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Begin New Search Topic International Trade and Finance Political Geography Global Focus

1. Can Multinationals Withstand Growing Trade Barriers?

Author:
Mahdi Ghodsi, Michael Landesmann, and Nina Vujanović
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
Multinational enterprises (MNEs) are increasingly dealing with challenges shaped by the new geopolitical and trade environments. Besides traditional tariffs, exporting firms need to comply with regulatory non-tariff measures (NTMs) in the form of technical barriers to trade (TBTs) and sanitary and phytosanitary (SPS) measures. Although trade costs associated with these policy measures affect all firms, implications could be multifaceted for multinationals that base their international activities on exporting and importing and are important for the formation of global supply chains. Applying Poisson pseudo maximum likelihood to the unique Orbis dataset of firms on multinational subsidiaries, we show that NTMs pose a greater challenge to MNEs’ subsidiaries’ activity and performance than tariffs do. High-tech manufacturing subsidiaries of foreign MNEs are particularly vulnerable to these NTMs, as they suffer higher regulatory losses. However, multinational affiliates that have higher productivity, those with full foreign ownership representation, those that are embedded within a larger international network of subsidiaries, and those that are located in trading partners with deep preferential trade agreements can turn these trade challenges to their advantage. Our results have important implications for policy makers regulating trade in goods.
Topic:
International Trade and Finance, Foreign Direct Investment, Multinational Corporations, Tariffs, and Supply Chains
Political Geography:
Global Focus

2. Designing a New Paradigm in Global Trade

Author:
Ryan Mulholland, Trevor Sutton, and Timothy Meyer
Publication Date:
05-2024
Content Type:
Special Report
Institution:
Center for American Progress - CAP
Abstract:
How a successful Global Arrangement on Sustainable Steel and Aluminum could function while delivering maximum benefits to workers and the environment.
Topic:
Climate Change, International Trade and Finance, Markets, Treaties and Agreements, Sustainability, and Metals
Political Geography:
Global Focus and United States of America

3. The Price of War

Author:
Jonathan Federle, André Meier, Steffen Müller, Willi Mutschler, and Moritz Schularick
Publication Date:
02-2024
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
In an integrated global economy, the economic fallout of war is not confined to the country where the conflict is fought but spills over to other countries. We study the economic effects of large interstate wars using a new data set spanning 150 years of data for more than 60 countries. War on a country’s territory typically leads to an output decline of 30 percent and a 15 percentage point increase in inflation. We find large negative effects also for countries that are geographically close to the war site, irrespective of their participation in the war. Output in neighboring countries falls by more than 10 percent over 5 years, and inflation rises by 5 percentage points on average. Negative spillovers decline with geographic distance and increase in the degree of trade integration with the war site. For very distant countries, output spillovers can turn positive so that wars create winners and losers in the international economy. We rationalize these findings in an international business cycle model, calibrated to capture key features of the data. As the war destroys capital in the war site and productivity falls, trade with nearby economies decreases, generating an endogenous supply-side contraction abroad.
Topic:
International Trade and Finance, War, Business, Geoeconomics, Russia-Ukraine War, Spillovers, and Supply Shocks
Political Geography:
Russia, Ukraine, and Global Focus

4. New Trade Models, Same Old Emissions?

Author:
Robin Sogalla, Joschka Wanner, and Yuta Watabe
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper investigates the elusive role of productivity heterogeneity in new trade models in the trade and environment nexus. We contrast the Eaton-Kortum and the Melitz models with firm heterogeneity to the Armington and Krugman models without heterogeneity. We show that if firms have a constant emission share in terms of sales — as they do in a wide range of trade and environment models — the three models’ emission predictions exactly coincide. Conversely, if firms have a constant emission intensity per quantity — a prominent alternative in the literature — the emission equivalence between the three models breaks. We provide a generalization that nests both constant emission shares in sales and constant quantity emission intensities as special cases. We calibrate the models to global production and trade data and use German firm-level data to estimate the key elasticity of how emission intensity changes with productivity. Our multi-industry quantification demonstrates that the role of firm heterogeneity depends both on the model and the estimated parameters. Moving from the Armington model to the EK model increases the emissions effect on trade, while moving from the Krugman model to the Melitz model decreases the emission effects on trade.
Topic:
Climate Change, Globalization, International Trade and Finance, Carbon Emissions, and Sustainable Development
Political Geography:
Global Focus

