Economic research and trade policy analysis

This paper surveys a wide body of economic literature on the relationship between currencies and trade. Two main issues are investigated: the impact on international trade of exchange rate volatility and of currency misalignments. On average exchange rate volatility has a negative (even if not large) impact on trade flows. The extent of this effect depends on a number of factors including the existence of hedging instruments the structure of production and the degree of economic integration across countries. Exchange rate misalignments are predicted to have short-run effects in models with price rigidities but the exact impact depends on a number of features such as the pricing strategy of firms engaging in international trade and the importance of global production networks. This effect is predicted to disappear in the long-run unless some other distortion characterizes the economy. Empirical results confirm that short-run effects can exist but their size and persistence over time are not consistent across different studies.

This paper examines the background of Article 66.2 of the TRIPS Agreement the nature of this obligation on developed country Members that pertains to the promotion of technology transfer to LDC Members and how it is being implemented and how such implementation is being monitored in the TRIPS Council.

This paper quantifies the extent of preferential trade as a share of total world trade in different regions of the world and for two periods. Results show that: i) preferential trade represented 40% of world trade in the period 1988-1992 and it slightly increased to 42% during the period 1993-1997; ii) during the second period agricultural products generally benefited more from the existence of preferential trade agreements than industrial products (maybe due to GATT-exemption); iii) the regional distribution of preferential trade is relatively uneven with a significant share of preferential trade in Western Europe (around 70 per cent) relatively low values in the Western Hemisphere (around 25 per cent) very low shares in Asia and Oceania (around 4 per cent) and average values in the rest-of-the-world (Eastern Europe and Africa); iv) the largest increase in shares of preferential trade between the two periods has occurred in the Western Hemisphere and in Eastern-Europe and Africa; v) at the country level there is an inverted-u-shape relationship between the share of preferential trade and the size and GDP per capita of individual countries; vi) countries which are highly open to trade tend to have a larger share of preferential trade on total trade in the period 1993-1997 suggesting that preferential and non-preferential trade can be seen as complements.

This paper reviews the main developments of trade and related policies and measures in the Asia and Pacific region during the 30 years since establishment in 1989 of the Trade Policy Review Mechanism (TPRM). The objectives of the TPRM include facilitating the smooth functioning of the multilateral trading system by enhancing the transparency of WTO Members' trade policies.

Competition agency guidelines policy statements and related advocacy are an important vehicle for policy expression and the guidance of firms across the full spectrum of anti-competitive practices and market conduct.

The WTO Secretariat has published an indicative list compiling information on the critical inputs for the manufacturing distributing and administering of COVID-19 vaccines. The list was jointly produced with the Asian Development Bank the Organisation for Economic Cooperation and Development the World Customs Organization some COVID-19 vaccine manufacturers researchers Chad Bown and Chris Rogers the Coalition for Epidemic Preparedness Innovations and DHL.

The paper studies empirically the fiscal policy instruments by which governments try to influence election outcomes in 24 developing countries for the 1973-1992 period. The study finds that the main vehicle for expansionary fiscal policies around elections is increasing public expenditure rather than lowering taxes and public investment cycles seem particularly prominent. Institutional mechanisms which constrain discretionary expenditure policies and which strengthen fiscal control are therefore worthwhile considering to prevent opportunistic policy making around elections.

The GATS does not offer a definition of "services" but services need to be identified and classified for the operation of the Agreement especially for the scheduling of specific commitments on market access and national treatment. There is no obligation on WTO Members to use any particular classification system in undertaking commitments. Nevertheless an informal document produced for the services negotiation during the Uruguay Round the Services Sectoral Classification List (W/120) was used and continues to be used as the principal guiding classification system not only in the WTO but also in bilateral and plurilateral services trade negotiations outside of the WTO. WTO jurisprudence has also noted the role of W/120 in the determination of sectoral coverage of GATS commitments. However services classification does not receive enough attention it deserves. This paper attempts to make contribution by providing an overview of services classification and highlighting its relevance to both trade negotiations and WTO dispute settlement. It consists of four sections. Section I reviews how a services classification system was introduced into the multilateral trading system and describes the main features of W120. Section II takes a closer look at some aspects of the classification system drawing attention to challenges in its application which arise from inter alia services with multiple end-uses overlaps between sectors and the issue of "new services". Section III considers the implications of classification on GATS commitments by examining a number of WTO dispute settlement cases. Section IV concludes. In conclusion the paper underlines the importance of services classification in assisting governments in clearly and accurately undertaking commitments. It also notes that WTO Members have taken or suggested various pragmatic approaches to addressing challenges in the application of the current services classification system. The proposed approaches again highlight the role of classification in ensuring the clarity certainty and predictability of specific commitments in services.

This paper studies the factors of comparative advantage within global value chains relying on a framework where comparative advantage is measured through the interaction of country and industry characteristics.

This paper analyzes the risks of preference erosion arising from MFN trade liberalization in manufactured products. It focuses on developing countries that receive non-reciprocal preferences in the markets of United States EU Japan Canada and Australia. The paper estimates preference margins as the difference between non-reciprocal preferential rates received by individual countries and the best available (MFN or better-than-MFN) treatment received on average by all other suppliers. Most previous work on this subject has compared the preferential rates for individual countries with MFN rates alone which the paper found to have the effect of over-stating the margin at risk from erosion following MFN reductions. The paper also considers the effect of less than full utilization of preference margins by beneficiaries but a lack of data prevented the inclusion of this additional moderating factor relating to erosion risk. The paper finds that developing countries as a whole do not loose from preference erosion following MFN liberalization although significant gains and losses underlie the estimate of the average. Almost all least-developed countries either lose from preference erosion or are unaffected by it because their exports are already largely MFN duty-free. A large number of LDCs are in the latter group. The main sectors where preference erosion occurs are textiles fish and fish products leather and leather products electrical machinery and wood and wood products. As regards trade solutions to preference erosion options are somewhat limited. Improved utilization rates may help certain countries but certainly do not offer a generalized solution. Limited scope exists for expanding the coverage of preference schemes within the destination markets considered in the paper. Other destination markets might offer some prospect but these are limited by the fact that the markets studied dominate the trade flows of the beneficiary countries.

