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International Trade in Natural Resources
Natural resources account for 20% of world trade and dominate the exports of many countries. Policy is used to manipulate both international and domestic prices of resources yet this policy is largely outside the disciplines of the WTO. The instruments used include export taxes price controls production quotas and domestic producer and consumer taxes (equivalent to trade taxes if no domestic production is possible). We review the literature and argue that the policy equilibrium is inefficient. This inefficiency is exacerbated by market failure in long run contracts for exploration and development of natural resources. Properly coordinated policy reforms offer an avenue to resource exporting and importing countries to overcome these inefficiencies and obtain mutual gains.
A Multilateral Agreement on Investment
Much has been recently written about the Multilateral Agreement on Investment (MAI) that has been negotiated by OECD countries. Perhaps even more has been said by the critics of those who would like to see an agreement of this kind extended among other countries. There has indeed been a great deal of "toing" and "froing" about the desirability of MAI and even misunderstandings about its merits. The principal question of this paper is whether there is any need for MAI. There are arguments in favour and against and this paper provides a short review. On balance the positive aspects of a multilateral agreement should outweigh the negative ones. The novelty of the paper is the attempt to address the critical voices. Given the lukewarm reaction in some countries it would seem sensible to pay more attention to these arguments – a feature that may only now become something of pressing need in the light of the difficulties encountered in the OECD negotiations.
Letting the Sun Shine in at the WTO
Without transparency trade agreements are just words on paper. Transparency as disclosure allows economic actors and trading partners to see how rules are implanted; transparency in decision-making ensures fairness and peer review. In the first section of this paper I discuss the logic of transparency in general and the motivation for its use in the trading system. Considerable information on WTO transparency mechanisms is available in the Minutes and annual reports of the various WTO bodies and in the Director-General’s annual overview of the trading system but comparative analysis is not easy. In the second section therefore I develop a framework in which different transparency mechanisms can be compared to each other using the metaphor of three generations in the evolution of transparency in the trading system as a means of explaining how transparency works in the WTO. For sunshine to work at least two things must happen. Information must be made available and Members have to use it. Probing the extent to which Members comply with their notification obligations in the third section and their efforts to improve the notification process allow an assessment of their commitment to being transparent. In the fourth section I consider how WTO committees are used to ensure that Members are accountable for their commitments including to notify. Since the committees differ I use the metaphor of the great pyramid of the legal order to compare committees to each other. Assessment of whether these mechanisms work underpins observations in the conclusion on whether more sunshine is needed and efforts underway to improve existing mechanisms.
Trade Skirmishes and Safeguards
I propose a framework within which to interpret and evaluate the major reforms introduced to the GATT system in its transition to the WTO. In particular I examine the WTO Agreement on Safeguards that has replaced the GATT escape clause (Article XIX) and the Dispute Settlement Process (DSP) that resembles a court of law under the WTO. Using this framework I interpret the weakening of the reciprocity principle under the Agreement on Safeguards as an attempt to reduce efficiency-reducing trade skirmishes. The DSP is interpreted as an impartial arbitrator that announces its opinion about the state of the world when a dispute arises among member countries. I demonstrate that the reforms in the GATT escape clause should be bundled with the introduction of the DSP in order to maintain the incentive-compatibility of trade agreements. The model implies that trade agreements under the WTO lead to fewer trade skirmishes but this effect does not necessarily result in higher payoffs to the governments. The model also implies that the introduction of the WTO court which has no enforcement power can in fact improve the self-enforceability of trade agreements.
Addressing Tensions and Avoiding Disputes
Most specific trade concerns (STCs) which are raised before the WTO Committee on Technical Barriers to Trade (TBT Committee) disappear from the TBT Committee’s meeting agendas without escalating into formal disputes. At the same time a relatively small number of TBT-related disputes have been subject to the WTO dispute settlement procedures. By examining the practice of raising STCs and the relationship between STCs and disputes the paper emphasises the role of STCs as a trade tension resolution mechanism.
The Contribution of Services Trade Policies to Connectivity in the Context of Aid for Trade
This paper examines how services trade and policies contribute to connectivity. It highlights the economic relevance of services and identifies some key channels through which trade in services contributes to physical and digital connectivity. The paper examines the impact of services trade policies on connectivity in view of recent research showing their impact on sectoral performance economic welfare and development. Finally it discusses the positive contribution that aid for trade can make in support of services policies.
The New Liberalism
In the last ten years there has been a sea change in trade and related policies in emerging markets. This results from autonomous reforms undertaken in conjunction with macroeconomic stabilization programmes. Many non-tariff measures have been eliminated and tariffs now the principal trade instrument have been rationalized and reduced. Considerable increases in security of market access result from increased membership of the GATT/WTO system which itself underwent important changes as a result of the Uruguay Round further developed in the first Ministerial Meeting of the WTO in Singapore in December 1996. The systemic changes and the expansion of WTO membership to the transition and other economies mark a dramatic change in international economic relations.
