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This paper studies the role of reduced barriers to international trade from two dimensions: (i) the implementation of Free Trade Agreements and (ii) declining "border effects". Our empirical estimates suggest that diminished border effects accounts for the bulk of the increase in international trade in manufactured goods since 1970. The cost of a national border has fallen by around 10% per year for total exports, whereas it has declined by 13% for exports of final goods and 8% for intermediate inputs. The introduction of FTAs have an important role to play as well, raising international trade by 54% after 10 years according to our estimates. We also find evidence that more recent FTAs have a greater trade effect than those signed in earlier periods. Moreover, when estimating the effect of FTAs, we show that it is important to control for different border effects for final goods and intermediate inputs.

This paper provides an analysis of the latest World Trade Organisation Trade Policy Review of the European Union. The review period was one of heightened trade tensions, where the dynamic between China-US-EU dominated the policy agenda. A number of key findings emerge from the review, broader literature and events after the review period: (i) much remains to be negotiated as part of Brexit (ii) there has been a change of approach whereby trade and investment agreements tend to be separate; this has important implications for the speed of implementation (iii) strategic oversight regarding extra-EU investment inflows hinges on national screening mechanisms (iv) rival infrastructure development schemes are emerging, suggesting that the EU will struggle to create space for their own initiative (v) free trade agreements are increasingly covering a broader range of issues such as labour rights and environmental protection (vi) digitisation and a tax schedule for digital services is still work in progress. Overall, the review is an extremely useful reference document. However, a critical assessment of the factual information is necessary.

Efficient distribution has a considerable influence on the sales volume of firms, and thus affects the firms' research and development (R&D) activities. This paper analyzes the relationship between competition in the transport sector and R&D of firms using the transportation services. We consider a two-region reciprocal market in which firms invest in cost-reducing R&D and use carriers that engage in price competition to supply their products to the foreign market. We show that, corresponding to the degree of R&D spillover, a transport cost (or price) reduction due to an increase in the number of carriers can increase or decrease the firms' R&D investments. This result is consistent with the finding in previous studies that trade liberalization can hinder R&D. Because inefficient firms lead to high prices in the market, an increase in the number of carriers may reduce consumer surplus. We further discuss a case in which firms have monopsony power in transportation services and show that our main results are robust to the extension.

This paper develops a model of multi-product firms with endogenous quality across products within a firm. The model can reconcile the empirical fact that product quality and market size exhibit an inverted U relationship. In our model, on the one hand a larger market has a larger scope of quality differentiation and induces firms to increase quality; on the other hand, market competition is more intense in a larger market, exerting a negative influence on quality. We show that the model without taking quality differentiation into consideration could significantly underestimate the market competition and welfare. Moreover, our numerical analysis suggests that the model without taking quality differentiation into consideration could also significantly overestimate the gains of trade liberalization.

The Melitz (2003) model with nominal exchange rates and sticky wages predicts that the extensive margin of exports can respond to both trade liberalization and nominal exchange rates, which might not, however, be supported by data according to Ruhl's (2008) argument about temporary vs. permanent shocks. Using Chinese firm-product data during 2000-2006, this paper empirically tests this theoretical prediction and has three main findings. First, overall, changes in tariffs, charged by trade partners, and nominal exchange rates both have significant effects on China's exporter numbers at the product level. Second, the effects are larger for processing trade, low income destinations, and differentiated products. Third, our calculation of autocorrelations and standard deviations indicates that China's nominal exchange rate changes should not be considered as temporary shocks during this period, and thus our results do not contradict Ruhl's argument.

