A Framework for the Assessment of Fiscal Consequences of Global Trade Wars

Keywords: global trade wars, trade conflicts, foreign trade, trade imbalances, tax revenues, fiscal consequences, fiscal risks, business activity of enterprises.

Abstract

The article is devoted to topical issues of assessing the consequences of trade wars for the fiscal space of third countries. The main preconditions and causes of the trade conflict between the United States and China were studied. The main models for assessing the consequences of global trade wars were analyzed. Particular attention is paid to the global integrated monetary, fiscal and global trade models, which are based on the principles of general economic equilibrium and are widely used to assess the economic consequences of global challenges, including trade wars. It was found that the global integrated monetary and fiscal model, other macroeconomic models were aimed at determining the economic consequences and effects and cannot be directly used to assess fiscal risks and likely budget losses due to global trade wars. The aim of the article is to deepen the principles of assessing the fiscal consequences of trade wars in the conditions of uncertainty in foreign economic policy and directions of restructuring of the world value chains. The economic consequences of the conflict and the channels of their spread to third countries were identified taking into account the deepening globalization processes. The direct and indirect dependence of exports and imports, GDP, investments, factor productivity level and tax revenues on changes in foreign trade, tariff increases, increasing uncertainty in world trade in the short, medium and long term is highlighted. The estimates obtained by different models are summarized. The fiscal consequences of the trade conflict between the United States and China for Ukraine as a country with a small, open and predominantly commodity economy were quantified. The inclusion in fiscal risks of probable losses of foreign trade from global trade wars, arising due to various reasons, which may decrease the tax revenues or increase the expenditures on the public support of enterprises, is justified. Changes in the methodology for assessment of fiscal risks are proposed, enabling to estimate the cost impact of fiscal risks on the public budget of Ukraine. Proposals for improvements in the statistical monitoring of business activity of enterprises, to form an appropriate information base for monitoring foreign economic activities, assessing fiscal risks and making decisions to ensure the sustainability of public finance and public support for enterprises in the conditions of global trade wars, are substantiated.

Downloads

Download data is not yet available.

References

Ostashko, T. O. (Ed.). (2021). Rozvytok natsionalnoi torhovelnoi polityky dlia pidvyshchennia konkurentospromozhnosti ekonomiky Ukrainy [Development of national trade policy to increase the competitiveness of Ukraineʼs economy]. Kyiv: IEP NAS of Ukraine. Retrieved from http://ief.org.ua/docs/mg/353.pdf [in Ukrainian].

Lunina, I. O. (2020). Publichni finansy v makroekonomichnii politytsi zrostannia [Public finances in macroeconomic growth policy]. Kyiv: IEP NAS of Ukraine. Retrieved from http://ief.org.ua/docs/mg/339.pdf [in Ukrainian].

Meinen, P. (2019). The effects of tariff hikes in a world of global value chains. ECB Economic Bulletin, Issue 8, рр. 36–45.

Dizioli, A. G., & Roye, B. (2018). Macroeconomic implications of increasing protectionism. ECB Economic Bulletin, Issue 6, рр. 35–38.

Bekkers, E. & Teh, R. (2019). Potential economic effects of a global trade conflict. Projecting the medium-run effects with the WTO Global Trade Model. Staff Working Paper ERSD-2019-04.

Berthou, A., Jardet, C., Siena, D., & Ursula, S. (2018). Costs and consequences of a trade war: a structural analysis. Rue de la Banque. Banque de France. No 72. Retrieved from https://publications.banque-france.fr/sites/default/files/medias/documents/818459_rdb72_en_v5.pdf

Ferrari, M. M., Kurcz, F., & Pagliari, M. S. (2020). Do words hurt more than actions? The impact of trade tensions on financial markets. ECB Working Paper Series, No. 2490. Retrieved from https://www.econstor.eu/bitstream/10419/229104/1/ecb-wp2490.pdf

Furceri, D., Hannan, S. A., Ostry, J. D., & Rose, A. K. (2019). Macroeconomic consequences of tariffs. IMF Working Paper WP/19/9.

