research proposal on international trade

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• Published: 13 July 2020

Impacts of international trade on global sustainable development

• Zhenci Xu 1 , 2   na1 ,
• Yingjie Li 1 , 3   na1 ,
• Sophia N. Chau   ORCID: orcid.org/0000-0002-6504-2020 1 ,
• Thomas Dietz 1 , 3 , 4 ,
• Canbing Li 5 ,
• Luwen Wan   ORCID: orcid.org/0000-0002-6414-4500 6 ,
• Jindong Zhang 7 ,
• Liwei Zhang   ORCID: orcid.org/0000-0002-2195-1070 8 ,
• Yunkai Li 9 ,
• Min Gon Chung   ORCID: orcid.org/0000-0002-7177-7189 1 , 3 &
• Jianguo Liu   ORCID: orcid.org/0000-0001-6344-0087 1  

Nature Sustainability volume  3 ,  pages 964–971 ( 2020 ) Cite this article

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The United Nations has adopted 17 Sustainable Development Goals (SDGs) with 169 targets. International trade has substantial influences on global sustainability and human well-being. However, little is known about the impacts of international trade on progress towards achieving the SDG targets. Here we show that international trade positively affected global progress towards achieving nine environment-related SDG targets. International trade improved the SDG target scores of most (65%) of the evaluated developed countries but reduced the SDG target scores of over 60% of the evaluated developing countries. The SDG target scores of developed countries were higher than those of developing countries when trade was accounted for, but those scores would be lower than those of developing countries if trade were not a factor. Furthermore, trade between distant countries contributed more to achieving these global SDG targets than trade between adjacent countries. Compared with adjacent trade, distant trade was more beneficial for achieving SDG targets in developed countries, but it more negatively affected SDG target scores in developing countries. Our research suggests that enhancing the accounting for and management of virtual resources embedded in trade is essential for achieving and balancing sustainable development for all.

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Data availability.

All the source data described in the ‘ Data ’ section can be obtained from the World Input–Output Database (WIOD) and World Bank. The intermediate data that support the findings of this study are available from the corresponding author upon reasonable request. Source data are provided with this paper.

Code availability

All computer code used in conducting the analyses summarized in this paper is available from the corresponding author upon reasonable request.

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Acknowledgements

We thank R. M. Scarrow and S. Nichols for their constructive comments that have greatly helped improve the paper. We are grateful for financial support from the National Science Foundation (grant nos DEB-1924111 and DEB-1340812), Michigan State University, Michigan AgBioResearch, the Environmental Science and Policy Program (ESPP) Doctoral Recruiting Fellowships and the China Scholarship Council.

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These authors contributed equally: Zhenci Xu, Yingjie Li.

Authors and Affiliations

Center for Systems Integration and Sustainability, Department of Fisheries and Wildlife, Michigan State University, East Lansing, MI, USA

Zhenci Xu, Yingjie Li, Sophia N. Chau, Thomas Dietz, Min Gon Chung & Jianguo Liu

School for Environment and Sustainability, University of Michigan, Ann Arbor, MI, USA

Environmental Science and Policy Program, Michigan State University, East Lansing, MI, USA

Yingjie Li, Thomas Dietz & Min Gon Chung

Department of Sociology, Michigan State University, East Lansing, MI, USA

Thomas Dietz

Department of Electrical Engineering, Shanghai Jiao Tong University, Shanghai, China

Department of Earth and Environmental Sciences, Michigan State University, East Lansing, MI, USA

Key Laboratory of Southwest China Wildlife Resources Conservation, China West Normal University, Nanchong, China

Jindong Zhang

School of Geography and Tourism, Shaanxi Normal University, Xi’an, China

Liwei Zhang

College of Water Resources and Civil Engineering, China Agricultural University, Beijing, China

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Z.X., Yingjie Li and J.L. designed the research. Z.X. and Yingjie Li contributed the data. Yingjie Li and Z.X. performed the data analysis and interpreted the results with support from S.N.C., J.L., T.D., C.L., L.W., J.Z., L.Z., Yunkai Li and M.G.C. Yingjie Li, Z.X. and J.L. wrote the manuscript with contributions from S.N.C. and T.D. All authors reviewed and commented on the manuscript.

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Correspondence to Jianguo Liu .

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Xu, Z., Li, Y., Chau, S.N. et al. Impacts of international trade on global sustainable development. Nat Sustain 3 , 964–971 (2020). https://doi.org/10.1038/s41893-020-0572-z

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Received : 23 July 2018

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Published : 13 July 2020

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DOI : https://doi.org/10.1038/s41893-020-0572-z

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About the Trade and International Integration Research Program

The research program on trade and international integration is an integral part of the World Bank’s work on development. The goal is to promote more informed national policies, international cooperation and development assistance. Research is helping us to better understand the role of international trade in development, poverty reduction, and shared prosperity. We are also contributing to the development of databases, techniques, and policy tools to facilitate independent analysis of the impact of trade policy reforms. We help provide technical assistance and policy advice to governments seeking to reform their policy regimes, sometimes in conjunction with policy-based loans to support reforms.