5. International investment income: patterns, drivers, and heterogeneous sensitivities

Author:
Giovanni Donato and Cedric Tille
Publication Date:
07-2024
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Financial globalization has led to a large increase in international asset holdings. While the rise of associated dividend and interest flows has until now been muted by the decreasing trend in interest rates, this pattern could change, leading to a larger role of investment income flows in the balance of payments. We use a broad sample of countries to document the heterogeneous evolution of the various components of investment income flows, with a rising role of FDI and equity income, especially in advanced economies. We then assess the impact of various variables on yields with a panel analysis. Various drivers have highly heterogeneous effects across investment categories and country groups, often impacting the yields on both assets and liabilities. This translates into substantial heterogeneity in the response of countries’ income balance, due to different compositions of asset and liabilities. This heterogeneity is amplified if we consider country-specific estimates in complement to the panel ones. Focusing on the impact of changes in interest rates, we find that higher rates only had a limited impact in the 2013 taper tantrum, investment income balances are likely to benefit from higher US rates in the current phase of higher rates, with offsetting effects of higher domestic rates.
Topic:
International Trade and Finance, Foreign Direct Investment, Financial Markets, Investment, Interest Rates, and Financial Integration
Political Geography:
Global Focus

6. Beyond Borders: Do Gender Norms and Institutions Affect Female Businesses?

Author:
Holger Görg and Ina C. Jäkel
Publication Date:
08-2024
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
In this paper, we investigate whether gender norms and institutions act as a constraint to the performance of female businesses. We exploit novel and unique micro data on start-ups in Denmark, which we combine with information on individual-level characteristics of the entrepreneur as main decision maker of the firm. We overcome the challenge of disentangling norms and institutional biases against women from other constraints and hurdles that female businesses might face by exploiting detailed trade data. In this trade context, we study the relative performance of firms across markets with varying institutions, while controlling for other factors that affect female businesses uniformly across all markets. We provide evidence that gender inequality and institutional biases against women in trade partner countries play an important role in explaining gender differences in export and import behaviour. We also perform an event study of a concrete policy change in a destination market – the introduction of quotas for the share of females on the boards of directors in Norway – and how it has affected the gender gap in trade participation.
Topic:
Globalization, International Trade and Finance, Inequality, Startup, Gender, Opportunity, and Firm Internationalization
Political Geography:
Global Focus

7. When the Exception Overtakes the Rule: COVID-19, Security Exemption Clauses, and International Investment Agreements

Author:
Kayla Maria Rolland
Publication Date:
02-2024
Content Type:
Journal Article
Journal:
The Goettingen Journal of International Law
Institution:
The Goettingen Journal of International Law
Abstract:
In the trade and investment law regimes built in the post-war period, “security exemption clauses” were included within trade and investment agreements as a safety valve, permitting States to deviate from their commitments in the event that their security interests were implicated. Initially, these clauses were understood to be narrowly limited to instances of war and interstate conflict. With the rise of the national security state in the decades since, however, the concept of security interests has ballooned to encompass an ever-growing set of issues, with some fearing that the rules may become irrelevant. This has been particularly facilitated through “third generation” security exemption clauses and their inclusion of self-judging language. The COVID-19 pandemic in particular adds a new dimension to this phenomenon. As a case study analysis of the text of the Chile-Hong Kong, China SAR bilateral investment treaty (BIT) will demonstrate, it may be feasible for States to invoke security exemption clauses to justify measures taken in response to the COVID-19 pandemic in some contexts, particularly with third generation, self-judging security exemption clauses. The expanding notions of security exemption clauses have significant implications for the investor-State dispute system as a whole.
Topic:
Security, International Law, International Trade and Finance, Treaties and Agreements, COVID-19, and International Investment Agreements
Political Geography:
China and Global Focus

