Wednesday, July 31, 2013

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. 


Sunday, July 28, 2013

Global Value Chains and trade rules

Heard Mark Wu from Harvard Law School talk at IIFT recently on the relevance of global trade rules in the context of Global Value Chains. Was fascinating.

And also came across this interesting piece by Sungjoon Cho and Claire Kelly on the same subject titled "Are World Trading rules passé?"

GVC and trade rules definitely seem to be the next big area of research...

Wednesday, July 24, 2013

Plain Packaging - Some debates

Interesting to read about two experts well known to WTO law enthusiasts - Joost Pauwelyn and Benn McGrady - argue, albeit in an academic setting, on the tobacco plain packaging case that has made its way to the doorsteps of the WTO dispute settlement process. While whether the measure of Australia's plain packaging is overtly restrictive on trade and violative of obligations under the TRIPS Agreement will be known only when the Panel decides the case, this case has nevertheless evinced a lot of interest in trade law circles for a variety of reasons as I have blogged here, here and here about it.

The latest news about UK dropping plans to introduce Plain Packaging adds to the series of measures (and non-measures) by governments in this particular setting. 

The Tobacco Plain Packaging case raises fundamental issues of restriction on trade, public health objectives versus international trade, intellectual property rights and permissible restrictions on them, domestic policy space to decide on policy objectives, determinants of justifiable policy objectives, employment versus health objectives and many more.

I agree with Simon, the mock trial should have a webcast (video link) for all those aficionados! 

Monday, July 22, 2013

Here is to more abbreviations!

A recent ASIL insight highlighted the nature of world trade law making with many plurilateral agreements making their way into the quagmire of international trade law rules. For those who want to get a grip on the various trade agreement jargon and their abbreviations (TPP, TTIP, TISA, RCEP) in terms of their coverage and status, this piece is a good reckoner.

Meredith Kolsky Lewis makes an important point about dispute settlement and the various plurilateral agreements in the offing - will it lead to the disintegration of the crown jewel of the multilateral system or will it strengthen it?
"This is not a matter of great concern for disputes that solely relate to non-WTO commitments, but could raise concerns in the case of disputes featuring some WTO-overlapping provisions and some plurilateral agreement-only provisions. While it might be possible to bifurcate the dispute and bring part of it before the WTO and part of it before the plurilateral agreement's dispute settlement mechanism, the complainant might well find it more convenient to have the entire dispute resolved by the tribunal established pursuant to the terms of the plurilateral agreement. Thus the spectre of inconsistent jurisprudence may be less theoretical in the case of the new plurilateral trade agreements than the more traditional FTAs to which we have become accustomed."
 Time will tell if these various plurilaterals become the basis for WTO 2.0 or will ultimately lead to the disintegration of the multilateral, rule based system. For now, let us welcome more abbreviations!

Thursday, July 18, 2013

Currency Reform Bill gains ground?

Is the Currency undervaluation and trade debate going to take centre stage again? I have blogged about it here, here and here.

Trade Reform has this interesting take:
"Because of your emails to Congress, we are now at a new high of 106 co sponsors to the House currency manipulation bill (HR 1276 - Currency Reform for Fair Trade Act).  We’re getting closer."
A distinct possibility? What impact would this move have on proposals at the WTO regarding currency misalignment and trade?

Monday, July 15, 2013

Unprecedented or myth of globalisation?

Krugman recently in his NYT blog had commented on the unprecedented globalization that has taken place since the 1970s. The percentage of world trade to world manufactures and increased continuously during the last two-three decades.
"You see the interwar trade decline; the growth in world trade after World War II didn’t return to 1913 levels of globalization until around 1970. But since then, trade has grown incredibly. Interestingly, the big tariff cuts in GATT rounds had already happened; what we’re looking at here is trade liberalization in developing countries plus containerization, and the emergence of massive vertical specialization (iWhatevers being made in many stages in different countries)."
Thus, is the world getting more interconnected? As per traditional international trade theory is mercantilism or free trade fuelling this unprecedented globalization? Some still argue that there is a myth of globalization and there is a trend towards creating more jobs domestically than manufacturing outside. Nevertheless, whether goods are being manufactured outside or locally, more trade is definitely happening. What about services trade? Is that becoming increasingly globalized or is it still largely confined to domestic borders. In many countries services is the major component of the country's GDP - Is it also a major proportion of the country's trade?

Friday, July 12, 2013

Expertise, ICJ and WTO

Came across this interesting brief in the International Law Reporter about the role of experts in the ICJ decision making process. It was referring to Caroline E Foster's article titled " New Clothes for the Emperor? Consultation of Experts by the International Court of Justice".

