International Trade, 31E00500

Transcription

1 International Trade, 31E00500 Lecture 7: Strategic and applied trade policy Saara Tamminen 1 1 VATT Institute for Economic Research, Finland Winter 2018 Tamminen (VATT) Lecture / 57

2 Table of contents 1 Strategic trade policy & trade policy options 2 Applied trade policy modelling Dierent models and databases Structure of GTAP CGE models 3 Case: TTIP What is Transatlantic Trade and Investment partnership (TTIP) about? Estimates on the economic impacts of TTIP Tamminen (VATT) Lecture / 57

3 Table of Contents 1 Strategic trade policy & trade policy options 2 Applied trade policy modelling Dierent models and databases Structure of GTAP CGE models 3 Case: TTIP What is Transatlantic Trade and Investment partnership (TTIP) about? Estimates on the economic impacts of TTIP Tamminen (VATT) Lecture / 57

4 Trade policy options Old fashioned trade policy: taris, quantitative restrictions or import quotas, tari-quota systems and anti-dumping policies (e.g. EU import restrictions for sugar) New trade policy: non-tari measures (NTMs) and non-tari barriers (NTBs) NTMs: all non-price and non-quantity restrictions on trade in goods, services and investment (e.g. technical standards and testing, licence requirements, IPR rules, dierences in regulations from one state to another) NTBs: NTMs that can be considered protectionists restrictions and can be disputed in WTO (e.g. excessive custom delays, rm subsidies, embargoes) Trade disputes and WTO: Bananas, Steel, Shrimps, Meat (hormones), lately mostly NTB disputes (e.g. subsidies to Boeing and Airbus) Tamminen (VATT) Lecture / 57

5 Market power and trade restrictions The impact of trade restrictions depends on the type of competition on the domestic market With imperfect competition quotas are more restrictive than taris With taris rms are always confronted with the threat of foreign competition (hence "tarication" preference in WTO) Governments trying to inuence competitive position of domestic rms through trade policy = strategic trade policy In practise the evaluation of strategic trade policies likely eects rather complicated (next section) Tamminen (VATT) Lecture / 57

6 Quotas under imperfect competition 1 Tamminen (VATT) Lecture / 57

7 Quotas under imperfect competition 2 Tamminen (VATT) Lecture / 57

8 Trade policy a la 1930s: "Beggar-thy-neigbour" Tamminen (VATT) Lecture / 57

9 Start of multilateral cooperation Tamminen (VATT) Lecture / 57

10 International Trade Organizations The disastrous 'Beggar-thy-neigbour' policies of the 1930s showed the importance of international cooperation and rules World Trade Organization (previously GATT) and General Agreement in Trade in Services (GATS) most important Non-discrimination Reciprocity Prohibition of trade restrictions other than taris United Nations and UNCTAD - global coverage Organization for Cooperation and Development (OECD) - rich man's club Tamminen (VATT) Lecture / 57

11 Multilateral cooperation dicult Tamminen (VATT) Lecture / 57

12 GATT not sucient in current world Tamminen (VATT) Lecture / 57

13 Services export modes dened in GATS, 1995 Services exports, dierent modes: Mode 1: Cross-border supply; Mode 2: Consumption abroad; Mode 3: Commercial presence; and Mode 4: Presence of natural persons. (Mode 5: Domestic indirect services value added embodied in goods trade, Cernat 2014) Note: Services exports vs. service sectors' exports Tamminen (VATT) Lecture / 57

14 Rise of regionalism 1 Preferential Trade Agreement (PTA); trade restrictions are reduced for some goods or services (e.g. EU - ACP countries) Free Trade Area (FTA); member countries eliminate internal restrictions, no common external trade policy (e.g. NAFTA) Customs Union; additionally: common external policy (EEC) Common Market; additionally: mobility of factors of production, such as capital and labour (e.g. EU) Economic Union, additionally: harmonization of institutions and policy coordination (e.g. EMU) Tamminen (VATT) Lecture / 57

15 Rise of regionalism 2 Tamminen (VATT) Lecture / 57

16 Main concepts related to RTAs Trade creation? Tamminen (VATT) Lecture / 57

17 Main concepts related to RTAs Trade creation? Trade diversion? Tamminen (VATT) Lecture / 57

18 Table of Contents 1 Strategic trade policy & trade policy options 2 Applied trade policy modelling Dierent models and databases Structure of GTAP CGE models 3 Case: TTIP What is Transatlantic Trade and Investment partnership (TTIP) about? Estimates on the economic impacts of TTIP Tamminen (VATT) Lecture / 57

