Economic research and trade policy analysis
Trade Reform, Managers, and Skill Intensity: Evidence from India
International trade economists have long been interested in understanding the distributional implications of globalization or trade liberalization or product market competition. One of the crucial aspects of such distributional effects which have received a lot of attention especially from the 1990s onward is how such forces divide the labor pie into skilled (or nonproduction) and unskilled (or production) workers. In other words does an increase in trade participation or exposure to international markets result in an increase in returns for skilled or less skilled workers?
The Impact of Tariff Liberalization on the Labor Share in India’s Manufacturing Industry
India opened its domestic market to international trade in the early 1990s. The decision had profound implications on the development trajectory of the country. Trade opening allowed the country’s firms to source inputs more cheaply and increase their competitiveness. At the same time it meant that firms in India were exposed to increased competition from abroad while consumers enjoyed lower prices for final goods. While the trade opening helped boost economic growth it required an adjustment of capital and labor within and across sectors.
Trade Liberalization and the Hukou System of the People’s Republic of China: How Migration Frictions Can Amplify the Unequal Gains from Trade
The emergence of the People’s Republic of China as a great economic power has stimulated an epochal shift in patterns of world trade in contradiction to the conventional wisdom regarding the impact of trade on labor markets in developed countries (Autor Dorn and Hanson 2016). The global effects of the People’s Republic of China’s trade and economic growth has been widely documented (Autor Dorn and Hanson 2013; Bugamelli Fabiani and Sette 2015; Balsvik Jensen and Salvanes 2015; Giovanni Levchenko and Zhang 2014; Hsieh and Ossa 2011) reshaping our understanding of the consequences of trade for wages unemployment and other labor market outcomes.
Export Boom, Employment Bust? The Paradox of Indonesia’s Displaced Workers, 2000–2014
Charles Dickens’ phrase “it was the best of times; it was the worst of times” is for many Indonesian workers an apt summary of their experience during the early 2000s. While the national economy and especially its resource-exporting sectors enjoyed trade-driven growth of unprecedented magnitude and duration millions of blue-collar workers and labor market entrants found themselves paradoxically sidelined from well-paid jobs in manufacturing and instead forced to seek livelihoods in low-paid low-skill service sector jobs. This happened at a time when many Asian countries led by the People’s Republic of China were enjoying (continued) expansion of manufacturing trade by participating in global production networks which in turn created better employment opportunities for their less-skilled agricultural workforces. For many Indonesians on the other hand the boom was a period of stagnating real wages and diminished earnings prospects even as national income and spending surged ahead and overall expectations for the future became increasingly bright. For workers the consequence of job displacement due to structural change would have been particularly severe during this time.
The Rise of the People’s Republic of China and Its Competition Effects on Innovation in Japan
As a reaction to import competition from low-wage economies firms in developed economies would respond by upgrading their innovative activities leading to so-called defensive skill-biased innovation. In this chapter we examine this “defensive innovation” hypothesis which was first discussed in Wood (1994) and subsequently formalized in Thoenig and Verdier (2003). In a broader context the effect of competition on the rate of innovation has been one of the most studied areas in the literature (e.g. Aghion et al. 2005). In the study most relevant to our work Bloom Draca and Van Reenen (2016) found that a large sample of European firms increased a wide range of their innovative activities (patenting research and development [R&D] expenditures computer use and total factor productivity growth) driven by intensified competition from the People’s Republic of China. This innovation was conducted within-firm.
Trade Adjustment in Asia
Asia’s economic success over the past four decades has been built on a strategy of export promotion coupled with trade opening. Poverty rates throughout the region have fallen dramatically especially in countries that have succeeded in integrating into regional or global value chains. However this economic success has been accompanied by structural changes such as the need for workers to change roles sectors and sometimes regions. Faced with increased foreign competition firms have been forced to reorganize and quickly adopt new technologies. Despite the importance of this adjustment process relatively little empirical evidence exists. This volume aims to close this gap by providing new insights into how Asia’s labor markets and firms have adjusted to trade opening. Written by leading trade economists with expertise in the region the publication shows that trade opening has led to a more efficient allocation of capital and labor but this has been accompanied by significant adjustment costs. The book sheds light on the effects of trade on workers and firms with the aim of improving understanding of the adjustment process and contributing to the debate on how to make globalization work for all.
