Trade Facilitation Agreement - A guide already?

For those interested in Trade facilitation issues, the new Trade Facilitation Agreement and developing countries interests, there seems to be a guide already out - it is here and is titled "Trade Facilitation Agreement - Business Guide for Developing Countries".

The press release says:

"The guide, which is available free of charge via ITC's web site, explains the provisions of the agreement in clear and jargon free language, with a focus on what businesses need to know from an operational perspective if they are to use the new rules as a platform to increase trade and decrease the cost and time of exporting."

Many more of such treatises to follow, I guess.

On Law Schools and leaders

Came across this interesting piece by Susan Sturm in the Harvard Law Review pertaining to the role of Law Schools in creating and shaping public leaders:

"Law schools’ rhetoric celebrates lawyers’ leadership role. In law schools around the country, entering and departing students are told that they are the nation’s leaders, reminded of the serious and intractable problems facing the nation and the world, and exhorted to roll up their sleeves and put public good before private gain. Law schools define cultivating public leadership as core to their mission and admissions practices...

         ... 

Law schools have the potential to ignite and energize people’s aspirations, imaginations, and passions to work on matters of public concern, including problems of growing inequality, as an integral part of their work. I want to suggest that it is imperative to connect the redesign of law schools to a broader vision of law and a deeper set of questions about lawyers’ roles in addressing the pressing problems that require public attention and that our current public and private institutions lack the capacity to solve. Law schools should take more seriously and focus considerable attention on how lawyers participate in and exercise leadership in a wide variety of settings, and do so in ways that are deeply collaborative with other professions and with those most directly affected by the challenges that are the subject of attention."

More research on exchange rate mainpulation

For those following the currency exchange manipulation debate, a recent Congressional Research Study (CRS) analyses some of the important issues involved. Pointing out the debate on possible intervention in the WTO, the author states:

"Given the relationship between exchange rates and trade, some have argued that the World Trade Organization (WTO) has a role to play in responding to currency disputes. Some analysts and lawyers have examined whether WTO provisions allow for recourse against countries that are unfairly undervaluing its currency. 

One aspect of the debate is whether WTO agreement on export subsidies applies to countries with undervalued currencies. The WTO Agreement on Subsidies and Countervailing Measures specifies that countries may not provide subsidies to help promote their national exports, and countries are entitled to levy countervailing duties on imported products that receive subsidies from their national government. Some economists maintain that an undervalued currency lowers a firm’s cost of production relative to world prices and therefore helps encourage exports. Some argue, then, that an undervalued currency should count as an export subsidy. It is not clear, however, whether intentional undervaluation of a country's currency is an export subsidy under the WTO's specific definition of the term, and thus is eligible for recourse through countervailing duties under WTO agreements. For example, the subsidy must be, among other things, specific to an industry and not provided generally to all producers. There is debate over whether intentional undervaluation of a currency is “industry specific” because it applies to everyone.  

Another aspect of the debate relates to a provision in the GATT (the WTO agreement on international trade in goods), which states that member countries “shall not, by exchange action, frustrate intent of the provisions” of the agreement.Some analysts argue that policies to undervalue a currency are protectionist policies, and thus should count as an exchange rate action that frustrates the intent of the GATT. Others argue that the language is too vague to apply to undervalued currencies. Specifically, they argue that the language was written to apply to an international system of exchange rates that no longer exists (the system of fixed exchange rates, combined with capital controls, that prevailed from the end of World War II to the early 1970s).  

No dispute over exchange rates has been brought before the WTO, and whether currency disputes fall under the WTO's jurisdiction remains a contested issue."

I have blogged on this quite a bit. For the moment, there seems to be no immediate appetite for a WTO intervention, either at the negotiating table or at dispute settlement. However, one can never rule out possibilities in international law and politics.

More litigation practise

Talking about litigation practice, it seems Indonesia has filed another case. This time it is against Pakistan over anti-dumping measures taken by it against writing and printing paper from Indonesia. The case (DS470) is reported here.

Talking about WTO disputes, the big one this week was the Seals dispute between Norway and EU that I have  blogged about here earlier. 