After the formation of the World Trade Organization (WTO) in 1995, most countries gradually reduced their import tariffs to a fairly low level. However, the reduced tariffs could not be simply read as a reduction in trade barriers. Indeed, many suspect that countries tend to use more non‐tariff measures (NTMs), substituting them for tariff barriers, to protect their domestic economies. This paper uses newly compiled and detailed Chinese NTM data, together with highly disaggregated firm import data and manufacturing firm operational data, to investigate the impact of China's import‐related NTMs on firm imports. The main empirical results show that, as in the case of tariff barriers, China's trade policy NTMs mainly inhibit firms’ intermediate imports. In contrast, China's public policy NTMs significantly improve the intensive and extensive margins of firm's intermediate imports and raise the prices and quality of imported inputs. The greater the extent to which a firm engages in processing trade, the larger is the promoting effect of public policy NTMs on the firm's import margins for intermediate inputs, and the greater is the restricting effect on the prices and the quality of the firm's imported inputs.

We extend the Melitz model to include pure exporters and study how they influence economic performance. We find that the presence of pure exporters lowers the productivity premium of exporters. Moreover, if there is a large portion of pure exporters, then international trade lowers the average productivity, but not welfare. Moreover, we explore how trade liberalization in form of lower entry cost into foreign markets and lower variable export cost influences the distribution of firms between pure exporters, ordinary exporters and non-exporters.

This paper develops a general equilibrium model of international trade in homogeneous intermediate inputs. In the model, trade between countries is driven exclusively by uncertainty in the delivery of inputs. Because their managers are risk-averse, final good firms contract with multiple suppliers located in different countries in an attempt to decrease the variability of their profits. The analysis shows that risk diversification provides an incentive for international trade over and above such reasons as comparative advantages (emphasized in classical models of international trade) and economies of scale (emphasized in new trade models), and highlights a new channel – a reduction in uncertainty – through which trade liberalization increases welfare.

This paper provides the implications of firm heterogeneity for the global environment and trade liberalization in a trade model with endogenous markups and regulatory non-compliance. We show that firms with heterogeneous productivities respond differently to a uniform environmental regulation (emission taxation), which changes the market competition structure within a country and across countries, and disentangles the interaction effects of environmental regulations and trade liberalization. In autarky, raising emission tax generates an average productivity gain and favors efficient firms in the sense that they can expand output but may produce more emissions via non-compliance to escape the regulation and maintain competitiveness. In a symmetric two-country open economy, trade liberalization can break the trade-off between output and environment, not only increasing worldwide output but also decreasing global pollution emissions. Under asymmetric environmental regulations, a unilateral increase in the emission tax decreases average productivity in this country if openness to trade is substantially high, which contrasts with the e§ect under autarky. Our welfare analysis shows a U-shaped relationship between the optimal emission tax and openness to trade regardless of whether under tax harmonization or tax competition. Trade liberalization unambiguously decreases global pollution emissions under tax harmonization but it may increase global pollution emissions under tax competition.

One of the main features of Free Trade Agreements (FTAs) is that certain products are excluded from tariff concessions. But why do some products receive more protection than others in FTAs? In this paper, we use disaggregated agricultural product data and a political economy analytical framework to examine the determinants of product exclusions from tariff reductions in China’s FTAs. Taking into account the political costs of the incumbent government, our results show that products associated with trade creation and politically sensitive products are more likely to be excluded from tariff concessions in FTAs. Furthermore, we show that the Chinese government tends to use its negotiating power to achieve various objectives by seeking more economic benefits from large trading partners and making more concessions to small ones.

Many studies have investigated the impact of imports, especially those from China, on the domestic labor market. In this paper, we empirically examine the effects of not only imports from China but also those from regional trade agreement (RTA) partners on employment in Japan. To this end, we decomposed the total import penetration into the import penetration under the most favored nation (MFN) and RTA regimes. To address the endogeneity concern on our import penetration variables, we estimated our models by the instrumental variable method. As in previous studies in the literature, we found that the rise in import penetration from China significantly decreases employment in Japan. In contrast, import penetration under the RTA regime is found to have significantly positive effects on employment. The increase in imports under RTA regimes is not harmful to the domestic labor market.

