kcal per capita per day or roughly 17.3% of total calories consumed globally in 2022. Rice production and consumption is concentrated in Asia though rice has grown as an important staple crop outside of Asia. Sub-Saharan Africa currently accounts for 7 percent of global rice consumption but account for over 28 percent of total rice imports. Rice is a thinly traded crop compared to other staples like wheat and maize. Rice imports account for about 10 percent of total consumption today but import penetration is expected to grow to about 11 percent by 2033. India is the world’s largest exporter accounting for about 40 percent of total exports in recent years. Pakistan, Thailand, Vietnam and the United States account for an additional 40 percent of world exports. Mid-range projections for the next 10 years suggest that trends in place will likely continue. Yields are assumed to keep pace with global consumption trends. Sub-Saharan Africa will account for a significant share of the overall growth in consumption. The US Department of Agriculture (USDA) forecasts that Sub-Saharan Africa will account for 27 percent of the growth in global rice consumption and 47 percent of the growth in global imports over the next 10 years. Climate and government distortions remain the single largest vulnerabilities to the rice market. Because of the large concentration of rice production in South and Southeast Asia, crop production is vulnerable to El Niño and other climatic events like the Indian Ocean Dipole which can bring hot and dry weather and disrupt the monsoon season. Since rice is so thinly traded, market restrictions imposed by one of more of the major exporting countries can cause large price impacts. In 2007/08, export bans affected as much as 80 percent of rice trade which caused global prices to almost triple. In July 2023, India imposed export restrictions fearing that domestic production would be harmed by a developing El Nino event. Global rice prices rose by 30 percent as a result. Importing countries bore much of the brunt of those increases, particularly poorer countries in the rice-importing areas of Sub-Saharan Africa. Other potential vulnerabilities include logistical issues, particularly bottlenecks in the major shipping lanes of Asia. |
| Keywords: | climate; rice; risk; trade; vulnerability |
| Date: | 2024–12–31 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:gsspwp:168523 |
| By: | Kazunobu HAYAKAWA; Keiko ITO |
| Abstract: | This study empirically examines the impact on Japanese supplier firms’ exports to China of the US government’s tightening of export control regulations on China’s telecommunications equipment company, Huawei Technologies Co., Ltd. (hereinafter, Huawei). We identify Huawei’s major Japanese suppliers and apply the difference-in-differences method to firm-level data from 2016 to 2021. The results indicate that compared with other Japanese firms in the same industry, Huawei’s supplier firms reduced their exports to China in 2020, just after Huawei was added to the US Entity List in 2019. The negative effect was larger for Huawei suppliers’ exports to non-affiliated Chinese firms (i.e., exports in inter-firm transactions) than for their exports to affiliated firms in China (i.e., intra-firm exports). Suppliers that intensively engaged in research and development activities further reduced their exports by 2021. By contrast, while non-China-bound exports were not affected by the US regulations, Huawei suppliers significantly increased exports to their affiliates located in countries or regions outside China in 2021, suggesting a stronger inclination among Huawei’s Japanese suppliers toward less risky alternatives. Indeed, either an insignificant change or even a significant increase was found in the total sales of Huawei’s suppliers. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25061 |
| By: | Shujiro URATA; Youngmin BAEK |
| Abstract: | The expansion of global value chains (GVCs) has reshaped labor markets in developed countries, influencing both wage levels and inequality. By linking the "Basic Survey of Japanese Business Structure and Activities" with the "Basic Survey on Wage Structure, †this study employs the Mincer model to empirically examine the effects of a firm’s GVC participation on workers' wages. The results indicate that GVC participation is associated with higher wages across nearly all worker characteristics, with both direct and indirect GVC firms offering wage premiums relative to non-GVC firms. Moreover, GVC participation appears to mitigate the wage inequality between male and female workers, non-production and production workers, and non-routine and routine workers. However, these benefits are not distributed evenly. Cognitive and regular workers experience greater wage gains, whereas manual and non-regular workers face lower wage growth, leading to a widening wage gap. This finding aligns with the Stolper-Samuelson theorem because Japan, a developed country, specializes in capital- and skill-intensive production while offshoring labor-intensive tasks. These findings have significant implications for Japan’s labor market, where wage inequality persists despite prolonged wage stagnation. As many Japanese firms are likely to engage in GVCs and many GVC firms faced with shrinking domestic markets intensify their participation in GVCs, the wage disparity between cognitive and manual workers, as well as between regular and non-regular workers, may further intensify. To cope with this problem, policies should focus on reskilling and upskilling manual and non-regular workers to ensure that they benefit from globalization. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25057 |
| By: | Sourish Dutta |
