Evaluating the Impact of the US–China Trade War

We evaluate the impact of the US–China trade war using a dynamic computable general equilibrium (CGE) model of global trade. We conduct ex ante simulation analysis exploring three scenarios to understand how the trade war affects import tariffs, investment, and productivity. The escalation of the trade war reduces gross domestic product (GDP) in China and the USA by ?1.41% and ?1.35%, respectively. The trade war reduces nearly all sectoral imports and outputs in both countries. To reflect the important role of global value chains (GVCs), we modify the dynamic CGE model with agent‐specific import demands, and we explore the difference between the results for the two models relating to the trade war impacts on GDP and bilateral trade. When GVCs are accounted for, the negative impacts on bilateral trade are more widespread across countries, and world GDP in the modified model is reduced by ?$US450 billion. These results suggest that the GVCs play substantial role in determining trade responses at the disaggregated level.     

World Exports of New and Used Automobiles: A Gravity Model Comparison among the European Union,Japan and the United States

This paper considers new and used automobile exports of the European Union, Japan and the United States within a gravity model framework. This standard framework has similar explanatory power for the new and used automobile exports of the European Union and the United States, as well as for the new automobile exports of Japan, but not for Japan's used automobile exports, a finding the paper associates with the importance of left-hand driving in determining the markets for Japan's used (but not ‘made to order’ new) automobile exports. The paper concludes that, while used automobiles are somewhat more important to lower income markets, controlling for discrimination and other factors, used automobile trade clearly supplements new automobile trade from the prospective of the importing country.     

标准化对中国出口贸易的影响效应——基于局部均衡的分析

由于技术差距的存在,中国出口贸易产品的技术标准普遍低于美、日、欧等发达国家,因此,标准化对中国出口贸易的影响显著。从局部均衡的角度分析短期和长期的不同影响效应发现：在短期内,标准化对中国的出口贸易效应主要是负面的,表现为贸易限制效应、贸易转移效应和贸易条件效应;而在长期情况下,如果企业能够积极改进,不断创新,那么标准化对中国的贸易会产生积极的促进效应,贸易量会增加,同时贸易条件也会得到改善。     

Trade diversion from tomato suspension agreements

Abstract .  Trade barriers can cause output to be diverted to other countries and into other products. We study the effect of a voluntary price restraint (VPR) on Mexican tomatoes entering the United States. The diversion caused by the VPR is statistically and economically significant – representing over four-fifths of the direct effects of the trade barrier. When the VPR was binding, Mexico exported more tomatoes to Canada, the United States cut back on exports while Canada increased their exports to the United States. The VPR also diverted fresh tomatoes in Mexico into paste production, which was then exported to the United States.     

US Trade Policy in the Trump Administration

President Donald Trump has emphasized three recurring themes regarding trade policy: the importance of trade balances, including bilateral trade balances, currency manipulation to gain unfair advantage in trade, and “disastrous” trade agreements. Asia figures prominently in these concerns. Trump withdrew the United States from the Trans‐Pacific Partnership, is increasing contingent or process protection, demanding the renegotiation under duress of the North American Free Trade Agreement and the Korea‐United States Free Trade Agreement. These policies are modeled quantitatively and results generated for sectoral output and employment at the state and metropolitan area level.     

Accounting for the China–US Trade Imbalance: An Ownership‐Based Approach

This paper focuses on measuring the trade imbalance between China and the United States (US) within the framework of the ownership‐based approach. It extends the baseline model developed, respectively, by NAS, Julius, and BEA into a three‐country framework, consisting of the domestic economy, the foreign economy, and the rest of the world. The results of the study show that the non‐US foreign direct investment in China is mostly responsible for China's trade surplus with the US. As a result, China's ownership‐based trade surplus is surprisingly small relative to the conventional measure.     

Effects of trade diversion and trade creation of MERCOSUR on US and world apple markets

Apples are the third most valuable fruit in the United States and account for 18% of US fruit exports. Chile is a major competitor to the United States in the MERCOSUR market, since it is one of the leading apple producing countries and enjoys the tariff reductions as a member of MERCOSUR. Consequently, Chilean exports displace US exports in MERCOSUR. In addition, other MERCOSUR members import more from lower-cost Chile, leading to a reduction in production and an increase in consumption in these countries. This study develops a theoretical and an empirical model of world apple market to quantify the trade diversion and trade creation effects of the MERCOSUR free trade agreement and to estimate the welfare impacts.     

Understanding the recent Sino-U.S. trade conflict

ABSTRACT

To understand Sino-U.S. trade relations, this article interprets the trade imbalance between China and the United States from the Trump administration’s perspective. The Trump administration claims that the Chinese government’s subsidies and high import tariffs cause the Sino-U.S. trade deficit, resulting in job losses in the U.S. The Trump administration therefore argues that imposing high tariffs on Chinese exports can resolve the deficit. The article finds that U.S. statistical accounting overestimates the deficit. Reducing China’s imports cannot increase U.S. employment, and China provides the United States with low-price and high-quality products. Chinese investors tend to invest the surplus by purchasing U.S. Treasury bonds. In addition, the United States limits Chinese investments due to ‘national security’ concerns. China’s upgrading to the high end of the global value chain is a consequence of economic development. Therefore, the two countries should rebalance Sino-U.S. trade by seeking economic and trade cooperation via trade negotiations.     