Successful international integration, supported by sound national policy and effective international cooperation, has underpinned most experiences of rapid growth, shared prosperity, and reduced poverty. However, global trade growth has slowed down, a backlash against globalization is sweeping through the countries that were once its strongest advocates, and some of the most ambitious initiatives for international cooperation, from the Doha Agenda to the Trans Pacific Partnership, have run into difficulty. The objective of our research is to generate new knowledge on how international integration can be harnessed to promote development in these challenging circumstances, particularly in regions that are further away from reaping its full benefits.

Our activities include data collection, research, and dissemination on three inter-related issues:

• How does economic integration affect productivity and poverty in a diverse set of countries?
• How can national policies related to international integration be reformed to enhance growth and shared prosperity, and to reduce poverty?
• How can international cooperation help in achieving these objectives?

Despite significant advances in country-level analysis of trade patterns in final goods and conventional trade policies, we still need to improve our understanding of key issues relating to:

• Macroeconomic aspects of the slowdown in global trade growth and how this process might affect development prospects;
• Microeconomic aspects of international integration, involving firms, workers, and households, as well as the implications of technological change and global production fragmentation;
• New policy challenges, especially the growing use of non-tariff measures such as technical regulations in developing countries and their trade partners, and devising cost-effective strategies for trade facilitation and export promotion;
• International trade cooperation, especially the changing political economy of international trade cooperation, stalled multilateral and mega-regional negotiations, and the stuttering efforts to accomplish deeper regional integration among developing countries.

The focus is on concrete, applied research, supported by data and empirical tools. The aim is to assist World Bank operations and to help inform and shape policy. In many cases, the specific policy research questions we address are defined by demand from Bank operations, client countries, and our development partners. The answers are based on rigorous analysis of new data, in collaboration with researchers from developing countries, partner organizations, and prominent academic institutions. The databases and findings of research are widely and publicly disseminated and translated into actionable policy recommendations. The research projects described below are examples of the research that we are carrying out and intend to carry out rather than a comprehensive list of projects.

The current research program has four main pillars.

• The Causes and Consequences of the Trade Slowdown This component is focusing on the patterns of growth in trade and investment, globally and in specific regions and countries. Three broad questions are being addressed: How has the relationship between growth in trade and growth in incomes changed, especially in the years after the financial crisis? Why has trade growth slowed down and failed to keep up with the growth in GDP, after growing nearly twice as fast in the long 1990s? And, most important, does the slowdown matter for development?
• The Micro-Foundations of Trade, Productivity and Poverty This component is focusing on the impact of international trade on the firm, the worker and the household and hence on productivity and poverty. Three broad questions are being addressed: What are the key determinants of export participation, expansion, and survival of firms in developing countries? What are the opportunities and challenges for developing countries created by the global fragmentation of production and the emergence of global supply chains in goods and services? How does globalization interact with technological change to affect workers, and hence poverty and shared prosperity?
• Trade Policy Reform for Inclusive Growth This component reflects recent changes in policy focus, with emphasis not only on conventional trade restrictions like tariffs and quotas but also on non-tariff barriers in goods and services that are gaining prominence across a wide range of countries. In parallel, we are undertaking and developing techniques for the rigorous impact evaluation of policy interventions designed to reduce trade costs and promote exports which now command a large share of international assistance and national resources in the realm of trade.
• International Trade Cooperation for Development This component is seeking to understand the altered state of international trade cooperation, and examine how it can be revived in a way that contributes to international development. While the more ambitious projects, from the Doha Agenda to the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) have run into difficulty, some of the regions where poverty is concentrated and that are among the least integrated regions of the world are making new efforts to promote regional integration. Four questions are being addressed: How has the political economy of trade cooperation changed? How have international trade agreements evolved in terms of scope and depth? What are the implications of the progressively deeper agreements for participating and for excluding countries? What can be done to promote desirable integration and to protect the interests of those who are left out?
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International trade and integration: The latest research

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What’s the latest research in international trade and integration? Researchers from the World Bank, the IMF and the WTO recently gathered for a one-day workshop to present their latest research on the topic. The papers presented addressed topical questions in areas as diverse as the links between trade, wage inequality and the poor, global value chains, non-tariff measures, preferential trade agreements, FDI restrictions, and migration. We provide a quick roundup on the papers presented during the workshop.

