Recherche économique et analyse des politiques commerciales
Filter :
A ‘Probabilistic’ Approach to the Use of Econometric Models in Sunset Reviews
Economists have increasingly become involved in trade remedy and litigation matters that call for economic interpretation or quantification. The literature on the use of econometric methods in response to legal requirements of trade policy is rather limited. This article contributes to filling this gap by demonstrating the efficacy of using a simple ‘probabilistic’ model in analyzing the ‘likelihood’ of injury to the local industry concerned following a finding of continuation or recurrence of dumping (or countervailable subsidies). The legal concept of ‘likelihood’ is not only particularly well-suited to illustrate the systemic need for trade lawyers and economists to cooperate. It is also of imminent practical relevance with a groundswell of ‘sunset’ reviews looming on the horizon. We discuss the significance of economic analysis for trade remedy investigations by reviewing the literature the applicable WTO rules and in particular the pertinent case law. The potential value of probabilistic simulations for ‘likelihood’ determinations is exemplified using a real-world application. Using data from past United States International Trade Commission investigations we find that a probabilistic model that takes account of the uncertainty surrounding economic parameters reduces the risk of misjudging the effect on the domestic industry of a termination of trade remedies.
The Impact of Mode 4 Liberalization on Bilateral Trade Flows
This paper gives insights into the possible trade creating effects of service trade liberalization via Mode 4. In particular we expect that temporary movements of persons like permanent movements have the potential to reduce transaction costs for merchandise trade between home and host country. Exploiting data on H-1B beneficiaries from different origins in the United States and using a gravity model of trade we find significantly positive effects of temporary movements of persons on bilateral merchandise trade. In addition to this the paper provides insights into the determinants of temporary movements of persons.
Multilateral Solutions to the Erosion of Non-Reciprocal Preferences in NAMA
This paper analyzes the risks of preference erosion arising from MFN trade liberalization in manufactured products. It focuses on developing countries that receive non-reciprocal preferences in the markets of United States EU Japan Canada and Australia. The paper estimates preference margins as the difference between non-reciprocal preferential rates received by individual countries and the best available (MFN or better-than-MFN) treatment received on average by all other suppliers. Most previous work on this subject has compared the preferential rates for individual countries with MFN rates alone which the paper found to have the effect of over-stating the margin at risk from erosion following MFN reductions. The paper also considers the effect of less than full utilization of preference margins by beneficiaries but a lack of data prevented the inclusion of this additional moderating factor relating to erosion risk. The paper finds that developing countries as a whole do not loose from preference erosion following MFN liberalization although significant gains and losses underlie the estimate of the average. Almost all least-developed countries either lose from preference erosion or are unaffected by it because their exports are already largely MFN duty-free. A large number of LDCs are in the latter group. The main sectors where preference erosion occurs are textiles fish and fish products leather and leather products electrical machinery and wood and wood products. As regards trade solutions to preference erosion options are somewhat limited. Improved utilization rates may help certain countries but certainly do not offer a generalized solution. Limited scope exists for expanding the coverage of preference schemes within the destination markets considered in the paper. Other destination markets might offer some prospect but these are limited by the fact that the markets studied dominate the trade flows of the beneficiary countries.
