1. What role should the US play in terms of leadership for reforming the WTO2. Blocking the appointments at the Appellate Body and its consequences - the alternative MPIA mechanism and who is making those rules?3. The elephant in the room - China!4. Workers rights, the role of the WTO and who benefits from trade - is market access only for those who have access to capital and knowhow - how unskilled labour gets impacted5. Judicial activism and how that dissuades future trade negotiations6. How to be part of the rule making rather than staying out of it7. How will rules be implemented now if appeals are filed against panel decisions essentially delaying the process8. How can all WTO members be treated as developing countries? The need to redefine development!9. How important ecommerce rule making is for WTO's success10. Women, WTO and role of reform
Friday, July 31, 2020
Wednesday, July 29, 2020
Sunday, July 26, 2020
Many outside analysts are skeptical that such plans for deglobalization will succeed. They rightly note that contemporary global supply chains are extremely complex, the outcome of millions of individual uncoordinated firm decisions. Any attempts to unwind these processes will be cumbersome and costly. Although COVID-19 has prompted firms to revisit the trade-offs between efficiency and resiliency in their own supplier relationships, this does not mean that they’ll welcome government interference in such assessments. In fact, early reports suggest that firms around the world have been cool to their governments’ efforts to woo them away from China.
The skeptics are correct that rewiring supply chains will be difficult, and that firms are unlikely to simply fall in line with the wishes of politicians, particularly when doing so cuts against their bottom lines. Yet governments have more power to shift supply chains than may be obvious at first glance: Yes, it’s true that global supply chains reflect individual firm decisions. But these decisions are made within a policy environment set by governments. The current form of globalization is a policy choice; other worlds are still possible.
What is clear, however, is that political exhortations alone won’t shift supply chains: Governments need concrete policy proposals, not vague directives, if they want to see real change. Moreover, restructuring supply chains should be done carefully and strategically, not through ad hoc, piecemeal policy announcements. In short, governments need to do their homework before acting. Rushing to dole out untargeted subsidies or implement new export controls will be both costly and ineffective: Governments will end up not only wasting money but also failing to address the vulnerabilities that worried them in the first place. Here are some practical steps to get started.
For the decade spanning 2007–2016, these results identify a subset of mineral commodities, including rare earth elements, platinum-group elements, cobalt, niobium, tantalum, and tungsten, that pose the greatest SR for the U.S. manufacturing sector. This subset includes commodities that have a high degree of production concentration in countries that may become unable or unwilling to supply to the United States, are mainly imported from other countries, and are consumed in economically important manufacturing industries that may be less able to withstand a price shock that may result from a supply disruption. It is this subset of commodities for which further investigations are necessary.
Friday, July 24, 2020
As technology grows, the world becomes more connected and seems smaller. Each country used to be its economy, but now we can work with and communicate instantly with people all over the world. All businesses are now global and have the potential for worldwide employees and customers. Globalization brings complex geopolitical issues and great opportunities to collaborate and share cultures. Future leaders need to embrace globalization by becoming global citizens who appreciate different cultures and know how to communicate across cultural and language barriers. Different ideas should be viewed as opportunities, not fear-filled challenges. Leaders of the future need to pay attention to global issues and understand what is happening around the world.
Tuesday, July 21, 2020
It offered five initiatives that needed to be taken by the BIG THREE - the US, EU and Japan to turn around the mood on trade - to make people love trade again! The initiatives were:
1. The Big Three. The U.S., EU, and Japan, should establish a consultative body on trade to forge a new approach that allows trade to move ahead in the absence of universal consensus.
2. No harm, no foul. Each of the Big Three should commit to zero tariffs on any item not produced in each particular market.
3. A de minimis strategy. Tariffs should be eliminated on all products where the current tariff is less than 2%. At that level tariffs are simply a nuisance fee.
4. Mind the social costs. Expand the Nairobi Protocols to include health products and green tech. Scrapping import tariffs on medical and green goods would not only encourage additional trade but will also provide health and environmental benefits.