The panel concluded that the IC exception under the EU Seal Regime violates Article I:1 of the GATT 1994 because an advantage granted by the European Union to seal products originating in Greenland (specifically, its Inuit population) is not accorded immediately and unconditionally to the like products originating in Norway. With respect to the MRM exception, the panel found that it violates Article III:4 of the GATT 1994 because it accords imported seal products treatment less favourable than that accorded to like domestic seal products. The panel also found that the IC exception and the MRM exception are not justified under Article XX(a) of the GATT 1994 (“necessary to protect public morals”) because they fail to meet the requirements under the chapeau of Article XX (“not applied in a manner that would constitute arbitrary or unjustified discrimination where the same conditions prevail or a disguised restriction on international trade”). The panel additionally found that the European Union failed to make a prima facie case that the EU Seal Regime is justified under Article XX(b) of the GATT 1994 (“necessary to protect … animal … life or health”).

Need to get down to reading the Panel report and commenting on it soon.

Strategic litigation at any cost?

I have blogged about the Tobacco Plain packaging case here, here and here. The dispute brings to the fore many aspects of dispute settlement at the WTO itself - like what is national interest, domestic policy space and international economic law, employment issues and trade as well as corporate interests and national positions.

This piece in the Jakarta Globe which gives a background on Indonesia's entry into the dispute  brought another angle to the dispute - strategic preparation in dispute settlement.

"For Indonesia, this is another opportunity for it to develop and enhance its understanding of how, when, and why to use the WTO dispute settlement system to further its own export interests. Indonesia started out by being a rather reluctant user of the system, when it was on the receiving end of complaints brought by several developed countries against its indigenous car program in 1996." 

 Is this another facet of strategic litigation at any cost at the WTO?

Do not de-industrialise too soon?

Dani Rodrik's piece in the Project Syndicate recently brought to light the delicate balance between the role of the manufacturing and services sector in an economy. Titled "The Perils of Premature De-industrialisation" it warns of a shift away from the manufacturing sector too soon and it's possible impact on developing countries.

"The economic, social, and political consequences of premature deindustrialization have yet to be analyzed in full. On the economic front, it is clear that early deindustrialization impedes growth and delays convergence with the advanced economies. Manufacturing industries are what I have called “escalator industries”: labor productivity in manufacturing has a tendency to converge to the frontier, even in economies where policies, institutions, and geography conspire to retard progress in other sectors of the economy. 

That is why rapid growth historically has always been associated with industrialization (except for a handful of small countries with large natural-resource endowments). Less room for industrialization will almost certainly mean fewer growth miracles in the future.

The social and political consequences are less fathomable, but could be equally momentous. Some of the building blocks of durable democracy have been byproducts of sustained industrialization: an organized labor movement, disciplined political parties, and political competition organized around a right-left axis."

An indication that manufacturing and services have to go together? 

HSBC Global Connections Report 2013

For those looking to be optimistic about global trade volumes, a recent study by HSBC states that global trade stating that it would quadruple by 2030 is music to the ears. 

The report forecasts that infrastructure related trade in goods would rise in the coming years as major emerging economies invest in large infrastructure projects. It concludes:

"This analysis suggests that even as economies develop and become wealthier, their demand for infrastructure products remains strong – for both intermediate goods and for investment in equipment. There is no single model for the pattern of industrial capacity, infrastructure 

spending and wealth creation. While much of Asia has followed a traditional export-driven industrialisation pattern, India has still been able to achieve growth 

without the same focus on infrastructure, but 

infrastructure bottlenecks are now blamed for stalling 

growth. As the country becomes wealthier, it will 

increasingly build up its infrastructure. 

 At the same time, advanced economies like the USA, the UK and Germany will need to continue investing in infrastructure to maintain their competitive advantage in supplying investment goods to the rest of the world. 

We expect infrastructure-related goods to increase their 

share of rising global trade, providing opportunities for 

both exporters and importers of both those goods and 

the merchandise that can be manufactured as a result.

Trade forecasts looking down due to protectionism?  Thought I heard that somewhere...

Services liberalisation - FTZ style

For those watching services liberalisation, this is something to watch out for - the Shanghai Free Trade Zone that was opened recently.

The details are found here.

Trade and sub-national interests

I came across this interesting website titled "Trade Benefits America" that maps benefits of trade to states within the country as contrasted to the national level.Normally, trade analysis is limited to the benefits a country gets in terms of national outcomes - jobs, GDP growth, investment and export growth. Going to the sub-national level is normally not attempted. This website maps perceived benefits right upto the State level on many parameters. It makes trade look more relevant and grounded.

I had blogged about this issue some time back here.

Some lessons to be learnt for countries having federal polities.

It's LIVE, well almost!

The WTO website announced the viewing of the compliance proceedings of the much talked about Boeing Subsidies case about which I have blogged here, here and here.

