1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Miracle or Mirage

What role can trade policies play in tackling global trade imbalances?

Global trade imbalances narrowed in the aftermath of the global financial crisis. They have remained at a lower level but are still of concern to policy makers because of the risks they pose to individual economies, as well as globally. However, the ultimate causes of these imbalances are not fully clear. Current account positions reflect the gap between national saving and investment, which are in turn affected by policy distortions, including in trade policy. Simulations of the OECD’s METRO model show liberalisation of existing trade distortions would modestly narrow aggregate trade imbalances in the medium term for some countries. Reducing tariffs, non-tariff measures and the combined market access and productivity-enhancing effects of pro-competitive measures in services all have some rebalancing potential. Liberalisation would also offer economically significant income gains for all countries. By contrast, narrowing trade imbalances using trade restrictions would come at disproportionately high economic costs for all countries.

English

Keywords: trade imbalance, savings, trade policy, foreign direct investment, balance of payments, services trade, trade restrictions, bilateral trade balance, current account, exchange rate, productivity, efficiency, welfare, global imbalances, non-tariff measures, tariffs, investment, trade liberalisation
JEL: F17: International Economics / Trade / Trade: Forecasting and Simulation; C68: Mathematical and Quantitative Methods / Mathematical Methods; Programming Models; Mathematical and Simulation Modeling / Computable General Equilibrium Models; F13: International Economics / Trade / Trade Policy; International Trade Organizations; F32: International Economics / International Finance / Current Account Adjustment; Short-term Capital Movements
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