Research and analysis

DBT areas of research interest on trade and investment 2023

Published 23 May 2023

Foreword

We know effective operational decisions and policymaking rely on a comprehensive, up-to-date, and well-structured evidence base, drawing from diverse sources. Putting the best available evidence at the heart of policy development and implementation is critical to achieving the Department for Business and Trade’s (DBT) mission.

DBT has an active programme of data gathering, analysis and research. DBT collaborates with other government departments to share evidence and best practice, and to work towards joint analytical objectives. Complementing that, DBT is committed to working with external partners, including academic and industry researchers, and drawing on external evidence sources, to bolster our ability to address complex issues. We recognise research is a collaborative endeavour. Working with diverse external partners ensures we remain at the cutting edge of analysis.

For example, on trade and investment, our research shapes and supports bilateral and multilateral trade negotiations. Our research also helps to articulate the impacts of trade agreements (including on people and places) and identifies current and future trends DBT should prepare for. Our analysis allows us to understand trade and investment patterns, and to deliver the best value for money services to investors and exporters. Our evidence base supports the transformation and continuous improvement of the department’s programmes.

A critical part of DBT’s external engagement is our areas of research interest (ARI) publication. Following the creation of DBT, we are delighted to introduce our trade and investment ARI. We will now look to update this document to reflect our full range of business and trade research interests as a new department. Building on the positive ARI engagement to date, this document sets out a non-exhaustive list of priority questions related to trade and investment.

We’d be delighted for you to engage with these questions, and beyond those we welcome engagement where your research relates to any of DBT’s areas of work. The next section explains how we’d like you to engage with us. We look forward to hearing from you.

Ben Cropper, DBT Chief Economist and Director of Analysis

Professor Julia Sutcliffe, DBT Chief Scientific Adviser

Interpreting the ARI

DBT’s ARI represents a framework for external engagement, setting out a range of priority and long-term questions on trade and investment that we would welcome the submission of evidence and engagement from external partners on. We have developed the ARI through extensive discussions with policy and analyst colleagues within the department. We have also worked with other government departments to identify areas of mutual interest and to share evidence and best practice. These are questions we believe the external community are well placed to engage on. We have structured the questions around 4 core trade and investment themes, as well as a set of cross-cutting themes covering the topics of:

• trade agreements and market access barriers
• inward investment
• utilising trade agreements and exports
• international trading systems
• cross-cutting topics:
  • economic shocks
  • climate change and environment
  • innovation and sectors of the future
  • services and digital trade
  • statistics, evaluation and performance
  • levelling up and trade

DBT has extensive and evolving evidence needs. DBT’s ARI does not represent an exhaustive list of research questions we are interested in or developing evidence for. For certain questions, evidence may already exist, for others, evidence may not yet be synthesised, and for others, there may be weak or no evidence. It intends to open and frame discussions.

For each question, we are also interested in where analysis might reveal differential impacts between specific nations, regions, and groups of people (for example, firms, consumers and workers). This helps to ensure DBT’s evidence base can be utilised to optimise the benefits of trade and investment as well as support those who are negatively impacted by adjustment costs.

Beyond the questions listed, DBT also welcomes engagement on any of DBT’s areas of work. We will also now look to update this document to reflect our full range of business and trade research interests as a new department.

The purpose of our ARI is to improve our 2-way communication with the research community, to prompt discussions, to elicit research evidence, and to diversify our sources.

The ARI sits alongside other important analytical publications and processes for DBT, such as the trade modelling review and our monitoring and evaluation strategy. The ARI is part of our broader programme of outreach to external research partners. The Government Office for Science provides further guidance on interpreting and using the ARIs.

Engaging with the ARI

We welcome your engagement with the ARI as a researcher in the following ways:

1. If you have evidence that completely or partly answers one of our questions, or relates to DBT’s areas of work more broadly, we invite you to share that.

2. If you are, or plan to be, carrying out research relating to one of our questions, we’d like to hear about it. Likewise, if you aware of research being conducted elsewhere.

3. If you are submitting a funding or grant application that aligns with one of our questions, we hope that referencing the DBT ARI will help to strengthen your case for the possible public impact of the research.

