Shang-Jin Wei has his hand in a pair of recent papers that sound interesting.

Raymond Fisman, Peter Moustakerski, Shang-Jin Wei – “Outsourcing Tariff Evasion: A New Explanation for Entrepot Trade”

Traditional explanations for indirect trade through an entrepot have focused on savings in transport costs and on the role of specialized agents in processing and distribution.  We provide an alternative perspective based on the possibility that entrepots may facilitate tariff evasion.  Using data on direct exports to mainland China and indirect exports via Hong Kong SAR, we find that the indirect export rate rises with the Chinese tariff rate, even though there is no legal tax advantage to sending goods via Hong Kong SAR.  We undertake a number of extensions to rule out plausible alternative hypotheses based on existing explanations for entrepot trade.

Shang-Jin Wei & Zhiwei Zhang – “Collateral Damage: Exchange Controls and International Trade”

While new conventional wisdom warns that developing countries should be aware of the risks of premature capital account liberalization, the costs of not removing exchange controls have received much less attention. This paper investigates the negative effects of exchange controls on trade. To minimize evasion of controls, countries often intensify inspections at the border and increase documentation requirements. Thus, the cost of conducting trade rises. The paper finds that a one standard-deviation increase in the controls on trade payment has the same negative effect on trade as an increase in tariff by about 14 percentage points. A one standard-deviation increase in the controls on FX transactions reduces trade by the same amount as a rise in tariff by 11 percentage points. Therefore, the collateral damage in terms of foregone trade is sizable.