Multilateral,Regional and Bilateral Trade‐Policy Options for the United States and Japan

We have used the Michigan Model of World Production and Trade to simulate the economic effects on the United States, Japan, and other major trading countries/regions of the Doha Round of WTO multilateral trade negotiations and a variety of regional/bilateral free trade agreements (FTAs) involving the United States and Japan. We estimate that an assumed reduction of post‐Uruguay Round tariffs and other barriers on agricultural and industrial products and services by 33 per cent in the Doha Round would increase world welfare by $686.4 billion, with gains of $164.0 billion for the United States, $132.6 billion for Japan, and significant gains for all other industrialised and developing countries/regions. If there were global free trade with all post‐Uruguay Round trade barriers completely removed, world welfare would increase by $2.1 trillion, with gains of $497.0 billion (5.5 per cent of GNP) for the United States and $401.9 billion (6.2 per cent of GNP) for Japan. Regional agreements such as an APEC FTA, an ASEAN Plus 3 FTA, and a Western Hemisphere FTA would increase global and member country welfare but much less so than the Doha multilateral trade round would. Separate bilateral FTAs involving Japan with Singapore, Mexico, Chile and Korea, and the United States with Chile, Singapore and Korea would have positive, though generally small, welfare effects on the partner countries, but potentially disruptive sectoral employment shifts in some countries. There would be trade diversion and detrimental welfare effects on some non‐member countries for both the regional and bilateral FTAs analysed. The welfare gains from multilateral trade liberalisation are therefore considerably greater than the gains from preferential trading arrangements and more uniformly positive for all countries.     

Bilateral ‘WTO‐Plus’ Free Trade Agreements: The WTO Trade Policy Review of Singapore 2004

The World Trade Organisation's 2004 Trade Policy Review of Singapore (WTO‐TPR Singapore 2004) depicts the small and outward‐oriented economy as one of the most open countries to international trade and investment. The review highlights the benefits of the outward‐oriented strategy that has enabled the Singapore economy to weather recent external shocks such as the Asian financial crisis to the SARS and to the recent unfavourable conditions in the Middle East. In particular, the report commended Singapore's efforts on its liberalisation of the services sector and its economic benefits to consumers and global trade. However, the WTO‐TPR Singapore 2004 highlights several key areas of concerns: (a) the commitment to multilateral agreements with the rising number of bilateral free trade agreements signed by Singapore and (b) the lack of growth of total factor productivity, a key indicator for long‐run efficiency of the economy. The paper addresses the above key concerns raised in the WTO's TPR of Singapore in terms of its commitment to global trade in terms of WTO‐plus bilateral FTAs, which intends to support a multilateral trading system, and its overall industrial strategies to raise its competitiveness.     

Failure of the WTO Ministerial Conference at Cancun: Reasons and Remedies

This paper first discusses four general developments in the world trading system that have made it increasingly difficult in recent years for nations to reach multilateral agreements aimed at further liberalising international trade, namely: (1) the increased technical complexity and disruptive domestic economic effects of the issues being negotiated; (2) the shift in relative bargaining power among the negotiating participants in favour of the developing countries; (3) the proliferation of bilateral and regional free trade agreements in contrast to multilateral agreements, and (4) the increased emphasis on achieving ‘fairness’ rather than reciprocity in trade liberalisation. Differences in negotiating positions of the participants on the major specific negotiating subjects of the Doha Round, such as new rules covering investment, competition policy, government procurement policy, and trade facilitation, agricultural liberalisation, changes in anti‐dumping and countervailing duty rules, the tariff‐cutting rule to increase access to non‐agricultural markets, and further liberalisation in the services sector, are then considered as well as the likelihood of reaching compromises on these matters. Finally, the possibilities of reaching acceptable balances of concessions and gains are considered for such key participants as the Group of 20 developing countries, the European Union, the United States and other industrial countries.     

Computational Analysis of the Menu of US‐Japan Trade Policies

We have used the Michigan Computable General Equilibrium (CGE) Model of World Production and Trade to calculate the aggregate welfare and sectoral employment effects of the menu of US‐Japan trade policies. The menu of policies encompasses the various preferential US and Japan bilateral and regional free trade agreements (FTAs) negotiated and in process, unilateral removal of existing trade barriers and global (multilateral) free trade. The welfare impacts of the FTAs on the United States and Japan are shown to be rather small in absolute and relative terms. The sectoral employment effects are also generally small but vary across the individual sectors depending on the patterns of the bilateral liberalisation. The welfare effects on the FTA partner countries are mostly positive though generally small, but there are some indications of potentially disruptive employment shifts in some partner countries. There are indications of trade diversion and detrimental welfare effects on non‐member countries for some of the FTAs analysed. In comparison to the welfare gains from the US and Japan bilateral FTAs, the gains from both unilateral trade liberalisation by the United States, Japan and the FTA partners, and from global (multilateral) free trade are shown to be rather substantial and more uniformly positive for all countries in the global trading system. The US and Japan FTAs are based on ‘hub’ and ‘spoke’ arrangements. We show that the spokes emanate out in different and often overlapping directions, suggesting that the complex of bilateral FTAs may create distortions of the global trading system.     

