Economic research and trade policy analysis
The Economic Impact of COVID-19 on Women in Vulnerable Sectors and Economies
Women are likely to be harder hit than men by trade disruptions caused by the COVID-19 pandemic and the dangers are particularly acute in developing countries according to a new information note from the WTO Secretariat. The paper points to how governments’ policy responses could address gender-specific effects of the crisis.
The GATS Turns Ten: A Preliminary Stocktaking
The paper discusses the experience to date with the implementation and application of the General Agreement on Trade in Services (GATS), some ten years after its entry into force. One striking observation is the smooth functioning of the Agreement, which has created far less tensions and frictions, including at Ministerial Meetings, than its difficult negotiating history might have suggested. This is due in large part to a high degree of flexibility at several levels: Members have more scope than under the GATT to depart from common horizontal obligations, in particular the MFN principle; they are able to adjust the breadth and depth of their trade commitments (market access and national treatment) to particular sector conditions; and they face less constraints, if any, in the use of trade-related policies such as subsidies, export restrictions, or domestic regulatory interventions. An additional source of flexibility is the uncertainty still surrounding a few core concepts of the Agreement and their sometimes daring application in individual schedules. While the ongoing negotiations also provide an opportunity for technical corrections of scheduling problems, the basic (built-in) flexibility elements of the Agreement - including the bottom-up approach of undertaking sector commitments and the possibility of inscribing limitations under individual modes - will, of course, persist. (Their actual relevance may, nevertheless, differ significantly between 'old' Members and countries negotiating their accession to the WTO.) Given the broad reach of of the Agreement in terms of membership, sector application, and modal coverage, flexibility may be considered a conditio sine qua non. There is little reason to believe that a more rigid structure would have been acceptable to Uruguay Round participants and, even if so, that it would have proven stable and resilient over time. However, flexibility may come at a cost: lack of meaningful obligations across a reasonably broad range of service sectors. Vested interests may find it far easier than under the GATT to defend their privileges and defy more rational and harmonized trading conditions. While the paper discusses formula-based approaches that have been proposed to improve the quantity and/or quality of sector commitments within the existing framework of GATS, there should be no illusion about the scope for technical solutions to what constitutes a political and institutional challenge.
Revisiting Growth Accounting From a Trade in Value-Added Perspective
Global Manufacturing and International Supply Chains changed the way trade and international economics are understood today. The present essay builds on recent statistical advances to suggest new ways of looking at the demand and supply side approaches when Global Value Chains (GVCs) — articulating supply and demand chains from an international perspective-are taken into consideration. This pilot case focuses on the G-20 countries, a group of leading developed and developing economies which took a prominent role in fostering and managing global economic governance. The paper is organised into two independent parts. The demand dynamics is first analysed through a growth-accounting decomposition, then through the long term determinants of income elasticity of imports. The second part looks at the implications of global manufacturing for our understanding of the supply-side growth dynamics, privileging a trade perspective: the definition of comparative advantages and the potential for value-chain up-grading.
Trade Issues Affecting Disaster Response
The frequency, severity and economic impact of natural disasters are growing. Import surges resulting from disaster-response efforts can highlight underlying structural failings in the border clearance regimes of disaster-affected countries.
The WTO's TPR Coverage of SPS Systems in Sub-Saharan Africa
The main purpose of the paper is to present the coverage of SPS systems in SSA countries by TPR reports, and their main findings. It also opens the discussion as to whether the SPS analytical framework in TPR reports has been sufficiently comprehensive and beneficial in guiding technical assistance (TPR follow-up) activities in SSA. At the outset, we briefly present the strategic importance of agriculture in SSA countries, with a description of the link between an effective SPS regulatory system and the performance of agriculture.
Georgia's Post-Accession Structural Reform Challenges
The process leading to WTO accession is complex, requires solid domestic coordination mechanisms in the acceding country, a rethinking of its economic and trade policies and significant domestic structural reforms. It often implies the creation of new institutions designed to coordinate and implement the policies at the national level, as was the case in Georgia.
Lessons Learned and Challenges Ahead for the WTO Trade Monitoring Exercise
A little over a decade has passed since the onset of the global financial crisis in 2008. Shortly after the collapse of the Lehman Brothers investment bank, an internal Secretariat Task Force was established by the WTO Director-General to monitor the trade-related developments associated with the crisis. Meeting in London in early 2009, the G20 Leaders mandated the WTO, together with other international bodies, to monitor and report publicly on G20 adherence to resisting protectionism and promoting global trade and investment. Since then, 22 G20 reports and 24 WTO-wide reports have been published.
