Academic Conference 2024 - Programme

Sir Clive Granger Building, University of Nottingham, NG7 2RD

Programme is now confirmed

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Thursday 18th April

Welcome and Introduction (Room A48)

09.15 - 09.20

Keynote Speech (Room A48)

09.20 - 10.20

Marcelo Olarreaga (Geneva, CEPR)
Labor provisions in Trade Agreements

Coffee Break (Foyer)

10.20 - 10.50

Session 1

10.50 - 12.20

1a Special Session: Trade, Space and R & D (Room A39)

Should we stay or should we go? Firms’ decisions on services mode of supply
Holger Breinlich (Surrey)

Services account for one-third of global trade, yet little is known about the impact of trade restrictions on services trade. To make progress in this area, it is crucial to understand through which modes services are traded (cross-border, movement of people, foreign investment or consumption abroad) and how firms substitute among these modes. We provide novel micro-level evidence on firms’ mode choices, combining detailed data on UK firms’ trade and affiliates’ sales. We also estimate the substitution between trade modes using Brexit as an exogenous shock, finding that UK firms increasingly relied on local affiliate sales to serve the EU market after 2016. This shift protected firm-level services exports from expected higher trade barriers after Brexit, but at the cost of lower domestic employment.

UK Trade and Productivity Across Space
Giordano Mion (Nottingham and Essec)

We use a newly constructed database for the UK spanning almost a million firms per year to revisit the importance of agglomeration economies across UK TTWAs and their connection with international trade.

Shock Therapy for a Greener Future: The Dynamics of Firms' R&D Investments
Esther-Ann Boler (Imperial College), Katinka Holtsmark (University of Oslo), Karen Helene Ulltveit-Moe (University of Oslo)

The transition from fossil to clean energy sources requires a large-scale shift in technological development from fossil to clean technologies. This project explores how green research and development in firms that supply inputs to producers of dirty energy (oil), react to a strong negative shock to future expected returns to oil producers. In a theoretical framework of directed technical change, we show that if firms face a cost of adjusting the size of their innovation activity, a negative shock to profitability in dirty energy production may induce exposed firms to shift their activity towards green innovation. In our empirical analysis, we study Norwegian firms supplying intermediates to oil producing companies and propose a novel method of identifying the extent of their exposure to variations in the oil price. We find that firms that are more exposed to the 2014 fall in oil prices increase their clean research and development more than firms that are less exposed to the shock. Our findings have important implications for how to design effective policies that promote environmentally sustainable economic growth.

1b Trade and Labour Markets (Room A40)

Trade-Displaced or Trade Stuck? Self-employed workers and adaptation to trade shocks in low-income countries
Romaine Loubes (PSE)

This paper studies the impact of trade shocks on self-employed workers in low-income countries. Using establishment-level census data and job spell-level survey data, I study an import tariff shock affecting self-employed retailers in Rwanda and show that the characteristics of self-employment work in low-income countries imply specific adjustment patterns to trade shocks. I find that the informality and unemployment channels, often put forward in studies of richer countries, are not at play here. Rather, the self-employed have specific margins in the face of a negative earnings shock, such as reallocation of hours across multiple jobs. I summarise these novel results into a simple framework of time allocation with multiple job holdings. The model predicts heterogeneity in adjustment strategies depending on the quality of outside options. Given that women experience worse outside options in the Rwandan labor market, I test the model by looking at gender-specific trajectories, after giving suggestive descriptive evidence. I produce evidence of sizeable heterogeneity in adaptation strategy: in particular, while men shift hours away from affected retail jobs toward other paid occupations, women abandon their other jobs and increase hours worked in retail, even though hourly wages are decreasing in that occupation. The effects are still visible 15 months after the shock. My results stress the need for research on trade shocks and the self-employed, in particular as their increased risk of being stuck in decreasingly lucrative occupations makes targeted trade adjustment assistance policies crucial.

Trade Policy and Jobs in Vietnam: The Unintended Consequences of Trump’s Trade War
Lorenzo Rotunno (Aix-Marseille School of Economics.), Sanchari Roy (King’s College and CAGE, Warwick.), Anri Sakakibara (King’s College), Pierre-Louis Vézina (King’s College)

We use the US-China trade war as an exogenous shock to export opportunities in Vietnam and examine its effect on Vietnam’s exports and labor markets. We find that Vietnamese exports to the US were around 40 percent higher in 2020 relative to 2017 in sectors hit by US tariffs on Chinese products. This increase is driven by both new export product varieties and increased exports in existing categories. This expansion in export opportunities led to job creation and increased working hours in affected sectors relative to non-affected ones. It also led to an increase in wages, even more so for women workers.

Trade liberalization and informality: Evidence from India
Maxime Berrou (CYU), Maria Bas (CEPR) and Pamela Bombarda (CY)

This paper estimates the effects of trade liberalization on informality in India. We use representative survey data on formal firms, informal firms, and workers over the period 1990-2010, and build various measures of informality for both firms and workers. We then estimate the effects of trade policy changes through a difference-in-differences framework. Our results show the ambiguous effect of trade liberalization on firms’ and workers’ formality status. While import tariff reductions are associated to greater informality levels, input-trade liberalization appears to formalize the economy. Our results are robust to alternative definitions of informality.

1c Trade Facilitation (Room A42)

Export credit insurance and Firm export performance: Evidence from China’s export promotion program
Yangqing Zhong (Sheffield)

Exporting to foreign markets is a risky business because export firms may have to cope with the issue of trade cost and uncertainty which result in export risk, such as default payment and political uncertainty. Export credit insurance instruments mitigate some of these risks by insuring exporters against commercial and political risks. However, the limited coverage of export credit insurance and its high costs frequently prevent exporters from using this financial tool against export risk, especially for the most vulnerable and credit-constrained exporters, such as Small and Medium Enterprises (SMEs). Often governments provide public support with the help of public export credit agencies against export risk. Export promotion programs, such as China’s export credit insurance (ECI) subsidies, aim to alleviate these problems, facilitating smaller and new exporters' entry into foreign markets, by allowing them to buy credit insurance at a reduced cost. We take advantage of discontinuities around the threshold in the five types of eligibility criteria for ECI subsidies introduced in the Guangdong province in China in 2014 to identify which features of ECI subsidies are connected with better export performance, and to evaluate the causal impact of export credit insurance on firm export performance using a regression discontinuity design (RDD). We use a linear and quadratic order polynomial model with different bandwidths to generate estimated results, which hold in the robustness test with different bandwidths. Our results show that receiving ECI subsidies could boost a firm’s export value, the number of transactions, products, and destinations significantly.

