Investigación económica y análisis de políticas comerciales
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Trade and Deforestation
Forest plays a significant role in the overall balance of carbon in the atmosphere. Forest carbon sequestration can potentially reduce the accumulation of greenhouse gases in the atmosphere. However, when deforestation takes place, carbon is released to the atmosphere again. Globally, it has been estimated that about 11% to 39% of all carbon emissions from human origin come from the forest sector (Hao et al. 1990). Regarding global warming, the balance between forest conservation and deforestation can change forest sector activities from a solution to a problem and vice versa.
Why are Trade Agreements more Attractive in the Presence of Foreign Direct Investment?
This paper argues that interests of nationals and owners of home-based foreign capital in the formation of a Trade Agreements (TA) are not antagonistic, except under rather particular assumptions on initial tariffs among potential members. Further, if initial tariffs are endogenously determined through an industry-lobbying process, then TA that would have been immiserising in the absence of Foreign Direct Investment (FDI), may be welfare-enhancing in the presence of foreign-owned firms. The rationale is linked to the effect that the entry of FDI has on the pre-TA tariff, through contributions to the incumbent government. These results may help explain recent integration programs between developed and developing countries.
Trade in Medical Goods in the Context of Tackling COVID-19
The COVID-19 pandemic has brought considerable attention to trade in medical products, and specifically trade in products for prevention, testing and treatment. This study provides a comprehensive overview of trade and tariffs imposed on medical goods in general, many of which appear to be in severe shortage as a result of the current crisis. The purpose of this note is to provide factual information on how these goods are traded globally.
The Value of Domestic Subsidy Rules in Trade Agreements
This paper investigates the efficient design of rules on domestic subsidies in a trade agreement. A clear trade-off emerges from the economic literature. Weak rules may lead Member governments to inefficiently use domestic subsidies for redistributive purposes or to lower market access granted to trading partners once tariffs are bound. On the other hand, excessive rigidity may inhibit tariff negotiations or induce governments to set inefficiently high tariffs, as strict regulations would reduce policy makers' ability to use subsidies to offset domestic market distortions. Efficient subsidy rules are, therefore, the ones that strike the right balance between policy flexibility and rigidity. This economic approach provides a framework to interpret the provisions on domestic subsidies in the WTO.
Trade Finance in Periods of Crisis
This paper reviews a number of initiatives taken by public and private institutions aimed at minimizing the impact of the on-going crisis of the financial sector on its ability to supply trade finance to support trade at affordable rates. In doing so, it draws a few policy lessons. One of them is that a relatively stable segment of the financial industry is now regularly hit by the contagion of financial crises, with potentially very harmful spill-overs on global trade through a dry up of its financing. Specific policy measures to restore confidence in this otherwise safe market required a good level of coherence and dialogue between national governments and international and regional development organizations. Lessons from the Asian and Latin American financial crises of the late 1990's have been learned and academia provided input by developing understanding on a previously under-rated topic in the literature. Learning-by-doing and leadership have also been features of the policy response, which altogether had some successes. Still, longer-term challenges remain, such as addressing the structural gaps in the availability of trade finance in low-income countries - ad hoc programs have been designed to fill the gap between the perceived and actual risk of extending trade credit to traders in these countries. Moreover, regulation of the trade finance market needs to continue to take into account its low-risk character, the absence of leverage and its impact on development.
Reducing Trade Costs in LDCs: The Role of Aid for Trade
This study analyses the role of Aid for Trade in reducing trade costs in least developed countries (LDCs). The analysis builds on questionnaires and case stories submitted as part of the Aid-for-Trade monitoring and evaluation exercise for the Fifth Global Review of Aid for Trade. Trade costs are high in LDCs and constitute a major impediment to their participation in international trade. The most important sources of trade costs in LDCs are inadequate transport infrastructure, cumbersome border procedures and compliance with non-tariff measures for merchandise exports. In the case of LDC services exports, major drivers of trade costs include ICT networks, poor regulation, low skill levels, the recognition of professional qualifications and restrictions on the movement of natural persons. LDCs are well aware of the issue of high trade costs, which is addressed by more than 90% of LDCs in their national strategies. Trade facilitation is the top Aid-for-Trade priority for LDCs, which is also reflected in increasing Aid-for-Trade flows. The analysis of questionnaires, case stories, diagnostic trade integration studies and existing econometric work illustrates the important role played by Aid-for-Trade interventions in lowering trade costs in LDCs.
