|
on International Trade |
|
Issue of 2025–12–15
sixteen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Gary Gereffi (Duke University) |
| Abstract: | This featured article is authored by Gary Gereffi, one of the architects of the Global Value Chains (GVC) framework for understanding global trade and a major contributor to the body of scholarship on international trade.<p> The article is part of a series of contributions by global scholars to be published in IER leading up to the 50th anniversary of KIET's founding.<p> In contrast to the relatively fluid process of trade and FDI growth at the height of the globalization era (from the 1980s to mid-2000s), the period from the financial crisis of 2008 to the present is characterized more by disruption and geopolitical fragmentation. The bipolar international order of the Cold War (1950s-1980s) followed a short-lived period of US hegemony in the 1990s and early 2000s; the present environment is a bitterly-contested multipolar global regime that presents MNEs with major uncertainties. This paper describes how this new environment is shaping GVCs today, and the implications carried for firms and governments alike. |
| Keywords: | global value chains; GVCs; GVC governance; industrial policy; value-added trade; global trade; weaponized interdependence; economic security |
| JEL: | F13 F15 F23 F51 F52 F60 |
| Date: | 2025–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kieter:021803 |
| By: | Amandine Aubry; Anthony Edo |
| Abstract: | This paper studies how immigrants in intermediate sectors affect downstream export performance. We develop a theoretical model in which a sector’s exports depend not only on its own immigrant workforce, but also on immigrant labor in input-supplying sectors. Using a new dataset on U.S. input–output from 2003-2017, we show that increases in immigrant employment in these sectors raise exports in connected downstream industries. This effect operates partly through improved production efficiency that lowers upstream input costs. By linking labor migration to production networks, we identify a new channel through which immigration shapes comparative advantage in international trade. |
| Keywords: | Immigration;Trade;Sectoral Linkages;Intermediate Sectors |
| JEL: | F22 F16 J61 O31 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:cii:cepidt:2025-17 |
| By: | Thi Thanh Ha DOAN; Asei ITO; Changyuan LUO; Hongyong ZHANG |
| Abstract: | Utilizing comprehensive parent-affiliate matched data on Japanese multinational firms, this study investigates how geopolitical risks affect global supply chain configurations, with a focus on East and Southeast Asia during the period 2009–2022. We construct firm-level exposure to geopolitical risk in China using data on trade and foreign direct investment. First, Japanese multinational firms tend to respond to geopolitical shocks by diversifying their supply chains away from China and toward the Association of Southeast Asian Nations’ (ASEAN) economies. This response is particularly pronounced among firms that depend heavily on imported inputs from China or maintain substantial production operations there. Second, such diversification typically does not entail drastic within-firm relocation (“friend-shoring†) of supply chains. Third, Japanese multinational firms tend to increase their capital investment in Japan while maintaining their existing production bases in China. These results suggest that firms favor a strategy of supply chain diversification—rather than outright relocation / reshoring or abrupt decoupling—as a means of mitigating geopolitical risks. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25112 |
| By: | Charles Yuji Horioka (Center for Computational Social Science and Research Institute for Economics and Business Administration, Kobe University, Asian Growth Research Institutem, Institute of Social and Economic Research, Osaka University, Asian Growth Research Institute, JAPAN, and National Bureau of Economic Research, U.S.A.); Nicholas Ford (Wolfson College, University of Cambridge, U.K.) |
| Abstract: | In this paper, we show that the existing models and descriptions of the transfer of capital between countries that are provided in international economics are inadequate because they fail to explain the causes of, or the consequences of, persistent trade imbalances and because the assumption that there is a world interest rate, r* at which all countries can theoretically lend or borrow is extremely misleading.Instead, we argue that a more fruitful modeling approach is to regard the world as consisting of a number of regions, each of which has a particular rate of return on capital, which is a function of the local marginal product of capital (MPK). We demonstrate that such a modeling approach can provide some additional insights into who gains and loses from persistent trade deficits and how this might be affected by the Trump Administration's tariff policy. |