"At the request of the parties in the dispute “United States — Measures Affecting Trade in Large Civil Aircraft (Second Complaint) — Recourse to Article 21.5 of the DSU by the European Union” (DS353), the panel has agreed to show to the public a video recording of the non-confidential portions of its hearing. The screening is scheduled for 31 October 2013 at the WTO."

Though it is not live, it is a recording of some parts of the hearing.

What lies next - a webcast perhaps?

WTO disputes, trade and strategic litigation?

An interesting link between WTO disputes and the growth of trade is analysed in a paper titled "Do WTO disputes actually increase trade?". The paper finds:

"We find that WTO disputes do not, on average, increase a country’s imports of the products at issue. We find only very specific effects of disputes based on the dispute outcome and issue-area. We find significant variation across countries in their responsiveness to disputes, yet that most common explanations cannot account for this variation. This article highlights and begins to fill a significant gap in our understanding of the purpose of the WTO and its effects on trade."

The paper concludes:

"This paper presents an important finding: the effect of WTO disputes on imports at issue is, at best, inconsistent. In the aggregate, disputes are not associated with a statistically significant increase in imports. Looking at particular dispute outcomes and issue areas, only certain types of disputes have been associated with increased trade, and many have resulted in decreases. More- over, certain respondents are more “responsive” to disputes than others. Disputes against some countries have resulted in increased imports, while disputes against others have failed to do so. We do not find strong evidence of a systematic explanation for this variation."

While the relationship between a dispute and the impact it has on trade is far more complex, I found two reasons noted in the paper as to why countries probably file WTO cases interesting - rule clarifying and setting precedence for one's advantage.

"It may be, for instance, that the benefit of dispute settlement rests entirely on its rule-clarifying function. In such a telling, a dispute’s resolution leads to a convergence of expectations over country behavior. If we are to believe that most noncompliance amounts to a misunderstanding of the meaning of rules (Chayes and Chayes, 1993), the main benefit of a dispute may be to clarify the meaning of the underlying law. This benefit would be felt throughout the institution, as countries adjust their behavior to take into account that, e.g. the use of safeguards is now known to require the demonstration of “unforeseen developments”.If this is the case, however, our null finding over the effect on trade of mutually agreed solutions is of special concern. Indeed, settlements have no clarifying effect, since their content is usually kept largely private. When taken together with the finding that settlements have no average effect on trade, there remains little to recommend settlements. This is especially striking given the literature’s contention that MAS are where most of the action occurs in dispute settlement. 

Related to the idea of rule-clarification, it could be that dispute settlement is mostly an exercise in changing the meaning of the rules to one’s advantage. Perhaps countries file to set favorable precedents about matters of concern to them. Although the WTO features no formally binding precedent, or stare decisis, scholars largely agree that something akin to de facto stare decisis actually takes place (Bhala, 1998), where rulings do constrain the rulings of judges in subsequent cases. .."

Strategic litigation? 

Trade, Law and Development - Call for papers

I have blogged about the brilliant work Trade, Law and Development journal has done in the area of international economic law and policy. For those interested, Trade, Law and Development has called for papers.  

Here is the call for papers:

Call for Submissions

Special Issue on Trade and Climate Change

Founded in 2009, the philosophy of Trade, Law and Development has been to generate and sustain a constructive and democratic debate on emergent issues in international economic law and to serve as a forum for the discussion and distribution of ideas. In keeping with these ideals, the Board of Editors is pleased to announce Trade and Climate Change as the theme for its next Special Issue (Vol. VI, No. 1). 

Climate change is one of the foremost challenges facing the global community today and intersects with international trade in numerous ways. Sustainable development and protection and preservation of the environment are recognized as fundamental goals of the WTO, although its principal objective is to foster international trade. The WTO permits members to avail of exceptions to its principles in order to protect the environment under specific conditions. The on-going Doha Round has further consolidated the WTO’s stance on the environment by launching the first ever multilateral trade and environment negotiations. Moreover, the recent COP-15, Rio+20 and Earth Summit negotiations have given significant impetus towards achieving a global solution to climate change. There is hope that this multilateral dialogue will materialise into a global climate change deal in 2015 under the auspices of the UNFCCC.

This Special Issue, currently scheduled for publication in June, 2014, will provide an ideal platform for deliberation on the relationship between trade and climate change in the run-up to the proposed 2015 global climate change deal. Accordingly, the Board of Editors is pleased to invite original, unpublished submissions for the Special Issue on Trade and Climate Change for publication as ‘Articles’, ‘Notes’, ‘Comments’ and ‘Book Reviews’. Preference will be given to submissions that espouse perspectives of developing and under-developed countries.

