Use Of Trade Policy Research Articles

A Unifying Enlightenment: Institutions of Political Economy in Eighteenth-Century Spain (1700–1808)

A Unifying Enlightenment: Institutions of Political Economy in Eighteenth-Century Spain (1700–1808)

Trade policy responses to the COVID-19 pandemic crisis: Evidence from a new data set.

This paper presents new high‐frequency data on trade policy changes targeting medical and food products since the beginning of the COVID‐19 pandemic, documenting how countries used trade policy instruments in response to the health crisis on a week‐by‐week basis. The data set reveals a rapid increase in trade policy activism in February and March 2020 in tandem with the rise in COVID‐19 cases but also uncovers extensive heterogeneity across countries in both their use of trade policy and the types of measures used. Some countries acted to restrict exports and facilitate imports, others targeted only one of these margins, and many did not use trade policy at all. The observed heterogeneity suggests numerous research questions on the drivers of trade policy responses to COVID‐19, on the effects of these measures on trade and prices of critical products, and on the role of trade agreements in influencing the use of trade policy.

Optimal trade policy, equilibrium unemployment, and labor market inefficiency

AbstractUnder which circumstances is using trade policies to prevent job losses welfare improving? To answer this question, I incorporate a frictional labor market into the Heckscher–Ohlin model. The results suggest that (a) a country that has an inefficient level of unemployment may experience welfare losses from free trade; (b) having search‐generated unemployment is not sufficient to justify a use of trade policy, because free trade is still optimal when the labor market is constrained‐efficient; and (c) a small country that has an inefficient level of unemployment can use trade policy to improve its welfare.

Trade Wars, Currency Wars

For most of the post WWII period, until recently, trade protectionism followed a downward trend, and was formulated in multilateral or bilateral agreements between countries. Recently however, there hasbeen a sharp shift towards unilateral, discretionary trade policy focused on short term macroeconomic objectives, and as a consequence, the use of trade policy has become entangled with that of monetary policy. This paper explores the consequences of this shift within a standard DSGE open economy macroeconomic model. We find that a discretionary non-cooperative approach to trade policy can significantly worsen macroeconomic conditions. Moreover, the stance of monetary policy has major implications for the degree of protection in a non-cooperative equilibrium. In particular, cooperative determination of monetary policy implies an increase in both equilibrium tariffs and inflation, and a significant fall in welfare. By contrast, when the exchange rate is pegged by one country, equilibrium rates of protection are generally lower, but in this case, there are multiple asymmetric equilibria in tariff rates which benefit one country relative to another. We also explore the determination of non-cooperative tariffs in a situation where monetary policy is constrained by the zero lower bound on nominal interest rates. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Trade Policy Responses to the COVID-19 Pandemic Crisis: Evidence from a New Dataset

This paper presents new high frequency data on trade policy changes targeting medical and food products since the beginning of the COVID-19 pandemic, documenting how countries used trade policy instruments in response to the health crisis on a week-by-week basis. The dataset reveals a rapid increase in trade policy activism in February and March 2020 in tandem with the rise in COVID-19 cases, but also uncovers extensive heterogeneity across countries in both their use of trade policy and the types of measures used. Some countries acted to restrict exports and facilitate imports, others targeted only one of these margins, and many did not use trade policy at all. The observed heterogeneity suggests numerous research questions on the drivers of trade policy responses to COVID-19, on the effects of these measures on trade and prices of critical products, and on the role of trade agreements in influencing the use of trade policy.

Trade Wars, Currency Wars

For most of the post WWII period, until recently, trade protectionism followed a downward trend, and was formulated in multilateral or bilateral agreements between countries. Recently however, there hasbeen a sharp shift towards unilateral, discretionary trade policy focused on short term macroeconomic objectives, and as a consequence, the use of trade policy has become entangled with that of monetary policy. This paper explores the consequences of this shift within a standard DSGE open economy macroeconomic model. We find that a discretionary non-cooperative approach to trade policy can significantly worsen macroeconomic conditions. Moreover, the stance of monetary policy has major implications for the degree of protection in a non-cooperative equilibrium. In particular, cooperative determination of monetary policy implies an increase in both equilibrium tariffs and inflation, and a significant fall in welfare. By contrast, when the exchange rate is pegged by one country, equilibrium rates of protection are generally lower, but in this case, there are multiple asymmetric equilibria in tariff rates which benefit one country relative to another. We also explore the determination of non-cooperative tariffs in a situation where monetary policy is constrained by the zero lower bound on nominal interest rates. (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This a (This abstract was borrowed from another version of this item.)

Legal and Economic Principles of World Trade Law: National Treatment

The primary objective of most trade agreements is to restrain members' use of trade policies for protectionist purposes. But it would be pointless to restrict the application of border instruments without regulating the possible use of domestic policies for protectionist purpose. To this end, most agreements include an obligation for National Treatment (NT) of foreign products. The NT provision in the GATT appears in Art. III, which applies to most government actions that have impact trade. It requires that imported products be treated as favorably by domestic policy as similar, indigenous products. This study offers suggestions based on legal and economic analysis about how this vaguely-formulated provision ought to be interpreted. The study first examines the purposes of Art. III, as it appears from an economic point of view, as well as from its negotiating record. It also examines the case law, arguing that the absence of a coherent methodology implies that it is often unclear whether case law interpretations of the key terms promote the intended objectives of the provision. The study then identifies two alternative approaches that might be used to interpret Art. III, and its interplay with the general exceptions clause in Art. XX GATT. The first approach only requires that the products are in sufficiently close potential or actual competition in the market, in a case where an imported product is given a less favourable treatment than a domestic product. The second approach requires additionally that the importing country has no policy rationale other than protectionism for treating the two products differently. The main difference between the two approaches is that under the former, the protectionism test occurs if/when an Art. XX exception is requested, while the latter approach mandates that the protectionism test should be performed as part of the evaluation of the alleged violation of Art. III. As discussed in the study, the second, and favored, approach provides a more permissive regime for domestic policy instruments.

Russia and the Use of Trade Policy: Concentration with Soviet Successor States

Economic policy has often been an integral part of foreign policy usage by governments. Many states will use trade, aid, and investment as instruments to attain other objectives deemed to be in the national interest. Albert Hirschman in an early and classic study suggested that governments in the Weimar Republic and Nazi Germany consciously attempted to dominate the trade of weaker states in Europe as a means of enhancing the German foreign policy position. Russian trade policy since the breakup of the Soviet Union has followed a similar policy, especially in regard to the other successor states of the former Soviet Union. Patterns were different for the Baltic countries, other European successor states, the Transcaucasian states, and Central Asian countries. Notwithstanding differences that were present, there was evidence in the trade patterns to indicate that Moscow was using trade policy to gain influence in the successor states.

Trade, Transboundary Pollution, and Foreign Lobbying

In this paper, we explore the use of trade policy in addressing transboundary stock pollution problems such as acid rain and water pollution. We show that a tariff determined by the current level of accumulated pollution can induce the time path of emissions optimal for the downstream (polluted) country. But if the upstream (polluting) country can lobby the downstream government to impose lower tariffs, distortions brought by corruption and foreign lobbying lead to a rise in the upstream country’s social welfare, and to a decrease in social welfare in the downstream country. Thus, the usefulness of trade policy as a tool for encouraging cooperation and internalizing transboundary externalities depends critically on the degree of governments’ susceptibility to foreign political influence.

