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How Does the Regular Work of WTO Influence Regional Trade Agreements?
This paper illustrates how the work of the WTO's standing committees is fuelling regulatory cooperation between WTO members and inspiring RTA negotiators.
WTO Trade Monitoring Ten Years on Lessons Learned and Challenges Ahead
A decade has passed since the onset of the global financial crisis in 2008. Less than a month after the collapse of the investment bank Lehman Brothers an internal Secretariat Task Force was established by the WTO Director-General to monitor the trade related developments associated with the global financial crisis.
TBT and Trade Facilitation Agreements
The average international trade transaction is subject to numerous procedural and documentation requirements which add to the costs of doing business as an importer or exporter and also use up scarce government resources. While these requirements can be necessary to fulfil policy objectives questions are often raised about why and how they are implemented. The Trade Facilitation Agreement (TFA) adopted by WTO Members in 2014 seeks to expedite the movement release and clearance of goods across borders and reduce these trade transaction costs - by an average of 14.3 per cent as estimated by the 2015 World Trade Report. At the same time many WTO Agreements already contain provisions aimed at facilitating trade procedures and avoiding unnecessary costs. The Agreement on Technical Barriers to Trade (the TBT Agreement) is one of these: its provisions on transparency and conformity assessment procedures some of which are applied at the border are of particular relevance in this context. The TFA and TBT Agreements are in fact complementary with the TFA introducing some new requirements/recommendations which are likely to apply to certain TBT measures. This paper maps out the linkages between these two Agreements. It does so with a view to informing TBT officials of the requirements and best practices emerging in the trade facilitation area as well as raising awareness amongst trade/customs officials of existing rules and evolving practices in the TBT area. The 2015 World Trade Report refers to “border agency cooperation” as the main TFA implementation challenge identified by developing countries and also points to the importance of cooperation and coordination between ministries as one of the main success factors. Considering that a significant share of import/export procedures and controls arise from the implementation of TBT measures a better understanding of the linkages between the TFA and the TBT Agreement (as well as other relevant WTO Agreements such as the SPS Agreement) will be crucial for effective implementation. It will also contribute to more streamlined technical assistance activities and raise awareness among TBT officials of the opportunities generated by trade facilitation projects. The procedures and practices of the WTO TBT Committee especially with regards to transparency and specific trade concerns could also be of interest to the future TFA Committee as it embarks on its task of furthering the implementation of the TFA. All these in turn will help reap the expected benefits of the new Trade Facilitation Agreement.
SPS Measures and Trade
In an attempt to disentangle the impact of sanitary and phytosanitary (SPS) measures on trade patterns we estimate a Heckman selection model on the HS4 disaggregated level of trade. Using SPS measures obtained from the SPS Information Management System of the WTO and controlling for zero trade flows we find that SPS concerns reduce the probability of trade in agricultural and food products consistently. However the amount of trade is positively affected by SPS measures conditional on market entry. This suggests that SPS measures constitute an effective market entry barrier. Additionally we split SPS measures into requirements related to (i) conformity assessment and (ii) product characteristics. Both types of measures are implemented by policy makers to achieve a desired level of health safety yet entail diverse trade costs. We find that conformity assessment measures hamper not only the likelihood to trade but also the amount of trade while measures related to product characteristics do not affect the market entry decision but have a strong positive impact on the trade volume. This suggests that trade outcomes crucially depend on the measure policy makers decide to implement.
Making (Small) Firms Happy
This paper considers the asymmetric effect of Trade Facilitation Agreement (TFA) policies on heterogeneous exporters based on matching a detailed panel of French firm exports to a new database of Trade Facilitation Indicators (TFIs) released recently by the Organisation for Economic Cooperation and Development (OECD). We analyze the effect of these TFIs on three trade-related outcomes: (i) exported value (firm intensive margin) (ii) number of products exported (product extensive margin) and (iii) average export value per product exported (product intensive margin). We find strong evidence of a heterogeneous effect of trade facilitation across firm size. While better information availability advance ruling and appeal procedures mainly benefit small firms the simplification of documents and automation tend to favor large firms’ trade. This is coherent with the idea that while some elements of the TFA simply reduce the fixed cost of exporting (favoring small firms in particular) other chapters in the TFA reduce the scope for corruption at borders making large firms less reluctant to serve corrupt countries.
