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This paper documents the presence of \"sensitive sectors\" in Free Trade Agreements, defined as sectors for which the within-FTA tariffs remain positive. The paper includes some brief theoretical discussion of the welfare implications of these, but the main emphasis is on reporting two measures of this phenomenon for countries in FTAs that entered into force between 1994 and 2003. One measure is the percentage of tariff lines that remain dutiable, and the second is the change, from before the FTA to after, in the average maximum (across 6-digit products) positive tariffs. Both measures are derived from data in the UNCTAD TRAINS database, and are then related to measures of country characteristics that might explain them. Low per capita GDP countries tend to have larger fractions of dutiable tariff lines, while higher income countries tend to post larger increases in average maximum positive tariffs. Both suggest that the favored treatment of sensitive sectors is undermining the potential gains from trade that FTAs could provide.

Professional lobbyists are among the most experienced, knowledgeable, and strategic actors one can find in the everyday practice of politics. Nonetheless, their behavioral patterns often appear anomalous when viewed in the light of existing theories. We revisit these anomalies in search of an alternative theory. We model lobbying not as exchange (vote buying) or persuasion (informative signaling) but as a form of legislative subsidy—a matching grant of policy information, political intelligence, and legislative labor to the enterprises of strategically selected legislators. The proximate political objective of this strategy is not to change legislators' minds but to assist natural allies in achieving their own, coincident objectives. The theory is simple in form, realistic in its principal assumptions, and counterintuitive in its main implications. Empirically, the model renders otherwise anomalous regularities comprehensible and predictable. In a later section, we briefly bring preferences back in, examining the important but relatively uncommon conditions under which preference-centered lobbying should occur.

This paper examines the effects of a fall in the price of an imported good in a region of a country that is specialized in producing that good. The context is a “lumpy country” model in which factors are unable to move between locations, although in this case I assume that only labor is immobile, and that the other factor, capital, is perfectly mobile between regions. With mobile capital, the lumpy-country equilibrium can be anywhere in the factor-price equalization set, but my focus is on a region that initially produces only one good, on the border of that set. When the price of that good falls due to import competition, it would be possible for both factors to reallocate partially into production of the other good, but I assume instead that some capital simply leaves the region, so that it continues to produce only the same good that it did before. The result of this is a fall in the real wage of labor, just as under Stolper-Samuelson assumptions. I then look at production also of a non-traded good, and find that the same import competition that cheapened the traded good also cheapens the nontraded good. The result is that the region shrinks, losing capital and producing less of both goods unless the substitution in favor of the nontraded good expands its consumption out of a smaller income.

I'm told that John Jackson was the world's foremost scholar on the law of international trade policy and institutions. Since all that I know of trade law I learned from John, I can only trust the opinions of others on that. But I know that John had an excellent understanding of, and appreciation for, the economics of international trade. And he put those together in both his writings and his advice to policymakers, through which he had a profound influence on the development of the institutions of trade policy that we enjoy today.

The Trans-Pacific Partnership (TPP) aspires to become a state-of-the-art trade agreement linking 12 countries on both sides of the Pacific. In addition to establishing a free trade agreement (FTA) among these countries, negotiators are pursuing a long list of other issues, both trade-related and non-trade related. This paper examines the likely effects of the TPP on trade alone, taking into account the fact that all of the potential members of the TPP are already participants in other FTAs. Using information from the World Trade Organization (WTO) on the existence of these FTAs plus data on the identities of countries’ major trading partners for both exports and imports, I discuss the likely effects on a list of countries in terms of trade creation, trade diversion, preference erosion, and “trade reversion”—the reversal of trade diversion that has already occurred due to existing FTAs. The list of countries includes all of the members of the TPP as well as of the Association of Southeast Asian Nations (ASEAN). In addition it includes 10 additional Asian economies that are not part of either.

Have you ever wondered what a term in international economics means? This useful reference book offers a glossary of terms in both international trade and international finance, with emphasis on economic issues. It is intended for students getting their first exposure to international economics, although advanced students will also find it useful for some of the more obscure terms that they have forgotten or never encountered.