Illicit Trade and Infectious Diseases
We collect a novel dataset that covers about 130 countries and the six four-digit live animal categories in the Harmonized System (HS) over a sixteen-year period to study the link between illicit trade in live animals and threat to animal health from infectious diseases.
Determining "Likeness" under the GATS
The concept of "like services and service suppliers" used in the General Agreement on Trade in Services (GATS) is still very much uncharted territory. The few dispute cases involving national treatment and most-favoured-nation treatment claims under the GATS are vague concerning the criteria which should be used to establish "likeness". Discussions among WTO Members on this subject have remained limited and inconclusive. Perhaps the only point on which everybody agrees is that a determination of "likeness" under the GATS gives rise to a wider range of questions – and uncertainties – than under the GATT. The intangibility of services the difficulty to draw a line between product and production the existence of four modes of supply the combined reference to like services and like service suppliers and the lack of a detailed nomenclature are some of the factors which complicate the task of establishing "likeness" in services trade. This contribution focuses on the concept of “likeness” in the context of the national treatment obligation (Article XVII of the GATS). It discusses the possible implications of the combined reference to “like services and service suppliers” as well as the relevance and role of the modes of supply in determining “likeness”. It also examines whether the criteria developed by GATT case-law (physical properties classification end-use and consumer tastes) can be mechanically transposed to services trade and how far they may contribute to establishing “likeness” under the GATS. It then discusses whether other parameters such as the regulatory context or an “aim and effect” type approach could be relevant.
Liberalization of Air Transport Services and Passenger Traffic
Using a gravity-type model to explain bilateral passenger traffic this paper estimates the impact of liberalizing air transport services on air passenger flows for a sample of 184 countries. We find evidence of a positive and significant relationship between the volumes of traffic and the degree of liberalization of the aviation market. An increase in the degree of liberalization from the 25th percentile to the 75th percentile increases traffic volumes between countries linked by a direct air service by approximately 30 per cent. In particular the removal of restrictions on the determination of prices and capacity cabotage rights and the possibility for airlines other than the flag carrier of the foreign country to operate a service are found to be the most traffic-enhancing provisions of air service agreements. The results are robust to the use of different measures of the degree of liberalization as well as the use of different estimation techniques.
Export Policies and the General Agreement on Trade in Services
Compared to its counterpart in merchandise trade the General Agreement on Tariffs and Trade (GATT) of 1947 the General Agreement on Trade in Services (GATS) contains a variety of conceptual innovations. In addition to cross-border supply the Agreement covers three additional types of transactions i.e. the supply of services via consumer movements abroad as well as the presence of foreign firms and foreign service professionals in the respective markets. At the same time the GATS accommodates a range of measures including the use of quantitative restrictions and discriminatory taxes or subsidies which are clearly constrained under the GATT. The Agreement offers particularly broad scope for various types of export-related interventions regardless of ensuing market distortions. The social and economic relevance of such measures is immediately evident. This paper seeks to provide an overview and assessment in the light of relevant GATS provisions and WTO dispute rulings.
Potential Economic Effects of a Global Trade Conflict
The WTO Global Trade Model is employed to project the medium-run economic effects of a global trade conflict. The trade conflict scenario is based on recent estimates in the literature of the difference between cooperative and non-cooperative tariffs.
The Impact of Basel III on Trade Finance
Trade finance particularly in the form of short-term self-liquidating letters of credit and the like has received relatively favourable treatment regarding capital adequacy and liquidity under Basel III the new international prudential framework. However concerns have been expressed over the potential” unintended consequences” of applying the newly created leverage ratio to these instruments notably for developing countries’ trade. This paper offers a relatively simple model approach showing the conditions under which the initially proposed 100% leverage tax on non-leveraged activities such as letters of credit would reduce their natural attractiveness relative to higher-risk less collateralized assets which may stand in the balance sheet of banks. Under these conditions the model shows that leverage ratio may nullify in part the effect of the low capital ratio that is commensurate to the low risk of such instruments. The decision by the Basel committee on 12 January 2014 to reduce the leverage ratio seems to be justified by the analytical framework developed in this paper.
Trade, Testing and Toasters
Even if traders adapt to technical regulations and standards in an export market they still must prove compliance by undergoing conformity assessment procedures (CAPs) such as testing inspection or certification. Duplication delays or discrimination in CAPs can significantly increase trade costs and this risk is reflected in the growing importance of CAPs in WTO discussions and bilateral and regional free trade agreements. This paper conducts an empirical study of the trade issues that WTO Members encounter with CAPs as described in specific trade concerns (STCs) raised in the WTO Committee on Technical Barriers to Trade (TBT) during 2010-2014. We observe that CAPs raise proportionally more concern among WTO Members than technical regulations do and that testing and certification are the procedures that most frequently give rise to trade problems. Within the framework of the TBT Agreement we find that questions around transparency and whether CAPs create unnecessary barriers to trade are the two most prominent issues highlighted by Members.
