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on International Trade |
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Issue of 2026–01–19
seventeen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Khanal, Ajit; Grant, Jason H.; Legrand, Nicolas |
| Abstract: | The United States-Mexico-Canada Agreement (USMCA), effective in 2020, revised dairy trade provisions between the United States and Canada. However, disputes have arisen over the allocation of Canada’s tariff rate quotas (TRQs). This paper analyzes the impact of the USMCA on US dairy exports to Canada by quantifying changes in unobservable trade costs using an international border indicator and estimated trade elasticity within a structural gravity framework. Our empirical analysis finds no economically or statistically significant change in Canada’s trade costs facing U.S. dairy exports—either at the aggregate or individual product level—following the implementation of the USMCA on July 1, 2020. Moreover, we estimate that U.S. exports face higher trade frictions in Canada than in other major export destinations (eg, 65.1 percent higher than Mexico). Counterfactual simulations suggest that reducing U.S.-Canada export frictions to levels comparable to U.S.-Mexico would increase U.S. exports to Canada and Canadian exports to the U.S., albeit with a decline in intra-national trade. Export diversification toward emerging economies, coupled with targeted trade negotiations, could mitigate U.S. reliance on Canada’s dairy market. |
| Keywords: | International Relations/Trade |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361045 |
| By: | Francois de Soyres; Ece Fisgin; Alexandre Gaillard; Ana Maria Santacreu; Henry L. Young |
| Abstract: | We study how the sectoral composition of exports and imports shapes bilateral trade flows. Building on earlier similarity indices, we introduce the Partner Similarity Index (PSI), which measures sectoral alignment between a country’s export structure and its partner’s import demand. Embedded in a gravity framework, PSI is a strong predictor of bilateral trade flows after accounting for standard gravity determinants, trade policy variables, and high-dimensional fixed effects. Applied to China and advanced economies, the index reveals growing asymmetries: China’s export basket is increasingly aligned with advanced-economy import demand, while China’s import demand has become progressively less aligned with advanced-economy exports. |
| Keywords: | international trade; export similarity; sectoral composition; gravity |
| JEL: | F12 F14 O33 |
| Date: | 2025–12–31 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:102334 |
| By: | Shin, Kiseok; Grant, Jason; Legrand, Nicolas |
| Abstract: | This paper studies the effects of tariff schemes on the absolute and relative emissions embodied in agricultural imports across countries and commodities. Between 2001 and 2017, shifts in the global agricultural trade structure drove an increase in emissions embodied in imports; preferential margins widened under proliferating preferential trade agreements; and reductions in agricultural import tariffs were associated with increased trade flows. Building on these patterns, we employ a structural gravity framework to quantify the general equilibrium effects of two counterfactual tariff schemes: the universal adoption of most-favored-nation (MFN) rates and a transition to global free trade. Given the significance of relative emissions embodied in trade as a critical directional indicator, the paper finds that universal MFN rates reorient agricultural sourcing toward carbon-intensive exporters, while the abolition of tariffs shifts the trade structure toward suppliers with lower emissions intensities in agricultural production. However, analysis by importers and commodities uncovers divergent outcomes. These findings suggest that tailored trade policies should account for the specific trade structure of each agricultural product and the economic status of trading partners. |
| Keywords: | International Relations/Trade |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361037 |
| By: | Basak Bayramoglu (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Jean-François Jacques (ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12); Julie Lochard (ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel) |
| Abstract: | The rise of global value chains (GVCs) in recent decades has induced significant changes in the geography of world production, with consequences for bilateral relations. What are the consequences of GVC-related bilateral trade for the allocation of bilateral foreign aid? Using data on bilateral aid from 22 donors to 127 recipient countries over 2000-2018, our findings, robust to endogeneity, show that a larger participation of the recipient country in GVCs increases the amount of aid allocated to that country. To rationalize these findings, we develop a theoretical model that provides a simple explanation for the existence of transfers among countries: foreign aid allows a donor country producing a final good to buy less expensive intermediate inputs from an upstream country. Overall, this suggests that donors allocate aid strategically to import inputs at a lower cost. |
| Keywords: | Trade, Global value chains, Foreign aid |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05417354 |
| By: | Liu, Jiawen |
