On Terms of Trade, Offshoring Ties, and the Enforcement of Trade Agreements

Subhayu Bandyopadhyay, Arnab Basu, Nancy Chau and Devashish Mitra

No 2022-039, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper unpacks the role of offshoring in the enforcement of trade agreements. In a two-country model of task offshoring, we show that by depressing demand and thus demand for embodied labor, own-tariff effects on factor content weighted terms of trade are: (i) negative in upstream countries, backfiring on upstream workers, and (ii) positive in downstream countries which render imported labor tasks even cheaper. This progression in own-tariff effects on terms of trade along the supply chain presents a novel challenge to the effectiveness of dispute settlement rules designed to nullify unwarranted terms of trade gains. The pros and cons of deep trade integration as a remedy, involving well-enforced labor standards both upstream and downstream as an integral part of trade agreements, are highlighted.

Keywords: offshoring; dispute settlement reciprocity; labor standards (search for similar items in EconPapers)
JEL-codes: F11 F13 F16 F66 O19 O24 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2022-12, Revised 2023-04
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://s3.amazonaws.com/real.stlouisfed.org/wp/2022/2022-039.pdf Full text (application/pdf)

Related works:
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:fip:fedlwp:95250

Ordering information: This working paper can be ordered from

DOI: 10.20955/wp.2022.039

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis ().