Alejandro Jara talks to Viv Davies about the 2013 WTO Bali ministerial conference and the recent Vox report, ‘Building on Bali’, co-edited with Simon Evenett. Jara presents his views on the post-Bali agenda, mega regional trade agreements and trade protectionism. They also discuss the extent to which the ‘global value chain revolution’ has changed the nature and focus of international trade and trade agreements. Jara concludes by presenting policy recommendations for the way forward. The interview was recorded in January 2014.
The global value chain revolution has changed trade and trade agreements. Trade now matters for making goods as well as selling them. Trade governance has shifted away from the WTO towards megaregional agreements. This column argues that 21st-century regionalism is not fundamentally about discrimination, and that its benefits and costs are best thought of as network externalities and harmonisation costs respectively. More research is needed to determine how the megaregional trade agreements across the Pacific and Atlantic will fit with the WTO.
Trade and trade agreements used to be relatively simple. Trade primarily meant trade in ‘made-here-sold-there’ goods, so 20th-century regional and multilateral trade agreements dealt primarily with barriers to goods crossing borders – especially tariffs. For governments, the key purpose of trade and trade agreements was to help their firms sell things.
Global value chains, interdependence, and the future of trade
Pascal Lamy18 December 2013
The emergence of intra-firm trade as the primary component of international trade reflects a global interdependence in the production process. In this column the former Director-General of the WTO argues that this necessitates a re-examination of how we think about – and how we measure – trade between nations. Interdependence allows different sectors to add value, and complicates the implementation of trade barriers. Only with a modern perspective can effective trade policy be conducted.
Andrew B. Bernard, Andreas Moxnes, Karen-Helene Ulltveit-Moe
Today, the expansion of global value or production chains means that most products or services are assembled with inputs from many countries. We may still think in terms of Ricardo’s world of trade between nations, but in reality most trade now takes place within globe-spanning multinational companies and their suppliers. The results of this ‘trade in tasks’ are all around us.
The recent Bali Ministerial Conference was successful enough to ensure that the WTO lives to fight another day. This column introduces a new VoxEU eBook exploring how the WTO can make the most of this opportunity to restore its central place in world trade governance.
The successful conclusion of the Bali Ministerial Conference and its terrific reception in the international press and from government leaders means that the WTO now has the opportunity to restore its fortunes. Talk of the WTO’s demise as a negotiating forum has been set aside, at least for now. If the WTO membership takes the right decisions in the coming months concerning its near-term work programme, and assiduously follows up, then such talk might be banished for good.
The WTO signed a mini-package of trade initiatives in Bali last week. This column argues that the ‘Bali package’ is welcome but not enough. Without some new initiative or direction, the WTO looks set to drift for the next few years. The WTO cannot move ahead until the trans-Pacific and trans-Atlantic ‘mega-regionals’ are done or dead. In the meantime, the WTO should promote research and discussion on how 21st-century trade issues could be brought into the WTO when the time is ripe.
Bali’s success got multilateralism out of the emergency room and into the intensive care unit – but we don’t know whether the operation was a success. The Bali package is only distantly related to the heart of the 2001 agenda (WTO 2013). Indeed, the ‘Bali Package’ should really be called the ‘Bali Ribbon’ since very large parts of it were already being implemented unilaterally by members (Meltzer 2013).
Bernard Hoekman, Jesper Jensen, David Tarr29 November 2013
Two regional trade agreements are centre of attention in Ukraine: the Deep and Comprehensive Free Trade Agreement with the EU – that for the time being Ukraine has rejected – and the Eurasian Customs Union with Russia, that Ukraine has been invited (or pressured) to join. Rather than choosing between the two, Ukraine should focus on reducing policy frictions that negatively affect trade through processes that mobilise firms and industries on both sides of the border. The recent proposal by Ukraine to establish a joint commission among Ukraine, Russia and the EU to promote trade could be a step in this direction.