The Interface between the Trade and Climate Change Regimes
As governments increasingly adopt policies to reduce greenhouse gas emissions, concern has grown on two fronts. First, carbon leakage can occur when mitigation policies are not the same across countries and producers seek to locate in jurisdictions where production costs are least affected by emission constraints. The risk of carbon leakage raises questions about the efficacy of climate change policies in a global sense. Secondly, it is precisely the cost-related consequences of differential mitigation policies that feed industry concerns about competitiveness. We thus have a link between environmental and competitiveness perspectives that fuses climate change and trade regimes in potentially problematic ways as governments contemplate trade actions to manage the environmental and/or competitiveness consequences of differential climate change policies. On the trade side of this relationship, we have the reality that the GATT/WTO rules were not originally drafted to accommodate climate change policies and concerns. The purpose of this paper is to analyze the relevance of certain WTO rules to the interface between climate change and trade, focusing in particular on border measures, technical regulations on trade, standards and labelling, and subsidies and countervailing duties. It concludes that in the absence of clear international understandings on how to manage the climate change and trade interface, we run the risk of a clash that compromises the effectiveness of climate change policies as well as the potential gains from specialization through trade.
Environmental Quality Provision and Eco-Labelling
This paper is a literature survey of some relevant issues arising from environmental quality provision and eco-labelling schemes. First of all it is shown how the two topics are strictly related. Firms adopting a production process (or producing a good) more environmentally friendly than others (environmental quality provision aspect) may want to make it public (eco-labelling aspect). The survey addresses the question of optimal environmental quality provision (also as a policy tool) and firms compliance. With regard to eco-labelling, its impacts on market structure are analysed. It hasn’t been possible to consider all issues, like for example that of moral hazard in providing non truthful information. Different issues related to trade are also analysed, even if the literature is not abundant on this yet. In the literature both aspects, of environmental quality provision and eco-labelling, are analysed using product differentiation models. The usual result is that multiple equilibria arise depending also on the parameters. Models are also not robust to different assumptions. Environmental quality provision and eco-labelling are also compared to more traditional policy instruments like taxes (or subsidies) and standards. From the empirical evidence it can be concluded that information plays a crucial role both for consumers’ and producers’ decisions. Consumers are willing to pay a higher price to be informed about the greenness of a good, and a label can really be a determinant in their choice of which brand to purchase. On the supply side, disclosing information about the environmental performance of a firm can affect investment decisions and its stock value.
Fragmented Production
This paper explores the impact of vertical specialization on world trade within the framework of the O-ring theory of production. Within such a framework there is little scope for substituting quantity for quality or for gaining market shares by undercutting established suppliers purely on cost. Furthermore, quality requirements will increase as lead firms in the supply chain invest in technology that reduces inventory and speeds up the production process. It is shown that potential suppliers in low-cost countries will only have an incentive to upgrade quality if adequately efficient infrastructure, logistics and customs procedures are in place. Changing trade patterns between USA and Mexico and China suggests that proximity and low trade barriers are important determinants of the extent and nature of vertical specialization. Thus, a larger share of Mexico's trade with USA is driven by vertical specialization than China's trade with USA. Nevertheless, China has caught up with Mexico as far as share in US total imports is concerned, and the market share gap has narrowed even in electronics, the sector in which vertical specialization is most prominent. It appears that vertical specialization adds to total world trade rather than replacing traditional trade flows.
Exchange Rate Regimes and the Stability of Trade Policy in Transition Economies
This paper examines the interplay between exchange rate regimes and policies and commercial policy in six transition economies. In all these economies the rate of protection afforded domestic industry by the exchange rate has been eroded by high rates of inflation and insufficient growth in productivity. As a result, there has been pressure on governments to increase trade barriers and each country examined has had recourse to various means of restricting imports. We argue that more flexible management of the nominal exchange rate would be a preferable way of dealing with the real appreciation of these countries’ currencies.
The Application of Competition Policy Vis-À-Vis Intellectual Property Rights
This paper examines the evolution of national competition (antitrust) policies and enforcement approaches vis-à-vis intellectual property rights (IPRs) and associated anti-competitive practices in major jurisdictions over the past several decades. It focuses especially on the underlying process of economic learning that has, the authors suggest, driven relevant policy changes.
Services and Global Value Chains
This paper analyses the role of services in international trade through the lens of global value chains (GVCs). Services account for more than 70% of world GDP but only for around 20% of world trade in balance of payments terms. In value added terms, accounting for services embodied in exported goods, services account for 40% of world trade. Services industries increasingly produce in networked or "fragmented" arrangements. The paper lays out conceptual and measurement issues related to services networks and provides evidence based on trade in value added statistics and on a case study on the film industry. In contrast to goods value chains, services networks appear less fragmented internationally based on trade in value added statistics and survey evidence. However, to better capture the international services fragmentation, advances in statistics by enterprise characteristics and by mode of supply, i.e. taking into account the movement of labour and capital, are required.
Transparency — Why it Matters at Times of Crisis
For trade in goods and services to flow, traders and governments need to know the rules. At no time is this more critical than at moments of crisis such as the COVID-19 pandemic. New trade measures are being taken by governments every day in response to COVID-19. If the different actors engaged in supply chains are not aware of these new requirements, they can struggle to adapt to the new conditions, thereby risking unnecessary disruptions. Transparency is precisely about allowing access to this information and more. It enables governments and traders to keep up to date in a rapidly evolving trade landscape and provides.
