Sunday, March 31, 2013

Compulsory Licensing and domestic policy space - A view

I had written about compulsory licensing, TRIPS and the exercise of domestic policy space, albeit in a judicial context, here

An interesting piece titled "Compulsory Licences for pharmaceuticals: An inconvenient truth?" by Sivaramjani Thambisetty on the recent grant of compulsory licenses in India highlights the various principles involved. As summarized by the author, the case brings to the fore these issues:
"Irrespective of the outcome of this case on appeal, the decision of the IPAB plays a crucial role in building up alternative and legitimate legal narratives around TRIPS and the ability to meet the public health needs of populations in all parts of the world. Despite the explicit legal grounds to grant compulsory licenses, they have been used relatively rarely in developing countries. There are many poorly reasoned and inadequately articulated fears that have prevented their wider use: fears that a CL will be seen as protectionist and incompatible with the TRIPS agreement; fear that it will chill foreign direct investment; or fear that a CL will draw the kind of political pressure and sanctions that were common prior to the TRIPs agreement. These fears appear in many cases to trump the reasonable legal conditions that have to be met in all cases where CLs are granted as well as widespread precedents from developed countries where CLs are used to tackle anti-competitive measures. (For instance, see here and here. )"
Issues of the violation of TRIPS, defining public interest, exercise of domestic policy space, developing country needs in the context of multilateral rules as well as public health concerns are raised here. Definitely more food for thought.

A wonderful read.

Saturday, March 30, 2013

70000 and counting

Marking the blog's viewership count gain with this blog post. 70000 it is.

Hitting 70k page views is a satisfying experience. I have marked the previous occasions thus: 10k, 20k, 30k, 40k, 50k, 60k. The other heartening thing is that while it took 180 days for the first 10000 hits, it took only 20 days for the last 10k.

Thank you readers.

Friday, March 29, 2013

Developing countries and strategizing at the WTO

I have often written about developing countries participation at the WTO both in terms of negotiations and dispute settlement. An example that is often heralded as a beacon of hope for the developing and Least Developed Countries in multilateral trade participation is Brazil. Brazil's successful participation and strategy at the WTO has been a subject of extensive research over the years.

Came across this interesting paper by Gregory Shaffer, Michelle Ratton Sanchez and Barbara Rosenberg that summarizes the strategy that Brazil has adopted in engaging successfully with the multilateral trading system. It summarizes the strategy thus:
First, we argue that international trade law and judicialization have mattered in Brazil, unleashing a competition for expertise and helping to transform the government’s relations with business and civil society regarding trade policy. 
Second, and related to this point, we contend that being a defendant in WTO cases can help catalyze these changes, giving rise to mechanisms of public-private coordination to defend a country’s interests at the international level.  
Third, we find that these developments have not represented a weakening of the state, but rather the strengthening of the state’s ability to engage at the international level through a diffusion of international trade law and policy expertise. 
 Fourth, we observe that these processes reflect a growth of pluralism for trade policymaking within Brazil, as the government has been pressed to become more transparent and open to dialogue. 
Fifth, we maintain that these processes are not automatic, but are a function of domestic as well as international factors. We highlight the roles of Brazil’s professional, merit-based Ministry of Foreign Affairs, the development of Brazilian career paths in the international trade field, Brazil’s private sector that has been able to overcome collective action problems to engage with the government, and a general shift in orientation in Brazil’s development strategies.
 Sixth, we find that although the example of Brazil offers some hope to other developing countries, these countries generally face greater challenges and will need to develop their own strategies in light of their own contexts.  
Seventh, we conclude regarding the need to take into account the reciprocal interaction of the domestic and international spheres to understand the operation of international legal orders."
Are there lessons for other developing countries to develop internal institutional capacities to engage with the multilateral trading system? Another more recent study on the participation of Latin American countries participation in the WTO highlighted the importance of private sector involvement and the need for creative solutions to engage with the rule based system. 

Developing countries must engage proactively in the system be it through negotiation, dispute settlement, participation in the  proceedings of various Committees at the WTO or private sector engagement. The strategy should be to actively engage withthe rules rather tan shy away from it. However each country would have to develop its own creative, need based strategy depending on its own requirements. Though there is no one-size-fits-all strategy, lessons learnt in Brazil's engagement would surely help other developing countries. A BRICS strategy perhaps?

Thursday, March 28, 2013

Vera Thorstensen on currency manipulation and world trade

I have written about the growing significance of the currency question in international trade law here, here, here and here. Though there does not seem to be any immediate dispute at the WTO around this critical issue, Vera Thorstensen and others have summarised the issues in this CUTS paper. Titled "Trade and Exchange Rates: Effects of Exchange Rate Misalignments on Tariffs" the paper argues that the WTO must play a more active role in addressing the concerns that a devalued or manipulated currency could adversely impact a country's rights under the international trading system. 

