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This paper takes a first look at new data on the content of Preferential Trade Agreements (PTAs). The data contain detailed information on the eighteen policy areas most frequently covered in PTAs, focusing on the stated objectives, substantive commitments, and other aspects such as transparency, procedures and enforcement. A number of new stylized facts emerge: (i) PTAs have reduced trade-weighted average tariff rates to less than 5 percent for more than two-thirds of countries; (ii) the number of commitments in PTAs has increased over time, particularly since the 2000s and in areas aiming at facilitating flows of services, goods and capital; (iii) deepening commitments have been accompanied by an increase in regulatory requirements, namely on enforcement; (iv) developing countries tend to have fewer commitments in PTAs, with larger gaps in areas such as labor and environment; (v) PTAs are more similar within blocs, but similarity can be significant even across blocs. The paper also discusses the challenges of quantification of PTA “depth” and its effects and proposes a research agenda for future work on trade agreements.

This paper studies the trade effects of COVID‐19 using monthly disaggregated trade data for 28 countries and multiple trading partners from the beginning of the pandemic to June 2020. Regression results based on a sector‐level gravity model show that the negative trade effects induced by COVID‐19 shocks varied widely across sectors. Sectors more amenable to remote work contracted less throughout the pandemic. Importantly, participation in global value chains increased traders’ vulnerability to shocks suffered by trading partners, but it also reduced their vulnerability to domestic shocks.

This paper attempts to quantify the impact of economic policy uncertainty on overall trade and trade linked to global value chains. Using new data on policy uncertainty for 18 countries and 24 years, it finds a statistically significant negative impact of policy uncertainty on overall trade growth. A 1 percent increase in uncertainty is associated with a 0.02 percentage point reduction in the growth of goods and services trade, implying that the increase in policy uncertainty since mid-2018 may have caused a 1 percentage point decline in world trade growth. The paper also finds that the impact of policy uncertainty on trade linked to global value chains is similar to overall trade. This is likely to be the result of two opposing forces: global value chains are more dependent on relation-specific investments that are sensitive to policy uncertainty, but these investments also make trade patterns sticky. More research and better data are needed to disentangle these different effects empirically.

SUMMARY How should economists interpret current trade wars and the recent US trade actions that have initiated them? In this paper, we offer an interpretation of current US trade actions that are at once more charitable and less forgiving than that typically offered by economic commentators. More charitable, because we argue that it is possible to see a logic to these actions: the United States is initiating a change from ‘rules-based’ to ‘power-based’ tariff bargaining and is selecting countries with which it runs bilateral trade deficits as the most suitable targets of its bargaining tariffs. Less forgiving, because the main costs of these trade tactics cannot be avoided even if they happen to ‘work’ and deliver lower tariffs. Rather, we show that the main costs will arise from the use of the tactics themselves and from the damage done by those tactics to the rules-based multilateral trading system and the longer-term interests of the United States and the rest of the world. JEL codes: F02, F13

This paper investigates the impact of global value chain participation on productivity, using data on trade in value added from the World Input-Output Database. The results based on a panel estimation covering 13 sectors in 40 countries over 15 years suggest that participation in global value chains is a significant driver of labor productivity. Backward participation in global value chains, that is, the use of imported inputs to produce for exports, emerges as particularly important. An increase by 10 percent in the level of global value chain participation increased average productivity by close to 1.7 percent.

The labor force of each industrial country is being shaped by three forces: ageing, education and migration. Drawing on a new database for the OECD countries and a standard analytical framework, this paper focuses on the relative and aggregate effects of these three forces on wages across different skill and age groups over 2000–2010. The variation in the age and educational structure of the labor force emerges as the dominant influence on wage changes. The impact is uniform and egalitarian: in almost all countries, the changes in the age and skill structure favor the low-skilled and hurt the highly skilled across age groups. Immigration plays a relatively minor role, except in a handful of open countries, like Australia and Canada, where it accentuates the wage-equalizing impact of ageing and education. Emigration is the only inegalitarian influence, especially in Ireland and a few Eastern European countries which have seen significant outflows of high-skilled labor to Western European Union countries.

To understand the longer term consequences of natural disasters for global value chains, this paper examines trade in the automobile and electronic sectors after the 2011 earthquake in Japan. Contrary to widespread expectations, the analysis shows that the shock did not lead to reshoring, nearshoring, or diversification; and trade in intermediate products was disrupted less than trade in final goods. Imports did shift to new suppliers, especially where dependence on Japan was greater. But production relocated to developing countries rather than to other top exporters. Despite important differences, the observed pattern of switching may be relevant to disasters like the COVID-19 pandemic.

