The Crucial Role of International Trade in Adaptation to Climate Change

Climate change effects on agricultural yields will be uneven over the world with a few countries, mostly in high latitudes, that may experience gains, while most will see average yield decrease. This paper aims at quantifying the role of international trade in attenuating the effects of climate change by allowing the expression of the new climate-induced pattern of comparative advantages. To do this, we develop a quantitative general equilibrium trade model where the representation of acreage and land use choices is inspired from modern Ricardian trade models but also consistent with theoretical and empirical literature on land use choices. The model is calibrated on spatially explicit information about potential yields before and after climate change coming from the agronomic literature. The results show that the climate-induced yield changes generate large price movements that incentivize adjustments in acreage and trade. The new trade pattern is very different from the current one, showing the important role of trade flows in adapting to climate change. This is confirmed by larger welfare losses from climate change when adjustments in trade flows are constrained versus when they are not.

By Christophe Gouel

This piece concentrates on the effects of trade internationally on climate change. This is the idea that Gouel came up with is that large amount of imports and exports effect the domestic demand for the products. The producers of the agriculture have a decision to what to use their space for they would either use it for agricultural growth or for spaces for other labour to occur, like factory work. The main question that they have to ask themselves is which is going to return the most revenue throughout the year (regardless of the seasonal weather). Their stock diversification will be important in their maximization of profits to stay in line with the world demand of the products. 

In my opinion it is very important to regulate the use of agricultural growth and crops because it is taken that everything is available for free trade apart from the grass used as feed for the animals. And with growth of crops it would be expected that the demand and supply of the product is flexible. The demand for the crops for food in US in significantly higher than the consumption of crops that the world which isn't possible for America to sustain their own food consumption, which requires a high level of imported products from throughout the world which makes these products have a higher carbon footprint which effects the climate change in the world, which will have a great effect on what the world can produce in the future with the different weather conditions. Where the world population will continue to increase it will be very challenging on the worlds producers to meet the ever expanding levels of demand, but doing it in a way which is good for the environment, sustaining it as well as possible.

Asian Economies and The U.S.-China Trade War

Asian Economies and the Trade War

The growing tension in the tariff war between the U.S. and China is causing disruptions in multiple segments of Asian economies that are dependent on imports and exports to/from China. In the short run, multiple Asian economies will suffer disruptions in the technology and automobile sector; and these disruptions will mainly result in decreasing terms of trade for smaller Asian nations. However, more economies will benefit in the long run due to the sector migration of productive resources and domestic labor pools. 

This article primarily studies complex, unfinished goods that are exported from China to other nations before being finished and imported to the U.S., where they will be taxed by the additional tariffs. In the short run, these unfinished goods will be exported from China at a premium in order to recover the taxes that will later be applied upon their importation to the U.S. These premiums will increase prices of the goods in the intermediate shipping nations, which will increase the prices to U.S. consumers. These premium prices will also decrease the profit margins and revenue streams of the domestic industries within smaller Asian nations in the short run. However, these premium prices will encourage smaller nations to adapt their economies by mobilizing resources and labor pools to different sectors, which would increase the output and productive capabilities of smaller nations. By augmenting and reorganizing their productive capabilities, these smaller nations may benefit in the long run by increasing their international presence and utilization of domestic production. 

The growing tensions caused by tariffs and counter tariffs between the U.S. and China have created panic in international markets. The short run disruptions caused by these tariffs will cause profit and revenue reductions in smaller nations that import unfinished goods from China and export finished products to China for export to the U.S. However, in the long run, the smaller  nations may benefit from increased production and trade stemming from relocating their productive resources and labor pools to more profitable, alternative sectors of their economies. 

https://www.cnbc.com/2018/11/08/us-china-trade-war-countries-in-asia-that-will-be-winners-or-losers.html?recirc=taboolainternal 

Mexico, Canada play hardball on trade deal over steel tariffs

As the United States-Mexico-Canada Agreement talks are coming to an end there is pressure from Mexico and Canada for the US to restore the tariff exemptions on steel that the US originally revoked to put pressure on Mexico and Canada to come to an agreement. The US is worried however that if they do restore the exemptions this will allow China to hurt the US steel industry and is instead proposing a quota system for steel with Mexico and Canada. Neither country is happy with this proposal and do not understand why the exemptions can not go back into place now that they are tentatively scheduled to sign the USMCA in the end of November. Some people support the quota system proposal because they can be as effective as tariffs but unlike Tariffs the exporting country would get the money instead of the US getting the tariff money. Others however believe a quota system may create a political problem for the exporting country as the government picks and chooses what companies get allocated part of the quota amount. Though there may be another solution according to “Hugo Perezcano Diaz, deputy director of the international law research program at Canada's Centre for International Governance Innovation and a former NAFTA negotiator.” Diaz believes that talks of a quota system could lead the United States, Mexico, and Canada to adopt a closed North American steel market. Canada already has a similar safeguard in place that protects against imports of steel products from the rest of the world. Diaz thinks if Mexico were to implement a similar system, closing off the steel market in North America the U.S. may feel secure enough to eliminate the steel tariffs. 

I think that the US is smart not to implement the exemptions on the tariffs just yet. They have not officially come to an agreement with Mexico and Canada so I think the exemptions would be premature. I however don’t think that the quota system proposal will go through with Canada and Mexico and also may cause a rif in the relationship between the countries just as they are trying to come to an agreement. I think Diaz’s solution is very interesting and may be a smart move for the three countries while it will upset many other countries such as China, who the US is currently involved in trade talks with. Realistically, I do not know if Diaz’s proposal would ever be able to be implemented but I think it would be a viable solution for the United States, Mexico, and Canada.

https://www.washingtonexaminer.com/policy/economy/mexico-canada-play-hardball-on-trade-deal-over-steel-tariffs