UK in a Changing Europe Fellowship

点击翻译按钮获取中文摘要

What types of trade agreements should the UK join post-Brexit? The world trading system, comprised of multilateral, mega-regional, and bilateral trade agreements offers multiple paths forward for the future of UK trade. Which path to take depends crucially upon answers to questions like: How do the complex features of overlapping international trade agreements impact the choices of globally-engaged firms? How do trade policy and commitments over domestic policy among trading partners affects firms' decisions to enter and exit foreign markets, set prices and export volumes, and adopt production technologies? The UK's future trade agreements must be crafted in a global environment in which the future direction of the world trading system is uncertain. The largest multilateral agreement, the World Trade Organization, is struggling to cope with some of the most intractable problems in international economic policy, including state support of industry and the protection of intellectual property. Mega-regional agreements, like the European Single Market, face serious complaints about rules and practices that infringe on national sovereignty and lack popular democratic support. Bilateral and smaller regional agreements are proliferating, but their value in creating trade seems to vary considerably. Under this Fellowship, I will conduct research to better understand how individual firm responses to government policy and international agreements aggregate to global trade flows and, hence, impact welfare. Firstly, I will conduct empirical research estimating a firm and product level gravity model of trade, with detailed information on bilateral tariff preferences and the content of trade agreements provisions. This project will provide valuable guidance to policymakers regarding the global input sourcing choices of UK firms and the influence that specific trade agreements provisions exert over these decisions. To evaluate the impacts of trade agreements, policymakers use standard economic models that assume markets within a country are competitive - that is, firms have no power to markup their prices over cost. I propose to build a multi-country model of trade featuring oligopolistic competition among producers charging variable markups and the use of local distribution services. Final consumer prices will thus embody foreign production costs, a global and destination-specific markup charged by the foreign producer, and a local distribution margin. Applying this model to analysis of proposed bilateral, regional, or multilateral trade agreements will highlight heterogeneity in changes to international and domestic prices across firms and industrial sectors under different types of trade agreements. Finally, I will examine firms' choices of currencies in which to invoice their international sales. International trade is founded on micro transactions in different currencies. The currency in which exporters set their prices determines the degree to which movements in exchange rates affect the relative prices of internationally traded goods with implications for how export and import volumes will respond to large exchange rate shocks. Two projects will examine how (1) competition in foreign markets influences a firm's choice of an invoicing currency and (2) the relationship between the number of different currencies a firm uses for its foreign sales and the financing available to a firm. This research will fill important gaps in policymakers' knowledge about UK trade which can be used to better predict the likely outcomes of different proposed trading arrangements. Regardless of the form Brexit takes, the need for concrete facts and more accurate models to evaluate policy is indisputable.