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.