5. Harmonize down. The Big Three should commit that on every tariff line each of the three will be no worse than the next worse. In other words, each of the Big Three will agree to reduce its tariff on every product where it has the highest tariff of the three.While the initiatives are to be provided by the three, it cannot be restricted to the three because of the MFN provision under GATT, unless the three are proposing a mega FTA amongst themselves. Therefore unilaterally undertaking such cuts would mean free-riding. Other countries would benefit from such a reduction without necessarily having to pay back. This would be fine for the others - but whether it is a cost the three would be willing to pay for the love of trade is debatable?
A critique of this paper would be two fold:
1. The paper views leadership on trade issues being possible only from the large trading powers. So if the US or EU are not coming forward, it necessarily means that there is a leadership crisis. The presumption that there are only a few rule givers, while the rest are rule takers persist. A leaderhship charge from China or developing countries like India and Brazil are not envisaged at all. Quite expected. Rule receivers can never become rule givers!
2. On the role of the WTO's consensus principle being a step backward, the examples given don't quite seem to reverabrate in reality. There have been no smaller countries bringing the WTO to a halt for non-trade issues of AIDS, environment or the like. In fact, non-trade issues have always been an agenda that developing countries tend to oppose at the WTO.
3. The Big Three should set the norms and other should follow suit later - a la China or the rest. This was the mode earlier. Not a mode that 2020 should subscribe to.
The international trading system is facing a serious challenge from a legitimacy crisis both in the west and the developing worlds. How one needs to tackle this apathy and disdain is for the collective leadership to solve. Multipolarity must replace unipolar, bipolar and tri-polar worlds. Easier said that done though. However, the future must begin with the principle of engagement of al trading nations rather than a few.
However, the signs of the trilateral stewardship has probably begin. This trilateral statement of the way forward in subsidies negotiations at the WTO is an indication that this alignment is not a theoretical possibility but a distinct possibility. How other trading nations would react to this would determine whether trade is loved by everyone.
Monday, July 20, 2020
Ravi Velloor makes a neat analysis of the India Singapore CECA and how it continues to impact Singapore's economy. In this piece in the Strait Times, he calls for a long time view of any trade agreement instead of looking at short term factors. he analyses how the CECA has impacted Singapore's labour market but also how SIngapore has gained access to India's financial sector. The point made was that these agreements have helped Singapore increase its exports. However, its market too has been opened up to the partner's imports as well as movement of professionals. Would this have been possible without the CECA? Another interesting fact is the rise in FDI from Singapore post-CECA. One of the arguments against BITs and ISDS has been that BITS do not really contribute to FDI inflows into a country. The rise of FDI in India of Singaporean companies post 2005 is a counterfactual to this narrative.
This new report raises the balance one has make to be both self reliant and open. With trade pacts opening up one's economy, it also provides opportunities for local manufacturers and service suppliers to benefit. How much, to what extent and in what sectors is the critical questions to be asked before one embarks on a trade pact negotiation.
The eternal question will remain - how much to liberalise and at what cost?
