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on International Trade |
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Issue of 2025–11–10
fourteen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Mariam Camarero (University Jaume I and INTECO, Department of Economics, Campus de Riu Sec, E-12080 Castellón (Spain).); Joan Crespo (University of Val`encia and INTECO, Department of Applied Economics II, Av. dels Tarongers, s/n Eastern Department Building E-46022 Valencia, (Spain).); Cecilio Tamarit (University of Val`encia and INTECO, Department of Applied Economics II, Av. dels Tarongers, s/n Eastern Department Building E-46022 Valencia, (Spain).) |
| Abstract: | This paper investigates the role of Foreign Direct Investment (FDI) in shaping the evolution of comparative advantages within global production networks. Extending existing frameworks on knowledge diffusion, we conceptualize FDI as a vector for cross-border capability transfer. The empirical strategy combines static and dynamic approaches: the static analysis employs gravity-style models to assess patterns of export similarity across countries, while the dynamic analysis examines how FDI influences specialization, with a particular focus on high-complexity sectors. Drawing on a bilateral dataset covering FDI and trade flows for 138 countries over two decades, from 2001 until 2021, the results show that FDI significantly enhances the host economy’s ability to develop new comparative advantages in capability-intensive goods. Moreover, the dual approach reveals that FDI supports both diversification and consolidation, acting through different mechanisms. These findings offer new insights into the processes of industrial upgrading and structural transformation in an increasingly interconnected global economy. |
| Keywords: | Foreign Direct Investment; Competitive Advantage; Relatedness; External Linkages |
| JEL: | F23 F43 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:eec:wpaper:2511 |
| By: | Arvis, Jean-Francois; Burman, Akanksha; Espitia Rueda, Alvaro Raul; Maur, Jean-Christophe; Rocha, Nadia; Ulybina, Daria |
| Abstract: | This work discusses simple frameworks for measuring a country's exposure and vulnerability to international trade shocks at the sector and product levels based on widely available data. Exposure refers to measuring reliance, at the country or sector level, on purchases or sales abroad, and vulnerability assesses the risks associated with exposure. The paper argues that traditional measures of trade openness, such as trade over gross domestic product, which measure participation in international trade and exposure to it, fail to capture the true extent of a country's reliance on international markets and do not allow for more granular insights at the sectoral level. A set of indicators based on multi-region input-output data and disaggregated trade data is proposed to address these shortcomings. Multi-region input-output–based indicators highlight the need to consider both drivers of supply and demand through participation into global value chains and resulting indirect trade linkages as important dimensions of exposure to global trade. Whether exposure to international markets leads to vulnerabilities is captured by identifying risk features of participation in international trade. Vulnerability will arise when foreign sourcing (imports) and foreign demand (exports) cannot be easily substituted to mitigate shocks on international markets. When assessing risks of disruption to international trade flows, this work proposes to combine three dimensions related to trade concentration, its volatility, and logistics complexity, highlighting both the risks associated with overreliance on specific and volatile trade partners and products in the absence of easy substitutes, as well as inherent risks associated with international logistics supply chains. |
| Date: | 2025–10–29 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11243 |
| By: | Kee, Hiau Looi; Taglioni, Daria; Xie, Enze |
| Abstract: | This paper examines the roles of tariff and non-tariff measures in China’s meteoric rise as the world’s leading green product supplier. Evidence from customs transaction data from 2000 to 2016 shows that processing firms propelled the export surge, utilizing the expanding domestic material varieties due to trade liberalization benefiting their upstream suppliers. The substitution of domestic materials for imported materials raised the domestic value-added ratio of the processing firms and the exports of green products. A two-sector model rationalizes the empirical results. Trade policy liberalization, together with industrial policies, market scale, and synchronized global demand, contributed to China’s dominance. |
| Date: | 2025–10–23 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11240 |
| By: | Naoto JINJI; Keiko ITO; Toshiyuki MATSUURA |
| Abstract: | This study examines how US export controls targeting Chinese firms affect the export behavior of Japanese firms using Japan Customs data. Focusing on the impact of the US Bureau of Industry and Security’s Entity List (EL), we identify exports from Japanese firms to Chinese firm added to the EL by the end of 2022. We find that inclusion of Chinese firms in the EL led to a significant reduction in Japanese firms’ exports to those firms. In response, the affected Japanese firms increased their exports to non-targeted Chinese firms and firms in countries aligned with the United States. |
| Keywords: | export controls; Entity List; Japan Customs data. |
| JEL: | F13 F14 F51 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:kue:epaper:e-25-008 |
| By: | Robin Braun; Ryan A. Decker; Fariha Kamal |
| Abstract: | Raising America's industrial output is a key goal of the recent increases in U.S. import tariffs. Domestic output could rise if positive effects of reduced foreign competition outweigh negative effects of increased policy uncertainty and complexity, higher costs of imported inputs, and retaliatory trade policy in export markets. |
| Date: | 2025–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:2025-10-31 |
| By: | James Heintz (Department of Economics, University of Massachusetts, Amherst); William Milberg (Department of Economics, New School for Social Research) |
