B - Statement of Work.pdf

DESCRIPTION/SPECIFICATIONS/STATEMENT OF WORK

Analyze the effects of trade agreements using Quantile Gravity methods

1.1 Introduction

The United States International Trade Commission (USITC or Commission) is an independent, quasi-judicial Federal agency with broad investigative responsibilities on matters of trade. The Commission investigates the effects of dumped and subsidized imports on domestic industries and conducts global safeguard investigations. The Commission also adjudicates cases involving imported goods that are alleged to infringe U.S. intellectual property rights. The Commission’s mandate, among other things, is to provide the President, the United States Trade Representative (USTR), and Congress with independent, quality analysis and information regarding international trade and competitive conditions facing U.S. firms. In doing so, the Commission contributes to the development of sound and informed U.S. trade policy.

1.2 Brief Background

The gravity model is frequently used by the Office of Economics to determine the ex-post effects of trade agreements in the Commission’s factfinding studies such as in the 2021 report on the “Economic Impact of Trade Agreements Implemented Under Trade Authorities Procedures.” An important limitation with traditional gravity estimates is the assumption that trade agreements have a homogeneous treatment effect on the trade flows of member countries. However, some recent empirical studies have shown that trade agreements can generate heterogenous economic effects depending on the ex-ante geographic and institutional frictions (distance, language, legal systems) present between member countries. It will thus benefit the Commission to employ the latest quantile estimation methods developed for the gravity model to assess the effects of trade agreements across the entire distribution of trade flows—allowing for a more precise and targeted quantification of the overall welfare effects.

1.3 Objectives

This requirement will entail a research paper to be written by an expert on quantile estimation methods and with an established record of conducting research on the economic effects of trade agreements using the gravity model. The paper will be co-authored by the Commission staff.

This paper will conduct original research and employ quantile estimation methods to determine the heterogenous effects of trade agreements at the disaggregate sector level. The estimates from the quantile regression will then be employed in a general equilibrium gravity framework to simulate the welfare effects of trade agreements. The final paper should include a comparison with other common methods used to estimate the gravity model and the benefits and drawbacks of the different approaches.

The research should be conducted under certain parameters. First, it should provide a review on how the literature currently accounts for heterogenous treatment effects from trade agreements.

Second, with respect to methodology, the quantile estimation methods should be robust to the incidental parameter problem that arises when using quantile regressions on panel trade data with three-way fixed effects in the specification (importer-year, exporter-year, importer-exporter).

The selected quantile method should also be capable of generating estimates in the presence of any zeros in the sample. Finally, the research should rely upon publicly available data sources.

1.4 Scope of Work

The contractor shall provide the Government with:

1. A research plan and annotated outline, which will include a description of the methodology and sources of information used, as well as a plan for the contributions to be made by USITC staff.

2. One workshop to discuss quantile estimation methods in general and a second technical workshop to discuss the use of quantile estimation in gravity models of trade flows.

3. A draft research paper co-authored by USITC staff, following the requirements defined in the research objectives.

4. A final version of the co-authored paper that could be submitted to a peer-reviewed academic journal.

5. A final presentation of research findings upon completion of the paper.

1.5. Technical Requirements

The subject-matter expert contractor shall provide the competed paper and its associated parts (data files for used tables and charts) to the USITC upon the completion of this project.

1.6 Deliverables

Technical Workshop #1 USITC Presentation by Jan 1, 2025 Research plan and annotated outline (including roles for USITC co-authors)

COR (by email) by Feb 15, 2025

Technical Workshop #2 USITC Presentation by April 1, 2025 First Draft of Research Paper COR (by email) by June 15, 2025 Final Draft of Research Paper COR (by email) by September 15, 2025 Final Presentation of Findings USITC Presentation by September 30, 2025

Any work completed under this contract may be released to the public at the Commission’s discretion.

1.7 General Acceptance Criteria

General quality measures, as set forth below, will be applied to each work product received from the contractor under this statement of work.

• Accuracy - Work products shall be accurate in presentation, technical content, and adherence to accepted elements of style.

• Clarity - Work products shall be clear and concise. Any/all diagrams shall be easy to understand and be relevant to the supporting narrative.

• Consistency to Requirements - All work products must satisfy the requirements of this statement of work.

• File Editing - All text and diagrammatic files shall be editable by the Government.

• Format - Work products shall be submitted in hard copy (where applicable) and in media mutually agreed upon prior to submission.

• Timeliness - Work products shall be submitted on or before the due date specified in this statement of work or submitted in accordance with a later scheduled date determined by the Government.

1.8 Period of Performance

The period of performance is October 1, 2024–September 30, 2025.

1.9 Place of Performance

The place of performance may be at the contractor’s facilities or at the USITC.

1.10 Type of Contract

The Government anticipates award of a Firm Fixed Price Contract as a result of this solicitation.