Author: Ayako Obashi

Publisher:

Published: 2018

Total Pages: 130

ISBN-13:

The first chapter entitled ``Trade Policy and Production Location with Cross-Border Unbundling'' sheds new light on the trade policy implications of production relocation by featuring the effects of export restrictions on intermediate inputs on the downstream final-good producer's location and sourcing decision. The chapter revisits governments' incentives to use trade policies in a theoretical framework considering the firm's global production operation subject to a combination of trade costs, inclusive of trade barriers, imposed on different stages of production process. An interrelationship between trade policies through production linkage gives rise to a novel, assembly-relocation motive for policy intervention against trade in intermediates. A government may use an export tax on intermediates as a way to attract the final assembly so that conditional on the assembly relocation it can maximize its ability to manipulate the international terms of trade. The second chapter entitled ``Trade Agreements with Cross-Border Unbundling'' and the third chapter entitled ``Revisiting Profit-Shifting Trade Policy Intervention under Cross-Border Unbundling'' revisit the purpose and design of trade agreements in the presence of cross-border unbundling of production. The second chapter features an interrelationship among market-clearing prices of final goods and the associated domestic and imported intermediates due to their dependence on trade policies through production linkage. There arises a local price externality, and a government uses a combination of trade policies to manipulate the local equilibrium price for domestically-sourced intermediates in the trading partner country to its advantage. The third chapter focuses on the trade policy implications of international profit-shifting, and detects another form of local price externality. Here I show that a government unilaterally chooses an inefficient mix of trade policies on final goods and the associated intermediates to manipulate its local prices so as to induce international profit-shifting in its favor. Both chapters call for the potential of trade agreements beyond the conventional market-access argument associated with the terms-of-trade theory. To achieve globally efficient outcomes through trade agreements, I propose to specify the market access using the trade-weighted version of terms of trade so that governments effectively coordinate in changing the value-added created from trade within production chains in a reciprocal manner.