Abenomics and Japan's Trade Policy in a New Era

Trade policy, in particular, the Trans‐Pacific Partnership Agreement (TPP), has been a centerpiece of the Abe administration's economic strategy. The TPP's contributions to Japan's growth strategy include: (i) creating trade and investment opportunities abroad for Japanese companies through ambitious liberalization targets; (ii) advancing domestic reforms – with the largest service and agricultural liberalization commitments to date; and (iii) increasing bargaining leverage in other trade negotiations. But the domestic reform goals of Abenomics in agriculture have come up short due to opposition from domestic lobbies. American trade politics – which culminated in the US withdrawal from the TPP – have upended the goals of trade policy under Abenomics. Japan's best option in this new environment is to deliver on high quality, multi‐party trade agreements: concluding negotiations with Europe; scaling up the ambition of Regional Comprehensive Economic Partnership; and salvaging a TPP 11. The merits of a bilateral free trade agreement with the USA will depend on how the Trump administration operationalizes its America First policy.     

Trade negotiations, domestic policies, and the Most Favored Nation clause

Abstract.  This paper illustrates how restricting trade instruments to non-discrimination links trade agreements to non-trade agreements and, under certain conditions, helps governments further lower tariffs and/or domestic standards (policies). These conditions are: (i) governments' objective functions are sufficiently concave with respect to domestic standards (policies); (ii) domestic standards are sufficiently valued; and (iii) policies are strategic complements. These can then be used as a rationale for restricting safeguard measures to non-discrimination.     

The economic and trade effects of the UK–Korea free trade agreement on the United Kingdom,Korea, Japan,China, and the European Union

We explored a comparative static computable general equilibrium model with six regions and 12 sectors to estimate the impacts of the recent UK–Korea free trade agreement (FTA) along with the European Union (EU)–Korea FTA. The empirical results provide quantitative evidence of the impact on national GDP, national exports and imports by sector, and the changes in exports or imports among the United Kingdom, Korea, Japan, China, and the EU. The UK–Korea FTA, along with the EU–Korea FTA, increases GDP and welfare for the United Kingdom and Korea; moreover, there is a large increase in automobiles, transport equipment, and machinery exports between Korea and the United Kingdom. The GDP and welfare level of non-member countries such as Japan and China will slightly decline. Exports from the United Kingdom and Korea to non-member countries are also expected to decrease in most manufacturing sectors. The UK–Korea FTA will lead to increases in imports between the United Kingdom and Korea due to mutual trade creation effects and trade diversion effects. However, non-member countries such as Japan's exports are expected to experience a large decline in automobiles to the United Kingdom and in most manufacturing products to Korea due to the negative impact of the UK–Korea FTA.     

The Welfare Cost of Autarky: Evidence from the Jeffersonian Trade Embargo, 1807–09

The United States came close to complete autarky in 1808 as a result of a self‐imposed embargo on international shipping from December 1807 to March 1809. Monthly prices of exported and imported goods reveal the embargo's striking effect on commodity markets and allow a calculation of its welfare effects. A simple general‐equilibrium calculation suggests that the embargo cost about 5 percent of America's 1807 GNP, at a time when the trade share was about 13 percent (domestic exports and shipping earnings). The welfare cost was lower than the trade share because the embargo did not completely eliminate trade and because domestic producers successfully shifted production toward previously imported manufactured goods.     

Trade,Determinants, and Causality: A Case of Hong Kong's Exports to The United States

This paper examines recent development in Hong Kong's exports to the United States. It explains the trade flows by estimating five demand-equations for exports. Besides, vector autoregressions are fitted to test the causal relationship among exports, exchange rates and income. Our study suggests that a sustained high growth rate of Hong Kong's exports of principal commodities to the United States contribute to the chronical bilateral trade surplus for Hong Kong. Variations in income and exchange rates, the major determinants of Hong Kong's exports, “cause” exports to change as indicated in the causality test. [420]     

Little Divergence: Evidence from Cotton Textiles in Japan and China 1868–1930

This paper looks at the role of textile exports in Japan and China's economic development in the period of 1868–1930 as a major explanation for the “Little Divergence” between the two countries in the context of the “Great Divergence” between Europe and Asia. Because of textiles' large weighting in proto‐industrialization gross domestic product (GDP), we postulate that China's initial 20‐year lag in textiles vis‐à‐vis Japan turns out to be fatal for its industry and that it eventually ordains totally different development patterns for the textile industry in the two countries, which ultimately led to different growth patterns for the overall economy. Although both countries saw rapid growth of textile exports, the nature of those exports and the entailed position of each country in the industry value chain of trade were quite different. We then use Granger causality tests to show that in one case (Japan) it is in support of the export‐led‐growth hypothesis (ELG) while in another (China) it is not. Our study then also explains why Japan's industrial revolution took place much earlier than China's.     

