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41. The impact of trade and trade policy on the environment and the climate: A review

Author:
Gabriel Felbermayr and Sonja Peterson
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
While international trade can offer gains from specialization and access to a wider range of products, it is also closely interlinked with global environmental problems, above all, anthropogenic climate change. This survey provides a structured overview of the economic literature on the interaction between environmental outcomes, trade, environmental policy and trade policy. In this endeavor, it covers approaches reaching from descriptive data analysis based on Input‐Output tables, over quantitative trade models and econometric studies to game‐theoretic analyses. Addressed issues are in particular the emission content of trade and emissions along value chains, the relocation of dirty firms and environmental impacts abroad, impacts of specific trade polices (such as trade agreements or tariffs) or environmental policy (such as Border Carbon Adjustment), transportation emissions, as well as the role of firms. Across the different topics covered, the paper also tries to identify avenues for future research, with a particular focus on extending quantitative trade and environment models.
Topic:
Climate Change, Environment, International Trade and Finance, Trade, and Carbon Emissions
Political Geography:
Global Focus

42. Economic Costs of Friend-shoring

Author:
Beata Javorcik, Lucas Kitzmueller, Helena Schweiger, and Muhammad A. Yıldırım
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Geo-political tensions and disruptions to global value chains have led policymakers to reevaluate their approach to globalisation. Many countries are considering regionalisation and friend-shoring – trading primarily with countries sharing similar values – as a way of minimising exposure to weaponisation of trade and securing access to critical inputs. If followed through, this process has the potential to reverse global economic integration of recent decades. This paper estimates the economic costs of friend-shoring using a quantitative model incorporating inter-country inter-industry linkages. The results suggest that friend-shoring may lead to real GDP losses of up to 4.6% of global GDP. Thus, although friend-shoring may provide insurance against extreme disruptions and increase the security of supply of vital inputs, it would come at a significant cost.
Topic:
Trade, Production, Regionalization, and Friend-shoring
Political Geography:
Global Focus

43. The Rules of Origin and Global Value Chains Conundrum

Author:
Israel Gutierrez
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
Abstract:
This paper studies the relationship between Global Value Chains (GVC's) and Rules of Origin (RoO's). These are two of the most prevalent features of the trade environment today but have not received a satisfying theoretical treatment, let alone one conjointly. This paper aims to fill that gap in the literature. I present a trade model with heteroge- neous firms where I introduce GVC's and RoO's. I analyse the incentives a firm faces to comply with RoO's and those it faces to operate as a GVC. I then analyse how the stages of production a GVC chooses to operate is affected by RoO's. I find that the optimal number of stages of production decreases the more restrictive the RoO is, and it increases the cheaper its foreign intermediate inputs are. Lastly, I show that, all else equal, a firm operating as a GVC has a bigger incentive to comply with RoO than an exporting firm.
Topic:
Tariffs, Trade, Global Value Chains, Rules of Origin, and Heterogeneous Firms
Political Geography:
Global Focus

44. Monetary Effects of Global Stablecoins

Author:
Dong He
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The globalized economy now moves at the speed of electrons — and the future of money is inexorably going digital, too. New forms of digital money, such as central bank digital currencies (CBDCs) and so‐​called global stablecoins, are shaping the future of money and payments. CBDCs are a digital form of fiat currency issued by a central bank. Some central banks started exploring CBDCs a few years ago, and those explorations have gathered momentum since Facebook and its partners announced their intention to launch the Libra stablecoin in June 2019. Because the stablecoins issued by large technological companies or platforms (Big Techs) have the potential to be adopted by businesses and households everywhere, they are called “global stablecoins,” or GSCs, in shorthand.
Topic:
Geopolitics, Global Political Economy, Money, Currency, and Trade
Political Geography:
Global Focus

45. Global Trade Today is Global Value Chains

Author:
David Henig
Publication Date:
01-2021
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
In the last 25 years global value chains have come to dominate global trade in a way surprisingly little discussed or understood. To meet the policy challenges of today and the future we need to understand the key characteristics of this new global trade and how they came about. The OECD estimate around 70% of total trade takes place in global value chains. Using their definition as where “the different stages of the production process are located across different countries”, and considering both goods and services inputs, this may be an understatement. The example most commonly used is the automotive sector, with 30,000 parts and associated services like satellite navigation going into one car. However there are many others. Modern primary commodity production is optimised by technology developed in other countries, diverse services and goods are frequently combined to create new product offerings, and most international business to consumer transactions are facilitated by leading global platforms. Positively this new globalization has provided consumers with an unprecedented choice of products at affordable prices. More challengingly it has seen governments struggle with the question of how they can best influence modern trade, amid signs of a backlash and simple demands for ‘more domestic manufacturing’. The popular global narrative that feeds such demands is one that has a traditional view of trade as a set of simple primary or manufactured goods transactions. Policymakers must move on from this narrative, making their choices, and explaining them clearly, on the basis of global value chains.
Topic:
International Political Economy, International Trade and Finance, Trade, and Global Value Chains
Political Geography:
Global Focus