Provisions on Small and Medium-Sized Enterprises in Regional Trade Agreements
This paper reviews the different types of provisions explicitly addressing small and medium enterprises (SMEs) including micro firms (MSMEs) in regional trade agreements (RTAs). The analysis covers the 270 RTAs currently in force and notified to the WTO as of April 2016. The analysis shows that half of all the notified RTAs namely 136 agreements incorporate at least one provision mentioning explicitly SMEs. These SMEs-related provisions are highly heterogeneous and differ in terms of location in the RTA language scope and commitments. Many of the SMEs related provisions are only found in a single or couple of RTAs. A limited but increasing number of RTAs incorporate specific provisions in dedicated articles or even chapters on SMEs. Although the number of detailed SMEs-related provisions included in a given RTA has tended to increase in recent years most SMEs-related provisions remain couched in best endeavour language. The two most common categories of SMEs-related provisions found in RTAs are provisions (1) promoting cooperation on SMEs and (2) specifying that SMEs and/or programs supporting SMEs are not covered by the RTAs' obligations provisions. Other types of SMEs-related provisions incorporated in a limited number of RTAs refer inter alia to government procurement trade facilitation electronic commerce intellectual property or transparency.
Patent-Related Actions taken in WTO Members in Response to the COVID-19 Pandemic
COVID-19 caused by SARS-Cov-2 was declared to be a pandemic by the World Health Organization on 11 March 2020. Since then the issue of the relationship between patent protection and the development of and access to medical treatments and technologies – a longstanding and enduringly important public policy issue – has become central to the debate on the linkages between IP innovation access and public health between stakeholders with divergent interests.
The Falling Elasticity of Global Trade to Economic Activity
Since the recovery from the great financial crisis in 2010 global real trade flows grew much slower than pre-crisis in both absolute terms (growth rates) and relative terms (relative to GDP from 2:1 in the great 1990's to 1:1 since 2012) A debate has arisen as to whether this global trade slowdown and related falling trade-to-income elasticity was structural or cyclical.
The Impact of Mode 4 on Trade in Goods and Services
This paper estimates the impact of liberalization of temporary movements of individual service suppliers on trade in goods and services. In particular the paper looks at the impact of the so-called forth mode to provide a service on trade in services under the other three modes: cross-border service supply (Mode 1) consumption abroad (Mode 2) and commercial presence abroad (Mode 3). Estimates are obtained using a gravity model of trade augmented for a measure of temporary movements of service suppliers. Estimates of the size of a country’s Mode 4 trade in services are based on specific information regarding the number of temporary foreign workers occupied in the service sector and their estimated average earnings thus overcoming the limitations of traditional measures of Mode 4 based on remittances or compensation for employees. We find a positive and significant effect of temporary movements of service providers on merchandise trade and services trade under Mode 1 and 3. No significant relationship is found between services trade under Mode 2 and Mode 4.
Bilateralism in Services Trade
In most of the current literature the spread of regionalism in international trade relations is iscussed in terms of a rapidly rising number of preferential trade agreements (PTAs). Far less attention is given to the even more rapid proliferation of bilateral investment treaties (BITs) and their overlap with obligations assumed by WTO Members under the General Agreement on Trade in Services (GATS). About 60 per cent of world foreign investment stocks are in services and thus covered by mode 3 (commercial presence) of the GATS. A closer look reveals that BITs generally apply across a far wider range of sectors in particular in the case of LDCs and developing countries than those scheduled under the GATS. Furthermore a number of obligations enshrined in BITs go beyond their potential counterparts under the GATS. At the same time since most WTO Members have not listed relevant exemptions from the Most-Favoured-Nation (MFN) clause of the Agreement their BIT obligations are to be applied on an MFN basis. While this extension may not cause problems in many cases given generally liberal investment regimes and the focus of most treaties on protecting rather than liberalizing access inconsistencies remain between the two frameworks. Based on an assessment of relevant provisions this article discusses options on how WTO Members could proceed.
Export Quality in Advanced and Developing Economies
This paper develops new estimates of export quality far more extensive than previous efforts covering 178 countries and hundreds of products during the period 1962—2010. It finds that quality upgrading is particularly rapid during the early stages of development with the process largely completed as a country reaches upper middle-income status. There is significant cross-country heterogeneity in the growth rate of quality. Within any given product line quality converges over time to the world frontier. Institutional quality liberal trade policies FDI inflows and human capital all promote quality upgrading although their impact varies across sectors. The results suggest that reducing barriers to entry into new sectors can allow economies to benefit from rapid quality convergence over time.