Merchandise trade (% of GDP). World Trade Organization, and World Bank GDP estimates. data.worldbank.org. Retrieved from https://data.worldbank.org/indicator/TG.VAL.TOTL.GD.ZS

Bilorus, O. H., Vlasov, V. I., Hasanov, S. S., & Khanin, I. H. (2020). Kinets ery hlobalizatsii, dehlobalizatsiia, “nova” hlobalizatsiia chy perekhid do noosfernoho spivrozvytku? [The end of the era of globalization, deglobalization, “new” globalization or the transition to noosphere co-development?]. Finansy Ukrainy – Finance of Ukraine, 8, 7–25 [in Ukrainian].

World Trade Statistical Review 2018. Statistical tables. www.wto.org. Retrieved from https://www.wto.org/english/res_e/statis_e/wts2018_e/wts2018chapter08_e.pdf

Berthou, A., & Stumpner, S. (2020). Quantifying the impact of the US-China trade war on exports. February 14. www.freit.org. Retrieved from https://www.freit.org/WorkingPapers/Papers/TradePolicyMultilateral/FREIT1674.pdf

FRED Economic Data. Federal Reserve Bank of St. Louis. fred.stlouisfed.org. Retrieved from https://fred.stlouisfed.org

Amiti, M., Redding, S. J., & Weinstein, D. E. (2020). The Recent Consequences of Trade wars and Trade threats. Whoʼs Paying for the US Tariffs? A Longer-Term Perspective. AEA Papers and Proceedings, 110, рр. 541–546.

United States Announces Deal with Canada and Mexico to Lift Retaliatory Tariffs, May 17, 2019. Retrieved from https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/may/united-states-announces-deal-canada-and

Heiets, V. M. (2020). Fenomen nestabilnosti – vyklyk ekonomichnomu rozvytku [The phenomenon of instability – a challenge to economic development]. Kyiv: Akademperiodyka, 456 p. [in Ukrainian].

Aguiar, A., Corong, E., Mensbrugghe, D., Bekkers, E., Koopman, R., & The R. (2019). The WTO Global Trade Model: Technical documentation. World Trade Organization Economic Research and Statistics Division. Staff Working Paper ERSD-2019-10. Retrieved from https://www.wto.org/english/res_e/reser_e/ersd201910_e.pdf

Bekkers, E., & Schroeter, S. (2020). An economic analysis of the US-CHINA trade conflict. Staff Working Paper ERSD-2020-04.

Harrison, W. J. & Pearson, K. R. (1996). Computing Solutions for Large General Equilibrium Models Using GEMPACK. Computational Economics, 9, 83–127.

Anderson, D., Hunt, B.L., Kortelainen, M., Kumhof, M., Laxton, D., Muir, D.V., & et al. (2013). Getting to know GIMF: the simulation properties of the global integrated monetary and fiscal model. IMF Working paper, No. 13/55. Retrieved from https://www.imf.org/external/pubs/ft/wp/2013/wp1355.pdf

Laxton, D., Mursula, S., Kumhof, M., & Muir, D. V. (2010). The Global Integrated Monetary and Fiscal Model (GIMF) – Theoretical Structure. IMF Working Papers, N 10/34. DOI: https://doi.org/10.5089/9781451962734.001

Corong, E., Hertel, T., McDougall, R., Tsigas, M. & van der Mensbrugghe, D. (2017). The Standard GTAP Model, Version 7. Journal of Global Economic Analysis, 2 (1), 1–119. DOI:10.21642/JGEA.020101AF

Krugman, P. (2013). “The One Minute Trade Policy Theorist,” the conscience of a liberal. The New York Times, February 5. www.princeton.edu. Retrieved from https://www.princeton.edu/~pkrugman/The%20one-minute%20trade%20policy%20theorist.pdf

Cox, J. (2021). Labor productivity rate falls at the fastest pace since 1960. CNBC. 12.07.2021. www.cnbc.com. Retrieved from https://www.cnbc.com/2021/12/07/labor-productivity-rate-falls-at-the-fastest-pace-since-1960.html

Georgiadis, G., Hildebrand, S., Ricci, M., Schumann, B., & Roye, B. (2021). ECB-Global 2.0: a global macroeconomic model with dominant-currency pricing, tariffs and trade diversion. ECB Working Paper Series, No 2530. Retrieved from https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2530~e5f2c33c35.en.pdf

Bilousova, O. S. (2021). Instrumentarii otsinky naslidkiv hlobalnykh torhovykh viin dlia fiskalnoho prostoru [Toolkit for assessing the consequences of global trade wars for the fiscal space]. Proceedings from Development Strategy of Ukraine: Financial, Economic and Humanitarian Aspects: VIII Mizhnarodna naukovo-praktychna konferentsiia – VIII International Scientific and Practical Conference. (рp. 15–20). Kyiv: DP “Inform.-analit. ahentstvo”. Retrieved from http://194.44.12.92:8080/xmlui/bitstream/handle/123456789/6048/1%20%283%29.pdf?sequence=1 [in Ukrainian].

