Firms in International Trade: Trade Policy Implications of the New New Trade Theory

Ciuriak, Dan et al., (2014) 'Firms in International Trade: Trade Policy Implications of the New New Trade Theory,' Global Policy (Forthcoming)

38 Pages Posted: 19 Apr 2011 Last revised: 2 Sep 2014

See all articles by Dan Ciuriak

Dan Ciuriak

Ciuriak Consulting Inc.; Centre for International Governance Innovation (CIGI); C.D. Howe Institute; Asia Pacific Foundation of Canada; BKP Development Research & Consulting GmbH

Beverly J. Lapham

Queen's University

Robert Wolfe

Queen's University - School of Policy Studies

Terry Collins-Williams

Government of Canada - Department of Foreign Affairs and International Trade of Canada (DFAIT)

John M. Curtis

Centre for International Governance Innovation (CIGI)

Date Written: September 1, 2014

Abstract

This paper explores the implications of recent developments in firm-based trade theory and empirics for trade policy and negotiations. While traditional trade theory focused on the country, and the new trade theory of the 1980’s adopted the industry as the unit for analysis, the newest theory emphasizes the role of firms and firm heterogeneity in international trade. We describe insights from this reformulation of theory and the empirical literature that illuminates it. The realities of trade as now understood show the need for a new new trade policy. Evaluating trade at the level of the firm implies that overcoming firm-level fixed costs of trade and reducing uncertainty lead to increased trade along margins that generate the highest productivity, innovation, and welfare gains. The traditional market access agenda ought now to be less important on the multilateral agenda than services, standards, trade facilitation, procurement, and innovation policy. The analytical needs of a new new trade policy require new models and more access to firm-level data to formulate and evaluate the multi-faceted impacts of trade policy.

JEL Classification: F10, F13

Suggested Citation

Ciuriak, Dan and Lapham, Beverly J. and Wolfe, Robert and Collins-Williams, Terry and Curtis, John M., Firms in International Trade: Trade Policy Implications of the New New Trade Theory (September 1, 2014). Ciuriak, Dan et al., (2014) 'Firms in International Trade: Trade Policy Implications of the New New Trade Theory,' Global Policy (Forthcoming). Available at SSRN: https://ssrn.com/abstract=1814226 or http://dx.doi.org/10.2139/ssrn.1814226

Dan Ciuriak

Ciuriak Consulting Inc. ( email )

83 Stewart St.
Ottawa, Ontario K1N 6H9
Canada

Centre for International Governance Innovation (CIGI) ( email )

57 Erb Street West
Waterloo, Ontario N2L 6C2
Canada

C.D. Howe Institute ( email )

67 Yonge St., Suite 300
Toronto, Ontario M5E 1J8
Canada

Asia Pacific Foundation of Canada ( email )

Canada

HOME PAGE: http://ciuriakconsulting.com/

BKP Development Research & Consulting GmbH ( email )

Romanstrasse 74
München, 80639
Germany

Beverly J. Lapham

Queen's University ( email )

Kingston, Ontario K7L 3N6 K7L 3N6
Canada

Robert Wolfe (Contact Author)

Queen's University - School of Policy Studies ( email )

Ontario K7L 3N6
Canada

Terry Collins-Williams

Government of Canada - Department of Foreign Affairs and International Trade of Canada (DFAIT) ( email )

125 Sussex Drive
Ottawa, Ontario K1A 0G2
United States

John M. Curtis

Centre for International Governance Innovation (CIGI) ( email )

57 Erb St. West
Waterloo, Ontario N2L 6C2
Canada

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