Unilateral Trade Policy Research Articles

Developments in US Trade Policy Amid the Shifting Dynamics of World Trade

Today, world trade stands at a juncture. The proliferation of unconventional, unilateral trade policies calls into question the fundamental legitimacy of the World Trade Organization (WTO). To date, the global trading system evolved alongside a plethora of exogenous factors, such as the US-China competition. The political realities came to reveal the inadequacies of the existing trading regime to receive unique non-market economies (NMEs) like China in the world market. To better withstand the changes in world trade, the US resorted to unconventional, unilateral trade tactics. But how exactly did we get here? This study argues that the root cause can be found in the developments in US trade policy under each US presidency. The study’s findings demonstrate that the overarching goal of US trade policy has remained remarkably consistent across different presidencies in terms of countering the rise of China. Along the way, the incumbent president’s different priorities and political ideals, and the sustained impact of China’s accession to the WTO, induce profound changes in US-China relations and, at large, the world trading system. In short, this article aims to provide a policy-wise explanation to the current conundrum in world trade by following the developments in US trade policy since China’s accession to the WTO.

Analysis of the US Unilateral Trade Policy for the Developing Countries: Impact on Trade Creation

Analysis of the US Unilateral Trade Policy for the Developing Countries: Impact on Trade Creation

Strategic trade policy in general oligopolistic equilibrium: The case of import tariffs

In a two-country model of general oligopolistic equilibrium with technologically heterogeneous sectors, I study how, in a home-market scenario, a unilateral rise in uniform cross-sector import tariffs affects wages, countrywide profits, and welfare. Firms face resource constraints and wages are simultaneously determined. Economy-wide protectionism reduces the foreign wage without affecting the domestic one. Domestic countrywide profits benefit from a small rise in uniform tariffs, whereas the foreign counterpart is damaged. Domestic welfare is unambiguously hindered. Hence, the general-equilibrium cross-sector perspective goes against the textbook version theory of the optimal tariff in partial equilibrium. Rationalization of these effects suggests a political-economy view on tariff formation in general equilibrium. Then I extend the model to segmented markets, considering uniform specific and ad valorem tariffs for bilateral and unilateral trade policies.

Country characteristics and trade policy during the COVID‐19 pandemic

AbstractGovernment policy responses to the COVID‐19 pandemic often included changes to trade policies. This article uses detailed data on trade policy measures targeting medical products during the first 18 months of the pandemic (January 2020–June 2021) compiled by the Global Trade Alert to analyze the relationship between national trade policy activism and pre‐pandemic trade patterns, import protection and international integration. The focus is on both potential country‐specific drivers of unilateral trade policies and the duration of implemented measures. We find significant heterogeneity in the relationships between trade policy actions and country characteristics. The likelihood of import liberalization was more prevalent among net exporters of medical products, whereas net importers were more inclined to impose export restrictions. The results suggest trade policy responses to the challenges raised by the COVID‐19 pandemic are only partially explained by extant theory.

Imperial Presidency Versus Fragmented Executive? Unilateral Trade Measures and Executive Accountability in the European Union and the United States

AbstractFaced with a changing geopolitical environment, the European Union has embarked on a legislative program to upgrade its unilateral trade instruments toolbox. By reforming existing instruments—for example, anti-dumping—and by adding new instruments to the European Commission’s toolbox (foreign subsidies instrument, international procurement instrument, anti-coercion instrument, and others), the EU legislature is significantly strengthening the position of the Commission in the governance of unilateral trade policy in the EU. This development raises accountability questions. By means of a comparative analysis of democratic accountability in unilateral trade policy in the United States and the EU, I describe this transformation of executive power in the EU and I argue that a further strengthening of democratic accountability mechanisms is needed to match the Commission’s growing responsibilities in this underexamined corner of EU trade policy.

The Unilateral Turn in EU Trade and Investment Policy

As part of the European Commission’s Open Strategic Autonomy agenda, the European Union has reformed its unilateral trade and investment policy toolbox. Existing instruments have been updated (e.g., Trade Defence Instruments, the Enforcement Regulation) and new instruments have been adopted (e.g., the Foreign Subsidies Regulation, the Foreign Direct Investment Screening Regulation, the Anti-Coercion Instrument). These developments are significant: taken together, they herald a unilateral turn in the EU’s trade and investment policy. This special issue explores aspects of this unilateral turn. It combines a bird’s-eye perspective with studies of specific instruments; it brings together political science and legal methodologies; and it looks at the unilateral turn from the inside-out and from the outside-in. The special issue scratches the surface of what we consider to be a seismic change in the EU’s trade and investment policy. We hope it will trigger further debate and scholarly analysis of this important topic. In this introduction, we set the scene and introduce the six articles that are part of this special issue. unilateral turn, unilateralism, EU trade and investment policy, security, sustainability, level playing field, geopolitics, geopoliticization, economic coercion, restrictive measures, common commercial policy

