Trade monitoring
Aperçu
L’objectif général de l’OMC est d’aider ses Membres à mettre le commerce au service du relèvement des niveaux de vie de la création d’emplois et de l’amélioration des conditions de vie des populations. L’OMC administre le système mondial de règles commerciales et aide les économies en développement à renforcer leur capacité commerciale. Elle offre aussi une enceinte permettant à ses Membres de négocier des accords commerciaux et de régler les problèmes commerciaux qui les opposent.
Introducción
El objetivo general de la OMC es ayudar a sus Miembros a utilizar el comercio como medio para elevar los niveles de vida crear empleo y mejorar la vida de las personas. La OMC administra el sistema mundial de normas comerciales y ayuda a las economías en desarrollo a crear capacidad comercial. Asimismo constituye un foro al que acuden sus Miembros para negociar acuerdos sobre comercio y resolver los problemas comerciales que tienen unos con otros.
Quiénes somos
La OMC está dirigida por los Gobiernos de sus Miembros. Todas las decisiones importantes son adoptadas por la totalidad de los Miembros ya sea por sus Ministros (que se reúnen por lo menos una vez cada dos años) o por sus Embajadores o delegados (que se reúnen regularmente en la sede de la OMC en Ginebra). Las decisiones normalmente se adoptan por consenso. La Secretaría de la OMC coordina las actividades de la OMC.
Observaciones formuladas a modo de conclusión por la Presidenta, Excma. Sra. Dra. Athaliah Lesiba Molokomme de Botswana, en nombre del actual Presidente del Órgano de Examen de las Políticas Comerciales, Excmo. Sr. Ángel Villalobos Rodríguez de México, en la reunión de Examen de las Políticas Comerciales de México celebrada los días 5 y 7 de octubre de 2022.
Este séptimo examen de las políticas comerciales ha ofrecido una excelente oportunidad para examinar los principales cambios de las políticas comerciales y de inversión de México y las dificultades que se han planteado en relación con estas desde que se realizó el último examen en 2017. Quiero dar las gracias a la Subsecretaria de Comercio Exterior de la Secretaría de Economía Excma. Sra. Luz María de la Mora Sánchez que ha viajado de México así como al Embajador Ángel Villalobos y al resto de la delegación de México por su activa participación en este examen. Asimismo me gustaría dar las gracias a nuestra ponente la Excma. Sra. Embajadora Clare Kelly (Nueva Zelandia) por su valiosa contribución.
Introduction
The Trade Policy Review Mechanism (TPRM) was first established on a trial basis by the GATT contracting parties in April 1989. The Mechanism became a permanent feature of the World Trade Organization under the Marrakesh Agreement which established the WTO in January 1995.
Concluding Remarks by the Chairperson of the Trade Policy Review Body, H.E. Mr Ángel Villalobos Rodríguez of Mexico, at the Trade Policy Review of Brazil, 23 and 25 November 2022.
The eighth Trade Policy Review of Brazil has offered us a good opportunity to deepen our understanding of recent developments in and challenges to its trade economic and investment policies. Since its seventh TPR in 2017 Brazil’s initiatives to maintain its participation in the Multilateral Trading System and take advantage of the opportunities it offers were greatly appreciated. Indeed the 958 advance written questions submitted by 38 Members and the 51 delegations that took the floor during the first and second day underline the importance attached by Members to Brazil’s trade and investment policies and practices.
Introduction
The Trade Policy Review Mechanism (TPRM) was first established on a trial basis by the GATT contracting parties in April 1989. The Mechanism became a permanent feature of the World Trade Organization under the Marrakesh Agreement which established the WTO in January 1995.
Concluding Remarks by the Chairperson, H.E. Dr Athaliah Lesiba Molokomme of Botswana, acting on behalf of the current Chairperson of the Trade Policy Review Body, H.E. Mr Ángel Villalobos Rodríguez of Mexico, at the Trade Policy Review of Mexico, 5 and 7 October 2022.