| Abstract: | The question of how value is distributed within global value chains (GVCs) is one of the central questions in contemporary research on trade and development and an analysis of power is central to understanding this issue. This paper extends existing research on distribution within global value chains by focusing on the issue of power in both product markets and supplier markets. We present a formal model in which lead firms capture a larger share of value-added, either through higher mark-ups – monopoly power – or lower unit costs goods purchased from suppliers – monopsony power. Maintaining or expanding this market power involves costly investments in intangible assets, with the nature of that investment depending on the characteristics of the GVC. This framework provides new insights into the distributive dynamics of value chains, including reputation effects tied to corporate social responsibility. In this way, the paper presents an innovative way of theorizing international trade, inspired by the unequal exchange tradition, that can be extended in future research. |
| Keywords: | Global value chains, market power, distribution, intangible assets, corporate social responsibility |
| JEL: | F12 L13 L14 J80 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:new:wpaper:2516 |
| By: | Andrew Greenland; James Lake; John Lopresti |
| Abstract: | This paper demonstrates that ignoring the source of variation in tariff levels yields misleading conclusions regarding the effects of tariff changes. Specifically, we show that changes in the ad valorem equivalent (AVE) tariff are insufficient to quantify the magnitude or sign of the effect of tariff changes on economic outcomes. To illustrate this point, we construct the first database of annual US statutory tariffs from 1972 to 1988 and use it to explore the consequences of liberalization in the years spanning the Tokyo Round of the General Agreement on Tariffs and Trade (GATT). Decomposing the aggregate AVE into its statutory and endogenous components, we document two distinct liberalizations in our sample. Prior to 1979, inflation combines with specific tariffs to create an ``accidental liberalization'', despite the absence of widespread statutory tariff changes. After 1979, endogenous changes in the composition of imports mask the large Tokyo Round statutory tariff liberalization. Generalizing an exact hat framework to accommodate specific tariffs, we show that inflation-driven reductions in AVEs account for roughly half of the tariff liberalization in our sample, but these changes ultimately reduce imports and welfare. Finally, we show that specific tariffs remain an important determinant of cross-sectional variation in AVEs: between 2000 and 2017, one-third to one-half of the annual cross-sectional variance in good-level AVEs is driven by variation in the AVE of specific tariffs. |
| Keywords: | specific tariffs, inflation, Tokyo Round, GATT, welfare, imports |
| JEL: | F10 F13 F14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12224 |
| By: | Taglioni, Daria; Kee, Hiau Looi |
| Abstract: | As tariffs have declined, non-tariff measures (NTMs) have become central to trade policy, especially in high-income countries and regulated sectors like food and green technologies. Although NTMs may serve legitimate goals, they could also sort countries and firms into or out of markets based on compliance capacity and differences in product mix. Documenting recent advances in the estimation of ad valorem equivalents (AVEs), this paper uncovers new patterns of use and exposure of NTMs. High-income countries rely more heavily on NTMs relative to tariffs, while low- and middle-income countries face steeper AVEs on their exports. Firm-level evidence shows that NTMs disproportionately affect smaller firms, leading to market exit and concentration. Poorly designed NTMs can harm productivity and welfare, while coordinated, capacity-aware use can deliver inclusive outcomes. Policy design, transparency, and diagnostics must evolve to reflect the growing role—and risks—of NTMs in a fragmented global trade landscape. |
| Date: | 2025–10–22 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11236 |
| By: | Baiker, Laura; Borchert, Ingo; Echandi, Roberto; Fernandes, Ana Margarida; Hans, Ishrat; Magdeleine, Joscelyn; Marchetti, Juan A.; Colomer, Ester Rubio |
| Abstract: | The economic environment for services trade has changed dramatically over the past 15 years, driven by rapid technological progress that has expanded the possibilities for exchanging services. How has trade policy responded to these changes? How do policy stances in a wide range of service sectors compare across economies? With its unprecedented global coverage, the Services Trade Policy Database and the associated Services Trade Restrictions Index, developed jointly by the World Bank and the World Trade Organization, help address these questions. This paper makes three principal contributions. First, it offers an in-depth discussion of the current state of services trade policies and their differences across 134 economies and 34 services subsectors. Second, the paper reveals how recent (2016–22) changes in policy stances have seen progressive liberalization by lower-income economies but stabilization or even slight policy reversals in high-income economies. This dynamic differs fundamentally from the trend that unfolded after the Great Recession over 2008–16. Third, the paper shows the implications of policy changes over the past six years on services trade costs, and it showcases how the Services Trade Policy Database’s regulatory information can inform trade negotiations, regulatory analysis, and policy making. Alongside these contributions, the paper documents updates to the Services Trade Policy Database’s economy and sector coverage and explains the latest methodological improvements made to the World Bank–World Trade Organization Services Trade Restrictions Index. |
| Date: | 2025–10–28 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11242 |
| By: | Tanguy Bonnet |