Firm Adjustment to Trade Policy Changes in East Asia
Trade and investment liberalization has been one of the key features of economic policy in many developing countries since the 1990s. A new understanding of the benefits of international trade triggered unilateral tariff reductions from countries throughout the world. As a result the global economy in the early 21st century has seen significantly reduced barriers creating much larger trade volumes between countries. This has promoted globalization as the increasingly borderless countries have nurtured the growth of production networks between countries. It has also made exports an engine of growth and a strategy to foster industrialization.
On the Effectsof GATT/WTO Membership on Trade
We capitalize on the latest developments in the empirical structural gravity literature to revisit the question of whether and how much does GATT/WTO membership affect international trade. We are the first to capture the non-discriminatory nature of GATT/WTO commitments by measuring the effects of GATT/WTO membership on international trade relative to domestic sales.
Women’s Economic Empowerment
Aid for Trade supports developing and least-developed countries in building their trade capacity and in increasing their exports by turning market access opportunities into market presence. It does so by addressing four key areas: trade policy & regulations; economic infrastructure; building productive capacity; and trade-related adjustment.
Trade Policies Supporting Women’s Economic Empowerment
This paper looks at the various trade policies WTO Members have put into place to foster women’s economic empowerment. The analysis below is based on the information provided by WTO Members as part of their Trade Policy Review (TPRs) process from 2014 to 2018. Reports from the WTO Secretariat governments as well as the question and answer sessions were examined for the purpose of this paper.
How WTO Commitments Tame Uncertainty
Guided by a cost benefit analysis model and using a unique database of tariff bindings for all WTO countries over the 1996-2011 period we show that WTO commitments affect members’ trade policy. More stringent bindings reduce the likelihood of responding to import shocks by raising tariffs and increase the likelihood of contingent measures. We argue that this reduces overall trade policy uncertainty. In a counterfactual scenario where WTO members can arbitrarily increase tariffs they are 4.5 times more likely to do so than under current bindings.
Product Patents and Access to Innovative Medicines in a Post-TRIPS era
This WTO working paper studies availability and affordability of new and innovative pharmaceuticals in a post-TRIPS era. The WTO’s TRIPS Agreement (TRIPS) makes it obligatory for WTO members– except least-developed country members (LDCs) - to provide pharmaceutical product patents with a 20-year protection term. Developing country members other than LDCs were meant to be compliant with this provision of TRIPS by 2005.
Potential Economic Effects of a Global Trade Conflict
The WTO Global Trade Model is employed to project the medium-run economic effects of a global trade conflict. The trade conflict scenario is based on recent estimates in the literature of the difference between cooperative and non-cooperative tariffs.
The welfare effects of trade policy experiments in quantitative trade models
This paper compares the solution methods and baseline calibration of three different quantitative trade models (QTMs): computable general equilibrium (CGE) models structural gravity (SG) models and models employing exact hat algebra (EHA). The different solution methods generate identical results on counterfactual experiments if baseline trade shares or baseline trade costs are identical.
Distance, Formal and Informal Institutions in International Trade
This paper brings together three strands of literature on the determinants of international trade – distance formal and informal institutions – to explain differences in export performance across countries. Using an augmented gravity model we find that the importance of formal institutions (rule of law) for bilateral trade increases with distance.
Services Trade Policy, WTO Commitments, and their Role in Economic Development and Trade Integration
Services have long been perceived as playing a secondary role in world trade. In particular the role of services trade policies and multilateral services commitments often tends to be downplayed. However in value added terms services account for about 50% of world trade and are significant in exports of countries of all levels of development.
Acknowledgements
This publication was prepared by Arti Gobind Daswani Roy Santana and János Volkai of the WTO Secretariat with the support of WTO Deputy Director-General Karl Brauner Valerie Hughes (former Director of the WTO’s Legal Affairs Division) Suja Rishikesh Mavroidis (Director of the WTO Market Access Division) and John Adank (Director of the Legal Affairs Division). Special acknowledgment is owed to William Castro of the WTO’s Young Professionals Programme for his contributions to the processing of the data and preparation of the one-page case summaries to WTO staff members Jesse Kreier and Olga Falgueras Alamo from the Rules Division for their contribution to the compilation of relevant documents and to Jesse Nicol from the Appellate Body Secretariat for his comments. The authors are also grateful to Laoise Ní Bhriain Maria Bressi and Bryson Strupp from the Archives Section of the WTO Information Management Services for their active collaboration in checking the archives and identifying relevant information and to Tan Albayrak intern at the Legal Affairs Division for assisting in the final editing of the onepage case summaries.