Foreign Trade Barriers and Jobs in Global Supply Chains

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Abstract

This paper studies the impact of foreign barriers to goods and services trade on domestic jobs that are directly or indirectly related to affected 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. With these findings, the paper provides evidence on 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.