Development, implementation and outcome of standards to restrict fatty meat in the food supply and prevent NCDs: learning from an innovative trade/food policy in Ghana

BackgroundDiet-related noncommunicable diseases represent a major global public health challenge, and require a multisectoral policy response. However, the use of trade policy in this context has met with varied success in the face of strong global trade liberalization agendas. The Government of Ghana has implemented an innovative food standards policy to limit the amount of fat in meat and meat cuts, in response to rising imports of low quality fatty meat cuts. This paper presents an analysis of the policy process and outcomes, as well as contextual factors in policy development, to enable policy learning in other jurisdictions.MethodsWe conducted 28 semi-structured policy analysis interviews with 37 stakeholders at the national and regional level in Ghana, and collated relevant documents. We analysed the data using the health policy analysis triangle and policy theories related to lesson drawing.ResultsThe standards were developed in response to health concerns related to fatty meat (particularly turkey tails), in a context of rising meat imports and a generalised concern about the low quality and high fat content of imported meats. The standards were the result of collaboration between the trade and health sectors. The standards apply to both imported and domestic meat, and were designed to be compliant with Ghana’s multilateral trade commitments. The overall effect of the ban has been to reduce availability of specific ‘low quality’ high-fat meats in the Ghanaian food supply, namely turkey tails and chicken feet.ConclusionsThis study indicates that the use of standards can reduce availability of high-fat meat in a national food supply. The main strength of a standards approach to reducing fatty meat (mainly imported) in the food supply is compliance with global trade law, while the main challenge is effective enforcement. However, the Government of Ghana appears to have developed a functional and flexible application of the policy. Features of this policy approach useful for policy learning include: collaboration at every stage between ministries of trade and health; considerations relating to compliance with international trade law; strategic enforcement of the policy; and the importance of public awareness efforts.

Global Supply Chains and Trade Policy Responses to the 2008 Crisis

The collapse in trade and the contraction of output that occurred during 2008–9 was comparable to, and in many countries more severe than, the Great Depression of the 1930s. However, it did not give rise to the rampant protectionism that followed the Great Crash. The idea that the rise in the fragmentation of production across global value chains – vertical specialization – may be a deterrent against protectionism is underappreciated in the literature. Institutions also played a role in limiting the extent of protectionist responses. World Trade Organization discipline raises the cost of using trade policies for member countries and has proved to be a stable foundation for the open multilateral trading system that has been built over the past 50 years. Using trade and protection data for seven large emerging market countries that have a history of active use of trade policy, the influence of these and other factors on trade policy responses to the 2008 crisis are empirically examined. An instrumental variables strategy is used to identify their impact. Participation in global value chains is found to be a powerful economic factor determining trade policy responses.

The strange birth of liberal Denmark: Danish trade protection and the growth of the dairy industry since the mid‐nineteenth century1

The usual story of the ‘first era of globalization’ at the end of the nineteenth century sees Denmark as something of an outlier: a country which, like the UK, resisted the globalization backlash in the wake of the inflow of cheap grain from the New World, but where agriculture, rather than going into decline, in fact flourished. Key to the success of Danish agriculture was an early diversification towards dairy production. This article challenges this simple story which sees Denmark as something of a liberal paragon. Denmark's success owed much to a prudent use of trade policy which favoured dairy production. Moreover, this favouritism continued even after a more general movement to free trade in the 1860s. Using micro‐level data from individual dairies, we quantify the implied subsidy to dairy production from the tariffs, and demonstrate that in many cases this ensured the profitability of individual dairies.

Trade and food policy: Case studies from three Pacific Island countries

There is growing interest in the use of trade policy to create a healthier food supply. Eighty percent of chronic disease deaths occur in low and middle income countries, and a responsive food policy is an absolute necessity. In this paper we analysed three trade-related food policy initiatives to reduce the supply of fatty meat in the Pacific, in order to help public health workers understand how to effect policy change in sectors beyond the health portfolio. We found that policy uptake and implementation were easier with advocacy, tailoring the policy to the political context, the selection of policy tools that align with Government priorities (e.g. trade commitments) – ideally tools that are already used by trade policy makers in other contexts – and a broad justification for the policy initiative. Barriers to policy success included a focus only on health concerns (not taking into account policy issues of other sectors), limited engagement from other sectors in proposing and developing these cross-sectoral policies, and lack of a clear enforcement mechanism.