This seventh Trade Policy Review has provided an excellent opportunity to review the main developments in and challenges of Mexico’s trade and investment policies since its last Review in 2017. I would like to thank Undersecretary for Foreign Trade at the Secretariat of Economy the Hon. Ms Luz María de la Mora Sánchez who has travelled from Mexico and Ambassador Ángel Villalobos and the rest of the Mexican delegation for their active engagement in this Review. I would also like to thank our discussant Ambassador Clare Kelly of New Zealand for her valuable contribution.
Informe de México
Este Séptimo Examen de las Políticas Comerciales de México se enmarca en un periodo de alta inestabilidad económica internacional. Nuestro país como una economía abierta y con fuertes lazos económicos con la comunidad internacional se ha visto afectado por los efectos negativos de dicho entorno.
Qui nous sommes
L’OMC est dirigée par les gouvernements Membres. Toutes les grandes décisions sont prises par l’ensemble des Membres soit au niveau des ministres (qui se réunissent normalement au moins tous les deux ans) soit au niveau des ambassadeurs ou des délégués (qui se rencontrent régulièrement au siège de l’OMC à Genève). Les décisions sont normalement prises par consensus. Le Secrétariat de l’OMC coordonne les activités de l’Organisation.
Ce que nous défendons
Des principes fondamentaux simples sont à la base du système commercial multilatéral. Ces principes sont au coeur de toutes les activités de l’OMC depuis sa création en 1995.
Introduction
The overall objective of the WTO is to help its members use trade as a means to raise living standards create jobs and improve people’s lives. The WTO operates the global system of trade rules and helps developing economies build their trade capacity. It also provides a forum for its members to negotiate trade agreements and to resolve the trade problems they face with each other.
What we do
The WTO operates the global system of trade rules guaranteeing WTO member governments important trade rights.
What we stand for
Simple fundamental principles form the foundations of the multilateral trading system. These principles have lain at the core of all WTO activities since its creation in 1995.
Who we are
The WTO is run by its member governments. All major decisions are made by the membership as a whole either by ministers (who meet at least once every two years) or by their ambassadors or delegates (who meet regularly at the WTO’s headquarters in Geneva). Decisions are normally taken by consensus. The WTO Secretariat coordinates the activities of the WTO.
Prefacio
El Mecanismo de Examen de las Políticas Comerciales (MEPC) establecido a título experimental por las partes contratantes del GATT en abril de 1989 se ha convertido en un elemento permanente de la Organización Mundial del Comercio en virtud del Acuerdo de Marrakech por el que se estableció esta Organización en enero de 1995.
Report by Brazil
The Brazilian Government is pleased to submit its eighth Trade Policy Report to WTO Members. Brazil considers this periodic review mechanism as a key element of the multilateral trading system embodied in the WTO contributing to a more transparent and comprehensive understanding of Members’ trade policies and regulatory frameworks.
Report by the WTO Secretariat
The Mexican economy experienced a severe downturn starting in mid-2018 followed by a slight contraction in real GDP in 2019 due in particular to a fall in gross capital formation a reduction in public spending and a slowdown in private consumption. In 2020 the economy was badly affected by the COVID-19 pandemic which caused GDP to shrink by 8.2% during the year. In 2021 the Mexican economy rebounded with GDP growth of around 4.8% thanks in large part to the measures adopted to deal with the pandemic which were aimed primarily at assisting the hardest-hit families and businesses particularly small and medium-sized enterprises. These measures include the opening of facilities to provide an adequate level of liquidity incentives for the restructuring of bank loans and the implementation of social programmes and business support programmes such as the Financial Support Programme for Family-Run Microenterprises.
Report by WTO Secretariat
Located in the Horn of Africa Djibouti is a least developed country (LDC) and has been classified by the World Bank as a lower-middle-income country. It had a gross national income per capita of USD 5610 in 2020. Its geographical location port infrastructure and political stability make it a major maritime hub and have prompted several countries to establish military bases there. Revenue from the bases and from port activities has fostered the emergence of a modern segment of the economy that coexists with a large informal sector. However the high cost of production factors and the strong presence of public companies continue to hinder the country’s economic development. Given Djibouti’s narrow production base international trade is fundamental for the country which relies almost exclusively on imports to meet its domestic demand for most goods and some services. Thanks to the infrastructure (especially ports) re-exports far outstrip exports.
