Free trade agreements and globalisation in the shadow of brexit and trump

FREE TRADE AGREEMENTS AND GLOBALISATION In the Shadow of Brexit and Trump Arne Melchior Free Trade Agreements and Globalisation Arne Melchior Free Trade Agreements and Globalisation In the Shadow of Brexit and Trump Arne Melchior Norwegian Institute of International Affairs Oslo, Norway ISBN 978-3-319-92833-3    ISBN 978-3-319-92834-0 (eBook) https://doi.org/10.1007/978-3-319-92834-0 Library of Congress Control Number: 2018946237 © The Editor(s) (if applicable) and The Author(s) 2018 This work is subject to copyright All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations Cover illustration: Sandema / Alamy Stock Photo Printed on acid-free paper This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland Acknowledgements Main parts of this book were written as contributions to the research project “Europe in transition—small states in an age of global shifts (EUNOR)”, funded by the Research Council of Norway (project no 238017) during 2014–2017 The model presented in Chap and Appendix B was partly developed as part of the research project “Trade Integration, Geopolitics and the Economy of Russia (TIGER)”, funded by the Research Council of Norway during 2013–2016 (project no 228244) I would like to gratefully acknowledge the financial support provided by the Research Council of Norway I thank Natalia Turdyeva and other TIGER projects’ participants for useful feedback when the preliminary material was presented at a project workshop at Centre for Economic and Financial Research (CEFIR), Moscow (21 April 2016) I also thank Natalia Turdyeva and Roman Vakulchuk for guidance in accessing regional data for Russia and Kazakhstan, respectively, and Sergei Golovan for useful advice on aspects of MATLAB programming Parts of the material included in the book were also presented at seminars during 2017 at the University of Oslo and at the Norwegian Institute of International Affairs, Oslo, Norway, and at the conference on “Trade and Integration in a Time of Anti-Globalisation” in Malmö, Sweden, on 25–27 October 2017 I thank the participants at these seminars and conferences for their valuable comments.  Finally, I thank the anonymous referees of Palgrave Macmillan for their useful comments on the plan for v vi  Acknowledgements the book as well as a preliminary version of it I also thank Laura Pacey and Clara Heathcock at Palgrave Macmillan for their excellent follow-up as well as patience when the book deadline had to be postponed for unforeseen reasons As usual, the responsibility for remaining errors, if any, stays with the author Contents 1 Introduction and Overview   1 2 A Portrait of World Trade  19 3 The Global Landscape of FTAs  37 4 Tariffs: The Most and the Least Favoured Nations  49 5 Non-tariff Issues in FTAs  67 6 How Important Is Trade? Estimates from a World Trade Model  93 7 Trade, USA and the Rise of China: Pains and Gains 115 8 Global Versus Local Integration and Europe’s Options 131 9 Trade Policy Spillovers and Regulatory Cooperation 147 vii viii  Contents A  ppendix A: Data Tables 173  Appendix B: A World Trade Model with Commodities and Differentiated Goods 179 Appendix C: Tables Related to Numerical Model Simulations 211  Appendix D: Teaching Material: A Simple Model of Regional Trade Integration 265 Index 271 Abbreviations ACP Africa, Caribbean and Pacific countries AD Anti-dumping AfCFTA African Continental Free Trade Area AGOA African Growth and Opportunity Act (US trade preferences) ANZCERTA Australia-New Zealand Closer Economic Relations Trade Agreement BEA Bureau of Economic Analysis (US agency) BITs Bilateral Investment Treaties CBI Caribbean Basin Initiative (US trade preferences) CD Countervailing Duties (WTO measure against subsidies) CES