This study examined whether the presence of a Free Trade Agreement between the United States and a foreign country significantly affected the outcomes of Internet domain name dispute arbitration cases, conducted within the framework of the Uniform Dispute Resolution Policy. Data were collected for approximately 2800 arbitration cases filed during the 2001-2019 period from ten countries, five with U.S. FTAs and five without. Therefore, this study sought to examine whether FTAs impact domain name arbitration cases. Logistic regression, with controls for additional variables, found that complainants are less likely to win in FTA countries. Separate analysis of high- and low-income countries found that the complainants’ win percentage is significantly reduced in the high-income countries while there was no impact in in low-income countries.

The ASEAN-inaugurated Regional Comprehensive Economic Partnership (RCEP) was eventually concluded on 15 November 2020 after 8 years of tough negotiations India was counted as an important member of the RCEP, but it chose to back out when other members were finalizing the RCEP legal text This article critically analyzes the relevant legal provisions leading to India's withdrawal from this significant mega trade deal, the reasons behind India's refusal of those provisions, the possibility of isolationism India might face, and geopolitical changes in Sino–India relations post stand-off on the Galwan Valley as well as the COVID-19 pandemic It argues that unbalanced economic relations, India's self-reliant ideology, as well as China's growing hegemony in the Asia-Pacific region are among the principle factors for India to back out from the RCEP However, the door to participate in the future remains open for India © 2021 Center for International Studies, Inha University

This study examines how the rules of origin (RoO) of a free trade agreement (FTA) affect firms' pricing strategies. The value‐added criterion (VAC) of the RoO requires firms to add more than a certain level of value within an FTA when firms use inputs originating from outside the FTA. The VAC may work as a price floor, and the resulting increases in prices can benefit all firms if it induces an offshoring firm to manipulate its output price. Meanwhile, a consumer‐hurting FTA formation is possible, even if all firms make tariff‐free exports. Furthermore, such an FTA formation may worsen total welfare.

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 sensitive‐sector 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. Les secteurs exclus des accords de libre‐echange. Dans le cadre des traites de libre‐echange, presque tous les pays excluent des exportations de leurs partenaires commerciaux au moins quelques produits voire quelques secteurs d’une exoneration totale de tarifs douaniers. Les tarifs douaniers restant imputables au sein de ces accords de libre‐echange sont souvent les tarifs douaniers les plus eleves appliques par les differents pays selon la clause de la nation la plus favorisee ou clause NPF . De telles exclusions sont tres vraisemblablement determinees par l’exposition particuliere des producteurs domestiques aux importations du pays partenaire. En clair, il s’agit de proteger les secteurs particulierement sensibles. Nous avons d’abord etaye cette idee de facon theorique, puis l’avons evaluee de facon empirique en etudiant les donnees issues de 37 pays et de 240 paires d’importateurs et d’exportateurs au sein d’accords de libre‐echange. Nous pouvons corroborer cette hypothese du secteur sensible uniquement dans les pays a revenu eleve. Les pays a faible revenu, quant a eux, excluent les secteurs ou la suppression bilaterale des tarifs douaniers aurait davantage tendance a engendrer une distorsion commerciale, ce qui s’avererait nefaste. Notre explication, appuyee de facon empirique, ne corrobore en rien l’idee que ces pays suivent les recommandations des economistes du commerce, mais plutot qu’ils cherchent a eviter les pertes de recettes douanieres; un pouvoir de negociation plus important des pays plus riches et/ou plus grands au sein de leurs accords de libre‐echange pourrait egalement influencer leurs decisions.

This paper discusses a new approach to quantify trade creation and trade diversion that relies on the structural decomposition analysis in an inter‐country input–output framework. The proposed measure captures the contribution of trade creation (diversion) between two countries to the GDP growth of the home country, partner country and third countries. For a trial calculation, the author uses the 2016 release of the OECD inter‐country input–output tables and focuses on the period 2000–11. Creation, diversion, but also contraction of trade flows are shown to be intrinsic to any pair of countries that may or may not be linked by a trade agreement. There is no evidence that the rise of free trade agreements in 2000s is associated with higher magnitude of these trade effects for an average country pair. The proposed approach is thought to be a useful alternative to econometric estimates of trade creation and trade diversion available to date.

