Trade policy and the crisis: “The fateful allure of protectionism”

The CEPR & World Bank have a new book on trade policy and the crisis edited by Simon Evenett, Bernard Hoekman, and Olivier Cattaneo.

They are mostly warning that countries should guard against protectionism, though we haven’t seen any serious outbreak yet:

Some countries have utilized the ‘policy space’ they have to raise tariffs, but projections – based on past behaviour – are that any such increases are likely to remain limited: In a sector that in the 1970s and 1980s became a bastion of protectionism, textiles and apparel, policy remains very open. Another illustration of the relevance of WTO rules is that countries that are not members are among those that have made the most intensive use of measures to restrict trade and/or investment – e.g., Algeria, Russia.

Whether more positive actions – complete the Doha round, look at climate change initiatives, fund trade policy monitoring efforts, etc – are politically feasible remains to be seen.

Trade policy and the crisis: "The fateful allure of protectionism"

The CEPR & World Bank have a new book on trade policy and the crisis edited by Simon Evenett, Bernard Hoekman, and Olivier Cattaneo.

They are mostly warning that countries should guard against protectionism, though we haven’t seen any serious outbreak yet:

Some countries have utilized the ‘policy space’ they have to raise tariffs, but projections – based on past behaviour – are that any such increases are likely to remain limited: In a sector that in the 1970s and 1980s became a bastion of protectionism, textiles and apparel, policy remains very open. Another illustration of the relevance of WTO rules is that countries that are not members are among those that have made the most intensive use of measures to restrict trade and/or investment – e.g., Algeria, Russia.

Whether more positive actions – complete the Doha round, look at climate change initiatives, fund trade policy monitoring efforts, etc – are politically feasible remains to be seen.

“Does the internet defy the law of gravity?”

Bernardo Blum & Avi Goldfarb, Does the internet defy the law of gravity?, Journal of International Economics, 2006:

We show that gravity holds in the case of digital goods consumed over the Internet that have no trading costs. Therefore trade costs cannot fully account for the effects of distance on trade. In particular, we show that Americans are more likely to visit websites from nearby countries, even controlling for language, income, immigrant stock, etc. Furthermore, we show that this effect only holds for taste-dependent digital products, such as music, games, and pornography. For these, a 1% increase in physical distance reduces website visits by 3.25%. For non-taste-dependent products, such as software, distance has no statistical effect.

"Does the internet defy the law of gravity?"

Bernardo Blum & Avi Goldfarb, Does the internet defy the law of gravity?, Journal of International Economics, 2006:

We show that gravity holds in the case of digital goods consumed over the Internet that have no trading costs. Therefore trade costs cannot fully account for the effects of distance on trade. In particular, we show that Americans are more likely to visit websites from nearby countries, even controlling for language, income, immigrant stock, etc. Furthermore, we show that this effect only holds for taste-dependent digital products, such as music, games, and pornography. For these, a 1% increase in physical distance reduces website visits by 3.25%. For non-taste-dependent products, such as software, distance has no statistical effect.

FT: “WTO signals backing for border taxes”

Fiona Harvey for the Financial Times:

Countries implementing cap-and-trade systems for greenhouse gases may be able to use border taxes to protect domestic industries, after the World Trade Organisation gave a cautious nod to such measures.

In a report to be published today, written jointly with the United Nations Environment Programme, the WTO said it was possible to implement border measures for environmental reasons under its rules.

“Rules permit, under certain conditions, the use of border tax adjustments on imported and exported products,” said the WTO. “The objective of a border tax adjustment is to level the playing field between taxed domestic industries and untaxed foreign competition by ensuring that internal taxes on products are trade neutral.”

FT: "WTO signals backing for border taxes"

Fiona Harvey for the Financial Times:

Countries implementing cap-and-trade systems for greenhouse gases may be able to use border taxes to protect domestic industries, after the World Trade Organisation gave a cautious nod to such measures.

In a report to be published today, written jointly with the United Nations Environment Programme, the WTO said it was possible to implement border measures for environmental reasons under its rules.

“Rules permit, under certain conditions, the use of border tax adjustments on imported and exported products,” said the WTO. “The objective of a border tax adjustment is to level the playing field between taxed domestic industries and untaxed foreign competition by ensuring that internal taxes on products are trade neutral.”