About the WTO
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.
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.
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 300000 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.