This paper discusses the transmission mechanism and effects that trade liberalization influences energy intensity through energy‐saving technological change (ESTC). We construct panel data from manufacturing industries in China over the period of 1994–2017, thereby conducting empirical tests through mediation models and discontinuity regression models. The results find that trade liberalization significantly promotes the lowering of energy intensity through ESTC. Heterogeneity test results show that the trade liberalization effect is higher in industries with low barriers to entry and industries with high pollution. Fuzzy regression discontinuity (FRD) results show that energy intensity decreasing as China's accession to the World Trade Organization (WTO). (JEL F10, F18, L60, Q43)

We investigate how trade liberalisation affects the performance of Chinese manufacturing firms via sourcing from the South. Taking imports from Indonesia, the largest country in South‐east Asia—China's current trading partner as an example, we find that Chinese firms with higher import shares from Indonesia perform better in productivity, exports and sales, and they are more likely to engage in processing exports. Moreover, the impacts of foreign trade liberalisation on China's export scopes are more pronounced for firms with larger import shares from Indonesia. Such findings are robust to different empirical specifications.

This paper examines the effects of industrial policy on firm productivity, using a three‐year panel data set of Thai manufacturing as a case study. A range of industrial policy tools is defined, including tariff measures, subsidies, and investment incentives through the Board of Investment (BOI), which represent the main industrial policy tools used in Thailand. The effect of ‘water in the tariffs’ and partial trade liberalisation undertaken through free trade agreements (FTAs) signed between Thailand and her trading partners is also examined. The key findings concern the role traditional tools, that is trade openness, R&D, and skills upgrading, play in fostering firm productivity. Promoting a conducive environment, especially within domestic competition, is crucial in encouraging firm productivity. Some industrial policy tools are effective in promoting firm productivity, that is providing investment incentives via the BOI and lowering tariff protection. Subsidies, by contrast, tend to degrade firm productivity. Among trade protection measures, the effective rate of protection, which includes water in the tariffs encountered by exporting firms, has the greatest effect on firm productivity. The FTA‐led trade liberalisation fails to add substantial competitive pressure and induce firms to improve productivity. Such statistical insignificance reflects the nature of FTA commitments that Thailand has made so far.

© 2020 The Author. International Journal of Finance & Economics published by John Wiley & Sons Ltd. Trade liberalization is famously known for both creating winners and losers via processes of dislocation, sectoral reallocation, and specialization. This paper studies the conditions under which excess “losers” are generated during the process of liberalization with a focus on the role of institutions in economic transition. I contend that poor institutions, in particular property rights and democracy, can create unnecessary hardship in the transition to greater openness, generating a much higher burden on compensatory policies and making it more difficult to sustain open trade policies. Using a new dataset of trade openness, economic inequality, and institutions, and using 3SLS estimation to account for endogeneity, the analysis finds that this is indeed the case: high property rights and more democracy appear to help to mitigate trade-related inequality. Moreover, poor institutions create a downward spiral, with greater inequality leading to lower trade openness. These results imply that basic institutions can help to minimize losses sparked by globalization, while other well-meaning policies can actually increase disruptions.

Since the year 2000, the number of recorded hate groups in the United States has increased by more than 50 %. Some argue that the strain caused by unemployment or other socioeconomic stressors can play a critical role in the prevalence of extremist groups and crimes. We examine whether a change in U.S. policy to normalize trade relations with China, which fueled a surge in import competition that led to higher levels of unemployment, affected the presence of hate crimes. Using a difference‐in‐differences model and an event‐study framework, we find that areas most exposed to import competition experienced an increase in the number of anti‐Black hate crimes. We also find a qualitatively similar effect on the number of active hate groups in response to import competition. This result holds pre‐ and post‐the Great Recession and is consistent across levels of aggregation. The results are consistent and robust to various controls and specifications. (JEL F13, F16, Z13)

Objective In this paper we consider the possible effects of contextual economic conditions (i.e., job losses attributed to trade, general unemployment) and subjective economic evaluations on how Americans think about international trade. Methods We use data from the 2016 Voter Study Group survey and from the 2016 American National Election Study, and we supplement these survey data with data on state contextual variables from the Bureau of Labor Statistics and from the Trade Adjustment Assistance (TAA) program of the U.S. Department of Labor. Results We find that state job losses linked to trade have discernible effects on Americans' attitudes toward trade, as do subjective economic evaluations tied to confidence and anxiety about the economy. Conclusion Simply, (trade‐related) economic context has a strong effect on how Americans think about expanded and free trade.