Sovereign default and international trade: The mitigating effects of export credit insurance
Thilo Kroeger (Copenhagen)

This paper provides evidence that export credit insurance can signi cantly mitigate the decline in imports that a country typically experiences after defaulting on its sovereign debt. Moreover, my results suggest that extensive use of export credit insurance could fully counteract the decline in trade even at high levels of default. I show that it is in particular insurance provided by public export credit agencies (ECAs) that leads to the observed mitigating e ects. However, as nonpayment of trade credit increases during periods of sovereign default, ECAs are more e ective in recovering claims than private insurance companies and thus do not distort markets, but are an overall e cient mechanism of risk (re-)allocation.

Distributional and Welfare Effects of Trade Facilitation: Evidence from China
Yumeng Ao (Peking), Jiancong Liu (Bocconi), Jie Shuai (Zhongnan)

This paper investigates how trade facilitation affects firms asymmetrically. We explore China’s “Single Window” reform, which streamlined administrative procedures in international trade, to elucidate within-country distributional effects. Leveraging the by-province roll-out of the reform, we find decreasing per-shipment fixed costs and increasing export value at the aggregate level due to quantity growth. The falling trade costs encourage entry of new firms, intensify competition, thus lead to null, if any negative, impacts on top firms. The consequent declining export prices signify welfare gains to international buyers. Our findings provide vital empirical insights for the real impacts of the trade facilitation reform.

1d Trade Policy (Room A41)

Regulatory Co-Operation in Environmental Services as a Catalyst for Liberalisation
Nicolette Butler (Manchester), Jasem Tarawneh (Manchester)

This paper will examine the challenges and opportunities for regulatory co-operation pertaining to environmental services. The authors will suggest that whilst barriers to environmental services trade can be reduced through positive action within the multilateral trading system as well as through free trade agreements, targeted regulatory co-operation agreements (including the negotiation of mutual recognition agreements) may be more effective and much quicker to implement. For example, the paper will suggest that a greater degree of transparency that could be achieved through the simple publication of market access barriers to environmental services around the world could contribute to the facilitation of the recognition of relevant professional qualifications and the movement of environmental services suppliers across borders. Such efforts could catalyse stalled efforts to liberalise trade in environmental services, which could have positive outcomes for international trade flows as well as climate goals.

Exempting Least Developed Countries from Border Carbon Adjustments: Simple Economically but Complex Legally
Sunayana Sasmal (Sussex), Dongzhe Zhang (Sussex), Emily Lydgate (Sussex), L. Alan Winters (Sussex)

The EU has introduced a Carbon Border Adjustment Mechanism (CBAM) which extends its carbon prices to imported products in some sectors. Other countries are considering imposing similar measures, known generically as border carbon adjustments (BCAs). BCAs are facing a global backlash against the lack of consideration of adverse impacts on developing countries and in particular, least developed countries (LDCs). This article first argues that small overall import volumes support the conclusion that exempting or lessening BCA requirements from LDCs would not undermine developed countries’ climate-related objectives in practical terms. An economic analysis with a focus on the EU and UK’s trade in relation to a CBAM, is performed to support this assertion. However, legally, such an exemption is difficult. These difficulties stem from the complexity of the legal characterisation and objectives of BCAs; their interaction with existing special and differential treatment (SDT) provisions; and the complexity of certain policy options available to enacting members to provide development-based preferential treatment. Our analysis concludes that there is a gap between the normative aims of the SDT provisions to support and differentiate developing countries, and current WTO law and jurisprudence which do not provide adequate space for WTO members to provide preferential treatment without risking allegations of discrimination. In the context of increasing unilateral climate action, an inability to integrate SDT more meaningfully into WTO non-discrimination frameworks will risk further weakening of international cooperation on climate and trade.

 

Lunch (Foyer)

12.20 - 13.30

Session 2 - Plenary: Trade, Multinational Production, and Carbon Emissions (Room A48)

13.30 - 15.30

Can Trade Policy Mitigate Climate Change?

Ahmad Lashkaripour (Indiana University), Farid Farrokhi (Purdue University)

Trade policy is often cast as a solution to the free-riding problem in international climate agreements. This paper uncovers the extent to which trade policy can deliver on this promise. We introduce global supply chains of carbon and climate externality into a multi-country, multi-industry general equilibrium model of trade. By deriving analytical formulas for optimal carbon and border taxes, we quantify the reduction in emissions under two prominent proposals that combine carbon pricing with border taxes. First, we show that carbon border taxes can reduce global emission by only a modest amount. By comparison, Nordhaus’s (2015) climate club proposal can result in an inclusive club of all nations that promotes free trade and cuts global emissions by two-thirds of the emission reduction attainable under the globally first best. This successful outcome hinges on the EU, US, and China committing to the climate club as core members, using their collective trade penalties to enforce cooperation by reluctant governments.

Voluntary Emission Restrains in Developing Economies: The Role of Trade Policy

Fernando Parro (Penn State), Lorenzo Caliendo (Yale),Marcelo Dolabella (IDB), Mauricio Mesquita (IDB) , Matthew Murillo (Yale)

In this paper, we focus on trade policy’s potential contribution for one of the most pressing climate policy challenges that countries face: meeting voluntary emission restraints, better known as “nationally determined contribution (NDC)”, submitted under the auspices of the 2015 Paris Agreement. These NDCs are climate action plans that signatories of the agreement are required to submit periodically, setting quantitative targets for GHG emissions, as well as adaption goals.
We evaluate quantitatively the role of trade policy to achieve the NDC. In particular, we evaluate the trade and welfare effects of alternative sets of trade policies that can be used to achieve the NDC. For instance, we evaluate the consequence of a carbon tax together with a carbon border adjustment tax, versus trade policies that eliminate their environmental bias, among others.