Manuscripts may be submitted via email, ExpressO, or the TL&D website. For further information and submission guidelines, please visit the Journal’s website: www.tradelawdevelopment.com.

In case of any queries, please feel free to contact us at: editors[at]tradelawdevelopment[dot]com

LAST DATE FOR SUBMISSIONS: JANUARY 31, 2014 

And now it is Indonesia

I have blogged about the Plain packaging of Tobacco products dispute here, here and here. 

And now Indonesia joins the battle over Tobacco Plain Packaging.  More details here.

Trade routes and their relevance

Who thought trade routes matter in this age? 

This report in Al Jazeera is an interesting read:

"China, along with other Asian trading nations, is also looking towards the north for alternate shipping lanes. The Bering Strait is a deep, wide, pirate-free channel between Russia and Alaska that connects the Pacific and Arctic Oceans. Eastward from there, Canada's Northwest Passage offers a 7,000-kilometre shortcut to the US' Atlantic Seaboard. Westward, Russia's Northern Sea Route offers a 10,000-kilometre shortcut to Europe. With time, a third route will open across the centre of the Arctic Ocean.

These Arctic routes are becoming alternatives to conventional routes because of climate change. Rising temperatures are causing sea-ice to melt at an unprecedented rate; all six of the lowest ice-extents on record have occurred in the last six years. Last summer, the area of Arctic Ocean covered by ice was just half the average seasonal low from 1979 to 2000." 

 There is also a book on this by Michael Byers titled "International Law and Arctic". 

The next great Arctic rush?... 

Of State and markets

The role of the State vis vis markets is an old and continuing debate. The nature, scale and extent is a matter of debate rather than the need of either.

This piece by Devesh Kapur and Arvind Subramanian offers a course to rebuild the Indian State:

"It is well worth remembering that the difference in the economic performance between China and India is not the extent to which each has turned to markets, because both have. Rather, the Chinese Communist Party-state, as an economic institution, is more responsive, more meritocratic, and more skilled in human capital than the Indian state. Rebuilding the Indian state on firmer foundations may well determine not just what future India will have, but whether it has a future."

The question is not whether we need the State or not, it is what kind of a State it should be.

Fossil fuels, renewable energy and WTO rules

An ASIL insight into subsidies, renewable energy and fossil fuels throws open larger issues of trade, environment protection and world trade rules.

Timothy Meyer questions the dichotomy between the differential treatment between subsidies given to fossil fuels vis a vis those provided to renewable energy.

"The existence of domestic content requirements in renewable energy programs is likely a political condition for passage by governments that wish to show that they are not subsidizing foreign investors. But this political necessity has rendered government support for environmentally-helpful renewable energy programs vulnerable to challenge before the WTO in a way that environmentally-harmful fossil-fuel subsidies are not, creating tension once again between trade and climate objectives."

Who will bell the cat? 

Currency issues in regional trade deals?

For those following the currency manipulation debate in international trade, a recent WSJ piece may seem interesting where the issue of provisions seeking to address the issue of currency manipulation in trade agreements was discussed.

I have blogged about it here, here and here. 

A possible entry of provisions relating to currency manipulation in regional deals?

The Speech

WTO DG Roberto Azevedo's inaugural vision speech is here.

"We must be committed to deliver a deal before we get on the plane to Bali. It is vital that we succeed. All of us need the WTO. Ordinary people need it too even though they don't know it. Ultimately we should judge our performance on the difference we make to people’s lives. I believe that the multilateral trading system can be the preeminent force supporting growth and development in the world — lifting people out of poverty, improving living standards and helping to put the global economy back on track. We have a unique opportunity to restore the WTO to its proper place at the heart of this system, and to realise the mission of this organisation. 

The intermission is over: it’s time the WTO was back at the centre of the world stage. The stakes couldn’t be higher. We have to deliver. And, if we work together, I know that we will."

Over to Bali... 

More on global value chains

Global value chains is the new buzzword now in international trade. I have blogged about some aspects of it here and here though I am no expert on it.

A new joint OECD-UNCTAD-WTO Report on Global Value Chains reiterates the growing importance of it in today's global economic scenario. the report is titled "Implications of Global Value Chains for Trade, Investment, Development and Jobs".

Some of the highlights of the report are:

 "The growth of global value chains (GVCs) has increased our interdependence: between 30% and 60% of G20    countries’ exports are comprised of imported inputs or are used as inputs by others.

Trade facilitating measures are vital to successful participation in GVCs; trade cost reductions from practical and relatively inexpensive actions could be as high as 16% for some developing countries. 