| Abstract: | Low-carbon technologies are highly intensive in critical minerals for which extraction and transformation generate heavy socio-environmental negative externalities. Global trade flows of such materials and technologies are part of a singular macroeconomy, filled with geopolitical issues and national strategies.This paper aims to draw on environmental justice and ecological macroeconomics theoretical frameworks in order to assess the global material allocation of critical minerals and low-carbon technologies, and question its equity and efficiency, in the lens of the ecologically unequal exchange theory.Peripheral mining countries assume the heavy socio-environmental costs related to the extractive activities, while global trade flows enable an asymmetrical material allocation toward richer core countries. Two countries stand out : China, as the semi-periphery, and the US, as the challenged core.The paper also discusses how shifting geopolitics, geo-economic fragmentation and national strategies could modify such patterns of ecologically unequal exchange. |
| Keywords: | critical minerals ; global trade flows ; ecologically unequal exchange ; environmental justice ; geo-economic fragmentation |
| JEL: | Q42 L72 F18 Q37 Q56 Q57 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:drm:wpaper:2025-39 |
| By: | Cecilia Carvalho; Daniel Monte; Emanuel Ornelas |
| Abstract: | Members of the World Trade Organization are increasingly disregarding its rules, raising concerns about the future of the multilateral trading system. To analyze the sustainability of the rules-based trade regime, we develop a dynamic framework of stochastic asynchronous games where the leading country determines the trade regime and leadership changes over time. We show that transitioning from a power-based to a rules-based regime requires the presence of a hegemonic power â€" i.e., a country significantly larger than all others. Nonhegemonic leading countries benefit from a power-based regime, but may nevertheless uphold rules anticipating that they can lose their dominance in the future. We find that the longterm viability of a rules-based equilibrium hinges on the cost of establishing it, which must be neither too small nor too large, on countries’ discount factors and on the degree of turnover in world leadership, both of which must be sufficiently large. In a bipolar state, free-riding and market-power forces further undermine the feasibility of rules-based equilibria. We also highlight the trade-offs that a redesign of the WTO rules must face to remain viable. If the leading country becomes shortsighted, the system needs to become more efficient, offer more latitude to the leading country, or even exclude it from the system. |
| Keywords: | hegemonic stability theory, World Trade Organization, trade agreements |
| Date: | 2025–10–22 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2128 |
| By: | Itskhoki, Oleg; Mukhin, Dmitry |
| Abstract: | Trade wars and financial sanctions are again becoming an increasingly common part of the international economic landscape, and the dynamics of the exchange rate are often used in real time to evaluate the effectiveness of sanctions and policy responses. We show that sanctions limiting a country’s exports or freezing its assets depreciate the exchange rate, while sanctions limiting imports appreciate it, even when both types of policies have exactly the same effect on real allocations, including household welfare and government fiscal revenues. Beyond the direct effect from sanctions, increased precautionary savings in foreign currency also depreciate the exchange rate when they are not offset by the sale of official reserves or financial repression of foreign-currency savings. We show that the dynamics of the ruble exchange rate following Russia’s invasion of Ukraine in February 2022 are quantitatively consistent with the combined effects of these forces calibrated to the observed sanctions and government policies. We evaluate the associated welfare, fiscal and inflationary consequences for both Russia and the coalition of Western countries. |
| Keywords: | trade sanctions; financial sanctions; financial repression; FX market |
| JEL: | E50 F31 F32 F41 F51 |
| Date: | 2025–10–25 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129422 |
| By: | Pasquale Scaramozzino |
| Abstract: | This paper assesses the role of foreign investment in the economic performance of South Africa. Although the evidence is inconclusive about how foreign capital flows affect aggregate variables, there is clear evidence of their positive and significant long-run effects at the sectoral level. Foreign direct investment has a positive impact on economic performance and is in turn attracted to sectors with stronger performance. Debt instruments tend to display stronger long-run relationships with economic performance indicators than equity and investment fund shares. Overall, the analysis in this paper confirms the beneficial effects of foreign direct investment on the South African economy. The design of capital flow management policies should thus take into account the sectoral impact of direct investment and its potential to stimulate sectors economic performance. |
| Date: | 2025–11–05 |
| URL: | https://d.repec.org/n?u=RePEc:rbz:wpaper:11092 |
| By: | Jacopo Timini |
| Abstract: | This paper reexamines the effects of the Latin Monetary Union (LMU) - a 19th century agreement among several European countries to standardize their currencies through a bimetallic system based on fixed gold and silver content - on trade. Unlike previous studies, this paper adopts the latest advances in gravity modeling and a more rigorous approach to defining the control group by accounting for the diversity of currency regimes during the early years of the LMU. My findings suggest that the LMU had a positive effect on trade between its members until the early 1870s, when bimetallism was still considered a viable monetary system. These effects then faded, converging to zero. Results are robust to the inclusion of additional potential confounders, the use of various samples spanning different countries and trade data sources, and alternative methodological choices. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.25487 |