Globalization and Trade Flows
The trade collapse that followed the recent financial crisis has led to a renewed interest on the measurement issues affecting international merchandise trade statistics in the new globalized economy. The international fragmentation of industrial production blurs the concept of country of origin and calls for the production of new statistics on the domestic content of exports with a view of estimating trade in value added. Alongside the international statistical community has revised in 2010 the concepts and definitions on both international merchandise trade and trade in services statistics. This paper discusses the various issues related to the concepts of "goods for processing" and "intra firm trade" in trade statistics and provides an overview of the method of analysing the impact of the fragmentation of production in international value chains.
An Economic Analysis of the US-China Trade Conflict
This paper provides an economic analysis of the trade conflict between the US and China providing an overview of the tariff increases a discussion of the background of the trade conflict and an analysis of the economic effects of the trade conflict based both on empirics (ex post analysis) and on simulations (ex ante analysis).
Implementing the Trade Facilitation Agreement
After a decade of negotiations and additional preparatory work the WTO Trade Facilitation Agreement (TFA) is poised to enter into force. It promises to streamline and substantially prune the red tape that all too often slows and impedes international commerce - thereby significantly reducing both cost and time needed to do business across borders. The paper chronicles the path from the conclusion of the talks at the 2013 Bali Ministerial Conference to the present day as we prepare for the Agreement to take effect. It reviews the state of the ratification process analyses implementation schedules and outlines work still to be done. The study shows that the emerging application of the TFA like its negotiation has once again confounded the sceptics – who first doubted that a TF Agreement would see the light of day and then questioned if it would ever be put into practice. While plenty remains to be done to implement the TFA across the full WTO membership its entry into force is set to happen – a valedictory moment.
Least-Developed Countries’ Trade During the “Super-Cycle” and the Great Trade Collapse
LDCs' trade patterns changed in the past decade thanks to the rebalancing of global demand towards large emerging countries and the resulting cycle of high international commodity prices. This process led to a wider geographical diversification of LDCs' exports but contributed also to a greater reliance on those highly priced commodities. Notwithstanding some progress in market and product diversification — including services — LDCs remain particularly vulnerable to external shocks. With the exception of 2006-2008 the LDCs as a group have systematically recorded a trade deficit. The 2008-2009 global crisis and the bumpy recovery which followed illustrate the volatility of the recent trends. In such a perspective renewed efforts towards extensive product diversification are called for. Fostering diversification has been supported for many years by preferential market access to developed countries; more recently emerging countries have also been granting such preferences to LDCs products. Preferential market access remains relevant but is not sufficient to improve the supply-side capabilities. The new business model related to global value chains (GVC) offers new opportunities to LDCs for export diversification. But GVC participation cannot materialize without a proper trade environment. Some of the main obstacles for joining GVCs are the high transaction costs in importing the necessary inputs and exporting the processed goods. Active trade facilitation programmes such as those identified during the Fourth Global Review of Aid for Trade in July 2013 offer new options to LDCs for joining GVCs. For those LDCs that have already been able to join these global production network up-grading towards higher "value-added" activities requires more encompassing horizontal policies.
Do Trade and Investment Agreements Lead to More FDI?
The previous literature provides a highly ambiguous picture on the impact of trade and investment agreements on FDI. Most empirical studies ignore the actual content of BITs and RTAs treating them as "black boxes" despite the diversity of investment provisions constituting the essence of these agreements. We overcome this serious limitation by analyzing the impact of modalities on the admission of FDI and dispute settlement mechanisms in both RTAs and BITs on bilateral FDI flows between 1978 and 2004. We find that FDI reacts positively to RTAs only if they offer liberal admission rules. Dispute settlement provisions play a minor role. While RTAs without strong investment provisions may even discourage FDI the reactions to BITs are less discriminate with foreign investors responding favourably to the mere existence of BITs.
Assessing the Supply Chain Effect of Natural Disasters
This paper uses Chinese firm level data to detect the international propagation of adverse shocks triggered by the US hurricane season in 2005. We provide evidence that Chinese processing manufacturers with tight trade linkages to the United States reduced their intermediate imports from the United States between July and October 2005.
Interplay Between Patents and Standards in the Information and Communication Technology (ICT) Sector and its Relevance to the Implementation of the WTO Agreements
The interplay between patents and standards in the information and communication technology (ICT) sector has been intensively debated at international regional and national levels over the past decades. In essence the debate is firstly about the extent and impact of patent holdup and holdout in the ICT sector and then about how to eliminate or reduce these practices.