19 Subsection 1 Dierent models and databases Tamminen (VATT) Lecture / 57

20 Trade policy analyses in practise Main problems of practical trade policy analyses: Most agreements create structural eects, i.e. sectors are unevenly aected Most agreements are very complex and involve many countries and many products & services Mixes of taris reductions and NTB/NTM removals Analyses need to account for all eects at the same time with correct timings Need to be based on real statistics, theoretical analyses are not sucient Tamminen (VATT) Lecture / 57

21 Global fragmentation of production processes Tamminen (VATT) Lecture / 57

22 Gross value of exports vs. export's value added Tamminen (VATT) Lecture / 57

23 The forest of economic model acronyms The eld of applied economics is full of models: (National/Regional) Computable/Applied General Equilibrium models (CGE / AGE), static and dynamic versions Global Trade Analyses Project (GTAP) database and global GTAP CGE model Partial Equilibrium models (PE) (Old) Input-output models World input-output database (WIOD) Dynamic Stochastic General Equilibrium models (DSGE) (Econometric) Macro Models (Econometric) Gravity Models DSGE and Macro models typically do not model economic structures suciently. Tamminen (VATT) Lecture / 57

24 CGE/AGE in short CGE and Gravity most used in applied trade policy analyses with GTAP data or WIOD data. One country models, regional models and global CGE models In short, combination of: 1 Many (micro)economic theories on consumers, rms and public sector behavior 2 Real data on economic structures from Social accounting matrixes (SAMs) Solved with special computer programs Account for direct and indirect eects of dierent policies Main adjustment mechanisms to policy changes via: 1) Price changes and/or 2) Changes in technologies and tastes Tamminen (VATT) Lecture / 57

25 Social accounting matrixes, SAMs Tamminen (VATT) Lecture / 57

26 World Input-Output database (WIOD) Source: Timmer et al., 2015, Review of International Economics Tamminen (VATT) Lecture / 57

27 Static vs. dynamic AGEs Static: Results from one year to another (e.g. from 2015 to 2030), but no information on the path between the two years Dynamic, recursive models: Path on how the economic is aected from one year to another in future Dynamisation of the SAMs and rules for how the economy goes from one year to another (e.g. capital stocks!) Models solves an equilibrium to one year at a time, last year results and dynamic rules form the database for next year Tamminen (VATT) Lecture / 57

28 Example on dynamic results Economic impacts of the dierent options for reducing transport sector's emissions? Source: Tamminen & Honkatukia, 2015 Tamminen (VATT) Lecture / 57

29 Statistics on exports' value added Data available from TiVA - OECD, GTAP and WIOD Trade in Value added (TiVA) statistisc of OECD: Combination of Inter-Country Input-Output (ICIO) tables and trade data to construct domestic and foreign value added in exports Includes value added in re-imports Data for 1995, 2000, 2005 and 2008 to 2011, nowcast economies covering OECD, EU28, G20, most East and South-east Asian economies and a selection of South American countries 34 industries More info: Tamminen (VATT) Lecture / 57

30 Subsection 2 Structure of GTAP CGE models Tamminen (VATT) Lecture / 57

31 GTAP database Publicly available global data base: Detailed bilateral trade ows for all countries Country level data on main transport costs and protection (taris, quotas, NTBs) Country specic input-output data Energy and CO2 emission datasets Most recent GTAP 9 Data Base: 2004, 2007 and 2011 reference years Data for 140 regions and 57 commodities Standard global general equilibrium modeling framework Global network of more than 9,000 researchers in more than 159 countries Tamminen (VATT) Lecture / 57

32 GTAP data Tamminen (VATT) Lecture / 57

33 GTAP Production structure Source: Broeckmeier, 2000 Tamminen (VATT) Lecture / 57

34 Structure of GTAP CGE model Source: Broeckmeier, 2000 Tamminen (VATT) Lecture / 57

35 Table of Contents 1 Strategic trade policy & trade policy options 2 Applied trade policy modelling Dierent models and databases Structure of GTAP CGE models 3 Case: TTIP What is Transatlantic Trade and Investment partnership (TTIP) about? Estimates on the economic impacts of TTIP Tamminen (VATT) Lecture / 57

36 Subsection 1 What is Transatlantic Trade and Investment partnership (TTIP) about? Tamminen (VATT) Lecture / 57

37 Conspiracies vs. Reality The entire negotiation mandate (that restricts the freedom of our negotiators to negotiate on dierent topics) is visible for anyone to read: Tamminen (VATT) Lecture / 57