On trade, wage inequality, labor mobility and the poor Countries often protect their poor by raising tariffs on the goods they produce. But if all countries apply pro-poor trade policies, a coordination problem arises since the poor are employed in similar sectors across countries.  The result is that the goods the poor produce face higher barriers in destination markets. Roberta Piermartini from the WTO shows that indeed tariffs faced by Indian exports abroad are higher for goods produced by individuals in lower-income groups and by women. Removing this unbalanced access to international markets may contribute to a more even distribution of the gains from trade.   Empirical evidence shows that after countries liberalize trade, wage inequality increases gradually for several years but then stops increasing and can even decrease. The model by Matthieu Bellon from the IMF explains this evidence emphasizing the dynamics of worker reallocation between heterogeneous firms and workers in the presence of adjustment costs to labor.     Using a novel district-to-district migration dataset, Aaditya Mattoo from the World Bank studies the determinants of worker mobility across Indian districts. He provides evidence of invisible walls across state borders  explained by the existence of state-level entitlement schemes, ranging from access to subsidized goods through the public distribution system to the bias in favor of states’ own residents in access to tertiary education and public sector employment.   On Global Value Chains (GVCs)   Strong domestic linkages across firms reduce fragmentation costs but also create a lock-in situation in relationship-specific sectors. Therefore, domestic value chains (DVCs) can either be stepping stones or stumbling blocks for GVCs. Cosimo Beverelli from the WTO presents empirical evidence showing that GVCs have their foundations in DVCs, supporting the stepping stone hypothesis.   Real currency depreciations not only increase exports of domestic value-added (DVA) - a conventional result - but also increase imports of foreign value added (FVA) - a result contrasting with traditional trade theory, according to the study by Gee Hee Hong from the IMF.  These results support the idea that GVC-related exports and imports are complements in production.   On preferential trade agreements   The impact of trade agreements in existence until 1995 is revisited by Swarnali Hannan from the IMF who introduces synthetic control methods as a novel approach to establish causality. She finds substantial gains from trade agreements, with an average boost to exports among preferential partners of 80 percentage points over a decade.   Exploring the role of deep trade agreements, which go beyond tariff reduction to cover policy areas such as investment, competition policy, and intellectual property rights protection, Alen Mulabdic from the World Bank uses a new dataset on the depth and content of the agreements to show that deep trade agreements lead to more trade creation and less trade diversion than shallow trade agreements.   Below is a brief flavor of other interesting papers also presented at the workshop:

• Revisiting the trade and growth debate focusing on China as a source of supply and demand shocks, Jaebin Ahn from the IMF finds a positive impact of Chinese import penetration and export market access on sectoral total factor productivity growth in advanced economies. The recent trade slowdown could thus weigh significantly on the already weak productivity growth in advanced economies.
• Using a new methodology to estimate bilateral ad valorem equivalent (AVE) of non-tariff measures (NTMs), Hiau Looi Kee from the World Bank shows that products with higher AVEs exhibit larger discrepancies across reported import and export statistics for a given bilateral flow.  The evidence is consistent with the hypothesis that firms misdeclare product codes or country of origin to circumvent cumbersome and opaque NTMs.
• According to a unique disaggregated IMF dataset on global trade in services, presented by Saurabh Mishra from the IMF, service exports from developing countries have grown tenfold since 1990 - twice as fast as those from advanced economies.  Transport and travel have lost share in world services exports to intellectual property and financial services.
• The availability of factoring - an alternative finance instrument - is shown by Marc Auboin from the WTO to allow small firms in emerging economies to access international markets, in particular by being involved in global supply chains.
• Foreign acquisitions improve management practices – e.g., through an increase in the number of hierarchical layers and increased span of control among top managers. One reasons could be acquisition-induced reductions in communication costs within acquired firms in Portugal, according to the study by Paulo Bastos from the World Bank.
• Bilateral investment agreements can lower FDI restrictions but in practice several countries have lowered their FDI restrictions without such agreements while others retain high FDI restrictions with no interest in such agreements. The research by Mathilde Lebrand from the World Bank emphasizes the role of tax havens to which the profits of multinationals can be shifted as an important determinant of FDI restrictions.
• Aggregate trade responds sharply to spatial frictions, falling rapidly over short distances as distance to the destination increases, even within the European Single Market. The study by Shawn Tan from the World Bank shows that such sharp trade responses are explained by trade in intermediate inputs, as there is spatial clustering of firms connected by input-output linkages, who choose to co-locate to avoid trade costs.
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The Importance of Trade for Developing Countries

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• Bela Balassa 3 , 4  

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Participation in international trade provides a Variety of benefits to the developing countries. They may obtain gains through resource allocation according to comparative advantage; the exploitation of economies of scale and increased capacity utilization; improvements in technology; increases in domestic savings and foreign direct investment; and increased employment.

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B. Balassa, ‘The Newly-Industrializing Developing Countries after the Oil Crisis,’ Weltwirtschaftliches Archiv , CXVII (1981) pp. 142–94.

