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GTAP Resource #5891

"Regional Integration and Global Response to US Protectionism"
by Robinson, Sherman and Karen Thierfelder

US trade policy in the Trump administration is protectionist, raising tariffs outside of WTO rules, threatening trade wars, withdrawing from existing trade agreements, and negotiating new bilateral trade deals rather than free trade agreements. The reaction of the rest of the world has been to support the WTO rules-based trading system and to pursue new and expanded regional trade agreements that do not include the US. The result may be US disengagement from the world trading system, with countries diverting trade around the US.

Currently, international trade is dominated by three interconnected regional economies (ICREs): Europe, East and Southeast (E&SE) Asia, and North America. They each account for about a quarter of global GDP but differ in their shares of global exports. Europe has the largest share (37%), followed by E&SE Asia (28%) and North America (14%). The implication is that the US is no longer hegemonic in the world trading system and that the world can continue regional integration and globalization without the US.

We use a global computable general equilibrium (CGE) model to analyze changes in trade and production patterns for a variety of scenarios, including US trade wars. We find that adjustment to US disengagement is feasible—the changes in trade shares as countries divert trade are modest and achievable, with very little impact on the volume of global trade. If the US engages in trade wars with major partners, the best response for other trade partners is to sit out the trade war, accept higher US tariffs, and gain markets from global trade diversion around the US. Finally, because of indirect effects, widespread tariffs fail to benefit the protected sectors—a fallacy of composition in a protectionist trade policy.

Resource Details (Export Citation) GTAP Keywords
Category: 2019 Conference Paper
Status: Published
By/In: Presented at the 22nd Annual Conference on Global Economic Analysis, Warsaw, Poland
Date: 2019
Created: Robinson, S. (4/16/2019)
Updated: Robinson, S. (6/3/2019)
Visits: 1,563
- Baseline development
- Multilateral trade negotiations
- Preferential trading arrangements
- Asia (East)
- European Union

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