Unequal Trade Agreements

Goldberg, P and N Pavcnik (2016), “The effects of trade policy”, in B Staiger and K Bagwell (eds.), The handbook of commercial policy, Volume 1A, Elsevier, pp. 161-206. Africa`s share of world trade has steadily increased from $277 billion (2.3 per cent) in 2001 to about $1 trillion (4.6 per cent) in 2011, according to the United Nations Conference on Trade and Development. While Europe remains Africa`s largest trading partner, Africa`s trade with Asia grew by 22% during this period, while trade with Europe grew by only 15%. In addition, Europe`s contribution to Africa`s industrial imports increased from 32 per cent in 2002 to 23 per cent in 2011, while Asia`s share increased from 13 per cent to 22 per cent over the same period. With the rise of Chinese nationalism and anti-imperialism in the 1920s, the Kuomintang and the Chinese Communist Party used this concept to characterize the Chinese experience of loss of sovereignty between about 1840 and 1950. The term “unequal treaty” has been associated with the concept of China`s “century of humiliation,” particularly concessions to foreign powers and the loss of customs autonomy through the treaty`s ports. AG: At 3% in 2015, global trade is growing slowly for the fourth consecutive year, compared to the pre-crisis average of 7%. The evolution of world trade is also slightly lower than real GDP growth. In this rather negative context, we are witnessing a new energy in the trade negotiations. Despite these concerns, the solution is not a return to protectionism. Consumers in developing countries have benefited from international trade through access to cheaper and more diversified products.

International trade has also improved the performance of industry and firms in these countries, through the redistribution of economic activity from less productive firms, the introduction of new technologies, access to cheaper and more diversified inputs, innovation, and the elimination of distortions and inefficiencies (Goldberg and Pavcnik 2016). As growing concerns about inequality threaten what previous liberalizations and trade agreements have enabled, academics and policymakers face the challenges posed by the unequal distribution of the benefits of globalization. Baier, S and J Bergstrand (2004), “Economic determinants of free trade agreements,” Journal of International Economics 64: 29-63. The effects we discover are considerable and are described in Figure 2. In the top panel, we report on the estimated impact of trade imbalances and inequalities on the average probability of the formation of preferential trade agreements. An increase in trade imbalances by one standard deviation reduces the probability of entering into a preferential trade agreement by 6.17% above the reference level. Similarly, an increase in inequality by a standard deviation reduces the likelihood of preferential trade agreements being formed by 5.65% from the baseline. Unequal treaties ended at different times for the participating countries. Japan`s victories in the First Sino-Japanese War of 1894-95 convinced many in the West that Japan`s unequal treaties could no longer be enforced. Korea`s unequal treaties with European states became largely null and void in 1910 when it was annexed by Japan. [12] A second strong finding is that the impact of international trade on incomes and employment is geographically concentrated and uneven within a country. Ultimately, the impact of international trade depends on the extent to which a region is exposed to import and export shocks.

People living in regions where the concentration of industries that benefit from exports outperforms people living in less exposed areas (McCaig, 2011, Erten and Leight, 2017). Conversely, people living in regions where the concentration of industries subject to import competition is more efficient than people living in less exposed regions (Topalova 2010, Kovak 2013, Dix-Carneiro and Kovak, 2017). Topalova, P (2010), « Factor Immobility and Regional Impacts of Trade Liberalization: Evidence of Poverty from India », American Economic Journal: Applied Economics 2 (4): 1-41. . .