Report by Djibouti
The Republic of Djibouti is a State in the Horn of Africa located on the Red Sea and bordered to the north by Eritrea to the north-west west and south by Ethiopia and to the south-east by Somalia. The territory is delimited by 370 kilometres of coastline the population is estimated to be 1 million and the country has no natural resources.
Introduction
Le Mécanisme d’examen des politiques commerciales (MEPC) a été établi à titre expérimental par les parties contractantes du GATT en avril 1989. Il est devenu un élément permanent de l’Organisation mondiale du commerce en vertu de l’Accord de Marrakech qui a institué cette organisation en janvier 1995.
Rapport du Secrétariat de l’OMC
Situé dans la corne de l’Afrique Djibouti est un pays moins avancé (PMA) à revenu intermédiaire de la tranche inférieure selon le classement de la Banque Mondiale. Son Revenu national brut par habitant était de 5 610 dollars EU en 2020. Sa situation géographique ses infrastructures portuaires et sa stabilité politique en font un important carrefour maritime et y ont favorisé l’installation de bases militaires par plusieurs pays. Les revenus découlant des bases militaires et des activités portuaires ont favorisé l’émergence d’un segment moderne de l’économie qui cohabite avec un large secteur informel. Cependant les coûts élevés des facteurs de production et la forte présence d’entreprises publiques continuent de retarder le développement économique du pays. Du fait de l’étroitesse de sa base de production le commerce international joue un rôle incontournable pour Djibouti qui recourt presqu’exclusivement aux importations pour satisfaire sa demande nationale de la plupart des biens et certains services. Favorisées par les infrastructures (portuaires surtout) les réexportations dominent largement les exportations.
Introduction
The Trade Policy Review Mechanism (TPRM) was first established on a trial basis by the GATT contracting parties in April 1989. The Mechanism became a permanent feature of the World Trade Organization under the Marrakesh Agreement which established the WTO in January 1995.
Report by United States
As we undergo our fifteenth trade policy review the United States affirms that our priorities at the WTO and in the global trading system are more important than ever. We are leveraging our core values of fairness inclusivity growth and sustainability to navigate the myriad complex challenges we find ourselves in today: a pandemic response violent conflict initiated by one WTO Member against another supply chain shortages and environmental concerns.
Report by the Secretariat
The United States has a large economy that is highly integrated with the rest of the world. After a period of stable economic growth in 2018 and 2019 when real GDP expanded by 2.9% and 2.3% respectively the U.S. economy suffered the effects of the COVID-19 pandemic. Real GDP contracted by 3.4% in 2020 after 11 consecutive years of expansion. The economy experienced a rapid rebound in 2021 aided by the support packages put in place by the Government and by an easing of monetary conditions. This led to a real GDP growth rate of 5.7% in 2021.
Rapport de Djibouti
La République de Djibouti est un état de la Corne de l’Afrique située sur la mer Rouge et bordée au nord par l’Erythrée au nord-ouest à l’ouest et au sud par l’Ethiopie et au sud-est par la Somalie. La superficie du territoire est limitée avec 370 kilomètres de façade maritime la population est estimée à un million d’habitants et le pays ne dispose pas de ressources naturelles.
Introduction
The Trade Policy Review Mechanism (TPRM) was first established on a trial basis by the GATT contracting parties in April 1989. The Mechanism became a permanent feature of the World Trade Organization under the Marrakesh Agreement which established the WTO in January 1995.