| Keywords: | Capital flows; Capital market imperfections; Capital mobility; Capital transfers; Current account deficits; Current account imbalances; Exchange rate; Feldstein-Horioka Paradox; Feldstein-Horioka Puzzle;Financial frictions; Financial market imperfections; Globalization; Goods market imperfections; International capital flows; International capital mobility; International financial markets; Investment; Marginal product of capital; MPK; Net capital transfers; Open economy macroeconomics; Rate of return on capital; Saving; saving-investment correlations; Tariffs; Trade barriers; Trade costs; Trade deficits; Trade frictions; Trade imbalances; Trade policy; Trump tariffs; World interest rate |
| JEL: | E43 F13 F21 F32 F41 F62 G15 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:kob:dpaper:dp2025-31 |
| By: | Gergő Motyovszki |
| Abstract: | US trade policy has taken a sharp protectionist turn under the second Trump administration, with the aim of boosting domestic manufacturing production, reducing the US trade deficit, and raising budgetary revenues ”paid by foreigners.” This paper assesses the macroeconomic consequences of recent US tariff announcements, based on quantitative simulations by the European Commission’s multi-region New Keynesian DSGE model, QUEST. Results indicate that, rather than aiding domestic production, tariff hikes weaken the US economy. While tariffs shift demand from imports towards US-produced goods, they also act as an adverse supply shock. In addition, the equilibrium terms-of-trade appreciation crowds out exports, and monetary tightening in response to inflationary pressures hurts domestic demand as well. Although tariff revenues generate additional fiscal space for the US government, only around a quarter of the burden falls on foreigners in the form of a US terms-of-trade gain. Finally, tariff hikes reduce US trade deficits only temporarily. The effects on EU GDP are moderately negative, driven mainly by weaker exports to the US. At the same time European exporters gain market share in third countries at the expense of less competitive American firms. US tariffs on other countries lead to trade diversion, slightly deepening the short-term economic losses in Europe, but reversing later on. A general tit-for-tat retaliation would deepen the negative impacts in both the US and the EU. Beyond the direct effects of tariffs, rising uncertainty and a loss of investor confidence in the US economy further aggravates the adverse economic consequences by tightening financing conditions. Sensitivity analyses highlight the role of tariff persistence, the currency of trade invoicing and the monetary policy response. |
| JEL: | E62 F13 F41 F42 F47 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:234 |
| By: | Charlton, Diane; Countryman, Amanda; Manning, Dale; Ikeme, Sionegael |
| Keywords: | International Relations/Trade, Community/Rural/Urban Development, Labor and Human Capital |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea24:343771 |
| By: | Maximilian Huppertz |
| Abstract: | It is well established that climate change affects productivity, but its effects on trade costs have not been studied. I combine international trade and weather data covering 190 years. I use an augmented gravity framework to show that rising temperatures at the origin or destination country increase bilateral trade costs. Adaptation to these impacts is slow. The impact appears to be driven by the vulnerability of sea ports to climate change. Combining these results with a standard international trade model, I find that 2010s welfare would increase by 1.6 percent if we could undo the impact of climate change on trade cost over the preceding 100 years. Welfare gains depend not only on countries' own climate trends, but also on their neighbors' trajectories. Poor and rich countries are roughly equally harmed. Smaller economies, which are more reliant on international trade, are especially affected. Ignoring this trade cost channel and focusing only on productivity effects leads to a nine percent underestimate of the welfare impact of climate change. Because it is based on a gravity framework, my methodology can easily be embedded in studies of the impact of climate change. |
| Keywords: | climate change, international trade, sea ports, welfare impacts, adaptation |
| JEL: | Q54 Q56 F18 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12282 |
| By: | Sebastian Kranz |
| Abstract: | Recent crises have increased concerns about supply security in sectors that are considered strategically important. The goal of sufficient domestic production capacities has motivated various forms of subsidies, tariffs and other instruments. This paper revisits Warren Buffett's (2003) proposal of tradeable import certificates (TIC) in this context. TIC differ from classical import quotas mainly by linking the import volume to export performance. The certificate price functions like a mix of flexible tariffs and export subsidies whose levels depend on net imports in the strategic sector. We analyse benefits and drawbacks in a simple two-country model. In competitive markets, TIC constitute a transparent and efficient instrument that effectively reduces incentives for other countries to deviate from agreements via hidden subsidies or non-tariff trade barriers. However, TIC can have adverse effects if there are domestic producers with market power in the certificate market. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.22159 |