| Abstract: | International trade networks are increasingly vulnerable to disruptions from natural disasters, yet the resilience of global trade flows remains insufficiently understood. This study examines how different types of natural disasters—including earthquakes, droughts, extreme temperatures, floods, and storms—affect bilateral trade, and investigates whether structural factors such as export diversification and sectoral positioning shape trade resilience. Our analysis proceeds in two stages. In the first stage, we employ a gravity model estimated using Poisson Pseudo Maximum Likelihood (PPML) on bilateral trade data from Comtrade and disaster data from EM-DAT to quantify the impact of disasters on export volumes. We find that upstream industries experience the most severe trade contractions—particularly due to extreme temperatures and storms—while downstream industries are relatively less affected. In the second stage, we adopt a moment-based three-step method to assess trade resilience by estimating the conditional probability of trade stability following a shock. Our results indicate that export diversification enhances resilience, but its effectiveness varies by economic context: high-income countries benefit more from complexity-driven trade adjustments, whereas low-income economies are more adversely affected by disruptions. Additionally, we find that disasters in trading partner countries generate strong spillover effects in vulnerable economies. |
| Keywords: | International Relations/Trade |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361043 |
| By: | Gomes Da Silva, Raphael; Nogueira, Lia |
| Abstract: | Mercosur is the largest trading bloc in South America. It was formed in 1991 by Argentina, Brazil, Paraguay, and Uruguay. Mercosur is known for its abundant natural resources, extensive land area, and favorable climate, which contribute significantly to its agricultural sector. Mercosur’s primary goal of promoting regional integration in South America has been pursued through trade agreements with neighboring countries. These agreements seek to reduce or eliminate tariff and non-tariff barriers within the bloc. By lowering barriers, these agreements can increase existing trade and encourage the exchange of less-traded goods. This study investigates the impact of Mercosur’s trade agreements with Chile (1996), Bolivia (1997), Peru (2005), and Colombia and Ecuador (2005) on the agricultural sector. We assess whether these agreements have expanded Mercosur’s agricultural exports and promoted diversification. We use a structural gravity model to analyze these outcomes, accounting for the phased implementation of each agreement. Our findings indicate that while trade agreements have significantly increased trade in manufacturing goods, their effect on agricultural trade has been minimal. |
| Keywords: | International Relations/Trade |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361034 |
| By: | Vázquez Emmanuel Jose; Rodríguez-Castelán Carlos; Winkler Hernan |
| Abstract: | This article investigates the local impacts of the 2018-2019 US-China trade war across Mexican municipalities. Using detailed customs data on exports at the municipal level and US tariff data, we find that municipalities with exports more concentrated in products targeted by US tariffs on Chinese goods experienced significantly larger increases in exports to the US. A 1 percent increase in exposure to US tariffs on China led to a 4.3 percent increase in municipality-level exports to the US. These export gains were accompanied by improved labor market outcomes, including a 5.6 percent increase in total labor income and a 0.25 percentage-point reduction in labor informality. Effects were heterogeneous across skill levels, with only semi-skilled workers experiencing employment gains. These effects were mainly concentrated in the manufacturing sector, with some positive spillovers to services but none to agriculture. The findings show that changes in trade policies between major economies can influence the geographic distribution of economic activity and labor market outcomes within bystander countries. |
| JEL: | F14 R23 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4843 |
| By: | Sho HANEDA; Hyeog Ug KWON |
| Abstract: | Since China's accession to the WTO, the impact of increased competition from Chinese imports (the "China shock") on employment and productivity in many developed countries has become a major concern for policy makers. The share of manufacturing workers in the total number of employees has been declining, and Japan is no exception. The paper empirically examines the impact of the increase in imports from China on employment using questionnaire information of the Census of Manufactures and the Economic Census for Business Activity as well as the Trade Statistics of Japan and the National Freight Flows Survey (Logistics Census) . The main results are twofold. First, imports of intermediate products from China have a positive impact on employment at Japanese firms. Second, imports of capital products from China might have a negative effect on employment growth. Thus, reducing trade barriers in intermediate products, participating in global value chains, and supporting inter- and intra-industry labor mobility for specific workers, regions, and industries that are negatively affected by capital goods are key to employment growth in Japan. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25123 |
| By: | Kim, Dongin; Steinbach, Sandro |