The carbon border adjustment mechanism is inefficient in addressing carbon leakage and results in unfair welfare losses

The European Commission has proposed a Carbon Border Adjustment Mechanism (CBAM) to reduce carbon leakage and create a level playing field for its domestic products and imported goods. Nevertheless, the effectiveness of the proposal remains unclear, especially when it triggers threats of retaliation from trading partners of the European Union. We apply a Computable General Equilibrium model - Global Trade Analysis Project - to assess the economic and environmental impacts of different CBAM schemes. Here we show that the effectiveness of the CBAM to address carbon leakage risks is rather limited, and the CBAM raises concerns over global welfare costs, Correct to Gross Domestic Product (GDP) losses, and violation of equality principles. Trade retaliation leads to multiplied welfare losses, which would mostly be borne by poor countries. Our results question the carbon leakage reduction effect of a unilateral trade policy and suggest that climate change mitigation still needs to be performed within the framework of international cooperation.

Geopolitical competition, globalisation and WTO reform

AbstractThis paper discusses options to manage spillovers of unilateral trade policies motivated by national security and other non‐economic objectives on global trade and investment. Within the WTO framework, we argue a ‘specific trade concern’ mechanism is likely to be more effective than dispute settlement to address national security‐motivated trade intervention. More broadly, we propose creation of a platform for governments, supported by relevant international organisations, to enhance transparency and assess the effectiveness and magnitude of the spillover effects of trade/related policies of systemic import. This would serve to help identify efficient instruments to achieve economic and non‐economic goals and inform WTO reform discussions on subsidies and discriminatory trade policies. Plurilateral cooperation among like‐minded nations offers a pragmatic pathway to address spillover effects of policies to achieve security and other non‐economic objectives but requires a stronger governance framework to ensure consistency with an open multilateral trading system.

GHG emissions, trade balance, and carbon leakage: Insights from modeling thirty-one European decarbonization pathways towards 2050

Recognizing the urgent need for concrete sectoral information in designing European climate change mitigation pathways of policy relevance, this study formulates, simulates and compares 31 European decarbonization pathways, focusing on changes in trade flows and GHG emissions. This paper exploits the rich sectoral details from a large bottom-up built system dynamics energy model (the European Calculator model), soft-linking it to a tailor-made computable general equilibrium model (GTAP-EUCalc). Our modeling results suggest that increasing decarbonization ambitions leads to higher reductions of greenhouse gas emissions in Europe (EU27 plus the UK and Switzerland), but with the undesirable outcome of decreasing its external competitiveness through worsened trade balance, if the rest of the world does not reciprocate Europe's decarbonization ambition. A comparison of results across pathways with varying ambition levels between demand and supply measures further reveals their differential roles: when keeping demand-side ambitions constant, elevating efforts on the supply side leads to larger emission reductions and bigger decrease in trade balance; however, holding supply-side ambitions unchanged and increasing demand-side efforts improves the trade balance while achieving larger emission reductions. Furthermore, ambitious demand measures avoid more losses of net exports when coupled with more ambitious supply mitigation measures. These results point to the need for coordinated demand and supply climate change mitigation actions across sectors, and to the benefits of climate-friendly lifestyle choices in not only reducing emissions but also in avoiding undesirable trade outcomes. Our results also demonstrate positive associations between increasing reductions in GHG emissions, worsening external trade balance, and rising carbon leakage rate for Europe. To safeguard the global effectiveness of European decarbonization actions, global cooperation under the Paris Agreement is needed so as to avoid the application of unilateral trade policy such as border carbon adjustments.

환경 및 팬데믹 리스크와 무역정책이 글로벌 가치사슬에 미치는 영향에 대한 분석

This paper analyzes the impact and interaction of environmental and pandemic risks and trade policies on GVCs through literature research, and examines policy implications for this. Just as the impact of environmental and pandemic risks and trade policies on GVCs increases, so does the impact of GVCs on environmental and pandemic risks and trade policies. However, environmental and pandemic risks and trade policies belong to human-generated sources and mechanisms, and if handled well, can be better controlled internally and externally. On the other hand, if these risks and the negative effects of trade policies are not reduced through appropriate measures, the benefits provided by GVCs may also be at risk. Preventive measures against risks help reduce the cost of coping with growing risks. Only international cooperation, reciprocity and transparency can reduce uncontrolled climate change, pandemics and unilateral trade policies.