Manufacturers in India are increasingly selling services—a phenomenon referred to as servitization. Both the proportion of manufacturers selling services and the share of services in total revenue of manufacturers increased threefold between 1994 and 2013. More productive manufacturers and those more exposed to import competition are more likely to sell services and to obtain a higher share of their revenue from services. A 10 percent increase in servitization is associated with 2.6 percent increase in manufacturing revenue. However, servitizing firms suffer a greater contraction in manufacturing revenue with increased import competition. This evidence suggests that servitization is not a successful defensive strategy to maintain manufacturing sales in the face of import competition, and it is more likely to be an exit strategy to flee import competition. Corroborative results indicate that past services sales are positively associated with the introduction of new services products and eventually a switch out of manufacturing and into services as the primary activity. Thus, servitization appears to be an aspect of “premature deindustrialization” in India, driven by the inability of manufacturers to cope with import competition, rather than structural transformation associated with a maturing manufacturing sector.

Deep trade agreements (DTAs) cover not just trade but additional policy areas, such as the international flows of investment and labor, and the protection of intellectual property rights and the environment. Their goal is integration beyond trade, or deep integration. DTA rules influence how countries transact, invest, work, and, ultimately, develop. The rules and commitments in DTAs should be informed by evidence and shaped by development priorities rather than international power or domestic politics. An impediment to this goal is that data and analysis on trade agreements have not captured the new dimensions of integration. Little effort has been made to identify the content and consequences of DTAs. This Handbook takes a step towards filling this gap in our understanding of international economic law and policy. It presents detailed data and analysis on the content of the policy areas most frequently covered in DTAs, focusing on the stated objectives, substantive commitments, and other aspects such as transparency, procedures, and enforcement. Each chapter, authored by lead experts in their respective fields, explains in detail the methodology used to collect the information and provides a first look at the evidence by policy area.

This paper presents new data on the content of preferential trade agreements. The data contain detailed information on the 18 policy areas most frequently covered in preferential trade agreements, focusing on the stated objectives, substantive commitments, and other aspects such as transparency, procedures, and enforcement. Several new stylized facts emerge: (i) preferential trade agreements have reduced trade-weighted average tariff rates to less than 5 percent for more than two-thirds of countries; (ii) the number of commitments in preferential trade agreements has increased over time, particularly since the 2000s and in areas aiming at facilitating flows of services, goods, and capital; (iii) deepening commitments have been accompanied by an increase in regulatory requirements, namely on enforcement; (iv) developing countries tend to have fewer commitments in preferential trade agreements, with larger gaps in areas such as labor and the environment; and (v) preferential trade agreements are more similar within blocs, but similarity can be significant even across blocs. The paper also discusses the challenges of quantification of preferential trade agreements "depth" and its effects and proposes a research agenda for future work on trade agreements.

This paper describes the Services Trade Policy Database, a joint initiative by the World Bank and the World Trade Organization Secretariat, which builds on a database developed by the World Bank nearly 10 years ago and draws on a recent Organisation for Economic Co-operation and Development database. The Services Trade Policy Database offers comparable information on services trade policies for 68 economies in 23 subsectors across five broad areas -- financial services, telecommunications, distribution, transportation, and professional services. The database features several improvements. First, the data are collected according to a newly developed policy classification, consistent with the earlier World Bank database and the current Organisation for Economic Co-operation and Development database, enabling a comparison of services policies over a significant period and across a large cross-section of industrial and developing economies. Second, in addition to trade policies, the database contains information on licensing conditions and data restrictions. Third, policy restrictiveness is quantified following a more systematic approach that aggregates the information within a single consistent and transparent framework. Building on these innovations will make it possible to identify global patterns of services trade policies and secular trends in policy making over the past decade.

