Macro/Trade Seminar: An Unhealthy Trade Surplus?
The School of Economics invites you to a seminar presented by Shang-Jin Wei (University of Columbia Business School).
Jungho Lee (Singapore Management University)
Jianhuan Xu (Singapore Management University)
Recognizing that trade imbalance can generate a difference in the unit shipping cost, we show that countries with a large trade surplus (deficit) tend to systematically import (export) more of goods that are heavy relative to their value. We report both cross-country evidence and evidence from ports across China that is consistent with this prediction. A particular example of goods that are relatively heavy is solid industrial waste such as scrap metals and scrap glass. We report evidence that countries with a trade surplus systematically import more of industrial waste. If the associated pollution externality is not properly corrected by a tax, a trade surplus is also translated into more health hazard associated with imported waste. We then propose a quantitative model to evaluate and compare several public policies that are meant to address this problem.