Trade Reform Research Articles

Advancing equitable value chains for the global hydrogen economy

Hydrogen is a rapidly growing focus for countries seeking to develop green industries, but there are many questions about how the nascent global hydrogen economy will develop, and what this implies for equitable sharing of benefits and burdens between nations. In this perspective we summarize emerging trends in national hydrogen strategies and develop recommendations for researchers and policymakers to center equity in hydrogen development. This will require integrating innovation and development perspectives on international technology transfer, developing more detailed representation of hydrogen trade in systems models, building equity considerations into national and international planning processes, and establishing robust technology transfer efforts. Policymakers will also need to grapple with the difficulties of verifying life cycle emissions of hydrogen if hydrogen trade emerges as a significant trend, potentially requiring new methods of emissions accounting and trade reforms that prioritize international equity.

Indonesia’s export growth decomposition in ASEAN and ASEAN dialogue partners

Purpose ― This paper evaluates Indonesia's trade integration efforts and their impact on export competitiveness from 1989 to 2021. It examines the evolution of trade arrangements, starting with the ASEAN Preferential Trade Arrangement (APTA) and progressing to bilateral agreements.Methods ― Based on Leamer and Stern, the Constant Market Share Analysis (CMSA) measures Indonesia’s export competitiveness over the years.Findings ― The results indicate no significant improvement in competitiveness during the analysis period, with export growth primarily driven by the effect of world growth. Although competitiveness did not shift markedly over time, it remained positive overall, suggesting a buffer effect during economic crises.Implications ― The paper suggests Indonesia should pursue deeper trade integration and unilateral economic reforms. Drawing on Korea’s experience, combining export promotion policies with trade agreements could enhance market access and foster internal competitiveness.Originality ― This study provides long-term insights into Indonesia’s export competitiveness amidst global trade integration efforts and offers policy recommendations based on the success of Korea’s trade reforms.

A Dynamic Analysis of Sustainable Economic Growth and FDI Inflow in Saudi Arabia Using ARDL Approach and VECM Technique

This study investigates the relationship between sustainable economic growth and foreign direct investment (FDI) in Saudi Arabia from 1980 to 2023. The ARDL approach and VECM technique are employed to analyze the short-run and long-run dynamics. The short-run results show mixed effects. Sustainable economic growth has a positive impact on current and one-period lagged FDI but a negative impact on the two periods lagged. Trade openness and infrastructure negatively affect FDI in the short run. Interestingly, oil rents and real economic growth also have negative short-run impacts on FDI, but these effects become positive with a longer lag. Long-run analysis reveals a negative relationship between trade openness, infrastructure, and oil rents with FDI, suggesting a potential crowding-out effect. Trade openness has a positive long-run impact on most variables, including sustainable growth, FDI, real growth, and CO2 emissions. Oil rents also have a positive long-run impact on these variables. This study finds six bidirectional causal relationships in the short run, primarily between trade openness, infrastructure, oil rents, and FDI. Unidirectional causality runs from oil rents, trade openness, exchange rate, sustainable growth, and real growth to FDI and infrastructure. Additionally, CO2 emissions cause FDI, and trade openness causes sustainable growth. While sustainable economic growth benefits FDI in the long run, short-term policies regarding trade openness and infrastructure require reevaluation. Oil revenue and real economic growth may initially deter FDI, but this reverses in the long term. To attract sustainable FDI, policymakers should focus on long-term economic growth strategies and consider reforms in trade and infrastructure policies. A comprehensive FDI strategy that moves beyond oil dependence and leverages trade openness is crucial to long-term economic diversification.

The price of capital goods, investment and labour: Micro‐evidence from a trade liberalization

AbstractIn this paper, we show that a reduction in capital goods prices induced by trade policies can stimulate both investment and labour. We exploit a quasi‐natural experiment in the form of a trade reform in Colombia to study how firms with differential exposure to reductions in capital goods tariffs react in terms of their investment and labour decision. Firms that see a larger decline in the input tariff for capital goods increase investment and labour for production, as well as their labour share. Reductions in input tariffs are passed through to input prices for all goods. However, only lower prices for capital, not for other goods, translate into more investment and employment of production workers.

Intra-Africa trade and the need to rethink the neo-liberal approach

Notwithstanding past trade reforms, trade in Africa and particularly intra-Africa trade, remain dismal. Africa has even created economic communities, fitted with monetary, fiscal, and socio-political anchors, by way of various Regional Economic Communities (RECs) – now reflected by the African Continental Free Trade Area (AfCFTA). Whilst these have yielded marginal benefits, the persistence of low intra-Africa trade calls into question their suitability. Focused on the realities of institutions targeted by these reforms and Africa's context – i.e., weak linkages between institutions, high informality, and low social capital – we posit that reforms have not elicited the hoped-for high intra-Africa trade because of their near total reliance on the neo-liberal approach, which neglects Africa's context. Drawing on Africa's sociology and new institutional economics, we use a conceptual institutional analysis to evolve a political economy based framework that suggests potential solutions: Linking the formal sector that currently underpins economic/trade policies to the informal institutions that are reflective of Africa's norms, values, cultures and expectations (the informal sector), and scaling up production; via the cooperatives production model, strategic procurement mandates, and effectuation of continental transportation infrastructure network, are our recommended pathways to reversing the current dismal intra-continental trade.