The role of efficient and competitive services sectors is also crucial: services account for 42% of exports (in value added terms) from G20 economies and more than 50% for some countries. 

 GVCs strengthen the case for multilateral market opening, as barriers between third countries, including various non-tariff measures, upstream or downstream can matter as much as barriers put in place by direct trade partners. 

 Open, transparent and predictable trade and investment policies need a range of flanking policies to ensure benefits from GVCs are inclusive and widespread. In some less developed economies there remains much work to be done to address specific obstacles to effective participation in GVCs.  

Overcoming obstacles to GVC participation can pay big dividends; developing economies with the fastest growing GVC participation have GDP per capita growth rates 2% above average.  

 Multinational Enterprise (MNE) coordinated GVCs account for 80% of global trade. But it is also estimated that the contribution of local firms is very significant (in the range of 40-50% of export value added).  

 GVCs can be an important avenue for developing countries to build productive capacity where local firms can capture a significant share of the value added: but technology dissemination, skill building and upgrading are not automatic and require significant investment.  

Individual countries will want to carefully weigh the costs and benefits of proactive policies, carefully tailored to the country’s specific situation and coherent with its overall development strategy. 

 A structured approach would include embedding GVCs in industrial development policies, in particular creating an environment conducive to trade and investment and building productive capacities in local firms and skills in the local workforce.  

Multilateral co-operation can contribute much to ensuring an overall trade and investment policy climate conducive to sustainable GVC growth, avoiding “beggar thy neighbour” policies, and addressing specific development policy concerns in today’s more interconnected world."

Some food for thought for those working on global value chains, the chalenges of integration and their  relevance to developing countries.

New team, new hopes?

The new WTO chief, Roberto Azevedo took over yesterday. 

The WTO announcement is here. And the welcome address concluded thus:

"Governments do have regional or bilateral trade negotiating options. But I have never heard a trade negotiator from any country say that these options were preferable to a global deal through the WTO. A global deal encompasses more countries and more segments of economic activity than any regional accord could possibly deliver. But if we are to help build a multilateral path forward, all 159 members must work together to deliver in Bali. 

I believe that a deal can be struck despite the short time we have between now and Bali. I shall do everything I can to see that agreement is reached. But there is no such thing as a sure thing, and a great deal of work and commitment are required in the coming weeks if we are to succeed. 

I look forward to your continued interest and engagement in the WTO."

Bali and post Bali developments awaited. 

Role of the State and trade agreements

The role of the State and government in a globalised world is a subject matter of great debate especially depending on which side of the spectrum you come from. Is the role of the State incompatible with free trade and globalisation? Can they co-exist? Does free trade and globalisation necessarily mean reduction of the role of the State in economic activity and governance?

I had written about this a long time ago in this blog piece that I "searched out" here - on State Capitalism and globalisation. A more recent piece is the rather critical one wherein Martin Khor alleges that regional trade agreements are reducing the role of the State, especially State Owned Enterprises with provisions relating to them found in these agreements.

Titled "The Role of the State in Developing Countries under Attack from New FTAs", he argues:

"Naturally, there are pros and cons to any agreement, including the FTAs. Any potential gain for a country in exports or investments should be weighed against potential losses to domestic producers and consumers, and especially the loss to the government in policy space and potential pay-outs to companies claiming compensation under the FTAs' investment rules. 

But if developing countries have to come under new international rules that curb the role of the state and that re-shape the structure of their economy, then the prospects for future development will be adversely affected."

The role of the State, State owned enterprises and government are a source of constant challenge in discussions on liberlaisation and globalisation. How do international trade agreements address this question? Does GATT/WTO distinguish between a State led economy and a liberalised economy? Does it prefer one over the other? Is there place for a mixed economy in this discourse? Can we build a model for a mixed discourse?

Another plurilateral agreement - Now it is the International Supply Chain Agreement

One often hears about mega bilateral and regional deals marring the multilateral landscape. Sad but inevitable, others say. It is also the age of plurilateral trade agreements. 

I came across the suggestion of a latest one - International Supply Chain Agreement - ISCA (?), a la a TISA or a Government Procurement Agreement.

Writing in VoxEU, Michitaka Nakatomi suggests that the time has come for a plurilateral to address the issue of global value chains and the new reality of trade. He calls tis plurilateral the International Supply Chain Agreement. I have blogged about the issue of present day world trade rules and their inadequcy of addressing the issues of complex global supply chains here and here.