Constant Elasticity of Substitution CGE Computable General Equilibrium COMTRADE United Nations Commodity Trade Statistics Database CTS Consolidated Tariff Schedules (of the WTO) DESTA Design of Trade Agreements database DSM Dispute Settlement Mechanism EAEU Eurasian Economic Union EBA Everything But Arms (EU trade preferences for LDCs) EEA European Economic Area EFTA European Free Trade Association EPA Economic Partnership Agreements (EU trade agreements with ACP) FAO Food and Agriculture Organization ix x  Abbreviations FATF Financial Action Task Force FMINCON Constrained Non-linear Minimization Algorithm in MATLAB FSB Financial Stability Board FTA Free Trade Agreement GATS General Agreement on Trade in Services GATT General Agreement on Tariffs and Trade GDP Gross Domestic Product GSP Generalised System of Preferences GVC Global Value Chain HM Her Majesty IAIS International Association of Insurance Supervisors ICP International Comparison Program (mapping international price differences) ICT Information and Communication Technology IIT Intra-industry Trade ILO International Labour Organization IMF International Monetary Fund IOSCO International Organization of Securities Commissions IPR Intellectual Property Rights ISDS Investor-State Dispute Settlement ITU International Telecommunication Union LDCs Least Developed Countries MAI Multilateral Agreement on Investment MFN Most Favoured Nation MRA Mutual Recognition Agreement NAFTA North American Free Trade Agreement NQTM New Quantitative Trade Models NTM Non-tariff Measures OECD Organisation for Economic Co-operation and Development PPP Purchasing Power Parity PSAs Partial Scope Agreements (between developing countries, notified under WTO’s enabling clause) REACH Registration, Evaluation, Authorisation of Chemicals (EU chemical regulation) RO Rules of Origin RTA Regional Trade Agreement SACU South African Customs Union 262  Appendix C: Tables Related to Numerical Model Simulations  ppendix Table C.18: Intra-regional Trade A Integration in World Regions: Impact on Real Income Per Capita Results from numerical simulations Shaded areas: Regions involved in trade integration Head row denotes integration scenarios Region Runwest1 Runwest2 Rucentr Rusouth Ruvolga Ruural Rusibwe Rusibno Rusibea Rufesou Rufenor Rusakha Belarus Kaznor Kazsou Kazwes Armen Kyrgyz Georgia Azerb Tajik Uzbek Ukraine Moldova Benelux France Germany Italy Greece Unitedk Ireland Denmark Spaport Sweden Finland WEUR –0.05 –0.01 –0.05 –0.04 –0.01 0.00 –0.01 0.00 0.00 0.00 0.00 0.00 –0.06 –0.03 –0.04 –0.01 –0.05 –0.04 –0.05 –0.01 –0.04 –0.03 –0.05 –0.07 0.52 0.41 0.41 0.48 0.63 0.45 0.50 0.48 0.53 0.50 0.56 EEUR 0.22 0.09 0.19 0.21 0.11 0.09 0.14 0.09 0.09 0.09 0.09 0.09 0.33 0.36 0.39 0.17 0.30 0.37 0.27 0.16 0.47 0.35 0.26 0.38 –0.01 –0.01 –0.01 –0.01 –0.01 –0.01 –0.01 –0.01 –0.01 –0.01 –0.01 NAM –0.04 0.00 –0.04 –0.03 –0.01 0.00 –0.01 0.00 0.00 0.00 0.00 0.00 –0.04 –0.03 –0.04 0.00 –0.04 –0.03 –0.04 0.00 –0.04 –0.02 –0.03 –0.04 –0.04 –0.04 –0.04 –0.04 –0.04 –0.04 –0.05 –0.04 –0.05 –0.04 –0.04 Integration scenario: SAM MEA AFR –0.01 –0.02 –0.02 0.00 0.00 0.01 –0.01 –0.02 –0.02 –0.01 –0.03 –0.02 0.00 –0.01 0.00 0.00 0.00 0.01 0.00 –0.01 0.00 0.00 0.00 0.01 0.00 0.00 0.01 0.00 0.00 0.01 0.00 0.00 0.01 0.00 0.00 0.01 –0.01 –0.02 –0.02 –0.01 –0.02 –0.02 –0.01 –0.02 –0.02 0.00 0.00 0.01 –0.01 –0.03 –0.02 –0.01 –0.02 –0.02 –0.01 –0.03 –0.02 0.00 0.00 0.01 –0.01 –0.03 –0.02 –0.01 –0.02 –0.01 –0.01 –0.02 –0.02 –0.01 –0.03 –0.02 –0.01 –0.02 –0.02 –0.01 –0.02 –0.02 –0.01 –0.02 –0.02 –0.01 –0.03 –0.03 –0.01 –0.03 –0.03 –0.01 –0.02 –0.02 –0.02 –0.02 –0.03 –0.01 –0.02 –0.02 –0.02 –0.02 –0.03 –0.01 –0.02 –0.02 –0.01 –0.02 –0.02 ASIA –0.35 0.03 –0.35 –0.33 –0.06 0.01 –0.15 –0.01 –0.02 –0.03 –0.01 –0.01 –0.33 –0.34 –0.43 0.02 –0.36 –0.39 –0.38 0.03 –0.45 –0.26 –0.25 –0.36 –0.32 –0.32 –0.32 –0.33 –0.36 –0.30 –0.33 –0.31 –0.32 –0.33 –0.33 World 2.67 2.57 2.59 2.65 2.57 2.58 2.63 2.57 2.56 2.58 2.67 2.62 2.89 3.31 3.35 2.98 2.72 3.38 2.46 2.89 3.82 3.67 2.73 2.84 1.90 1.81 1.75 2.08 2.39 1.82 2.01 1.89 2.15 1.93 2.11      Appendix C: Tables Related to Numerical Model Simulations  Region Eucentr Baltic Poland Bulgrom Norway Iceland Switzer Turkey Balkan Cabco Caeast Camid Canor Caont Usalas Uslake Usnoea Usplai Usrock Ussoea Ussowe Uswest Mexico Amecen Amecen2 Andean Brazn Brazne Brazse Brazse Brazco Argenti Paragua Uruguay Chile Egypt Medeas Arabia Iran Afghan Pakista Indcen Indne1 Indne2 Indnor WEUR 0.57 0.55 0.52 0.60 0.50 0.63 0.53 –0.06 –0.07 –0.03 –0.04 –0.01 –0.01 –0.04 –0.02 –0.04 –0.04 –0.03 –0.03 –0.03 –0.03 –0.03 –0.03 –0.04 –0.01 –0.02 –0.03 –0.03 –0.02 –0.03 –0.03 –0.03 –0.03 –0.03 –0.01 –0.04 –0.06 –0.01 –0.01 –0.04 –0.03 –0.03 –0.02 –0.03 –0.03 EEUR –0.01 –0.01 –0.01 –0.01 0.00 –0.01 –0.01 –0.01 –0.01 0.00 0.00 0.00 0.00 –0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 –0.01 0.00 0.00 –0.01 –0.01 0.00 0.00 0.00 –0.01 NAM –0.04 –0.04 –0.04 –0.04 –0.02 –0.06 –0.04 –0.04 –0.04 0.66 0.62 0.46 0.48 0.62 0.50 0.44 0.40 0.49 0.52 0.42 0.46 0.48 0.81 –0.08 –0.01 –0.03 –0.05 –0.05 –0.04 –0.05 –0.05 –0.05 –0.05 –0.05 –0.02 –0.02 –0.04 0.00 0.00 –0.04 –0.03 –0.03 –0.02 –0.02 –0.03 Integration scenario: SAM MEA AFR –0.01 –0.03 –0.02 –0.01 –0.02 –0.02 –0.01 –0.02 –0.02 –0.01 –0.03 –0.02 0.00 –0.01 –0.01 –0.02 –0.02 –0.02 –0.01 –0.02 –0.03 –0.01 0.55 –0.02 –0.01 0.63 –0.02 –0.02 –0.02 –0.02 –0.02 –0.02 –0.02 0.00 0.00 0.00 0.00 0.00 0.00 –0.02 –0.02 –0.02 –0.01 –0.01 –0.01 –0.02 –0.02 –0.02 –0.02 –0.02 –0.02 –0.02 –0.02 –0.02 –0.02 –0.01 –0.02 –0.02 –0.02 –0.02 –0.01 –0.01 –0.01 –0.02 –0.02 –0.02 –0.02 –0.01 –0.01 0.60 –0.02 –0.02 0.44 0.00 0.00 0.42 –0.01 –0.01 0.41 –0.01 –0.02 0.39 –0.02 –0.02 0.29 –0.01 –0.02 0.38 –0.02 –0.02 0.40 –0.02 –0.02 0.47 –0.02 –0.02 0.57 –0.02 –0.02 0.51 –0.02 –0.02 0.24 0.00 0.00 –0.01 0.43 –0.02 –0.01 0.64 –0.03 0.00 0.15 0.00 0.00 0.51 0.00 –0.01 0.84 –0.02 –0.01 0.52 –0.02 –0.01 –0.02 –0.02 –0.01 –0.01 –0.01 –0.01 –0.02 –0.01 –0.01 –0.02 –0.02 ASIA –0.33 –0.32 –0.32 –0.32 –0.14 –0.37 –0.34 –0.36 –0.30 –0.31 –0.28 –0.05 –0.07 –0.31 –0.18 –0.29 –0.29 –0.28 –0.28 –0.28 –0.22 –0.33 –0.20 –0.29 0.01 –0.09 –0.21 –0.29 –0.20 –0.28 –0.27 –0.27 –0.27 –0.27 –0.02 –0.20 –0.37 0.02 0.02 –0.47 –0.45 1.74 1.84 2.02 1.96 World 2.13 2.20 2.14 2.36 2.00 2.28 1.92 2.45 2.62 2.35 2.21 2.17 2.21 2.14 2.30 1.98 1.90 2.09 2.20 1.95 2.11 2.13 2.63 2.97 3.11 3.04 3.04 3.01 2.86 3.00 3.03 3.18 3.45 3.26 2.63 2.79 2.45 2.49 3.45 3.54 2.67 2.32 2.43 2.54 2.51 263 264  Region indsou indwes asiasou srilank asean1 Thailan Singapo Philipp Malaysi Indones chicn chics chiin chiis chimo chine chiwe chicm mongol korea japan honkong austral newzeal afrnor afrwest afreast afrcen afrsadc afrsacu Appendix C: Tables Related to Numerical Model Simulations WEUR – 0.03 – 0.03 – 0.03 – 0.04 – 0.03 – 0.02 – 0.03 – 0.03 – 0.02 – 0.02 – 0.03 – 0.02 – 0.02 – 0.02 0.00 – 0.03 0.00 – 0.02 – 0.02 – 0.03 – 0.03 – 0.03 – 0.02 – 0.03 – 0.04 – 0.03 – 0.04 – 0.03 – 0.02 – 0.03 EEUR 0.00 0.00 – 0.01 – 0.01 0.00 0.00 – 0.01 0.00 0.00 0.00 – 0.01 0.00 0.00 0.00 0.00 – 0.01 0.00 0.00 0.00 – 0.01 – 0.01 – 0.01 0.00 0.00 0.00 0.00 – 0.01 0.00 0.00 0.00 NAM – 0.03 – 0.02 – 0.03 – 0.04 – 0.03 – 0.03 – 0.04 – 0.03 – 0.02 – 0.02 – 0.03 – 0.03 – 0.03 – 0.02 0.01 – 0.03 0.00 – 0.03 0.00 – 0.04 – 0.04 – 0.04 – 0.03 – 0.05 – 0.02 – 0.03 – 0.03 – 0.02 – 0.02 – 0.03 IntegraƟon scenario: SAM MEA AFR – 0.01 – 0.02 – 0.02 – 0.01 – 0.02 – 0.01 – 0.01 – 0.02 – 0.02 – 0.01 – 0.02 – 0.02 – 0.01 – 0.02 – 0.01 – 0.01 – 0.02 – 0.02 – 0.01 – 0.02 – 0.02 – 0.01 – 0.02 – 0.02 0.00 – 0.01 – 0.01 – 0.01 – 0.01 – 0.01 – 0.01 – 0.02 – 0.02 – 