On November 21 2013, Ukraine suspended preparations for signing the Deep and Comprehensive Free Trade Agreement (DCFTA) with the European Union (EU) at the Third EU-Eastern Partnership Summit in Vilnius on November 28-29. In 2010, the Russian Federation, Belarus and Kazakhstan formed the Eurasian Customs Union (ECU) and have invited Ukraine to become a member. This has become a politically charged issue, generating great uncertainty that is likely to have negative consequences for investment and economic activity (see Handley and Limão 2013, Shepotylo 2013).
Does policy uncertainty reduce economic activity? Insights and evidence from large trade reforms
Kyle Handley, Nuno Limão23 November 2013
The impact of policy uncertainty on economic activity is potentially important, but controversial because it is hard to identify and quantify. Recent research provides a framework to identify the impacts of policy uncertainty on firm decisions, and finds it has strong effects in the context of international trade. China’s WTO accession secured its most-favoured nation status in the US, and the evidence shows this reduction in uncertainty can explain a significant fraction of its export boom to the US.
The impact of policy uncertainty on economic activity is an issue traditionally associated with developing countries. Since 2008, however, the spotlight has shifted. Governments’ responses to the Great Recession and the Eurozone crisis have raised considerable uncertainty about the future policies of advanced economies. Examples include the timing and size of financial bailouts, government expenditures, and the risk of sovereign-debt default. These crises have also heightened trade policy uncertainty.
Will the WTO Bali conference advance the Doha Round and Asia?
Matthias Helble, Ganeshan Wignaraja 13 November 2013
Intensifying negotiations leading to the December WTO Ministerial Conference in Bali have renewed optimism for concluding the beleaguered Doha Round and boosting Asia’s trade. Agreement in Bali on tariff-quota administration, trade facilitation, and food security would improve the prospects for a Doha deal and WTO credibility. Failure at Bali, however, would spur the rise of mega-regional trade agreements – to the detriment of countries outside these agreements.
Trade negotiators from Asia and elsewhere are locked in intense negotiations to lay the platform for a Doha trade deal at the WTO Ministerial Conference in Bali, Indonesia, 3–6 December 2013. A new WTO Director-General, a ministerial venue in an influential Asian country, the risk of eroding WTO credibility, and the advent of mega-regional trade agreements have all enthused and motivated trade negotiators. This article assesses what the Bali Ministerial Conference might reasonably deliver, and how this may advance the Doha Round and Asia’s trade.
Sustaining trade reform: Institutional lessons from Peru and Argentina
Elías A. Baracat, J. Michael Finger, Julio J. Nogués, Raúl León Thorne28 October 2013
Trade reforms must be durable if countries are to reap the benefits of international specialisation and trade. Whereas Peru has sustained the reforms it carried out in the 1990s, Argentina has introduced multiple trade restrictions in recent years. This column argues that Peru’s success is due to two factors. First, Peruvian trade reform was part of a broader reform effort. Second, by highlighting the success of Asian countries and negotiating bilateral agreements, Peru’s political leaders fostered a positive vision of Peru’s role in the world economy.
Beyond removing restrictions, trade reform in Latin American in the 1980s and 1990s was also an attempt to reform the culture of policy management, and in some countries to introduce an optimistic, ‘Asian’ perspective into trade politics. In Peru, reforms have been sustained over several changes of president. In contrast, Argentina has introduced multiple restrictions and has reverted to the ‘off-the-books’ forms of policymaking that the adoption of GATT/WTO standards by previous the leadership tried to eliminate.
'Special and differential treatment' was justified on the basis that developing countries lacked the fiscal resources to smooth the transition to free trade. However, despite improved fiscal circumstances, exceptions to WTO rules remain in place. Establishing an independent watchdog for the WTO could help it to address these issues.
Admitting that 'the present is just a snapshot in a journey' is disconcerting, so we feel better assuming that the current state of affairs will turn out to be permanent. Indulging in this mistake is common, and we also see it happening in multilateral institutions – particularly if they do not have a watchdog to keep them free from self-deception. The WTO does not have such a watchdog, and this may explain its resistance to acknowledging the obvious.