The Dynamism of Trade Balance in Ghana

Developing economies have frequently employed macroeconomic factors such as the currency rate, inflation, investment, and so on to manage trade flow; yet, there are often chronic deficits in the balance of trade and payments due to a structural imbalance between the amounts of exports and imports. As most rich countries intentionally used the benefits of international trade to improve their trade balance position, many developing countries signed up for numerous unilateral and multilateral trade policy reforms that provided little to no economic benefit. As a result, this study employs cointegration and an error correction model based on the Autoregressive Distributed Lag (ARDL) framework to analyse and estimate the effect of macroeconomic factors on Ghana's trade balance and how Ghana's trade balance has changed from 2000 to 2018. Quarterly time series data covering a period of 19 years, from 2000 to 2019 was collected on all dependent and independent variables such as exchange rate, inflation rate, interest rate and GDP per capita. The results indicate that exchange rate and interest rate significantly affect trade balance while GDP per capita and inflation insignificantly affect trade balance. The study recommended that the government should put in more measures to stabilise the currency and local manufacturers should be motivated by giving subsidies and tax exceptions.

(Unintended) Consequences of export restrictions on medical goods during the Covid-19 pandemic

Abstract The outbreak of the Covid-19 pandemic led several governments to impose restrictions on the export of medical supplies. Despite being at odds with the canonical prescriptions of the economic theory, non-cooperative measures of this kind remain popular tools in times of crisis. By modelling the diffusion of the effects of export restrictions on the domestic availability of medical goods through the international trade network, we study the zero-sum game logic that lies behind these policies. We show that, even if one abstracts from the complex and non-linear real-world dynamics that characterize global crises, unilateral trade restrictions are not helpful. In fact, while restrictions would be beneficial to a country implementing them in isolation, we observe that their generalized use makes most countries worse off relative to a no-ban scenario. Moreover, the results also indicates restraining from export bans has negligible costs even when other countries apply them. In terms of normative analysis, our results provide new evidence against unilateral trade policies which go above and beyond the context of the current pandemic.

The Impacts of Trade Restrictions on World Agricultural Price Volatility during the COVID‐19 Pandemic

During the COVID‐19 pandemic, countries applied trade restrictions to insulate their domestic markets from the world market. However, these trade policies could have amplified international market price fluctuations. This paper explores the effects of trade restrictions on international agricultural price volatility. A theoretical model is developed to quantify how trade policies amplify the initial shock. Using panel data covering 71 countries from January 2020 to July 2021, we examine empirically the effects of trade policies on world agricultural price volatility. The results show that trade distortions further induced volatility of world agricultural prices by around 22 percent during the COVID‐19 pandemic. The multiplier effects are much more substantial in agricultural exporting countries than in importing countries. Large countries like China and the US could make significant contributions to stabilizing world prices by limiting the extent of unilateral trade policy interventions.

The Impact of Unilateral Trade Policy on International Trade Structure

Uncertainty grows with the diffusion of unilateral trade policies. In particular, the average value of the World Uncertainty Index increased by four to fivefold compared to 1990. Recently, unilateral trade policies are spreading internationally. Non-tariff measures including anti-dumping, countervailing measures, SPS and TBT are increasing. Moreover, both developing and developed countries are adopting trade-disruptive measures and these are rapidly increasing. This report analyzes the widespread diffusion of unilateral trade policies and changes in trade structures.

WTO Litigation and SEZs: Determining the Scope of Exceptional Trade Unilateralism

ABSTRACT The incentives available to enterprises located in special economic zones can be classified into three broad categories, namely, (i) fiscal incentives in the nature of tax incentives and exemption of duties, (ii) non-fiscal incentives in the form of infrastructural and developmental facilities, and (iii) regulatory incentives covering lenient and flexible compliance requirements. The fiscal incentives in special economic zones are, to an extent, regulated by the law of the World Trade Organization although direct challenges of special economic zone policies have been very few or non-existent. The absence of legal challenges led to a number of World Trade Organization members pursuing unilateral trade policies within their special economic zones. However, the recent World Trade Organization Panel findings in India—Export Related Measures appear to highlight the thin margin for trade unilateralism especially in relation to fiscal incentives in special economic zones. In the above context, this article examines the permissible limits of trade unilateralism, in the context of special economic zones, by providing a fresh understanding of the disciplines under international trade law and the available jurisprudence. It focuses, in particular, on the precise contours of permissible trade unilateralism exercised by World Trade Organization members when granting fiscal incentives. In doing so, this article also examines the concept of exception as a manifestation of unilateralism in International Economic Law.

