Trade Regime Research Articles

Policy Space for Capital Flow Management: An Empirical Investigation

ABSTRACT Many in the academic community have identified that some trade and investment treaties restrict the ability of nation states to regulate volatile capital flows to prevent and mitigate financial instability. This paper quantifies the variation across preferential and free trade agreements with respect to their policy space for capital flow management measures. With these data we create a composite score of treaty flexibility and examine the collective level of policy space across the global trade regime. We find that the majority of trade treaties leave significant policy space for regulating cross-border finance in the world economy. South-South treaties tend to have the most policy space, whereas North-South and North-North treaties have less. When weighted by the level of gross domestic product (GDP) and incoming foreign investment however, we find that those treaties with the least amount of policy space for capital flow measures represent 65% of world GDP and 48% of global capital flows. What is more, it appears that the global trend is toward treaties without the policy space for appropriate regulation.

Climate and trade policies: from silos to integration

ABSTRACT This paper investigates linkages between trade and climate policies by examining commitments made in preferential trade agreements (PTAs) and Nationally Determined Contributions (NDCs) under the Paris Agreement. While environmental protection and economic growth are often perceived as conflicting policy goals, PTAs and NDCs have the potential to encourage mutually supportive approaches to climate and trade governance. Building upon three recent datasets, the paper locates a sample of 21 countries in a typology of four issue-linkage strategies across both types of instruments: policy integration, policy silos, asymmetry in favour of trade policy, and asymmetry in favour of climate policy. It finds that countries that reveal a preference for strong linkage with climate in their PTAs typically do not reveal a preference for strong trade linkage in their NDCs, and vice versa. No state from the sample favours strong policy integration. After sketching out possible explanations for this observation, the paper concludes that policy-makers have significant room for enhancing synergies between trade and climate commitments and that scholars have a role to play in this endeavour. Key policy insights There is substantial untapped potential for simultaneously promoting trade and tackling the climate crisis across borders in future NDCs and PTAs. In future NDCs, trade provisions, e.g. the reduction of trade barriers for climate-friendly goods and services, should be strengthened in national climate plans. Countries should make better use of climate provisions in their PTAs, e.g. to encourage their trade partners to commit to binding climate objectives and foster exchanges of climate-friendly goods and services.

The Effect of Government Size and Trade Openness on Banking Crisis in Iran: Based on the Method of Jing et al. (2013)

The Effect of Government Size and Trade Openness on Banking Crisis in Iran: Based on the Method of Jing et al. (2013)

Initiator conditions and the diffusion of digital trade-related provisions in PTAs

ABSTRACT Digital trade has become an important driver of global commerce and accounts for an increasing share of many countries’ economies. While progress in digital trade-related discussions at the World Trade Organization has been limited until fairly recently, the topic has gradually been gaining importance in preferential trade agreements (PTAs) since the early 2000s. As we also observe that digital trade governance has become increasingly politicized, we know little about these provisions’ origins and diffusion in PTAs. This research note discusses novel data and analyzes 91 digital trade-related provisions and 347 trade agreements signed between 2000 and 2019. In this note, we focus primarily on the initiator conditions and how these might lead to differences in diffusion patterns. We find that almost half of digital trade-related provisions were initially introduced by PTAs in which the United States was a signatory. Using negative binomial regressions, we find no evidence, however, that these provisions diffuse relatively more often than provisions first introduced by other countries. Our analysis shows that the diffusion of digital trade-related provisions is influenced by original trade interests and the existence of domestic digital policies at the initiator stage. Interestingly, we find that the initial degree of legalization of the provisions themselves matters for a more substantial diffusion, which contradicts the established view that soft law provisions are the preferred approach for new trade topics. This research note highlights the need to factor in the extent to which new international law obligations are adopted through the treaty networks as a result of initiator conditions addressing a certain blind spot in the diffusion literature. By focusing on the initiating states, we also speak to the literature on how international agreements serve to diffuse leading states’ preferred policy options.

Fair trade governance: revisiting a framework to analyse challenges and opportunities for sustainable development towards a green economy

As a relatively new form of non-state governance, the fair trade movement presents an opportunity to promote sustainable production and consumption and hence social change. Global market demands and consumer engagement denote changes in social practices that have led governments to share decision-making processes with private sector and non-governmental organisations. In this context of change, it is important to consider not only whether new forms of governance weaken or strengthen states’ authority within the marketplace but also the extent to which they may allow for “green washing” instead of the green economy proposed by the United Nations Environmental Program. This study considers the fair trade of food production and consumption as a potential innovative model. In doing so it examines the existing general literature on governance, which highlights that decision-making processes tend to reproduce top-down approaches. While such practices may reproduce conventional hierarchies, it is worth questioning the potential of new forms of governance within global markets. This article builds on a sustainability governance analytical framework to deepen understandings of fair trade governance and its possible responses to the dilemmas of food production for ethical consumption and thus sustainable development in transnational relations. This research aims to contribute to the literature on improving compliance with global sustainability standards and through this, inform practices that allow for cooperation towards a green economy.