| Abstract: | Outlines the construction of high-resolution, 7-digit product-level Supply-Use Tables (SUTs) and symmetric Input-Output Tables (IOTs) for the Indian economy, leveraging microdata from the Annual Survey of Industries (ASI) for the period 2016-2022. We delineate a robust methodology encompassing the generation of detailed input and output flows, with a particular focus on the reconciliation of data from registered and unregistered manufacturing sectors through a meticulously developed NPCMS-NIC concordance. The critical transformation from the often-rectangular SUTs to square, symmetric product-by-product IOTs is explicated using the Industry Technology Assumption, a choice justified by its suitability for handling by-products prevalent in a diverse manufacturing landscape. The analytical prowess of this newly constructed high-resolution IOT framework is then demonstrated through its application to assess key economic impacts, specifically the Domestic Value Added (DVA) generated and the employment supported by production and export activities. A detailed case study of India's rapidly evolving mobile phone manufacturing sector (NPCMS 4722200) for the 2016-2022 period reveals profound structural shifts: significant output growth coupled with notable import substitution, a remarkable surge in exports, and a dynamic evolution in the DVA versus Foreign Value Added (FVA) shares, particularly in export-oriented production. The analysis further uncovers substantial employment growth, albeit with an increasing reliance on contractual labour and a heartening rise in female participation in the workforce. These meticulously constructed tables represent a significant methodological advancement and provide an invaluable empirical resource for nuanced analysis of sectoral interdependencies, the efficacy of industrial policy, and the complex dynamics of India's engagement with global value chains. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.13936 |
| By: | Warwick J. McKibbin (Peterson Institute for International Economics); Marcus Noland (Peterson Institute for International Economics); Geoffrey Shuetrim (McKibbin Software Group Pty Ltd.) |
| Abstract: | This paper explores the implications of President Donald Trump's so-called Liberation Day tariffs on the US and global economies under five alternative scenarios. As he continues to change his tariffs daily, the paper starts with a snapshot of two plausible, core, tariff scenarios based on his recent comments—one with high tariffs and one with low tariffs. The paper then considers two more scenarios in which other economies retaliate to the high or low US tariffs by imposing matching tariffs on US exports. The fifth scenario includes high US tariffs with retaliation plus a rise in the risk of holding US assets. This increase in risk causes a depreciation of the US dollar similar in scale to the shifts seen in the week following the Liberation Day tariffs announcement on April 2, 2025. The paper starts by exploring the details of the changes made to the original tariff announcements from April 2 to May 10. This is particularly important for understanding the tariffs on Canada and Mexico, which were substantially reduced during the period through exemptions under the United States-Mexico-Canada Agreement (USMCA). The authors find the tariffs significantly reduce US and global economic growth and increase inflation in many economies, depending on how countries respond. However, the outcomes are less severe than the original April 2 announcements implied. Many exemptions and tariff adjustments have been made since then for particular goods and countries. Retaliation by other countries worsens the economic losses, and inflation increases. The tariffs disproportionately hurt the US agriculture and durable manufacturing sectors by reducing output and employment and increasing prices. Finally, in the fifth scenario, the falling dollar and higher longer-term interest rates accentuate US losses in employment and income as foreign capital flows away from the United States to other countries. A more complete set of results for most countries and regions can be found in the online dashboard (https://documentation.gcubed.com/gcubed/version/6G/scenarios/McKibbin_Noland_Shuetrim_2025a/). The Peterson Institute for International Economics has no partisan goal in publishing this research. Our objective is to educate policymakers and the public about the effects these policies would have on Americans and other people around the world. |
| JEL: | F13 F47 C69 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:iie:wpaper:wp25-13 |
| By: | Tadashi ITO; Toshiyuki MATSUURA |
| Abstract: | Using firm-level data from Japan, this study examines how firms restructure in response to import competition from China, with a focus on employment adjustments and industry switching. The results indicate that many firms reduced their workforce in response to rising imports, with production workers experiencing the most substantial job losses. An analysis of the time lag in the effects of import shocks suggests that while the number of production workers declines immediately following an increase in imports, broader employment adjustments and industry switching typically occur after a delay of two or more years. Moreover, a comparison between firms that switched industries and those that did not shows that non-switching firms faced more severe negative impacts from import competition. Offshoring plays a critical role in mitigating these adverse effects. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25059 |
| By: | Huynh, Quynh (University College London); Ku, Hyejin (University College London) |
| Abstract: | We examine the relationship between economic development and female labor force participation, with a focus on the impact of gender norms. Analyzing quasi-random variation in provincial exports in reunified Vietnam from 2002 to 2018, we find that a positive economic shock led to a significant decline in women’s labor market engagement, particularly among married women from wealthier households and those with husbands in more skilled occupations. This trend is more pronounced in the South (formerly capitalist) than in the North (always socialist), and among native Southerners compared to Northerners relocated to the South after the war. Our findings highlight the importance of gender role attitudes in shaping women’s responses to rising incomes. |
| Keywords: | female labor force participation, social norms, gender role attitudes, income and substitution effects, trade liberalization |
| JEL: | J16 J22 O12 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17911 |