Almost all participants in free trade agreements (FTAs) exclude at least a few products or sectors from complete tariff removal on the exports of their FTA partners. The positive tariffs that remain within an FTA are often the highest tariffs that the countries apply on an MFN basis. It seems plausible that such exclusions may be chosen because the domestic producers of these products are viewed as especially vulnerable to competition from imports from the partner country. In brief, they are especially “sensitive sectors.” We develop this idea theoretically and then test it empirically on data from 37 countries in 240 importer–exporter pairs within FTAs. We find support for the sensitivesector hypothesis only in the high-income countries. We find that low-income countries, in contrast, exempt sectors where bilateral tariff removal would be more likely trade-diverting and therefore harmful. Our explanation for this, supported empirically, is not that they are following the advice of trade economists, but rather that they are avoiding loss of tariff revenue and may also perhaps be influenced by the greater bargaining power of richer and/or larger partners in their FTAs. Dans le cadre des traités de libre-échange, presque tous les pays excluent des exportations de leurs partenaires commerciaux au moins quelques produits voire quelques secteurs d’une exonération totale de tarifs douaniers. Les tarifs douaniers restant imputables au sein de ces accords de libreéchange sont souvent les tarifs douaniers les plus élevés appliqués par les différents pays selon la clause de la nation la plus favorisée ou clause NPF. De telles exclusions sont très vraisemblablement déterminées par l’exposition particulière des producteurs domestiques aux importations du pays partenaire. En clair, il s’agit de protéger les secteurs particulièrement sensibles. Nous avons d’abord étayé cette idée de façon théorique, puis l’avons évaluée de façon empirique en étudiant les données issues de 37 pays et de 240 paires d’importateurs et d’exportateurs au sein d’accords de libre-échange. Nous pouvons corroborer cette hypothèse du secteur sensible uniquement dans les pays à revenu élevé. Les pays à faible revenu, quant à eux, excluent les secteurs où la suppression bilatérale des tarifs douaniers aurait davantage tendance à engendrer une distorsion commerciale, ce qui s’avérerait néfaste. Notre explication, appuyée de façon empirique, ne corrobore en rien l’idée que ces pays suivent les recommandations des économistes du commerce, mais plutôt qu’ils cherchent à éviter les pertes de recettes douanières; un pouvoir de négociation plus important des pays plus riches et/ou plus grands au sein de leurs accords de libre-échange pourrait également influencer leurs décisions.

As tariffs on imports of manufactures have been reduced as a result of multi-lateral trade negotiations, interest in the extent to which existing nontariff barriers may distort and restrict international trade is growing. Accurate and reliable measures are needed in order to address the issues involving the use and impacts of nontariff barriers. This study assesses currently available methods for quantifying such barriers and makes recommendations as to those methods that can be most effectively employed. The authors focus both on the conceptual issues arising in the measurement of the different types of nontariff barriers and on the applied research that has been carried out in studies prepared by country members of the OECD Pilot Group and others seeking to quantify the barriers. Nontariff barriers include quotas, variable levies, voluntary export restraints, government procurement regulations, domestic subsidies, and antidumping and countervailing duty measures. The authors discuss the many different methods available for measuring the effects of these and other nontariff barriers. Illustrative results are presented for industrial OECD countries, including Australia, Canada, Germany, Norway, the European Union, the United Kingdom, and the United States. Finally, the authors offer guideline principles and recommend procedures for measuring different types of nontariff barriers. Economists, political scientists, government officials, and lawyers involved in international trade will find this an invaluable resource for understanding and measuring NTBs. Alan V. Deardorff and Robert M. Stern are Professors of Economics and Public Policy, University of Michigan.

[...]trade and financial integration/globalization tend to have a positive correlation, as documented in some past studies. [...]the size of outstanding crossborder assets and liabilities is huge, as a result of financial transactions made in past decades. [...]some reversals in capital flows seen during COVID-19 will not affect the size of cross-border assets and liabilities in a major way. [...]financial globalization may help to slow down the de-globalization of trade after COVID-19. [...]on dispute resolution, Hoekman does not need to remind us of the current sad state of the Dispute Settlement Understanding, and his main suggestion here is that reforms not be limited to only fixing the Appellate Body, but rather should include improving the panel process, though he does not say how to do that.

A neoclassical growth model provides an explanation for a `poverty trap', `club convergence', or `twin peaks', in terms of specialisation and international trade. The model has many countries with identical linearly homogeneous technologies for producing three goods using capital and labour. With diverse initial endowments, initial equilibrium has unequal factor prices and two diversification cones. With savings out of wages, following Galor (1996), there may easily be multiple steady states. Poor countries converge to a low steady state while rich countries converge to a high one, even though all share identical technological and behavioural parameters.