Circular Economy and International Trade: a Systematic Literature Review

The role of international trade in accelerating the transition to a circular economy is receiving increasing attention in the global policy arena and academic literature. It is a complex area of study encompassing domestic policy, international trade governance, multilateral environmental agreements, material flow analysis, and Just Transition. Due to the expansiveness and interconnectivity of the topic, this article conducts the first systematic literature review on the intersection between a just circular economy transition and international trade. A total of 69 articles were reviewed spanning academic and grey literature. The article identifies and discusses the predicted adverse impacts and benefits of the global CE transition. One striking finding of the review is the prevalence of competing claims across the literature, which will potentially lead to the design of ineffective policy actions. This contradiction of claims is indicative of the significant knowledge gaps in terms of mapping and understanding the complex trade flow dynamics associated with the CE transition. It also presents the most common recommended actions covering immediate policy actions and further research. Policy actions include the development and harmonization of CE standards and definitions, upgrading the Harmonized System of codes structure and customs processes to better enable trade in CE goods and services and mainstreaming circular economy objectives in free trade agreements. Further research is required on how to ensure a Just Transition, the role of global trade in terms of remaining within the planetary boundaries and achieving the SDGs; and improving trade flow modelling. New research is also required on the impacts of geopolitics, technological innovation, and CE finance on circular trade.

Challenges faced by Chinese firms implementing the ‘Belt and Road Initiative’: Evidence from three railway projects

In 2013, China launched its ‘Belt and Road Initiative’ (BRI) as a major effort to enhance international trade and economic development. An important feature of the BRI is that it supports free trade regimes and a world economy based upon open regional cooperation. The concept of BRI involves establishing a transport route between China and participating countries to provide more profitable trade and investment corridors. There are few comprehensive studies examining the social and environmental impact on development in recipient countries. To address this gap, this study gathered empirical evidence on railroad projects in three key countries: Indonesia, Ethiopia, and Kenya. The comparative analysis revealed that while political leaders signed agreements that welcomed China’s BRI in support of their national transport development plans, the implementation of these ambitious infrastructure projects faced significant management and operational challenges that had not been foreseen by the Chinese partners. More effective implementation of BRI infrastructure projects in the future will require better understandings of governance, specifically through harmonization with the cultural, institutional and political contexts in partner countries. Social and cultural characteristics of the countries where Chinese firms are working need to be well understood if sustainable and inclusive benefits from the BRI infrastructure projects are to be delivered. Further research on the benefits gained by local people living in the areas affected by the BRI investments is needed.

Uneven development: convergence, divergence and politics

AbstractThe paper positions itself in contrast to some themes in work on local and regional development. These have included an emphasis on policy rather than politics, tendencies to over-generalize across countries, and to abstract from the more global context. The empirical context for the discussion is the shifting character of geographically uneven development since the Second World War: first a convergence and then, after the mid-1970s, a divergence. Convergence is held to be the result of what some have called spatial Keynesianism. The conditions for this and for its demise, resulting in divergence, are traced out with particular reference to how the shifting pressures and opportunities were refracted by the specificities of countries. State form emerges as particularly important in understanding different trajectories, along with a neo-liberal globalisation that has been in contrast to the monetary and trading regime inaugurated by the Bretton Woods agreements.

Cooperative control and the governance of cross-border trade in Chinese border cities

ABSTRACT One essential question in the literature on trade governance concerns the relationship between state and non-state actors. This paper addresses the question by focusing on how the Chinese state deploys a strategy of cooperative control to govern cross-border trade with Myanmar. We identify three terrains of trade affairs – traffic flows, cross-border payment and anti-smuggling – which correspond to three modes of governance – active cooperation, acquiescence and compromise. It is found that the more the Chinese state cooperates to facilitate cross-border trade with Myanmar, the harder its unilateral crackdown on smuggling, showing the coordinative and coercive nature of state power to selectively cooperate with other actors. In the domain of cross-border trade, the Chinese state exercises cooperative control to forge network governance not in response to market dysfunction and state failure, but to overcome structural conditions brought by the territorial border between China and Myanmar. By analysing cooperative control at the border, this paper’s contribution is to overcome the government versus governance dualism, and shed light on innovative strategies in spatial and administrative orchestration aiming to facilitate legal trade and deter illegal trade at the border.

