The literature on international economics has undergone a major transformation over the last decade. While the focus was once on efficiency and gains derived from liberalization, current academic studies have shifted to resilience, sustainability, and fragmentation due to rising geopolitical tensions, pandemics, and the climate crisis.
Classic studies, using micro-data within the Melitz model framework, focused on how firms benefited from globalization. Current research, however, examines the vulnerability and political risks of these global chains.
Decoupling and Friend-Shoring: Academics are analyzing the restructuring of supply chains—moving away from cost-efficiency toward political reliability—following the US-China trade wars. The long-term welfare effects of firms' decisions to near-shore or friend-shore are being analyzed.
Supply Chain Risk Management: The costs to firms of holding inventory, diversifying suppliers, and dispersing production locations against geopolitical and climate shocks are being modeled using structural econometrics methods.
While the growth rate of goods trade slows, services trade and cross-border data flows are rapidly increasing. This brings with it challenges in measurement and policy.
Data Flow and Productivity: Research is exploring the extent to which data localization requirements increase trade costs and the impact of information-intensive services on productivity. Since traditional GDP measurements struggle to capture this flow, research in this area is focused on developing new statistical metrics.
Microeconomics of Services Trade: The application of heterogeneous firms theory (the Melitz model), which is common in goods trade, to service sectors such as banking, IT, and consulting is being examined. Non-tariff barriers in services trade are often more complex than in goods trade.
Environmental policies are the most dynamic area of current trade research and include the largest potential policy shifts.
Carbon Border Adjustment Mechanism (CBAM): The Carbon Border Adjustment Mechanism (CBAM) implemented by the European Union is a core focus of academic study. Research analyzes CBAM's effectiveness in preventing carbon leakage, its distributive effects on developing countries, and its potential use as a protectionist tool.
Green Subsidies and WTO Rules: Studies are examining how national subsidies for renewable energy technologies (electric vehicles, solar panels) challenge WTO rules and whether they will lead to new trade disputes.
International economics research no longer focuses solely on the static gains derived from comparative advantage and free trade. Current work seeks to understand how the global system under risk operates. In the coming years, the integration of new cost variables such as data security, geopolitical risk, and carbon footprint into standard trade models will remain the primary academic agenda.