| By: | Laura Alfaro; Harald Fadinger; Jan Schymik; Gede Virananda |
| Abstract: | Trade and industrial policies, while primarily intended to support domestic industries, may unintentionally stimulate technological progress abroad. We document this mechanism in the case of rare earth elements (REEs) – critical inputs for manufacturing at the knowledge frontier, with low elasticity of substitution, inelastic supply, and high production and processing concentration. To assess the importance of REEs across industries, we construct an input-output table that includes disaggregated REE inputs. Using REE-related patents categorized by a large language model, trade data, and physical and chemical substitution properties of REEs, we show that the introduction of REE export restrictions by China led to a global surge in innovation and exports in REE-intensive downstream sectors outside of China. To rationalize these findings and quantify the global impact of the adverse REE supply shock, we develop a quantitative general-equilibrium model of trade and directed technological change. We also propose a structural method to estimate sectoral input substitution elasticities for REEs from patent data and find REEs to be complementary inputs. Under endogenous technologies and with complementary inputs, input-supply restrictions on REEs induce a surge in REE-enhancing innovation and lead to an expansion of REE-intensive downstream sectors. |
| Keywords: | Trade Restrictions, Industrial Policy, Global Value Chains, Rare Earths, Directed Technological Change, Input-Output Linkages, Downstream Sectors, Innovation |
| JEL: | F13 F14 F42 O33 O47 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_720 |
| By: | Paul Jung (Hong Kong Polytechnic University); Kijin Kim (Asian Development Bank); Ah-Hyun Jo (Korea Maritime Institute); Joseph Seong-Hyun Cho (Technical University of Denmark) |
| Abstract: | Global chokepoints such as the Panama Canal propagate drought shocks into supply chains, yet disruptions to shipments remain poorly investigated. We examine the impact of supply chain disruptions induced by the 2022–2023 Panama Canal drought on Asia–United States (US) trade flows. We fuse Automatic Identification System vessel trajectories with US Customs Bills-of-Lading, matching 95% of 29.6 million 2022–2023 filings to 48 million hourly vessel positions. Difference-in-differences and event study analysis results present that canal voyages of containerized shipments took 133.8 hours longer, spent 33.6 hours more stopped, and sailed 2.3 kilometers per hour slower, with route distance unchanged, and these disruptions more than reversed normal-time efficiency gains. Shipment times for metallic raw materials and light manufacturing shipments increased markedly, and there was no significant effect on food products. The results provide a robust foundation for valuing delay-induced opportunity costs and designing resilient trade-facilitation policies for export-oriented economies in Asia. |
| Keywords: | Panama Canal drought;maritime chokepoints;global supply-chain disruptions;Asia–US container trade;transaction-level trade data |
| JEL: | F14 R41 Q54 C23 |
| Date: | 2025–11–25 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021789 |
| By: | Afesorgbor, Sylvanus Kwaku; Kornher, Lukas; Santeramo, Fabio G. |
| Keywords: | Agribusiness, Food Security and Poverty, International Relations/Trade |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea24:343703 |
| By: | Pamina Koenig (Paris School of Economics); Jiancong Liu (Paris School of Economics); Sandra Poncet (Paris School of Economics); Dan Xie (University College Dublin) |
| Abstract: | We provide the first empirical evidence linking digital trade facilitation reforms to changes in port operations. Leveraging the staggered rollout of Single Window reforms in the People’s Republic of China (2014–2016), which streamlined customs clearance, we combine Automatic Identification System data on container ship movements with event study methods to identify causal effects. While effects on carried tonnage are positive but statistically insignificant, decomposition analysis reveals that the Single Window operates through a specific channel, without changing vessel loading conditions, ship size, and port processing times. To assess port responses, we analyze heterogeneity across vessel and terminal characteristics. Impacts are concentrated among smaller vessels and less congested terminals, with no effect on larger vessels and capacity-constrained facilities. These findings demonstrate that administrative efficiency improvements boost maritime activity through extensive rather than intensive margins, with ports accommodating increased trade demand primarily through higher vessel frequency. |