Building on open economy politics to understand the stalled EU–India trade negotiations

Abstract Global trade governance is increasingly characterized by a growing fragility in multilateral institutions and a preference for bilateral negotiations. The literature on such negotiations focuses primarily on successful agreements. Academic research on unsuccessful or stalled bilateral talks is limited, although better understanding of such outcomes may provide lessons for future negotiations. This article contributes to such understanding by proposing a revised open economy politics (OEP) framework, adapted to ‘second generation’ OEP analysis. Our framework highlights the multidirectional linkages between the trinity of interests, institutions and international interactions within trade negotiations, while adding the role of power and ideas to the analysis. We leverage our revised framework to explore why the European Union–India Free Trade Agreement (EUIFTA) negotiations stalled, thus providing insights as negotiators seek to revive them. Drawing on 45 semi-structured interviews conducted over a seven-year period in the EU and India, we examine what impact these different factors had on the progress of talks. Our results suggest that our revised OEP approach provides a multi-layered and integrated framework which enables us to better understand negotiating outcomes. Furthermore, our findings suggest that the shifting balance between emerging economies and developed economies as a result of the geopolitical (power) shifts and ideational change will affect future trade negotiations.

Зовнішня торгівля аграрними товарами України в контексті Угоди про асоціацію з Європейським Союзом

The purpose of the article is to establish, based on the analysis, trends in foreign trade and directions for improving the competitiveness of agricultural goods of Ukraine in the EU in the context of the implementation of the Association Agreement. Research methods. In the course of the research the following methods were used: analysis and synthesis, analytical generalizations - during the analysis of foreign trade in agricultural goods; tabular - for clarity of the image of the received results of research; economic and statistical - to assess trends in foreign trade; abstract-logical - in drawing conclusions. Research results. The article analyzes the volume, dynamics, structure of exports and imports of agricultural goods of Ukraine with EU countries, assesses changes in the foreign trade regime, identifies trends and the impact of the implementation of the Association Agreement between Ukraine and the EU on Ukraine's foreign trade. The place and importance of the agricultural sector in European markets are studied. The foreign trade turnover of agricultural goods of Ukraine is determined. The algorithm for assessing the level of competitiveness of agricultural goods is generalized. Scientific novelty. The authors found that, on the one hand, the export orientation of raw materials to the EU market of crop products has increased, on the other hand, there is a high import dependence on finished food products, and the structure of imports is more diversified. Practical significance. Adaptation of Ukrainian legislation in the field of agriculture and sanitary and phytosanitary measures is incomplete and lags behind the planned pace. Ways to diversify exports and increase the profitability of foreign trade in agricultural goods from Ukraine in the EU market are proposed. Tabl.: 1. Figs.: 3. Refs.: 19.

A Trade Agenda for the Right to Food.

Whoever benefits from a trade regime in effect gains power over significant aspects of different food systems. And yet the WTO still does not provide a coherent food policy and the 2021 UN Food Systems Summit made very little space for trade policy. The degree of international trade policy discord and supply chain fragility strongly suggests that there must be new international trade negotiations around fundamental questions of principle. Seeing little benefit in reforming the WTO, this article explains how the trade agenda for the right to food could focus on territorial markets and negotiating new types of treaties, International Food Agreements.

The economics of state fragmentation: Assessing the economic impact of secession

AbstractThis paper presents estimates of the economic effects of secession for a large panel of countries that gained independence between 1940 and 2016. It relies on a semi‐parametric identification strategy that controls for the confounding effects of past gross domestic product (GDP) dynamics, anticipation effects, unobserved heterogeneity, model uncertainty, and effect heterogeneity. Our findings indicate that secession lowered per capita GDP, on average by around 24% in the 10th post‐independence year. Nevertheless, the associated cross‐sectional standard deviation of 25% emphasizes that the economic impact of secession also varied widely across countries. A novel procedure to produce confidence intervals around synthetic control estimates of treatment effects demonstrates the statistical significance of the findings. We document the implications for several historical independence waves and connect them to the existing literature. We find tentative evidence that, in decreasing order of relative importance, the adverse effects of independence are disproportionally present in non‐oil producing landlocked countries and are mitigated when newly independent states use their new‐found political autonomy to democratize or to liberalize their trade regime.