4. We will use the ARI document to structure events and build new connections with external partners.

When you engage with DBT’s ARI, we will ensure that the evidence you submit reaches the right parts of the department for their consideration. Colleagues may also wish to follow up with you if they have further questions.

Please note that we are not able to offer endorsement of funding or grant applications. The ARI is not an offer to collaborate with researchers on projects and we cannot respond to speculative approaches for research funding. Externally commissioned research projects are competitively tendered on Contracts Finder and the Research Marketplace. DBT’s research and statistics are published on GOV.UK.

Examples include:

• UK trade in numbers, which provides a snapshot of the UK’s latest trade and investment position
• Trade and investment factsheets which provide a snapshot of the UK’s trade and investment positions with individual trading and investment partners overseas
• Impact assessment of the free trade agreement (FTA) between the UK and Australia, which provides information on the potential economic impacts of the agreement
• Global trade outlook which sets out some of the long-term trends that are likely to shape the global economy and international trade in coming decades

Areas of research interest

1. Trade agreements and market access barriers

DBT is committed to securing world-class free trade agreements and reducing market access barriers, ensuring opportunities and benefits are spread across people and places and we understand their impact. Evidence and analysis are crucial to delivering this outcome. Methods, modelling and measurement of these is an evolving research area. Future evidence may include investigation into the impacts of provisions in new and modernising trade agreements.

1.1 What are the short- and long-term impacts of free trade agreements on businesses, consumers, regions, the labour market, and growth?

1.2 Which chapters or specific provisions of trade agreements have had the greatest impact? How do we best evaluate this and provide a consistent assessment across chapters?

1.3 What are the most effective methodologies for determining the impacts of free trade agreements after entry into force?

1.4 How can we best measure the prevalence, extent and impact of market access barriers and non-tariff barriers for goods, services, and investment, and which data sources can support with these?

1.5 What is the UK public and industry awareness, perception and understanding of trade policy and global trade patterns, and what aspects are most important to them? What factors and sources of information influence this for different demographics, and impact firm decision-making on imports and exports?

1.6 What are the factors influencing whether firms trade under free trade agreement preferences or not? What is the relative importance of, and key interactions among, these factors? How does real-world experience of an exporter or importer influence this?

1.7 What role, if any, do customs intermediaries or trade consultants play in whether a firm makes use of FTA preferences and provisions?

1.8 How can we best raise awareness of how businesses can make the most of free trade agreements?

2. Inward investment

Foreign investment is a central pillar underpinning both the national and local economies. DBT seeks to maximise the economic and social benefits of foreign investment through using a robust evidence base to inform operational and policy related decisions. DBT would like to deepen its understanding of the role foreign investment plays in furthering government objectives and the role that DBT can play in meeting those objectives.

2.1. What factors determine the UK’s attractiveness as an investment destination? How can DBT most effectively identify and address market failures and barriers to improve the UK’s attractiveness?

2.2 What policy and operational factors can influence the location of an investment decision within a country? Which factors are most fundamental?

2.3 How can DBT and other departments optimally design policies that reduce the risks of disinvestment across UK nations and regions, and different industries?

2.4 To what extent do trade policies and trade agreements impact the UK’s attractiveness as an investment destination? How can DBT best promote them to maximise the utilisation of our trade agreement commitments among investors?

2.5 Does investment promotion also influence trade and exporters? Does it do so directly through invested companies, or indirectly through impact on domestic businesses?

2.6 How can we use evidence to identify and measure forward and backward linkages between trade and investment promotion, and their impact on productivity and growth at the local and national level?

2.7 What are the economic impacts for the UK of outward direct investment, for instance on exports? How are these impacts influenced by the destination countries and sectors the UK invests in?

2.8 How can we use novel datasets to identify organisations to market capital investment opportunities to and to understand capital investment needs across the UK, including by sector and region?

2.9 How should foreign investment best support delivery of key long-term government priorities, such as Net Zero and the 2.4% GDP R&D target? What is DBT’s contribution to these priorities?

2.10 How can the additionality of government investment promotion and its constituent activities, including digital support, face-to-face support, events, expos, and financial incentives, be effectively evaluated? How might this vary at a regional and sectoral level? What is the optimal balance of delivery between central coordinations hub, regional offices and overseas posts?