0.01 – 0.02 – 0.02 – 0.01 – 0.01 – 0.01 – 0.01 – 0.01 – 0.01 0.01 0.00 0.01 – 0.01 – 0.02 –-0.01 0.00 0.00 0.00 – 0.01 – 0.02 – 0.02 0.00 0.00 – 0.01 – 0.01 – 0.02 – 0.02 – 0.01 – 0.02 – 0.02 – 0.01 – 0.02 – 0.02 – 0.01 – 0.01 – 0.01 – 0.02 – 0.02 – 0.02 0.00 0.44 – 0.01 – 0.01 – 0.02 0.64 – 0.01 – 0.02 0.80 – 0.01 – 0.01 0.75 – 0.01 – 0.01 0.55 0.52 – 0.01 – 0.02 ASIA 1.84 1.78 2.41 2.59 2.09 1.40 1.27 1.57 1.28 1.41 1.08 1.14 1.02 1.01 0.87 1.28 1.03 1.09 1.66 1.90 1.60 1.71 1.80 1.84 – 0.06 – 0.20 – 0.34 – 0.17 – 0.19 – 0.26 World 2.43 2.40 2.88 2.97 2.67 2.32 1.97 2.51 2.24 2.54 1.77 1.86 1.74 1.81 2.13 2.10 2.18 1.78 3.01 2.02 1.89 1.91 2.70 2.93 2.91 3.21 3.50 3.68 3.45 3.05  Appendix D: Teaching Material: A Simple Model of Regional Trade Integration Building on Krugman (1980), we construct a simple model of regional integration There are three countries with subscripts i, j = 1, 2, We assume than countries and can integrate whereas country remains outside There is two-way trade in manufacturing between all three, with trade costs shown in Fig D.1 Country Trade costs t Country Trade costs t Trade costs z Country Fig D.1  Trade costs in manufacturing between three equal countries © The Author(s) 2018 A Melchior, Free Trade Agreements and Globalisation, https://doi.org/10.1007/978-3-319-92834-0 265 266  Appendix D: Teaching Material: A Simple Model of Regional Countries are of equal size and have labour endowments L. These can be used for production in a “numeraire sector” A, where one unit of labour is used to produce one unit of A with constant returns to scale Goods from this sector are traded internationally at zero cost The other sector is a standard “Dixit-Stiglitz” sector where differentiated manufactured goods are produced with economies of scale and under monopolistic competition We use small x for an individual variety and large X for the aggregate of manufactured goods Manufactures are traded internationally with trade costs t in both directions between country and the two others and z between countries and These are expressed so that t and z are both larger than one; for example, 10% trade costs between countries and means z = 1.1 Trade costs are of the “iceberg type” where some of the goods traded “melt away” in transport If a quantity q is shipped from country to country 2, only q/z arrives Trade costs in the home market are zero In the model, there is two-way trade in manufacturing, and a trade surplus (deficit) in manufacturing must be matched with a trade deficit (surplus) in sector A There is a two-level demand system: The choice between A and X is subject to a Cobb-Douglas utility function: Ui = C 1Ai-a X ia where α is the consumption share for manufactured goods and CAi is the consumption of A goods in country i The choice between varieties of X is undertaken according to a CES (constant elasticity of substitution) sub-utility function with σ > as the elasticity of substitution If Yj is the income of country i, the demand for an individual variety of X from country i in market j is: xij = a Y j pij -s Pjs -1 Here pij is the price for a manufactured variety shipped from country i to country j, and Pj is the price index for manufactured goods in country j Readers not familiar with this approach may consult Fujita et al (1999, Chap 4) for more details   Appendix D: Teaching Material: A Simple Model of Regional      267 We assume that all three countries are diversified in the sense that they have production in both sectors Free trade in product A assures that the wage is the same in all three countries and equal to one, since A is the numeraire Given this, we assume that manufacturing firms in all three countries have the same cost function C = f + cx where x is the total quantity produced by the firm, c is marginal cost, and