WTO Working Papers

The plurilateral negotiations on a Trade in Services Agreement (TISA) have attracted much attention in trade policy circles. Policy and economic implications are intensely debated given the number and economic importance of participants. This paper aims to provide insights into the market access issues arising in such negotiations. Should TISA negotiations result in participants exchanging the best commitments they have so far undertaken in their preferential trade agreements (PTAs) – a reasonable starting point —, TISA market access commitments would go well beyond GATS commitments and services offers tabled in the Doha Round. While this would be in itself a significant outcome (especially in terms of predictability and stability), we also highlight, however, that the real economic benefits would be reduced by the fact that a number of participants have already exchanged significant concessions amongst themselves through bilateral PTAs. Further, and more importantly, exchanging 'best PTA' commitments would not meet the participants' most important export interests. These have often remained unaddressed in many of the previous bilateral negotiations or involve countries not currently participating in TISA. Addressing better these export interests would require going beyond an exchange of 'best PTA' commitments among TISA participants — with the more difficult policy and negotiating decisions that this implies — and/or seeking to expand the group of participants. We also discuss the different forms that such a plurilateral agreement may take vis-à-vis the WTO framework.

Economic projections for the world economy, particularly in relation to the construction of Computable General Equilibrium (CGE) baselines, are generally rather conservative and take scant account of the wide range of possible evolutions authorized by the underlying economic mechanisms considered. Against this background, we adopt an ‘open mind’ to the projection of world trade trajectories. Taking a 2035 horizon, we examine how world trade patterns will be shaped by the changing comparative advantages, demand, and capabilities of different regions. We combine a convergence model fitting three production factors (capital, labor and energy) and two factor-specific productivities, alongside a dynamic CGE model of the world economy calibrated to Economic projections for the world economy, particularly in relation to the construction of Computable General Equilibrium (CGE) baselines, are generally rather conservative and take scant account of the wide range of possible evolutions authorized by the underlying economic mechanisms considered. Against this background, we adopt an ‘open mind’ to the projection of world trade trajectories. Taking a 2035 horizon, we examine how world trade patterns will be shaped by the changing comparative advantages, demand, and capabilities of different regions. We combine a convergence model fitting three production factors (capital, labor and energy) and two factor-specific productivities, alongside a dynamic CGE model of the world economy calibrated to reproduce observed elasticity of trade to income. Each scenario involves three steps. First, we project growth at country level based on factor accumulation, educational attainment and efficiency gains, and discuss uncertainties related to our main drivers. Second, we impose this framework (demographics, gross domestic product, saving rates, factors and current account trajectories) on the CGE baseline. Third, we implement trade policy scenarios (tariffs as well as non-tariff measures in goods and services), in order to get factor allocation across sectors from the model as well as demand and trade patterns. We show that the impact of changing baselines is greater than the impact of a policy shock on the order of magnitude of changes in world trade patterns, which points to the need for care when designing CGE baselines. observed elasticity of trade to income. Each scenario involves three steps.

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.

This study surveys preferential rules of origin applied by 192 regional trade agreements (RTAs) covering trade in goods notified to the GATT/WTO up to 1 November 2010. It takes into account the preferential rules of origin that were notified to the WTO; whenever known and available, modifications to the original rules of origin have been updated. This study contains two basic features: a description of some key elements of preferential rules of origin in RTAs, followed by an attempt to provide a reality-check of how these rules affect actual trade. That is done by an ex-post examination of data on the use of RTAs' preferences and, in their absence, of their margins of preference (MOPs). While the raison d'être of preferential rules of origin is the avoidance of trade deflection, the practice in RTAs has diluted this objective and it would seem that preferential rules of origin are increasingly becoming an economic, political and trade instrument. In its descriptive part, the study identifies what seems to be a tendency to design stricter rules of origin, while detecting concomitantly the inclusion in modern preferential rules of origin of flexibilities that provide, through the rules of origin themselves, a preference beyond the lower tariff rate resulting from the preferential treatment and mechanisms that allow the integration of third-parties into preferential rules of origin regimes. The reality-check part of the study points to the fact that much beyond the coverage of RTAs, it is their effective implementation that poses a challenge to economic operators. Though data on the use of preferences is either not disclosed or inexistent, they are nevertheless available for some economies. On the basis of existing data of preference utilization, the analysis of the effects of rules of origin on preferential trade flows appears to give rise to a dual reality - namely a relatively high use of preferences in certain instances coexisting with preferences failing to attain their potential in other cases. As regards RTAs for which utilization rate is not available, the paper analysis preferential rules of origin from a MOPS perspective, assuming that MOPs of at least 5 percentage points would offset compliance costs and thus provide a stimulus to comply with rules of origin in order to benefit from preferences. The analysis, made for 68 out of 192 RTAs, do not allow any conclusion regarding that generally presented hypothesis. Finally, the paper briefly outlines some suggestions for further action, including the launching in the WTO of exploratory work on preferential rules of origin within an "open regionalism" scenario.