The impact of trade reforms on industry wage premia in Pakistan: A sectoral perspective

Pakistan witnessed significant trade liberalization reforms between 1988 and 2005. This study investigates the impact of Pakistan's significant trade liberalization policies in 1988 on industry wage premia. We use an estimation strategy that takes into account dispersion in sector wage premiums and trade reforms over time and across sectors. We employed the wage premium approach and Restricted Least Squares to obtain sectoral wage premia. We used weighted least squares and two-stage-least-squares (2SLS) to explore the liaison between trade reforms and sector wage premia. Contrary to previous empirical studies on less developed economies, our findings reveal a significant and resilient correlation between changes in trade reforms and fluctuations in sector wage premiums during the liberalisation period of 1990-2005. Our findings are consistent with short- and medium-run trade models in which workers are immobile across industries or, on the other hand, with the presence of sector rents that are reduced when trade policy is liberalized.

The tax revenue implication of trade liberalisation in sub‐Saharan Africa: Some new evidence

AbstractDespite the advent of trade liberalisation, trade taxes still remain a key source of tax revenues in sub‐Saharan Africa. Further trade reforms in the form of the African Continental Free Trade Area could, however, hinder output growth in the region if these reforms lead to a decline in total tax revenues. Motivated by this conundrum, this paper investigates the impact of trade liberalisation on tax revenues across a panel of sub‐Saharan African countries. The results indicate that trade liberalisation is associated with an increase in total tax revenues. Also, the reduction of import and export duties significantly increases and decreases domestic and trade tax revenues, respectively. In addition, greater urbanisation is associated with an increase in total tax revenues, while inflation decreases tax revenues.

Does Trade Reform Promote Economic Growth? A Review of Recent Evidence

Abstract Do trade reforms that significantly reduce import barriers lead to faster economic growth? In the twenty-five years since Rodríguez and Rodrik's (2000) critical survey of empirical work on this question, new research has tried to overcome the various methodological problems that have plagued previous attempts to provide a convincing answer. I examine three strands of recent work on this issue: cross-country regressions focusing on within-country growth, synthetic control methods on specific reform episodes, and empirical country studies looking at the channels through which lower trade barriers may increase productivity. A consistent finding is that trade reforms have had a positive impact on economic growth, on average, although the effect is heterogeneous across countries. Overall, these research findings should temper some of the previous agnosticism about the empirical link between trade reform and economic performance.

Gain without pain? Non‐tariff measures, plant markup, and productivity

AbstractThis paper extends the evidence on the impact of trade reforms on firms by focusing on non‐tariff measures (NTMs), an increasingly important trade policy instrument in advanced and developing economies. We build a novel time‐varying dataset on all NTMs applied to imported products by Indonesia and quantify the trade distortions they generate. We find that unlike tariffs, which reduce plants' productivity, NTMs do not significantly affect plants' performance. However, the most trade‐reducing NTMs are associated with lower plant‐level markups, which is consistent with the increase in the cost of imported inputs induced by these NTMs.

Planetary Welcare principles for just and sustainable futures: a compass for system change, trade reforms, and transformations

International trade, a cornerstone of the global economy, has witnessed substantial growth since the start of the 21st century. This expansion, largely driven by liberalizing policies and supported by initiatives like the United Nations Sustainable Development Goals, has deeply integrated economies worldwide, making trade a substantial part of global gross domestic product (GDP). However, this growth also spotlights cultural, social, and environmental consequences. Studies indicate that trade is responsible for up to 70% of global environmental impacts, often transferring burdens from “developed” to “developing” nations. While trade bolsters economies, it also poses risks to people, nature, and the planet. In this article, I introduce the Planetary Welcare compass, an innovative framework designed to navigate these multifaceted challenges and drive transformative change. This framework integrates diverse perspectives on development, equity, sustainability, and planetary health into five interconnected principles: enhancing well-being, promoting balanced consumption, fostering accountability with integrity, embracing rooted globalism, and championing environmental stewardship. The article delves into the foundation of this framework and applies it to the overarching strategies of both the World Trade Organization (WTO) and the International Fair Trade Charter (IFTC), highlighting their divergent approaches and associated challenges. In conclusion, the Planetary Welcare compass offers a comprehensive set of principles to guide and assess production and consumption systems, including trade policies and agreements. It suggests a significant shift from the traditional welfare-state model toward a broader focus on planetary health, equity, and sustainability, ushering in the emergence of a “Welcare state” paradigm for a just and sustainable future.