Article 50 of the Statute of the International Court of Justice states:
"“The Court may, at any time, entrust any individual, body, bureau, commission or other organisation that it may select, with the task of carrying out an enquiry or giving an expert opinion.”
Commenting on the inadequate reliance of expert opinion of the ICJ of expert opinion the author relies heavily on the practise of the panels and Appellate Body of the WTO in the use of expert opinion:
"Practice in the World Trade Organisation (WTO)’s dispute settlement procedures provides helpful insights on a number of matters central to this article. The direct transposition of WTO procedures into the practice of the Court is not necessarily advocated, but this author's prior close study of the records of WTO panels' consultations with independent scientific experts yields valuable perspectives on how adjudicators may interact with independent experts in open-ended policy-based disputes. So far as the parties’ agreement to such a process is concerned, the preference in the appointment of independent experts in the course of dispute settlement proceedings in the WTO is understandably for panels to appoint experts with the parties’ agreement. However, a panel may do so acting on its own initiative, as seen in the case of United States – Import Prohibition of Certain Shrimps and Shrimp Products29 and the consultation of independent experts has also taken place where the parties do not agree on the need for a panel to do so.30 Even those parties disagreeing on the need for the panel to appoint independent experts have participated in the written and oral procedures by which these experts are consulted.31"
 The article referes in great detail to the procedures and processes of expert opinion by the dispute settlement mechanism of the WTO. Another important point made was on what was being relied on in the case of expert opinion:
"In the WTO it has proved helpful to establish a sense that the experts’ “mandate” is limited to assisting panels to “understand and evaluate the evidence submitted and the arguments made”158 but that “the answering of a legal question which will determine whether a party is in breach of the WTO Agreements cannot be delegated to experts”.159 Experts are expressly requested to refrain, in their written and oral testimony, from expressing views on the legal issues,160 and it is understood that, should they do so, this should carry no weight. However, the mixed legal and scientific nature of many of the rules of WTO law has blurred the boundaries slightly in practice.161"
Now, this is a very tricky area - where does expert opinion end and legalese begin? Where does one draw the line? The TBT and SPS Agreements have complex scientific questions to be answered that overlap precariously with legal questions. The Subsidies Agreement is inextricably linked with economic expertise. How often does it get blurred? Is there a middle path?

Wednesday, July 10, 2013

EU takes on Russia in the automobile recycling fee case

I was expecting this soon but did not think it would happen this soon. I have blogged about the Russia recycling fee issue here, here and here. The BBC reported it here.

Reports from the WTO indicate that the EU has decided to file a WTO complaint (DS462) against the fee. This would be the first case in which Russia is facing the dispute settlement mechanism after it joined the WTO in 2012.

"The European Union notified the WTO Secretariat on 9 July 2013 of a request for consultations with the Russian Federation on measures imposed by Russia relating to a charge, the so called “recycling fee”, imposed on motor vehicles.

According to the European Union, these measures adversely affect exports of motor vehicles from the European Union to Russia. The EU claims that Russia subjects imported vehicles to the payment of a “recycling fee”.  In contrast, domestic vehicles are exempted from that payment under certain conditions. An exemption is also available to vehicles imported from certain countries, such as Belarus and Kazakhstan. However, there is no exemption for vehicles imported from the European Union.  As a result, vehicles imported into Russia from the European Union are treated less favourably than domestic vehicles, or vehicles imported from Belarus and Kazakhstan.

The EU also claims that the structure of the “recycling fee” also appears to afford protection to domestic production."

Well, the dispute was anticipated but the complainant and timing was uncertain. Russia's time to defend or amend? There was news about some amendment to the legislation that addressed the alleged discrimination. One will have to see what the Russian response to this is.

Monday, July 8, 2013

What is national interest?

Joseph Stiglitz has a hard hitting article on trade agreements and interests that need to be protected while negotiating them in this piece in the Guardian. What caught my attention is the commercial interests versus national interest argument that I have tried to grapple with in many pieces of this blog:
" trade agreement should put commercial interests ahead of broader national interests, especially when non-trade-related issues like financial regulation and intellectual property are at stake. ... 
If negotiators created a genuine free trade regime that put the public interest first, with the views of ordinary citizens given at least as much weight as those of corporate lobbyists, I might be optimistic that what would emerge would strengthen the economy and improve social well-being. The reality, however, is that we have a managed trade regime that puts corporate interests first, and a process of negotiations that is undemocratic and non-transparent."
Some food for thought for trade policy negotiators around the world? Whose interests are at stake? Are not domestic business interests national interest? national interest may be a broader term but is not pursuing the interest of one's domestic industry part of national interest? Is it antithetical to common citizen's interests? Can they go together? Sometimes they do sometimes they dont? Who decides and on what terms? How does one do the balancing act? What if one's national business interest is impacting local citizen's interest in the trading partner? Is international trade about advancing one's own domestic business interest or addressing the issue of inequity worldwide? Can national interest be an amalgam of domestic corporate interest and the interest of a number of stakeholders? Like one trade policy maker stated recently can it combine the interest of the "worker, farmer, rancher, manufacturers, service providers, innovators, investors and consumers" all at once? 

