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Trade in an Environment of Increasing Economic Nationalism
Saturday, Jan. 6, 2018
2:30 PM - 4:30 PM
Agricultural and Applied Economics Association
Kathryn A. Boys,
North Carolina State University
Trade Liberalization and Institutional Constraints on Moves to Protectionism: Multilateralism Versus Regionalism
In this paper, two key questions are asked: why has the GATT/WTO worked in terms of multilateral tariff reduction and promotion of global trade, and to what extent will it act as a constraint on economic nationalism? To answer these two questions, the paper is divided into two sections: first, the seminal economic model (Bagwell and Staiger, 1999) rationalizing the economic logic of the GATT/WTO is assessed, along with a discussion of the perceived relevance of the GATT/WTO in a world of increasing regionalism (Bagwell, Bown and Staiger, 2016; Baldwin, 2016); and second, drawing on previous work (Chow, McGuire, and Sheldon, 2018), the robustness of the GATT/WTO legal framework and dispute resolution mechanism will be evaluated. The key conclusion of the paper is that the underlying economic logic of the GATT/WTO is still relevant, but that enforcement of the cooperative agreement will likely be placed under significant strain with threat of a potential trade war.
Trade and production impacts of rolling back NAFTA's agricultural preferences: An application of the systematic heterogeneity general equilibrium gravity model
We explore several scenarios under which NAFTA preferences for agriculture are rolled back using a systematic heterogeneity general equilibrium (GE) gravity model. In the systematic heterogeneity model, the distribution of productivity within the agricultural sector is linked to land and climate characteristics. The set of agricultural products in which a country is likely to have comparative advantage is then influenced by these characteristics. A country’s production and bilateral trade response to changes in a competitor’s trade costs is thus larger (smaller) for competitors that are more (less) likely to have comparative advantage in a similar set of products. We find that rolling back NAFTA’s agricultural preferences depresses consumer demand for agricultural products in North America and decreases the competitiveness of agricultural producers, both within and outside North America. As a consequence, NAFTA members’ exports decline in North America and globally.
Evaluating the Economic Impact of Brexit: ‘Fear-mongering’ or Just a Matter of Degree?
In this paper recent evidence on the economic impact of Brexit is considered, with particular reference to the UK and EU food and agricultural sectors. In the run-up to the Brexit referendum, there was a considerable amount of research that highlighted the expected impact of Brexit on the UK, the potentially substantial costs being almost universally highlighted by the economics profession (e.g., HM Treasury, 2016; OECD, 2016). However, this research was seemingly ignored by the general public (even by those who would be most likely negatively affected by Brexit); in political debate, ‘Brexit research’ was interpreted as ‘fear-mongering’ with the predictions of this research being unlikely to arise at least to the extent highlighted by the “Remain” camp. While the Brexit referendum may have reflected a broader range of concerns beyond the potential economic impact of Brexit, it has also been viewed as a lack of impact that economists have on ‘big’ issues of the day. In the paper, stock is taken of the economic research leading up to Brexit; the implications of Brexit for the food and agricultural sectors via trade and immigration are addressed, along with the expected effect on consumer food prices and farmer economic well-being. The paper concludes with some reflection on the wider implications for the EU and the implications that Brexit has for the future of regionalism particularly in the context of the UK seeking trade ‘deals’ outside the EU Single Market.
The Road Not Taken: Agricultural Trade Without the GATT/WTO
While economic theory and the founding principles of the GATT/WTO stand in stark contrast to economic nationalism, it is not clear what international (agricultural) trade would look like in a world without the GATT/WTO. Building on the foundations of Grant and Boys (2012), this paper will provide a comprehensive assessment of the counterfactual case of international agri-food trade in a global economy where economic nationalism either gains momentum or countries retreat from upholding their GATT/WTO commitments. Incorporating recent theoretical and empirical advances in estimation of the gravity equation explaining bilateral trade flows, and using both parametric and non-parametric approaches, results are presented concerning what would have been the level of global agricultural trade had developed and developing countries not participated in the GATT/WTO, essentially reversing decades of multilateral cooperation on market access.