f is a fixed cost The manufacturing firms maximise profits π = px − C under monopolistic competition This gives the pricing condition p = s *c / (s - 1) So the price is a mark-up on marginal cost, which is inversely related to the substitution elasticity Assuming free entry and exit until all firms have zero profits, we set profits equal to zero, substitute for p, and obtain the firm size (measured in quantity): x = (s - 1) f which is the same in all countries Turning to the three markets, the firmlevel allocation of sales are as follows: x11 + x12 + x13 = x x21 + x22 + x23 = x x31 + x32 + x33 = x where x, firm scale, is given above Now we may use the demand equations to express all x variables in the first column as functions of x11, all in the second column as functions of x22, and all in the third column as functions of x33 Now we must remember that with iceberg trade costs, the shipped and received quantities are not the same, and so the consumed 268  Appendix D: Teaching Material: A Simple Model of Regional quantity is, for example, x21/t and the “real price” is p21=pz, where p is the factory price and this is the same for firms in all countries Using this, we must have ( ) ( ) ( x21 / z* x11 = a Y1 p21-s P1s -1 / a Y1 p11-s P1s -1 ( = a Y1 ( pz ) -s )( ) P1s -1 / a Y1 p -s P1s -1 = z -s ) which gives, x21 = x11 z1-s x12 must be the same, and x13, x23, x31, and x32 are obtained in similar way Countries and must be identical (same size and same trading costs), and so x11 = x22 Then it reduces to two equations with two unknowns, and we may solve for x11 and x33 (also substituting the solution for firm size x) and derive all the other x variables The number of manufacturing firms is endogenous and we denote it by ni, i = 1, 2, and Using this, we set up the equations for market clearing for X goods in each country The consumption share for X is α and the income in all countries must be L, and so we have n1 px11 + n2 p x21 + n3 p x31 = aL n1 px12 + n2 p x22 + n3 p x32 = aL n1 px13 + n2 p x23 + n3 p x33 = aL Here we use the producer prices and quantities since the product of quantity*price is the same on the producer and consumer side Here p is known from the pricing condition, the x’s are derived from the equations above, and we know that n1 = n2, since countries and are identical (country has the same size, but faces different trading costs) Using this, the first two equations become identical, and we may solve for n1 and n3 Having obtained the solutions for the number of firms, we may analyse how these expressions respond to changes in z If z = t, the three countries are obviously in the same situation If t > z, you will find that n1 = n2 > n3   Appendix D: Teaching Material: A Simple Model of Regional      269 The solution is left to the reader The integration between countries and (lowering z) leads to “production shifting” of manufacturing from country to the two integrating countries The integrating countries also obtain higher welfare, whereas welfare in country declines Welfare effects can be studied using the price indexes: 1-s 1-s Px1 = é n1 p1-s + n2 ( pz ) + n3 ( pt ) ù 1-s ë û Since n1 = n2, the expression for country will be similar For country we must have: 1-s 1-s Px3 = é n1 ( pt ) + n2 ( pt ) + n3 p1-s ù 1-s ë û Using the solutions for the number of firms, welfare effects may be derived In Appendix B, it was noted that integration may give rise to trade effects or wage effects The model presented here gives trade effects only, since wages are equalised across countries: The improved market access shows up in changed trade flows and production shifting (Baldwin and Venables 1995) The model solution is valid only as long as all three countries are diversified If differences in market access are large enough, or if there are also