Preferential Rules of Origin in Regional Trade Agreements
This study surveys preferential rules of origin applied by 192 regional trade agreements (RTAs) covering trade in goods notified to the GATT/WTO up to 1 November 2010. It takes into account the preferential rules of origin that were notified to the WTO; whenever known and available modifications to the original rules of origin have been updated. This study contains two basic features: a description of some key elements of preferential rules of origin in RTAs followed by an attempt to provide a reality-check of how these rules affect actual trade. That is done by an ex-post examination of data on the use of RTAs' preferences and in their absence of their margins of preference (MOPs). While the raison d'être of preferential rules of origin is the avoidance of trade deflection the practice in RTAs has diluted this objective and it would seem that preferential rules of origin are increasingly becoming an economic political and trade instrument. In its descriptive part the study identifies what seems to be a tendency to design stricter rules of origin while detecting concomitantly the inclusion in modern preferential rules of origin of flexibilities that provide through the rules of origin themselves a preference beyond the lower tariff rate resulting from the preferential treatment and mechanisms that allow the integration of third-parties into preferential rules of origin regimes. The reality-check part of the study points to the fact that much beyond the coverage of RTAs it is their effective implementation that poses a challenge to economic operators. Though data on the use of preferences is either not disclosed or inexistent they are nevertheless available for some economies. On the basis of existing data of preference utilization the analysis of the effects of rules of origin on preferential trade flows appears to give rise to a dual reality - namely a relatively high use of preferences in certain instances coexisting with preferences failing to attain their potential in other cases. As regards RTAs for which utilization rate is not available the paper analysis preferential rules of origin from a MOPS perspective assuming that MOPs of at least 5 percentage points would offset compliance costs and thus provide a stimulus to comply with rules of origin in order to benefit from preferences. The analysis made for 68 out of 192 RTAs do not allow any conclusion regarding that generally presented hypothesis. Finally the paper briefly outlines some suggestions for further action including the launching in the WTO of exploratory work on preferential rules of origin within an "open regionalism" scenario.
Buena Vista Social Corporate Responsibility Provisions in Regional Trade Agreements
Corporate social responsibility (CSR) has become an integral part of many companies' business strategy. A detailed analysis of 579 RTAs including 305 agreements currently in force and notified to the WTO (as of December 2020) reveals that a limited but increasing number of RTAs namely 65 agreements refer explicitly to CSR. These CSR-related provisions are particularly heterogeneous in terms of location in the RTA language scope and commitments.
Trade Imbalances and Multilateral Trade Cooperation
Rising current account and merchandise trade imbalances marked the years before the global financial and economic crisis. These imbalances either contributed to or precipitated the crisis and to the extent that they create systemic risks it is desirable that they be reduced. There are many factors related to macroeconomic structural exchange rate and financial policies that contributed to the imbalances. The inability to manage these issues at the international level reflects the “coherence gap” in global governance. This paper examines the contribution that the WTO can make in its three areas of activities — negotiations rule-making and dispute settlement — to deal with trade imbalances and with the main factors leading to them including exchange rate misalignments. First market opening efforts in services including in the area of financial services can reduce policy-related distortions and market imperfections in surplus countries that lead to the build-up of unsustainable imbalances. Second in the context of a broad international effort to coordinate macroeconomic exchange rate and structural policies to deal with the roots of imbalances (the first-best solution) there is a general efficiency argument that could be made for the use of WTO-triggered trade actions to enforce cooperative behaviour towards rebalancing. Absent this first-best response trade rules alone would not provide an efficient instrument to compensate for the weaknesses in international co-operation in macroeconomic exchange rate and structural policies.
Effects of WTO Accession on Policy-Making in Sovereign States
The purpose of the paper is to discuss the effects of WTO accession on policy-making and institutional reforms in transition countries. This is done by looking at the experience of those transition countries which are already Members of the WTO. We start by examining the effect of accession on trade policy and distinguish between the effects of accession negotiations and those of autonomous policy initiatives. We find that no precise blueprint of accession conditions can be ascertained that WTO played a role albeit not an exclusive one in the process of liberalization that the costs of WTO Membership are not negligible that the benefits of WTO Membership are also significant in terms of a better market access improved governance and a recourse to better economic policies.
Digital Connectivity & E-Commerce
Digital networks are an increasingly critical component of global trade. In 2017 the Global Review of Aid for Trade highlighted the importance of accessible and affordable connections for trade connectivity. Drawing extensively on information harvested in the Monitoring and Evaluation exercise in preparation for the Review this paper analyses aid for trade for digital connectivity and e-commerce.
