The Handbook of Global Trade Policy

Andreas Klasen

• Publisher: Wiley-Blackwell
• Year: 2019
• Print ISBN: 9781119167396, 9781119167389
• eBook ISBN: 9781119167426
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Public Policy
• Index: Politics & International Relations

Provides a state-of-the-art overview of international trade policy research 

The Handbook of Global Trade Policy offers readers a comprehensive resource for the study of international trade policy, governance, and financing. This timely and authoritative work presents contributions from a team of prominent experts that assess the policy implications of recent academic research on the subject. Discussions of contemporary research in fields such as economics, international business, international relations, law, and global politics help readers develop an expansive, interdisciplinary knowledge of 21^st century foreign trade.

Accessible for students, yet relevant for practitioners and researchers, this book expertly guides readers through essential literature in the field while highlighting new connections between social science research and global policy-making. Authoritative chapters address new realities of the global trade environment, global governance and international institutions, multilateral trade agreements, regional trade in developing countries, value chains in the Pacific Rim, and more. Designed to provide a well-rounded survey of the subject, this book covers financing trade such as export credit arrangements in developing economies, export insurance markets, climate finance, and recent initiatives of the World Trade Organization (WTO). This state-of-the-art overview:

• Integrates new data and up-to-date research in the field
• Offers an interdisciplinary approach to examining global trade policy
• Introduces fundamental concepts of global trade in an understandable style
• Combines contemporary economic, legal, financial, and policy topics
• Presents a wide range of perspectives on current issues surrounding trade practices and policies

The Handbook of Global Trade Policy is a valuable resource for students, professionals, academics, researchers, and policy-makers in all areas of international trade, economics, business, and finance.

Part I
Foreign Trade in the 21st Century

Chapter 2
The Global Trade Environment – A New Reality

Martina Höppner

Introduction

Global trade has been one of the major pillars of global economic development and growth. Not only today’s industrialised countries but also emerging economies have profited. The “export‐led growth” strategies of Asian countries have long been promoted as a model of development for emerging and frontier markets. The integration of value chains has linked countries to an unprecedented extent (Constantinescu et al., 2014). However, since the 2008 Global Financial Crisis, global trade has slowed, whereby both cyclical and structural factors are at play. Doubts regarding the benefits of trade are becoming increasingly vocal. Free trade is blamed for everything from lost jobs in Detroit to the danger of chlorine‐washed chicken in Germany (Sinn, 2014). Free trade agreements have become contentious (Felbermayr and Kohler, 2015). While it is important to acknowledge that free trade can create some losers, blaming trade for developments that are not induced by it is not only unjustified but even dangerous, as policy responses will be ill‐targeted and therefore limited in their effectiveness. Having a clear picture of the global trade environment is therefore highly relevant.

The aim of this chapter is fourfold. First, it will look at historic and current trends in trade. Second, it will search to disentangle the extent to which current economic developments are driven by global trade as opposed to innovation, automation and new technologies, while acknowledging that all of these factors are intertwined. Third, it will discuss current trends in free trade and contrast these with rising protectionist tendencies. Forth, it will look into the impact of global trade, its advantages and disadvantages, as well as the challenges of adjusting to these developments in industrialised, emerging and frontier economies. Finally, based on the issues discussed, determinants for future trends in trade will be stipulated.

Ever since David Ricardo, one of the earliest economists establishing the principle of comparative advantage, the notion that global trade is largely beneficial remains undisputed among economists. Just as undisputed is the notion that not everybody will gain from trade (Krugman and Obstfeld, 2000). While winners of trade are often numerous but diffuse and their gains tend to be relatively small, losers – facing comparatively large losses – tend to be clearly identifiable. Although the gains from trade generally outweigh the losses, thus allowing losers of trade to be compensated, in reality this compensation has often not happened, or at least not successfully. Add to this Olson’s theory of lobbies – which states that when there is a large group and a small group with divergent interests, the small group always wins out in the political process as it enjoys a higher per capita gain from lobbying (Sinn, 2014) – and the success of recent tendencies towards populism and protectionism become comprehensible.