country size differences, some countries may lose all its manufacturing production, and the model cannot be solved in the way shown above In order to get wage effects instead of trade effects, we can drop the numeraire sector, and so there is only one sector, the manufacturing sector Then there will only be intra-industry trade, and since trade must be balanced, there are no trade specialisation effects Integration between countries and will then show up in different wages; the integrating countries will have higher wages and a higher welfare level With wage effects, it is more difficult to solve the model explicitly, and so we have to use numerical simulation even in this simple setting In the model presented in Chap and Appendix B of this book, there are trade effects as well as wage effects 270  Appendix D: Teaching Material: A Simple Model of Regional References Baldwin, R. E & Venables, A. J (1995) Regional Economic Integration In Grossmann, G. M & Rogoff, K (Eds.), Handbook of International Economics Volume (Chapter 31, pp. 1597–1644) Amsterdam: North-Holland Fujita, M., Krugman, P., & Venables, A. J (1999) The Spatial Economy Cities, Regions and International Trade Cambridge MA/London: The MIT Press Krugman, P (1980) Scale Economies, Product Differentiation, and the Pattern of Trade American Economic Review, 70(5), 950–959 Index1 A B Africa, 14, 20, 22, 25, 30, 31, 34, 40, 45, 47, 53, 88n6, 132, 136, 137, 140, 142–144, 144n4, 176, 207n10, 216, 246, 247, 250, 255 Agglomeration, 196 Agglomeration shadow, 139, 144n2 Alaska, 10, 116, 121, 125, 135, 215 Anti-dumping (AD), 77 Asia Asian, 2, 7, 11, 13, 14, 20, 22–25, 30, 33, 34, 38, 45, 46, 68, 69, 115, 116, 120, 126, 128, 131, 132, 136, 137, 139, 140, 142, 144, 177, 207n10, 216, 237, 240, 246, 247, 250, 255 Autarky, 13, 95, 100, 105–107, 190–191, 206n1 Basel Basel Accords, 156 Baseline scenario base scenario, 204–206 Bilateral Investment Treaties (BITs), 75 Bound, 8, 12, 46, 51, 52, 54, 56, 60, 63n2, 63n3, 135 Bound tariffs, 12, 51, 52, 54, 135 Brexit, 3–6, 8, 10, 13, 15, 16n3, 33, 36n8, 50, 52, 76–86, 93, 108–110, 149, 156, 160, 165 Brexiteers, 3, 5, 131 C Canada, 50, 79, 99, 125, 126, 129, 131, 176, 177, 197, 200, 213, 219, 220  Note: Page numbers followed by ‘n’ refer to notes © The Author(s) 2018 A Melchior, Free Trade Agreements and Globalisation, https://doi.org/10.1007/978-3-319-92834-0 271 272  Index Capital-labour ratio, 13, 95, 100, 104, 110, 124, 134, 180, 182, 186, 191, 196, 199 Chemicals, 84, 85 Chile, 2, 11, 38, 43, 50, 134, 159, 175, 223, 227, 231, 235, 238, 241, 244, 252, 258 China Chinese, 2, 4, 5, 7, 9, 10, 13, 34, 43, 75, 99, 115–129, 133, 136, 149, 152, 154, 162–164, 167n4, 167n11, 175, 176, 197, 204, 213, 214, 219, 220, 234–237 Classification tariff classification, 23, 29, 35n4, 41, 52, 53, 55, 85 Commodities, 7, 9, 11, 13, 19, 20, 24, 26, 30, 33, 95, 97, 98, 102, 106, 108, 120, 122, 136, 179–206, 211 export, 7, 11, 33, 34, 97, 99 exporters, 13, 14, 20, 47, 94, 100, 108, 126 price, 20, 23, 25, 32, 33, 96, 108, 180, 185 price fluctuations, 20, 32, 108 regions, 11, 20, 22–26, 28–30, 33, 132, 142, 206 trade, 13, 20, 35, 97, 99–101, 136, 179, 181, 197 Complete specialisation, 34, 96, 102, 190 Computable General Equilibrium (CGE), 8, 9, 97, 147, 165 Countervailing duties (CD), 77 Customs union, 41, 49, 50, 82, 147 D Deindustrialised/deindustrialisation, 96, 125 Delors, J., 15, 149, 164, 165 Dispute settlement, 5, 75, 77, 154, 155, 162, 164, 167n11 Doha Round Doha Development Agenda, 56, 154 Domino effects, 2, 15, 148, 152, 153 Duocentric, 196 E Eastern Europe, 14, 20, 22, 25, 45, 140, 142 Enabling clause, 41, 53, 60 Endogenous, 9, 124 Equivalence, 80, 81 European Economic Area (EEA), 2, 57, 68, 70, 78, 82, 88n7, 152, 157, 160 European Free Trade Association (EFTA), 2, 11, 15, 