Friday, July 5, 2013

US on Russia's WTO commitments

The USTR's first annual report on "Report on WTO Enforcement Actions:Russia" is out. Stewart and Stewart has this brief analysis of the Report.After Russia's entry into the WTO after more than a decade of accession efforts, it is time compliance challenges are gradually faced. Though all issues may not lead to disputes, it will be raised at various fora and opportunities by other WTO members.

I have earlier blogged here and here about a potential challenge of a Russian regulation regarding motor vehicle re-cycling duty that allegedly discriminates foreign and domestic car manufacturers. I was curious to know what this report stated about recycling fee issue.

Here it is:

"Motor Vehicle Recycling Fee

In September 2012, Russia introduced a “recycling fee” on sales of wheeled vehicles for the announced purpose of covering the cost of establishing a recycling industry. Domestic manufacturers of wheeled vehicles, however, do not have to pay the fee if they agree to assume the responsibility to recycle the vehicle at the end of its life. Both bilaterally as well as in meetings of the WTO Council for Trade in Goods, the United States, along with other Members, has objected strenuously to the apparent discriminatory nature of the fee. The United States also has registered its concern with the amount of the fee itself, particularly on large construction vehicles, and submitted written questions to the Russian delegation seeking further information about implementation of the program. In response to these concerns, on May 30, the Russian Duma published proposed amendments to the recycling law that would revise the program and apply the fee to domestically produced vehicles as well as to imports. USTR will monitor carefully the implementation of this stated commitment to ensure that our objectives are achieved."

So as of now, it is potentially open to challenge? No WTO dispute for now but a potential dispute settlement case, perhaps the first one for Russia? Business Beyond the Reef seems to think the modification should work.


Wednesday, July 3, 2013

The eternal generalist vs. specialist debate revisited

A good piece I dug out from the Harvard Business Review which is about generalists and specialists - it becomes all the more relevant in the context of experts and expert opinion about which I have blogged often.
"The declining returns to expertise have implications at the national, company, and even individual level. A collection of specialists creates a less flexible labor force, one that requires "retraining" with technological developments creating constantly shifting human resource needs. In this regard, the recent emphasis in American education on "job-specific" skills is disturbing. Within a company, employees skilled in numerous functions are more valuable as management can dynamically adjust their roles. Many forward-looking companies are specifically mandating multi-functional experience as a requirement for career progress. Finally, individuals should manage their careers around obtaining a diversity of geographic and functional experiences. Professionals armed with the analytical capabilities (e.g. basic statistical skills, critical reasoning, etc.) developed via these experiences will fare particularly well when competing against others more focused on domain-specific skill development. 

The time has come to acknowledge expertise as overvalued. There is no question that expertise and hedgehog logic are appropriate in certain domains (i.e. hard sciences), but they certainly appear less fitting for domains plagued with uncertainty, ambiguity, and poorly-defined dynamics (i.e. social sciences, business, etc.). The time has come for leaders to embrace the power of foxy thinking."
Any "expert" opinion on this?

Monday, July 1, 2013

Race and capitalism

I have blogged a bit about caste and globalization in the Indian context a bit here and here.

Found an interesting (and rather heavy) piece on "racial capitalism" in the Harvard Law Review titled "Racial Capitalism" by Nancy Leong.
"Racial capitalism — the process of deriving social and economic value from the racial identity of another person — is a longstanding, common, and deeply problematic practice. This Article is the first to identify racial capitalism as a systemic phenomenon and to undertake a close examination of its causes and consequences. 
The Article focuses on instances of racial capitalism in which white individuals and predominantly white institutions use nonwhite people to acquire social and economic value. Affirmative action doctrines and policies provide much of the impetus for this form of racial capitalism. These doctrines and policies have fueled an intense legal and social preoccupation with the notion of diversity, which encourages white individuals and predominantly white institutions to engage in racial capitalism by deriving value from nonwhite racial identity." 

Though not really related to international trade law and policy, the article did catch my attention due to the complex inter-relationship between race and capitalism. For those interested in a response to the article you can find it in Richard Thomson Ford's piece here.
"But by and large, the occasional inversion of our nation’s long-lived racial value system that results in minority race being seen as an asset instead of a liability is, on the whole, something to celebrate and (ahem) capitalize on, not something to complain about. Many of the problems Leong ably points out are the inevitable toxic by-product of our nation’s long, ugly history of racism and of our more recent halting but on the whole commendable attempts to correct it. I am not so sure that “racial capitalism” is distinct from the much more familiar problems of racial hierarchy and unforgiving market capitalism. And I doubt that there is any viable — even any conceivable — alternative to the kinds of self-interested calculations, strategic self presentations, subtle and overt pressures for conformity, and resulting psychological tensions that Leong describes as instances of identity commodification and racial capitalism. Just as the symptoms of a cold are caused by the body’s immune response, so the inconveniences and annoyances Leong catalogues are probably part of the necessary process of social change. On the whole, better to suffer through them than to stay infected."
Interesting debate...