Trade and Trade Policy

A Manual for Parliamentarians in Commonwealth Africa

Dr Massimiliano Calì, Overseas Development Institute

Regional Workshop for East African Parliamentarians Arusha, 27-8 May 2010

Why produce a Manual?



The effects of trade permeate through an economy – as does the impact of change to:

   supply and demand on the world market; a country’s trade policy; other countries’ trade policies.

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But the effects:

 flow along multiple channels; and  are often complex and indirect.



So it is often hard to track the impact on any particular individual or socio-economic group.

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What’s in it for Parliamentarians?

 

There is plenty they can do:

 governments have only a few instruments that directly channel trade; but  many policies can influence the short- and long-term impact of trade on development;  most of which fall outside the trade portfolio.



Parliamentarians are central to the regulation of trade because the decisions are inherently political:

    they create winners and losers; they require wide consultation if they are to be implemented effectively; they affect tax – and hence also expenditure; and trade policy must reflect a country’s development strategy.

Mainstreaming trade policy is essential to reinforce desirable, and minimise negative, effects.

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Scope of the Manual

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The Manual moves from underlying questions to trade policy formulation.

 

The chapters deal in turn with:

 why, and what, to trade;  what lessons can be learned from the experience of the fastest-growing states;  how can governments:  influence the impact of trade on their citizens;  shift their country to a more dynamic trade pattern, given that: • it is the private sector that does most trading; • many key forces affecting poor countries are outside direct control.

How can these insights be brought to bear in actual trade policy negotiations:

 multilateral (Doha);  African regional groups, Economic Partnership Agreements (EPAs)?



What special role do Parliamentarians have to play in this process?

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There are no short cuts

  

The experience of recent decades has challenged much conventional wisdom:

 trading manufactures is not ‘good’ and primary products ‘bad’ for development – it all depends on which goods (and services);  there is a role for both ‘the market’ and ‘the state’ – it is the ‘way’ they operate that counts;  regional trade agreements can foster growth, but they may also hinder it.

The ‘big message’ of the Manual is that detail matters:

 the detail of trade agreements;  the market niche in which a country trades;  the place of a national firm in its global value chain.

Which poses a challenge for Parliamentarians:

 to master the detail;  to communicate it to the electorate.

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Tools for African Parliamentarians

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The Manual provides the tools to be applied to many current trade policy questions:

   Doha:   what are Africa’s interests; what are the implications of further delay in completion?

EPAs:   what are the implications for pre-existing African regional groups; how should governments respond to the revenue challenges?

Global Financial Crisis:   how Africa is affected; what is needed to make countries less vulnerable to ‘collateral damage’?

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Some key messages

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Politics and communication are at the heart of trade policy – Parliamentarians’ input comes at every stage.

 

Trade policy:

  should reflect national economic priorities, which requires that it must be translated into a set of negotiable points.

Mainstreaming trade policy is vital: without it negotiators are operating in a vacuum.

 

Tariff liberalisation always has distributional impacts:

  either fiscal expenditure will go down (through spending cuts); or other taxes will need to increase – with a different incidence from the old taxes.

Parliamentarians need to push for Aid for Trade: so far provision has been underwhelming.

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Trade and Trade Policy

A Manual for Parliamentarians in Commonwealth Africa

Dr Massimiliano Calì, Overseas Development Institute

Regional Workshop for East African Parliamentarians Arusha, 27-8 May 2010