Unbalanced Trade: Is Growing Dispersion from Financial or Trade Reforms?

Unbalanced Trade: Is Growing Dispersion from Financial or Trade Reforms?

Contribution of the Common Market for Eastern and Southern Africa in Poverty Alleviation: A Case of Trade Liberalisation in Zambia

Background: This study was undertaken due to high levels of poverty in the Common Market for Eastern and Southern Africa (COMESA) Member States. The overall objective of the study was to explore the contribution of COMESA in the fight against poverty in Africa, a case study of Zambia from 2010-2021. The specific objective in this article was to explore the Contribution of the Common Market for Eastern and Southern Africa in Poverty Alleviation, a case of trade liberalisation in Zambia. The study employed qualitative approach with an exploratory research design and critical case sampling to choose 13 key respondents to explore the contribution of the Common Market for Eastern and Southern Africa in Poverty alleviation in Zambia from 2010-2021. Primary data was analysed from 13 key respondents selected purposively using an interview guide to support secondary data. Data was analysed using thematic and content analysis. This study found that COMESA was established by a treaty in December 1994 as a basis for trade liberalisation. The aim of trade liberalisation was to remove tariffs and non-tariff barriers to reduce the cost of doing business to create employment hence contributing to poverty alleviation. Zambia embarked on trade liberalisation and received financial support from COMESA and its international cooperating partners of development to achieve trade liberalisation. The study established that COMESA had been significant in the fight against poverty in Zambia. However, despite the trade reforms implemented, the study established that poverty levels in Zambia had not reduced since 2010 instead there had been an increase from 54.4 % in 2020 to 60.3 % in 2021. Zambia requires a clear regulatory framework predictable for business planning with a conducive legal business environment that promote trade through innovative policy framework targeting various sectors of the economy to generate income activities and employment. There must be regular review of the trade liberalisation rules to ensure coherence and compliance with COMESA rules in order to realise the gains of trade.

Asymmetric Trade Reform and External Adjustment: Theory and Evidence from China

Asymmetric Trade Reform and External Adjustment: Theory and Evidence from China

Contribution of the Common Market for Eastern and Southern Africa in the Fight Against Poverty in Zambia Through Private Development and Promotion of Foreign Direct Investment

Background: This study was undertaken due to high levels of poverty in the Common Market for Eastern and Southern Africa (COMESA) Member States. The overall objective of the study was to explore the contribution of COMESA in the fight against poverty in Africa, a case study of Zambia from 2010-2021. The specific objective in this article was to explore the Contribution of the Common Market for Eastern and Southern Africa in fight against poverty in Zambia through private development. The study employed qualitative approach with an exploratory research design and critical case sampling to choose 13 key respondents to explore the contribution of the Common Market for Eastern and Southern Africa in Zambia through private sector development from 2010-2021. Primary data was analysed from 13 key respondents selected purposively using an interview guide to support secondary data. Data was analysed using thematic and content analysis. This study found that COMESA was established by a treaty in December 1994 as a basis for private sector development and promotion of foreign direct investment in the region with a view to create employment and income generating activities contributing to poverty alleviation. Zambia embarked on private sector development and promotion of foreign direct investment with the financial support from COMESA and its international cooperating partners of development. The study established that COMESA had been significant in the fight against poverty in Zambia. However, despite the trade reforms implemented, the study established that poverty levels in Zambia had not reduced since 2010 instead there had been an increase from 54.4 % in 2020 to 60.3 % in 2021. Zambia requires a clear regulatory framework predictable for business planning with a conducive legal business environment that promote the private sector and foreign direct investment with an enabling business environment and innovative policy framework targeting various sectors of the economy.

How the Paradox Preference Undermines Effective Insider Trading Reform

How the Paradox Preference Undermines Effective Insider Trading Reform

Examining the agriculture-induced environment curve hypothesis and pollution haven hypothesis in Rwanda: the role of renewable energy

Agriculture has a main impact on increasing the economy of most developing countries, and energy policies in fighting climate change have a vital role in strengthening economic growth. This paper studies the impact of agriculture, trade openness and green energy on CO2 emissions in Rwanda during 1990–2022. Phillips- Peron and Augmented Dickey fuller unit root test affirmed the stationary of data, and autoregressive distributed lag (ARDL)-bound testing confirmed a long-run relationship among variables. The study employed an ARDL approach.Findings from long-run elasticities showed that 1% increase in agriculture productivity increased carbon dioxide emissions by 1.94%; 1% increase in trade openness increased carbon dioxide emissions by 0.16%; whereas 1% increase in renewable energy consumption and GDP per capita decreased carbon dioxide emissions by 2.71% and 2%, respectively. The result confirmed the induced environment curve and the pollution haven hypothesis in Rwanda. Moreover, green energy consumption and GDP per capita decreases CO2 emissions eventually, which supports the validity of environment Kuznets curve in Rwanda.The findings recommend that an increase in renewable energy usage and trade reforms accompanied by strong environmental policies to reduce CO2 emissions will develop the agriculture sector and regional economy.Graphical

