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on International Trade |
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Issue of 2025–07–28
eleven papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Aaron Flaaen; Fariha Kamal; Eunhee Lee; Kei-Mu Yi |
| Abstract: | Global value chains (GVC) are a pervasive feature of modern production, but they are hard to measure. Using confidential microdata from the U.S. Census Bureau, we develop novel measures of the linkages between U.S. manufacturing establishments’ imports and exports. We find that for every dollar of exports, imported inputs represent 13 cents in 2002 and 20 cents by 2017. Examining GVC trade flows in a gravity framework, we find that these flows are higher within “round-trip” (input and output market is the same) linkages, regional trade agreements, and multinational firm boundaries. The strong complementarities between input and output markets are muted by the proportionality assumptions embedded in global input-output tables. Finally, with an off-the-shelf model, we show the round-trip results can be obtained when firm-specific sourcing and exporting fixed costs are linked. |
| Keywords: | global value chains, manufacturing, exports, imports, establishment, microdata |
| JEL: | F1 F14 O51 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:25-44 |
| By: | Cody Kallen |
| Abstract: | Rising geopolitical tensions and supply chain vulnerabilities have driven recent fragmentation of foreign direct investment (FDI). This paper provides systematic evidence of FDI fragmentation along ideological and geographic lines across five dimensions: shifting away from ideologically distant countries (ideological sorting), prioritizing politically aligned countries (friendshoring), reducing exposure to specific high-risk countries (derisking), moving production closer to the home country (nearshoring), and returning investment to the home country (reshoring). Measures of FDI based on financial transactions reveal evidence of ideological sorting and nearshoring. The capital expenditures of multinational enterprises and their affiliates display ideological sorting, derisking, nearshoring, and reshoring. Cross-border M&A deals reflect patterns of derisking, while horizontal (but not vertical) M&A exhibits broader ideological realignment. At the industry level, derisking and ideological sorting appear widely distributed. By contrast, friendshoring and nearshoring of M&A remain concentrated in goods-producing sectors. |
| Keywords: | Fragmentation; Geoeconomics; Foreign direct investment |
| JEL: | F21 F23 F36 F50 F65 |
| Date: | 2025–07–16 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgif:1413 |
| By: | Hernán Vallejo (Universidad de los Andes) |
| Abstract: | This article presents a simplified model to compile and synthesize in a formal - and hopefully clear- way, some of the most important trade policy results of the literature, in what can be thought of as a Fundamental Theorem of Trade Policy. It shows that ceteris paribus, when other externalities and other distortions are not considered, optimal import tariffs and optimal taxes on exports are: positive for large countries; “beggar thy neighbor” and “beggar thy world” policies when applied by a large country; and examples of a dominant strategy for each large country, a Nash Equilibrium in trade policy and a Prisoner´s Dilemma, when applied simultaneously by several large countries. Import and export subsidies are shown to be “beggar thyself”, “benefit thy neighbor”, and “beggar thy world” policies. Optimal import tariffs and export taxes are zero for small countries. Consequently, retaliation by small countries when large countries use tariffs and/or export taxes exacerbates their own welfare losses. Enforceable and verifiable commitment technologies, through a multilateral institution such as a credible WTO, are required to avoid undesired outcomes. |
| Keywords: | Optimal Tariff, Optimal Export Tax, Beggar Thyself, Beggar Thy Neighbor, Benefit Thy Neighbor, Begga |
| JEL: | F13 F15 |
| Date: | 2025–07–15 |
| URL: | https://d.repec.org/n?u=RePEc:col:000089:021406 |
| By: | Broner, Fernando; Martin, Alberto; Meyer, Josefin; Trebesch, Christoph |
| 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 international treaties as a proxy for alignment and compile a novel "Global Treaties Database", covering 77, 000 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:zbw:ifwkwp:320425 |
| By: | Ebadi, Ebad; Aldaz-Carroll, Enrique |
| Abstract: | Trade’s impact on emissions is not straightforward. Existing literature on trade and emissions primarily focuses on countries' net export emissions, often neglecting the emissions saved by importing products instead of producing them domestically. The environmental impact from trade is influenced by the balance between emissions generated from exporting goods and emissions avoided by not producing them domestically. This paper investigates the environmental impacts of trade, focusing on the spatial differences in production emissions. Our estimates indicate that direct emissions embodied in exports are significant and rising, accounting for 31 percent of annual greenhouse gas (GHG) emissions and 25 percent of annual particulate matter (PM2.5) emissions in 2021. However, considering the direct emissions saved through imports, trade results in a reduction of global GHG emissions annually by up to 2.2 percent from 2004 to 2021, as it allows countries with high emission intensity to import rather than produce domestically. This reduction is not observed in PM2.5 emissions, where trade leads to an increase of up to 1 percent. These findings highlight the discrepancy in emission intensities between exporting and importing countries, which influences the impact of trade on global emissions. |
