Economic research and trade policy analysis

This paper is concerned with three problems in the interpretation of the national treatment obligation in the General Agreement on Trade in Services (GATS). First, the precise domain of Article XVII on national treatment has not been clearly delineated, particularly in relation to Article XVI dealing with market access. Secondly, there is a difference between the text of Article XVII and the structure of the schedules of commitments, which makes it difficult to interpret the scope of the national treatment obligation even for identical services supplied through different modes. The final, and most complex, problem arises in establishing the definition of "like" services and "like" service suppliers. Uncertainty about the precise meaning of the national treatment obligation may undermine the key GATS objective of creating a secure, predictable trading environment. Moreover, the extent of liberalization implied by the commitments under GATS depends on the precise choice of interpretation.

The WTO Secretariat has published two information notes on issues relating to the manufacturing of COVID-19 vaccines.

Improving trade data on products needed to combat the COVID-19 pandemic — including vaccines and their components — is key to ensuring that the right policies are in place to facilitate their distribution, according to a new information note issued by the WTO Secretariat on 1 July.

Le concept d'assurance est fondé sur la mutualisation de risques futurs aléatoires moyennant le paiement en amont d'une contribution financière par le client (la prime d'assurance). Pour être effective, l'assurance suppose une confiance élevée de la part des clients dans la capacité des fournisseurs d'assurance (les compagnies d'assurance) à payer les dommages lorsqu'ils se matérialisent. Sinon, les clients ne payeraient pas leurs primes aux compagnies d'assurance.

The paper discusses the efforts deployed by various players, mainly multilateral financial institutions, regional development banks, export credit agencies, to mobilize greater flows of trade finance for developing countries, with a view to help them integrate in world trade. As an institution geared towards the balanced expansion of world trade, the WTO is in the business of making trade possible. Its various functions include reducing trade barriers, negotiating and implementing global trade rules, and settling disputes on the basis of the rule of law. The WTO is also interested in strengthening the "supply-side" of developing countries so that they can respond to new market opportunities. To this end, it supports various initiatives aimed at improving the "trade infrastructures" of developing countries, ranging from the ability to meet international product, safety and sanitary standards, to run efficient customs, or to participate effectively to the multilateral trade negotiations by training public servants. The WTO carries out various initiatives with other partners (public and private sector institutions), in the context of its own technical assistance program, or in the context of multi-agency projects such as the Integrated Framework or the Aid-for-Trade Initiative. Since more than 90% of trade transactions involve some form of credit, insurance or guarantee, one can reasonably say that trade finance is the lifeline of trade. Producers and traders in developing or least-developed countries need to have access to affordable flows of trade financing and insurance to be able to import and export, and hence integrate in world trade. From that perspective, an efficient financial system is one indispensable infrastructure to allow trade to happen. In line with the above initiatives, the WTO has been following actively, and at times, directly supporting, initiatives to boost the availability of trade finance in developing and least-developed countries wherever it was needed. Since the WTO is not a financial institution, it has been supporting in the past few years partners engaged in this effort such as international financial institutions, export credit agencies, large banks and regional development banks. Initially, the WTO has been asked by its members at several points in recent years to examine the issue of availability of trade financing – as a key infrastructure needed by developing and leastdeveloped countries to integrate in world trade. Paragraph 36 of the Ministerial Declaration of Doha requested WTO Members to examine, and if necessary come up with recommendations, on measures that the WTO could take, within its remit, to minimize the consequences of financial instabilities on their trade opportunities. In the context of the newly created Working Group on Trade, Debt and Finance (WGTDF), the interruptions of the flows of trade finance in emerging markets during the Asian and Latin American financial crises were quickly identified as concerns by Members, as well as the chronic difficulties of low income Members to secure more affordable flows of trade financing in the long-run. These concerns were channelled to the WTO Ministerial Meetings in Cancun (2003) and Hong-Kong (2005).2 During this period of examination, the Heads of the IMF, World Bank and the WTO agreed at the General Council Meeting on Coherence of 2002 to form an expert group including all interested parties, multilateral and regional public institutions, export credit agencies, private banks to examine what went wrong in this segment of financial markets, and how to create an enabling environment in local markets to provide adequate flows of trade finance on a on-going basis. In chairing one of these meetings, the Director-General of the WTO defined the role of the WTO in this area: encouraging liberalization of this type of financial services under the financial services agreement, being a regulator of export credit and guarantee subsidies under the ASCM, and serving as a forum to discuss WTO-compatible ways of providing support to developing countries. Conclusions by the Working Group were presented at the WGTDF, and later at the General Council. WTO Secretariat work on this topic up to 2003, in particular its contribution to the WGTDF and to the expert group, was summarized in WTO Discussion Paper 2.4 While the liquidity in financial markets improved from 2002 until the recent turmoil created by the crisis of the sub-prime mortgage markets, trade finance remained an issue for concern for WTO Members, in particular the poorest, which do not have access to international financial markets or for emerging markets which remain prone to changes in market sentiment, and hence credit rating. Despite the rapid development of "trade finance facilitation" schemes developed by regional development banks and the IFC, with immediate success in low income countries, the issue of availability of trade finance came back among other "supply-side" constraints identified by the Aidfor- Trade Task Force, after the WTO Ministerial Meeting in Hong-Kong. While the mandate of the WTO under the Aid-for-Trade is essentially one of evaluation and monitoring, it may be in cases one of advocacy. Based on the work being carried out since 2002, and after consultation with partners (regional development banks, multilateral institutions, export credit institutions,...), input by the WTO Secretariat to boost the availability of trade finance for developing countries under the Aid-for-Trade umbrella was welcomed by Members. Lack of trade financing and guarantee infrastructures were identified as one of the barriers to integration of low income countries in world trade by each of the three regional Aid-for-Trade Reviews. It was acknowledged that the current Aid-for-Trade Initiative could provide the extra leverage to convince WTO partners to deliver more plentiful of trade credit and guarantees to WTO members that need it the most. This paper provides background on the difficulties of some countries and traders to access affordable trade credit and finance, on the growing divide between these low income countries and economically advanced countries in handling modern trade finance instruments, and on the joint reflection undertaken by the WTO, most recently under the Aid-for-Trade programme, and previously under the umbrella of the WGTDF and the Coherence Mandate, to help strengthen developing countries' capacities in this area.