The Strange Birth of Liberal Denmark: Danish Trade Protection and the Growth of the Dairy Industry Since the Mid-Nineteenth Century

The usual story of the “first era of globalization” at the end of the nineteenth century sees Denmark as something as an outlier: a country which, like Britain, resisted the globalization backlash in the wake of the inflow of cheap grain from the New World, but where agriculture, rather than going into decline, in fact flourished. Key to the success of Danish agriculture was an early diversification towards dairy production. We dispute this simple story which sees Denmark as something of a liberal paragon. Denmark’s success owed much to a prudent use of trade policy which favoured dairy production. Moreover, this favouritism continued even after a more general movement to free trade in the 1860s. Using micro-level data from individual dairies, we quantify the implied subsidy to dairy production from the tariffs, and demonstrate that this in many cases ensured the profitability of individual dairies.

International Labor Standards and the Political Economy of Child-Labor Regulation

Child labor is a persistent phenomenon in many developing countries. In recent years, support has been growing among rich-country governments and consumer groups for the use of trade policies, such as product boycotts and the imposition of international labor standards, to reduce child labor in poor countries. In this paper, we discuss research on the long-run implications of such policies. In particular, we demonstrate that such measures may have the unintended side effect of lowering domestic support for banning child labor within developing countries, and thus may contribute to the persistence of the child-labor problem. (JEL: I21, J88, O11, O19, O24)

International Labor Standards and the Political Economy of Child Labor Regulation

Child labor is a persistent phenomenon in many developing countries. In recent years, support has been growing among rich-country governments and consumer groups for the use of trade policies, such as product boycotts and the imposition of international labor standards, to reduce child labor in poor countries. In this paper, we discuss research on the long-run implications of such policies. In particular, we demonstrate that such measures may have the unintended side effect of lowering domestic support for banning child labor within developing countries, and thus may contribute to the persistence of the child-labor problem.

Auto Pact: Creating a Borderless North American Auto Industry, 1960-1971 (review)

Reviewed by: Auto Pact: Creating a Borderless North American Auto Industry, 1960–1971 Wayne Lewchuk Auto Pact: Creating a Borderless North American Auto Industry, 1960–1971. Dimitry Anastakis. Toronto: University of Toronto Press, 2005. Pp. 285, illus., b&w, $29.95 paper, $55.00 cloth On the eve of the twenty-first century, one in seven Canadians owed their employment to the automotive sector and one in five vehicles assembled in North America was assembled in Canada. Understanding how Canada became a preferred location for North American automotive production is essential for anyone interested in Canada's post–Second World War economic development. The Auto Pact plays a central role in understanding this story. Given the contrasts between the principles of the Auto Pact and more recent free trade agreements, understanding how and why this policy was adopted is both timely and necessary. Anastakis begins by examining the crisis in the automobile sector in the early 1960s and policy alternatives. One option was to increase protection of Canadian manufacturers, with the likely result of higher prices for cars sold in Canada and reduced choice for consumers. The alternative was free trade, which would almost certainly have led to hardship for Canadian producers. The Auto Pact was an ingenious compromise. Trade would be organized on a continental basis. Automotive production could flow duty free between Canada and the United States, subject to constraints on both sides. Material could be imported into Canada duty free by firms that produced as many vehicles in Canada as they sold. US-based manufacturers could organize production on a continent-wide basis, and Canada would get its 'fair' share of North American production. The author presents in detail the steps leading to the Auto Pact. The earlier failure of the continental free trade deal in agricultural implements was very much in the minds of the Canadian framers of the Auto Pact. The agreement was also influenced by the growing willingness of Canadian policy makers to question our close economic relationship with the United States. This caution led to attempts (largely unsuccessful) to diversify our trade, away from the United States. More successful was the use of trade policy to resolve imbalances with the United States. For example, duty-remission programs encouraged increased exports of Canadian production to the United States through positive economic incentives. The United States was highly critical of these policies. But rather than fold in the face of criticism, Canadian policy makers demanded a fair share of automobile production. The Auto Pact was the result. Before the deal could be finalized, an exemption was necessary from the [End Page 326] General Agreement on Tariffs and Trade, as it violated the principle of bestowing preferential treatment. That such an exemption was granted points to how different the 1960s were, compared to trading relationships today. Given the recent experience with softwood lumber and the more intense competition over global market share in the automotive sector, it is hard to imagine such a deal being sanctioned by the international community today. The Auto Pact reflected an emerging sense of economic nationalism. It was one of the lasting legacies of Walter Gordon and the period when Liberal politicians endorsed nationalistic trade policies. Other countries, including Mexico and Australia, pursued different polices in the face of US dominance. They moved to protect their producers and their share of vehicle-production employment through protective tariffs and domestic content regulations. Canada embraced a form of continental free trade with guarantees of a fair share of employment. This approach had the advantage of ensuring Canadian jobs and reasonably priced vehicles, but the disadvantage was that it left the Canadian industry largely in the hands of the original 'Big Three.' Until the 1990s, this looked like a good arrangement. Production exceeded the minimum safeguards, employment expanded, and vehicle costs were kept relatively low. Today the heavy reliance on US-based producers is questioned by some, as they themselves find it difficult to compete in the new global economy. Others have more deeply explored the contribution of labour to this deal. The volume is also relatively silent on the role Canada was asked to play by the United States in supporting its global...

