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2. Trump ended WTO dispute settlement. Trade remedies are needed to fix it.
- Author:
- Chad P. Bown
- Publication Date:
- 01-2022
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Unhappy with the rulings of the WTO dispute settlement system, which disproportionately targeted US use of trade remedies, the United States ended the entire system in 2019. There are multiple hurdles to agreeing to new terms of trade remedy use and thus potentially restoring some form of binding dispute settlement. First, a change would affect access to policy flexibility by the now large number of users of trade remedies. Second, although China’s exports are the overwhelming target of trade remedies, exporters in other countries increasingly find themselves caught up in trade remedy actions linked to China. Third, critical differences posed by China’s economic model may call for new rules for trade remedies, but no consensus on those rules has emerged. Even some of the most promising reforms have practical limitations, create additional challenges, or may be politically unviable.
- Topic:
- Economics, Trade, Donald Trump, and WTO
- Political Geography:
- China and United States of America
3. WTO 2025: Restoring binding dispute settlement
- Author:
- Alan Wm. Wolff
- Publication Date:
- 04-2022
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Binding dispute settlement—the ability to obtain a final judgment of whether a member of the World Trade Organization (WTO) has acted inconsistently with its obligations—was the defining attribute of the WTO as created in 1995. Global commerce thrived on having the certainty provided by its taking place within this system. For well over a decade, the United States had complained that the dispute settlement system was undermining the trade remedies—antidumping, countervailing duties against subsidies, and safeguard actions against injurious imports—that were allowed under the WTO’s rules. When a populist US administration assumed office in 2017, it blocked appointments to the WTO’s Appellate Body. Today, the WTO dispute settlement system has become balkanized. The European Union and a number of other countries have banded together to put into place an alternative mechanism. Outside this system are the other two-thirds of the WTO members, including the United States. For most WTO members, no definitive result can be reached as to whether WTO obligations have been violated, as there is no assurance that WTO dispute settlement will be binding for them. This paper addresses how to reconstruct a system that the United States could join that would be broadly acceptable to others. It sets out a wide range of elements for negotiators to consider to rebuild the WTO dispute settlement system and make WTO agreements enforceable again.
- Topic:
- Economics, Trade, WTO, and Disputes
- Political Geography:
- Global Focus
4. WTO 2025: Enhancing global trade intelligence
- Author:
- Alan Wm. Wolff
- Publication Date:
- 04-2022
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- International trade flows based on information. Is the foreign market open? What are the conditions for entry? Are there customs duties to be paid and other regulations that need to be satisfied? Businesses thrive on getting as much certainty as they can find, and this requires reliable information. Is the competition subsidized? Are the competitors favored state-owned companies? During the pandemic, governments needed to know if food and medical supplies were going to be available from foreign sources and, most importantly, how available vaccines would be as most of the world’s countries could not produce any. Effective public policy cannot be made in the dark. The World Trade Organization, and the General Agreement on Tariffs and Trade before it, were founded with the idea of providing transparency. But more is needed to understand why trade is taking place, and even more important, when it is not, why not?
- Topic:
- Economics, Markets, Trade, and WTO
- Political Geography:
- Global Focus
5. Public responses to foreign protectionism: Evidence from the US-China trade war
- Author:
- David Steinberg and Yeling Tan
- Publication Date:
- 06-2022
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- America's recent turn toward protectionism has raised concerns about the future viability of the liberal international trading system. This study examines how and why public attitudes toward international trade change when one's country is targeted by protectionist measures from abroad. To address this question, the authors fielded three original survey experiments in the country most affected by US protectionism: China. First, they find consistent evidence that US protectionism reduces Chinese citizens' support for trade. This finding is replicated in parallel experiments on technology cooperation, and further validated outside of the China context with a survey experiment in Argentina. Second, they show that responses to US protectionism reflect both a "direct reciprocity" logic—citizens want to retaliate against the United States specifically—and a "generalized reciprocity" logic that reduces support for trade on a broader, systemic basis.
- Topic:
- Economics, Political Economy, Public Opinion, Trade, and Protectionism
- Political Geography:
- China, Asia, North America, and United States of America
6. How COVID-19 medical supply shortages led to extraordinary trade and industrial policy
- Author:
- Chad P. Bown
- Publication Date:
- 07-2021
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Early in the COVID-19 pandemic, a global shortage of hospital gowns, gloves, surgical masks, and respirators caused policymakers around the world to panic. This paper examines international trade in this personal protective equipment (PPE) during the crisis, with a focus on China, the European Union, and the United States. As the pandemic first hit, China increased imports and decreased exports of PPE, removing considerable quantities of supplies from global markets. For the European Union and United States, the decrease in their imports from China was not immediately replaced by increased trade from other foreign suppliers. Early shortages led to EU and US export controls on their own, domestically produced PPE and other extraordinary policy actions, including a US effort to reserve for itself supplies manufactured in China by a US-headquartered multinational. By April 2020 China’s exports had mostly resumed, and over the rest of the year its export volumes of some products surged, more than doubling compared to pre-pandemic levels. But China’s export prices also skyrocketed and remained elevated through 2020, reflecting severe and continued shortages. This paper documents these facts. It also explores these and other government actions, such as US trade war tariffs and the emergence of US industrial policy in the form of over $1 billion of subsidies to build out its domestic PPE supply chain, as well as potential lessons for future pandemic preparedness and international policy cooperation.