Sunday, July 19, 2020
In this background the a latest piece in the Journal of International Economic Law (JIEL) titled "The Remains of the Day: The InternationalEconomic Order in the Era of Disintegration" lays out threadbare the elements of the crisis and what is in store. It speaks about the disintegration of the international economic order in two ways - disintegration through law and disintegration of law. The two are explained thus:
On the one hand, disintegration is understood as the impact of international economic rules on socio-economic structures and the environment (disintegration through law). On the other hand, disintegration is also a phenomenon eroding international economic regimes and institutions (disintegration of law).On the working and disintegration of the WTO, it has this to say:
To begin with, disintegration through law offers a compelling explanation to the disintegration of international trade law. As is well-known, the World Trade Organization had shown signs of distress already at the beginning of the new millennium. However, although the agonizing stalemate ofthe Doha round cast serious doubts on the prospect of advancement of the multilateral trading system, the day-to-day functioning of the WTO was not in peril. But the unthinkable became reality. Disintegration culminated in the United States’ obstructing the appointment of Appellate Body members,to which the European Union has responded by promoting the establishment of an interim appeal facility. Not to mention the attempt of the US at reading the national security clause to include economic security; and the efforts at bi-lateralizing the relationship with China. (footnotes excluded)On the churning in international investment law, it goes on:
"It thus comes as no surprise that international investment law has entered a phase of tumultuous change. On the one hand, States have unilaterally withdrawn from IIAS and denounced the ICSID Convention (albeit more limited in numbers). On the other hand, there is currently a plethora of reform proposals concerning both substantive standards and the ISDS mechanism, some possibly more transformative than others. But the road to change is bumpy and tortuous. For one thing, even formal withdrawal from IIAs does not necessarily imply a complete disengagement from the current investment protection regime. Sunset clauses—at times long ones—delay the full and immediate effects of withdrawals. Furthermore, reforming the massive network of IIAs inevitably takes time." (footnotes excluded)This JIEL piece and special edition is an elaborate exercise in stating the current crisis and offering a way forward.
The first is the idea of the ‘repatriation’ of competences, which is a ‘return’ to the State as the main place of decision-making. The second is the conceptualization of a (re)embedded liberalism in a multilateral dimension, that is the idea of addressing certain compelling issues in existing multilateral frameworks. The third could be defined as progressive ‘managed’ integration, half-way between deep integration and reshoring, with more ad hoc solutions in the short-term and the possibility to extend them multilaterally at a later stage. The fourth one advances an inversion of scope with the regulation of the market being subservient to social and environmental issues, rather than ‘embedding’ these issues in market regulation. The last could be indicated as a ‘participatory’ approach, in that these solutions identify the site of democratic decision-making in the affected stakeholders at a subnational and transnational level, rather than in the nation-state.
All these solutions present advantages and disadvantages, both from a substantive and pragmatic perspective. The idea of the return to the State might conceal both the (now highly visible) risk of autocratic power grab, but also ‘de-responsibilize’ international economic law of its central role in the attainment of public purposes. On the other hand, a (re)-embedded multilateralism might still risk obliterating the ‘perspective of the oppressed,’ and maintaining the traditional divides between ‘trade and non-trade issues’. Solutions that rest on bilateralism—albeit in the short-term— may advance more progressive agendas, such as a stronger active industrial policy and be more achievable, while risking to fragment the response.To conclude, what are we looking at in terms of the emerging landscape:
1. A form of hyper-protectionism or precautionary-ism and State led growth models and positions in international trade?
2. A renewed effort by States to address environmental and the traditionally "non-trade" issues in multilateral and bilateral fora?
3. More examples of "coalition of the willing" types of arrangements as seen today on ecommerce, investment facilitation and services liberalisation?
4. Moving away from the State as the focal point of decision making, and more "democratic" movements and structures drive the agenda on economic integration?
But to those doomsday naysayers and global critics, the article also clarifies:
A cautionary note, however, is in order. By taking this perspective, this special issue does not aim to sound the death knell for all types of international economic integration. Nor does it wish to provide ‘ammunitions to the barbarians’ or stoke up the appetite for simplistic and chauvinist solutions.Well once again, where and how will the middle path be found?
Monday, July 13, 2020
Due to the lockdown impact in Europe, imports of cheap french fries to New Zealand is causing prices to dip and challenge local growers and makers of french fries. The news reports are found here and here.
I was surprised to find a website called Potato News Today which traces the potato industry. It reported thus:
Globally, the disruption of supply chains, and particularly sales to hospitality, by virtue of COVID-19 restrictions has led to the complete collapse of potato prices in major production centres, in particular the European Union (EU).
This will shortly lead to extraordinary price reductions in frozen potato chips from the EU. It’s expected that a similar collapse will be seen in other parts of the northern hemisphere, in particular in North America. The EU currently have approximately 2.6 million tonnes surplus frozen fries.