PROSPECTS FOR ECONOMIC COOPERATION IN CENTRAL ASIA

This research article examines the state and prospects of economic cooperation among the countries of Central Asia (CA). As history would have it, economic cooperation within the CA region was previously limited, and investments in Central Asia were mainly concentrated in the mining sector of the economy. Demographic and economic trends in the region have led to an expansion of the internal market; most Central Asian states have implemented wide-ranging reforms, which have improved the overall investment climate; and the CA states have stepped up the development of multilateral trade and economic relations, laying the groundwork for broader cooperation. The article also covers recent problems related to the economic situation in the region. For example, the current situation associated with COVID-19 has had an impact on economic relations between the CA countries. In the view of international experts, this crisis has not provided any new reasons for integration in the region. The quarantine measures taken in various Central Asian countries have had a negative effect on their foreign trade and thus on intra-regional trade and economic cooperation in general. The authors also examine other problems, such as those caused by the CA countries’ economic dependence on other countries, namely their dependence on imports from outside the region. These problems also affect the prospects of economic cooperation in Central Asia. All countries, including those rich in natural resources, want to produce and export finished goods with high value added. The production of high value added products and services enables a country to earn more revenue and reduce its dependence on primary commodity exports. The Central Asian countries are no exception. But for many reasons their finished products are often insufficiently competitive in countries outside the region. Despite the existence of economic problems connected with the need to improve the economic aspects of cooperation, there is a clear trend towards diversification of the economy of the CA countries caused by a desire to develop various specializations. These include agricultural processing, production of consumer goods for the population, development of the service sector, and other areas. Thus, the choice of a new model for the development of multilateral relations and the emerging trend towards economic growth in the region have made it possible to lay the foundation for long-term cooperation among the Central Asian states. Keywords: regional cooperation, Central Asia region, diversification of the economy, trade regimes, external economic policy, region, Kazakhstan, Uzbekistan, Tajikistan, Turkmenistan, Kyrgyzstan.

Abnormal pricing in international commodity trade: Empirical evidence from Switzerland

Mispricing of international trade in natural resources poses a significant risk for tax base erosion from resource-rich, developing countries, while also contributing to regulatory and financial risks for commodity trading hubs. This paper presents a novel empirical approach which combines statistical price-filter analysis methods with commodity market research to provide evidence on the magnitude of abnormally priced Swiss commodity imports. Our analysis compares transaction-level import prices to an arm's length price range representing fair market value and defined using contemporaneous benchmark prices from commodity exchanges, adjusted for product-specific factors. We find a significant magnitude of abnormally under-valued unwrought gold doré imports as well as relatively smaller magnitudes of abnormally under-valued cocoa and coffee imports. Next, we contrast our new estimates with traditionally used proxies for trade mispricing based on aggregate mirror trade statistics to highlight the unreliability of widely used methods and data sources. Finally, we discuss the limitations in our analysis even using the best available administrative data which reinforces the urgency to improve the statistical infrastructure used to record international commodity trading in order to promote transparency and improve international trade governance.

Harmonising Seed Regulatory Regime for up-scaling Global Seed Trade

Quality seed of well adapted improved varieties are fundamental for the agricultural development. Considerable efforts have been made towards the strengthening seed sector in many parts of the world in terms of seed production and distribution with appropriate seed policies, laws and regulations etc. Global seed market is growing enormously and is highly dependent on the seed regulatory frameworks at national and international levels. An efficient and transparent seed regulatory system is crucial to ensure that farmers have timely access to high quality seed at an affordable price. The international seed regulatory framework consists of (i) seed certification schemes based on varietal identity and varietal purity (OECD & AOSCA); (ii) seed testing (ISTA, AOSA); (iii) phytosanitary measures (IPPC, WTO-SPS & NPPO); and the plant variety protection (UPOV or sui generis systems). The rapid growth in the volume of international seed trade has given rise to many challenges, of which, the need for harmonization of seed regulatory framework is of utmost importance. International organisations such as, the OECD, ISTA, AOSA, UPOV, IPPC have been involved in the development of uniform, standard and science-based seed regulatory framework and methodologies, which have been adopted by the governments and seed industries around the world. The harmonization of seed regulatory framework with appropriate seed policies, capacity building activities, and awareness creation among the farmers would certainly help to boost the global seed trade by assuring confidence about the quality, good coordination between the public-private stakeholders, increased transparency and reducing technical trade barriers. This would also improve the farmers access to quality seeds of well adapted crop varieties in all the regions of the world.