Are changes in services markets provoking reform, restrictions, or inertia? To address this question, this paper draws on a new World Bank-World Trade Organization Services Trade Policy Database. The paper analyzes the services trade policies of 68 economies in 23 subsectors across five broad areas -- financial services, telecommunications, distribution, transportation, and professional services. Policy measures are quantified into a Services Trade Restrictions Index (STRI) following a novel, consistent and transparent framework. The paper identifies patterns of services trade policies across sectors and economies, and secular trends over the past decade. Higher income economies are still more open on average than developing economies, but the chronology of reform differs markedly across sectors. In telecommunications and finance, there is convergence toward greater openness driven by liberalization in the previously more restrictive developing economies. In the hitherto universally protected transport and professional services, there is policy divergence, as some higher income economies pioneer reform. But while explicit restrictions are being lowered in most services sectors—in contrast to recent developments in goods trade policy -- there is greater recourse to regulatory scrutiny, especially in higher income economies. These measures could reflect legitimate prudential or security concerns, but they could also reflect recourse to less transparent forms of protection.

This paper examines how providing better information to customs inspectors and monitoring their actions affects tax revenue and fraud detection in Madagascar. First, an instrumental variables strategy is used to show that transaction-specific, third-party valuation advice on a subset of high-risk import declarations increases fraud findings by 21.7 percentage points and tax collection by 5.2 percentage points. Second, a randomized control trial is conducted in which a subset of high-risk declarations is selected to receive detailed risk comments and another subset is explicitly tagged for ex-post monitoring. For declarations not subject to third-party valuation advice, detailed comments increase reporting of fraud by 3.1 percentage points and improve tax yield by 1 percentage point. However, valuation advice and detailed comments have a significantly smaller impact on revenue when potential tax losses and opportunities for graft are large. Monitoring induces inspectors to scan more shipments but does not result in the detection of more fraud or the collection of additional revenue. Better information thus helps curb customs fraud, but its effectiveness appears compromised by corruption.

Faced with COVID-19 (Coronavirus), countries are taking drastic action based on little information. Two tests can help governments shorten and soften economically costly suppression measures while still containing the novel coronavirus (COVID-19) pandemic. The first—a PCR assay—identifies people currently infected by testing for the presence of live virus in the subject. The second—an antibody test—identifies those rendered immune after being infected by searching for COVID-19-specific antibodies. The first test can help contain the disease because it facilitates the identification of infected persons, the tracing of their contacts, and isolation in the very early stages of an epidemic—or after a period of suppression, in case of a resurgent epidemic. The second can help us assess the extent of immunity in the general population or subgroups, to finetune social isolation and to manage health care resources. Wide application of the two tests could transform the battle against COVID-19 (Coronavirus), but implementing either on a large scale in developing countries presents challenges. The first test is generally available, but needs to be processed in adequately equipped laboratories with trained staff. The second test is easy to perform and can be processed quickly on the spot, but at this stage it is produced and available only on a limited basis in a few countries. This policy brief reviews the use of both tests, suggests strategies to target their use, and discusses the benefits and costs of such strategies. If PCR assay testing, together with tracing and isolation, helps reduce the duration of suppression measures by two weeks, and antibody testing allows one-fifth of the immune return to work early, the gain could be about 2 percent of national income, or about $8 billion for a country like the Philippines. Because the estimated economic benefits of the tests are likely to far outweigh the cost, the international community must help countries develop the capacity to process the first test and procure the second.

The virus that triggered a localized shock in China is now delivering a significant global shock. This study simulates the potential impact of COVID-19 on gross domestic product and trade, using a standard global computable general equilibrium model. It models the shock as underutilization of labor and capital, an increase in international trade costs, a drop in travel services, and a redirection of demand away from activities that require proximity between people. A baseline global pandemic scenario sees gross domestic product fall by 2 percent below the benchmark for the world, 2.5 percent for developing countries, and 1.8 percent for industrial countries. The declines are nearly 4 percent below the benchmark for the world, in an amplified pandemic scenario in which containment is assumed to take longer and which now seems more likely. The biggest negative shock is recorded in the output of domestic services affected by the pandemic, as well as in traded tourist services. Since the model does not capture fully the social isolation induced independent contraction in demand and the decline in investor confidence, the eventual economic impact may be different. This exercise is illustrative, because it is still too early to make an informed assessment of the full impact of the pandemic. But it does convey the likely extent of impending global economic pain, especially for developing countries and their potential need for assistance.