The Determinants of Quality Specialization
A growing literature suggests that high-income countries export high-quality goods. Two hypotheses may explain such specialization, with different implications for welfare, inequality, and trade policy. Fajgelbaum, Grossman, and Helpman (JPE -2011-) formalize the Linder (1961) conjecture that home demand determines the pattern of specialization and therefore predict that high-income locations export high-quality products. The factor-proportions model also predicts that skill-abundant, high-income locations export skill-intensive, high-quality products (Schott, QJE 2004). Prior empirical evidence does not separate these explanations. I develop a model that nests both hypotheses and employ microdata on US manufacturing plants’ shipments and factor inputs to quantify the two mechanisms’ roles in quality specialization across US cities. Home-market demand explains at least as much of the relationship between income and quality as differences in factor usage.
New Evidence on Preference Utilization
We analyse the degree of preference utilization in four major importing countries (Australia, Canada, EU and US) and provide evidence that preferences are more widely used than previously thought. For Australia and Canada, we have obtained a new dataset on imports by preferential regime that has so far not been publicly available. For the EU and US, we make use of more disaggregated data than previously used in the literature. We empirically test what determines utilization rates. In line with previous studies, we find that utilization increases with both the preferential margin and the volume of exports, suggesting that using preferences can be costly. However, we also find that utilization rates are often very high, even for very small preferential margins and/or very small trade flows, which contradicts numerous estimates that average compliance costs are as high as 2-6%. We extend the existing literature in relation to both data and methodological issues. In particular, we construct "pseudo transaction-level" data that allows us to assess more precisely when available preferences are utilized. Using this methodology, we obtain a more realistic estimate of what determines utilization. Rather than constituting a percentage share of the trade value, our findings indicate that utilization costs involve an important fixed cost element. We provide estimates for such fixed costs, which appear to be in the range of USD 14 to USD 1,500.
Typology of Environment-Related Provisions in Regional Trade Agreements
The last 25 years have witnessed a rapid increase in regional trade agreements (RTAs). Although RTAs generally aim at lowering tariff and non-tariff trade barriers, an increasing number of trade agreements extend their scope to cover specific policy areas such as environmental protection and sustainable development. This paper establishes a comprehensive typology and quantitative analysis of environment-related provisions included in RTAs. The analysis covers all the RTAs currently into force that have been notified to the WTO between 1957 and May 2016, namely 270 trade agreements. While environmental exceptions, along with environmental cooperation continue to be the most common types of environment-related provisions, many other different types of provisions are incorporated in an increasing number of RTAs. The common feature of all environment-related provisions, including environmental exceptions, is their heterogeneity in terms of structure, language and scope.
The Relation between International Trade and Freshwater Scarcity
It is becoming increasingly important to put freshwater issues in a global context. Local water depletion and pollution are often closely tied to the structure of the global economy. With increasing trade between nations and continents, water is more frequently used to produce exported goods. International trade in commodities implies long-distance transfers of water in virtual form, where virtual water is understood as the volume of water that has been used to produce a commodity and that is thus virtually embedded in it. Knowledge about the virtual-water flows entering and leaving a country can cast a completely new light on the actual water scarcity of a country. For example, Jordan imports about 5 to 7 billion m3 of virtual water per year, which is in sharp contrast with the 1 billion m3 of water withdrawn annually from domestic water sources. This means that people in Jordan apparently survive owing to the import of water-intensive commodities from elsewhere, for example the USA.
Revisiting Trade and Development Nexus
The rapid rise in global fragmentation — foreign investment, global supply chains, and ‘production sharing — is fundamentally reshaping the multilateral trading system. This paper uses a simple economic modeling framework to understand how the global fragmentation phenomenon may reshape the WTO, and particularly its developing country members that are most affected by the rise in global production sharing and foreign direct investment. The paper argues that the surge in global production sharing, supply chain agreements, and investment has not only recast the role of existing GATT/WTO rules, but that these same forces also create a strong rationale for new multilateral disciplines pertaining to investment incentives and other ‘behind-the-border’ policies.