Economic Implications of WTO Negotiations on Non‐agricultural Market Access

The economic implications of current WTO negotiations are likely to be far reaching. The World Bank and UNCTAD estimate annual global gains in agriculture and non‐agricultural products (including fish) of about $70−150 billion each under various scenarios and technical assumptions. Liberalising trade in services could be even more important, especially if agreement were reached to facilitate the temporary movement of labour (Mode 4 under the General Agreement on Trade in Services, GATS). Some qualifications, however, are in order. First, gains are likely to be spread unevenly across countries and across sectors; and, second, short‐term adjustment costs might precede long‐term gains. Much depends on how ambitious liberalisation is and on policies to facilitate adjustment. This paper examines the Doha mandate in non‐agricultural market access (NAMA) and the current state of the WTO negotiations, in particular some key proposals being considered at the December 2005 Ministerial Meeting in Hong Kong. We analyse various scenarios and their implications for trade, welfare, output, employment, revenues and preferences, as well as the distributional effects across countries and sectors. We note possible adjustment problems related to balance of payments and structural adjustment, as well as revenue and preference losses. These suggest the need for ‘aid for trade’ to help developing countries realise gains possible from WTO negotiations.     

A South–South Survival Strategy: The Potential for Trade among Developing Countries

Trade between developing countries, or South–South trade, has been growing rapidly in recent years following reductions in tariff barriers. However, significant barriers remain, and there is currently reluctance in many developing countries to undertake further reductions, with a preference instead for focusing on opening up access to developed country markets, or maintaining the status quo given that multilateral liberalisation may result in the erosion of preferential access enjoyed by some developing countries. This emphasis on Northern markets represents a missed opportunity for developing countries. To assess this we compare the potential effects of the removal of barriers on South–South trade with the gains from developed country liberalisation and from regional free trade areas within Africa, Asia and Latin America. A general equilibrium model, the Global Trade Analysis Project (GTAP) model, containing information on preferential bilateral tariffs, is used to estimate the impacts. The results indicate that the opening up of Northern markets would provide annual welfare gains to developing countries of $22 billion. However, the removal of South–South barriers has the potential to generate gains 40 per cent larger. The results imply that giving greater emphasis to removing barriers between as well as within continents could prove a successful Southern survival strategy.     

自由贸易协议谈判中的国际劳工标准问题

国际劳工标准是一种规范全球范围劳工事务的制度。经济全球化导致劳工标准问题的重要性日益凸现,发达国家采取了将劳工标准与贸易挂钩的方式推进劳工标准的实施,并在地区层次和双边层次取得了重大进展,但在全球层次的谈判则陷入"囚徒困境"。这是发达国家和发展中国家在劳工标准领域博弈的结果。中国在劳工标准领域也面临着巨大的挑战。     

Trade in Educational Services: Trends and Emerging Issues

This paper examines the trends and emerging issues in trade in educational services. It provides rough estimates of the size of the international market in educational services drawing on the limited data available in services trade statistics and data on foreign students in tertiary education in OECD countries. It outlines the current commitments for trade in educational services under the General Agreement on Trade in Services (GATS). It also reviews the implications of the on‐going GATS negotiations for further multilateral trade liberalisation in this sector. It points out that OECD countries have been noticeably reluctant to make proposals for further liberalisation of trade in educational services. One reason for this is the concern in many countries about the potential threats posed to cultural values and national traditions by growing trade liberalisation in educational services. Finally, the paper reviews some of the main policy issues arising from trade in educational services.     