While prior literature on trade liberalisation and the environment has mostly focused on the macroeconomic ramifications, this study explores at the firm level whether and how changes of trade barriers brought about by China's accession to the WTO may impact on its manufacturing firms’ environmental performance. Adopting a difference‐in‐differences (DID) methodology, we document the effects of tariff reductions on improving firm‐level SO2 emission intensity, and the key corporate strategic decisions responsible for delivering the observed results, with robustness tests covering other major pollutants. In response to trade liberalisation, firms are found to increase labour resources for environmental protection and to improve their production processes to reduce emission intensity. This study contributes to the literature by investigating at the level of the operating firm how output and input tariff reductions may impact on environmental performance and uncovering for the first time the specific actions responsible for the results.

Labour market outcomes of trade liberalization are at the heart of the policy debate. In this model, the long‐run effects of trade liberalization and trade‐induced skill‐biased technological change on wage inequality and unemployment are studied by augmenting a heterogeneous firm trade model with job search and unemployment. In the model, there are two types of workers—skilled and unskilled—and two types of technologies—low and high. Firms draw their productivities from a common distribution and, conditional on their productivity, decide on the entry, export and type of technology. Then they post the optimal number of vacancies and engage in individual wage bargaining with workers. In the case of two symmetric partners, trade liberalization leads more firms to enter foreign markets while leading the least‐productive firms to exit. Moreover, with lower technology‐adoption costs and/or a higher initial level of liberalization, more firms upgrade their technology after a reduction in variable trade cost. The redistribution of market shares toward more‐productive firms increases the demand for both skilled and unskilled workers. This, in turn, raises wages and reduces unemployment rates for both types of workers. Nevertheless, trade liberalization has asymmetric wage effects on workers: it increases wage inequality in favour of skilled workers. Further, the unemployment rate in the skilled labour market falls to a greater extent, implying a change in the skill composition of unemployed workers in both trade partners. Resume Inegalite salariale, chomage lie aux competences specialisees et liberalisation. Les consequences de la liberalisation des echanges sur le marche du travail sont au cœur du debat politique. Dans ce modele, nous etudions les effets a long terme de la liberalisation des echanges et des evolutions technologiques induites par le commerce, lesquelles favorisant les competences specialisees, a la fois sur les inegalites salariales et le chomage. A cette fin, nous avons augmente un modele commercial d’entreprises heterogenes en y ajoutant la recherche d’emploi et l’inactivite professionnelle. Dans ce modele, nous nous appuyons sur deux types de travailleurs, les travailleurs qualifies et non qualifies, et sur deux types de technologies, les technologies rudimentaires et les hautes technologies. Les entreprises tirent leur productivite d’une distribution commune, et en fonction de cette meme productivite, peuvent decider de l’introduction, de l’exportation et du type de technologie. Ensuite, ces entreprises proposent un nombre optimal d’emplois a pourvoir et s’engagent dans une negociation salariale individuelle avec les travailleurs. Dans le cas de deux partenaires symetriques, la liberalisation des echanges conduit davantage d’entreprises a integrer les marches etrangers tout en poussant les moins productives a en sortir. De plus, avec des couts d’adoption technologiques plus faibles et/ou avec un niveau de liberalisation initial plus eleve, de plus en plus d’entreprises modernisent leur technologie apres avoir reduit leurs couts commerciaux variables. La redistribution des parts de marche vers les entreprises les plus productives provoque une augmentation de la demande de travailleurs qualifies et non qualifies. Par voie de consequence, les salaires augmentent et le taux de chomage diminue pour les deux types de travailleurs. Neanmoins, la liberalisation des echanges engendre un effet asymetrique quant au salaire des travailleurs car elle augmente les inegalites salariales en faveur des travailleurs les plus qualifies. De plus, le taux de chomage des travailleurs qualifies diminue bien davantage, modifiant ainsi la composition des competences de la main d’œuvre des travailleurs sans emploi pour les deux partenaires commerciaux.