This Working Paper contains some observations concerning the evolution of trade and trade-related policies in the Asia-Pacific region since the establishment in 1989 of the Trade Policy Review Mechanism (TPRM) whose goal is to improve the transparency of these policies. It also draws some lessons from the Reviews undertaken. In particular the Paper examines how reforms either unilateral or in connection with bilateral regional or multilateral trade agreements can be greatly facilitated by transparency including cost-benefit (C-B) analyses of policies and measures that take full account not just of the interests of domestic producers but also those of other groups including exporters and domestic consumers. While high quality transparency is not cheap the costs of achieving it pale in comparison with the financial assistance involved and efficiency losses associated with such assistance. Trade Policy Reviews (TPRs) throw light not only on measures that appear to contravene WTO rules although that is not their purpose; more importantly they identify measures not seemingly covered by WTO rules which can nonetheless have economic effects equivalent to measures that are subject to these rules. One of the main lessons from these TPRs is that impediments to economic development are largely homegrown. Consequently unilateral structural reform of which liberalization of both trade and foreign direct investment (FDI) has been an integral part is of paramount importance. By fostering transparency particularly evaluating the effectiveness of policies and measures in achieving their objectives and their overall impacts (intended or unintended) on the economy the TPRM can be a catalyst for unilateral reform including liberalization of trade and FDI. Although the latter has received added impetus from multilateral liberalization under the auspices of the GATT/WTO the stalling of negotiations in connection with the Doha Development Agenda (DDA) should not preclude further unilateral liberalization. By contrast the benefits of preferential trade agreements are far from obvious notwithstanding their proliferation during the past decade throughout the Asia-Pacific region here few governments have subjected these agreements to rigorous cost-benefit analysis. Economies in the Asia-Pacific region especially East Asia have been much more successful than those in other regions in achieving sustained fast growth and thereby raising living standards and reducing poverty. This success can be attributed not so much to transparency which is largely lacking but to inter alia their broad outward-looking development strategy. This strategy has involved in particular an increasingly high degree of integration into the global economy with heavy reliance on growth of manufactured exports high rates of national saving to finance high rates of domestic investment including public investment in physical and social infrastructure (notably education and health) supplemented by FDI (as well as maintenance of macroeconomic stability reliance on a functioning market system to allocate resources and committed capable and credible governments). However this development strategy has left growth very heavily dependent on domestic investment and exports which dropped sharply in the wake of the global financial crisis that erupted in 2008. This and resulting current account imbalances and consequent trade tension has prompted a rethink in a number of East Asian economies of their development strategies. As a consequence China Chinese Taipei Korea and Malaysia for example are now attempting to wean their economies off investment and exports and give freer rein to domestic consumption. As circumstances (including comparative advantage) change and global resources become increasingly scarce policies need to be continually reviewed in order to ensure that second-best measures are replaced by more cost-effectiveness ones. As improved productivity is the key to sustained development in the long run policies need to be adapted to ensure that they facilitate rather than inhibit the efficient re-allocation of resources by markets in accordance with evolving comparative advantage. Reform needs to be ongoing therefore. Transparency builds support for and thus paves the way for such reform.

Regional trade agreements (RTAs) have become an indelible feature of the international trading landscape. Most if not all RTAs contain provisions that establish procedures for resolving disputes among their signatory members. Yet the design and functioning of these dispute settlement mechanisms (DSMs) and more specifically how they differ from the WTO dispute settlement system remain relatively unexplored. Existing academic literature has primarily focused on the narrow issue of jurisdictional conflict between DSMs of RTAs and the WTO dispute settlement system. Literature mapping out and classifying systematically the DSMs of RTAs is more limited. This research paper goes beyond considering the issue of jurisdictional conflict between the multilateral and "regional" regimes. We map out the DSMs in RTAs that have been notified to the WTO and were in force at the end of 2012 and consider a typology of these DSMs based on their nature and design. We also use the data obtained from our mapping exercise in two ways. First we identify trends and patterns of use either regionally or by individual countries of the different types of DSMs in RTAs. Trends are analysed in relation to five key factors: (i) evolution over time (ii) level of economic development (iii) regional characteristics (iv) level of integration (partial scope agreement free trade agreement or customs union) and (v) configuration (bilateral or plurilateral). Second we undertake a "nuts and bolts" analysis of the DSMs of RTAs by examining their approach to various issues in international dispute settlement. Our aim is to draw conclusions about the extent to which the predominant type of DSM in RTAs has features that are different from those of the WTO dispute settlement system.

We examine the impact of banking crises on the duration of trade relations. We also investigate the effect of product-level characteristics such as the size of exports and exporting experience and of sector-level financial dependence variables on the time to recover after a banking crisis. Using highly disaggregated US import data from 157 countries between 1996 and 2009 we first provide evidence that banking crises negatively affect the survival of trade relations. On average the occurrence of a banking crisis decreases the rate of survival of trade relations by 13 percent. Moreover we find that both the size of exports and exporting experience matter for recovery of trade relations after banking crises. Sectoral financial dependence has an experience-specific effect. Relations with more experience recover faster in financially dependent sectors. There is instead no clear evidence indicating effects of size heterogeneity neither in financially dependent sectors nor in non-financially dependent ones. The results are robust and consistent across alternative econometric models.