Ohliad ekonomichnoi aktyvnosti (pidsumky sichnia 2021 roku) [Review of economic activity (results of January 2021)]. (2021). Ministry of Economy of Ukraine. Retrieved June 04, 2021 from https://www.me.gov.ua/Documents/List?lang=uk-UA&id=010de307-2345-4162-b5e5-1dd8b2f81d10&tag=OgliadEkonomichnoiAktivnosti [in Ukrainian].

Struktura podatkovykh nadkhodzhen za haluziamy ekonomiky za 2019 r. [Structure of tax revenues by sectors of the economy in 2019]. (2020). Reitynh – Rating, Issue 1. Retrieved from https://rating.zone/wp-content/uploads/2020/02/struktura-podatkovykh-nadkhodzhen-za-haluziamy-ekonomiky-za-2019-r..pdf [in Ukrainian].

Biudzhetnyi kodeks Ukrainy vid 08.07.2010 r. № 2456-VI stanom na 29.09.2021 r. [Budget Code of Ukraine of July 8, 2010 No. 2456-VI as of September 29, 2021]. zakon.rada.gov.ua. Retrieved September 30, 2021 from https://zakon.rada.gov.ua/laws/show/2456-17#Text [in Ukrainian].

Pro zatverdzhennia Metodyky otsiniuvannia fiskalnykh ryzykiv: Postanova Kabinetu Ministriv Ukrainy vid 24.04.2019 r. № 351 stanom na 14.11.2019 r. [On approval of the Methodology for assessing fiscal risks: Resolution of the Cabinet of Ministers of Ukraine of April 24, 2019 № 351, as of November 14, 2019]. zakon.rada.gov.ua. Retrieved September 10, 2021 from https://zakon.rada.gov.ua/laws/show/351-2019-%D0%BF#Text [in Ukrainian].

Pro zatverdzhennia form derzhavnoho statystychnoho sposterezhennia shchodo stanu dilovoi aktyvnosti pidpryiemstv: Nakaz Derzhavnoi sluzhby statystyky Ukrainy vid 25.06.2021 r. № 133 [On approval of forms of the state statistical survey of economic activity of the enterprises: the Order of the State Statistics Service of Ukraine of June 25, 2021 № 133]. zakon.rada.gov.ua. Retrieved September 10, 2021 from https://zakon.rada.gov.ua/rada/show/v0133832-21#Text [in Ukrainian].

The Joint Harmonised EU Programme of Business and Consumer Surveys User Guide. European Commission Directorate-General for Economic and Financial Affairs. (2016). ec.europa.eu. Retrieved from https://ec.europa.eu/economy_finance/db_indicators/surveys/documents/bcs_user_guide_en.pdf

Metodolohichni polozhennia z orhanizatsii derzhavnoho statystychnoho sposterezhennia “Stan dilovoi aktyvnosti pidpryiemstv”: Nakaz Derzhavnoi sluzhby statystyky Ukrainy vid 17.06.2020 r. № 184 stanom na 11.01.2021 r. [Methodological principles on the organization of state statistical survey of economic activity of the enterprises: the Order of the State Statistics Service of Ukraine of June 17, 2020 № 184 as of January 11, 2021]. www.ukrstat.gov.ua. Retrieved September 10, 2021 from http://www.ukrstat.gov.ua/norm_doc/2021/04/4.pdf [in Ukrainian].


Abstract views: 16
PDF Downloads: 20
Published
2022-03-13
How to Cite
Bilousova, O. S. (2022). A Framework for the Assessment of Fiscal Consequences of Global Trade Wars . Statistics of Ukraine, 95(4), 13-23. https://doi.org/10.31767/su.4(95)2021.04.02