"Here, I would like to remind that the goal of the Agreement is to improve global value chains, and the key to achieving that end lies in close cooperation and coordination between governments and business communities. It is essential to select areas subject to negotiation in such a way as not to end up with an agenda that is too heavy to digest."

Well, will we the launch of plurilateral negotiations on global value chains, post Bali?

To comply or not to comply is the question

An interesting debate in the comments section  in the IELP blog on next steps in the Cloves Cigarette case (DS406 ) got me thinking. It brings us to the question of what constitutes "compliance" in WTO law and what do countries do when they feel WTO decisions in their favour are not being complied with? It also raises issues about the effectiveness of the dispute settlement process and how "hard" WTO law actually is.

The issue in question here was whether Indonesia has taken the right step in seeking authorisation  for retaliation against the US under Article 22.2 DSU for non-compliance without taking recourse to Article 21.5 DSU which essentially states:

"Where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, including wherever possible resort to the original panel. The panel shall circulate its report within 90 days after the date of referral of the matter to it.  When the panel considers that it cannot provide its report within this time frame, it shall inform the DSB in writing of the reasons for the delay together with an estimate of the period within which it will submit its report."

While we await further legal clarity on the point of the right legal recourse of seeking suspension of concessions via vis establishment of another panel to decide whether there was compliance, my attention was drawn to Article 22.6, 22.7 and 22.8 of the DSU.

"6.The DSB shall keep under surveillance the implementation of adopted recommendations or rulings.  The issue of implementation of the recommendations or rulings may be raised at the DSB by any Member at any time following their adoption.  Unless the DSB decides otherwise, the issue of implementation of the recommendations or rulings shall be placed on the agenda of the DSB meeting after six months following the date of establishment of the reasonable period of time pursuant to paragraph 3 and shall remain on the DSB's agenda until the issue is resolved.  At least 10 days prior to each such DSB meeting, the Member concerned shall provide the DSB with a status report in writing of its progress in the implementation of the recommendations or rulings.

7.         If the matter is one which has been raised by a developing country Member, the DSB shall consider what further action it might take which would be appropriate to the circumstances.

8.         If the case is one brought by a developing country Member, in considering what appropriate action might be taken, the DSB shall take into account not only the trade coverage of measures complained of, but also their impact on the economy of developing country Members concerned." 

Another avenue is to raise the issue at the DSB "at any time following their adoption"(adoption of the ruling). Developing countries have been given some special rights. Has this avenue been significantly used by the developing world? Has it borne fruit and served its intended purpose of assisting developing countries in getting rulings complied with. Any studies or analysis on the use of this provision? Or is it just on paper?

Compliance of WTO rulings is a very critical issue in legitmizing the role of the multilateral institution as well as the dispute settlement process. While legalese and complexity will prevail when one goes into the details of cases, non-compliance overall undoubtedly impacts credibility of the predictability of multilateral rules. Ofcourse, what constitutes non-compliance is again a matter of incessant debate!

Team Azevedo

Roberto Azevedo, the WTO DG designate has announced his new team of Deputy Director Generals to take over in October. 

They are:

 - Yi Xiaozhun of China (Mr. Yi is a senior trade official in China’s Ministry of Commerce who has worked on international trade issues since the 1980s. He has served as China’s Ambassador to the WTO since 2011.)

 - Karl-Ernst Brauner of Germany (Dr. Brauner is a senior officer in the Federal Department of Economics and Technology who has been Germany’s representative to the Trade Policy Committee in Brussels for the last 12 years.  He has been involved with the WTO since the start of the Doha Development Agenda.)

 - Yonov Frederick Agah of Nigeria (Mr. Agah has been involved with international trade issues in the Ministry of Industry, Trade and Investment since the early 1990s, including as Nigeria’s Ambassador to the WTO since 2005.  He was Chair of the WTO General Council in 2011.)

 -  David Shark of the United States ( Mr. Shark has been serving as the US’s Deputy Permanent Representative to the WTO since 2000 and has a long experience with GATT and WTO issues going back to the 1970s in the Office of the US Trade Representative)

The WTO website stated:

"The Deputies have been selected because of their outstanding commitment to the multilateral trading system and their extensive experience on WTO issues over many years.  They will be working directly with the Director-General to advance the interests of the Organization, including the preparations for the 9th Ministerial Conference in Bali.  “Their specific skills and experience of these deputies will be immensely valuable to advancing the effective and efficient functioning of the WTO,” Azevêdo said.  