The Economic Impact of EPAs in SADC Countries
The Cotonou Agreement introduces new fundamental principles with respect to trade between the European Union and African Caribbean and Pacific countries relative to the Lomé Convention: in particular non-reciprocal preferential market access for ACP economies will only last until 1 January 2008. After that date it will be replaced by a string of Economic Partnership Agreements meant to progressively liberalise trade in a reciprocal way. The progressive removal of barriers to trade is expected to result in the establishment of Free Trade Agreements between the EU and ACP regional groups in accordance with the relevant WTO rules and help further existing regional integration efforts among the ACP. In this paper an applied general equilibrium model (15 regions 9 sectors) is used to simulate the impact of EPAs for countries of the Southern African Development Community. The standard Global Trade Analysis Project (GTAP) model has been extended to include the elimination of textile quotas EU enlargement to 25 members as well as tax revenue sharing and a common external tariff among Southern African Customs Union countries. A number of comparisons between different scenarios are undertaken in particular: (i) the EPA scenario is compared to the multilateral liberalization scenario; (ii) SADC liberalization with the EU only is compared to a scenario with simultaneous regional integration among African economies and to the case of the EU also signing an FTA with Mercosur; and (iii) a complete reduction of import barriers is contrasted with partial liberalization (i.e. only 50 per cent tariff reductions in agriculture) and with full trade liberalization that includes the elimination of subsidies. The issue of tariff revenue loss is also addressed and the required tax replacement is calculated. Selected experiments are re-run under an unemployment closure. Simulation results show that EPAs with the EU are welfare-enhancing for SADC overall leading also to substantive increases in real GDP. For most countries further gains may arise from intra-SADC liberalization. The possibility of the EU entering an FTA with other countries such as Mercosur reduces estimated gains but they still remain largely positive. Similarly estimated gains need to be revised downwards if agriculture liberalization is not as far reaching as a reduction of import barriers for manufactures. At the sectoral level the largest expansions in SADC economies take place in the animal agriculture and processed food sectors while manufacturing becomes comparatively less attractive following EU-SADC liberalization. Interestingly multilateral liberalization would instead foster some of the manufacturing sectors (textile and clothing and light manufacturing). Results also show the need for the SACU tariff pooling formula to be adjusted to reflect new import patterns as tariffs are removed.
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.
International trade in air transport: Recent developments and policy issues
Air transport like other transport services is associated with international trade in two distinct ways. First air transport is traded as a service in its own right. Second it is a key intermediate service for many other kinds of trade in the domain of both goods and services (such as tourism). Numerous studies have highlighted the importance of an efficient effective and reliable air transport infrastructure especially in developing countries to ensure the materialization of the gains from trade (WTO 2004). These studies also highlight the important role of international civil aviation in contributing to the development process and its role in the leisure and commercial decisions of many people. This importance is expected to increase as a result of technological innovation deregulation and enhanced market access for foreign companies which are all making air transport more accessible to a wider set of customers in a broader range of countries.
Standards in the multilateral trading system
This Section focuses on standards-related WTO legal texts and relevant jurisprudence. The Section begins with a discussion of the texts themselves. This is followed by a detailed discussion of some of the key concepts relevant to standards in the TBT and the SPS Agreements as well as GATT 1994. The Agreements are then placed in the context of the economic discussion presented in the previous Sections and reference is also made to accumulated standards-related jurisprudence. Since the focus of the Report is on product standards only WTO legal texts and jurisprudence bearing on “goods” will be discussed. It is important to note though that the General Agreement on Trade in Services (GATS) also contains standards-related provisions on services specifically in Article VI paras. 4 and 5.
Selected medium-term developments
International trade in fuels and pharmaceuticals has expanded at above-average rates in recent years affecting the structure of global merchandise trade flows. These developments are examined here.
Introduction
Product standards specify or pin down the characteristics of a product. These characteristics can include design size weight safety energy and environmental performance interoperability material and even the process of production. Examples of standards include the dimensions of freight containers and of screw threads; safety performance of seat belts air bags and medical devices; pasteurization of milk; and protocols that allow computers from different vendors to communicate with one another.
Executive summary
The World Trade Report 2005 begins with a brief review of salient trends in international trade focusing firstly on recent developments and then examining medium-term developments in the oil sector and the pharmaceutical sector. Section II of WTR 2005 contains the core topic of this year’s Report which is standards and trade in the context of the WTO. The Section looks first at the economics of standards and trade and then at a range of institutional and policy issues. This is followed by a discussion of standards in the multilateral trading system. Section III of the Report takes up three discrete and topical issues of relevance to international trade. The three thematic essays in this Section are on the use of quantitative economics in WTO dispute settlement trade in air transport services and offshoring services. The essay on the use of quantitative economic analysis in WTO dispute settlement procedures explains the kinds of quantitative techniques and econometric models that have been applied in various WTO legal disputes and discusses the use that was made of such analysis in a selected range of cases. The essay on trade in air transport services takes a close look at key characteristics of the industry and examines how it has evolved over time. The analysis also considers the economics of this sector and a number of issues relating to competition regulation governance and trade in air transport services. Finally the essay on offshoring services considers the economic characteristics of the activity its scope and implications and how it is relevant to the General Agreement on Trade in Services.
