Centre for Inclusive Trade Policy home pagePeople, Firms and Places
International trade affects prices, wages and employment opportunities. We unpack how trade integration, trade disintegration and trade policy affect individuals, businesses and the nations and regions of the UK in a differentiated manner.
Focussing on people, we will compare aggregate effects of, say, signing a free trade agreement with individual outcomes for certain groups of workers or consumers and in specific regions. A new ‘Jobs in Trade Dataset’ will provide detailed information about some 6.5 million UK jobs that are directly or indirectly linked to exporting activity. As changes in wages and employment may also affect public views on trade openness, we will study how these impacts shape voting behaviour and radical sentiments.
Focussing on firms, international trade is increasingly part of the production process, and therefore major shocks such as Covid-19 and the rise of China profoundly affect UK businesses. Our research will look at the responses of businesses to these trends in terms of productivity, the use of international supply chains and investment decisions. Some projects will focus specifically on services trade, which comprises 50% of UK exports.
Focussing on places, regional policymaking in the devolved administrations creates challenges for a unified UK Internal Market. For instance, in some sectors, different rules could apply in each UK nation and yet we need to reconcile this with having a single UK market. We will focus on the regulatory and political fragmentation in the UK Internal Market and its implications for intra-UK trade, e.g. in agri-food products, and for the regional competition for foreign investment.
Theme Lead: Professor Ingo Borchert
Research Projects
Trade policy, jobs and attitudes towards trade
Trade and Employment
Trade is crucial to the success of any modern and open economy, providing opportunities for firms as new markets are opened up, but it can also provide risks as firms in less competitive industries are exposed to international competition. The gains from trade may not be evenly spread across society so it’s important to understand the impact that trade could have on different parts of the workforce, either by region, sector, etc so that any “winners” and “losers” from trade can be identified. In this study, we focus on the impact of one component of trade – exports – on the labour market.
Building on previous work, the team aims to define the estimated number of jobs supported by exports to different destinations and different characteristics. Data will be integrated into an economic model to understand how exports support different types of jobs throughout the export supply chain. By linking data on trade with business data and census data at the individual firm level, we will create a robust map of trading firms, their employees, and their employee characteristics. This work can help support trade policy and Free Trade Agreements with a significantly more detailed understanding of how changes to trade policy could positively or negatively impact people with different characteristics in the labour market, different types of firms, and different parts of the UK.
Trade, firm-level productivity and geography
This research project aims to document and unravel the connections between international trade, firm competitiveness, and the spatial distribution of economic activity. The distribution of firms is highly uneven across regions in terms of both industry composition (specialisation), and overall level of activity (density). Productivity is typically higher in denser and/or more specialised locations because of ‘agglomeration’ forces, but little is known about how trade interplays with the nexus between productivity and location. For example, do firms more involved in international trade enjoy the productivity benefits of density and specialisation to a different extent? Is the positive link between firm competitiveness and international trade weaker or stronger in more specialised and/or denser regions?
The researchers will generate a comprehensive dataset covering the location, productivity and international activities of UK firms, then, several econometric models will be used to assess the relevance of a number of questions regarding the connections between trade, productivity and geography. The project will also produce detailed geographical information about the productivity and international trade exposure of UK regions. This research will help policymakers design better regional policies and trade support schemes.
Shocks and supply chain trade
Trade, firm-level productivity and geography
This project aims to document and unravel the connections between international trade, firm competitiveness, and the spatial distribution of economic activity. The distribution of firms is highly uneven across regions in terms of both industry composition (specialisation), and overall level of activity (density). Productivity is typically higher in denser and/or more specialised locations because of ‘agglomeration’ forces, but little is known about how trade interplays with the nexus between productivity and location. For example, do firms more involved in international trade enjoy the productivity benefits of density and specialisation to a different extent? Is the positive link between firm competitiveness and international trade weaker or stronger in more specialised and/or denser regions?
The team will generate a comprehensive dataset covering the location, productivity and international activities of UK firms, then, several econometric models will be used to assess the relevance of a number of questions regarding the connections between trade, productivity and geography. The project will also produce detailed geographical information about the productivity and international trade exposure of UK regions. This research will help policymakers design better regional policies and trade support schemes.
Trade and investment outcomes across UK regions
Modelling trade links
Computable General Equilibrium (CGE) models have been used to analyse trade scenarios and their implications for whole economies, due to their ability to capture linkages between economic sectors both within and between countries. Numerous studies that examine the impact of Brexit and other trade scenarios using CGE have focussed on the overall impact at the UK national level and overlooked impacts that are specific to the regions.
The project aims to develop a multi-region CGE model that can identify trade links between UK regions and between the UK and the rest of the world. This will be used to assess the importance of trade policies at the sub-national level by accounting for the specifics of regional supply chains, fiscal powers, and labour force composition. The model will enable the CITP team to provide assessment and guidance to help policymakers determine the likely impact from a range of potential trade policy initiatives on the UK economy, the nature and strength of any trade-offs or complementarities between national and regional policies, and how sub-national areas may choose to respond to the consequences of new trading arrangements in different ways.
Partial equilibrium modelling of UK trade policy issues
To design effective trade policies, promote sustainable economic development and foster innovation, we need to understand the differences between firms and their interactions within and across borders. The purpose of the project is to develop a unified analysis tool that can be used to facilitate cutting-edge policy discussion on trade-related micro and macro market outcomes.
A partial equilibrium (PE) framework is used to examine the behaviour of a specific market in detail, without getting tangled in the complexities of the entire economy. It allows us to isolate the effects of a specific event or policy on a single market, while assuming that changes in one market do not significantly impact other markets in the economy. By extending existing work on partial equilibrium modelling, we can create tailor-made, industry specific analysis, intended to enrich the UK trade policy discussion. Researchers, economists, and policymakers can use this tool to gain insights into factors that promote economic growth, productivity, and competitiveness. By understanding the sources of differences among firms, more effective policies can be developed, cultivating a healthy and dynamic trade environment.