Trade Policy Uncertainty as Barrier to Trade
This paper studies the effects of trade policy uncertainty on the extensive and the intensive margins of trade for a sample of 149 exporters at the HS6 digit level. We measure trade policy uncertainty as the gap between binding tariff commitments under trade agreements (multilateral and regional agreements) and applied tariffs- what is also known as tariffs’ water. Our results show that trade policy uncertainty is an important barrier to export. On average the elimination of water increases the probability of exporting by 12 percent. A one percent decrease of water also increases export volumes by one percent. We also find that the negative impact of trade policy uncertainty is higher for countries with low quality of institutions and in the presence of global value chains. Finally, our findings show that on average trade policy uncertainty is equivalent to a level of tariffs between 1.7 and 8.7 percentage points.
Indicative list of trade-related bottlenecks and trade-facilitating measures on critical products to combat covid-19
This information note seeks to facilitate access to information on possible trade-related bottlenecks and trade-facilitating measures on critical products to combat COVID-19, including inputs used in vaccine manufacturing, vaccine distribution and approval, therapeutics and pharmaceuticals, diagnostics and medical devices. It is not meant to be an exhaustive list of all specific trade barriers, nor does it make any judgement on the existence or importance of bottlenecks, nor on the desirability of implementing any of the suggestions on trade-facilitating measures.
Using Supply Chain Analysis to Examine the Costs of Non-Tariff Measures (NTMs) and the Benefits of Trade Facilitation
It has become increasingly common to produce goods in a number of geographically dispersed stages linked by international trade. This tendency, known by names such as “production fragmentation”, “processing trade”, and “vertical specialization”, has important implications for the analysis of non-tariff measures (NTMs) and trade facilitation. First, different types of NTMs or trade facilitation issues are naturally associated with different stages in the movement of goods. Different price gaps can be assigned to these stages, making it possible to decompose the overall amount of distortion and to prioritize the policies with the largest potential efficiency gains. Second, NTMs may accumulate in long supply chains, implying that their trade-distorting effects are greater for goods produced in a fragmented manner than for goods with simple production processes. There is evidence that trade costs are more important for high technology goods or goods undergoing several stages of processing. Issues with product standards may be particularly important for goods with long supply chains. The link between NTMs and supply chains also has implications for economic development and for the relationship between liberalization in services and goods.
The Impact of Disasters on International Trade
In this paper we examine the impact of major disasters on international trade flows using a gravity model. Our panel data consists of more than 170 countries for the years 1962-2004 yielding approximately 300,000 observations. We find that the driving forces determining the impact of such events are the democracy level and, to a lesser extent, the area of the affected country. The less democratic and the smaller a country the more are its trade flows reduced in case it is struck by a disaster. We are also able to distinguish between the effect of a disaster on an importing and an exporting country.
International Regulation and Treatment of Trade Finance
The paper discusses a number of issues related to the treatment of trade credit internationally, a priori (treatment by banking regulators) and a posteriori (treatment by debtors and creditors in the case of default), which are currently of interest to the trade finance community, in particular the traditional providers of trade credit and guarantees, such as banks, export credit agencies, regional development banks, and multilateral agencies. The paper does not deal with the specific issue of regulation of official insured-export credit, under the OECD Arrangement, which is a specific matter left out of this analysis. Traditionally, trade finance has received preferred treatment on the part of national and international regulators, as well as by international financial agencies in the treatment of trade finance claims, on grounds that trade finance was one of the safest, most collateralized, and selfliquidating forms of trade finance. Preferred treatment of trade finance also reflects the systemic importance of trade, as in sovereign or private defaults a priority is to "treat" expeditiously trade lines of credits to allow for such credit to be restored and trade to flow again. It is not only a matter of urgency for essential imports to be financed, but also a pre-condition for economic recovery, as the resumption of trade is necessary for ailing countries to restore balance of payments equilibrium. The relatively favourable treatment received by trade finance was reflected in the moderate rate of capitalization for cross-border trade credit in the form of letters of credit and similar securitized instruments under the Basel I regulatory framework, put in place in the late 1980s and early 1990s. However, as the banking and regulatory communities moved towards internal-rating based and risk-weighted assets systems under the successor Basel II framework, a number of complaints emerged with respect to the treatment of trade credit – particularly in periods of crisis. Issues of pro-cyclicality, maturity structure and country risk have been discussed at some length in various fora, including in the WTO at the initiative of Members. Part of the issue was that Basel II regulation was designed and implemented in a manner that, in periods of banking retrenchment, seemed to have affected the supply of trade credit more than other potentially more risky forms of lending. With the collapse of trade in late 2008 and early 2009, the regulatory treatment of trade credit under Basel II clearly became an issue and was discussed by professional banking organizations, regulators and international financial institutions. A sentence made its headway into the communiqué of G-20 Leaders in London in April 2009, calling upon regulators to exercise some flexibility in the application of Basel II rules, in support of trade finance. As the issue of removing the obstacles to the supply of trade finance spread became part of the public debate, discussions with respect to the regulatory treatment of trade finance in the context of the making of "Basel III" rules are now raising political attention. Part of the underlying problem regarding the design of regulation of trade finance is that banking regulators may not have enough understanding of the way that trade and trade finance operate in practice. In turn, the banking community has made insufficient progress in explaining these issues to regulators and in providing evidence about the high level of safety and soundness of their activity, in collecting statistical information and even in defining clearly what comprises trade finance. This paper aims at clarifying such issues. The WTO, in its role as an "honest broker", is trying to help the parties concerned, and has been asked from time to time to act as a go-between between the two communities, in order to clarify issues. Section 1 looks at the overall Basel framework and its evolution over time, with particular emphasis on the regulation of trade finance. Section 2 looks at issues raised in the WTO context by the trading and trade finance communities, be it by WTO Members or by experts, and how this has helped to clarify some of the disputed issues. Section 3 raises a number of questions which need clarification from the trade finance community for regulators to be able to better capture the reality of trade finance operations, and allow them to regulate with full understanding of its implications.