The Carbon Footprint of Trade and Multinational Production

Andres Rodriguez-Clare (Nottingham, Berkeley)

How does multinational production affect climate change? Global climate negotiations have set the goal of enormous transfers per year from rich to poor countries, including through private investment, to address climate change. Two stylized facts motivate the analysis of multinational production as a mechanism for such transfers. First, carbon emissions per dollar of value added or output differ substantially across countries, even conditional on industrial composition. Second, the emissions rate of a foreign-owned plant increases with the emission rate of its home country, suggesting that firms bring green technology with them when operating abroad. We develop and quantify a multi-country general equilibrium model of multinational production, trade, and energy to assess how policies encouraging multinational production would affect global carbon emissions and welfare.

Coffee Break (Foyer)

15.30 - 16.00

Session 3

16.00 - 17.30

3a Special Session - The UK, its internal market and the Devolved Nations (Room A39)

Chairs: Viviane Gravey (Queens University Belfast), Ludivine Petetin (Cardiff University)

Reverse Market Access – The UK Internal Market Act’s Use of Market Access Principles for Services Trade and the Impact on Devolved Regulatory Autonomy
Gary Simpson (Queens University Belfast)

The EU’s market access principles (MAPs) were designed to facilitate deeper integration of regulatorily heterogenous markets. In contrast, the UK Internal Market Act 2020 (IMA) seeks to prevent an already largely harmonised market from disintegration.
This makes for an interesting investigation into the nuances which set apart the UK system of devolution in contrast to a “federal” internal market like the EU. It also poses questions surrounding the applicability of MAPs in contrasting constitutional contexts. The IMA will not deepen UK market integration, it is not intended to, its application of MAPs is designed only to prevent the market’s fragmentation. This comes at the expense of devolved autonomy and the de facto recentralisation of regulatory competence.
This paper argues that under the IMA, MAPs are thereby used in the reverse sense.This paper further examines the impact of the IMA’s reverse use of market access principles on regulatory autonomy in devolved services regulation. It does so by analysing the IMA through the lens of the economic theory of legal federalism – a conceptual framework developed to understand decentralised regulatory autonomy, legal diversity, and regulatory competition. Viewed in this light the UK’s current approach to internal market making fails to take into consideration the potential pros and cons of decentralised regulatory policy making. Thus, any legal framework for services market integration ought to consider the complex trade-offs between centralised internal market management and devolved autonomy.

‘Inclusiveness’ in Intra-UK Trade Policy: The Office for the Internal Market
Thomas Horsley (University of Liverpool), Jo Hunt (Cardiff University)

The Office for the Internal Market (OIM) was established by the United Kingdom Internal Market Act 2020 and sits within the Competition and Markets Authority. The OIM’s objective is to support the effective operation of the UK Internal Market.
In this paper, we will reflect on the OIM’s statutory role and emerging organisational practice with reference to the CITP’s four dimensions of inclusiveness regarding trade policy formulation and outcomes: geography, political domains, society and generations.
Firstly, we will engage inclusiveness to explore the Office’s outputs and engagement activities to date, including its provision of economic and technical advice in specific policy areas together with the OIM’s formative efforts to establish its institutional expertise and independence among key stakeholders. Our primary interest, however, is with future developments.
Secondly, we will map out and reflect on the challenges that confront the OIM to deliver inclusivity in intra-UK trade policy within a system of devolved government. In particular, and drawing on the experiences of other independent expert and technical organisations – including for example the Office for Budget Responsibility – we will consider the extent to which (and how) the OIM’s institutional role may develop (and strengthen) over time as a key actor in the management of domestic trade policy post-Brexit.

A Tale of Three Bottles (Deposit Return Schemes): Managing internal markets in Australian, Denmark/EU and the UK
Core Brown Swan (University of Stirling), Viviane Gravey (Queen's University Belfast)

Internal markets have to balance between fostering tailored policy responses to local needs and diminishing barriers to trade between their different regions/members. Each internal market strike that balance differently. This paper analyses the failed introduction of a Scottish Bottle Deposit Return Scheme for bottles and what it tells us about the design and operationalization of the UK Internal Market in light of two international comparisons which saw a Danish and South Australian scheme accommodated in the EU and Australian internal markets respectively.
It asks whether the failed accommodation of the Scottish scheme is a simple teething problem for the relatively new UK Internal Market (UKIMA) or whether it is revealing of a deep-seated imbalance towards centralization and barrier reduction in UKIMA’s design. Beyond the practical operation of UKIMA, this case raises questions both for the functioning of intergovernmental relations (IGR) in the UK and for environmental policy expansion and policy divergence more generally. Taking stock of how the EU and Australian internal markets have accommodated these, the paper makes suggestions for reducing tensions and smoothing the operation of UKIMA/IGR in the UK as the system takes greater shape.

3b Trade with Hererogeneous Firms (Room A40)

Non-Tariff Measures, Trade Margins and Firm Heterogeneity
Mustapha Douch (Edinburgh), Jun Du (Aston), Oleksandr Shepotylo (Aston), Dongzhe Zhang (Sussex)

Non-tariff measures (NTMs) influence a firm’s production and trade decisions. We study the impact of NTMs on firm-level trade and document the highly heterogeneous effect of NTMs on the export and import of UK firms in 2012-2018. We calculate ad valorem equivalents (AVE) of NTMs faced by firms of different sizes and exporting to different destinations. We also look at the range of NTMs, including technical and non-technical measures. Our results indicate that while SPS and TBT improve the quality of exports, inspection and licensing fail to address public policy concerns.