We study the causal link between trade openness via free trade agreements (FTAs) and obesity rates. When applying a difference‐in‐differences approach by exploiting the year a country entered a free trade agreement with the United States during the period 1990–2016. We find a positive and causal impact of FTAs on obesity rates, which are statistically and economically significant. We show that our findings are robust to placebo tests, the use of synthetic control methods, and a maximized sample. Furthermore, we show that when using an event studies approach the equal trends assumption holds.

After the Asian Financial Crisis, Thailand's trade policy has been driven by the proliferation of free trade agreements (FTAs). We use firm‐level data to estimate the effects of reductions in tariffs applied to Thai imports on Thai firms. Reductions in Association of Southeast Asian Nations (ASEAN) tariffs were associated with increasing firm employment and exports, lower ASEAN‐China import tariffs were associated with increasing firm employment, while lower tariffs from the Japan‐Thailand FTA were associated with reductions in firm employment and increasing likelihood of International Organization for Standardization (ISO) certifications. FTAs were associated with a decrease in firm R&D spending. (JEL F1, F2, F6)

We utilize an unprecedented liberalization episode in China, namely its World Trade Organization accession, to estimate the impact of trade liberalization on firm markup and markup distribution. Using a panel data quantile regression, we show that the impact of tariff reduction on markup can be heterogeneous to different firms, resulting in an unevenly distributed markup change across firms. In particular, reduction in output tariff reduces markup and markup dispersion, while reduction in input tariff increases markup and markup dispersion. (JEL F12, F13)

This paper explores the dynamics of trade negotiations over over‐the‐top (OTT) video streaming services (VSS) in the multilateral trading system. Specifically, it compares specific commitments made under the General Agreement on Trade in Services (GATS) and offers submitted to the Doha Round negotiations by the European Union and the United States, and examines the two countries’ recent domestic media regulatory reforms in order to delineate major negotiation issues for OTT VSS. The findings of the analysis suggest that the EU continues to take an ‘all‐or‐nothing’ negotiating strategy while the US takes a ‘salami‐slice’ strategy on OTT VSS to pursue the utmost trade liberalization in the sector. The case study of OTT VSS highlights fundamental issues central to the ongoing services trade negotiations in the digital era. It may provide policymakers with significant implications regarding digital trade policy.

This article analyses the reduction in duties under US President James Polk, enshrined in the Walker Tariff of 1846, as a proxy for understanding the interrelationship between the executive, the legislature, and broader societal developments. It concludes that congressional debates on the subject were constrained by three parameters: the perceived threat of sectionalism, fears of international belligerence, and the legacy of colonialism. First, memories of the earlier Nullification Crisis of 1833 determined that the political discourse was characterised by a striking emphasis on national unity. Second, contrary to the usual association of free trade with peace, the Walker Tariff was necessarily debated in terms of compatibility with ongoing warfare. Lastly, Britain's shadow coloured congressional language, with both sides exploiting simultaneous reductions of tariffs in the former colonising power to advance their rhetorical ends.