Given that this dilemma is anything but new, why have populist tendencies and protectionism recently surged? Four phenomena may be contributing to this development.

First, trade has decelerated considerably since the early 2000s and particularly since the 2008 Global Financial Crisis. Between 1986 and 2000, merchandise trade volume growth was approximately 6% a year on average, roughly twice the rate of world real gross domestic product (GDP) growth. While this period was certainly exceptional – including compared with preceding years – ever since the 2000s, and particularly since the financial crisis, trade growth has been sluggish. From 2008 to 2014, international trade grew at half the rate of 1986–1990 and at the same pace as global output (Constantinescu et al., 2016). While reasons for this development will be discussed later in this chapter, slower growth in trade may very well contribute to smaller gains from trade, leading to increasing dissatisfaction.

Second, trade is often used as a scapegoat for dislocations in communities and lost jobs. According to the World Trade Organization (WTO), innovation, automation and new technologies are responsible for roughly 80% of the manufacturing jobs that have been lost (WTO, 2017a; Rotman, 2013). Trade is thus only responsible for a small part of the disruption, although the factors and developments are certainly intertwined. Nonetheless, it appears that losses from trade are particularly long‐lasting, thus contributing to trade aversion (IMF, 2017a).

Third, free trade agreements have become much more contentious. They are blamed for job losses, particularly in advanced economies. In addition, rightly or wrongly, they are associated with deteriorations of standards. Consequently, the distrust towards free trade agreements has increased while their benefits are often less discussed (Felbermayr and Kohler, 2015; Sinn, 2014).

Forth, while it remains true that the gains from trade should be sufficient to compensate the losers from trade, it has become increasingly clear that some trends complicate putting this theoretical assumption into practice. Two trends have been prevailing since the 1990s: whereas poorer economies have been catching up with industrialised ones, regional inequalities in rich economies have been increasing. The first part of this observation fits well with trade theories: when poorer countries with low‐wage workers start trading with richer countries, pay for similar skilled workers should converge, i.e. workers in poor countries grow richer at the expense of low‐skilled workers in rich countries. The challenge appears to be that those losing out from trade in rich countries tend to live in similar places. Trade is thus hurting entire local and regional economies (although innovation, automation and new technologies have certainly also played their role in this phenomenon). However, the ability of these regions to adjust, or its inhabitants to move to more prosperous environments, has been less pronounced than expected. Consequently, losers from trade become easily visible. Moreover, emerging and frontier economies – despite generally being clear winners of trade – have their challenges cut out. Emerging markets – many of them profiting from export‐led growth and the inclusion in global value chains – have to find strategies of moving up the ladder in terms of value added of their products (UNCTAD, 2017). Frontier markets may face a plateauing of global value chains due to the increasing automation of production. They may therefore not be able to rely to the same extent on an export‐led growth strategy compared with their role models. They may thus face the challenge of having to create their own catch‐up model.

These four phenomena – the slowdown of trade since the 2000s, the lack of distinction between the effects of technological change and trade, the mixed picture of advances in global free trade and the challenges handling current trade and economic developments – have thus all played their role in dampening the enthusiasm for global trade.

However, retreating from global trade would only make matters worse. Gaining a clear understanding of the characteristics of the current global trade environment is thus vital to shape the discussion among both economists and the general public, to make a case for global free trade and mitigate its negative consequences for those at risk of losing out.

Historical and Current Trends in International Trade

In order to understand the new reality of trade, it is important to put the development of global trade into a historic perspective. Such a perspe...

Table of contents

• Cover
• Table of Contents
• Notes on Contributors
• Introduction
• Part I: Foreign Trade in the 21st Century
• Part II: Global Governance and International Institutions
• Part III: Global Trade and Regional Development
• Part IV: Financing Trade
• Index
• End User License Agreement