About the WTO

We capitalize on the latest developments in the empirical structural gravity literature to revisit the question of whether and how much does GATT/WTO membership affect international trade. We are the first to capture the non-discriminatory nature of GATT/WTO commitments by measuring the effects of GATT/WTO membership on international trade relative to domestic sales.

This paper gives insights into the possible trade creating effects of service trade liberalization via Mode 4. In particular we expect that temporary movements of persons like permanent movements have the potential to reduce transaction costs for merchandise trade between home and host country. Exploiting data on H-1B beneficiaries from different origins in the United States and using a gravity model of trade we find significantly positive effects of temporary movements of persons on bilateral merchandise trade. In addition to this the paper provides insights into the determinants of temporary movements of persons.

The Cotonou Agreement introduces new fundamental principles with respect to trade between the European Union and African Caribbean and Pacific countries relative to the Lomé Convention: in particular non-reciprocal preferential market access for ACP economies will only last until 1 January 2008. After that date it will be replaced by a string of Economic Partnership Agreements meant to progressively liberalise trade in a reciprocal way. The progressive removal of barriers to trade is expected to result in the establishment of Free Trade Agreements between the EU and ACP regional groups in accordance with the relevant WTO rules and help further existing regional integration efforts among the ACP. In this paper an applied general equilibrium model (15 regions 9 sectors) is used to simulate the impact of EPAs for countries of the Southern African Development Community. The standard Global Trade Analysis Project (GTAP) model has been extended to include the elimination of textile quotas EU enlargement to 25 members as well as tax revenue sharing and a common external tariff among Southern African Customs Union countries. A number of comparisons between different scenarios are undertaken in particular: (i) the EPA scenario is compared to the multilateral liberalization scenario; (ii) SADC liberalization with the EU only is compared to a scenario with simultaneous regional integration among African economies and to the case of the EU also signing an FTA with Mercosur; and (iii) a complete reduction of import barriers is contrasted with partial liberalization (i.e. only 50 per cent tariff reductions in agriculture) and with full trade liberalization that includes the elimination of subsidies. The issue of tariff revenue loss is also addressed and the required tax replacement is calculated. Selected experiments are re-run under an unemployment closure. Simulation results show that EPAs with the EU are welfare-enhancing for SADC overall leading also to substantive increases in real GDP. For most countries further gains may arise from intra-SADC liberalization. The possibility of the EU entering an FTA with other countries such as Mercosur reduces estimated gains but they still remain largely positive. Similarly estimated gains need to be revised downwards if agriculture liberalization is not as far reaching as a reduction of import barriers for manufactures. At the sectoral level the largest expansions in SADC economies take place in the animal agriculture and processed food sectors while manufacturing becomes comparatively less attractive following EU-SADC liberalization. Interestingly multilateral liberalization would instead foster some of the manufacturing sectors (textile and clothing and light manufacturing). Results also show the need for the SACU tariff pooling formula to be adjusted to reflect new import patterns as tariffs are removed.

Decision making in the WTO has become ever more difficult as the number of members increases and the range of issues tackled broadens. This paper looks at reasons why aspects of decision-making might be changed and discusses a number of potential pitfalls that change would have to avoid such as a dilution of commitments and fragmentation of the multilateral trading system. It then takes a detailed look at the notion of ‘critical mass’ decision-making. It argues for this approach under certain conditions as it would: i) allow for the emergence of a more progressive and responsive WTO agenda; ii) blunt the diversion of trade cooperation initiatives to RTAs; iii) allow more efficient differentiation in the levels of rights and obligations among a community of highly diverse economies; and iv) promote greater efficiency in multilaterally-based negotiations on trade rules and perhaps sectoral market access agreements.