International Trade, Volatility, and Income Differences
Roman Merga (IMF)

Developing countries trade less than rich countries. I show that this lack of involvement in trade arises because high domestic volatility discourages exporters’ investments in foreign market access. At the cross-country level, I find that the country’s TFP volatility explains 40% of the relationship between trade and GDP per capita. Using Colombian micro-level data, I document that those exporters facing higher domestic sales volatility export less. New exporters expand less over their life cycle in industries with higher domestic sales volatility. This dampening of the firm-level export expansion path is more severe in products with more variable markups. Motivated by these novel firm-level findings, I developed an international trade model with new exporter dynamics and non-CES demand that account for the novel facts at the firm and the cross-country level. These results suggest that estimated trade frictions using static trade models reflect the consequences of domestic volatility on exporters’ investment decisions to grow into foreign markets. Indeed, my quantitative findings show that the volatility differences across countries are crucial to account for the trade difference between developed and developing economies.

3c China and the World Economy (Room A42)

The US-China Trade War and the Relocation of Global Value Chains to Mexico
Hale Utar (Grinnell), Alfonso Cebreros Zurita (Bank of Mexico), Luis Bernardo Torres Ruiz (Federal Reserve)

Did the 2018/19 US-China trade war trigger adjustment of Global Value Chains (GVCs) and near-shoring to Mexico? We address this question with confidential longitudinal firm-level trade data from Mexico that covers the universe of international trade transactions over 2015-2021. By merging the firm-level customs data with the Ministry of Economy’s registry of GVC firms and constructing firm-level measures of trade policy exposures based on firms’ pre-shock trade at the level of HS 6-digit products destination pairs, we show that increased Chinese import protection in the US has a significant positive impact on Mexican firms’ trade with the US, and this positive impact is entirely driven by GVC firms, and especially those in skill-intensive manufacturing industries. The nature of the impact of the heightened Chinese import tariffs on GVC firms’ sourcing suggests a rise in GVC activities in Mexico with linkages to Asian and US-based GVCs. Our analysis also reveals increased net exports and product offerings of Mexican GVC firms in response to the heightened Chinese
import protection in the US, suggesting increased domestic activities in Mexico. However, we also document a negative impact of the retaliatory tariffs of China, primarily affecting export services and a counterbalancing negative effect of the US tariffs via GVC firms’ inputs from China, highlighting the complex dynamics at play.
Overall, our findings show a reorganisation of GVCs towards Mexico as a consequence of the trade war and provide evidence for the role of trade policy in reshaping GVCs.

Structural Change in the Global Economy
Hayato Kato (Osaka, CESifo), Kensuke Suzuki (Clark), Motoaki Takahashi (University of Mainz, Kiel Institute for the World Economy)

In the last few decades, advanced countries have witnessed a significant decline in their manufacturing sectors along with emerging economies being integrated into the global economy. Even had such globalization not been for, the fall in manufacturing might have been inevitable because of structural change, a stylized fact of economic growth that economies shift from agriculture to manufacturing and then to service. What role does structural change play in determining the impact of globalization? To address the question, we developed a quantitative dynamic general equilibrium model of trade with capital accumulation á la Eaton et al. (2016) and Caliendo and Parro (2015). Our model features nonhomothetic CES preferences developed by Comin et al. (2021), allowing consumers to present varying income elasticities of demand across sectors. We bring the model to the data for the world economy, encompassing three sectors (agriculture, manufacturing, and service) and 24 countries. We calibrate the model’s fundamentals, including trade costs and productivity, and solve the model for the transition path. By applying counterfactual trade costs for different sectors, productivity levels, and preferences to the model, we discuss how these factors collectively shape structural change and its interaction with international trade in advanced countries. Specifically, we show that international trade has heterogeneous impacts on declining manufacturing across countries, providing new insights into the impacts of globalization on advanced economies.

Relocation from China (with Chinese Characteristics)
Jason Garred (Ottawa), Song Yuan (Zhejiang, CAGE Warwick)

The share of Chinese goods in US imports has fallen sharply since 2018, as production for the US market has shifted from China to other countries. Does this trend represent US-China ‘decoupling’, or are other US trade partners playing growing roles as intermediaries in ongoing US-China economic relations? Using disaggregated data, we find that Chinese manufacturing investment and Chinese-produced intermediate inputs have increasingly flowed to third-country ‘winners’ who have simultaneously increased their US import market share. This suggests that relocation of production from China to countries gaining US market share has involved capital and parts from China itself.

3d International Trade, ICT and intellectual property rights (Room A41)

Which ICTs promote Global Value Chain Integration? Evidence from firm-to-firm data
Márta Bisztray (KRTK), Balázs Muraközy (Liverpool)

Technology upgrading in general has been shown to be both a precondition for and consequence of integration into Global Value Chains (GVCs), but we know less about the role of specific technologies in this context. This paper focuses on information technologies allowing for automated information sharing with business partners (external AIS). We link unique administrative  firm-to-firm transaction data from Hungary to a panel of detailed ICT surveys to identify firms that sell to buyers which are multinational (MNE) or, more generally, integrated into global value chains. We present a simple model in which suppliers' information technology complements global firms' technology and suppliers choose their information technology endogenously. Using external AIS helps firms in integrating into GVCs: suppliers using external AIS are more likely to be chosen by MNEs, and to acquire new MNE buyers. At the same time, MNE presence is associated with more external AIS introduction, hinting at spillover effects: suppliers are also more likely to introduce external AIS technologies if they have more potential or actual MNE buyers. According to these estimates, promoting AIS introduction may be effective in supporting GVC integration: AIS introduction by a supplier is associated with a 10pp (33% of the baseline probability) increase in the probability of serving an MNE. On the other hand, multinational entry can also promote AIS introduction: a 10pp higher MNE share among potential buyers increases the prevalence of AIS technologies by 16-24%.