16n2, 22, 38, 74, 88n6, 88n7, 126, 127, 129, 134, 136, 137, 148, 152, 157, 159–161, 167n8, 177, 237, 240 European Union (EU), xvii, 1–5, 9, 11, 12, 15, 22, 28, 29, 38–40, 42–44, 47, 49–53, 55–58, 60, 68–70, 73, 74, 78, 82–86, 109, 110, 126, 127, 129, 136, 137, 139, 147, 148, 150–152, 155, 157–161, 164, 165, 175, 177, 217, 237, 240 internal market, 36n6, 36n8, 88n6, 166n2, 167n5, 167n7, 167n8  Index     273 F I Factor endowments factor markets, 8, 10, 94, 96, 100, 194, 195, 199, 226–229 Fatigue of numbers, 15 Financial, 69, 166n4, 167n5 Food standards, 67, 73, 151 Free Trade Agreement (FTA) race, 2, 6, 14, 37, 39, 42, 43, 129, 134, 154 IIT, see Intra-industry trade Imperfect competition, 95, 97–99, 126, 207n8 Institutional similarity, 151 International Organization of Securities Commissions (IOSCO), 74, 156, 158 Intra-industry trade (IIT), xvi, 12, 19, 20, 28–34, 35n5, 95, 97, 98, 179, 194–197, 205, 206, 221 Issue linkage, 74, 149, 161–164 G Gains from trade, 14, 15, 20, 129 General Agreement on Tariffs and Trade (GATT), see World Trade Organization General Agreement on Trade in Services (GATS), 8, 41, 70–72, 74, 75, 84 See also World Trade Organization Generalised System of Preferences (GSP), 7, 53, 57, 60, 141 Geographical location, 9, 191, 201 Global governance, 4, 15, 148, 154–161 Global Trade Analysis Project (GTAP), 8, 9, 97 Global value chains (GVC), 7, 15, 35, 98 Goods trade, 28, 35, 43, 44, 81, 118 Gravity, 99, 153, 165, 196 H Harmonisation, 15, 68, 80, 81, 86, 150, 155 Hub-and-spoke, 141 J Jurisdiction, 47, 68, 76–79, 86, 148, 155, 159, 162, 164 L Latin America, 20, 22, 25, 45–47, 129 Least Favoured Nations, 49–63 Legal homogeneity, 15, 148, 152, 157, 160 Luxemburg process, 161 M Manufacturing, 7, 9, 11, 13, 14, 20, 22–26, 28–33, 35n5, 78, 95–97, 101–106, 110, 115, 116, 120, 121, 124–126, 128, 129, 129n2, 132–138, 140–142, 144n1, 163, 166n3, 179, 181–185, 188–196, 200, 204–206, 208n13, 211, 240–242, 255–260 274  Index Market access, 70–72, 75, 82, 84, 119, 121, 127, 140, 160, 163, 180, 195, 197 Mathematical mathematical model, 9, 93, 94 MATrix LABoratory (MATLAB), 9, 12, 99, 193 Megalaterals, 4, 152 Mexico, 22, 50, 128, 129, 131, 176 Middle East, 20, 22, 25, 45–47, 136, 142 Mirror data, 21, 34, 35n2 Model solution, 96, 99, 193 Monocentric, 196 Most Favoured Nation (MFN), 1, 12, 50–54, 69–71, 78, 149, 201, 202 applied, 51, 52, 54, 56–61, 63n2, 63n3 Multilateral/multilaterlism, Mutual recognition (MRA), 81, 155, 157 N Natural resource rents, 103, 104, 120, 121, 205, 220 Natural resources, xvi, 9, 10, 13, 95, 98, 100–104, 106, 108, 144n1, 190, 191, 198–200, 204, 217 Navarro, P., 4, 116, 118, 163 Non-discriminatory discrimination, 7, 15, 53, 67, 72, 78, 82, 83, 85, 87, 147, 149, 150, 152, 153 Non-Party MFN clauses, 71 Non-tariff measures (NTMs), 7, 8, 10, 12, 49, 67, 68, 73, 76, 79, 86–87, 125, 131, 147, 150, 153, 163, 166n1, 203 North America, 11, 20, 22, 23, 25, 26, 28, 30, 45, 46, 69, 77, 115, 121, 125, 136, 140 O Open Skies, 158–159 Organisation for Economic Co-operation and Development (OECD), 69–73, 75, 81, 84, 86, 87n3, 136, 141, 152, 155, 217, 218 P Per capita income, 95, 200 Plurilateral, 2, 15, 38, 149, 154, 158, 164 Poor countries, 8, 13, 20, 43, 47, 55, 83, 94, 132, 134, 135, 142, 162 Preferential, 41, 51, 53, 56, 57, 71, 201, 202 Production shifting, 126, 140 Protectionism, 5, 79 R Reciprocity non-reciprocity, 7, 8, 12–14, 75, 116, 124–126, 128, 132, 137, 140–142, 163 Regulatory cooperation, 3, 15, 49, 76, 85, 147–166  Index     Regulatory distance, 83 Rules of origin, 50, 71, 82 Russia, 13, 14, 39, 40, 43, 99, 132, 144, 152, 167n11, 197, 207n10, 214, 219, 220 275 Standards, 5, 12, 15, 73, 75, 79–85, 148–150, 152, 153, 155–159, 162–164 Steel, 5, 77, 78, 163, 167n11 Swiss formula, 55, 56 T S Safeguards, 77 Sanitary and Phytosanitary