Public Services and the GATS
The status of public services is one of the most hotly debated issues surrounding the GATS. There are two approaches to distinguish such services from any other services: an institutional approach that focuses on the legal and institutional conditions governing supply (e.g. ownership status, market organisation), and a functional approach based on the policy objectives that may be involved (e.g. distributional and quality-related considerations, concepts of universal access). Given the wide range of institutional arrangements that exist in different jurisdictions, with significant variations over time, the former approach does not appear appropriate. The services provided by government-owned facilities, whose costs are covered directly by the State, may well be indistinguishable, for all practical purposes, from the services provided by private commercial operators, whose users (students, patients, passengers, etc.) are reimbursed. This paper discusses the relevance of the GATS for different organisational settings - from government monopolies to regulated and/or subsidized private provision - that may be used by WTO Members to meet typical public service objectives. It turns out that virtually all forms of organisation can be accommodated within the framework of the Agreement. To fully exploit its opportunities and avoid unpleasant surprises, however, governments would need to thoroughly analyse the relevant provisions in the light of their own policy objectives.
The WTO Global Trade Model
This document provides a technical description of the WTO Global Trade Model developed by the Center for Global Trade Analysis (GTAP) and the World Trade Organization (WTO). The model can be used to generate global trade projections and to assess the medium and long run effects of a wide range of global and national trade policies.
Multilateral Approaches to Market Access Negotiations
Market access negotiations in merchandise trade at the multilateral level cover tariffs and non-tariff measures (NTMs). While tariffs have been substantially reduced in earlier rounds, they remain high in certain areas and further reductions involve a number of complex technical issues. Some formulae approaches, not used in the Uruguay Round, seem more favourable to developing countries. Elimination or phased reductions of NTMs in agriculture is one of the main areas for further market access negotiations in trade in goods. However, most NTMs are now the subject to negotiations on the rules under which they may be applied, e.g. in the areas of contingency protection and technical barriers to trade.
The Contribution of Services Liberalization to Poverty Reduction
There are various conceivable links between services liberalization and poverty reduction, including the efficiency effects associated with increased competition in intermediate (infrastructural) services, income transfers generated by workers moving abroad, or the mobilization of private investment for social policy purposes. Arguably the most promising option for interested governments, regardless of complementary moves by trading partners, is the opening of, and creation of favourable investment conditions in, core infrastructural services. However, apart from basic telecommunications, both the Uruguay Round schedules and the offers submitted in the Doha Round to date have remained disappointing in this respect. Effective services liberalization, as measured by the share of phase-in commitments in total commitments, has occurred mainly in the context of WTO accessions and Preferential Trade Agreements. Given the apparent lack of political impetus in broader-based trade rounds, this article discusses options how the submission of more meaningful offers could be encouraged.
Coordination Failures in Immigration Policy
We propose a theoretical framework for analyzing the problems associated to unilateral immigration policy in receiving countries and for evaluating the grounds for reform of international institutions governing immigration. We build a model with multiple destination countries and show that immigration policy in one country is influenced by measures adopted abroad as migrants choose where to locate (in part) in response to differences in immigration policy. This interdependence gives rise to a leakage effect of immigration policy, an international externality well documented in the empirical literature. In this environment, immigration policy becomes strategic and unilateral behavior may lead to coordination failures, where receiving countries are stuck in welfare inferior equilibria. We then study the conditions under which a coordination failure is more likely to emerge and argue that multilateral institutions that help receiving countries make immigration policy commitments would address this inefficiency.