Institutions and policy issues
This Section explains how standardization and conformity assessment work in practice and describes the relevant characteristics of standardization and conformity assessment infrastructures in various regions of the world. It starts with a discussion of the standardization process and considers where standardization takes place how it is organized and who participates in the process. Subsection 2 discusses the organization of conformity assessment at the international regional and national levels and describes the ways in which conformity assessment requirements may impact on trade.
Conclusion
This Report has shown that it is important to distinguish standards according to their function. The conceptual framework adopted in the Report distinguished standards related to network externalities imperfect information and negative production or consumption externalities.
Offshoring services: Recent developments and prospects
Despite the recovery in the world economy in 2003 and 2004 unemployment remained high in many industrial countries. Even in those countries which reported a strong recovery such as the United States and the United Kingdom employment levels recovered only moderately leading many observers to wonder about a “jobless recovery”. Although employment growth typically lags behind in each cyclical output recovery sluggishness in services sector employment seemed to be a new development. In previous downturns the services sector continued to generate new jobs. The information communications technology (ICT) sector – one of the most dynamic sources of new employment in the 1990s – not only slowed down in terms of job growth but actually experienced a decline in the payroll after the ICT crash in 2000-01. Many dot.com companies and telecom firms closed down or had to downsize as investment outlays in IT hardware and software decreased in OECD countries.
Recent trends in international trade
The world economy grew at 4 per cent in 2004 the strongest annual growth rate in more than a decade. Global GDP last year was also more broadly based regionally than in the three preceding years providing a solid basis for an acceleration in world trade growth. World merchandise trade rose by 9 per cent in real terms in 2004 the best annual performance since 2000 and more than twice as fast as world output (GDP measured at market rates) in 2004. Trade growth in 2004 also significantly exceeded average trade growth recorded over the last decade.
World Trade Report 2005
The report focuses on specific trade policy issues of current interest and reviews trends in international trade. The core topic addressed in the 2005 Report is the relationship between standards and trade. The Report also contains 3 shorter essays on the use of quantitative economic analysis in WTO dispute settlement proceedings trade in air transport services and offshoring services.
Quantitative economics in WTO dispute settlement
WTO dispute settlement continues to be the subject of extensive scrutiny by both trade practitioners and academics. Not surprisingly most of this analysis is legal in nature touching upon the various arguments that have been put forward by parties to disputes and the legal foundations upon which these disputes are adjudicated. While legal and procedural issues remain the domain of trade lawyers economists are being called upon with increased frequency on matters that call for economic interpretation or quantification. This should hardly be surprising given that multilateral trade rules reflect key economic principles such as comparative advantage and that many of the terms in WTO Agreements which are important in the resolution of disputes have an economic basis. It may also have to do with the fact that increasing numbers of disputes are reaching the implementation phase in which arbitrators need to quantify the allowable level of retaliation as will be further explained below.
The economics of standards and trade
We live in a world profoundly reliant on product standards. Faxes can be sent around the world because fax machines obey a common protocol. Computer files can be shared because computers employ various standardized hardware and software formats. The need for product standards is not a new phenomenon. In biblical times the lack of a common (standardized) language wreaked havoc at the Tower of Babel (Shapiro 2000). In more recent times during the great Baltimore fire of 1904 fire fighters called in from neighbouring cities were unable to fight the blaze effectively because their hoses would not fit the hydrants in Baltimore.