Breaking down barriers: The effectiveness of Mutual Recognition Agreements for trusted traders
Wanyu Chung (Birmingham), Robert J.R. Elliott (Birmingham), Yangjun Han (Birmingham), Antonio Navas (Sheffield)

Over 80% of the UK exports happen between trade partners with an Mutual
Recognition Agreement (MRA) for trusted traders, where they are entitled to reduced customs procedures at foreign borders, yet little is known about the efficiency of such trade policy. We entangle this problem using the UK-US MRA and the most widely used trusted trader scheme, the Authorized Economic Operator (AEO). We observe that most firms are indirectly deemed as "safe traders" by using AEO certificated agents and hence extend the heterogeneous firm model a la Melitz (2003) by incorporating administrative costs and highlighting the role of agents. Utilizing transaction-level UK customs data, we empirically confirm our model predictions that an MRA improve firms' participation in exporting and boost their export values through the use of certified agents.

Access to Justice: Intellectual Property Litigation and International Trade
Richard Kneller (Nottingham), Ioannis Papadakis (Sussex)

An important feature of any system of intellectual property rights protection are the legal protections for IP-owners to act for themselves on cases of IP infringement. In this paper we study the effect of a reduction IP enforcement costs on international trade. From a theoretical perspective, the effect on international trade of a change in IP-enforcement are uncertain as both both domestic and foreign IP-owners benefit. To empirically identify the effects of IP enforcement on imports we focus on set of UK reforms (2010 to 2013) that increased access to IP courts thereby benefiting lower-value IP. We use these reforms within a difference-in-differences strategy that leverages between product variation in technological intensity. Our analysis suggests that overall the net effect of these reforms was positive on imports of products with lower-value IP. These results are robust to various test for confounding contemporaneous policy changes, alternative measure of IP and falsification tests using imports for other countries. We also find evidence of heterogeneity associated with the origin of UK imports, with particularly strong positive effects for countries with high levels of domestic IP protection and negative effects for countries with mid- or low-IP protection.

Conference Dinner

19.00

The Pelican Club, 55 St Marys Place, Nottingham, NG1 1PH

Friday 19th April

Session 4

09.00 - 10.30

4a Special Session: Firms in globalisation (Room A39)

Trade liberalisation, Sourcing Capability and Multi-product Firms
Zhihong Yu (Nottingham)

How do multi-product firms gain from trade liberalisation? In this paper we show that firms’ sourcing capability plays a key dimension in determining firms’ product choices responding to export liberalisation. Using Chinese firm level export-import data, we show that reductions in trade policy uncertainty induced by China’s WTO entry can lead to substantial increase(decrease) in firms’ likelihood of export entry(exit) in new(existing) products, especially for those products that have greater input similarity with the firms’ existing input mix. These effects are stronger for high income export markets. We show that these results are consistent with recent theories of firm level comparative advantage (Boehm, Dhingra, and Morrow 2021), and the structural estimation of the model provide further evidence supporting the importance of the sourcing channel

Multi-establishment Firm Structure, Subsidies and Spillovers
John Morrow (Kings)

How do firms diffuse resources, and does this result in spillovers far from headquarters? We show subsidies induce French firms to hire new workers, mainly in new establishments and often in new commuting zones, with little evidence of reallocation. The most hiring responsive occupations are techies and support workers in line with R&D targeting. We estimate a subsidy employment spillover elasticity of .11 at the commuting zone level within industry, but weak effects in the commuting zone. Dispersed industries have half this elasticity and concentrated industries twice this elasticity. While subsidies are awarded to headquarters in advanced areas, firms redistribute effects more broadly.

Evaluating the Impact of Export Finance Support on Firm-level Export Performance: Evidence from Pakistan
Alejandro Riano (City University, London), Fabrice Defever (World Bank), Gonzalo Varela (World Bank)

This paper evaluates the impact of two large export finance support schemes on firm-level export performance. The Export Finance Scheme (EFS) and the Long-Term Finance Facility for Plant & Machinery (LTFF), administered by the central bank of Pakistan, provide loans at subsidized interest rates for exporters to finance working capital and the purchase of machinery and equipment respectively. We combine customs data with information on firms’ participation in each scheme between 2015 and 2017 with information on future rejection of applications to the schemes and use matching combined with difference-in-differences to estimate the effect of the schemes on firms’ export values, the number of products exported and the number of destinations they serve. We find that EFS has a large and positive impact on firms’ export values and a smaller effect on the number of destinations served, while LTFF, on the other hand, does not have a discernable impact on export performance in the short run. A back-of-the-envelope cost-benefit analysis suggests that EFS is an effective instrument to boost exports, particularly for new users of the scheme.

4b Historical perspectives (Room A40)

Losing the country: Agricultural crises and the rise of the Nazi party
Thilo N. H. Albers(Humboldt University) Felix Kersting (Humboldt University), Monique Reiske (Humboldt University)

We show how the combination of a trade shock and an economic crisis triggered the rise of the NSDAP in rural parts of Weimar Germany, where the party consistently received more than 50% of its votes. First, increasing import competition after 1925, due to exogenous productivity increases in the Americas, drove up agricultural debt and frustration with the democratic political system. Second, price declines during the Great Depression caused Fisherian debt deflation, making it unsustainable and leading to foreclosures. While traditional agricultural interest parties lost their constituents’ loyalty, the NSDAP gained support in areas more affected by this economic deprivation.

The consequences of a trade collapse: Economics and politics in Weimar Germany
Björn Brey (Oxford), Giovanni Facchini (Nottingham)

What are the political consequences of de-globalization? We address this question in the context of Weimar Germany, which experienced a 67% decline in exports between 1928-1932. During this period, the Nazi party vote share increased from 3% to 37%. Using newly digitized data, we show that this surge was not driven by the direct effects of the export decline in manufacturing areas. At the same time, trade shock-induced declines in food prices spread economic hardship to rural hinterlands. We document that this indirect effect and the pro-agriculture policies put forward by the Nazis are instead key to explain their electoral success.