Oil Price Volatility
In recent years, our understanding of the nature of energy price shocks and their effects on the economy has evolved dramatically. Only a few years ago, the prevailing view in the literature was that at least the major crude oil prices increases were exogenous with respect to the OECD economies and that these increases were caused by oil supply disruptions triggered by political disturbances in the Middle East. This view has little empirical support. Likewise, the popular notion that OPEC constitutes a cartel that controls the price of oil has not held up to scrutiny. At the same time, there has been increasing recognition of the importance of shifts in the demand for oil. Recent research has provided robust evidence that oil demand shocks played a central role in all major oil price shock episodes since the 1970s.
Institutions, Trade Policy and Trade Flows
This paper analyses to which extent domestic institutions affect trade flows. We use two complementary approaches, one focusing on the size of total trade flows and one focusing on bilateral trade patterns (gravity equation). Besides, we control for two other domestic policy variables: trade policy and domestic infrastructure. We find that the quality of institutions has a positive and significant impact on a country’s level of openness. Domestic tariffs have no statistically significant impact on their own, but do affect total trade flows when combined with good institutions. Domestic institutions also have a positive and significant impact on bilateral trade flows, but the parameter of our institution variables is reduced by almost a half and may turn insignificant when the quality of domestic infrastructure is included in the regression.
COVID-19 and Global Value Chains
Since the outbreak of the COVID-19 pandemic there has been a discussion among researchers and policy makers about changes to global value chains, both about expected changes and changes that should be promoted by government policies. In this paper we conduct an in-depth analysis of the reasons for changes in global value chains as a result of COVID-19 both from a positive angle, analysing expected changes in the behaviour of firms, and from a normative angle, assessing the different arguments for policy interventions by governments. After this analysis international cooperation of trade policies and the role of WTO in crises like the COVID-19 pandemic is explored.
International Trade in Travel and Tourism Services
In this paper, we investigate tourism-related policy approaches that WTO member countries adopted in the early weeks of the COVID-19 crisis. We highlight the need for stakeholders to coordinate their responses in order to mitigate the negative crisis effects and better prepare the sector for the future. In doing so, we explore the economic impact of potential tourism scenarios, underlining both the demand and supply side effects of the crisis.
EU Import Measures and the Developing Countries
The EU's import policies towards developing countries are complex, stemming from important sectoral and country variations in policy. Average tariffs are modest, and, while there are tariff peaks and escalation in some areas of interest to developing countries, these are being reduced as a result of the implementation of the results of the Uruguay Round. The use of non-tariff measures has fallen, particularly as a result of agricultural tariffication, and is being further reduced in textiles and clothing. The elimination of VERs has not led to an increase in the use of alternative measures. Contingency protection falls more heavily in chemicals, iron and steel, certain textile items and certain electrical consumer goods and on Asian, Central and Eastern European and former Soviet Union countries. The operation of various factors appears to be working to mitigate the use of trade defence measures in recent years, helping to counter pressures that seem likely to arise as liberalization proceeds.
How WTO Commitments Tame Uncertainty
Guided by a cost benefit analysis model and using a unique database of tariff bindings for all WTO countries over the 1996-2011 period, we show that WTO commitments affect members’ trade policy. More stringent bindings reduce the likelihood of responding to import shocks by raising tariffs and increase the likelihood of contingent measures. We argue that this reduces overall trade policy uncertainty. In a counterfactual scenario where WTO members can arbitrarily increase tariffs they are 4.5 times more likely to do so than under current bindings.
The Relationship between Services Trade and Government Procurement Commitments
To date, government procurement has been effectively carved out of the main multilateral rules of the WTO system. This paper examines the systemic and other ramifications of this exclusion, from both an economic and a legal point of view. In addition to relevant elements of the WTO Agreements, particularly the Agreement on Government Procurement (GPA) and the General Agreement on Trade in Services (GATS), it derives insights from a large number of Regional Trade Agreements (RTAs) that embody substantive provisions on both government procurement and services trade. An important finding is that, from an economic perspective, general market access commitments with respect to services trade and commitments regarding government procurement of services are complementary and mutually reinforcing. In contrast, from a legal point of view and at the multilateral level, disciplines in the two areas have been "divided up" into two Agreements with different (but complementary) spheres of application: the key provisions regarding the scope of application of the GATS and the GPA make clear that each serves purposes that the other does not. Analysis of corresponding provisions of RTAs broadly supports and extends this finding. In light of the foregoing, a question arises as to possible ways of deepening disciplines in this area. Part 5 sets out, for reflection, several related options: (i) the built-in mandate in the GATS for negotiations on services procurement (Article XIII:2); (ii) "multilateralization" of the GPA; (iii) the eactivation of work in the (currently inactive) WTO Working Group on Transparency in Government Procurement; and (iv) the taking up of relevant issues in the context of bilateral or regional negotiations. Overall, we find that each of these possibilities has potential merits, though none is without related challenges.