| Keywords: | trade facilitation;digital technology;container shipping;People’s Republic of China ports |
| JEL: | F10 F13 F14 R40 R58 |
| Date: | 2025–12–02 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021808 |
| By: | Davide Del Prete (the University of Naples Parthenope); Aminur Rahman (Asian Development Bank); Edoardo Tolva (University of Lisbon ISEG) |
| Abstract: | This paper studies how international buyers’ market power and transport mode shape the pass-through of exchange rate shocks to export prices. Using transaction level customs data from the Bangladeshi garment sector, we first document substantial buyer market power and the concentration of export activity in key trade hubs that shape transport decisions. We then show that large buyers leverage both their market power and their reliance on air freight to mitigate the impact of exchange rate fluctuations. Taken together, our findings highlight how buyer characteristics shape exporters’ adjustment to external shocks, with broader implications for regional economic resilience. |
| Keywords: | Bangladesh;exchange rate;global value chain;market power;transport mode |
| JEL: | D22 D43 E31 F10 L14 L22 |
| Date: | 2025–11–28 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021792 |
| By: | Kai A. Konrad; Marcel Thum |
| Abstract: | The enforcement of international sanctions is frequently undermined by multiple third-party sanction-breaking countries. This paper examines how a sanctioning country can optimally negotiate with several such loophole countries to close the enforcement gaps. We compare several sequential and simultaneous bargaining strategies. Suitably chosen sequencing, but also simultaneous negotiations under the Single-Undertaking Principle can minimize the cost to the sanctioning country by creating competitive pressure among the loophole countries. We find that, if the desire to make the sanctioning regime effective is sufficiently high, the ultimate goal of closing the sanction loopholes is achieved for all sequencing rules of ultimatum bargaining we consider. However, the equilibrium size and distribution of compensation among loophole countries differ. We characterize the optimal sequential strategy and the optimal simultaneous-offer strategy. Furthermore, for well-chosen negotiation strategies, the sum of compensations paid to multiple loophole countries is lower than if there is only one loophole country. |
| Keywords: | sanctions, negotiations, geoeconomics, conflict, trade |
| JEL: | F13 F51 C78 H56 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12308 |
| By: | Shuhui Xiang (Graduate Institute of International and Development Studies (IHEID)); Xinran Yin (Graduate Institute of International and Development Studies (IHEID)); Yuan Zi (Graduate Institute of International and Development Studies (IHEID) and CEPR) |
| Abstract: | This paper constructs a new database based on China's WTO subsidy notifications (2001–2022) and provides the first systematic overview of China's industrial subsidies over the past two decades. Five findings emerge. First, subsidies expanded rapidly, but direct fiscal support stabilized around 0.8 percent of GDP after 2008. Second, China has employed more subsidies than its income level would suggest, with striking policy persistence. Third, subsidies and tax incentives for FDI have declined, while those targeting specific industries and promoting innovation have grown. Fourth, wealthier and more trade-oriented provinces provide more local subsidies. Finally, subsidies are concentrated in a few sectors, and measures based on counts versus values reveal different patterns. These patterns reveal how China's subsidy strategy has evolved, offering insights to state-led development in the 21st century. |
| Keywords: | Industrial Policy; Industrial Subsidies; Chinese Economy |
| JEL: | F13 O25 H2 |
| Date: | 2025–12–11 |
| URL: | https://d.repec.org/n?u=RePEc:gii:giihei:heidwp18-2025 |
| By: | Charlie Joyez (Université Côte d'Azur, CNRS, GREDEG, France) |
| Abstract: | We introduce complexity, a Stata command available on SSC that computes generalized complexity indices for specialization matrices. Originally developed for assessing economic complexity with global trade data (Hidalgo and Hausmann, 2009), these metrics have since been extended to various domains including regional development, innovation, and labor economics. The complexity command implements three core methodologies: the eigenvector method (Hausmann et al., 2011a), the Method of Reflection (Hidalgo and Hausmann, 2009), and the fitness-complexity approach (Tacchella et al., 2012). It also computes relatedness metrics such as coherence, adjacency matrices of the activity space network, and the complexity outlook as a measure of complexity potential. We describe the syntax and options, review the underlying algorithms, and provide applied examples |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2025-50 |