Informe de la Secretaría de la OMC
La economía mexicana experimentó una fuerte desaceleración a partir de mediados de 2018 seguida de una ligera contracción del PIB real en 2019 debida en particular a la caída de la formación bruta de capital a una reducción del gasto público y a una desaceleración del consumo privado. En 2020 la economía se vio severamente afectada por los efectos negativos de la pandemia de COVID-19 que llevaron a una contracción del PIB del 82% en 2020. En 2021 la economía mexicana repuntó con una expansión del PIB del orden del 48% lo cual refleja en buena parte el efecto de las medidas adoptadas para hacer frente a la pandemia que se orientaron a atender sobre todo a las familias y a las empresas más afectadas particularmente las pequeñas y medianas empresas. Entre estas medidas cabe mencionar la apertura de facilidades para proveer un nivel adecuado de liquidez incentivos para la restructuración de créditos bancarios y la implementación de programas sociales y programas de apoyo a las empresas como el Programa de Apoyo Financiero a Microempresas Familiares.
Report by the WTO Secretariat
Since Brazil’s previous Review in 2017 efforts for improving economic fundamentals and strengthening macroeconomic resilience were undertaken. During the review period and prior to the COVID-19 outbreak Brazil’s annual GDP growth rate rose up to 1.8% (2018) before contracting to 3.9% (2020) due to the pandemic. It has since bounced back to an estimated 4.6% in 2021 as a result of timely adopted support measures booming terms of trade a pickup in commodity prices recovery in domestic and external demand and robust private sector credit growth. Brazil’s annual average GDP growth rate for the period 2017-21 was relatively low at 1% although higher than the average of -0.4% in 2012-16. Developments in the country’s position among the most competitive economies in the world reflect inter alia improvements in the business environment but also weaknesses in several areas where reforms have been under way. Between 2017 and 2020 inflation at rates ranging from 3.2% to 3.7% remained under the upper limit of the tolerance range established by the Central Bank of Brazil (BCB); however since January 2021 it exceeded its upper limit attaining 8.3% that year and rose progressively to 12.13% in April 2022 but easing subsequently to 11.7% in May 2022. Unemployment rose slightly to the historically high rate of 13.5% in 2020 and 2021 inter alia due to the impact of the pandemic.
Qué hacemos
La OMC administra el sistema mundial de normas comerciales y garantiza a los Gobiernos de los Miembros de la OMC importantes derechos comerciales.
Lo que propugnamos
El sistema multilateral de comercio está basado en principios simples y fundamentales. Estos principios han estado en el centro de todas las actividades de la OMC desde su creación en 1995.
Introduction
The Trade Policy Review Mechanism (TPRM) was first established on a trial basis by the GATT contracting parties in April 1989. The Mechanism became a permanent feature of the World Trade Organization under the Marrakesh Agreement which established the WTO in January 1995.
Women’s Economic Empowerment
Aid for Trade supports developing and least-developed countries in building their trade capacity and in increasing their exports by turning market access opportunities into market presence. It does so by addressing four key areas: trade policy & regulations; economic infrastructure; building productive capacity; and trade-related adjustment.
The Treatment of Medical Products in Regional Trade Agreements
The WTO Secretariat has published a new report on the treatment of medical products in regional trade agreements (RTAs) amid current supply shortages caused by the COVID-19 pandemic. The report examines the extent medical products are traded among preferential partners and the difference in liberalization rates within and outside these trade agreements.
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.
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.
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.
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.
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.
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.
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.
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).
Forecasting Trade
This paper develops a set of time series models to provide short-term forecasts (6 to 18 months ahead) of international trade both at the global level and for selected regions. Our results compare favourably to other forecasts notably by the International Monetary Fund as measured by standard evaluation measures such as the root mean square forecast error. In comparison to other models our approach offers several methodological advantages inter alia a focus on import growth as the core variable the avoidance of certain difficulties affecting the performance of structural models the selection of variables and lags on the basis of theoretical considerations and empirical testing as well as a full documentation of the modelling process.
