Managed Trade: What Could be Possible Spillover Effects of a Potential Trade Agreement Between the U.S. and China?

IMF Working Papers, November 15, 2019

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Canonical URL: Managed Trade: What Could be Possible Spillover Effects of a Potential Trade Agreement Between the U.S. and China?

Authors: Eugenio M Cerutti, Shan Chen, Pragyan Deb, Albe Gjonbalaj, Swarnali A Hannan, Adil Mohommad
Published: November 15, 2019
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9781513518312.001

Authors: Eugenio M Cerutti, Shan Chen, Pragyan Deb, Albe Gjonbalaj, Swarnali A Hannan, Adil Mohommad
Publication date: November 15, 2019
Series: Working Paper No. 2019/251
Pages: 21
DOI: https://doi.org/10.5089/9781513518312.001
Summary premise: Examines direct, first-round spillover effects for the rest of the world from a potential U.S.–China agreement that includes elements of managed trade using three approaches.

In the absence of a meaningful boost in China’s domestic demand and imports, bilateral purchase commitments are likely to generate substantial trade diversion effects for other countries.
The European Union, Japan, and Korea are likely to have significant export diversion in a potential deal that includes substantial purchases of U.S. vehicles, machinery, and electronics by China.
A deal that emphasizes commodities would put small commodity exporters at risk.
The results point to advantages of a comprehensive agreement that supports the international system and avoids managed bilateral trade arrangements.

Scenario: Substantial purchases by China of U.S. vehicles, machinery, and electronics
- Likely outcome: Significant export diversion for the European Union, Japan, and Korea.
Scenario: Greater emphasis on commodities in the deal
- Likely outcome: Increased risk to small commodity exporters.

Favor comprehensive agreements that support the international system.
Avoid managed bilateral trade arrangements to mitigate spillover and trade diversion effects.
Consider measures to boost China’s domestic demand and imports to reduce negative spillovers from bilateral purchase commitments.

Subjects: Commodities, Exports, Imports, International trade, Plurilateral trade, Tariffs, Taxes
Keywords: China trade talks, deal, export, export diversion, Exports, Global, import structure, Imports, Managed trade deal, managed trade deal help, Plurilateral trade, product, spillover effects., Tariffs, top ten exporter, trade data, trade gap, WP

IMF Working Paper No. 2019/251 (November 15, 2019) — Eugenio M Cerutti, Shan Chen, Pragyan Deb, Albe Gjonbalaj, Swarnali A Hannan, Adil Mohommad.