Trade Remedy Provisions in Regional Trade Agreements
This paper maps and examines the provisions on anti-dumping, countervailing duties and safeguards in seventy-four regional trade agreements (RTAs). The RTAs vary in size, degree of integration, geographic region and the level of economic development of their members. The key policy concern of the paper is that the elastic and selective nature of trade remedies may lead to more discrimination, with reduced trade remedy actions against RTA partners, but a greater frequency of trade remedy actions against non-members. The adoption of RTAspecific trade remedy rules increases this risk of discrimination, with trade remedies against RTA members being abolished outright or being subjected to greater discipline. The templates used for mapping the trade remedy provisions reflect this central concern. The results of the mappings suggest the need to be vigilant about increased discrimination arising from trade remedy rules in RTAs. A number of RTAs have succeeded in abolishing trade remedies. Probit and multinomial logit model estimations suggest that these RTAs are characterized by a higher share of intra-RTA trade and deeper forms of integration that go well beyond the dismantling of border measures. A fairly large number of RTAs have adopted RTA-specific rules that tighten discipline on the application of trade remedies on RTA members. In the case of anti-dumping for example, some provisions increase de minimis volume and dumping margin requirements and shorten the duration for applying anti-dumping duties relative to the WTO Anti-dumping Agreement. In similar fashion, many of the provisions on bilateral safeguards lead to tightened discipline or reduce the incentives to take safeguard actions. Safeguard measures can be imposed only during the transition period, have shorter duration periods and require compensation if put in place. Further, retaliation is allowed if there is no agreement on compensation. RTA provisions on global safeguards require that, under certain conditions, RTA partners be exempted from multilateral safeguard actions. This conflicts with multilateral rules which require that safeguard measures be applied to all sources of imports and highlights the problem of trade diversion. A small number of RTAs give a role to regional institutions to conduct anti-dumping and countervailing duty investigations and to review final determinations of national authorities. There is a theoretical presumption and some empirical evidence to suggest that this reduces the frequency of anti-dumping initiations and final determinations against RTA members. In the case of CVDs, we are unable to find major innovations in CVD rules and practice by past and present RTAs. A major reason for this may be the absence of commitments in the RTA on meaningful or significant curbs on subsidies or state aid.
Antidumping Regional Regimes and the Multilateral Trading System
As of November 2010, more than 300 regional trade agreements (RTAs) were in force. Approximately two-thirds of them had been notified to the WTO. Each of these RTAs had, implicitly or explicitly, established a regional legal framework for the application of intra-regional, and sometimes extra-regional, antidumping actions. This study focuses on intra-regional antidumping regimes and has been built around the analysis of antidumping provisions in 192 RTAs. This Working Paper first recalls the main constitutive elements of the multilateral and regional legal frameworks, a pre-requisite to consider if these rules and disciplines are competing with or are complementary to multilateral disciplines. Based on an analysis of these 192 RTAs, the Paper identifies two Categories of regional antidumping regimes, and assesses their relationships with the multilateral rules. Particular attention is paid to antidumping regimes in RTAs, which appear to "diverge" from the WTO disciplines. The Paper concludes that most regional antidumping regimes do not fundamentally change the Parties' rights to take antidumping measures, as compared with the multilateral regime. There appears to be no evidence that regional antidumping regimes increase RTA partners' rights to take antidumping actions at the intra-RTA level, and only a minority of regimes contains disciplines which diverge from multilateral rules, though most of those do not result in fundamental changes in the antidumping patterns of the RTA Parties. The Paper notes, however, that deep integration among a few RTAs has been decisive in bringing about a substantial change in the antidumping patterns of the RTA Parties concerned. It finds that legal consolidation, at the regional level, of a current practice of not using antidumping as a trade policy tool is restricted to a limited number of Parties. A few others seem to have used RTAs to restrict the possibility of using anti-dumping between RTA partners, as compared to multilateral rules. The Paper finally suggests that the proliferation of regional transparency mechanisms, related to antidumping may potentially undermine the oversight role of the multilateral trading system if "information diversion" materializes.
Regulatory Autonomy and Multilateral Disciplines
A major challenge for the multilateral trading system is to secure the benefits of trade liberalization without infringing on the freedom of governments to pursue legitimate domestic objectives. The difficulty lies in distinguishing between two types of situations. In one, a non-protectionist government cannot prevent certain domestic policies from incidentally discriminating against foreign competitors. In the other, a protectionist government uses a legitimate objective as an excuse to design domestic policies which inhibit foreign competition. The challenge is to devise rules which are sensitive to the difference between these two situations, exonerating the former while preventing the latter. The approach suggested in this paper is to create a presumption in favour of the economically efficient policy measure, with departures inviting justification.
