Trade monitoring
Offshoring services: Recent developments and prospects
Despite the recovery in the world economy in 2003 and 2004 unemployment remained high in many industrial countries. Even in those countries which reported a strong recovery such as the United States and the United Kingdom employment levels recovered only moderately leading many observers to wonder about a “jobless recovery”. Although employment growth typically lags behind in each cyclical output recovery sluggishness in services sector employment seemed to be a new development. In previous downturns the services sector continued to generate new jobs. The information communications technology (ICT) sector – one of the most dynamic sources of new employment in the 1990s – not only slowed down in terms of job growth but actually experienced a decline in the payroll after the ICT crash in 2000-01. Many dot.com companies and telecom firms closed down or had to downsize as investment outlays in IT hardware and software decreased in OECD countries.
Recent trends in international trade
The world economy grew at 4 per cent in 2004 the strongest annual growth rate in more than a decade. Global GDP last year was also more broadly based regionally than in the three preceding years providing a solid basis for an acceleration in world trade growth. World merchandise trade rose by 9 per cent in real terms in 2004 the best annual performance since 2000 and more than twice as fast as world output (GDP measured at market rates) in 2004. Trade growth in 2004 also significantly exceeded average trade growth recorded over the last decade.
World Trade Report 2005
The report focuses on specific trade policy issues of current interest and reviews trends in international trade. The core topic addressed in the 2005 Report is the relationship between standards and trade. The Report also contains 3 shorter essays on the use of quantitative economic analysis in WTO dispute settlement proceedings trade in air transport services and offshoring services.
Quantitative economics in WTO dispute settlement
WTO dispute settlement continues to be the subject of extensive scrutiny by both trade practitioners and academics. Not surprisingly most of this analysis is legal in nature touching upon the various arguments that have been put forward by parties to disputes and the legal foundations upon which these disputes are adjudicated. While legal and procedural issues remain the domain of trade lawyers economists are being called upon with increased frequency on matters that call for economic interpretation or quantification. This should hardly be surprising given that multilateral trade rules reflect key economic principles such as comparative advantage and that many of the terms in WTO Agreements which are important in the resolution of disputes have an economic basis. It may also have to do with the fact that increasing numbers of disputes are reaching the implementation phase in which arbitrators need to quantify the allowable level of retaliation as will be further explained below.
The economics of standards and trade
We live in a world profoundly reliant on product standards. Faxes can be sent around the world because fax machines obey a common protocol. Computer files can be shared because computers employ various standardized hardware and software formats. The need for product standards is not a new phenomenon. In biblical times the lack of a common (standardized) language wreaked havoc at the Tower of Babel (Shapiro 2000). In more recent times during the great Baltimore fire of 1904 fire fighters called in from neighbouring cities were unable to fight the blaze effectively because their hoses would not fit the hydrants in Baltimore.
Foreword
The World Trade Report 2005 follows the pattern established in previous years and takes up a number of key trade policy issues facing the international trading system for analysis and discussion. The underlying objective of the Report is to contribute to a deeper understanding of trade policy issues facing governments. The core topic in this year’s report is standards and international trade. Shorter essays have been prepared on three other topics – the use of quantitative economic analysis in WTO dispute settlement international trade in air transport services and offshoring services.
World trade developments in 2003 and prospects for 2004
Trade growth strengthened in the course of 2003 driven above all by demand expansion in the United States and East Asia. The 4.5 per cent gain in real merchandise exports on a year to year basis does not reveal the vigour of the expansion in the course of the year. Although foreign direct investment decreased globally capital flows to the emerging economies recovered in 2003.
International Trade Statistics 2004
Compiled and analyzed by the WTO’s economists and statisticians the figures provide comprehensive comparable and up-to-date statistics on trade in merchandise and commercial services for an assessment of world trade flows by country region and main product groups or service categories. Some 240 tables and charts are depict trade developments from various perspectives and provide a number of long-term time series as additional information.
Coherence
The starting point for this study is that appropriately designed and sequenced trade liberalization measures and a well crafted set of trade rules can make a positive contribution to growth and development. But the extent of that contribution also depends on other policies. The notion of coherence has been deployed in this study to characterize a situation in which relevant policies are pulling together in the same direction. In a world of multiple policy objectives and priorities and one where no consensus exists on the ideal policy set the concept of coherence cannot be given operational precision – rather it is indicative of the reality that policies are inter-dependent and that poor policy or neglect in one area can undermine the efficacy of efforts in another. Coherence cannot be uniquely defined unless a set of policy objectives is formally established and the objectives ranked in terms of priorities that indicate how trade-offs are to be made when these are necessary. A precise specification of a fully coherent policy set would also identify the exact nature and timing of all relevant government interventions. Any such undertaking is well beyond the scope of this study. Instead coherence in this context simply refers to the idea that mutually supportive approaches in related areas of policy are likely to produce greater harmony between intent and outcome. Coherence as discussed here is a matter of degree and more coherence means that the benefits of sound trade policies are greater than they would be without supportive policies in other areas.
Trade and trade policy developments
The expansion of global output and trade gained considerable momentum in the second half of 2003 resulting in an annual average increase of world GDP and world merchandise exports of 2.5 per cent and 4.5 per cent respectively. These changes represent stronger than expected improvements when compared with the preceding year although trade growth remained below the average rate recorded in the 1990s. These annual results were negatively affected by a combination of unusual temporary factors and longer-term structural weaknesses in a number of major economies (in particular the state of the banking system in Japan and the labour markets in Western Europe). One of the influencing temporary factors was the emergence of the severe acute respiratory syndrome (SARS) in East Asia. Although SARS remained a limited epidemic relative to malaria and the acquired immunity deficiency syndrome (AIDS) it had a dramatic short-term impact on the movement of people and on the tourism industry in the region. The build up of tensions resulting in the military conflict in Iraq weakened consumer and business confidence in many regions in the first quarter of the year. In OECD countries the composite leading (business) indicator hit its lowest level in March 2003 then displayed a trend increase from May 2003 onwards. The major stock markets showed a similar development dropping sharply until March but recovering thereafter and then expanding sharply until the end of the year.
Foreword
The World Trade Report 2004 is the second annual publication in the WTO Secretariat’s new series. As I indicated last year the World Trade Report seeks to deepen public understanding of current trade policy issues and to contribute to more informed consideration of the options facing governments. Like last year the Report begins with a review of recent world trade developments. This is followed by three shorter essays – on trade preferences the temporary movement of natural persons and geographical indications. The main topic of the Report this year is coherence.