How Have Trade Agreements Led To Globalisation
Economists generally distinguish between «general equilibrium consumption effects» (i.e. changes in consumption resulting from trade influencing prices of uns negotiated goods versus traded goods) and «general equilibrium effects» (i.e. wage variations resulting from the fact that trade affects the demand of certain types of workers who could be employed in trade and the unseeded sector). The graph shows the value of world exports over the period 1800-2014. These estimates are at constant prices (i.e. adjusted for inflation) and are indexed to 1913 values. Topalova, P. (2010). The factors of immobility and the regional impact of trade liberalization: evidence of poverty from India.
American Economic Journal: Applied Economics, 2 (4), 1-41. Available online here. This result is important because it shows that there are commercial advantages. But of course, efficiency is not the only relevant consideration here. As we discuss in an accompanying blog post, trade efficiency gains are generally not evenly divided by all. Evidence of the impact of trade on business productivity confirms this: «The redeployment of workers from less efficient producers» means that some jobs will be closed in some places. Given that distributional problems are real, it is important to promote public policies – such as unemployment benefits and other safety net programmes – that help redistribute the profits of trade. An important question is how these agreements, which are concluded and disgraced, will shape future trade and economic relations. Recent studies have examined the impact of trade agreements on trade flows (Baier et al.
2017, Mattoo et al. 2017). In our research (Laget et al. 2018), we use new data on the content of trade agreements to assess their impact on countries` participation in global value chains (CIS) 1 Until 1870, the sum of world exports accounted for less than 10% of world production. Today, the value of goods exported to the world is close to 25%. This shows that in the last hundred years of economic growth, world trade has grown more than proportionally. Preferential trade agreements (EPAs) have deepened over time and often go beyond traditional trade policy and encompass areas such as investment, competition and the protection of intellectual property rights. To assess the link between cross-border production relationships and the depth of trade agreements, we use a structural gravity model at the aggregate and sectoral levels.