| Date: | 2025–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11164 |
| By: | Sharon Jeon; Ricardo M. Reyes-Heroles; Abhi Uppal; Eva Van Leemput; David Yu |
| Abstract: | In recent years, protectionist trade policies have gained momentum globally, reversing decades of increasing globalization. This shift is driven by growing skepticism about the benefits of free trade, national security concerns, geopolitical considerations, and efforts to enhance economic resilience in the wake of COVID-19. |
| Date: | 2025–07–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:2025-07-07-1 |
| By: | Lorenzo Caliendo (Yale University); Samuel Kortum (Yale University); Fernando Parro (University of Rochester) |
| Abstract: | This paper develops a complete-markets model to analyze the determinants of endogenous trade imbalances across countries. We introduce a framework where countries can trade in Arrow-Debreu securities to insure against different states of the world, which enables them to run deficits in some states and surpluses in others. The model allows for counterfactual analysis of various trade policy scenarios, such as unilateral tariff impositions. We derive the conditions under which trade deficits arise endogenously and discuss implications for welfare and trade policy analysis. |
| Date: | 2025–07–16 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2448 |
| By: | Bekkers, Eddy; Jhunjhunwala, Kirti; Metivier, Jeanne; Stolzenburg, Victor; Yilmaz, Ayse Nihal |
| Abstract: | On average, wages of female workers are lower than wages of male workers. In this paper, we explore to what extent a gender bias in trade costs explains this gender wage gap and how different policy reforms could lower it. First, we analyse the relation between various types of trade costs and female labour intensity across sectors. We find that more female labour intensive sectors face both higher tariffs and non-tariff barriers when exporting to other regions and when importing inputs. Second, we explore different trade policy reforms with regards to goods and services trade, and find that services trade policy reform has a more meaningful impact. Third, we simulate trade cost reductions caused by a reduced requirement for face-to-face interaction in services jobs, a phenomenon driven by digitalisation. This change would generate a much larger reduction of the gender wage gap than trade policy reforms. |
| Keywords: | Trade Policy, Gender wage gap, Labour market discrimination |
| JEL: | F16 F17 J16 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:wtowps:321864 |
| By: | Oscar Monterroso; Diego Vilán |
| Abstract: | It has been extensively documented that medium and low-income countries tend to experience substantially more volatile business cycles than their more developed counterparts. Given their reliance on commodities, emerging economies are highly exposed to fluctuations in their terms of trade (the price of a country's export prices relative to its import prices). This note seeks to document and quantify the effects of time-varying uncertainty of commodity terms of trade on aggregate economic activity in developing countries. |
| Date: | 2025–07–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:2025-07-07-3 |
| By: | Mulyukova, Alina |
| Abstract: | This paper investigates the impact of services sector liberalization on product innovation of downstream manufacturing firms. Leveraging firm-product panel data from India and employing a shift-share research design, I find that services liberalization significantly increases firms' product portfolio. Allowing foreign investments in the banking sector decreases firm's credit-constraint and increases the amount of interest payments on short-term loans. This shows that services liberalization reduces firms' fixed costs of product innovation. Firms diversify into input-similar industries which changes the distribution of sales across products with the core product experiencing the most pronounced decline in the sales share. |
| Keywords: | Product mix, services liberalization, India |
| JEL: | F10 F61 D22 L8 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkwp:320414 |
| By: | Shapiro, Daniel; Estrin, Saul; Carney, Michael; Liang, Steven |
| Abstract: | We explore the nature of business groups (BGs) and their affiliates in emerging markets through the lens of the coordination failures associated with economic development. We propose that BGs develop distinct economic and political capabilities that provide affiliates with access to the complementary resources required for successful exporting. We further argue that these capabilities are context-specific, based on the market and political institutions of the home country. We propose that the BG advantage in supporting affiliate exporting increases as market institutions strengthen but is reduced (strengthened) as political systems become more democratic (autocratic). We apply Tobit estimation methods to a large sample of firms from emerging and developing countries at different stages of institutional development and find consistent evidence in favour of our hypotheses. We develop a framework to analyse alternative BG internationalization paths in a comparative institutional context. |
| Keywords: | business groups; exporting; coordination failures; emerging markets; market institutions; political systems |
| JEL: | J50 |
| Date: | 2024–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:119277 |