International Trade and Real Transmission Channels of Financial Shocks in Globalized Production Networks
The article analyses the role of international supply chains as transmission channels of a financial shock. Because individual firms are interdependent and rely on each other, either as supplier of intermediate goods or client for their own production, an exogenous financial shock affecting a single firm, such as the termination of a line of credit, reverberates through the productive chain. The transmission of the initial financial shock through real channels is tracked by modelling input-output interactions. The paper indicates that when banks operate at the limit of their institutional capacity, defined by the capital adequacy ratio, and if assets are priced to market, then a resonance effect amplifies the back and forth transmission between real and monetary circuits. The paper illustrates the proposed methodology by computing a supply-driven indicator (IRSIC) and indirect demand-driven impacts on five interconnected economies of different characteristics: China, Japan, Malaysia, Thailand and the United States.
The Revised WTO Agreement on Government Procurement (GPA)
The WTO's plurilateral Agreement on Government Procurement ("the GPA" or "the Agreement") is an important ongoing success story for the Organization. In March 2012, the GPA Parties completed a comprehensive revision of the Agreement, encompassing both its text and coverage (market access commitments). The revised GPA, the negotiating processes that led to its adoption and coming into force, and the continuing gradual broadening of its membership are of therefore interest for the evolution of the international trading system. The GPA's successful renegotiation, the continuing growth of its membership and its vitality as an instrument of public policy were not achieved through happenstance. The paper discusses a number of specific design features of the GPA that clearly facilitated the successful conclusion of the renegotiation and that, as such, may in the future be relevant to other areas of global trade liberalization. In addition to the Agreement's plurilateral nature, of particular interest are the approach taken with respect to application of the most-favored-nation (MFN) principle in the Agreement; the GPA's continuing strong emphasis on principles of reciprocity in market access concessions; and its approach to special and differential treatment for developing countries, in all of which it differs from approaches that are widely used in other WTO Agreements. Apart from the above, the GPA revision is important for the merging of trade and good governance concerns that it exemplifies. As discussed in the paper, the themes of governance and the sound management of public resources that are treated in the revised Agreement were not afterthoughts to the renegotiation; rather, they permeated the revised text and received focused attention from the Parties in their own right. As well, the GPA has direct implications for investment policy and for domestic economic reforms, and is an important tool of e-commerce. And, the revision has made possible very significant synergies between the GPA and other international instruments and activities in reducing barriers to participation and strengthening governance in public procurement markets. For all these reasons, the revised Agreement is likely to have a wider impact than meets the eye, and well merits the support and attention that it has received from the participating WTO Member governments.
National Environmental Policies and Multilateral Trade Rules
This paper provides an overview of institutional, economic and legal aspects of the relationship between national environmental policies and the multilateral trading system. In particular, it analyses some of the difficulties the WTO Dispute Settlement System faces when having to evaluate disputes on national environmental policies that have an impact on trade. From an economist's point of view it would be desirable that optimal environmental policies, i.e. policies that correct existing market failures, be ruled consistent with multilateral trade law. This paper argues that WTO law in theory provides appropriate tools to ensure rulings that are consistent with economic thinking. Yet, the paper also argues that economists have a rather imperfect knowledge of the precise welfare effects of different types of environmental policies. In practice, therefore, it is questionable whether economists are able to give adequate guidance to legal experts when it comes to the evaluation of national environmental policies. This is one of the reasons why there continues to be some degree of uncertainty as to the possible interpretations of certain WTO rules in the context of environmental disputes.