| Abstract: | This paper examines how GATT/WTO membership has influenced agricultural virtual water trade (VWT), a crucial channel for reallocating global water resources through trade. Using a newly constructed dataset and a theory consistent gravity framework, we find that while GATT/WTO membership initially appears to increase VWT flows by 67.2 percent, this estimate falls to 22.8 percent once globalization effects are accounted for, with WTO-era membership driving the majority of the growth. Although multilateral liberalization has facilitated the redistribution of water from water-abundant to more water-scarce regions, it has also intensified sustainability concerns. VWT outflows from medium-scarcity exporters have surged by 81.6 percent, and unfair flows—those moving from water-scarce to water-abundant regions—have increased by 68.4 percent. General equilibrium simulations further reveal that institutional trade preferences have disproportionately supported unfair VWT flows, reinforcing environmental inequities embedded in global trade patterns. These findings highlight the dual role of multilateral trade institutions and underscore the importance of integrating enforceable environmental provisions into future agreements to promote sustainable and equitable water governance. |
| Keywords: | International Relations/Trade |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361029 |
| By: | Victor Hernandez Martinez; Nicholas Kozeniauskas; Roman Merga |
| Abstract: | We study the effects of trade liberalization on the full wage distribution, exploiting Spain's 1993 entry into the European Single Market. Using employer-employee data, we identify the causal effects of trade across the entire wage distribution, using a novel shift-share instrument embedded in an unconditional quantile regression. We find that the liberalization reduced wage inequality, leading to wage compression through earnings gains at the bottom of the distribution and wage losses at the top. We trace this compression to two asymmetric channels: import competition disproportionately harmed high earners, while export opportunities benefited low earners. The key mechanism is an import-driven “skill-downgrading.” A multi-region multi-sector model shows that the key insight for understanding these empirical results is that trade's distributional effects depend on the skill intensity of a country's tradable sector, and Spain's was relatively low-skill intensive back then. |
| Keywords: | trade liberalization; inequality; ESM |
| JEL: | F15 F16 J24 J31 |
| Date: | 2026–01–12 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedcwq:102314 |
| By: | Jaime Miravet (Deptartment of Economics, Universitat Jaume I, Castellón, Spain); Inmaculada Martínez-Zarzoso (Department of Economics and Center for Statistics, Georg-August Universitaet Goettingen, Göttingen, Germany & IEI and Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | This paper examines how labor provisions in trade agreements affect labor rights in developing countries. Using panel data for 105 developing countries from 1995 to 2021 and an instrumental variables strategy to address endogeneity, we estimate the effects on both de jure and de facto labor rights. We construct novel measures capturing not only the category but also the depth of labor provisions, drawing on the ILO’s Labor Provisions in Trade Agreements Hub, which covers 79 thematic areas. We find that binding provisions improve de jure labor rights but do not affect de facto outcomes, thereby widening the gap between law and practice. Non-binding provisions show no significant effects, highlighting both the importance and limitations of enforceability and depth in labor provisions. |
| Keywords: | labor provisions, trade agreements, labor rights, enforceability, provision depth, developing countries. |
| JEL: | F13 J83 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:jau:wpaper:2026/1 |
| By: | Yanne Gabriella Velomasy (China Academy of Digital Trade, Zhejiang University, Hangzhou, CHINA); Hongsheng Zhang (China Academy of Digital Trade, Zhejiang University, Hangzhou, CHINA); Laixun Zhao (Research Institute for Economics and Business Administration, Kobe University, JAPAN) |
| Abstract: | This paper analyzes the impacts of importing intermediate digital inputs (IDIs) on income inequality between high-skilled and low-skilled workers, using a novel dataset that merges recent EU KLEMS and OECD data for 29 countries and 15 industries for 2008-2020. We find that IDI imports significantly widen income inequality, because such imports are associated with higher technology and capital intensities, which directly increase income inequality by complementing high-skilled labor while substituting for low-skilled labor, and indirectly exacerbate inequality through workforce skill upgrading. Heterogeneity analysis shows that these occur primarily in highly digitalized countries and industries, as well as technology-intensive sectors. We also construct two shift-share instrumental variables, namely the global imported IDI shocks and the global digital export shocks, to address endogeneity. |
| Keywords: | Imported intermediate digital input; Income inequality; Workforce skill upgrading |
| JEL: | F16 J31 O33 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:kob:dpaper:dp2026-01 |
| By: | Alice Chiocchetti (Paris School of Economics); Manon François (Stanford University); Laure Heidmann (CREST and INSEE); Giulia Aliprandi (Paris School of Economics and EU Tax Observatory) |
| Abstract: | This paper quantifies how profit shifting erodes workers’ earnings by reducing profit-sharing payouts in French multinational firms. We leverage newly available administrative microdata on the global activity of multinational firms linked to employer-employee data to build a credible counterfactual of profits and profit-sharing absent profit shifting. We estimate that large French multinationals shift 19% of their foreign profits annually to low-tax jurisdictions, resulting in €10.3 billion shifted out of France and €3.7 billion in lost tax revenues. We show that profit shifting reduces annual employees’ earnings by 2.6%. Low-income workers are disproportionately affected. The bottom 10% of workers lose 3.2% of wages, compared to 2.3% for top 10% earners. Changing the profit-sharing formula to account for global profitability, rather than subsidiary-level profitability, would increase wages by 4.1% for workers in profit-shifting subsidiaries. |