A perfect storm and the natural endowments of trade-enabling infrastructure Christian Vedel (University of Southern Denmark)

This study examines how a natural event in 1825, which created a navigable channel in northwestern Denmark, significantly impacted regional development by enabling ship access and boosting trade. Before the channel's formation, there was no ship traffic; afterward, trade flourished, leading to a 22% population growth in the area. The paper highlights the crucial role of natural trade-enabling infrastructure in fostering economic growth and prosperity, supported by historical and archaeological data.

4c Trade Agreements and Health (Room A42)

Capturing the health and well-being impact of a free trade agreement: the comprehensive and progressive trans-pacific partnership agreement
Leah Silva(WHO and Public Health Wales), Dr Liz Green(WHO and Public Health Wales), Dr Louisa Petchey (WHO and Public Health Wales)

As a result of the United Kingdom’s withdrawal from the European Union, the UK can negotiate its own trade agreements for the first time in over 40 years. This includes the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP).
Public Health Wales undertook a mixed-method Health Impact Assessment (HIA) to assess the potential impact of the CPTPP on health, well-being and inequalities in Wales. The HIA identified significant potential impacts across the determinants of health, e.g., employment, agricultural production and health care, as well as impacts across vulnerable population groups, e.g., those on low incomes. The Investor State Dispute Settlement (ISDS) mechanism, economic uncertainty and loss of regulatory alignment were identified as potential pathways for health impacts to affect the population.
The findings have been beneficial in informing policy and decision-makers to prepare for the implementation of the CPTPP and take action to maximise opportunities and prevent potential negative impacts.
This work has demonstrated the value of a HIA approach to FTAs by mobilising a range of evidence through a transparent process, resulting in transferrable learning for others as well providing an entry point for public health to have direct contact and engagement with trade negotiators and those participating in trade discussions.

Evidence Practices in World Trade Organization Committees: Challenging and Defending Health Promotion Policies
Gabriel Siles-Brügge (Bristol), Gregory Messenger (Bristol), May van Schalkwyk (London School of Health and Tropical Medicine)

The focus of trade policy scholarship on high-level negotiations and formal dispute settlement in the World Trade Organization (WTO) has obscured what Lang and Scott (2009) have called ‘the hidden world of WTO governance’. The day-to-day work done by diplomats of WTO members in the organization’s many committees has important consequences for the system of global economic governance, including in the area of health policy. As public health scholars have noted, member challenges to health promotion policies in bodies such as the Technical Barriers to Trade (TBT) Committee can have a chilling effect on regulation (e.g. Barlow and Stuckler 2021). While drawing attention to this neglected dimension of global governance, public health scholarship has tended to take a ‘black letter’ approach to such questions, seeing policy space as fixed and subject to the production of an appropriate body of evidence on which to justify public health measures. This paper challenges this interpretation. Focusing on how evidence is used to argue and respond to specific trade challenges at the WTO’s TBT Committee, it develops a novel theoretical framework which draws on International Relations scholarship on diplomatic practices and public policy work on evidence practices. It highlights how the epistemic features of the evidence (what kind of knowledge?) feed into specific evidence-giving practices by actors (how is this knowledge being invoked?), which speaks to and are shaped by different audiences (who is the evidence speaking to?) This puts practices, patterned activities by certain actors according to certain standards of legitimacy, at the centre of the analysis.

Are FTAs Driving Force for Regulatory Convergence on Private Data Protection
Minako Morita-Jaeger(Sussex), Atilla Kasap (Sussex)

We examine whether Japan’s FTAs act as a driving force for regulatory convergence on data protection between the EU and the US, using the legal and International Political Economy disciplines. It was found that Japan’s FTAs focus more on free data flows for business and innovation, rather than regulatory cooperation on data privacy. The predominant influence on Japan’s data privacy regime comes from the EU GDPR, through the adequacy decision. These policy preferences mirror its domestic ideas (a strong notion of serving for public), interests (strong business interests with lack of civil society involvement), and institutions (vertical segmentations among domestic government agencies).

4d Trade and Migration (Room A41)

Should gains from trade be redistributed at the national or regional level?
Geoffroy Duparc-Portier (Strathclyde), Gioele Figus (Strathclyde), Peter McGregor(Strathclyde), Graeme Roy (Strathclyde)

This paper assesses the spatial and distributional impacts of trade liberalisations and the extent to which national and regional governments are able to redistribute gains from trade using a multiregional general equilibrium trade model of the UK. We find that trade liberalisations have expansionary but regressive impacts in all UK regions. If taxes on income are used to restore the preliberalisation national Gini coefficient, regional Gini coefficients remain above the pre-liberalisation levels in some regions. If regional taxes on income are used to restore the pre-liberalisation regional Gini coefficients, the national Gini coefficient does not fully return to its pre-liberalisation value. This research demonstrates that national policies may not be suited to achieve regional objectives. Regional fiscal policies could supplement national policies to ensure that both national and regional distribution objectives are met.

New evidence on the effects of services trade at the worker level
Alexander Jaax (OECD), Elisabeth Van Lieshout (OECD)

The striking increase in services trade since the start of the 21st century contrasts with the relative scarcity of studies exploring its labour market implications. Combining industry-level trade data with labour force surveys for 27 countries for the years 2008-2021, this paper addresses this gap. The results show that gross imports and gross exports as well as imports of services inputs are positively associated with employment growth. The analysis of effects on income, part-time work, and hours worked reveals patterns of heterogeneity regarding workers’ gender, skill level, and tasks.

The Trade-Creating Effect of Immigrants: Evidence from Detailed Purchase Data
Christoph Albert (Collegio Carlo Alberto), Torsten Jaccard (Vancouver School of Economics), Brett A. McCully (Collegio Carlo Alberto)

We investigate how immigrants affect imports and the resulting spillovers to native consumption. We start by documenting three stylized facts: (i) immigrants consume imports at higher rates than comparable local natives, (ii) immigrants consume imports disproportionately from their origin, and (iii) counties with a higher immigrant share exhibit a higher import share of expenditures. We rationalize these facts through a model of trade featuring two-sided heterogeneity and fixed costs of exporting, which we estimate using highly detailed scanner data with product and household country of origin. A ten percentage point increase in the share of the local population from a given origin raises imports from that origin by 12%. We provide evidence that immigrants do not affect variable trade costs or the preferences of natives for imported varieties. Instead, immigrants reduce the fixed costs of exporting to the US, while their origin-biased preferences increase the market size leading to a greater number of exporters being able to overcome fixed export costs. We quantify the total contribution of immigrants to the import volume of consumption goods in the US via a counterfactual simulation that shuts down all channels through which immigrants affect importing. We find that, on average, immigrants increase import expenditure by 3.7%, with almost half of this effect driven by the composition effect of immigrant preferences for goods from their origin country.