Competition Policy and Poverty Reduction
This paper examines the role of competition law and policy as tools for poverty reduction and development. The authors put forward five related principles building upon the important work on related issues that has been done by the OECD the International Competition Network (ICN) UNCTAD and civil society organizations such as CUTS in recent years in addition to the earlier work done on these topics in the WTO Working Group on the Interaction between Trade and Competition Policy when that body was active from 1997 through 2003. Together these principles comprise the "holistic approach" to competition law and policy which is referenced in the title of the paper: First the focus of policy makers in using competition policy as tool for poverty reduction should be on approaches that are relatively easy to implement but have a trackrecord of being effective and economically sound. Second for competition policy reforms and legislation to be successful public acceptance and support is critical and must be an essential focus of related initiatives. Third to serve as an effective tool of poverty reduction competition policy needs to address the needs of the citizens of poorer societies in their capacities as producers (and therefore as users of extensive input goods and services including public infrastructure) in addition to their capacities as final consumers/households. Fourth it is posited that "competition policy" is more than just "what competition agencies do" and includes the full spectrum of measures that governments employ to enhance competition and improve the performance of markets. Fifth in order to address the challenges posed by the changing landscape of competition policy worldwide new forms of international co-operation may need to be considered. The paper then develops the application of these principles with respect to five specific areas in which competition policy can contribute to poverty reduction namely: (i) the reform of public and business infrastructure sectors particularly in the context of developing and transition economies; (ii) the complementary roles of competition law enforcement and market liberalization in public procurement markets; (iii) various related dimensions of competition policy as they relate to public health objectives; (iv) the addressing of possible monopsonistic practices in international supply chains that may affect the ability of developing country producers to reap gains from participation in international markets; and (v) measures to address the enduring problem of international cartels which despite an impressive record of prosecutions by developed jurisdiction competition agencies over the past decade continue to impose substantial costs on developing economies. The paper concludes with some observations regarding the future of international cooperation in the competition policy sphere.
Market Access Provisions on Trade in Goods in Regional Trade Agreements
This paper assembles detailed information on the market access provisions in trade in goods contained in 192 active regional trade agreements (RTAs) notified to the WTO as of November 2010. Although market access provisions in trade in goods in RTAs have been addressed in a number of studies much of this work has been limited to subsets of RTAs particularly plurilateral RTAs involving three or more parties. The goal of the current study is to expand beyond the more commonly studied RTAs and to include all RTAs notified to the WTO for which data are available. This task has been facilitated by the recent Transparency Mechanism for RTAs (TM) adopted in 2006 that provides the basis for the systematic provision of detailed tariff and trade data by WTO Members engaged in RTAs. This information has been supplemented by other public sources of data where available. A number of trends are evident. While a majority of RTAs result in a reasonably high degree of liberalization overall (with developing countries often liberalizing as much or more than developed countries) liberalization is not uniform across products or RTA parties. In some RTAs the degree of iberalization appears to be a negotiated outcome depending on the RTA partner. Agricultural goods continue to be subject to lower levels of liberalization frequent product exclusions and systematic protection in some RTAs regardless of the RTA partner's comparative advantage. Nonetheless a lower level of ambition in some RTAs is tempered by a commitment to negotiate further concessions or expand upon the RTA's scope at some future point: more than half the RTAs analysed contain such a commitment. Much has been written about the potential for the multilateralization of commitments undertaken in RTAs. While there may be scope for positive externalities in terms of regulatory convergence particularly with regard to services liberalization undertaken in RTAs there is less evidence in this study to suggest that increased market access in merchandise goods leads to a more favourable trading environment for third parties. Continuing constructive engagement by WTO Members in the Transparency Mechanism through the provision of data timely notifications and submission of implementation reports will increase the availability of tariff and trade liberalization data thus facilitating further examination of the topics highlighted in the study as worthy of future research.
More Trade for Better Health?
The main objective of this paper is to analyse trade flows and tariff policies of health products. The first contribution is to construct three groups of health products based on the 2007 Harmonized System classification of international trade. Using these commodity groups we analyse trade flows between 167 countries for the years 1996 to 2009. We find that trade in health products has developed very dynamically with trade in dosified medicine displaying the strongest growth with an annual growth rate of almost 12 per cent. The results further indicate that the market of health products is dominated by a small number of developed countries. Finally studying the tariffs on health products in preferential trade agreements between developing countries the results show that the tariff level is low but in some individual cases still substantive.