38 EU Negotiation mandate Source: EC, TTIP Negotiation mandate 17 June 2013, objective 8 of the agreement (p. 4) Tamminen (VATT) Lecture / 57

39 DG Trade makes it even clearer Source: EC (2015): The top 10 myths about the TTIP, separating fact from ction (p. 7), available in EC website Tamminen (VATT) Lecture / 57

40 Question Who's interest do the conspiracy theorists lobby? How will the TTIP most likely aect the economy? Who is actually likely to loose due to TTIP? Tamminen (VATT) Lecture / 57

41 EU-US trade structure Source: Spiegel, website Tamminen (VATT) Lecture / 57

42 EU-US FDI Tamminen (VATT) Lecture / 57

43 EU-US average tari levels Tamminen (VATT) Lecture / 57

44 EU-US trade: tari equivalents of NTMs Tamminen (VATT) Lecture / 57

45 What kind of NTMs hinder EU-US trade? Dierent color requirements of electrical wires Dierent testing requirement for edibility of oysters Standards for seat belt attachment Acceptance of foreign (university) degrees Animal testing requirements of cosmetics Subsidies to domestic rms Patent legislation Rules related to public procurement (Buy America(n) acts) National requirements Rules of origin Notice: Only around 50% of NTMs are actionable, the rest cannot be "removed" Tamminen (VATT) Lecture / 57

46 Subsection 2 Estimates on the economic impacts of TTIP Tamminen (VATT) Lecture / 57

47 Main economic analyses on the expected impacts of TTIP Berden et al. (Ecorys), 2009: Analyses of EU-US NTMs and few scenarios on the impacts of their limitation (with CGE) Francois et al. (CEPR), 2013: Main analyses on the impacts of TTIP, done with Prof. Francois' GTAP CGE model with imperfect competition and extensive modelling of capital ows Pelkmans et al, 2014, critical assessment of the Francois et al. (2013) methodology: Ecorys (2017): Trade Sustainability Impact Assessment analysis on the social and environmental impacts of TTIP Tamminen (VATT) Lecture / 57

48 Francois et al (2013): Scenarios Spillovers assumed since third countries will also benet if regulations/reguirements are the same. Tamminen (VATT) Lecture / 57

49 Francois et al (2013): Macro eects Tamminen (VATT) Lecture / 57

50 Francois et al (2013): Export eects Tamminen (VATT) Lecture / 57

51 Francois et al (2013): Import eects Tamminen (VATT) Lecture / 57

52 Francois et al (2013): US output eects by industry Tamminen (VATT) Lecture / 57

53 Francois et al (2013): EU output eects by industry Tamminen (VATT) Lecture / 57

54 Francois et al (2013): Decomposition of EU output eects Tamminen (VATT) Lecture / 57

55 Comparison of dierent CGE estimates on real income eects of TTIP Tamminen (VATT) Lecture / 57

56 Also few other studies Felbermeyer (2013, Bertelsmann Stiftung/CESIfo): Structural econometric estimation of trade eects. Assume that exports will increase by some 80% based on the results of previous FTAs. As a result US GDP will increase by 13%. Capaldo (2014, Tufs): Estimates based on UN GPM macroeconomics econometric model, which does not model dierent industries separately Modelling assumptions: "...we assume that the volume of trade among TTIP countries will initially expand at the pace indicated by the existing studies.." I.e. Capaldo assumes than every industry's exports are hit exactly equally and their production structures are also equal UN GPM especially bad at predicting EU employment Capaldo reports job losses in EU based on this methodology as breaking news results Tamminen (VATT) Lecture / 57

57 TTIP is expected to benet SMEs the most E.g. regulations and licencing based extra export costs exactly equal for all rms higher relative cost for smaller rms Various studies have concluded that SMEs will benet more from the removal of NTMs than larger rms (e.g. Felbermayr, 2013, Kaitila & Kotilainen, 2013, USITC, 2014, EC, 2015) The reduction of some NTMs could results in an increase in the number of export rms and a decrease in the concentration of export related benets and income Based on research, many multinationals are likely to loose due to TTIP (their markets are opened up to more rms) Tamminen (VATT) Lecture / 57

58 Next lecture Thursday 25.1, , on Firm heterogeneity and the "new new trade theory". Read CvM chapter 17 before lecture. Tamminen (VATT) Lecture / 57