Trade is an integral part of the Canadian economy. The main institutional drivers governing trade are bilateral and multilateral agreements outlining permissible trade distorting measures. Since its inception in 1972, Canada's supply management system has remained protected throughout trade negotiations. The system appears, by any economic measure, to be having an increasingly disproportional influence in recent trade negotiations. However, trade agreements serve not only to maximize social surplus, but also to maximize some measure of political welfare. Canada has recently negotiated three prominent trade agreements: the Canada‐European Union Comprehensive Economic and Trade Agreement (CETA) came into effect in the latter part of 2017; the Comprehensive and Progressive Agreement for Trans‐Pacific Partnership (CPTPP) came into effect at the end of 2018; and the Canada‐United States‐Mexico Agreement (CUSMA) could come into effect in 2020. Collectively, these agreements have guaranteed increased market access for fresh and processed dairy products. We build a spatial partial equilibrium model of the Canadian dairy industry consisting of three regions and 10 commodities to assess the individual and cumulative effect of these trade agreements. We pay particular attention to the institutional drivers within today's dairy sector: milk protein isolates; component pricing, including Class 7; and differential demand growth. We find that the aggregate impacts are: (a) a 1.4% decrease in the marginal retail price; (b) a 4.8% decrease in the blended producer price; and (c) an overall increase in social welfare of 7.8%. Worth noting, the decrease in producer surplus varies from 0.7% in the western region to 1.5% in Ontario. Our results may be relevant to future negotiations as well as the publicly promised compensation package for dairy producers.

The importance of free trade agreements (FTAs) has been increasing as such agreements help reduce barriers to trade. This paper estimates the agricultural trade creation and export diversion effects of Australia’s free trade agreements (FTAs) at the aggregate and disaggregate levels, using the Poisson pseudo‐maximum‐likelihood (PPML) estimator. It includes 24 of Australia’s major trading partner countries comprising FTA and non‐FTA members and covers 22 years from 1996 to 2017. The heteroscedasticity robust regression error specification test (RESET) confirms the relevance of PPML over the Ordinary Least Square (OLS) estimator. Results showed that China–Australia, Korea–Australia, Australia–USA and Japan–Australia have larger trade creation effects in the agricultural sector. At the commodity level, variation in trade creation effects is estimated from the different trade agreements. Among the selected commodities, the larger effects were generated in trade in sugar and wine by the implementation of the majority of the trade agreements. Overall, the trade creation was greater than the export diversion of the FTAs. The findings of the study have implications for Australia’s future trade agreements.

This paper empirically analyses the effect of trade competitiveness and complementarity on the trade development between China and the countries along the Belt and Road (B&R). The study first measures the trade competitiveness and the complementarity between China and the countries along the B&R by using the trade competitiveness coefficient (TCC) and the trade complementarity index (TCI). Then a spatial gravity model is constructed to analyse the effect of trade competitiveness and complementarity on trade development between China and the countries along the B&R. We use generalized method of moments (GMM) and spatial filtering technology to verify the robustness of the model. The results show that the GDP of China and the countries along the B&R, the land area of countries along the B&R, trade complementarity, common language, free trade agreements (FTA), and the B&R Initiative significantly promote the trade development between China and the countries along the B&R, whereas the geographical distance between countries and trade competitiveness significantly inhibit it. Finally, to promote the trade development between China and the countries along the B&R, the present paper puts forward suggestions including improving trade promotion policies between China and the countries along the B&R and vigorously expanding cooperation with complementary industries in the countries along the B&R to enhance trade dependence.

Recent events in Europe and the United States suggest that open economies are increasingly under stress as nationalist, protectionist and populist political entrepreneurs are gaining significant ground across the Western world. Many theories have been formulated as to which factors are more likely to explain such policy preferences. The hypothesis tested in this paper is that financial literacy affects economic policy preferences. I analyse data from the British Election Study and test my theory on support for free trade in the United Kingdom. Findings suggest that financial literacy does affect economic policy preferences. On average, financially literate individuals are more likely to think that free trade is good for the British economy. Furthermore, this is true regardless of economic self‐interest, as both financially literate winners and losers from globalisation are more likely to support free trade than their illiterate counterparts.

This article reviews the evolution of the role of export credit agencies (ECAs) and their impact on trade and investment. We argue that regional cooperation in Asia would foster regulation and facilitate access to trade and investment finance. Regional cooperation could take the form of regulation aiming at levelling the playing field; or it could go further, with the creation of a multilateral agency that would leverage the industry’s best practices and a good credit standing to facilitate access to trade and investment finance across Asia, particularly in the countries where availability is limited. We review the lessons learnt from existing multilateral ECAs and national ECAs in Asia and argue that these should be carefully considered when designing a new regional ECA.

