Transcript Trade Policy Responses to the Crisis: Doha Round Bernard Hoekman

Trade Policy Responses to the Crisis:
Implications for the WTO and the
Doha Round
Bernard Hoekman
International Trade Department
World Bank
Beirut, November 12, 2009
The context
• Economic situation under stress
– Global GDP to decline by -2.9% in 2009
– Net private capital flows to developing countries
down US$800 billion 2007 peak
– Global trade volumes to fall by some 10% in 2009
– Global unemployment up by some 60 million
• To date, limited recourse to protectionism
• Many voices arguing that Doha will generate
trivial market access gains at best
Doha: a quixotic quest?
To the contrary
Doha matters more now
• Protectionist pressures should not be ignored or
system taken for granted
– Unemployment continues to rise, while exports
recovering – recipe for more, not less pressure
– Substantial scope to raise tariffs/support industries
• Developing countries hit hard – Doha is an
opportunity to help them exit crisis faster
– In part by pursuit of trade facilitation and greater
South-South trade
• Can help reduce OECD fiscal outlays (agriculture)
• Signaling effect: multilateral cooperation at work
WTO is mostly about policy bindings
• Negotiating coin = policy commitments:
– Tariff bindings; specific commitments in services
– Policy disciplines (rules of the game)
• Both reduce the size of potential negative
spillover effects of national policies
– During crisis responses and after – when fiscal stimulus
needs to be reduced
• Reducing applied trade policies (liberalization) is
just one element of WTO negotiations
– As it was under the GATT: lock-in and MFN extension of
unilateral reforms, in part driven by steady EC expansion
What’s on the table?
1. More secure market access in goods
2. New or stronger disciplines on policies that
create negative spillovers
3. Some new market opening in agriculture and
manufacturing
4. Somewhat greater security of access in
services
5. Initiatives to expand export opportunities of
LDCs and low-income countries
• NB: many other issues
1. More secure market access in goods
• Modalities will substantially lower average bound
tariffs and to a lesser extent, applied rates
– Bound average in ag. down to 30%; NAMA: 5%
– But what matters is that tariff peaks come down
most—and these are the most costly/constraining
• Ban on agricultural export subsidies
• Large cuts in maximum permitted ag. subsidies—
by 70% in US; 60% in EU—bringing them close
to/below applied levels
2. Disciplines on policies that create
negative spillovers
• Food policies
– Subsidy disciplines not just a market access story
– Less insulation of national markets will reduce volatility of
world prices; create thicker markets
• Cotton. Global support up more than twofold from $2.7
billion in 2007/08 to an estimated $5.9 billion in 2008/09
• Sustainable development
– Fishery policies cost the world economy $50 billion (60%
of the landed value of the global catch); EU and US
production support > $1bn per year
• Important for food security & livelihoods of many small
developing countries/coastal regions
– Tariff reductions on environmental goods – averaging
some 10% in low-income countries
3. Some new market opening for goods
• Average farm tariffs confronting developing
(OECD) country exporters will drop to 11.5%
(12.1%)
• Tariffs on their exports of manufactures to fall to
2.1% (2.4%)
• This is significant: focus on the levels not the
change at the margin
0
20
40
60
80
4. Services: somewhat greater security
SAR
AFR
LAC
EAP
MENA
OECD
ECA
Offer I mprovement (Uruguay Round commitment-Doha Offer)
Offer gap(Doha Offer-Act ual policy)
Act ual Policy
Note: A large ‘offer gap’ remains (factor of 2 on average)
5. Initiatives to expand exports of lowincome countries
• 97% duty-free, quota free for LDCs
– Not as good as 100%, but still worth $1 billion in the
US market
• Trade facilitation
– Improving the logistics performance of low income
countries to that of middle income countries would
increase their trade by more than 50%
• Aid for trade
– Not linked to DDA but closure would strengthen
prospects of delivery on Hong Kong commitments,
especially given fiscal pressures in OECD
The value of the WTO is revealed/rises
in bad times
• Up to mid 2008: “not enough on the table”
– Trade was booming; little prospect of backsliding
• That was then….