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Essay 2 in Bela Balassa, The Newly Industrializing Countries in the World Economy (New York: Pergamon Press, 1981) pp. 29–81.

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Alternative definitions of the newly-exporting countries are provided in O. Havrylyshyn and I. Alikhani, ‘Is There Cause for Export Optimism? An Inquiry into the Existence of a Second Generation of Successful Exporters,’ Weltwirtschaftliches Archiv , CXVIII (1982) pp. 651–63.

G. H. Hughes and D. M. G. Newbery, ‘Protection and Developing Countries’ Exports of Manufacturers,’ Economic Policy , I (1986) pp. 409–41. The former include countries with manufactured export growth rates in excess of average growth rates by the NICs during the 1970s; the latter include countries with populations in excess of 10 million and per capita incomes of at least $750 in 1983. Both of these definitions have the disadvantage of excluding India, whose manufactured exports exceed that of any newly-exporting country under the two definitions, and Pakistan that also surpassed the majority of the NECs.

This section draws on B. Balassa and Associates, Development Strategies in Semi-Industrial Countries (Baltimore, Md.: The Johns Hopkins University Press, 1982).

B. Balassa, ‘Policy Experiments in Chile, 1973–83’, in G. M. Walton (ed.), The National Economic Policies of Chile (Greenwich, Conn.: JAI Press, 1985) pp. 203–38.

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B. Balassa, ‘Exports, Policy Choices, and Economic Growth in Developing Countries after the 1973 Oil Shock,’ Journal of Development Economics , XVIII (1985) pp. 23–35.

B. Balassa and Associates, The Structure of Protection in Developing Countries (Baltimore, Md.: The Johns Hopkins Press, 1971) p. 82.

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J. de Melo, ‘Estimating the Cost of Protection: A General Equilibrium Approach,’ Quarterly Journal of Economics , XCII (1978) p. 217. The results are 11.0 percent and 15.8 percent, respectively, postulating an optimal export tax for coffee, which is subject to an international agreement.

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At the same time, one may agree with Bhagwati that ‘while there is much empirical evidence in support of a statistical association between exports and saving, there is little evidence so far for some of the hypotheses that could provide a rationale for such an association implying a causal relationship running from exports to savings.’ J. N. Bhagwati, Foreign Trade Regimes and Economic Development: Anatomy and Consequences of Exchange Control Regimes (Cambridge, Mass.: Ballinger, 1978) p. 147.

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A. O. Krueger, Trade and Employment in Developing Countries. 3 Synthesis and Conclusions (Chicago: University of Chicago Press, 1983) Table 6.2.

G. S. Fields, ‘Employment, Income Distribution, and Economic Growth in Small Open Economies,’ Economic Journal ,’ XCIV (1984) pp. 74–83.

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J. B. Behrman, ‘Country and Sectoral Variations in Manufacturing Elasticities of Substitution between Capital and Labor,’ in A. O. Krueger, (ed.), Trade and Employment in Developing Countries 2. Factor supply and Substitution (Chicago: University of Chicago Press, 1982) p. 186.

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Balassa, B. (1989). The Importance of Trade for Developing Countries. In: New Directions in the World Economy. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-10588-5_1

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Hinrich Foundation Grants: Advancing Understanding of Global Trade Issues

Hinrich Foundation Grants: The Hinrich Foundation is pleased to announce a call for research proposals that aim to advance the understanding of global trade issues and support policy development. The Foundation’s international trade research program focuses on various trade-related sectors, including sustainable trade, digital trade, cross-border investment, and the nexus of trade and geopolitics.

We invite researchers and research organizations to submit proposals for projects in these areas. The deadline for submission is October 31, 2023. Submissions will be shortlisted twice a year, with the next shortlisting taking place in May 2023.

Submission Requirements

Research proposals should include the following information:

• Name and credentials of the researcher(s)
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The synopsis should address major trade-related themes and pose two to four key questions that the research seeks to answer. The researcher should also specify the method of research, whether primary or secondary.

We generally publish research in the form of white papers of around 4,000 words and articles of around 1,600 words. All research products will be subject to the Foundation’s editorial review, and the final decision to publish will be at the discretion of the Foundation.

Researchers may propose a new research project with article and/or white paper deliverables or provide an overview or summary of their existing work, including work published elsewhere.

Deliverable Timetable

We encourage projects to be completed within four (4) months from the point of commission. Researchers should provide regular updates on the progress of the project and take into account feedback from the Foundation’s research program team. Researchers may also be asked to deliver interim articles summarizing the ongoing research.

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Funding is negotiable and typically paid upon completion of the project.

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The upcoming deadline for submission is October 31, 2023. We look forward to receiving your proposals. Please send research proposals to [email protected].

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