How do trader characteristics explain international pricing behaviour? Evidence from Taiwan and UK customs trade data.

In 2019, the UK ranks as Taiwan's 3rd largest trading partner in Europe, while Taiwan is the UK's 7th largest trading partner in Asia (Taiwan's Ministry of Foreign Affairs). As the Brexit transition period ends and the UK will be able to develop its own independent trade policies, Taiwan and the UK have sought to boost trade and strengthen the economic partnership between the two countries in recent rounds of bilateral trade talks.

As both countries are small open economies trading next to a large neighbouring economy that is also their main trading partner, namely China and the EU, respectively, Taiwan and the UK stand to benefit from having a joint academic network that can share best practice and facilitate knowledge exchange between two trade teams that already have access to highly disaggregate transactional-level customs trade data and firm-level financial data for Taiwan and the UK.

This project aims to establish a close working partnership through the development of three work packages. The first package is to initiate closer networking by establishing a close working relationship between the two trade teams for (i) sharing experience in working with confidential customs data and discussing scope for data sharing through a launch event, (ii) training early career researchers who will be working with big data through a workshop, and (iii) engaging with wider research communities and policy audience through a closing conference to disseminate our research output.

Our second work package will initiate joint research activities with a research project on how different traders respond differently in terms of international pricing in response to external shocks such as exchange rate movements. In particular, we will focus on two aspects of trader characteristics in both countries (i) firms' financial constraints and (ii) firms' dependence on the largest trading partners (China for Taiwanese firms and the EU for UK firms), in explaining firms' pricing strategies.

We will take an innovative approach to identify these characteristics for both countries in the context of Taiwan-UK bilateral trade, and our findings will have strong policy implications for small open economies when making inflation forecasts or predicting the effectiveness of monetary policy.

Finally, our third forward-looking package will develop a 3-year plan as Areas of Interest for Taiwan-UK trade 2023-2026, to be advertised with a designated social media account. We will also seek to develop policy impact, for instance, by promoting potential bilateral trade facilitating policies such as a mutual recognition agreement for each other's trusted traders between Taiwan and the UK.