A Pattern New in Every Moment: The Temporal Clustering of Markets for Crude Oil, Refined Fuels, and Other Commodities

The identification of critical periods and business cycles contributes significantly to the analysis of financial markets and the macroeconomy. Financialization and cointegration place a premium on the accurate recognition of time-varying volatility in commodity markets, especially those for crude oil and refined fuels. This article seeks to identify critical periods in the trading of energy-related commodities as a step toward understanding the temporal dynamics of those markets. This article proposes a novel application of unsupervised machine learning. A suite of clustering methods, applied to conditional volatility forecasts by trading days and individual assets or asset classes, can identify critical periods in energy-related commodity markets. Unsupervised machine learning achieves this task without rules-based or subjective definitions of crises. Five clustering methods—affinity propagation, mean-shift, spectral, k-means, and hierarchical agglomerative clustering—can identify anomalous periods in commodities trading. These methods identified the financial crisis of 2008–2009 and the initial stages of the COVID-19 pandemic. Applied to four energy-related markets—Brent, West Texas intermediate, gasoil, and gasoline—the same methods identified additional periods connected to events such as the September 11 terrorist attacks and the 2003 Persian Gulf war. t-distributed stochastic neighbor embedding facilitates the visualization of trading regimes. Temporal clustering of conditional volatility forecasts reveals unusual financial properties that distinguish the trading of energy-related commodities during critical periods from trading during normal periods and from trade in other commodities in all periods. Whereas critical periods for all commodities appear to coincide with broader disruptions in demand for energy, critical periods unique to crude oil and refined fuels appear to arise from acute disruptions in supply. Extensions of these methods include the definition of bull and bear markets and the identification of recessions and recoveries in the real economy.

A Panoramic View of the UK Relations with the EU and Turkey Post-Brexit

In the last century, the importance of foreign trade, particularly net exports of goods and services, in achieving balanced and high-quality economic growth has become increasingly apparent. This certainly applies to Turkey. For example, the Eleventh Development Plan prepared for the 2019-2023 period was determined within the framework of a stable, export-based growth model, in which the industrial sector played a dominant role, focusing on productivity. Recently, the new trade regime between Turkey and the United Kingdom after Brexit has been included among the subjects within the agenda of Turkish foreign trade. The present study aims to find the preliminary clues to understand the extent of the recent trade agreement between two countries, which share deep-rooted trade links, in light of the new UK-EU deal. While one of these countries does not want to lose its position as a candidate country, despite the obstacles and disagreements posed by the EU in the negotiation mechanism, the other has managed to leave the EU as a result of a very intense and complex process, that lasted approximately thirty-four months.

COVID-19 and Global Supply Chain Configuration: Economic and Emissions Impacts of Australia-China Trade Disruptions.

Economic shocks from COVID-19, coupled with ongoing US-China tensions, have raised debates around supply chain (or global value chain) organisation, with China at the centre of the storm. However, quantitative studies that consider the global and economy-wide impacts of rerouting supply chains are limited. This study examines the economic and emissions impacts of reorganising supply chains, using Australia-China trade as an example. It augments the Hypothetical Extraction Method by replacing traditional Input-Output analysis with a Computable General Equilibrium analysis. The estimation results demonstrate that in both exports and imports, a trade embargo between Australia and China – despite being compensated for by alternative supply chains—will cause gross domestic production losses and emissions increases for both countries and the world overall. Moreover, even though all other economies gain from the markets left by China, many of them incur overall gross domestic production losses and emission increases. The finding that the Association of Southeast Asian Nations and India may also suffer from an Australia-China trade embargo, despite a gain in trade volume, suggests that no country should add fuel to the fire. The results suggest that countries need to defend a rules-based trading regime and jointly address supply chain challenges.

Trading Away Tariffs: The Operations of the GATT System

AbstractSince its formation, the GATT/WTO system has facilitated a worldwide reduction of trade barriers. We return to a founding moment of the regime, the GATT 1947 (GATT47), and look closely at the liberalization process, analyzing exactly what concessions were granted to whom and in return for what. With these data, we evaluate three prominent explanations for the operation of the early GATT. First, we ask whether or not US negotiators granted asymmetric access to the US market to spur post-war recovery. Second, we look at how the rules adopted in GATT47 balanced the interests of import sensitive producers with those of the more nascent exporter interests. Third, we examine specific US concessions and ask whether or not the US used the domestic market to either increase the productive capacity of nations damaged during the war and/or to bolster unstable regimes. Our most general finding is that the US, at least in this first Round of the trade regime, was less a liberal warrior and more a seeker of stability, and that tariff setting was significantly constrained by the institutions governing global tariff negotiations.