Discussions about international capital movements raise extremely important and controversial questions. Why should countries open up their capital accounts, especially considering that unrestricted international capital movement is a relatively new phenomenon? For example, many OECD countries have not eliminated their foreign exchange restrictions only until the 1980's. If the answer is unequivocally affirmative, does it matter how fast should countries do so? Should they wait until "all essential pieces" of the policy package are in place before they eliminate all restrictions? How are international capital movements related to domestic financial sectors? Is there a difference between opening to competition an industry such as car manufacturing as compared to the banking sector? Should the opening of the banking sector be governed by different rules? Rules about foreign exchange restrictions are already in place in the IMF Articles. Until recently, the IMF Articles only called for the elimination of foreign exchange restrictions on the current account. The ongoing discussion and the controversy about globalization that calls for the capital account liberalization introduces, therefore, a relatively new element into the whole discussion. These questions have also implications for the World Trade Organization. It is well known, that the Uruguay Round Agreements have already provided a coverage for a number of aspects that are directly related to foreign investment. Rules established elsewhere such as in the context of changes to the IMF Articles will obviously have an important bearing for the implementation of rules agreed in the Uruguay Round. This raises a variety of other questions in the mind of some observers. Who should decide about the rules on capital account liberalization? What rules? IMF? What is the role of the WTO? How does one link the two? All of the questions raised above are clearly extremely important and most of them are discussed in the following paper by John Williamson. Mr. Williamson's presentation is based on his lecture and discussion which was delivered on 17 June 1999 at the WTO. The actual text that follows is a transcript of that lecture.

The system of global agricultural and food trade is undergoing rapid processes of change, with important implications for economic development. In this paper we document and discuss these changes; including the rapid growth and structural change in agri-food trade, the increased consolidation in food supply chains, the proliferation of public and private food standards, high and volatile food prices, and increased vertical coordination in the chains. We investigate what the implications are of these changes for developing countries, for their participation in international agricultural trade as well as for economic development, income mobility and poverty reduction in rural areas.

The General Agreement on Trade in Services (known as the GATS) is an important new element in the international framework that affects the regulation of every WTO Member's financial sector. However, except for a limited number of country-specific case studies, no attempt has been made to compare WTO commitments to open the domestic banking sector to foreign banks with actual regulatory practice in a systematic and comprehensive manner on a cross-country basis. Nor has much attention been devoted to systematically and comprehensively assess the degree to which WTO Members discriminate against foreign bank. This paper draws upon a new and comprehensive dataset consisting of the commitments countries made at the WTO and the regulations actually imposed on foreign banks by those countries. The dataset covers 123 WTO Members for whom there was also information available on their current regulatory regime for banking (based on the responses to a World Bank survey as discussed in Barth, Caprio, and Levine (2006)). On the basis of that data, the authors develop indices measuring the degree of openness to foreign banking based upon both commitments made and actual regulatory practice, with a view to assessing the overall extent to which countries open their borders to foreign banks more than they are legally obliged to do based upon their WTO commitments. The dataset is also used to assess the overall extent to which countries discriminate against foreign banks by regulating them less favorably than domestic banks. Although our results are still quite preliminary, they do show substantial divergences between commitments and practices. Indices of market openness and discrimination reveal wide differences among the 123 countries in the sample. The paper also identifies various factors that help explain the level of commitments that WTO Members have made.

Are market access commitments on services in Preferential Trade Agreements (PTAs) reciprocal or simply unilateral? If reciprocal, do concessions granted in services depend on concessions received from the trading partner in other services or in non-services areas as well? In this paper we investigate the presence of reciprocity in bilateral services agreements, by sub-sector, mode of supply and type of agreement (North-North, South-North, South-South). To do so, we use a database of concessions given and received by 36 WTO Members in 40 services PTAs. Results reveal the presence of reciprocity at the product (sub-sector) level and across economic sectors (i.e., preferences in services trade in exchange for preferences received in goods trade). Reciprocity is stronger in agreements between developed countries. The findings provide insights into motivations for services PTAs, but also the multilateral negotiations. Indeed, the negotiation of services PTAs provides an incentive to withhold services offers in the Doha Round in order to extract more - reciprocal- concessions at a bilateral level. The existence of reciprocity on a sectoral basis may also hold lessons on optimal ways to improve the multilateral negotiating process.

Special and differential treatment (S&D) for developing countries continues to be a defining feature of the multilateral trading system. This paper seeks to address key aspects of what has become an increasingly entangled and multi-faceted discussion. The paper begins by reviewing the historical context in which the relationship of developing countries with the multilateral trading system evolved. The paper distinguishes several elements in the case typically made for S&D. It argues that concerns about graduation — the definition of which countries qualify for special treatment —have complicated progress on this issue, suggesting that a focus on measures rather than on country status would obviate this difficulty, while at the same time increasing the analytical underpinning of the case for special and differential treatment. The paper explores various forms of S&D and develops arguments for particular approaches to the design and management of access to S&D. An illustration is provided of how a more analytical approach would work by defining eligibility automatically in relation to measures rather than countries.