Enlarging the Vision for Trade Policy Space: Special and Differentiated Treatment and Infant Industry Issues

NAMA liberalisation alone will not be sufficient to make the Doha Round a pro‐development Round. It is important to enlarge the vision to include, for example, services and certain aspects of intellectual property rights. Further the ‘policy space’ notion often mentioned when discussing trade‐development relations should not be defined as limited to trade policy. It should include the many non‐trade instruments (e.g. subsidies or taxes on goods and factors of production) that a government could use for development purposes. Infant industry protection is the oldest, but most risky, use of trade policy as a development policy. As a policy it could be successful only in a very limited number of sectors and it has little chance of providing the broad impetus needed for development.

Does Trade Openness Promote Security Rights in Developing Countries? Examining the Liberal Perspective

As the global economy expands, there is an increasing opportunity for trade between diverse regime types. Simultaneously, human rights have become an increasingly important issue as regimes are faced with greater pressure to adopt democratic policies. As a result, it is common for contemporary western political rhetoric to advocate the use of trade policies in an attempt to deter human rights violations. Within the political science literature, the liberal position asserts that increased trade will lead to improved human rights practices. Critics of this view, on the other hand, argue that trade policies do not alter a regime's treatment of its citizens. The extent to which the level of trade in a country affects human rights remains a point of contention. This paper sets out to empirically test the liberal perspective regarding the effect of trade on human rights practices. A pooled cross-sectional time series analysis is utilized to investigate the effects of trade on human rights. We examine developing countries from 1976 to 1996. We find support for the liberal position, specifically that trade is negatively related to human rights violations.

Why is There an Anti-Trade Bias in Trade Policy?

Small economies rarely embrace free trade, a fact that is commonly explained as a consequence of the government's use of trade policy to redistribute income. But why is this redistribution typically biased in favor of import-competing sectors and is consequently trade restricting rather than trade promoting? This remains an important puzzle in trade policy. Most models assume the puzzle away by restricting the government set of policies or else generate the opposite, and empirically counterfactual, prediction--that trade policy has a pro-trade bias (e.g. Grossman-Helpman AER 1994). We show that if the government's objective reflects a concern for inequality, or diminishing marginal political support from factor owners, then trade policy exhibits anti-trade bias. Importantly the mechanism that we analyze generates the anti-trade bias independently of whether factors are specific or mobile across sectors. The mechanism also generates an anti-trade bias between large countries even after they sign reciprocal trade agreements that eliminate any terms-of-trade motivation for the use of trade protection.