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1. Export controls: America’s other national security threat

Author:
Chad P. Bown
Publication Date:
05-2020
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
While the public was transfixed by the Trump administration’s policies alleging that imports were a threat to America’s national security during 2017–20, there was a concomitant and more quiet US policy shift on the export side. Addressing the national security threat presented by exports posed different economic and institutional challenges from those associated with import policy, including the acknowledgment that export controls for legitimate national security reasons can be the first-best policy to confront the problem at its source. Yet, export controls could also be misused as a beggar-thy-neighbor policy to redistribute economic well-being across countries, even from one ally to another. This paper describes how US export control policy evolved over 2017–20, as well as the international institutions—first the Coordinating Committee for Multilateral Export Controls (COCOM), then the Wassenaar Arrangement—historically tasked with multilateralizing US export restrictions used to protect national security. With the potential for US export control policy to brush up more frequently against WTO rules designed to limit the use of export restrictions, the paper also highlights new challenges for the WTO’s system of resolving trade disputes. Overall, a US failure to strike the right balance for its export control policy would result in it being ineffective at addressing national security risks, costly for the economy, and problematic for trade and diplomatic relations.
Topic:
Economics, Government, National Security, Exports, and Trade
Political Geography:
North America and United States of America

2. Global value chains and the removal of trade protection

Author:
Chad P. Bown, Aksel Erbahar, and Maurizio Zanardi
Publication Date:
02-2020
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper examines how trade protection is affected by changes in the value-added content of production arising through global value chains (GVCs). Exploiting a new set of World Trade Organization (WTO) rules adopted in 1995 that impose an exogenously timed requirement for countries to reevaluate their previously imposed trade protection, the authors adopt an instrumental variables strategy and identify the causal effect of GVC integration on the likelihood that a trade barrier is removed. Using a newly constructed dataset of protection removal decisions involving 10 countries, 41 trading partners, and 18 industries over 1995–2013, they find that bilateral industry-specific domestic value-added growth in foreign production significantly raises the probability of removing a duty. The results are not limited to imports from China but are only found for the protection decisions of high-income countries. Back-of-the-envelope calculations indicate that rapid GVC growth in the 2000s freed almost a third of the trade flows subject to the most common temporary restrictions (i.e., antidumping) applied by high-income countries in 2006.
Topic:
Economics, International Trade and Finance, Global Markets, Finance, and Trade
Political Geography:
Global Focus

3. Why Trump shot the sheriffs: The end of WTO dispute settlement 1.0

Author:
Chad P. Bown and Soumaya Keynes
Publication Date:
03-2020
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
On December 10, 2019, the World Trade Organization’s (WTO) 25-year-old system of resolving disputes broke down. This paper explains why. It describes the dysfunctional system that preceded the WTO, when the United States dealt with politically troublesome imports by using voluntary export restraints and increasingly resorted to the “aggressively unilateral” Section 301 policy to resolve trade concerns. The WTO was a compromise between the rest of the world and the United States, whereby the latter accepted some constraints with the expectation that the new system of binding dispute settlement would serve its interests. But although the creation of the WTO resolved some concerns about American unilateralism in the short term, its system of handling disputes turned out to be politically unsustainable.
Topic:
Economics, World Trade Organization, Trade, and Donald Trump
Political Geography:
North America and United States of America

4. Did Trump's Trade War Impact the 2018 Election?

Author:
Emily Blanchard, Chad P. Bown, and Davin Chor
Publication Date:
12-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Republican candidates lost support in the 2018 congressional election in counties more exposed to trade retaliation but saw no commensurate electoral gains from US tariff protection. The electoral losses were driven by retaliatory tariffs on agricultural products and were only partially mitigated by the US agricultural subsidies announced in summer 2018. Republicans also fared worse in counties that had seen recent gains in health insurance coverage, affirming the importance of health care as an election issue. A counterfactual calculation suggests that the trade war and health care can account for five and eight of Republicans' lost House seats, respectively.
Topic:
Politics, Elections, Trade Wars, Trade, and Donald Trump
Political Geography:
North America and United States of America

5. WTO'ing a Resolution to the China Subsidy Problem

Author:
Chad P. Bown and Jennifer A. Hillman
Publication Date:
10-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The United States, the European Union, and Japan have begun a trilateral process to confront the Chinese economic model, including its use of industrial subsidies and deployment of state-owned enterprises. This paper seeks to identify the main areas of tension and to assess the legal-economic challenges to constructing new rules to address the underlying conflict. It first provides a brief history of subsidy disciplines in the General Agreement on Tariffs and Trade and the World Trade Organization (WTO) predating any concerns introduced by China. It then describes contemporary economic problems with China’s approach to subsidies, their impact, and the apparent ineffectiveness of the WTO’s Agreement on Subsidies and Countervailing Measures to address them. Finally, it calls for increased efforts to measure and pinpoint the source of the problems—in a manner analogous to how the Organization for Economic Cooperation and Development took on agricultural subsidies in the 1980s—before providing a legal-economic assessment of proposals for reforms to notifications, evidence, remedies, enforcement, and the definition of a subsidy.
Topic:
Economics, World Trade Organization, Tariffs, and Trade
Political Geography:
Japan, Europe, Asia, North America, United States of America, and European Union