ECONOMIC RESEARCH AND ANALYSIS
The Selection Panel also gave an honourable mention as runner-up to Yuan Mei of the University of Chicago for his work entitled "Regulatory Protection and the Role of International Cooperation".
The prize winners were announced at the annual meeting of the European Trade Study Group, the largest conference specializing in international trade, which took place on 13 September 2018 in Warsaw, Poland.
Alonso de Gortari's paper highlights a new feature of global value chains (GVCs), namely that they employ specialized inputs tailored to the destination of the final product. For example, regarding Mexico’s car exports, “the U.S. accounts for a colossal 74% of the foreign inputs embedded in Mexican vehicles sold to U.S. consumers but for only 18% of the inputs of those sold to German consumers.” Similarly, the share of German inputs is much higher in cars exported to Germany than in those exported to the United States.
The paper shows that members of GVCs are substantially more integrated with one another than traditional measures have shown, with the implication that the traditional study of GVCs substantially under-estimates the cost of GVCs being disrupted.
Since GVCs are a very significant feature of international trade, the Selection Panel took the view that the calculation of their welfare effects, including losses inflicted by the disruption of GVCs, is extremely important. While much work remains to be done, both in terms of the collection of appropriate data and the calculation of the effects, this paper is a very useful start and may launch an “industry” of research.
Alonso de Gortari is a Mexican national. He received his Ph.D. in economics from Harvard University in 2018. He is currently a IES post-doctoral fellow in Princeton University. He will be joining Dartmouth College as Assistant Professor in 2019.
Yuan Mei's paper studies the effects of product standards regulation on trade and welfare. The key finding is that standards can affect fixed as well as marginal costs of production. Therefore, these standards affect the number of firms and variety of products. This means standards regulation creates opportunities for inefficient policy making on a unilateral basis.
The paper considers various approaches to handling the regulatory inefficiencies that arise when there is a lack of coherence in policy making, and identifies conditions where the national treatment rule (the principle of giving others the same treatment as one's own nationals) can achieve efficiency in regulations and where it cannot. The paper shows that while the gains from national treatment are relatively small, the potential gains from international cooperation in standards regulation can be very large.
In the view of the Selection Panel, the paper provides a useful reminder that while, for most non-tariff barriers (NTBs), it is possible to quantify the tariff rate that reduces trade by the same amount (the so called "tariff equivalent"), this is not an accurate measurement because how the NTB impacts the economy is of a different nature. The example of standards highlighted in the paper emphasizes this point.
Yuan Mei is a Chinese national. He received his Ph.D. in Economics from the University of Chicago in 2018. He is currently assistant Professor of Economics at Singapore Management University.
The Selection Panel for 2018 comprised Avinash Dixit (Emeritus Professor of Economics, Princeton University), Robert Koopman (Director, Economic Research and Statistics Division, WTO), Robert Staiger (Professor of Economics, Dartmouth University) and Alberto Trejos (Professor of Economics, INCAE Business School). Roberta Piermartini (ERSD, WTO) coordinated the work of the Selection Panel.