Coffee Break

10.30 - 10.45

Session 5

10.45 - 12.15

5a Special Session The European Open Strategic Autonomy strategy on critical raw materials. Implications for GVCs and civil society (Room A39)

Nearshoring, global value chains’ structure and volatility
Maria Savona (Sussex), Filippo Bontadini (LUISS Guido Carli University), Valentina Meliciani (LUISS), Ariel Wirkierman (Goldsmiths University)

Since the great trade collapse during the financial crisis and, more recently, the pandemic and the war in Ukraine, the role of global value chains (GVCs) and their economic implications has become a concern. They have exposed key dependences of production systems vis-à-vis foreign suppliers, raising questions around international fragmentation, its structure, and the propagation of shocks.
A trade-off has emerged in the policy debate, between economic efficiency and economic security . This is reflected in the Inflation Reduction Act in the US, the emerging idea of “open strategic autonomy” in Europe and the growing tensions around the supply of critical raw materials for the green and digital transition. However, it remains unclear which structural features of GVCs are important within this debate; as near-shoring, shortening, and concentration are hard to distinguish from one another.
In this paper, we look at the association between GVC final output growth and their structure, focusing on the propagation of supply shocks and ask two related key questions. Firstly, we assess whether GVC participation increases exposure to shocks, hampering GVC output. Secondly, we study whether GVC structural features, such as nearshoring, length and concentration, mediate supply shocks and their relationship with GVC output growth.
Our results suggest that GVCs that are more domestic experience slower real output growth and these have a stronger negative association to supply shocks. Among the structural features of GVCs we find more heterogenous results. The length (the degree of fragmentation of production), is associated to slower growth in GVC’s real output but at the same time seems to attenuate the negative relationship between supply shocks and real GVC output growth. These results offer novel evidence and contribute to a more nuanced understanding of how GVC integration and its structure relates to output growth and the propagation of shocks. We discuss these results in the context of the revived interest for industrial policy and strategic autonomy in Europe.

Making green growth feasible. Lessons from critical minerals in Argentina and Chile
Anabel Marin (Institute of Development Studies), Santiago Cunial (Interamerican Bank of Development)

In this paper based on evidence from the mineral sector in Argentina and Chile we show that the absence of citizens’ programmatic participation in green industrial policymaking processes is becoming increasingly problematic for global green transitions. The growing awareness of environmental and social challenges associated with mineral extraction in these two countries has led to mobilization of local communities to resist mining, which are blocking operations central for the green policy and energy transition. The evidence suggests that as communities become more aware of the environmental and social problems caused by mineral activities, their active engagement and resistance is a response to the lack of their involvement in decision-making processes. We argue that new industrial policy approaches that seek to actively involve citizens in policy making are not just desirable for issues of justice but necessary for the viability of global processes of green transition. Drawing on insights from participatory research and existing experiences of civil society engagement in policies related to the mineral sector, we then explore key aspects that these approaches should consider promoting to move participatory processes from being only instrumental or symbolic to be transformative.

Technological Sovereignty and Strategic Dependencies: The case of the Photovoltaic Supply Chain
Serenella Caravella (SVIMEZ), Francesco Crespi (University Roma Tre, Digital Economics Centre), Giacomo Cucignatto (University of Rome), Dario Guarascio (University of Rome)

The disruption of GVCs induced by the Covid-19 crisis and exacerbated by the Russo-Ukrainian War has exposed the risks of globalization; shortages of essential goods, production chains undermined by the lack of components and critical raw materials (CRMs), weaponized interdependence and technology wars. These are the key features of a global economy that is increasingly divided between two ‘competing blocs’, i.e. the US and China.
In this context, decarbonisation and transition to renewables have become even more pressing goals.  The transition to renewables is constrained by the asymmetric distribution of raw materials, manufacturing capacity and technological capabilities. While China experienced an astonishing technological catching up, gaining dominant market shares in key markets, such as photovoltaic (PV) panels and lithium batteries, the US and the EU are realizing that increasing dependence on a few suppliers of CRMs and intermediate goods can undermine growth prospects and distance their energy transition targets.
This paper adds to the literature on technological sovereignty by focusing on the photovoltaic supply chain (PVSC), aiming to develop a product-level ‘strategic intelligence’ analysis that could be informative for policy decision making.
First, we carry out a granular mapping of the PVSC, tracing all its relevant segments. Second, we provide a novel strategic dependence (SD) indicator based on detailed product-level trade data. Third, product codes are merged with International Patent Classes (IPC) to assess the role of knowledge and technology in shaping hierarchies and SDs.
This evidence is then discussed in the light of the industrial policy initiatives aimed at strengthening production and technology capabilities in the PV industry.

5b Political Economy of Trade (Room A40)

A Political Economy of Mercantilism
Paolo Epifani (UNNC)

I show that, in the presence of a monopolistic distortion in the tradable sector, non-tariff barriers (and import protection more generally) harm both consumers and producers under balanced trade. Then, why do we observe protectionism? My theory and quantitative exploration suggest that running a trade surplus is essentially the only way a politically motivated government can use protectionism to benefit domestic producers. And therefore that we observe protectionism because governments make a mercantilist use of it, a conclusion in line with the evidence showing that more protectionist countries tend to run larger trade surpluses on average.