2.11 How can we best measure relationship between trade and foreign direct investment (FDI)? Particularly the complementarity and substitutability of trade with certain types of foreign direct investment, but also the different relationship each has with larger macroeconomic pressures?

3. Utilising trade agreements and exports

Given the benefits of engaging with the international economy through goods and services exports, this form of trade facilitation focuses on transparency. Firms are supported in navigating complex processes associated with international market access. Evidence should help to target this support where there exist market failures.

3.1. What are the wider impacts of exporting generally and spillover effects on non-exporting firms? How does this vary by region and business size?

3.2 What do businesses need from government to help them export, and what types of businesses need the most support?

3.3 How can export support be targeted to narrow regional disparities in economic outcomes?

3.4 To what extent do businesses see exporting as a means of achieving business growth? How does this vary by business characteristic?

3.5 What are the common costs of entering a new foreign market and, how do businesses understand and approach these costs?

3.6 How do barriers to investment affect export performance?

3.7 What barriers stop businesses from using new and existing FTAs to export their goods and services and how can we reduce these barriers?

3.8 How do local supply chains affect the considerations for government when designing export support services? How are non-exporting businesses supported by exporting businesses?

3.9 How can we measure the impact of government support, in trade facilitation and export finance? Can we isolate the impact in specific goods and services?

3.10 How do UK businesses compare with non-UK businesses in their use of trade finance?

3.11 What are the best practices for the design and evaluation of export finance products and services?

3.12 How can the time and cost to UK businesses of going through border processes for goods and administrative processes for services be best measured?

3.13 How can trade promotion levers in the UK and abroad be best applied so that UK businesses maximise their position in regional and global value chains?

4. International trading systems

DBT is committed to supporting the multilateral rules-based trading system and the importance of evidence and analysis in informing reform. This includes using evidence to improve our understanding of the incidence and impacts of unfair market distorting practices. Analysis informs multilateral negotiations and agreements on key issues such as the environment, health and improving the resilience of supply chains.

4.1 How can we improve the transparency and monitoring of harmful subsidies, unfair state-owned enterprise activity and other market distorting practices in the multilateral trading system?

4.2 What are the likely negative spillovers or impacts of harmful subsidies, unfair state-owned enterprise activity and other market distorting practices on the UK and the multilateral trading system? How can we best evaluate these and their impacts?

4.3 How can we better demonstrate which international trade measures are likely to have the most substantive impact in responding to future pandemics and health crises?

4.4 How can we assess the longer-term structural changes and trends to the global trading system and trade patterns, in particular following a trade shock?

4.5 What trade and investment interventions are most effective in creating inclusive growth for both UK and developing countries? What is the impact of increased trade on poverty reduction?

4.6 How can we better estimate the costs and benefits of multilateral and plurilateral trade agreements on the UK?

4.7 What data and methods can improve estimation of UK and international supply chains?

4.8 How do the supply chains of the businesses we support relate to geographies we are targeting?

5. Cross-cutting

There are several cross-cutting themes that span DBT’s trade and investment work, where evidence and analysis are critical for tackling complex issues.

Economic shocks

5.1 What different patterns are observed in trade and investment flows following exogenous shocks (such as coronavirus (COVID-19)), compared to endogenous shocks (such as financial shocks) to the economy?

5.2 What effect do economic shocks, such as COVID-19, have on business trading models, resilience strategies and supply chain structure? How does this vary by business size, location and sector?

5.3 What long-term trade opportunities and risks may arise from changes in the use of technology and ways of working resulting from shocks, such as COVID-19?

5.4 What can international best practise tell us about using data and innovative approaches to manage economic shocks and recovery? Particularly, how could real time indicators, data science, geospatial analysis, and other innovative ways of data collection inform decisions?

5.5 How do businesses assess and mitigate risks, both upstream and downstream in their supply chain?

Climate change and environment

5.6 How can we best measure and evaluate the impact of trade on the environment and global emissions?

5.7 What are innovative ways that DBT can use its trade levers to promote net zero ambitions and to advance the circular economy?