일방적 통상정책의 국제적 확산과 무역구조의 변화에 관한 연구 (A Study on Unilateral Trade Policy and International Trade Structure)

일방적 통상정책의 국제적 확산과 무역구조의 변화에 관한 연구 (A Study on Unilateral Trade Policy and International Trade Structure)

The Theory of Agricultural Price Bubble & Price Crash in Global Economy

Agricultural prices play greater role in living Economics. Since many decades’ farmers faced declining agricultural prices and low prices in developing countries. Therefore, in these countries agricultural price policies are under closer appraisal. Government and policy makers worry about inflation. Economic precision is required in determining prices. This understanding led to conception of the study. The specific objectives are to review various agricultural price theories, research evidences and construct the theory of agricultural price bubble and crash and their effect on macro economy and suggest measures to improve. The study reviews various agricultural price theories, concepts, policies, research gaps and do meta-analysis and formulated the theory of Agricultural prices bubble and price crash. Since 1950, many development economists and practitioners prophesy in developing countries is that low agricultural commodities prices discourage poverty alleviation. Many countries are unable to make successful pricing policies due to there is not enough operative methodological and theoretical support for decision-making. According to the economic theory of cooperativism, the entities come closer to the pecking order theory. Unexpected changes and changes in regulations can have significant impact on the profitability of farming activities. “Demand channel" is the crucial factor in elucidation of commodity price growth. Future prices moments in agriculture have fat-tailed distributions and display quick and unpredicted price jumps. World Trade Organization study highlights the importance of strengthening multilateral disciplines on both import and export trade interventions to food price fluctuations to reduce beggar-thy-neighbor unilateral trade policy. The theory of NAFTA regionalism did not lead to regionalization and not increasing share of intraregional international trade. In EU countries land rents in modern agriculture causing upward trend in agricultural land prices. Information friction, agricultural supports, agricultural price & trade policies, agricultural price transmission are responsible price fluctuations. In economic theory, asymmetric price transmission has been the subject of considerable attention in agricultural gaps. Selection of forecasting models are based on chaos theory. Chaos in agricultural wholesale price data provides a good theoretical basis for selecting forecasting models. This theory can be applied to agricultural prices forecasting. Novelties in agricultural products fluctuations research offer scientific basis in planning of agricultural production.

Assessing the impact of unilateral trade policies EBA and AGOA on African beneficiaries' exports using matching econometrics

AbstractThe existing literature studying the impact of non‐reciprocal preferential trade agreements (NRPTAs) assumes implicitly NRPTAs are non‐randomly assigned without showing the evidence of that. Using a matching methodology, this paper investigates whether the “African Growth and Opportunity Act” (AGOA) and the “Everything But Arms” (EBA) unilateral trade concessions have had an impact, and in what magnitude, on the exports of African beneficiary countries in the light of the evidence of the non‐random nature (endogeneity) of NRPTAs. Methodologically, previous studies using the matching procedure focused on bi or multilateral trade agreements. Our work focuses on NRPTAs that depend only on donors' conditions. Accordingly, we show that for NRPTAs, gravity covariates cannot be used for the matching procedure. We propose to use political variables as determinants for obtaining non‐reciprocal trade preferences in order to address the endogenous nature of NRPTA assignment. Our main results confirm that a country becomes eligible for a NRPTA only when it meets certain conditions, defined by their donors, such as political stability and economic regulation (for AGOA), and freedom of expression and human development (for EBA). Results also show that both AGOA and EBA policies have had a positive impact on African beneficiary countries' exports to NRPTA's providers, even if the magnitude impact of EBA is significantly lower than that of AGOA.

Biswajit Nag & Debashis Chakraborty (eds), India’s Trade Analytics: Patterns and Opportunities

Abstract. India, a leading developing country, initiated the process of trade liberalization since early nineties, but the wider effects of the reforms started taking shape only in the new millennium. The unilateral trade policy reforms undertaken by the country were supplemented by the WTO-induced liberalization measures from mid-nineties onwards. The investment liberalizations ushered in updated technology and global management practices across sectors. The internal policy reforms as well as the evolving global trade architecture created a number of winner sectors across the Indian economy, e.g., – tea and spices, fisheries (agriculture), garments, leather products, automobiles (manufacturing) and IT services (services). Confident with growing export potential as well as the rising trade openness in the partner countries, India started entering into a number of regional trade agreements (RTAs), primarily in Asia, from 2005 onwards. Keywords. Trade, Patterns and Opportunities. JEL. F00, F10, F13, F40.

Passive Unilateral Cross-ownership and Strategic Trade Policy

Abstract In a Cournot duopoly model in which exporters compete in a third market, this paper revisits the classical issue (dating back to the pioneering work of Brander and Spencer, Export Subsidies and International Market Share Rivalry, 1985) of the strategic trade policy choice in the presence of the passive participation of one firm in the rival. Passive cross-ownership dramatically alters the participating and participated firms’ governments’ choice to apply the strategic trade policy instrument, the equilibria typology and their efficiency properties. In fact, if the share of cross-ownership is sufficiently large, the participated firm’s government finds optimal to tax export. Moreover, beyond an adequately high threshold, cross-ownership modifies the equilibrium from the activist regime for both countries to an asymmetric regime in which only the participating firm’s government intervenes. In addition, in the case of the traditional common activist regime equilibrium, the classical prisoner’s dilemma game structure may disappear.