I develop a novel theory of GATT/WTO negotiations. This theory provides new answers to two prominent questions in the trade policy literature: first what is the purpose of trade negotiations? And second what is the role played by the fundamental GATT/WTO principles of reciprocity and nondiscrimination? Relative to the standard terms-of-trade theory of GATT/WTO negotiations my theory makes two main contributions: first it builds on a ‘new trade’ model rather than the neoclassical trade model and therefore sheds new light on GATT/WTO negotiations between similar countries. Second it relies on a production relocation externality rather than the terms-of-trade externality and therefore demonstrates that the terms-of-trade externality is not the only trade policy externality which can be internalized in GATT/WTO negotiations.

The WTO's Dispute Settlement Mechanism (DSM) has been hailed as a fundamental aspect of the Multilateral Trading System for developing countries. At the same time developing countries face many challenges to ensure their effective participation in the mechanism. This paper presents statistical evidence of how Latin-American countries have been very active in their use of the DSM especially when their use of the mechanism is compared to their participation in world trade. This paper also analyses why to a large extent Latin American countries have overcome the challenges of participating in the DSM; and have done so by coming up with innovative and creative solutions without deviating from the guidelines established by WTO rules.

In this report we first give a brief overview of trade in seafood and seafood production. We then review the basic bioeconomic theory of the fishery and pinpoint why fisheries are different from most other industries. We next review the theoretical literature on trade and renewable resources that shows how unconventional outcomes from trade liberalization can emerge. Given this background we discuss the most important policy issues in relation to seafood and trade including sections on managing the global commons and domestic trends in management. In the final section we discuss specific issues that are germane to the WTO and its rules.

This paper explores the role that quality of infrastructure has on a country's trade performance estimating a gravity model that incorporates bilateral tariffs and a number of indicators for the quality of infrastructure. The paper looks at the impact of the quality of infrastructure (road airport port and telecommunication and the time required for customs clearance) on total bilateral trade and on trade in the automotive clothing and textile sectors. In order to obtain unbiased estimators multilateral resistances for tariffs and remoteness are introduced in the gravity equation. Moreover the robustness of the results is tested by estimating a fixed-effect model where bilateral indexes of the quality of infrastructure are included. The results can be summarised in four main findings: (i) bilateral tariffs generally neglected in gravity regression of bilateral flows have a significant negative impact on trade; (ii) quality of infrastructure is an important determinant of trade performance; (iii) port efficiency appears to have the largest impact on trade among all indicators of infrastructure; (iv) timeliness and access to telecommunication are relatively more important for export competitiveness in the clothing and automotive sector respectively.

This paper examines the history of regional integration in Africa what has motivated it the different initiatives that African governments have pursued the nature of the integration process and the current challenges. Regional integration is seen as a rational response to the difficulties faced by a continent with many small national markets and landlocked countries. As a result African governments have concluded a very large number of regional integration arrangements several of which have significant membership overlap. While characterized by ambitious targets they have a dismally poor implementation record. Part of the problem may lie in the paradigm of linear market integration marked by stepwise integration of goods labour and capital markets and eventually monetary and fiscal integration. This tends to focus on border measures such as the import tariff. However supply-side constraints may be more important. A deeper integration agenda that includes services investment competition policy and other behind-the-border issues can address the national-level supply-side constraints far more effectively than an agenda which focuses almost exclusively on border measures.

This paper looks at the various trade policies WTO Members have put into place to foster women’s economic empowerment. The analysis below is based on the information provided by WTO Members as part of their Trade Policy Review (TPRs) process from 2014 to 2018. Reports from the WTO Secretariat governments as well as the question and answer sessions were examined for the purpose of this paper.

This paper is the first in the literature to examine the impact of natural disasters on trade in services. We measure the magnitude of natural disasters using two distinct sets of variables and quantify the effect of natural disasters on trade in services using a structural gravity model.

We exploit a decomposition of gross trade flows into their value added components to reassess the relationship between increased imports from China and manufacturing jobs in US local labour markets following the seminal paper of Autor Dorn and Hanson (2013 ADH).