5.8 What innovative measures can be developed to mitigate carbon leakage risk through product standards? What impact would the introduction of carbon taxes, such as border taxes, have on regional trade flows?

5.9 What measures could help minimise the risks of de-forestation, biodiversity, and habitat loss in producer countries, without creating excessive trade distortion?

5.10 With growing preference for greener investments, how should sustainability goals be balanced with ensuring all sectors can continue to access financial markets?

5.11 How is both climate change and environmental regulation to mitigate its effects, impacting comparative advantage?

5.12 How can metrics be developed to more accurately measure the potential export opportunity from the green economy?

5.13 How can we define and measure the scope of environmental goods and services for the purposes of international negotiations? Which goods, services and technologies would best help bolster developing countries’ resilience to climate change?

5.14 What barriers are preventing inward investment into sectors set out in the government’s ten point plan for a green industrial revolution? How can they be most effectively identified and addressed?

Innovation and sectors of the future

5.15 How can comparative advantage inform future trade and investment interests across regions and sectors, and how can it best be evaluated? What are the limits of comparative advantage here?

5.16 How can we best evaluate countries’ relative technology readiness levels (TRL), by technical area, sector and overall strategy? To what extent does the commercial, regulatory and legal environment impact on TRLs?

5.17 How can we forecast which technologies are most likely to disrupt the pattern of global trade and investment in the coming decades? What impact will they have on productivity growth?

5.18 Which countries excel at facilitating the commercialisation and export of new technologies and why?

5.19 How could technology affect the integration of developing countries into the global economy?

5.20 Which global economic sectors (such as agriculture, aerospace, financial services) are most likely to grow and shrink over the next decade?

5.21 How should we forecast total factor productivity growth in the long-term, an era of disruptive technological change?

5.22 What is the impact of new technologies, on trade and investment, and how can we best measure this? For example, in what ways can distributed ledger technology be used to facilitate trade, for example, through finance or supply chain facilitation.

5.23 How can DBT improve the evidence base on sectors and trade-offs across different trade and investment policy priorities?

Services and digital trade

5.24 How are new technologies (such as AI, IoT, Blockchain, communication) and digitalisation impacting the tradability of different services and existing supply chains?

5.25 How much of a barrier are cyber-security measures to consumers and businesses in a global market and what are the costs associated with these? How successful has international collaboration to relieve these barriers been?

5.26 How do businesses adapt their delivery of services between the General Agreement on Trade in Services (GATS) 4 Modes of Supply? To what extent are the 4 Modes of Supply complements or substitutes? How has the COVID-19 pandemic affected this?

5.27. How can the categorisation and measurement of trade in services by the modes of supply be developed and optimised?

5.28 How do we ensure free flow of data with trust? How does this interact with global data governance and potential divergence of standards?

5.29 How can we improve measurement of digital trade (e-commerce, Mode 1 services trade, and data) and estimate its impact on the economy?

Statistics, evaluation and performance

5.30 What data and methods can improve estimation of regional and intra-UK trade?

5.31 Which statistical methods can help reconcile foreign investment and trade asymmetries between partner countries?

5.32 What is the link between trade, productivity and growth, and how can we best measure it?

5.33 What are the wider labour market impacts of exports and investment? For example, any long-term consequences on skills.

5.34 How can we measure the resilience of the UK trading system, such as measuring the impact of trade defence measures? What headline indicators help to monitor this?

5.35 What data and methods can we exploit to estimate the extent of trans-shipment?

Levelling up and trade

5.36 What are the roles of complimentary policies to support trade to take a holistic approach to inclusive growth (such as the interaction between trade and investment with domestic market conditions)?

5.37 How can government unlock UK-wide inclusive growth and long-term prosperity by maximising trade and investment opportunities?

5.38 How can we optimise DBT levers to spread trade and investment opportunities across people and places?

5.39 How can we effectively identify the key trade-offs from trade openness and how can DBT and other government departments (OGDs) support adjustment costs for those who are disproportionately impacted?

5.40 What is the potential impact and size of the opportunity of identifying and targeting cohorts that are not taking up trade opportunities and support tools to increase productivity and growth?

Contact DBT

For all engagement with DBT’s ARI, please contact the DBT Research team at: [email protected].