- Topic:
- Industrial Policy, Economy, Trade, COVID-19, Health Crisis, and Supply
- Political Geography:
- Global Focus
7. How economic ideas led to Taiwan’s shift to export promotion in the 1950s
- Author:
- Douglas A. Irwin
- Publication Date:
- 08-2021
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Taiwan was the first developing country to adopt an export-oriented trade strategy after World War II. The factors usually associated with big shifts in policy—a macroeconomic crisis, a change in political power or institutions, lobbying by export interests, pressure from international financial institutions—were not present; it was ideas that were key. In 1954, economist S. C. Tsiang proposed that Taiwan boost export earnings rather than squeeze import spending to deal with its chronic shortage of foreign exchange. He recommended a currency devaluation to establish a realistic exchange rate and a market-based system of foreign exchange allocation to end the inefficient rationing by the government. Four years later, a policymaker, K. Y. Yin, fought for the adoption of Tsiang’s proposal, helping clear the way for Taiwan’s phenomenal growth in trade.
- Topic:
- Economics, History, Exports, and Trade
- Political Geography:
- Taiwan and Asia
8. From hermit kingdom to miracle on the Han
- Author:
- Douglas A. Irwin
- Publication Date:
- 09-2021
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In 1960, South Korea’s exports were about 1 percent of GDP, and the country’s ability to import depended almost entirely on US aid. After changing its foreign exchange and trade policies in the mid-1960s, Korea saw a surge in exports to more than 10 percent of GDP by the end of the decade. What factors account for the shift in policy that enabled this dramatic export growth to occur? The United States helped initiate the process by withholding financial assistance, pressuring Korea to devalue its currency and reform its foreign exchange regime. Initially, the Korean government resisted taking these steps, but in 1964 it became firmly committed to an export promotion strategy to boost foreign exchange earnings and end its dependence on American aid.
- Topic:
- Economics, Foreign Exchange, Reform, Exports, and Trade
- Political Geography:
- Asia and South Korea
9. Dollar not so dominant: Dollar invoicing has only a small effect on trade prices
- Author:
- Joseph E. Gagnon and Madi Sarsenbayev
- Publication Date:
- 12-2021
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- This paper estimates and tests four models of the effects of exchange rate changes on export prices. It supports the Goldberg and Knetter (1997) canonical result that exporters adjust their prices by about half of any movement in exchange rates. A new twist is that exchange rate movements against importing countries account for only three-fifths of this price adjustment, while exchange rate movements against a dominant currency account for the other two-fifths. The dominant currency is the euro in Europe and Africa and the US dollar in Asia and the Western Hemisphere. The recent claim that the dollar is the most important driver of export prices (Gopinath et al. 2020) is shown to be valid only for the smallest exporting economies. For the bulk of international trade, the extra effects of the dollar (or the euro) beyond their effects as exporter or importer currencies are relatively modest.
- Topic:
- Foreign Exchange, Exports, Currency, Trade, and Dollar
- Political Geography:
- Global Focus
10. 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
11. 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
12. 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
13. 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
14. 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
15. Protectionism under Trump: The China Shock, Intolerance, and the "First White President"
- Author:
- Marcus Noland
- Publication Date:
- 06-2019
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- In 2016, the United States elected an avowedly protectionist president. This paper uses US county-level electoral data to examine this outcome. The hypothesis that support for protectionism was purely a response to globalization is rejected. Exposure to trade competition encouraged a shift to the Republican candidate, but this effect is mediated by race, diversity, education, and age. If the turn toward protectionism is due to economic dislocation, then public policy interventions could mitigate the impact and support the reestablishment of a political consensus for open trade. If, however, the drivers are identity or cultural values, then the scope for constructive policy intervention is unclear.
- Topic:
- Economy, Trade, Donald Trump, and Protectionism
- Political Geography:
- China, Asia, North America, and United States of America
16. Does Trade Reform Promote Economic Growth? A Review of Recent Evidence
- Author:
- Douglas A. Irwin
- Publication Date:
- 05-2019
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Do trade reforms that significantly reduce import barriers lead to faster economic growth? In the two decades since the critical survey of empirical work on this question by Francesco Rodriguez and Dani Rodrik in 2000, new research has tried to overcome the various methodological problems that have plagued previous attempts to provide a convincing answer. This paper examines three strands of recent work on this issue: cross-country regressions focusing on within-country growth, synthetic control methods on specific reform episodes, and empirical country studies looking at the channels through which lower trade barriers may increase productivity. A consistent finding is that trade reforms that significantly reduce import barriers have a positive impact on economic growth, on average, although the effect differs across countries. Overall, these research findings should temper some of the previous agnosticism about the empirical link between trade reform and economic performance.
- Topic:
- Economics, Reform, Economic Growth, and Trade
- Political Geography:
- Global Focus
17. Does Trade Reform Promote Economic Growth? A Review of Recent Evidence
- Author:
- Douglas A. Irwin
- Publication Date:
- 05-2019
- Content Type:
- Working Paper
- Institution:
- Peterson Institute for International Economics
- Abstract:
- Do trade reforms that significantly reduce import barriers lead to faster economic growth? In the two decades since the critical survey of empirical work on this question by Francesco Rodriguez and Dani Rodrik in 2000, new research has tried to overcome the various methodological problems that have plagued previous attempts to provide a convincing answer. This paper examines three strands of recent work on this issue: cross-country regressions focusing on within-country growth, synthetic control methods on specific reform episodes, and empirical country studies looking at the channels through which lower trade barriers may increase productivity. A consistent finding is that trade reforms that significantly reduce import barriers have a positive impact on economic growth, on average, although the effect differs across countries. Overall, these research findings should temper some of the previous agnosticism about the empirical link between trade reform and economic performance.
- Topic:
- Reform, Economic Growth, and Trade
- Political Geography:
- Global Focus