Do foreign trade barriers impact jobs in global supply chains?

Published on the ILO website

This paper aims to contribute to a better understanding of how trade and trade policies shape job creation and destruction across countries in the context of a globally fragmented production, by considering manufacturing and services jobs separately. The analysis takes into account not only tariff and non-tariff barriers to goods trade, but also barriers to services trade.

This paper studies the impact of foreign barriers to goods and services trade on domestic jobs that are directly or indirectly related to trade flows. Using the ILO’s recently published estimates of the number of jobs in global supply chains, the empirical analysis in this paper largely confirms predictions derived from a theoretical model closely calibrated to actual data from international input-output tables. First, it identifies a sizeable cross-border impact of barriers to manufacturing trade not only on manufacturing jobs, but also on services jobs. Second, service trade barriers affect the number of jobs in both services and manufacturing. Third, spill-over effects of trade policy in one sector to jobs in other sectors have become more important over time. Based on this evidence, the paper shows the labour market consequences of the increased interconnectedness of countries and sectors through global supply chains, suggesting that trade policy can have significant external effects on foreign labour markets.

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