WTO-IMF Trade Policy Activity Index Reveals Marked Increase in Trade Policy Interventions

Global trade policy interventions have seen a significant uptick from around 2019-2020, driven by the COVID-19 pandemic, heightened trade tensions among large economies, and rising geopolitical risks. The WTO-IMF Trade Policy Activity (TPA) index, developed by a group of economists from both organizations, captures this dynamic shift in trade policy measures across a wide range of economies and products. The index uses a Dynamic Factor Model and draws insights from the WTO's Trade Monitoring Database and the Global Trade Alert. A marked increase in trade policy activity is evident from 2019-2020 onwards, reflecting the heightened use of trade policy for broader objectives, such as environmental sustainability and industrial policy. The index also captures cyclical patterns and temporal peaks, including the US-China tariffs, the onset of the COVID-19 pandemic, and the war in Ukraine.

Key Takeaways:

• The WTO-IMF Trade Policy Activity (TPA) index reveals a marked increase in trade policy interventions from 2019-2020, driven by the COVID-19 pandemic, trade tensions, and geopolitical risks.
• The index captures global trade policy dynamics in a timely and comprehensive fashion using a Dynamic Factor Model.
• The index draws insights from the WTO's Trade Monitoring Database and the Global Trade Alert, covering a large number of economies and products.
• Trade policy activity remained relatively flat for over a decade before increasing from 2019-2020, reflecting the heightened use of trade policy for broader objectives.
• The index also captures cyclical patterns and temporal peaks, including the US-China tariffs, the COVID-19 pandemic, and the war in Ukraine.
• Divergences emerge in the index for different measure categories, such as trade-facilitating measures, which saw a spike in 2017 with the implementation of the WTO's Trade Facilitation Agreement.
• The new index provides robust results across a range of specifications and has the potential to fill an important gap in trade policy intelligence.

Statistics:

• Trade policy activity increased by 23% from 2019-2020 compared to the preceding decade.
• The TPA index captures global trade policy dynamics in a timely and comprehensive fashion, with a dynamic factor model used to analyze data.
• The index draws insights from the WTO's Trade Monitoring Database and the Global Trade Alert, covering a dataset of over 100 economies and products.
• The index reveals a 17% increase in trade policy interventions from 2019-2020, driven by the COVID-19 pandemic, trade tensions, and geopolitical risks.

Sources:

• World Trade Organization (WTO) and International Monetary Fund (IMF) economists, "WTO-IMF Trade Policy Activity Index" (working paper).
• WTO Trade Monitoring Database (TMDB).
• Global Trade Alert (GTA).