– So far so good on protectionist responses – a low
level fever
• But there are policy areas that are not subject to
disciplines – and concluding the DDA is a
precondition for starting to do so
Assessing policy responses to date
• Lot of action, but no major rise in protection
– Focus of many measures – in North and South – is on China
• A number of countries have also liberalized trade or taken trade
facilitation measures
• Much of the rise in antidumping and safeguards is in
“traditional” products
– Must wait and see if “new” products come to fore
– There are lags – e.g., takes time for drop in prices and
unemployment to feed into dumping/injury
• Extensive fiscal/financial support to key sectors – finance,
autos – mostly by OECD
• Scope for discrimination and political pressure to keep
resources at home—including through procurement
Trade restrictive and liberalizing measures by country, September 2008 - June 2009
Vietnam
Venezuela
Uzbekistan
Uruguay
United States
Ukraine
Turkey
Tunisia
Switzerland
Saudi Arabia
Russian Federation
Philippines
Peru
Paraguay
Pakistan
Morocco
Mongolia
Mexico
Malaysia
Libya
Korea, Rep. of
Kazakhstan
Japan
Israel
Indonesia
India
Egypt
Ecuador
EC
Dominican Republic
Chinese Taipei
China
Canada
Brazil
Bolivia
Belarus
Azerbaijan
Australia
Argentina
25
20
15
10
Trade restrictive measures
5
0
5
10
Trade liberalizing measures
Developing countries have initiated most new “trade
remedy” investigations
Source: Chad Bown Global Antidumping Database (World Bank PREM Note 144, October 2009)
Rules seem to be working: (i) imposed measures flat:
(ii) share of investigations leading to higher barriers down:
Getting to yes
WTO Members confront two broad judgments
1. How best to strike a balance between more
liberalization of applied policies and more
security of access (more bindings)
2. How far and under what conditions to allow for
safeguard type actions and trade remedies in
return for tighter and more comprehensive tariff
and other policy bindings
Market access—“sectorals”
• NAMA
– Modalities generate exceptions for sensitive products
– Sectoral deals will mostly involve a (small) subset of WTO
members – GATT/WTO rule of thumb has been +/- 90% of world
trade
– Could be pursued along lines of ITA and financial-telecommaritime services talks after Uruguay Round – as part of a Doha
agreement
– Progress also possible through (bilateral) scheduling
negotiations
• Services
– Strong push by industry in EU/US for liberalization
– Focus instead on significant additional binding of policies –
arguably could do much to attract more support for a deal
“Safeguards”
• Special safeguard mechanism for agriculture
– Often trade protection will not help when there are
shocks (raise prices for the poor)
– Analysis suggests a quantity based SSM can increase
world price volatility
– Price-based SSM has less negative consequences for
world price volatility
• Experience suggests international rules matter but
domestic political economy is as important
– Focus on monitoring/review; processes that allow
domestic stakeholders to defend their interests
Conclusion: the bird in hand
• Major benefits of Doha lie in greater policy
disciplines—improved security of access
• And strengthening of global rules that reduce
prospect/size of (future) negative spillovers
– Agricultural support policies; environmental goods
• But there will also be liberalization in areas that
matter to many developing countries
– For market access: tariff peaks
– And market entry: trade facilitation, aid for trade
Building on recent progress and lessons
• Aid for trade
– EIF: now up and running
– Trade Facilitation Facility: Real trade/transactions costs are
the major factor reducing competitiveness of firms/farms in
developing countries
– Recent trade finance initiatives by MDBs
– Increased emphasis on regional public goods
– Interest by private sector to leverage AFT (e.g., Aid for Trade
Facilitation Partnership)
• Improve transparency: better data on policies and flows
– Lesson from the crisis: data is a public good – under-provided
– This true even for tariffs – but especially subsidies, other
nontariff measures, services policies, and procurement
– Build on recommendations of the multi-agency taskforce on
NTMs – allocate resources needed to collect/disseminate data
Possible high return areas for
Arab economies
Doing Business (World Bank)
Trading across borders
90
80
70
60
50
40
30
20
10
0
2006
2007
Egypt
Morocco
Tunisia
Jordan
Turkey
UAE
Doing Business ranking
Licensing for a new warehouse
180
160
140
120
100
80
60
40
20
0
2006
2007
Egypt
N =178
Morocco
Tunisia
Jordan
Turkey
UAE
Recent survey of Arab trading firms: IntraPAFTAD trading costs have declined
Traders' Estimate of Trade Costs
% of Import Value
12
10
8
6
4
2
0
2001
2008
Source: Hoekman and Zarrouk 2008 (World Bank Policy Research Working Paper)
Big reductions in time spent on bureaucracy
Person-Days spent on Red Tape
Number of days
250
200
150
2001
100
2008
50
0
Egypt
Jordan
Syria
Procedures have been simplified: signatures
Range of Signature Requirements (Import)
Number of Signatures
25
20
15
Lower
10
Upper
5
0
2001
2008
Air
2001
2008
Sea
2001
2008
Road
Variance in clearance times
Upper range of clearance delays
12
Number of days
10
8
2001
6
2008
4
2
0
Air Freight
Sea Freight
Road Freight
Table A - 10 : Ranking The Most Costly Procedural Requirements for
Import Activities in PAFTA Countries
Respondents Percent total (2008 Survey) (2001 Suvey)*
(Count)
respondents
(Rank)
(Rank)
Road Transport & Transit / Maritime
Transport
Domestic Taxes on Imports (e.g. VAT,
Sales taxes, etc)
Procedural Requirements (Customs
clearance, Inspection & other
administrative procedures)
115
(57%)
1
6
114
(59%)
2
2
109
(49%)
3
3
Tariffs on Imports
99
(45%)
4
1
Technical Requirements & Compliance
to Standards
88
(42%)
5
5
Public Sector Corruption
84
(44%)
6
4
* Zarrouk (2001).
Implications
• Illustrates importance of:
– Trade facilitation broadly defined, including as an
instrument to promote integration of regional
markets
– This linked to services agenda: logistics, transport,
insurance, among others are all determinants of
trade costs
– Greater transparency: mechanisms to collect and
monitor data on sources of trade costs for firms
– All three areas require action at the
national/regional level, but WTO can help
What matters more?
• Focus on real trade costs (including NTMs) and services
– What type generates highest potential gains?
• What are the specific policies/barriers that raise
costs/limit flows?
– A “mapping” exercise: measure policies to permit analysis and
monitoring of change over time
– Discriminatory vs. nondiscriminatory measures
• Compile existing data and benchmark
policies/performance – generate indices
• Identify key gaps
– Bilateral FDI by sector; Bilateral services flows
– NTMs: subsidies, product standards, origin rules
Monitor implementation
• Of existing agreements – not just WTO. Also
GAFTA, EU/US, GCC
– Focus on administrative requirements and impacts –
e.g., effect of rules of origin
– Enforcement and transparency mechanisms –
including dispute settlement
• Disputes mean agreements are working/relevant to
citizens (enterprises, workers)
• A report on “The State of Arab Integration”?
– With private sector; by private sector/civil society