Persistent exchange-rate misalignments cannot but create potentially infinite variations of market-access conditions among WTO members. This situation is directly the opposite of what the multilateral system sought with the establishment of the MFN principle, that aimed to assure that no particular country would have a commercial advantage in its trade with another contracting party, which otherwise could raise tensions and divert trade

The effects of misalignments are also distorting many other rules and instruments negotiated under the WTO, such as antidumping, subsidies, safeguards, rules of origin, GATT articles I, II, III, and XXIV.
The WTO can no longer ignore what is happening behind its magnificent structure of complex trade rules. The persistence of opposite exchange-rate misalignments, of countries with overvalued currencies and others with undervalued ones, for long periods is eroding the objectives of the rules-based multilateral trading system.

The core principles of WTO construction - transparency, predictability and confidence - are under question. The strengthening of trade rules, with the negotiation of instruments to neutralise the effects of exchange rates, is fundamental to the existence of the WTO. Otherwise, the WTO might become a diplomatic-juridical fiction - void of economic reality. 

Historically currency exchange issues have been dealt with by by the IMF and this jurisdictional barrier has kept the WTO from intervening. Will the WTO members allow this topic to gain centre stage at the multilateral body? Will Brazil's submissions be discussed in more detail at the Committees of the WTO? Will a dispute settlement case be initiated by a WTO member against a persistent manipulator of currency? How will the Panel and Appellate Body react? Will ti get included in future trade negotiation rounds as an addendum? Is the situation as serious as made out to be that the WTO would become void of economic reality if it does not recognize and address the issue of widespread currency manipulation? What impact does this have on domestic policy space, multilateral rules and barriers to international trade?

Wednesday, March 27, 2013

Gender and trade

The Gender Agenda in Trade - a thought-provoking piece in the IntLawGrrls on the 'gender-agenda' in trade highlights the informal sector in trade and the predominance of women in this sector which often goes unnoticed, unecognized and unaccounted.

The biggest challenge would be to devise strategies to ensure that the benefits of globalisation reach these sectors as well as making sure that these groups participate in the global economy. This is a neglected area of trade policy research and implementation.

Tuesday, March 26, 2013

Regionalization vs. Globalization

An interesting Working Paper titled "Regionalization vs. Globalization" comes to the conclusion that the importance of the regionalisation of business cycles in a globalized world should not be underestimated.
"We have analyzed the evolution of global and regional business cycles over the past five decades. Our results indicate that regional business cycles have increasingly become more pronounced especially in regions where intra-regional trade and financial linkages have registered rapid growth since the mid-1980s. In particular, the regional factor has explained a larger fraction of business cycle variation in the North American, European, Oceanian, and Asian regions over the past twenty-five years. Surprisingly, the importance of global factor has declined over time. The total contribution of common factors (global and regional) has not registered a significant change implying that there has been no change in the degree of international business cycle synchronicity during the past quarter century. 
These results present a different interpretation of the impact of globalization on the synchronization of business cycles. Most commentators argue that globalization of trade and financial linkages have led to the globalization of business cycles as well. Contrary to these popular arguments, regional factors, rather than global ones, have become the driving forces of business cycles during the recent era of globalization. This has led to the emergence of regional business cycles.

A wide range of developments at the regional level can explain the emergence of regional cycles. For example, the dramatic increase in intra-regional trade and financial flows fueled by regional integration initiatives can promote a higher degree of business cycle synchronization across countries in a region. Regional business cycles can also emerge because of the prominent role of region-specific shocks driven by the implementation of similar policies in a region. Moreover, cross-border spillovers of disturbances originating in a large country in a region can translate into more synchronized national business cycles in that region."
I am not an expert in trade policy but I found this paper interesting since it highlighted the complex nature of globalization as well as the multiple factors impacting it. 

Monday, March 25, 2013

Laos joins the WTO

For those who missed it, Lao People's Democratic Republic became the 158th member of the WTO in February of this year.

The Diplomat carried a comprehensive analysis of the benefits and pitfalls of the entry of Laos into the WTO here.

