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Do Trade and Investment (Agreements) Foster Development or Inequality?
Pierre Kohler and Francis Cripps
GDAE Working Paper 18-03
October 2018
Download the Working Paper

This paper proposes to revisit the debate on trade and investment agreements (TIAs), development and inequality, looking at the role of Global Value Chains (GVCs) and trans-national corporations (TNCs). After presenting stylized facts, the paper summarizes key contributions to the literature to provide a long-run perspective on external liberalization. Based on this stock-taking, it takes a fresh critical look at the TIAs-GVCs-TNCs nexus and its effects using data on value-added in trade and new firm-level data from the consolidated financial statements of the top 2000 TNCs. It then turns to the role of GVCs as a vehicle for economic concentration. The paper concludes by calling for a less ideological policy debate on TIAs, which acknowledges the mixed blessings of external financial and trade opening, especially their negative distributional impact and destabilizing macro-financial feedback effects. As an alternative to short-sighted protectionism, it discusses possible options for addressing undesirable effects arising from TIAs, such as rising carbon emissions, economic instability and inequality.

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Related Policy Briefs, Articles, Reprints:
Overcooked Free-Trade Dogmas in the debate over TTIP, Jeronim Capaldo, May 2, 2015 [Available in German]
TTIP: European Disintegration, Unemployment and Instability, Jeronim Capaldo, Queries, Spring 2015
For recovery, Europe needs to support labour not trade, Jeronim Capaldo, Government Gazette, March 18, 2015
Disoccupazione, diseguaglianza e instabilità. L'impatto del TTIP, Jeronim Capaldo, Italianieuropei, January 12, 2015
TTIP: European Disintegration, Unemployment and Instability, Jeronim Capaldo for the Foundation for European Progressive Studies, Economic Policy Viewpoint N.10. December 18, 2014
TTIP may lead to EU disintegration, unemployment, instability, Jeronim Capaldo, Reprinted in Third World Economics, November 2014

Further Analysis:

Trading Down: Unemployment, Inequality and Other Risks of the Trans-Pacific Partnership Agreement, Jeronim Capaldo, Alex Izurieta, and Jomo Kwame Sundaram, GDAE Working Paper 16-01, January 2016

Trade Hallucination: Risks of Trade Facilitation and Suggestions for Implementation, Jeronim Capaldo, GDAE Working Paper 14-02, June 2014

Support to WTO Trade Facilitation Agreement is Insufficient or Misdirected, Jeronim Capaldo, GDAE Policy Brief, July 25, 2014

Will the WTO fast-track trade at the expense of food security?, Timothy A. Wise and Jeronim Capaldo, Al Jazeera, July 24, 2014

The Uncertain Gains from Trade Facilitation, Jeronim Capaldo, GDAE Policy Brief 13-02 December 2013

Read more on Modeling Policy Reform
Read more from GDAE’s Globalization and Sustainable Development Program

The Global Development and Environment Institute’s Globalization and Sustainable Development Program examines the economic, social and environmental impacts of economic integration in developing countries, with a particular emphasis on the WTO and NAFTA's lessons for trade and development policy. The goal of the program is to identify policies and international agreements that foster sustainable development.

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