The Legacy of Conflict on Trade Negotiations
Belayneh Kassa Anagaw (Bahir Dar University), Chrysostomos Tabakis (KDI School of Public Policy and Management,), Gi Khan Ten (Keimyung University), Maurizio Zanardi (Surrey)

The proliferation of preferential trade agreements (PTAs) since the early 1990s has led to a large literature on their implications for the multilateral trade system. At the same time, the potential peace-creation effect of economic integration has also been investigated, with evidence consistent with the hypothesis that larger bilateral trade flows decrease the probability of interstate conflict. In this paper, we examine for the first time whether conflict affects the duration of trade negotiations. Past conflict might reduce trust between prospective PTA partners but might, at the same time, induce speedier negotiations in order to bene t from the peace-creation e ect of a PTA. Using a unique dataset on the history of formation of a large number of PTAs over the period 1980-2015, we find robust evidence in support of the second hypothesis: country pairs with past history of conflict conclude their trade negotiations about 1.8 times faster in comparison with country pairs with no history of conflict. However, the effect is weaker when the economic motives for integration are more pronounced.

5c Trade, Interstate Conflict and Sanctions (Room A42)

Reducing trade with Russia: Sanctions vs. reputation
Juan de Lucio (Universidad de Alcalá), Raúl Mínguez, Asier Minondo (Deusto Business School), Francisco Requena (University of Valencia)

The invasion of Ukraine in February 2022 led the European Union to impose a wide range of economic sanctions on Russia. Parallel to this process, many multinational firms, due to reputational concerns, voluntarily decided to suspend their activities in Russia. This paper quantifies the impact of trade sanctions and the decision of firms to suspend activities on Spanish exports and imports with Russia. Using an event study methodology, we find that the decision of firms to suspend activities in Russia contributed to the reduction in exports and imports by 26% and 43%, respectively, while sanctions contributed by 9% and 21%, respectively. These figures highlight that firms’ actions to protect their reputation can significantly complement sanctions in reducing the amount of trade with target countries.

To the Victor Go the Spoils? Asymmetric Trade Impacts of Inter-State Conflict
Michael Nower (Durham)

The impact of Inter-State conflict on international trade is large and persistent at an aggregate level. However, within this negative impact, there is the potential for significant asymmetries and heterogeneity, depending on the outcome of the conflict. We examine the asymmetric impact of war on trade for 183 countries over the period 1950-2019, using the gravity model, and find evidence of significant asymmetries for trade between belligerent countries, with exports falling significantly more for victorious countries than for those that lost the inter-state conflict. These asymmetries also extend to trade between belligerent and neutral countries. Using counterfactual analysis indicates that the costs of war to trade on an exporter-year basis range from a 60% reduction to a 10% increase in total exports.

The effects of economic sanctions on political unrest
Julian Emami Namini (Erasmus University Rotterdam), Aksel Erbahar (Erasmus University Rotterdam), Sacha Kapoor (Erasmus University Rotterdam)

Economic sanctions can generate dissatisfaction and economic hardship among citizens, and thus political unrest. We investigate the effect of economic sanctions on political unrest in Iran. Firstly, we draw on confidential micro-level survey data from the Statistical Center of Iran to develop a measure of household level exposure to sanctions. This measure aggregates various welfare effects of sanctions into one sufficient statistic. Secondly, we integrate our presanction exposure measure into a linear shift-share design that encompasses all economic sanctions on Iran between 1995 and 2018, to study the relation between sanctions and 145000 protest events. We consider the competing hypotheses that economic hardship may increase or decrease political unrest, and we consider different types of protest.

5d Topics (Room A41)

Preferential trade agreements under uncertainty
Nicolò Tamberi (Sussex)

In Preferential Trade Agreements (PTAs), not all firms utilise preferential tariffs, suggesting the presence of fixed costs of using tariff preference. I develop a model where firms can trade in a PTA under the standard Most Favoured Nation regime or, after paying an additional fixed cost, under the Preferential regime. I show that if tariff preferences become uncertain, more firms export under the MFN regime, but with the option to switch to the Preferential regime in the future. The model extends the  Handley and Limão one and nests its empirical equation under the restriction of a single trade regime. I apply the model to an excellent natural experiment: the Brexit referendum and UK trade with PTA partners. I find that ignoring the partial uptake of trade agreements understates the impact of uncertainty on trade and can lead to biased empirical results. Brexit uncertainty had a modest negative effect on UK imports from PTA countries. Continuity Agreements signed to replace the existing EU agreements only partly reduced the uncertainty introduced by the referendum.

Inward Foreign Direct Investment, Superstar Firms and Wage Inequality Between Firms: Evidence from European Regions
Juan Duran (ESRI), Iulia Siedschlag (Trinity College Dublin)

This paper empirically investigates the impact of inward foreign direct investment, with a focus on multinational firms holding dominant market shares, on wage dispersion between firms across European regions. The analysis uses firm-level data from the ORBIS Europe data set over 2012-2021 combined with a range of economic and social data at the regional level. Using a shift-share instrumental variables approach, we find that foreign direct investment, particularly international superstar firms, contributed to increased wage inequality between firms across European regions.

Market Segmentation, Price Dispersion and Misallocation in the EU: Evidence from Bottled Water
Joris Hoste (Cambridge)

Spatial price dispersion is commonplace but separating trading frictions from differences in primitive cost factors remains elusive. I leverage technological and institutional features of the European bottled water industry and study the effect of cross-border trading frictions on equilibrium price dispersion and consumer welfare. Using a partial equilibrium model of the bottled water industry, I estimate that cross-border frictions between European countries of the European Single Market amount to a 23% tariff equivalent. Removing these cross-border trading frictions and fully integrating the bottled water industry decreases international spatial price dispersion by 6% and increases consumer welfare by 2%.

Introduction to Keynote (Room A48)

12.15 - 12.20

Keynote Speech (Room A48)

12.20 - 13.20

Italo Colantone (Bocconi University)
The Backlash of Globalization: Structural Changes and Political Shifts

Lunch (Foyer)

13.20 - 14.30

And conference close