8. Pioneering a new classification: a comprehensive study of healthcare products in global trade

Author:
Pierre Cotterlaz, Guillaume Gaulier, Aude Sztulman, and Deniz Ünal
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
International trade in healthcare products took off in the 2000s at the height of hyper-globalisation. Twenty years on, the Covid-19 shock drove home to governments the importance of health security and trained the spotlight on the industrial sovereignty issues raised by the international organisation of production. However, the tangled web of international value chains has compromised the traceability of the manufacturing of these essential goods. In addition, the classification of healthcare products across a multitude of industries in the trade and production nomenclatures makes them hard to identify and muddies the picture further. In this paper, we have painstakingly identified these products and classified them together in one industry grouping to assess the scale of and trends in trade to meet the needs of national health systems. Covering a vast range of products (medicinal products and their compounds, medical technology equipment and small medical materials), this healthcare industry grouping has posted the strongest relative growth since 2000, rising to take the number two share of world trade in 2021 just behind electronic products. This paper details the nature of world trade in the healthcare industry grouping and its five branches by production stage (intermediate and final), type of trade flows (one-way and two-way) and quality/price range. It goes on to present how the advanced countries are positioned compared with the rest.
Topic:
Health, International Trade and Finance, Developing World, Economy, and Emerging Economies
Political Geography:
Global Focus

9. Crafting a Robust U.S. Carbon Border Adjustment Mechanism

Author:
Sanam Rasool, William Alan Reinsch, and Thibault Denamiel
Publication Date:
08-2024
Content Type:
Policy Brief
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
The introduction of a carbon border adjustment mechanism (CBAM) in the United States presents an intricate policy challenge at the intersection of climate action and international trade. With countries around the world integrating climate considerations into their trade policies, the United States is under growing pressure to develop and implement its own CBAM. This policy tool, already adopted by the European Union, is geared toward leveling the playing field for domestic industries while promoting global climate action and accountability. A future U.S. CBAM could serve as a vital instrument in the nation’s transition toward a net-zero economy, encouraging domestic carbon footprint reduction and driving trading partners to adopt cleaner practices. However, crafting and rolling out such a mechanism comes with knotty challenges, ranging from choosing optimal carbon accounting methods and pricing to warding off potential trade disputes and garnering global collaboration. As the United States charts its course through this complex policy landscape, it has the opportunity to shape global climate action while safeguarding its economic interests.
Topic:
Climate Change, International Trade and Finance, Economy, and Carbon Border Adjustment Mechanism (CBAM)
Political Geography:
North America, Global Focus, and United States of America

10. New Approaches and Challenges Regarding Trade, Climate Action, and the WTO

Author:
Sunayana Sasmal
Publication Date:
12-2024
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
The report examines the intricate relationship between climate change and international trade, emphasizing the necessity for global cooperation to tackle the climate crisis in a sustainable and equitable manner. Climate change poses a significant global challenge, affecting economic, social, and political aspects of life worldwide. While effective resolution requires international cooperation, achieving so is complex due to inadequate action, the distribution of the burdens of regulatory costs, and the potential of free riding—a situation reminiscent of the tragedy of the commons. Efforts for cooperation in the environmental field have included multilateral environmental agreements (MEAs), from the 1992 United Nations Framework Convention on Climate Change to the 2015 Paris Agreement. However, political discord has hindered progress, particularly in linking climate action with trade governance within the World Trade Organization (WTO). Tensions between the developed and the less developed regarding historical contributions to climate change and how such historical contributions qualify current levels of responsibility, inadequate climate finance despite repeated promises, and the technology divide, further complicate this issue. Limited technology transfers and the lack of enforceability of related commitments have led to growing resentment and distrust among WTO members, amid the rising number of climate-related trade measures.
Topic:
Climate Change, International Trade and Finance, and WTO
Political Geography:
Global Focus