中美贸易失衡与人民币汇率“操纵”——基于汇率与贸易收支关系的实证研究

基于2002年1月至2011年12月的月度数据,运用自回归分布滞后(ARDL)模型,分别从总体和分行业的角度,探讨人民币兑美元实际汇率、汇率波动率与中美贸易收支之间的关系。研究结果表明,无论长期还是短期,人民币汇率水平和汇率波动率对中美两国之间总体和分行业贸易收支差额均不会产生显著影响。该结论意味着无论长期还是短期,中国政府都无法通过汇率操纵来达到扩大中美贸易收支顺差的目的。     

Exchange‐Rate Risk and Japanese–Thai Industry Trade

Over the past decade, many papers have studied the effects of exchange‐rate volatility on international trade, particularly at the bilateral level for large numbers of individual industries. This is necessary because the underlying theory is ambiguous and because earlier papers failed to uncover significant results at a higher degree of aggregation. This paper examines the case of Japan and Thailand over the period from 1970 to 2010. We find that slightly more than half of 117 export industries and 54 import industries are affected by volatility in the short run. In the long run, 6 export and 2 import industries are affected positively, and 22 export and 9 import industries are affected negatively. Small Japanese export industries are more likely to be negatively affected, while imports show no differences regarding industry size. In a sectoral analysis, we find some evidence that Japanese exports of manufactures and certain machinery and transport equipment might be relatively more affected by the exchange‐rate risk. Raw material imports are least affected. These findings therefore suggest which industries might benefit most by a policy promoting a stable yen.     

On the asymmetric effects of exchange-rate volatility on trade flows: Evidence from US–UK Commodity Trade

We consider the response of each of the 67 industries that trade between the United States and United Kingdom to the volatility of the real dollar–pound exchange rate. When we follow previous research and estimate a linear ARDL model for each industry, we find short-run effects of volatility in 22 US exporting industries to the United Kingdom that last into the long run only in nine industries. As for the UK exports to the United States, we find short-run effects in 18 industries that last into the long run in 15 industries. However, when we estimate a nonlinear model for each industry, we find short-run effects of volatility on 41 US exporting industries and on 43 UK exporting industries, all in an asymmetric manner. Short-run asymmetric effects lasted into long-run asymmetric effects in 24 US exporting industries to the United Kingdom and in 33 UK exporting industries to the United States. While total trade shares of industries from the linear models were negligible, those of the industries from the nonlinear models were significant in size, in the tune of one-third of the trade.     

Does Ease of Communication Increase Trade? Commonality of Language and Bilateral Trade

Gravity model explanations of trade volumes frequently include dummy variables to account for the commonality of language among trading partners. In this paper we use a data set for the number of people in a country who speak English as a first language or English as a second language (Crystal, 1997) as an indicator of the ease with which trade with the United States occurs. Controlling for commodity fixed effects we use SITC three digit industry data centred on 1995 United States bilateral trade with 33 countries to determine the effect of the degree of language commonality on bilateral trade. Both English as a first language and English as a second language are found to be less important for exports than for imports. This is true for all three digit industries as well as when the specific industry groups identified in Rauch (1999) are considered.     

Trade Blocs and Trade Wars during the Interwar Period

What precisely were the causes and consequences of the trade wars in the 1930s? Were there perhaps deeper forces at work in reorienting global trade prior to the outbreak of World War II? And what lessons may this particular historical episode provide for the present day? To answer these questions, we distinguish between long‐run secular trends in the period from 1920 to 1939 related to the formation of trade blocs and short‐run disruptions associated with the trade wars of the 1930s. We argue that the trade wars mainly served to intensify pre‐existing efforts toward the formation of trade blocs which dated from at least 1920. More speculatively, we argue that the trade wars of the present day may serve a similar purpose as those in the 1930s, that is, the intensification of China‐ and US‐centric trade blocs.     

What Would Korea-US Free Trade Agreement Bring?

ABSTRACT

This paper uses a computable model of trade to forecast the effects of the US–Korea free trade agreement on the manufacturing sector. The model uses the Eaton–Kortum methodology to explain intra-industry trade instead of the usual Armington assumption. It is parameterized using 2005 data for 15 industries and 53 countries. The results show that implementing KORUS would increase the US manufacturing exports to Korea by 56.9% and Korean manufacturing exports to the US by 18.9%. It would also increase manufacturing employment by 26,500 jobs in Korea and 34,200 jobs in the US. In addition, KORUS would lead to significant changes in the patterns of trade and production. The US and Korea would increase their specialization in the industries where they have strong technological comparative advantages. Finally, KORUS would increase welfare in both countries, but only modestly: by 0.27% in Korea and 0.013% in the US.