Financial Development: The Role of GDP per Capita Dynamics in Low- & Middle-Income Economies

This study delves into the complex role of economic growth on financial development within low- and middle-income economies (LMIE). It analyzes a dataset spanning 85 countries from 1980 to 2020, collapsed into 9 periods, yielding 765 observations. Employing General Method of Moments (GMM), including two-step system GMM and forward-orthogonal deviations IV/GMM methods, the research uncovers intriguing dynamics. Positive shifts in GDP per capita are found to correspond with heightened financial development, whereas negative changes exhibit an adverse relationship. Government consumption yields mixed results, and inflation negatively impacts financial development, while trade openness and favorable terms of trade exhibit positive associations. These findings underscore the significance of economic development, price stability, trade openness, and financial sector stability in nurturing financial development in LMIE. Therefore, policymakers are encouraged to prioritize strategies aimed at fostering economic growth, income augmentation, and economic resilience, particularly in times of economic turmoil. This research offers a unique contribution by dissecting economic growth into positive and negative changes, providing insights into their distinct impacts on financial development using GMM estimation. It empowers policymakers to leverage economic growth shifts and trade reforms for inclusive financial development.

Structural Reforms and Elections: Evidence from a World-Wide New Dataset

Abstract We present two new databases we have constructed to explore the electoral consequences of structural economic policy reforms. One database measures reforms in domestic finance, external finance, trade, product, and labor markets covering 90 advanced and developing economies from 1973 to 2014. The other chronicles the timing and results of national elections. We find that liberalizing reforms are associated with economic benefits that accrue only gradually over time. Because of this delay, liberalizing reforms are costly to democratic incumbents when they are implemented close to elections. Electoral outcomes also depend on the state of the economy: Reforms are penalized during contractions but are often rewarded in expansions.

Performance, Challenges and Policies, Food Security in India

Food availability is a necessary condition for food security. India is more or less self sufficient in cereals but deficit in pulses and oilseeds. Due to changes in consumption patterns, demand for fruits, vegetables, dairy, meat, poultry, and fisheries has been increasing. There is need to increase crop diversification and improve allied activities. It may be noted that the slowdown in agriculture growth could be attributed to structural factors on the supply side, such as public investment, credit, technology, land and water management, etc., rather than globalization and trade reforms per se. Access to food can be increased through employment due to growth in labour intensive sectors and/or through social protection programmes. The malnutrition problem is much broader than that of access to food. The South Asian Enigma (levels of malnutrition in Asia are higher than in Africa) is well known. India has malnutrition levels almost the levels double those of many countries in Africa. This problem needs a multi-disciplinary approach covering diet diversification including micronutrients, women’s empowerment, education, health, safe drinking water, sanitation, and hygiene. India has government programmes such as TPDS including AAY, nutrition programmes like mid-day meals, and ICDS to improve food and nutrition security. NREGS and self employment programmes can also increase access to food and nutrition. Social protection programmes in India helped in improving incomes and providing protection from shocks for the population, particularly the poor. However, there are a number of gaps and inefficiencies in social protection programmes. Under national food security law, the government wants to provide rice and wheat to the poorest of poor at Rs. 3 per kilogram. This is too narrow an approach for implementation of the Right to Food. The Right to Food campaign specifies several other things to be included, apart from universal PDS, under the Food Entitlements Act. This research paper examines performance, challenges, and policies in food security in terms of availability, access, and absorption or nutrition.

Optimal Infrastructure after Trade Reform in India

Lower tariffs typically raise productivity, production, and trade, increasing the benefits from building infrastructure. Infrastructure spending by governments should therefore increase after countries open up to trade. I test this hypothesis empirically using a trade reform in India and find that a 1 percentage point reduction in tariffs increased states’ infrastructure spending by 0.5% between 1991 and 2001. To understand the mechanisms behind my empirical findings, I develop and calibrate a multi-region model of international trade, private capital accumulation, and infrastructure spending, in which each government chooses such spending to maximize their state’s welfare. I find if governments choose infrastructure following the reform optimally, infrastructure would have increased by 60% on average. The actual increase, based on my empirical findings, was about 29%. Counterfactual exercises show that raising aggregate infrastructure towards its optimal following the trade reform will result in state GDP to increase by 7% points on average.