Should the China-U.S. trade agreement prompt relief because it averts a damaging trade war or concern because selective preferential access for the United States to China's markets breaks multilateral rules against discrimination? The answer depends on how China implements the agreement. Simulations from a computable general equilibrium model suggest that the United States and China would be better off under this"managed trade"agreement than if the trade war had escalated. However, compared with the policy status quo, the deal will make everyone worse off except the United States and its input-supplying neighbor, Mexico. Real incomes in the rest of world would decline by 0.16 percent and in China by 0.38 percent because of trade diversion. China can reverse those losses if, instead of granting the United States privileged entry, it opens its market for all trading partners. Global income would be 0.6 percent higher than under the managed trade scenario, and China's income would be nearly 0.5 percent higher. By creating a stronger incentive for China to open its markets to all, an exercise in bilateral mercantilism has the potential to become an instrument for multilateral liberalization.

East Asia, for long the epitome of successful engagement in trade, faces serious challenges: technological change that may threaten the very model of labor intensive industrialization and a backlash against globalization that may reduce access to important markets. A detailed analysis of the evolution of East Asia's trade and trade policy in goods and services leads to the conclusion that how East Asia copes with these global challenges will depend on how it addresses three more proximate national and regional challenges. The first is the emergence of one East Asian country, China, as a global trade giant—accounting for nearly one-seventh of global exports and one-tenth of global imports -- which is fundamentally altering the trading patterns and opportunities of its neighbors. The second is the asymmetric implementation of national reform -- remarkable openness to goods trade and investment coexists with relative restrictiveness of services policies -- which is affecting the evolution of comparative advantage and productivity in each country. The third is the divergence between the relatively shallow and fragmented agreements that regulate the region’s trade and investment and the growing importance of regional and global value chains as crucial drivers of productivity growth.

This report is part of a broader work program on shaping a more positive narrative on regional integration in South Asia. It is a follow-up to a recent flagship report published by the South Asia Region of the World Bank, A Glass Half Full: The Promise of Regional Trade in South Asia. E-commerce is dramatically changing the way goods and services are transacted nationally, regionally, and globally. It facilitates international trade by reducing the cost of distance and remoteness and can be more inclusive of underrepresented groups such as women, small businesses, and rural entrepreneurs. Intraregional trade in South Asia is still below its potential, and the region lags behind other parts of the world in activating the potential benefits from e-commerce. Adopting a novel yet practical approach, this report explores how e-commerce can be boosted to deepen intraregional trade in South Asia. It examines the main transacting models in the digital space and the channels through which e-commerce helps reduce transactions costs for firms and consumers. It considers the regulations, as well as the regulatory gaps, affecting private sector participation in e-commerce, focusing on data privacy, consumer protection, delivery, cybersecurity, market-access regulations, and digital payments. Finally, the report presents recommendations for regulatory reforms that could enhance e-trade, especially in a regional context and as a possible platform for greater global engagement by South Asian firms. The scale of these recommendations ranges from the modest, such as allowing cross-border payments and streamlining the customs regime, to the more ambitious, such as allowing the operation of regional e-commerce platforms and liberalizing related cross-border logistics services.

Does "infant industry" preferential access durably boost export performance? This paper exploits significant trade policy changes in the United States around the turn of the 21st century to address this question. The expansion of Generalized System of Preferences (GSP) products for less developed countries in 1997 and the implementation of the African Growth and Opportunity Act (AGOA) in 2001 is used to assess whether preferential access boosts exports of eligible products in general and apparel specifically. The phase-out of the Multi-Fiber Arrangement (MFA) in 2005 is used to assess whether any expansion in apparel exports survived the erosion of preferences. To find a causal impact of these changes on exports to the United States from a given beneficiary country, the analysis uses a triple-differences regression and 26 years of newly constructed trade and tariff data at the country-product-year level (1992-2017). The analysis finds that the AGOA boosted African apparel exports, and the expansion of the GSP increased African exports of other eligible products. While the marginal impacts on African apparel exports grew sharply in the first years of AGOA, the impacts leveled off after 2005, when the end of the MFA quotas unleashed competition from Asian countries. The illusion of sustained African apparel exports is created by three late-bloomers in East Africa offsetting the boom-bust pattern in Southern Africa and the never-significant response in Central and Western Africa. Firm-level customs data for selected countries reveal that even in East Africa, the recent export growth was driven by new entrants rather than by incumbent firms whose competitiveness might have been nurtured by the big preference margins during the early AGOA period. Understanding the heterogeneous response to trade preferences remains a challenge. However, preliminary evidence suggests that preferential access per se was not sufficient but needed to be complemented by specific domestic reforms: tariff liberalization, reduced regulatory burden, enhanced connectivity, and competitive exchange rates.