If urgent steps are not put in place to prevent it, New Zealand is likely to be swamped by imports of frozen potato chips at those extraordinary prices. That, together with the existing impact of the current pandemic will in turn cause the New Zealand potato-growing and potato-processing industries to suffer severe and prolonged damage.Familiar points when domestic industry is hit by a surge of imports. The multilateral trade rules do provide for possible action - raising applied tariffs if within bound rates, imposing anti-dumping duties or taking safeguard measures.
However, is the surge of imports a manifestation of the market or a deliberate attempt to off load cheap french fries in the Kiwi market? How do losers in this episode react - do they believe in the virtues of a free trading system based on comparative advantages? Is the fall in prices due to the market, an interplay of demand and supply, or a deliberate attempt to undercut competition?
Saturday, July 11, 2020
And a survey is exactly what was conducted and the results were brought out in this paper by the European University Institute. Titled "Stakeholder Preferences and Priorities for the Next WTO Director General" the working paper brings out the results of the survey conducted amongst a mixed stakeholder group. The paper states that "Government officials (including the EU) represent the second largest category of respondents (24.6%) after academia (25.1%); followed by the private sector (companies and business associations) (19%); staff of international organizations (18%) and NGOs, labor unions, think tanks (11% of the sample). There was at least one government respondent for 76 of the 164 WTO members (46% of the membership). Of the government and EU respondents, 31% (66) are based in Geneva."
Amongst the many responses, the conclusion of the paper highlighting the survey is interesting:
As far as the characteristics the "stakeholders" hoped the new DG would have, there was near unanimity - well who wouldn't want a professional manager!
The bottom line that emerges from the responses to the survey regarding priorities when it comes to the professional and personal attributes of the next DG is relatively clear. Competence, political experience, a network that spans major capitals, international business and international organizations, knowledge of the WTO negotiating process and a background in economics are all characteristics that are ranked most highly. Moreover, Geneva-based officials often accord greater priority to these characteristics than the total sample.Time for a political head for the WTO, not a bureaucratic leader!
One hypothesis this suggests is that the DG should not be a technocrat/WTO delegate. There is a recurring debate among trade officials and practitioners that has something of a cyclical dimension: should the WTO be led by an ex-Minister/senior politician or by a bureaucrat (a trade official)? The most recent DG was a bureaucrat; some of his predecessors were former Ministers or Prime-Ministers (e.g., Renato Ruggiero; Mike Moore). It appears that as far the respondents to the survey are concerned the pendulum has swung to a preference for the latter type of profile.And thumbs up on the priorities for the new DG - sort out the dispute settlement crisis immediately!
There is a substantial degree of commonality in rank orderings of substantive issues for negotiation, institutional reform, and daily operations of the WTO. Resolving the dispute settlement crisis is a clear priority for most respondents, especially government officials.Well, will these considerations play out when 164 members of the WTO come together to select the next DG? Are these priorities for capitals at all? What will play out as the selection process moves forward. Will it be a fair selection considering the formats and closed door selection process, as this piece suggested?
Let us wait and wait.
Friday, July 10, 2020
Accordingly, the provisions of this Agreement shall not prevent, as between the territories of contracting parties, the formation of a customs union or of a free-trade area or the adoption of an interim agreement necessary for the formation of a customs union or of a free trade area...
1. This Agreement shall not prevent any of its Members from being a party to or entering into an agreement liberalizing trade in services between or among the parties to such an agreement, provided that such an agreement:
“The FTAs, in my opinion, we should just get rid of them. We should have a multilateral system or a bunch of bilateral systems,” Lighthizer said. “And to be honest, I can go either way. But we can’t have people who...profess to multilateralism and then go around basically being the biggest proponents of a bilateral system.”
