Economic research and trade policy analysis

This study investigates how environmental policies impact trade and innovation in environmental goods. We make two major contributions to the economic debate. First we extract a set of information from the WTO Environmental Database (EDB) through natural language processing techniques that could be useful for future research and policy analysis. Second we use this data to test a set of economic hypotheses on how environmental measures impact environmental innovation and trade.

Economic theory suggests that countries' tariff commitments in trade agreements reflect their import market power at the time of negotiations. However as countries grow their market power in different sectors can change in unforeseen ways and their commitments may no longer reflect changed economic conditions. Using a newly built dataset of pre-Uruguay Round applied tariffs and relying on the theoretical framework of the terms-of-trade motive for trade agreements we estimate hypothetical tariff commitments under current levels of market power and compare them with actual tariff commitments.

In this study we investigate three trade policy scenarios: i) the revival of multilateralism ii) plurilateral cooperation and iii) geopolitical rivalry. In the first scenario both tariffs and NTMs are reduced on a multilateral basis. In the second scenario varying groups of countries cooperate on specific topics such as E-commerce and services. In the last scenario two main blocks emerge: a Western block and an Eastern block. International cooperation breaks down between blocks leading to an increase in tariffs and NTMs with blocks of countries setting up their own set of rules. Our findings are based on simulations with the WTO Global trade Model which has a specific novel feature: the diffusion of ideas between countries as a by-product of trade.

In this paper the evolution of global trade patterns until 2050 is projected with a recursive dynamic computable general equilibrium (CGE) model. Feeding the model with exogenous projections on macroeconomic demographic sectoral and trade cost variables the evolution of trade patterns emerges endogenously from the model. The approach is innovative in both modelling approach and exogenous inputs. GDP growth emerges endogenously in the model because of diffusion of ideas as a result of international trade and trade cost changes are based on estimates of technology and trade policy changes.

Geopolitical conflicts have increasingly been a driver of trade policy. We study the potential effects of global and persistent geopolitical conflicts on trade technological innovation and economic growth. In conventional trade models the welfare costs of such conflicts are modest. We build a multi-sector multi-region general equilibrium model with dynamic sector-specific knowledge diffusion which magnifies welfare losses of trade conflicts. Idea diffusion is mediated by the input-output structure of production such that both sector cost shares and import trade shares characterize the source distribution of ideas.

Disruptions to global value chains (GVCs) — caused by conflicts natural disasters and accidents that close transport routes — and that affect specific regions or sectors are not unusual. However in recent years and amid the Covid-19 pandemic they have become more frequent and severe. High profile sizeable and repeated disruptions raise pressing questions: Is the breakdown in many GVCs a temporary glitch or a permanent phenomenon? Have GVCs become endemically more accident prone and why? And if so are firms going to rely less on them? If a sustained withdrawal from GVCs occurs how will business models be reshaped and what will be the consequences for growth and inflation? How will the global trading system be affected? In short policymakers want to know what is the future of GVCs?

We explore a global carbon pricing framework to inform the potential coordination of carbon pricing and equivalent policies. The framework has three main features aligning with the current multilateral system for climate action. First the carbon price is determined by a global average carbon price to achieve emission reductions required to remain on a 1.5-2 degrees Celsius global warming trajectory.

In this paper we project the impact of the implementation of a Joint Statement Initiative (JSI) on Services Domestic Regulation (SDR). We proceed in three steps. First we include the WTO SDR Index a binary score of SDR implementation in 23 sectors and 86 economies in a gravity equation estimated with the balance of payments services trade. We take into account domestic services trade to identify the impact of the importer-specific SDR Index by interacting the SDR Index with a border dummy following an established methodology in the gravity literature.