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on International Trade |
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Issue of 2026–10–19
six papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Irina Balteanu (Banco de España); Maximiliano Moreno (Banco de España and Paris School of Economics); Francesca Viani (Banco de España) |
| Abstract: | This paper investigates whether US tariffs on China diverted Chinese exports towards the EU, exploiting the first US-China trade war as a setting that permits clean identification of trade diversion effects. Applying difference-in-differences local projections to highly disaggregated tariff, import and unit value data, it shows that trade diversion occurred but was limited in size. For each dollar reduction in US imports from China, 9 cents were redirected to the EU market in real terms. The effects varied substantially across products and destination markets. Trade diversion was strongest for complex capital goods and homogeneous intermediate inputs, and was more pronounced in EU markets with greater import exposure to China and weaker competition from alternative suppliers. Products experiencing effective diversion also exhibited significant price declines, with competitive pressures concentrated in lower-price market segments. These findings suggest that tariffs of a magnitude comparable to those imposed by the United States in 2025 could redirect Chinese exports towards the EU, potentially contributing to a second “China shock” in Europe. While the aggregate effects are modest, diversion and price pressures may be considerably stronger in specific product categories and destination markets. |
| Keywords: | trade diversion, tariffs, trade war, EU imports, import prices, China shock |
| JEL: | F14 F6 E31 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2634e |
| By: | Haonan Li (Graduate School of Economics, Waseda University); Yasuyuki Todo (Graduate School of Economics, Waseda University, and Research Institute of Economy, Trade and Industry) |
| Abstract: | Existing measures of geopolitical risk are country-level and assume that all investors face the same risk in a given destination. This paper constructs a directional, bilateral geopolitical risk index that captures how the domestic media of each source country report on geopolitical conflicts involving each destination country. Using GDELT news data, the index covers more than 200 source and destination countries at a monthly frequency. We combine the index with project-level data on greenfield FDI and product-level trade data, and exploit variation across source countries for the same destination and period while controlling for destination-specific shocks. Source countries whose media place greater emphasis on a destination's geopolitical risk subsequently announce more greenfield projects there: a one-standard-deviation increase in the index is associated with a 7% increase in new projects. This suggests that firms may read such coverage as a signal of future market-access frictions and localize production in advance. Consistent with this interpretation, the association is concentrated in projects serving the host market and in sectors that depend on local demand, and is absent among politically aligned country pairs. By contrast, higher risk coverage is followed by a short-lived decline in imports, driven by severe conflicts, while exports do not respond. |
| Keywords: | geopolitical risk, media, foreign direct investment, trade, GDELT |
| JEL: | F14 F21 F23 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:wap:wpaper:2615 |
| By: | Zuhriddin Juraev (Chonnam National University); Young-Jin Ahn (Chonnam National University) |
| Abstract: | Economic sanctions are a routine instrument of statecraft, yet exposure to trade-restrictive measures is hard to compare across countries and over time. We build a continuous target-year index of trade-disruption exposure from the dyadic trade-sanction records of the Global Sanctions Data Base, Release 5, encoding the direction and stringency of each active restriction and the breadth of the sanctioning coalition, and a trade-weighted version scaling each restriction by the sender's pre-sanction trade share. In a structural gravity model the graded index recovers what a binary indicator hides. A complete ban is associated with a fall in bilateral trade of about two thirds, a partial ban about a tenth, and the binary flag averages them. The continuous index also predicts large reductions in aggregate trade where the binary indicator is only marginal. Applied to national income the association is not identified, which we present as a cautionary limit of aggregate inference. |
| Keywords: | trade disruption; economic sanctions; measurement; structural gravity; weaponised interdependence |
| JEL: | F13 F14 F51 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:drx:wpaper:202618 |
| By: | OECD |
| Abstract: | Non-product related process and production method measures based on carbon-intensity metrics are increasingly used in trade-related contexts and introduce a systematic reliance on complex emissions data. Their implementation depends on regulatory and technical interoperability to ensure that information is generated, exchanged and verified efficiently. When these requirements are enforced at the border, they create new and multifaceted interactions with border processes, raising operational questions about data transmission, validation and use in clearance and control. Using a trade facilitation lens, this paper examines how carbon-intensity requirements shape the practical functioning of border procedures, drawing on a mapping of existing regulations and policy proposals and their technical interoperability features. The analysis shows that these requirements rely on an ecosystem of actors and a sequenced set of operational steps involving documents, data elements, and information exchange systems. It also identifies potential disruptions in trade facilitation areas and highlights practical entry points for enhanced technical interoperability and alignment. |
| Keywords: | Border procedures, Carbon-intensity, Interoperability, Processes and production methods, Supply chains, Trade facilitation |
| JEL: | F13 F18 Q56 Q58 L15 |
| Date: | 2026–10–12 |
| URL: | https://d.repec.org/n?u=RePEc:oec:traaab:304-en |
| By: | Cheng Zhenghao (Nanchang University) |
| Abstract: | Export controls and economic sanctions have become increasingly frequent and covert, yet existing measurements either record de jure measures without observing enforcement, or presume known events at annual frequency. This paper transplants the monitoring paradigm of statistical process control (SPC) onto bilateral trade data and constructs the Rolling-Baseline Trade Suppression (RBTS) index, which relies solely on monthly customs records. A rolling baseline with selective updating identifies the in-control regime; idiosyncratic residuals from factor decomposition are calibrated and smoothed, yielding restriction readings in σ units that are comparable across commodity-partner pairs and over time. Two classified case studies and a blind test covering 120 sanction pairs on the full U.S. export matrix show that explicitly restricted pairs respond at the event or announcement month, pairs listed on paper but not actually restricted stay flat, and covert restrictions without formal texts are quantified; in the blind test, readings rise strictly monotonically with the ex-ante verified severity of measures (median shares of above-threshold cells 0.58%, 3.26% and 5.47% across three severity tiers). Simulations delineate the effective working zone of the index, with a minimum detectable effect of about 50% sustained suppression. The index complements list-based measures and provides a new statistical tool for monitoring trade restrictions. |
| Keywords: | trade restriction index; statistical process control; principal component residuals; export controls; mirror trade data |
| JEL: | F1 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:drx:wpaper:202619 |
| By: | Farid Farrokhi; Ahmad Lashkaripour; Homa Taheri |
| Abstract: | A critical tension in global governance is that trade agreements have evolved largely in isolation from climate policy. This paper shows that the two domains generate systematic cross-externalities: larger gains from trade are associated with greater climate externalities imposed on partners, while linking carbon taxes to trade agreements produces distributive externalities that undermine the balance of trade concessions. To address this tension, we present a framework to integrate harmonized carbon pricing into the WTO subject to institutional and political-feasibility constraints. We explore two linkage designs. The first is a centralized Climate Fund, where all members apply a common demand-side carbon tax and contribute a portion of the revenues to the fund, capped by fiscal constraints. The Fund then reallocates these contributions to balance the tax burden across countries, subject to informational constraints. Quantitative analysis shows that even a simple fund allocation rule can sustain a carbon price of $138 per ton of CO2, reducing global emissions by 54%. The main binding constraint is informational: knowing the precise incidence of the carbon tax across countries ex ante would raise the feasible price to $265. The second is a decentralized design without transfers. Each member meets a carbon tax revenue floor but retains full discretion over its mix of demand-side and supply-side taxes. Energy exporters choose supply-side taxes while energy importers opt for demand-side taxes. These choices organically balance the tax burden and yield a 47% reduction in global emissions, almost rivaling the centralized Climate Fund. |
| JEL: | F1 H23 Q5 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35834 |