What would bring together the China trade shock, road blocks in the West Bank, and the Belt and Road initiative? The 6th Annual IMF-World Bank-WTO Trade Research Conference, at which staff of the three institutions presented the results of twelve research projects.
The Conference is over, but the website lives on, and here you can find preliminary versions of papers. To whet your appetite, here are three examples of research that use creative methodologies and raise provocative questions.
The painful consequences for US labor markets, of exposure to Chinese import competition, have been famously demonstrated by Autor, Dorn and Hanson (2013). Victor Krumriz of the WTO asked: what if we exclude from the value of imports from China, the value of inputs that originate in the United States? After all, if imports of computers from China mostly embody chips and other inputs manufactured in the US, then the net effect on US employment cannot be so severe. But even after the deduction, the adverse effects persist, suggesting Chinese exports contain enough non-US value added to remain potent. What if we separate the value of inputs China buys from other countries like Germany from the value added that is purely Chinese? Interestingly, the third-country value added in Chinese imports is harmless, but the purely Chinese value added is not! The China impact on the US labor market seems to be driven by China-specific factors such as labor costs that are low even after considering differences in productivity.
But the worst might be over from the perspective of US manufacturing and workers. The research finds that China-exposed occupations and firms have either contracted or adapted successfully. And the surviving occupations and firms are resilient to further increases in import competition.
This research raises a methodological question that applies to both Autor, Dorn and Hanson (2013) and Kumritz’s work.The former also consider net imports by industry from China and the latter value added imports by industry. But neither considers the origin of US exports. If computer chips were made in the same state where computers are assembled, there would be no problem. But what if the chips were made in California and the assembly happened in Michigan? The relatively adverse effects on manufacturing employment in Michigan could then arise either because Michigan suffers more competition from China or because California benefits more from export opportunities to China. Besides, the “manufacturing fetishism” of recent work ignores the potential positive effects on services employment where US exports to China have grown significantly – a subject we are currently analyzing.
China is increasingly extroverted not just in trade, but also in infrastructure. The ambitious “Belt and Road” initiative (BRI) aims to build transportation, telecommunication, and energy infrastructure, dramatically improving connectivity for landlocked Central Asia and swathes of Eurasia. But can we tell how much it will boost trade? That was the subject of a new study presented by Nadia Rocha of the World Bank. First, georeferenced data and geographical information systems (GIS) analysis are used to compute how much time it takes today to trade between ports and major cities in the BRI countries, and how much those times will decline when the BRI is complete. Second, the relationship between bilateral trade and trade time is estimated using existing trade data. These two components help to estimate the impact on trade of the BRI. The largest gains in trade stem from improvements in trade times for inputs whose timely delivery is highly valued by producers.
But there is a puzzle in the preliminary results. They project South Asia as a big beneficiary even though the biggest country in the region, India, is hesitating to join the BRI. That raises an important question: how can all countries be reassured that the BRI will not create future vulnerability through dependence on infrastructure controlled by a powerful neighbor?
Why such assurance is critical for growth was demonstrated by Bob Rijkers of the World Bank. The research examined the consequences of manned and unmanned road blocks created by Israel in the West Bank. These road blocks restrict mobility and cut off West Bank localities from markets. In the absence of reliable statistics on local output, variation in night time lights captured by satellite photos is used to measure changes in local GDP. A tentative simulation suggests that GDP per capita would have been 5 percent higher in the West Bank if the road blocks had not been imposed.
This research is still inward looking, focusing on fluctuating access for West Bank producers to markets within the West Bank. How important are markets in Israel and the rest of the world? How is access to these markets affected by varying security measures? Those are the questions being addressed now.
And those are just three of the papers presented…
Check out all conference papers at http://www.imf.org/en/News/Seminars/Conferences/2017/11/13/sixth-imf-wto-wbg-trade-conference.