DG-Elect Azevêdo consulted extensively with WTO members in the selection of the DDGs.  This has enabled him to make sure that the qualities each of the Deputies will bring to their new positions will benefit the WTO and its future work.  While they come from different regions that symbolize the geographical diversity of the WTO membership, from 1 October they will be serving the multilateral trading system working with the Director-General as a team along with all WTO members."

The new team takes over in October 2013.

Multilateralism versus regional trade deals

Pascal Lamy's last address to the General Council of the WTO before he will demit office summarised his views on where the WTO is headed and the challenges before it. His point on multilateralism versus regionalism with all the regional trade agreements gaining steam is worth quoting:

"I often hear that the way forward is to abandon the WTO and simply move to plurilateral or regional arrangements. But we have all seen the fate of a number of these plurilateral deals such as the ACTA or the Global System of Trade Preferences among developing countries. We also know that behind the headlines of the launching of mega regionals, as some refer to them, lie tremendous difficulties and sometimes even no final deal at all, as was the case of the Free Trade Area of the Americas. 

I do not wish to be misunderstood. I am not against trade opening outside the WTO. I believe that plurilaterals, mega regionals, regionals, bilaterals and unilateral arrangements CAN contribute to trade opening and hence to the levelling of the global trade playing field, which must ultimately remain our collective goal. Because this is what fairness is about. But I do think we would do well to recognise that the issue is not trade opening IN the WTO as opposed to trade opening OUTSIDE the WTO. The issue today is with the difficulties involved in trade opening. Domestic trade politics have become more difficult and trade deals have become more complex because the nature of obstacles to trade has evolved. We are no longer negotiating just the reduction of tariffs, but also of non-tariff barriers, which have gained enormous importance."

 So the bottomline is whether it is multilateralism or regionalism, trade obstacles are becoming more complex with high tariffs being replaced by non-tariff barriers. How one addresses these non-tariff barriers would determine the fate of the global economic landscape.

Currency misalignment, world trade and the World Trade Report

The World Trade Report 2013 has a large section devoted to currency misalignment and world trade. It goes (p.261)...

The debate on the trade impact of exchange rates has surged again recently in the WTO,56 and is likely to do so each time that it is felt, rightly or wrongly, that the present state of international monetary cooperation does not allow for orderly exchange rate adjustment reflecting balance of payments positions and does allow a particular member, or several members, to enjoy competitive advantages as a result of such a lack of cooperation. While the influence of macroeconomic and structural policies in determining exchange rates is acknowledged (Eichengreen, 2007), the world trading system must regularly “deflect” tensions associated with the perceived trade impact of exchange rates. This has become more frequent in recent years, as growing international inflows and outflows of foreign exchange have the potential to destabilize domestic economic policies and reduce the efficacy of traditional controls (notably restrictions on capital movements).

The question for the WTO is also systemic because exchange rate shifts increase or weaken the desired or perceived level of protection of domestic operators – and thus seem to have a role in the definition of trade policy. At the multilateral level, the erratic movement of exchange rates is frustrating the desired levels of protection that are negotiated by WTO members through long-term commitments – precisely because policies are aimed at setting predictable conditions of access for producers and traders. In turn, members may seek a way to address cyclical development or exchange rate changes in the trade policy toolkit.   

... 

The need for greater coherence for trade and exchange rate policies was included in the GATT rule book at the outset (see Section E.3(c)). The IMF and GATT were created in response to a lack of coordination of economic policies during the Great Economic Depression – these new institutions aimed at dealing with trade and exchange rate policies as a matter of common interest, with the introduction of disciplines to avoid competitive devaluations, to maintain exchange rate stability, to reduce balance of payments crises and to fight protectionism. From the outset, the international monetary and trading systems were linked by a coherent set of rules aimed at the progressive opening of trade and payments. GATT provisions on coherence reflected two things: the attachment of the trade community to exchange rate stability; and the need for that community to ensure that the trading system was not frustrated by the undisciplined use of exchange restrictions or multiple exchange rates. The institutional set-up remains very much one of coherence – and not of conflict – between the two systems." 

Well, no mention of a possibility of a WTO dispute here. Has that died down? Coherence is the buzzword here. 

World Trade Report 2013

The World Trade Report 2013 is out. 

And some of it's conclusions make interesting reading:

"Inertia within WTO trade negotiations is becoming an increasing burden for a large number of countries. What needs to be done? First, governments need to move forward on the existing agenda addressing market access conditions for both goods and services with equal determination as well as other trade costs covered by the talks on trade facilitation. 