Lessons from the First Two Decades of Trade Policy Reviews in the Americas
The Trade Policy Reviews conducted in the Western Hemisphere over 1989-2009 contain a wealth of information that puts in clear evidence the considerable improvements achieved in most American countries during the first two decades of operation of the Trade Policy Review Mechanism. Those Reviews show that trade liberalization came hand-in-hand with internal reforms and was generally of an autonomous nature and an intrinsic component of improved economic management. Trade liberalization slowed down during the second decade under review with tariffs having come down mostly during the earlier years. The use of non-tariff barriers also fell over time although at a slow pace in some of the smallest Members which found it difficult to implement the more complex trade policy instrument applied by larger countries. Export and other government assistance schemes proliferated throughout the continent but were often characterized by a lack of unity in the criteria used to assign and apply them. The review period also witnessed enormous changes in the services sectors where reforms usually proved more complex than in the goods area. The multilateral and other international trade agreements contributed to the stability of trade policies and the general rejection of protectionism although backtracking did occur in a number of cases. Because the commitments made during the Uruguay Round negotiation now fall short of the more liberal trade regimes that came to be over the review period most Members in the Americas could presently raise trade and investment barriers without violating multilateral rules. Thus the pressing need to conclude the Doha Development Agenda in order to lock in the considerable trade policy liberalization achieved during past years and to strengthen the multilateral trading system.
Trade in Medical Goods in the Context of Tackling COVID-19
The COVID-19 pandemic has brought considerable attention to trade in medical products and specifically trade in products for prevention testing and treatment. This study provides a comprehensive overview of trade and tariffs imposed on medical goods in general many of which appear to be in severe shortage as a result of the current crisis. The purpose of this note is to provide factual information on how these goods are traded globally.
Developing and Delivering COVID-19 Vaccines Around the World
The WTO Secretariat has published a new information note on trade-related issues for COVID-19 vaccine production manufacturing and deployment. The note entitled “Developing and delivering COVID-19 vaccines around the world” explores how trade policy can play its part in ensuring the rapid roll-out of vaccines against COVID-19.
Developing & Delivering COVID-19 Vaccines Around the World
The WTO Secretariat has published a new information note on trade-related issues for COVID-19 vaccine production manufacturing and deployment. The note entitled “Developing and delivering COVID-19 vaccines around the world” explores how trade policy can play its part in ensuring the rapid roll-out of vaccines against COVID-19.
Trade Policies Supporting Women’s Economic Empowerment
This paper looks at the various trade policies WTO Members have put into place to foster women’s economic empowerment. The analysis below is based on the information provided by WTO Members as part of their Trade Policy Review (TPRs) process from 2014 to 2018. Reports from the WTO Secretariat governments as well as the question and answer sessions were examined for the purpose of this paper.
The Development of Trade Policies in the Asia and Pacific Region Over the Past 30 Years Since 1989
This paper reviews the main developments of trade and related policies and measures in the Asia and Pacific region during the 30 years since establishment in 1989 of the Trade Policy Review Mechanism (TPRM). The objectives of the TPRM include facilitating the smooth functioning of the multilateral trading system by enhancing the transparency of WTO Members' trade policies.
