EconPapers    
Economics at your fingertips  
 

Offshoring and the Role of Trade Agreements

Pol Antras and Robert Staiger

No 14285, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The rise of offshoring of intermediate inputs raises important questions for commercial policy. Do the distinguishing features of offshoring introduce novel reasons for trade policy intervention? Does offshoring create new problems of global policy cooperation whose solutions require international agreements with novel features? Can trade agreements that are designed to address problems that arise when trade predominantly takes the form of the exchange of final goods be expected to perform in a world where offshoring is prevalent? In this paper we provide answers to these questions, and thereby initiate the study of trade agreements in the presence of offshoring. We do so by deriving the Nash and internationally efficient trade policy choices of governments in an environment in which some trade flows involve the exchange of customized inputs, contracts governing these transactions are incomplete, and the matching between final-good producers and input suppliers may involve search frictions. By characterizing the differences between Nash and internationally efficient policies in this environment, and by comparing these differences to those that would arise in the absence of offshoring of customized inputs, we seek to understand the implications of offshoring for the role of trade agreements. Our findings indicate that the rise of offshoring is likely to complicate the task of trade agreements, because in the presence of offshoring, (i) the mechanism by which countries can shift the costs of intervention on to their trading partners is more complicated and extends to a wider set of policies than is the case when offshoring is not present, and (ii) because the underlying problem that a trade agreement must address in the presence of offshoring varies with the political preferences of member governments. As a consequence, the increasing prevalence of offshoring is likely to make it increasingly difficult for governments to rely on simple and general rules -- such as reciprocity and non-discrimination -- to help them solve their trade-related problems.

JEL-codes: D02 F02 F13 F5 (search for similar items in EconPapers)
Date: 2008-08
New Economics Papers: this item is included in nep-bec and nep-int
Note: ITI
References: Add references at CitEc
Citations: View citations in EconPapers (16)

Published as Pol Antr�s & Robert W. Staiger, 2012. "Offshoring and the Role of Trade Agreements," American Economic Review, American Economic Association, vol. 102(7), pages 3140-83, December.

Downloads: (external link)
http://www.nber.org/papers/w14285.pdf (application/pdf)

Related works:
Journal Article: Offshoring and the Role of Trade Agreements (2012) Downloads
Working Paper: Offshoring and the Role of Trade Agreements (2008) Downloads
Working Paper: Offshoring and the Role of Trade Agreements (2008) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:14285

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w14285

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by (wpc@nber.org).

 
Page updated 2024-12-28
Handle: RePEc:nbr:nberwo:14285