This paper evaluates the evidence as regards the extent to which trade liberalization has led to a decline in tariff revenue, total tax revenue, government expenditure, and government debt. Conventional theory generally predicts that when tariff losses do occur, they may be recouped through better forms of taxation – though a more sophisticated body of theory suggests otherwise. The empirical evidence is also mixed. Theory driven ex‐ante models of trade liberalization assume that trade agreements are revenue neutral. Ex‐post studies suggest that theory may hold in advanced and upper middle‐income economies. However, the consequences for lower income countries are a matter for concern. The majority of the evidence finds that low income countries lose trade tax revenue and are unable to recoup much of that lost revenue. At a time when fresh bilateral trade and investment treaties are being negotiated and WTO reform is on the global policy agenda, this paper highlights the need to design a treaty regime that enhances the ability of poorer nations to mobilize domestic resources without jeopardizing fiscal and financial stability.

The main aim of this paper is to examine the threshold impact of financial development and trade liberalization on income inequality as a measure of sustainable development in a sample of developed and developing countries using panel threshold analysis. Two major dimensions of financial development are considered: liquid liabilities and stock market capitalization. The empirical results revealed that financial development reduces income inequality only in countries where their GDP per capita is above ~US$11,000. It has no significant impact in reducing inequality in developing countries. This implies that institutional reforms in less developed and developing countries are necessary in order to reap the gains from financial development. Trade liberalization is found to have a positive impact on income inequality for both country groups—that is, trade benefits have worsened the income distribution.

This paper studies the employment effect of China's possible implementation of zero tariffs by comparing China's most‐favored‐nation tariffs and the tariff schedules of China's signed free trade agreements (FTAs) with the tariff concessions in a typical high‐standard FTA. It finds that there is a large gap between China's current tariff status and a high‐standard FTA, and the implementation of zero tariffs in China would have a significant negative impact on employment in some industries. However, the employment effect of implementing zero tariffs is heterogeneous. Analysis at the industrial level shows that, although employment would drop in a few industries as a result of the implementation of zero tariffs, more jobs would be created in most industries. The overall employment effect of a zero tariff policy would be positive, creating an estimated 8.05 million jobs in China. Therefore, China should consider the adjustment costs brought by the labor movement in different industries and introduce relevant policies to deal with the employment shocks caused by zero tariffs.

We develop a political economy model to analyse the US–Mexican tomato trade agreement by treating the minimum import price as a negotiated settlement. We incorporate the special characteristics of the US–Mexican tomato dispute, namely trade among large countries, the role of competing fresh and processed tomato lobbies, quota revenues accruing to Mexican producers, bargaining for a minimum import price rather than a tariff, and the role of the Canadian tomato market. We show the importance of the size of the lobby group's supply, the weight elected officials' place on national welfare, and the elasticities of export supply and import demand in determining the optimal price wedge. For the United States, larger fresh tomato or cherry–grape tomato supply intensifies the degree of protection awarded to US growers, while US processors work to mitigate this effect. From Mexico's perspective, larger Mexican fresh or cherry–grape output induces a push towards free trade due to the agreement's depressing effect on Mexican prices, while Mexican processors and quota revenues exacerbate the price wedge.

Civilizations rise and fall based on the effectiveness of their socio‐political arrangements and institutions. The institutions that matter most are the laws and customs that govern 1) production and exchange of goods (trade), 2) land tenure and the distribution of the surplus associated with it, 3) the levying of taxes to provide public goods and services, and 4) the monetary systems adopted to facilitate such activities. If those institutions distribute the benefits of civilization equitably to all members of society, the result is likely to be peace and prosperity. However, if the rules of a society are designed to protect the interests of an elite, conflict is likely to ensue. Unrestricted trade across national borders (“free trade”) has the potential to produce socially beneficial outcomes, but it is not sufficient to overcome systemic injustices associated with flawed systems of land tenure, taxation, and monetary management. This article makes use of historical examples to examine trade in relation to the other institutions to show why just social arrangements must be considered an essential part of trade policy.