Trade Policy
Paper Session
Friday, Jan. 3, 2025 10:15 AM - 12:15 PM (PST)
- Chair: Pol Antràs, Harvard University
A World Trading System For Whom? Evidence from Global Tariffs
Abstract
We use global tariffs to reveal the weights that nations implicitly place on the welfare of their trading partners relative to their own. Our estimated welfare weights suggest that formal and informal rules of the world trading system make countries internalize the impact of their policies onto others to a substantial extent, though not fully. On average, countries place 19% less value on transfers to foreigners than transfers to their own residents. Across nations, we find that countries that put more weights on the welfare of foreigners also tends to receive higher welfare weights from them. Our results are consistent with international cooperation being sustained by a general form of reciprocity among nations: cooperative behavior by one country, in the form of a higher welfare weight, is reciprocated with cooperative behavior by its partner, also in the form of a higher welfare weight. This is true both within and outside the World Trade Organization.The Increasing Cost of Buying American
Abstract
The latest resurgence in the U.S. of policies aimed at reducing imports and bolstering domestic production has included the expansion of Buy American provisions. While some of these are new and untested, in this paper we evaluate long-standing procurement limitations on the purchase of foreign products by the U.S. Federal Government. We use procurement micro-data to first map and measure the positive employment effects of government purchases. We then calibrate a quantitative trade model adapted to include features relevant to the Buy American Act: a government sector, policy barriers in final and intermediate goods, labor force participation, and external economies of scale. We show that current Buy American provisions on final goods purchase have created up to 100,000 jobs at a cost of between $111,500 and $137,700 per job. However, the recently announced tightening of the policy on the use of foreign inputs will create fewer jobs at a higher cost of $154,000 to $237,800 per job. We also find scant evidence of the use of Buy American rules as an effective industrial policy.Multinational Production and Trade Policy
Abstract
Multinational enterprises dominate international trade, yet much of the literature on optimal trade policy has overlooked their significance. We show that in 2018-2019 the Trump administration prioritized tariffs on goods from China that belong to industries with a higher related-party share, and that imports from China declined more for goods that belong to such industries. Theoretically, we show that multinational production shapes the aggregate trade elasticity, via the substitution of labor inside multinational enterprises across different countries of production. When markets are competitive and abstracting from entry costs to become a multinational enterprise, we obtain a neutrality result for optimal tariffs: unilaterally optimal second-best tariffs are uniform across sectors and countries, despite variations in multinational activity. In imperfectly competitive markets, governments have an incentive to set optimal tariffs that shift profits toward domestically owned multinationals.Discussant(s)
Ahmad Lashkaripour
,
Indiana University
Robert W. Staiger
,
Dartmouth College
Lydia Cox
,
University of Wisconsin-Madison
Stephen Yeaple
,
Pennsylvania State University
JEL Classifications
- F1 - Trade