Secondly, other sources of uneven competition and limitations on the open flow of trade need to be addressed at the global rather than regional level. Analysing the information provided under the WTO’s PTA transparency mechanism and further strengthening the WTO’s other transparency and monitoring functions may help to identify issues of concern that are already addressed in one way or another at the WTO, such as various types of NTMs. Additionally, new issues are likely to emerge, such as investment and competition policy, where multilateral action may be beneficial.

Thirdly, areas for international action that will shape the future of trade but reach beyond the mandate of the WTO must be addressed, including in terms of their impact on trade cooperation. Climate change and macroeconomic policies are two examples. Further reflection and discussion is needed on the role of the WTO in the institutional framework of global governance in order to ensure policy coherence and fruitful working relationships."

Inertia to be replaced by a new agenda for multilateralism? Sounds promising but  is it anywhere in sight? 

Japan joins the Russian roulette

I have blogged about the first case Russia is facing on recycling fee on automobile imports at the WTO here, here and here. Now Japan seems to have joined the Russian roulette. Japan filed a WTO case against Russia details of which are found here.

"According to Japan, Russia’s measures appear to be inconsistent with its obligations under several articles of the GATT 1994, the Agreement on Trade Related Investment Measures (TRIMs) and the Agreement on Technical Barriers to Trade (TBT).

Japan claims that through the measures at issue, Russia imposes a recycling fee on each vehicle imported into Russia or produced/manufactured on the territory of Russia. Russia exempts from the recycling fee the vehicles manufactured or produced by companies that have committed to ensure subsequent safe handling of waste. However, this exemption is only available to vehicles manufactured by companies which are legal entities registered in Russia and which have undertaken to produce their vehicles in Russia according to one of the modes involving certain specific manufacturing operations in the territory of Russia, Belarus or Kazakhstan. Therefore, the measures at issue, through these conditions, either taken together or separately, discriminate between imported vehicles and the “like” domestic products."

It would be interesting to see Russia's response, it's legal team, preparation as well as next steps. Will it amend its domestic legislation or will it defend its measure as being consistent with WTO law. Or will it just not comply with an adverse WTO panel ruling, if it so happens! 

All three are distinct possibilities.

The latest on Hyperglobalisation

Arvind Subramanian and Martin Kessler's latest piece titled "Hyperglobalisation of Trade and Its Future" on globalisation and the way forward looks like an exhaustive account of the present nature of globalisation. A must read for a comprehensive account.

It highlighted 7 important ingredients of present day globalisation:

•   hyperglobalization (the rapid rise in trade integration)
  
  
•   the dematerialization of globalization (the importance of services)
  
  
•   democratic globalization (the widespread embrace of openness)
  
  
•   criss-crossing globalization (the similarity of North-to-South trade and investment flows with flows in the other direction)
  
  
•   the rise of a mega-trader (China), the first since Imperial Britain
  
  
•   the proliferation of regional trade agreements and the imminence of mega-regional ones
  
  
•   the decline of barriers to trade in goods but the continued existence of high barriers to trade in services.

The piece has a bit about undervaluation and trade, an issue I have touched upon constantly in this blog.

"Currency wars or the resulting global imbalances are a systemic problem only if one or a few large countries pursue them. The possibility of collective action to prevent them must take account of this reality. 

Exchange rates and foreign exchange intervention are centrally implicated in mercantilism. The international monetary system, under the auspices of the IMF, is therefore the best forum in which to find a solution. The prospects for any serious reform remain slim, however, because of the inherent limits to international monetary cooperation."

A trade dispute, perhaps, will find a solution? My dear friend, Gulzar, had earlier commented on this issue thus:

"If forex mkt policies have to be regulated, by WTO or some other agency, then what form should it take? 

I am asking this because, unlike directly trade related issues like tariffs etc, exchange rate policies are very closely inter-twined with monetary policy and policies that regulate external capital flows (the impossible trinity). these three form the three pillars of any macroeconomic stabilization policy that open economies follow.  

Regulating one, would effectively (in a very direct sense) mean regulating the other two. it is a very small distance for us to be talking about regulating monetary policy itself. we need to remember that currency devaluations (which by definition has a beggar-thy-neighbour dimension) have been a commonly used critical policy instrument for regaining external competitiveness by countries. in fact, the biggest criticism of the eurozone experiment is that it denied countries the flexibility to devalue their way out of a sovereign debt and external competitiveness crisis. 

By the same logic, we should be arguing even more vehemently about regulating monetary policy itself, since the extraordinary monetary accommodation that the developed economies have been following for the past five years has done much more damage to the world economy (it has had strongly destabilising influence on emerging markets) than anything in the forex markets..."

No readymade answers on this one, but more food for thought.