Non-Reciprocal Preference Erosion Arising from MFN Liberalitzation in Agriculture
This paper estimates the risk of preference erosion for non-reciprocal preference recipients in the agricultural sector as a consequence of MFN tariff cuts. It is based on a simulation of a single tariff-cutting scenario. The measure of preference erosion risk is the difference in preference margins enjoyed by individual suppliers to the QUAD (Canada, EU, Japan, United States) markets before and after a MFN tariff reduction, multiplied by the associated trade flow. The paper does not attempt to determine how losses in preference margins translate into trade outcomes, but it does highlight which products and which non-reciprocal preference beneficiaries are the most vulnerable to erosion effects in the major developed country markets. Overall, the paper finds that the risk of preference erosion is small, but some countries are strongly affected in particular product lines (notably sugar and bananas).
Political & Quasi-Adjudicative Dispute Settlement Models in European Union Free Trade Agreements
In this paper, interpretation and application dispute settlement provisions of European Union (EU) Free Trade Agreements (FTAs) signed between 1963 and 2006 are analysed. This will be through the two models of Dispute Settlement in International Law: the political and adjudicative. Political elements of dispute settlement mechanisms in Public international Law and General Agreement of Tariffs and Trade (GATT) served to establish those of the EU FTAs. Adjudicative and quasi-adjudicative elements of dispute settlement mechanisms of Public International Law and World Trade Organization (WTO) Law were used as parameters to set up those of the EU FTAs. These parameters also helped to define a new and unique hybrid model. The features of this model were found in Agreements with trade issues other than FTAs. It is possible, however, for future FTAs to incorporate them. The hybrid model is based on an adjudicative framework and includes both political and adjudicative elements. In conclusion, it was found that even though WTO Members incorporated adjudicative elements in the Dispute Settlement Understanding (DSU), the EU did not incorporate them bilaterally for a further five years. Furthermore, since the creation of the DSU in 1995, the EU has established more FTAs based on a political model than on a quasi-adjudicative. Consequently, the quasi-adjudicative dispute settlement model has not represented a clear trend in EU FTAs.
Competition policy, trade and the global economy: Existing WTO elements, commitments in regional trade agreements, current challenges and issues for reflection
Competition policy, today, is an essential element of the legal and institutional framework for the global economy. Whereas decades ago, anti-competitive practices tended to be viewed mainly as a domestic phenomenon, most facets of competition law enforcement now have an important international dimension. Examples include: the investigation and prosecution of price fixing and market sharing arrangements that often spill across national borders and, in important instances, encircle the globe; multiple recent, prominent cases of abuses of a dominant position in high-tech network industries; important current cases involving transnational energy markets; and major corporate mergers that often need to be simultaneously reviewed by multiple jurisdictions.
The Role of WTO Committees through the Lens of Specific Trade Concerns Raised in the TBT Committee
In this paper we provide some evidence of the common claim that STCs improve transparency and monitoring as well as help mitigate trade conflicts.
Testing the Trade Credit and Trade Link
Trade finance has received special attention during the financial crisis as one of the potential culprits for the great trade collapse. Several researchers have used micro level data to establish the link between trade finance and trade, especially so during the financial crisis, and have found diverting results. This paper analyses the effect of trade credit on trade on a macro level through a whole cycle. We employ Berne Union data on export credit insurance, the most extensive dataset on trade credits available at the moment, for the period of 2005--2011-. Using an instrumentation strategy we can identify a significantly positive effect of insured trade credit, as a proxy for trade credits, on trade. The effect of insured trade credit on trade is very strong and remains stable over the cycle, not varying between crisis and non-crisis periods.
Reform in Basic Telecommunications and the WTO Negotiations
This paper examines liberalization of the basic telecommunications sector in a number of Asian countries and the role of the General Agreement on Trade in Services (GATS) in this process. It begins by explaining the working of the GATS as a mechanism for multilateral liberalization efforts. It then presents a description of the reforms taking place in the telecom regimes of selected Asian countries, and of the commitments these countries made in the recent GATS negotiations. The paper explores the reasons why governments have taken advantage of the GATS negotiations to make multilateral market-opening commitments, even though they were not pursuing export interests. The paper also considers the limits to what was achieved by way of liberalization commitments in the negotiations. Allowing greater foreign equity participation without liberalizing the conditions of entry may raise national welfare concerns. Furthermore, certain governments could have taken greater advantage of the opportunity under GATS to precommit to future liberalization.