Without transparency, trade agreements are just words on paper. Transparency as disclosure allows economic actors and trading partners to see how rules are implanted; transparency in decision-making ensures fairness and peer review. In the first section of this paper, I discuss the logic of transparency in general and the motivation for its use in the trading system. Considerable information on WTO transparency mechanisms is available in the Minutes and annual reports of the various WTO bodies, and in the Director-General’s annual overview of the trading system, but comparative analysis is not easy. In the second section, therefore, I develop a framework in which different transparency mechanisms can be compared to each other using the metaphor of three generations in the evolution of transparency in the trading system as a means of explaining how transparency works in the WTO. For sunshine to work, at least two things must happen. Information must be made available, and Members have to use it. Probing the extent to which Members comply with their notification obligations, in the third section, and their efforts to improve the notification process, allow an assessment of their commitment to being transparent. In the fourth section I consider how WTO committees are used to ensure that Members are accountable for their commitments, including to notify. Since the committees differ, I use the metaphor of the great pyramid of the legal order to compare committees to each other. Assessment of whether these mechanisms work underpins observations in the conclusion on whether more sunshine is needed, and efforts underway to improve existing mechanisms.

This paper reviews a number of initiatives taken by public and private institutions aimed at minimizing the impact of the on-going crisis of the financial sector on its ability to supply trade finance to support trade at affordable rates. In doing so, it draws a few policy lessons. One of them is that a relatively stable segment of the financial industry is now regularly hit by the contagion of financial crises, with potentially very harmful spill-overs on global trade through a dry up of its financing. Specific policy measures to restore confidence in this otherwise safe market required a good level of coherence and dialogue between national governments and international and regional development organizations. Lessons from the Asian and Latin American financial crises of the late 1990's have been learned and academia provided input by developing understanding on a previously under-rated topic in the literature. Learning-by-doing and leadership have also been features of the policy response, which altogether had some successes. Still, longer-term challenges remain, such as addressing the structural gaps in the availability of trade finance in low-income countries - ad hoc programs have been designed to fill the gap between the perceived and actual risk of extending trade credit to traders in these countries. Moreover, regulation of the trade finance market needs to continue to take into account its low-risk character, the absence of leverage and its impact on development.

Rising current account and merchandise trade imbalances marked the years before the global financial and economic crisis. These imbalances either contributed to or precipitated the crisis and to the extent that they create systemic risks, it is desirable that they be reduced. There are many factors related to macroeconomic, structural, exchange rate and financial policies that contributed to the imbalances. The inability to manage these issues at the international level reflects the “coherence gap” in global governance. This paper examines the contribution that the WTO can make in its three areas of activities — negotiations, rule-making and dispute settlement — to deal with trade imbalances and with the main factors leading to them, including exchange rate misalignments. First, market opening efforts in services, including in the area of financial services, can reduce policy-related distortions and market imperfections in surplus countries that lead to the build-up of unsustainable imbalances. Second, in the context of a broad international effort to coordinate macroeconomic, exchange rate and structural policies to deal with the roots of imbalances (the first-best solution), there is a general efficiency argument that could be made for the use of WTO-triggered trade actions to enforce cooperative behaviour towards rebalancing. Absent this first-best response, trade rules alone would not provide an efficient instrument to compensate for the weaknesses in international co-operation in macroeconomic, exchange rate and structural policies.