Wednesday, July 8, 2020
The jurists in the Russian dispute disagreed. So too did those in the Saudi dispute. In sum, their reasoning goes: If the national security exception is self-judging, if it cannot be reviewed like any other obligation in the WTO treaty, then why do the national security exceptions in the WTO rules on trade in goods and services and on trade-related aspects of IP rights set out specific limited circumstances in which these exceptions can apply?Notably, the panel in the Russian transit case– as mandated by the WTO treaty – drew on the "customary rules of interpretation of public international law" in noting that treaties must be upheld in "good faith" by those that are parties to them. On this basis, the panel in that case concluded that governmental actions for which a national security exception is claimed must "meet a minimum requirement of plausibility in relation to the proffered essential security interests."
WTO rulings in disputes in which none of the disputing countries are from the West are often ignored in the politics and in the media of the West. These two rulings, though, are deserving of much global attention. They remove the foundations for the U.S. argument that it can do whatever it wishes in trade if it does so in the name of national security. And they foreshadow more such rulings to come.
Sunday, July 5, 2020
The most concerning aspect of the new labor rules is the potential litigation boondoggle they may unleash, with the inclusion of a rapid response mechanism (RRM) for labor enforcement, which was put into place to ensure remediation of a denial of collective bargaining rights. There are two separate RRMs, one as between Canada and Mexico, and the other between the United States and Mexico, and is specifically designed to handle a particular denial of the right of free association and collective bargaining by a private entity at a particular worksite.
Saturday, July 4, 2020
This made me do a bit of research on the well known "precautionary" principle in EU trade policy. This detailed communication by the European Union on what the precautionary principle involves explains the circumstances under which the principle is applied.
The precautionary principle is detailed in Article 191 of the Treaty on the Functioning of the European Union. It aims at ensuring a higher level of environmental protection through preventative decision-taking in the case of risk. However, in practice, the scope of this principle is far wider and also covers consumer policy, European Union (EU) legislation concerning food and human, animal and plant health.The summary goes on to state:
The precautionary principle shall be informed by :
In addition, the of risk management remain applicable when the precautionary principle is invoked. These are the following five principles:The debate really is to what extent "precautionism" can be used to be veiled protectionism. Risk evaluation and assessments do have their element of subjectivity. So while tariffs and quotas are objective numbers and limits, precautionism can turn more murkier.
Coming from a person who was the former EU Trade Commissioner, precautionism does ring a bell!
Friday, July 3, 2020
1. More obstacles to freer trade2. Speed of globalization will change, but not towards deglobalisation3. Slowing down of global trade - there is huge amount of helicopter money in some countries - so large State intervention in US, EU, China4.Supply chain fragility - but more bark than bite5. Bit of rechoring may be in pharma6. Precautionism as opposed to protectionism7. It is protecting your people from risk - overall level of precaution will increase8. Safety standards, security - precaution is a politically connected issue - what is a good level for you9. As opposed to tariffs (usual tools) - addressing precautionism is very subjective - more fragmentation10. Leveling the playing field of precautionism is more difficult
1. WTO is weaker than 10 years ago2. Increasing divergence in collective preferences between the US and China3. Updating the WTO rulebook - is what we say reform of WTO4. China has changed - state owned part of economy is 30% of the economy5. SOE needs support from the State - intervention - distorts the market, internally and externally6. WTO disciplines in state aids are shallow and need to be strengthened - EU, US, China, Japan have to converge for competitive neutrality7. US-China rivalry well placed to stay8. Will take a few years to stabilize9. WTO reform - short term goals - cooling down period, easing trade distortions, coalition of the willing to stop the distortions10. Long term - Developing countries need to step in since international trade and investment is a big lever for development
1. Notion that playing field needs to be levelled is a major issue for developing countries - it is a further obstacle to development.2. Notion of rebalance will remain3. Is China a developing country anymore?
1. Existing set of disciplines does not constraining some trade distorting practises of certain WTO players.
2. No more convergence now. Co-existence now.
3. If they do not accept new disciplines, then opening up trade will stop. The rulebook is not enough to adapt to the present trade distorting practises.