This paper analyses the possible gains from regional and multilateral liberalization of financial services trade for African countries taking into account the implications of such liberalization for financial regulation and capital account liberalization. It also describes existing efforts to integrate financial markets within four African regions (WAEMU CEMAC SADC and COMESA) and discusses the existing GATS commitments of the relevant countries with respect to financial services. Although the regions differ significantly there is scope for further regional integration in all of them. Significant scope also exists for further multilateral liberalization of financial services in particular with respect to Mode 3.

The geography of global value chains (GVCs) depends crucially on trade costs between countries hosting various stages of production. Some stages might be more sensitive to trade costs than others. In this paper we exploit a value-added decomposition of bilateral trade flows to distinguish low value-added GVC trade typically associated with production stages such as assembly from high value-added GVC trade associated with stages such as R&D and design. We test the hypothesis that low value-added stages will more easily reroute given changes in trade costs between importing and exporting countries than high value-added stages.

Tariff water –the difference between bound and applied duties– provides relevant information on domestic trade policy and WTO trade negotiations. This paper examines the general and sectoral tariff structure of 120 economies using exploratory data analysis.

The paper reviews a number of issues related to the use of currencies in international trade more than one decade after the introduction of the euro and shortly after steps taken by the Chinese authorities to liberalize the use of the RMB in off-shore markets. Trade is an important factor in establishing a currency as an international currency notably by fulfilling the transaction/medium of exchange and unit of account motives of currency demand. A well prepared liberalization of currency use for international trade and foreign direct investment transactions can even be helpful in achieving the international investment and reserve currency status. While in the distant past the later was also linked to preponderance of a country in trade markets it is now linked to the prevalence of the currency in international financial transactions which supposes that the country in question engages at least partly in some liberalization of capital account transactions. This paper shows theoretical and practical reasons explaining the current dominance of the US dollar and the euro in the invoicing of international trade. There is little doubt though that in the medium-to-long term the RMB will become a major currency of settlement in international trade. This is not only the current direction of government policy but also that of markets as evidenced by the rapid expansion of off-shore trade payments in that currency. In the meantime though the US dollar and the euro are enjoying a nearduopoly as settlement and invoicing currencies in international trade. The stability of this duopoly is enhanced by a number of factors recently highlighted by economic analysis: coalescing "thick externalities" and scarcity of international currencies are useful to explain that until such time that RMB payments match at least the share of China in global trade the US dollar and of the euro will remain the main currencies in the invoicing and payment of international trade. Section 1 looks at the factors that determine the use of currencies in the invoicing and settlement of international trade. Section 2 looks at the actual reality of currency use for international trade flows and short-term prospects for the development of a possible alternative to the use of the US dollar and the euro (in particular in Asia) the RMB.

The creation of the General Agreement on Trade in Services (GATS) in the Uruguay Round and its entry into force in 1995 marked a new stage in the history of the multilateral system. It was motivated essentially by the rapid expansion of international services trade within an increasingly open environment in many countries. Given the peculiarities of services trade including the intangible nature of the products concerned and the need for direct contact between supplier and user in many cases the Agreement contains a variety of conceptual innovations including its extension to modes of supply beyond conventional cross-border trade (consumption abroad commercial presence and presence of natural persons) and its coverage and legitimization of various types of non-tariff restrictions. In turn the new concepts needed time to be absorbed by the ministries and agencies involved in services trade. Further the positive-list or bottom-up approach to scheduling trade commitments under the GATS meant that great flexibility was given to Members in selecting the sectors concerned and specifying the levels of access provided under individual modes. Thus not surprisingly the schedules that emerged from the Uruguay Round which still account for the majority of current commitments contain a variety of unclear or superfluous entries that may cause interpretation problems. Their solution could contribute significantly to the clarity and comparability of access obligations across sectors and WTO Members. The scheduling conventions agreed for the Doha Round thus provide specifically for the possibility of technical refinements that leave the substance of commitments unchanged. However not only was this possibility used more sparingly to date than might have been expected but additional flaws would be introduced if some current offers were to enter into effect. The following discussion with a focus on a particular group of entries (market access via commercial presence) tries to explain the scope for such refinements and develop a clearer picture of the areas where further action might be needed.

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.