This paper assembles detailed information about the intellectual property (IP) provisions contained in 194 active regional trade agreements (RTAs) that had been notified to the WTO by November 2010. IP provisions in RTAs have been the subject of much study and commentary. However, much of this work has focused on a relatively limited number of RTAs, with a concentration on parties with narrow geographical and economic profiles. The goal of the current study was to expand beyond the more commonly studied RTAs, to make an initial review of the full array of RTAs notified to the WTO, and in that way to lay the groundwork for a more comprehensive overview that would enable consideration of the broader system implications of this more diverse range of norm-setting activity. This was tackled by conducting a comprehensive mapping of the IP content in a larger number of RTAs involving parties from all regions and across different levels of development. This broad approach is necessary to better understand cross-cutting trends in RTAs, and how all the parts of the international IP framework influence each other. The methodology followed involved surveying each RTA in the sample to determine whether it made reference to any of 30 different IP-related provisions. The relevant provisions are discussed in detail and summary statistics used to identify patterns over time and by continent, level of economic development, and selected traders. The number of IP provisions in each RTA is then used to classify agreements according to their level of IP content. The first significant identified trend is the acceleration in the conclusion of RTAs with IP provisions after the creation of the WTO and the entry into force of the WTO TRIPS Agreement. A significant proportion of those RTAs contain some type of IP provision, but the number and type of those provisions vary widely across agreements. More than two-thirds of the RTAs surveyed include provisions on border measures or statements of general commitment to IP protection or cooperation. A smaller proportion contains explicit provisions on specific fields of IP law, such as geographical indications, patents, trademarks and copyright. The inclusion of even more detailed provisions elaborating on specific areas of IP law is less common. As a result, the actual IP content of RTAs differs greatly across the sample, with about 40% of these agreements found to have negligible substantive IP standards. A significant number of RTAs containing more detailed IP provisions are characterized by a hub-andspoke architecture in which the wording and structure of IP provisions converged around the RTAs of specific countries or blocs. The largest systems are grouped around the EFTA, the European Union and the United States with countries like Chile, Japan and Mexico constituting other hubs. The huband- spoke architecture seems to have encouraged the convergence of domestic IP regimes among the respective RTA signatories. The mechanics of this potentially crucial process and its economic implications require further investigation. The analytical methodology followed in this paper also needs additional development to take better advantage of the information gathered together in the course of this study and other data.

The study tries first to assess the extent of similarities and divergences among services rules in regional trade agreements as compared to the GATS. To do so, it uses a typology identifying variations in 48 key provisions structured under seven themes commonly found in RTAs and using the GATS as a benchmark. The analysis identifies two main “families” of agreements GATSinspired and NAFTA-inspired) and a residual category. The paper briefly explores the historical development that led to these families as well as their geographical spread both on an agreement by agreement basis and a country by country basis. The paper then analyses by theme the variations found in the RTAs among services rules including their novelty as compared to the GATS. Given the lack of available information on the implementation of the agreements the paper tries to assess whenever possible the magnitude of the discrepancies and their practical impacts. While subject to some qualifications, the results of the study are relatively straight forward: there is no "spaghetti bowl" in services rules, but just two "families" and one residual category. The details reveal that the degree of divergence between those two families does not overall seem insurmountable. This assessment concords with other studies (e.g. Marchetti, Roy) that have equated them in terms of national treatment and market access and have compared directly commitments undertaken under the three families of agreements. One may even note a certain tendency to a convergence towards the GATS model (e.g. the addition of market access clause in the second generation of NAFTA-like agreements or the use of GATS-type architecture by EU for agreements else than pre-adhesion ones). In terms of "novelty" the results prove somewhat disappointing except in certain areas like mode 4 and transparency. Other issues in which, in view of the intensity of WTO DDA debates, one would have expected a lot of bilateral creativity, such as domestic regulation, safeguards and recognition provisions show themselves to be surprisingly embryonic. Finally anecdotal evidence, gathered for instance during the drafting by the WTO Secretariat of Trade Policies Reviews and factual presentations on RTAs suggest that in numerous instances, provisions relating to future negotiations or even regular meetings are not implemented thereby casting doubt on the effective impact of RTA provisions (including diverging ones) on trade realities.