Does International Trade Cause Economic Growth? A Survey

This study surveys the literature on the relationship between international trade and economic growth, and succinctly reviews the role of GATT/WTO in fostering free trade. Most studies support the gains of trade and recognise the substantive contributions of GATT/WTO in fostering free trade; the evidence is, however, not ubiquitously unambiguous. The macroeconomic evidence provides a dominant support for the positive and significant effects of trade on output and growth, while the microeconomic evidence lends larger support to the exogenous effects of productivity on trade, as compared to the effects of trade on productivity. The GATT/WTO remains surrounded by barriers to trade and avowed preferences for preferential trade agreements. The strength of the argument for the gains of trade needs to be evaluated in juxtaposition with several methodological and measurement issues that surround the trade‐growth empirics. Most studies focus on partial equilibrium analysis of trade policy and ignore the general equilibrium aspects of macroeconomic policy. It is difficult to disentangle the effects of trade policies from those of other macroeconomic policies and unequivocally interpret the observed correlations between trade policies and economic growth. Trade is one of the several catalysts of productivity and growth and hence its contribution is contingent on its weight in economic activity.     

Regionalisation of Trade and Regionalism in Trade Policy – Patterns, Strategies and Impact

Against the backdrop of the stalled Doha Round the emphasis in the trade policies of nations and country groupings is widely expected to shift further away from multilateral trade negotiations and towards the conclusion of preferential trade agreements (PTAs). This article sketches the network of international trade flows and shows how it has increasingly been matched by a worldwide web of PTAs, the nature of which has changed over time. PTAs are discussed in their regional context and assessed with a view to their economic impact and their implications for the multilateral trading system.     

Bilateral versus Multilateral Trade and Investment Liberalisation

To assess the welfare effects of bilateral versus multilateral trade and/or investment liberalisation in general equilibrium, we set up a three‐country and three‐factor knowledge‐capital model of trade and multinational activity. Numerical simulation results indicate that multilateral liberalisation tends to dominate bilateral liberalisation in welfare terms. A transition economy tends to prefer bilateral over multilateral liberalisation to avoid plant relocation. For similar reasons, a developed country may prefer bilateral over multilateral liberalisation, if the other economies exhibit big relative factor endowment differences.     

Regionalism Within Multilateralism: The WTO Trade Policy Review of Canada

The World Trade Organisation published a Trade Policy Review of Canada in 2003. In this paper, we discuss the WTO Review and augment the discussion by presenting original data and reviewing the empirical literature. The WTO concludes that Canada's trade regime is open and transparent but maintains barriers in a few important sectors. We subject this claim to empirical scrutiny, comparing Canada's actual imports to a multilateral benchmark based on the gravity equation. We show that Canada imports about what should be expected given the size of its economy and its location. In a second benchmarking exercise, we show that Canada's anti‐dumping initiations are in proportion to its imports and that Canada's exports are targeted less by other countries’ anti‐dumping investigations than what might be expected based on Canadian export levels. Like many other countries, Canada has pursued trade liberalisation through the World Trade Organisation while simultaneously signing multiple regional trade agreements. Our summary of the recent literature indicates that Canada's regional trade agreements have generated more trade creation than trade diversion. Canada has also spurred imports from the least developed countries by unilaterally eliminating tariffs and quota barriers on 48 of the world's poorest countries in January 2003. We also discuss Canadian progress in opening its agriculture and clothing industries. Overall, we conclude that Canada appears committed to advancing globalisation through multilateral trade liberalisation supplemented by unilateral and bilateral initiatives.     

Movement of Natural Persons and the GATS

Trade in services has expanded considerably in recent years, However, numerous regulatory barriers constrain such trade, especially when it involves the temporary cross-border movement of labour, also termed, movement of natural persons. Many developing countries have the potential to export services through cross-border movement of professional, semi-skilled and unskilled labour. The General Agreement on Trade in Services (GATS) seeks to progressively liberalise trade in services via different modes of supply, including the movement of natural persons. Under the first round of GATS negotiations, member countries have made sectoral and cross-sectoral commitments to promote trade in services for these different modes of supply. This paper discusses the significance of and various constraints to the movement of natural persons in service trade. It also assesses the nature of liberalisation that has occurred in this mode of supply under GATS and notes the limited progress made in this regard. In view of the ongoing round of GATS negotiations, it suggests ways to stregthen the overall GATS framework through greater transparency and specificity in the commitments on movement of natural persons and through the introduction of various multilateral disciplines.     