Measures (SPS), 79–84, 156 Security, 5, 70, 78, 83, 163, 167n11, 203 Sensitive sectors, 57, 60 Services, 1, 7, 9–12, 16n1, 19, 35, 37, 39, 41, 47, 54, 67–73, 75, 82–84, 87, 95, 96, 141, 148, 151, 156–158, 162, 163, 179–183, 185, 189, 191, 192, 200, 211, 218 Simulate/simulation, xvi, 13, 33, 97, 99, 101, 103–107, 109, 120, 122–129, 129n2, 134–139, 143, 144n1, 165, 179, 185, 190–194, 197–206, 207n4, 207n7, 207n8, 207n9, 211–262 model, 100, 101, 115, 136, 193, 197 Singapore, 2, 11, 38, 43, 50, 134, 159, 162, 167n10, 175 Small countries, 2, 14, 38, 43, 106, 127, 134, 159 Special and Differential Treatment (SDT), 135 Spending effect, 102, 104, 107, 121, 195 Tariff equivalent, 10, 147, 148 Tariffs, 2, 5, 7, 8, 10, 12, 14, 49–61, 63n2, 63n3, 67, 72, 74, 77, 78, 82, 86, 87, 99, 125, 128, 131, 133, 135, 137, 147, 148, 155, 158, 163, 166n1, 167n11, 201–204, 208n15 Technical Barriers to Trade (TBT), 79–84, 88n7 Terms-of-trade, 13, 108, 115, 122, 136 Theory with numbers, 6, 8, 96, 101, 165 Trade cost, 10, 44, 72, 95, 109, 125, 129, 134, 137, 141, 142, 144n3, 147, 149, 150, 153, 166n1, 166n2, 201, 202, 212, 261 Trade deficit, 4, 13, 95, 115–119, 129, 164, 180 Trade elasticities, 61–63, 97 Trade facilitation, 81–83, 88n8, 153, 163, 167n10 Trade in Services Agreement (TISA), 70 Trade policy spillovers, 10, 14, 147–166 Trade-Related Intellectual Property Rights (TRIPS), 119, 149, 162, 163 276  Index Transatlantic, 49, 129, 136 Transatlantic Trade and Investment Partnership (TTIP), 2–4, 43, 47, 49, 84–86, 126, 127, 136, 147, 150–152, 155, 158, 165, 166n2 Trans-Pacific Partnership (TPP), 2–5, 40, 41, 43, 47, 50, 116, 129, 150, 152, 159, 162, 163, 177 Trump, Donald, 3–6, 8, 13, 34, 47, 55, 78, 116, 125, 127, 132, 136, 141, 154, 159, 162, 163, 167n5, 167n9 Two-way trade in manufacturing, 11, 20, 29, 30 U Unilateral liberalisation, 10, 12, 72, 75, 141, 149 United Kingdom (UK), 3–5, 9, 15, 33, 36n8, 52, 76, 96, 109, 110, 133, 149, 156, 159, 161 United States (USA), 1–6, 10, 12, 13, 15, 21, 30, 39–41, 43, 49, 50, 53, 57, 70, 72, 77, 79, 84–86, 96, 99, 115–129, 131, 144, 147, 149–152, 154, 156–159, 162, 163, 166n2, 167n11, 177, 197, 200, 215, 219, 220 Uruguay Round, 52 W Water in the tariffs water in the GATS, 8, 12, 54, 55, 63n2, 87 Welfare, 8, 9, 13, 14, 79, 93, 97, 99–102, 105, 106, 110, 111n6, 115, 116, 120, 121, 124–126, 128, 129n2, 132–135, 137, 139, 141, 142, 157, 166n3, 195, 250–255 Western Europe, 11, 14, 20, 22–26, 28–30, 45–47, 69, 88n6, 115, 121, 131, 136–141, 144, 247–260 The world economy, 6, 7, 47, 70, 93, 108, 115, 119, 131, 140, 164, 194, 197, 206n2, 207n7 World economy model, 24, 194, 207n2, 207n7 World regions, 1, 6, 7, 11, 14, 15, 20, 22–25, 28, 30, 31, 39, 45–47, 77, 84, 87, 116, 120, 121, 126–128, 131, 132, 136–139, 141–143, 148, 155, 163, 164, 208n10, 247–264 World trade, 3, 6, 8–12, 19–22, 24–27, 29, 30, 32–35, 38, 39, 43, 44, 47, 54, 68, 85, 93–110, 115, 136, 142, 164, 206 World Trade Organization (WTO), 1, 2, 4, 5, 8, 11, 12, 15, 19, 22, 37–39, 41, 43, 44, 50–56, 60, 61, 67–69, 72, 74–82, 85–87, 118, 119, 125, 132, 135, 141, 142, 148, 149, 152, 154–156, 158, 162–164, 177, 178, 181, 218 General Agreement on Tariffs and Trade (GATT), 16n1, 63n1, 64n5, 167n5, 167n10, 167n11 .. .Free Trade Agreements and Globalisation Arne Melchior Free Trade Agreements and Globalisation In the Shadow of Brexit and Trump Arne Melchior Norwegian Institute of International... role as a victim of cheating and manipulation by the trade partners of the USA (Who said decline of the West?) At the WTO, the USA is obstructing the appointment of new members of the Appellate... been part of trade agreements in the past, the Trump administration has broadened the agenda by linking trade to macroeconomic issues and investment With the tariffs on steel and aluminium announced