Evolution of Asia's Outward-Looking Economic Policies
This Working Paper contains some observations concerning the evolution of trade and trade-related policies in the Asia-Pacific region since the establishment in 1989 of the Trade Policy Review Mechanism (TPRM) whose goal is to improve the transparency of these policies. It also draws some lessons from the Reviews undertaken. In particular the Paper examines how reforms either unilateral or in connection with bilateral regional or multilateral trade agreements can be greatly facilitated by transparency including cost-benefit (C-B) analyses of policies and measures that take full account not just of the interests of domestic producers but also those of other groups including exporters and domestic consumers. While high quality transparency is not cheap the costs of achieving it pale in comparison with the financial assistance involved and efficiency losses associated with such assistance. Trade Policy Reviews (TPRs) throw light not only on measures that appear to contravene WTO rules although that is not their purpose; more importantly they identify measures not seemingly covered by WTO rules which can nonetheless have economic effects equivalent to measures that are subject to these rules. One of the main lessons from these TPRs is that impediments to economic development are largely homegrown. Consequently unilateral structural reform of which liberalization of both trade and foreign direct investment (FDI) has been an integral part is of paramount importance. By fostering transparency particularly evaluating the effectiveness of policies and measures in achieving their objectives and their overall impacts (intended or unintended) on the economy the TPRM can be a catalyst for unilateral reform including liberalization of trade and FDI. Although the latter has received added impetus from multilateral liberalization under the auspices of the GATT/WTO the stalling of negotiations in connection with the Doha Development Agenda (DDA) should not preclude further unilateral liberalization. By contrast the benefits of preferential trade agreements are far from obvious notwithstanding their proliferation during the past decade throughout the Asia-Pacific region here few governments have subjected these agreements to rigorous cost-benefit analysis. Economies in the Asia-Pacific region especially East Asia have been much more successful than those in other regions in achieving sustained fast growth and thereby raising living standards and reducing poverty. This success can be attributed not so much to transparency which is largely lacking but to inter alia their broad outward-looking development strategy. This strategy has involved in particular an increasingly high degree of integration into the global economy with heavy reliance on growth of manufactured exports high rates of national saving to finance high rates of domestic investment including public investment in physical and social infrastructure (notably education and health) supplemented by FDI (as well as maintenance of macroeconomic stability reliance on a functioning market system to allocate resources and committed capable and credible governments). However this development strategy has left growth very heavily dependent on domestic investment and exports which dropped sharply in the wake of the global financial crisis that erupted in 2008. This and resulting current account imbalances and consequent trade tension has prompted a rethink in a number of East Asian economies of their development strategies. As a consequence China Chinese Taipei Korea and Malaysia for example are now attempting to wean their economies off investment and exports and give freer rein to domestic consumption. As circumstances (including comparative advantage) change and global resources become increasingly scarce policies need to be continually reviewed in order to ensure that second-best measures are replaced by more cost-effectiveness ones. As improved productivity is the key to sustained development in the long run policies need to be adapted to ensure that they facilitate rather than inhibit the efficient re-allocation of resources by markets in accordance with evolving comparative advantage. Reform needs to be ongoing therefore. Transparency builds support for and thus paves the way for such reform.
Opening a Pandora’s Box
Economic projections for the world economy particularly in relation to the construction of Computable General Equilibrium (CGE) baselines are generally rather conservative and take scant account of the wide range of possible evolutions authorized by the underlying economic mechanisms considered. Against this background we adopt an ‘open mind’ to the projection of world trade trajectories. Taking a 2035 horizon we examine how world trade patterns will be shaped by the changing comparative advantages demand and capabilities of different regions. We combine a convergence model fitting three production factors (capital labor and energy) and two factor-specific productivities alongside a dynamic CGE model of the world economy calibrated to Economic projections for the world economy particularly in relation to the construction of Computable General Equilibrium (CGE) baselines are generally rather conservative and take scant account of the wide range of possible evolutions authorized by the underlying economic mechanisms considered. Against this background we adopt an ‘open mind’ to the projection of world trade trajectories. Taking a 2035 horizon we examine how world trade patterns will be shaped by the changing comparative advantages demand and capabilities of different regions. We combine a convergence model fitting three production factors (capital labor and energy) and two factor-specific productivities alongside a dynamic CGE model of the world economy calibrated to reproduce observed elasticity of trade to income. Each scenario involves three steps. First we project growth at country level based on factor accumulation educational attainment and efficiency gains and discuss uncertainties related to our main drivers. Second we impose this framework (demographics gross domestic product saving rates factors and current account trajectories) on the CGE baseline. Third we implement trade policy scenarios (tariffs as well as non-tariff measures in goods and services) in order to get factor allocation across sectors from the model as well as demand and trade patterns. We show that the impact of changing baselines is greater than the impact of a policy shock on the order of magnitude of changes in world trade patterns which points to the need for care when designing CGE baselines. observed elasticity of trade to income. Each scenario involves three steps.