Services Liberalization in the New Generation of Preferential Trade Agreements (PTAs)
This paper attempts to fill a gap in the trade literature by providing a comprehensive overview of services liberalization commitments in the new generation of preferential trade agreements (PTAs) as compared to prevailing GATS commitments and Doha Round offers. By developing a new database, the paper reviews the commitments undertaken by 29 WTO Members (counting the EC as one) under mode 1 (cross-border supply) and mode 3 (commercial presence) in 28 PTAs negotiated since 2000. The paper presents a general analysis from both a cross-country and cross-sector perspectives, and also examines in more detail the GATS+ commitments undertaken in a number of key sectors (audiovisual, distribution, education, financial, professional, and telecommunication services). The paper also discusses the potential economic costs arising from these preferential agreements, as well as the potential implications for the multilateral trading system, and for the Doha round of negotiations in particular. The paper concludes by discussing possible approaches to overcome the potential downsides of PTAs, including proposals for a more pro-active role for the WTO in the surveillance of these agreements.
The Layers of the IT Agreement's Trade Impact
The WTO’s plurilateral Information Technology Agreement (ITA) reduced tariffs to zero on many IT products. This paper presents a comprehensive study of its trade impacts by incorporating recent insights from both the global value chain (GVC) and time in trade literatures. Inserting tariffs directly into the gravity equation breaks the ITAs impact down into four layers. Import demand elasticities are found to be non-linear: Tariff reduction (layer 1) has relatively small impacts, while complete tariff elimination (layer 2) has high impacts, especially for intermediate goods. Beyond that, ITA accession has positive non-tariff effects on both imports (layer 3) and exports (layer 4). These commitment effects suggest that higher trade policy certainty affects investment and sourcing decisions in favour of signatories: Their ITA exports performed better relative to other ICT and machinery exports, unlike non-members. But “passive signatories” – which joined mainly as a by-product of a larger policy objective – reaped the most benefits. Featuring a smaller ITA sector upon accession, their final good exports increased also in absolute terms due to downstream GVC integration. However, such impacts are strongly heterogeneous with respect to countries’ geographical remoteness, education levels, business environment and institutions. China stands out with especially strong post-accession export increases, also extending to intermediate goods.
“Agricultural Products” and “Fishery Products” in the GATT and WTO
The WTO Agreement on Agriculture applies to those “agricultural products” as defined in its Annex 1. This definition expressly excludes “fish and fish products” from the scope of application of the Agreement. In light of this exclusion, the paper is intended to provide a historical account of the relationship between agricultural products and fishery products in the context of the negotiations leading to and during the GATT period up to the conclusion of the Uruguay Round, and some of its implications for WTO negotiations.
How WTO Members have used Trade Measures to Expedite Access to COVID-19 Critical Medical Goods and Services
The WTO Secretariat has published a new information note on how WTO members have used trade measures to expedite access to critical medical goods and services as part of their responses to the COVID-19 pandemic.
The Case for Creating a Working Party on the Functioning of the WTO
Since the conclusion of the Uruguay Round in 1994 and the creation of the WTO in 1995, the functioning of the multilateral trading system has been the focus of a considerable number of articles, proposals and debates. With the exception of a few important initiatives on transparency and decisionmaking, most contributions on the functioning of the WTO have been made by external observers of the WTO. However, over the past two years, an increasing number of Members have showed interest in systemic and institutional issues. This interest has to a large extent been generated by a concern about the role of the multilateral trading system in the overall international economic environment, particularly in light of the current global financial crisis. At the same time, the WTO as an institution is under considerable pressure following more than a decade of efforts to conclude the Doha Round of trade negotiations. This paper explores the possibility of establishing a Working Party on the Functioning of the WTO as a separate, deliberative process in the WTO. It seeks to outline the advantages of creating an informal forum or space for discussion among WTO Members and argues that many WTO Members appear to be ready for a broad discussion of institutional and systemic challenges facing the multilateral trading system.
Trade and Environment
In order to ensure transparency and to keep abreast of trade policies in support of sustainability, the WTO Committee on Trade and Environment (CTE) mandated the WTO Secretariat to compile and collate all environment-related measures notified to WTO. The database also includes environment-related entries found in Trade Policy Reviews (TPRs).
Provisions on Electronic Commerce in Regional Trade Agreements
This paper reviews the different types of provisions explicitly addressing electronic commerce (e-commerce) in regional trade agreements (RTAs). The analysis covers the 275 RTAs currently in force and notified to the WTO as of May 2017.
A Simple Trade Policy Perspective on Capital Controls
This note discusses capital controls using insights from the trade policy literature. It highlights some key issues that have been neglected in the current international debate on capital controls. Capital is tradable in the same way as many goods and services are. As a result, much of the analysis pertaining to trade and trade policy in goods and services applies with equal force to capital movements. Free trade is typically the best trade policy, no matter whether it is trade in goods, services or capital. But if investor behaviour and the prevailing policy environment are not conducive to immediate free trade, the choice of instrument for controlling capital flows becomes important. Tariffs and other price-related restrictions are preferable to quantitative restrictions or prohibitions because: (i) they cause less rent seeking, and (ii) they do not insulate the domestic market from price changes and innovations in international markets.