Tariff Liberalisation and the Growth of World Trade: A Comparative Historical Analysis of the Multilateral Trading System

The aims of this study are to assess the relationship between tariff barriers and world trade growth from a comparative and historical perspective, and to derive some useful indications for evaluating the effectiveness of the current multilateral trading system for promoting world trade. The novelty of this work is the complex reconstruction of a historical tariffs and trade series for the period 1870–2000, for 23 countries; this constitutes a good proxy for world trade (accounting for over 60 per cent) in this period. The effect of tariff liberalisation on trade growth is analysed empirically using panel data and time series. The results, while confirming the existence of a world level long‐term relationship between tariff reductions and trade growth, demonstrate how this substantial and significant relationship pre‐World War II gradually diminished in importance and significance after 1950. This result does not conflict with the key role of the General Agreement on Tariffs and Trade/World Trade Organization system in trade liberalisation; however, it underlines the importance of a formalised multilateral trading system, not so much for tariff liberalisation, but for building a virtuous process of international coordination of trade policies and ensuring fuller participation in world trade.     

中国入世10周年与全球多边贸易体制的变化

本文回顾了中国加入世界贸易组织10年来的改革与发展历程,指出中国对全球多边贸易体制的主要贡献在于推动国际经贸发展、反对贸易保护主义、忠实履行多边贸易规则、努力协调多边贸易谈判、积极参与多边贸易机制建设以及切实维护发展中国家利益。10年来,多边贸易体制的变迁主要表现为力量结构、议题结构及外部透明度的变化。展望未来,多边贸易体制的改革应重在制度建设与反对贸易保护主义。基于加入世界贸易组织以来的实践经验,本文得出了我国参与全球经济治理的几点启示。     

Trade Liberalisation: The Effects of Free Trade Agreements on the Competitiveness of the Dairy Sector

In recent years, preferential trade agreements (PTAs), free trade agreements (FTAs) in particular, have proliferated while WTO negotiations have stagnated. This paper contributes to the literature on trade liberalisation and the agricultural sector by analysing the effects of FTAs on the competitiveness of the dairy sector across 76 countries and over a 20‐year period from 1990 to 2009. With a longitudinal econometric model, the results demonstrate that when a country has a revealed comparative advantage in the dairy sector, FTAs positively influence several indicators of competitiveness in the dairy sector, such as production, market share and trade balance. The results also indicate that multilateral FTAs are more beneficial than bilateral FTAs. There is strong empirical evidence that FTAs are more beneficial to developed countries than to developing countries. There is no statistical evidence to support the hypothesis about a relationship between FTAs and farm‐gate price.     

Negotiating Effectively: Justice in International Environmental Negotiations

Are negotiators who rely on justice principles in the process of bargaining and drafting agreements more—or rather less—effective than others? This article examines whether adherence to principles of procedural and distributive justice in negotiations contributes to more effective results, with a focus on international environmental negotiations. Effectiveness is defined in terms of the extent of agreement (among parties and on issues), time to reach agreement, and comprehensiveness of the agreement. A set of hypotheses is evaluated on a selection of bilateral and multilateral cases of environmental negotiations, using statistical methods. The analyses reveal that adherence to principles of procedural justice contributes to more effective results in multilateral environmental negotiations. These principles are found to hinder effectiveness in the bilateral cases. On the other hand, adherence to principles of distributive justice is only moderately related to effectiveness in both the bilateral and multilateral cases.     

Does the Quality of Investment Protection Affect FDI Flows to Developing Countries? Evidence from Latin America

Studies on the impact of international investment agreements (IIAs), including bilateral investment treaties (BITs), on foreign direct investment (FDI) inflows have been inconclusive. This paper contributes to the debate about the effectiveness of IIAs using an original database that differentiates between investment agreements according to the quality of investor protection, and which covers a wide variety of trade and investment agreements signed and ratified in the Americas. We find evidence that in the least likely case of south–south FDI flows, high‐quality international investment treaties have a demonstrable effect on foreign direct investment inflows. Moreover, international investment agreements appear to be most effective in a context of deeper economic integration. That is, they work better when they provide higher quality protection to investors and when they are combined with other preferential economic integration agreements, such as trade agreements.     

Preferential trading arrangements as strategic positioning

We analyze a three-country model of trade negotiations in which countries can form bilateral free trade areas, bilateral customs unions or a trilateral preferential trading arrangement, and can continue negotiating after reaching an agreement. In contrast to the literature on multilateral bargaining, the set of agreements can form a (nonpartitional) network, while in contrast to the network literature, players can reach multilateral agreements. Patient enough countries only reach bilateral agreements if insiders gain more than outsiders, which allows them to manipulate the status quo in subsequent negotiations. However, a hub and spoke pattern may then emerge, and insiders then dissipate the advantages of strategic positioning. We also use variants on the model to explain why a US commitment not to bargain bilaterally sustained progress at GATT negotiations, and the rarity of open access preferential trading arrangements.