International Trade Theory and Policy I Introduction and Overview

Transcription

1 Introduction and Overview The Vienna Institute for International Economic Studies - wiiw March 7, 2017

2 Trade debates

3 Topics to be addressed I 1 Positive issues (Descriptive evidence) 2 Normative questions: Good or bad? 3 Trade policy issues: What to do? 4 Further issues

4 Topics to be addressed I 1 Positive (descriptive) issues 1 How important is trade? 2 What explains which goods are exported and which are imported? 3 Why countries export and import the same product simultaneously? 4 Why do not all firms exports? 2 Normative questions 3 Trade policy issues 4 Further issues

5 How important is trade? Value added trade Vertical trade 40 Share of trade in GDP (in %) China EU-27 Japan USA Note: At current prices Source: WIOD; author's calculations

6 Vertical Trade: The example of the ipod Global Value Chain Source: Dendrick and Kraemer, 2010

7 How important is trade? Value added trade Vertical trade 80 Share of trade in GDP (in %) Austria Germany Slovak Republic Note: At current prices Source: WIOD; author's calculations

8 Who is producing the Volvo? Source: Baldwin, 2009

9 Structure of exports Share in total gross exports (in %) Food, etc. Textiles, etc. Leather, etc. Wood, etc. Paper, etc. Coke, etc. Chemicals, etc. Rubber and plastics Minerals, etc. Metals, etc. Machinery, etc. Electrical products, etc. Transport equipment, etc. Manufacturing n.e.c China Note: At current prices Source: WIOD; author's calculations 1995 Change Food, etc. Textiles, etc. Leather, etc. Wood, etc. Paper, etc. Coke, etc. Chemicals, etc. Rubber and plastics Minerals, etc. Metals, etc. Machinery, etc. Electrical products, etc. Transport equipment, etc. Manufacturing n.e.c Germany

10 Structure of exports Share in total gross exports (in %) Food, etc. Textiles, etc. Leather, etc. Wood, etc. Paper, etc. Coke, etc. Chemicals, etc. Rubber and plastics Minerals, etc. Metals, etc. Machinery, etc. Electrical products, etc. Transport equipment, etc. Manufacturing n.e.c Brazil Note: At current prices Source: WIOD; author's calculations 1995 Change Food, etc. Textiles, etc. Leather, etc. Wood, etc. Paper, etc. Coke, etc. Chemicals, etc. Rubber and plastics Minerals, etc. Metals, etc. Machinery, etc. Electrical products, etc. Transport equipment, etc. Manufacturing n.e.c Russia

11 Structure of exports Share in total gross exports (in %) Food, etc. Textiles, etc. Leather, etc. Wood, etc. Paper, etc. Coke, etc. Chemicals, etc. Rubber and plastics Minerals, etc. Metals, etc. Machinery, etc. Electrical products, etc. Transport equipment, etc. Manufacturing n.e.c Japan Note: At current prices Source: WIOD; author's calculations 1995 Change Food, etc. Textiles, etc. Leather, etc. Wood, etc. Paper, etc. Coke, etc. Chemicals, etc. Rubber and plastics Minerals, etc. Metals, etc. Machinery, etc. Electrical products, etc. Transport equipment, etc. Manufacturing n.e.c USA

12 Intra-industry trade Grubel-Lloyd index Wood, etc. Textiles, etc. Rubber and plastics Leather, etc. Machinery, etc. Manufacturing n.e.c Electrical products, etc. Paper, etc. Chemicals, etc. Food, etc. Transport equipment, etc. Metals, etc. Minerals, etc. Note: At current prices Source: BACI; author's calculations Austria

13 Data 1 e.g. UN COMTRADE (HS 6-digit): around 6000 products Men s or boys overcoats, car-coats, capes, cloaks, anoraks (including ski-jackets), wind-cheaters, wind-jackets and similar articles, knitted or crocheted, other than those of heading No Of wool or fine animal hair Of cotton Of man-made fibres Of other textile materials 2 many other sources...

14 Trade and firm structures 1 Share of exports for top exporters in 2003 (total manufacturing) Country of origin Top 1 % Top 5 % Top 10 % Germany France 44(68) 73(88) 84(94) United Kingdom Italy Hungary Belgium Norway Source: Mayer and Ottaviano, Stylized facts: Exporters tend to be bigger 2... more productive 3... more capital and skill-intensive 4... etc.

15 Topics to be addressed II 1 Positive questions 2 Normative questions 1 Is trade beneficial in general for countries? 2 Are there losers from trade? Can these been compensated? 3 Adjustment costs of restructuring? 3 Trade policy issues 4 Further issues

16 Modelling approaches Modelling the effects of the Transatlantic trade and investment partnership (TTIP) agreement (in % of GDP) Source Method EU USA Austria Year Ecorys/EU (2009) CGE ECIPE (2010) CGE CEPR/EU (2013) CGE CEPII (2013) CGE FIW (2013) a CGE FIW (2013) b CGE ifo/bs (2013) Gravity Makro Source: Breuss (2014)

17 Is trade driving inequality? Income shares in manufacturing GVC income Source: Timmer et al., 2014

18 Topics to be addressed III & IV 1 Positive questions 2 Normative questions 3 Trade policy issues 1 Tariffs and quotas 2 Subsidies 3 Non-tariff measures (e.g. technical and safety regulations) 4 Free trade agreements (e.g. CETA, TTIP,...) 5 Role of international organisations (WTO) 4 Further issues 1 Trade in intermediates (inputs for further production and vertical trade) 2 Production fragmentation and Made in world 3 Services trade 4 What is the role of other forms of international integration? 1 Foreign direct investment 2 Worker mobility and migration 3 Balance-of-payment issues, exchange rates and financial flows

19 Theory: Modelling strategies 1 General equilibrium modelling: All markets are considered simultaneously 1 Well-behaved utility and production functions (e.g. Cobb-Douglas) 2 First and second welfare theorem 3 Computable General Equilibrium Modelling (CGE modeling) 2 Partial equilibrium modelling: Only one market is considered (e.g. steel market) 1 Demand-supply schedules 2 Changes in consumer and producer rent

20 Roadmap of lecture 1 Classical approach: Countries trade because they are different 1 Productivity differences (David Ricardo) 2 Endowments differences (Heckscher-Ohlin and Specific Factors model) 3 Various extensions and combinations 2 New Trade Theory 1 Intra-industry trade (Paul Krugman) 2 Firm behaviour modeling 3 New New Trade Theory: 1 Modeling firm heterogeneity (Marc Melitz) 4 Trade policy issues 1 Tariffs and quotas on imports 2 Subsidies on exports

21 Literature 1 Textbooks 1 Krugman, P.R., M. Obstfeld and M.J. Melitz (2012), International Economics. Theory and Policy, Pearson. 2 Borkakoti, J. (1998), International Trade. Causes and Consequences, London: MacMillan. 3 Navaretti, G.B. and A.J. Venables (2006), Multinational Firms in the World Economy, Princeton University Press. 2 Advanced readings 1 Dixit, A.K. and V. Norman (1980), Theory of International Trade, Cambridge/UK: CUP. 2 Feenstra, R. (2004), Advanced International Trade. Theory and Evidence, Princeton University Press. 3 Wong, K. (1995), International Trade in Goods and Factor Mobility, Cambridge/M.: MIT Press. 3 Policy focus 1 Rivera-Batiz, L. and M.-A. Oliva (2004), International Trade: Theory, Strategies and Evidence, Oxford: OUP.