46. Information in the First Globalization: News Agencies and Trade

Author:
Pierre Cotterlaz and Etienne Fize
Publication Date:
02-2021
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
This paper documents the effect of information frictions on trade using a historical large-scale improvement in the transmission of news: the emergence of global news agencies. The information available to potential traders became more abundant, was delivered faster and at a cheaper price between countries covered by a news agency. Exploiting differences in the timing of telegraph openings and news agency coverage across pairs of countries, we are able to disentangle the pure effect of information from the effect of a reduction in communication costs. Panel gravity estimates reveal that bilateral trade increased by 30\% more for pairs of countries covered by a news agency and connected by a telegraph than for pairs of countries simply connected by a telegraph.
Topic:
Economics, International Political Economy, Partnerships, Media, News Analysis, and Trade
Political Geography:
Global Focus

47. Thinking Outside the Container: A Machine Learning Approach to Forecasting Trade Flows

Author:
Vincent Stamer
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Global container ship movements may reliably predict global trade flows. Aggregating both movements at sea and port call events produces a wealth of explanatory variables. The machine learning algorithm partial least squares can map these explanatory time series to unilateral imports and exports, as well as bilateral trade flows. Applying out-of-sample and time series methods on monthly trade data of 75 countries, this paper shows that the new shipping indicator outperforms benchmark models for the vast majority of countries. This holds true for predictions for the current and subsequent month even if one limits the analysis to data during the first half of the month. This makes the indicator available at least as early as other leading indicators.
Topic:
Economics, Science and Technology, Trade, Shipping, and Machine Learning
Political Geography:
Global Focus

48. Trade and the Spatial Distribution of Transport Infrastructure

Author:
Gabriel Felbermayr and Alexander Tarasov
Publication Date:
04-2021
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
The distribution of transport infrastructure across space is the outcome of deliberate government planning that reflects a desire to unlock the welfare gains from regional economic integration. Yet, despite being one of the oldest government activities, the economic forces shaping the endogenous emergence of infrastructure have not been rigorously studied. This paper provides a stylized analytical framework of open economies in which planners decide non-cooperatively on transport infrastructure investments across continuous space. Allowing for intra- and international trade, the resulting equilibrium investment schedule features underinvestment that turns out particularly severe in border regions and that is amplified by the presence of discrete border costs. In European data, the mechanism explains about 16% of the border effect identified in a conventionally specified gravity regression.
Topic:
Economics, Infrastructure, Governance, Borders, and Trade
Political Geography:
Global Focus

49. Climate of cooperation: How the EU can help deliver a green grand bargain

Author:
Alex Clark, Susi Dennison, and Mats Engström
Publication Date:
10-2021
Content Type:
Policy Brief
Institution:
European Council on Foreign Relations (ECFR)
Abstract:
The global transition away from carbon will fundamentally alter the EU’s dependencies on energy, raw materials, and new technologies. The bloc needs to manage these dependencies while maintaining the fragile consensus between member states on the European Green Deal and fulfilling its ambitions for global climate leadership. The EU should help deliver a green grand bargain by making use of all its sources of economic, multilateral, and soft power. The bloc should reframe the international debate on energy security to focus on clean energy resources and efficiency, engaging in the market reforms needed to incentivise this shift. The EU should make every effort to reassure countries in the global south that the green transition will not leave them behind. The Global Gateway provides a strong framework for doing this – as would an EU Co-innovation and Green Tech Diffusion Fund. The EU also needs to place European sovereignty at the centre of its internal narrative on the European Green Deal. This could help win support for the agreement from member states that are concerned about the economic and social effects of the green transition.
Topic:
Climate Change, Development, Diplomacy, International Cooperation, Science and Technology, European Union, Partnerships, Multilateralism, and Trade
Political Geography:
Europe and Global Focus

50. The Commitment to Development Index 2021

Author:
Ian Mitchell, Lee Robinson, Beata Cichocka, and Euan Ritchie
Publication Date:
09-2021
Content Type:
Policy Brief
Institution:
Center for Global Development (CGD)
Abstract:
The Commitment to Development Index (CDI) ranks 40 of the world’s most powerful countries on policies that affect more than five billion people living in poorer nations. Because development is about more than foreign aid, the CDI covers eight distinct policy areas: Development Finance Investment Migration Trade Health Environment Security Technology
Topic:
Security, Development, Environment, Health, Migration, Science and Technology, Finance, Investment, and Trade
Political Geography:
Global Focus