| Keywords: | Multinational Firms, Profit shifting, Tax revenue, Incidence |
| JEL: | F23 H25 H26 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:039 |
| By: | Mannarino Valentin |
| Abstract: | This paper applies machine learning techniques to predict which manufacturing firms in Colombia are likely to become exporters, using data from the Encuesta Anual Manufacturera (EAM) and Encuesta de Desarrollo e Innovación Tecnológica (EDIT) for the period 2015–2019. The objective is to estimate each firm’s “distance to export” through a probability score learned from the characteristics of existing exporters. Among the different algorithms tested, Logit with LASSO regularization delivers the best predictive performance, correctly identifying nearly three out of four actual exporters. Building on these predictions, the study introduces an exporting score, a probability measure that ranks firms by their proximity to the export margin. This score captures heterogeneity among non-exporters, anticipates entry and exit dynamics, and highlights sectoral and geographic clusters of latent export potential. In addition, the analysis shows that a set of firm level characteristics consistently emerge as the most relevant predictors across models: importer status, firm size, and combined spillovers, complemented by operational variables such as value added, inventories, and quality certification. The findings offer valuable insights for export promotion policies, enabling more targeted support for firms likely to enter international markets. |
| JEL: | F1 L2 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4816 |
| By: | Rocco Macchiavello; Josepa Miquel-Florensa; Nicolas de Roux; Eric Verhoogen; Mario Bernasconi; Patrick W. Farrell |
| Abstract: | Do the returns to quality upgrading pass through supply chains to primary producers? We explore this question in the context of Colombia’s coffee sector, in which market outcomes depend on interactions between farmers, exporters (which operate mills), and international buyers, and contracts are for the most part not legally enforceable. We formalize the hypothesis that quality upgrading is subject to a key hold-up problem: producing high-quality beans requires long-term investments by farmers, but there is no guarantee that an exporter will pay a quality premium when the beans arrive at its mills. An international buyer with sufficient demand for high-quality coffee can solve this problem by imposing a vertical restraint on the exporter, requiring the exporter to pay a quality premium to farmers. Combining internal records from two exporters, comprehensive administrative data, and the staggered rollout of a buyer-driven quality-upgrading program, we find empirical support for the key theoretical predictions, both the lack of pass-through of quality premia under normal circumstances and the possibility of a buyer-driven solution through a vertical restraint. Calibration of the model suggests that one-third to two-thirds of the (substantial) gains from the program accrue to farmers, with the vertical restraint playing a critical role. The results are consistent with the hypotheses that quality upgrading can provide a path to higher incomes for farmers, but also that it is unlikely to be viable under standard market conditions in the sector. |
| JEL: | F61 L23 O12 Q12 Q13 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34610 |
| By: | Kyoji FUKAO; Tetsushi HORIE; Tomohiko INUI; Takafumi KAWAKUBO; Young Gak KIM; Hyeog Ug KWON; Hongyong ZHANG |
| Abstract: | This study examines the extent to which imported intermediate inputs lead to biased estimates of firm-level total factor productivity (TFP) growth, a phenomenon referred to as “offshoring bias.†To this end, we construct a novel firm-level dataset by linking the Japanese customs data with the financial information. We newly develop firm-specific import deflators at the granular Harmonized System 9-digit product level and use them to deflate import values. Comparing TFP estimates based on this approach with those based on commonly used industry-level deflators reveals that the conventional method tends to overestimate TFP growth. Moreover, our regression results indicate that the offshoring bias is more pronounced among firms with higher import shares. This suggests that conventional TFP estimation methods may systematically overestimate productivity growth for firms that rely to a greater extent on imported intermediate inputs. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25129 |
| By: | Alejandra Martinez; Dennis Novy; Carlo Perroni |
| Abstract: | A large literature has documented transitivity as a key feature of social networks: individuals are more likely connected with each other if they share common connections with other individuals. We take this idea to trading relationships between firms: firms are more likely to trade with each other if they share common trading partners. Transitivity leads to a clustered pattern of relationship formation and break-up. It is therefore important for understanding how firms meet and how shocks propagate through firm networks. We describe a method for detecting and quantifying transitivity in firm-to-firm transactions, based on systematic deviations from conditional independence across firm-to-firm relationships. We apply the method to Colombia-U.S. exporter-importer data and show in counterfactuals that transitivity is a significant and economically meaningful factor in how firm networks adjust to cost shocks. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.18893 |