Transition Economies, Business and the WTO
Transition economies are going through a process of changing the role of the state, allowing a greater role for the private sector. This is consistent with the market-oriented approach of the WTO. Remaining state agencies and enterprises will need to adapt their ways of doing business, including in their approach to procurement of goods and services, for economic and legal reasons. There is some hesitation about privatization, as for foreign direct investment, and, where accepted, about the precise timing. Where privatization of basic service monopolies occurs, the role of the state shifts towards a regulatory function. In some private sector activities, a non-interventionist approach to competition may be justified by market considerations, while in others a pro-active policy may be necessary to ensure the benefits of economic liberalization.
The WTO
We consider the purpose and design of the World Trade Organization (WTO) and its predecessor, GATT. We review recent developments in the relevant theoretical and empirical literature. And we describe the GATT/WTO architecture and briefly trace its historical antecedents. We suggest that the existing literature provides a useful framework for understanding and interpreting central features of the design and practice of the GATT/WTO, and we identify key unresolved issues.
International Trade and the Position of European Low-Skilled Labour
This paper presents a discussion of the potential channels through which international trade affects the position of low skilled workers in the European Union. After an analysis of the European Union's trade flows showing the predominant role of intra-industry trade with other industrialised countries, the discussion focuses on the potential effects of intra-industry trade on low skilled labour. Particular attention is paid to possible interactions between trade and technological change and to the possible effects of trade on the price elasticity of labour. The paper also discusses how trade may affect incentives to invest in skills and thus a country's potential to alter the skill structure of its working force.
Services Trade Policy, WTO Commitments, and their Role in Economic Development and Trade Integration
Services have long been perceived as playing a secondary role in world trade. In particular, the role of services trade policies and multilateral services commitments often tends to be downplayed. However, in value added terms, services account for about 50% of world trade and are significant in exports of countries of all levels of development.
LDC Poverty Alleviation and the Doha Development Agenda
Despite being a leading export sector and source of foreign exchange for most (non-oil exporting) LDCs, tourism never makes the headlines of the WTO's Doha Development Agenda negotiations. When tourism's impressive potential for poverty alleviation is considered, the lack of attention is even more striking. Reasons for the apparent neglect are complex, and include a lack of awareness of tourism as an export sector, the fragmented nature of the industry and low political influence, exaggerated concerns over "leakages", misunderstandings about poverty alleviation and tourism, and the "poker playing" characteristic of trade negotiations. The evident results are missed opportunities to address services infrastructure constraints (one of the greatest impediments to increasing LDC tourism revenues and value-added), as well as a failure to address sufficiently tourism's agricultural, industrial, and Aid for Trade linkages. Existing national-level investment promotion objectives, as well as DTIS and TPR reports can be helpful for identifying priorities for both GATS negotiations and Aid for Trade. The focus should not necessarily be on making GATS commitments, but rather on ensuring that the importance of tourism for LDCs is acknowledged and acted upon. Indeed, governments can always further liberalize on a unilateral basis; in the context of the DDA, however, they can request greater access to trading partners' markets in exchange, as well as gain valuable international attention and publicity.
Telecommunications Services in Africa
This paper examines the impact of telecommunications liberalization in Africa on both sectoral performance and economic growth. Besides unilateral measures, we account for WTO commitments fostering the credibility of reforms. Actual regulatory quality plays a major role in bringing down prices and in improving access to telecommunication services in Africa. Competition, notably in the mobile telephony segment, also improves sector performance. Increasing access to mobile networks by 1 per cent translates into a 0.5 per cent increase in real GDP per capita. In Africa, multilateral commitments do not reflect recent reforms. However, at the global level, adherence to the WTO Reference Paper entails lower prices.
Trade Facilitation Provisions in Regional Trade Agreements Traits and Trends
The paper first surveys the Trade Facilitation landscape at the regional level and analyses the main forces shaping it. It identifies key factors driving regional Facilitation approaches, examining their priorities, features and underlying philosophies. The study also highlights significant trends in regional Trade Facilitation provisions and analyses their implications. The paper then compares regional and multilateral initiatives, looking at areas of convergence and divergence, and highlighting where potential gaps exist. It analyses negotiating positions in the respective frameworks and discusses both the benefits and limitations of the resulting Trade Facilitation provisions. Examining the impact of the recently concluded WTO Agreement, the study highlights its potential value added.
Timeliness and Contract Enforceability in Intermediate Goods Trade
This paper shows that the institutional environment and the ability to export on time are sources of comparative advantage as important as factors of production. In particular, the ability to export on time is crucial to explain comparative advantage in intermediate goods. These findings underscore the importance of investing in infrastructure and fostering trade facilitation to boost a country's participation in production networks. Furthermore, we contribute to the so-called “distance puzzle” by showing that the increasing importance of distance over time is in part driven by trade in intermediate goods.