Sunday, March 24, 2013

EU, Protectionism and a strategy

For those interested in the EU's views on protectionism and trade one can look at the Trade and Investment Barriers Report 2013. I am not going into the specifics of the report (it is a wealth of information of EU's perception of trade barriers implemented by other members of the WTO) and the views expressed but the broad strategy on how to tackle trade barriers seems to be clearly outlined. It lists 4 broad strategies:

1.Trade Diplomacy
2. Dispute Settlement
3. Effective use of WTO Committees 
4. FTA negotiations

The broad strategy is detailed here:
"Against the evidence of rising protectionism around the world, the European Commission will continue to ensure that the EU's trading partners stick to their commitments and keep their markets open. Firstly, it will use the trade diplomacy instrument, leveraging on EU's global network of Delegations and working closely with the EU Member States. Secondly, it will use the WTO's Dispute Settlement Mechanism and the EU's presence in WTO Committees to enforce international trade rules. Finally, the European Commission will use negotiations for bilateral trade agreements and WTO accessions to address certain specific trade disruptive measures in third countries."
Some tips to be picked up by other WTO members on how to use international trade rules to pursue national interest?

Saturday, March 23, 2013

Global citizens and local problems

Dani Rodrik has often argued against the dominance of global institutions on national sovereignty. His book Globalization Paradox epitomized the tensions between national sovereignty, democracy and autonomy in decision making. His recent piece titled "National Government, Global Citizens" highlighted the dichotomy of globalization and domestic political sovereignty.
"Nothing endangers globalization more than the yawning governance gap – the dangerous disparity between the national scope of political accountability and the global nature of markets for goods, capital, and many services – that has opened up in recent decades. When markets transcend national regulation, as with today’s globalization of finance, market failure, instability, and crisis is the result. But pushing rule-making onto supranational bureaucracies, such as the World Trade Organization or the European Commission, can result in a democratic deficit and a loss of legitimacy."
The piece highlighted a trend, albeit minimal, of the rise of "global citizens" pressurizing their national governments to be more accountable. Can global governance be achieved by the enhanced role of global citizens? Citizens today, especially in the developing world are more concerned with issues of local governance and livelihood. Do issues of international law, global governance matter to them at all? Isn't it more pragmatic to look at global governance and accountability through national political representation? If a national government's position in the international sphere is guided and accountable to representational government at the national level (howsoever weak that is) is that not a desirable step? More than being desirable, is it not achievable?

Pascal Lamy speaking recently highlighted the need for more discussion of international issues in the domestic arena.
"The final principle that I would put to you is that since the political “demos” remains essentially national, legitimacy would be greatly enhanced ifinternational issues were to become a larger part of the domestic political debate. The exercise of democracy today needs an international dimension. The fact that citizens elect the governments that represent them in global institutions is not itself sufficient to ensure the legitimacy of international organizations. The fact that in an organization such as the World Trade Organization, decisions are taken by consensus, and are based on one-country one-vote, may not be enough to ensure its legitimacy in the eyes of our global citizenry. More is required. National actors — political parties, parliaments, civil society, trade unions, and citizens — need to ensure that the issues discussed and decided at the “global level” are carefully explored, first, at the “domestic level.”
Is this more feasible? 

Friday, March 22, 2013

Hacking and the WTO

I had blogged about cyberespionage and the applicability of WTO rules here.

Now, a piece in National Interest which argues that hacking should be remedied through a dispute at the WTO. It argues fo rusing international law, especially TRIPS obligations to ensure cyber security.

I am not sure how realistic this is but this surely would make the WTO dispute settlement tread dangerous waters...

Thursday, March 21, 2013

Malawi, Tobacco regulations and a WTO challenge

The link between Tobacco and the WTO does not seem to be going away anytime soon. After the Tobacco Plain packaging dispute about which I have blogged about here and here, concerns about EUs new Tobacco Products Directive (TPD) were raised by Malawi at the TBT Committee at the WTO.

As per the WTO website:
"The TPD includes a wide range of provisions related to packaging, composition and sale of tobacco products in the EU.  For instance, tobacco products with characterising flavours (including menthol) and slim cigarettes (with a diameter of less than 7.5 mm) would be banned; health warnings would need to occupy at least 75% of the front and the back of the packs; and, cigarette packs would need to be of a uniform size and shape.  These provisions would not apply to cigars, cigarillos, and pipe tobacco, according to the rationale that such products are predominately used by older people — instead the provisions of the existing tobacco directive would continue to apply (Directive 2001/37/EC)."
Reuters reporting about it here highlighted Malawi's concerns about the measure impacting its foreign exchange earning capacities as well as it's employment.

Will this be the next Tobacco dispute at the WTO with developing countries that rely on tobacco exports as one of the main sources of employment and trade challenging the measure? Is the exemption of cigars and other cigar products justified under the TBT Agreement? While Plain packaging was a TRIPS issue, this regulation is more int he nature of a technical regulation that is a restriction on international trade. WIll we see Malawi requesting for consultation at the WTO? Another example of the "rule-based" WTO system where countries irrespective of economic power and standing can participate in the multilateral system to protect their national interests?

Wednesday, March 20, 2013

Oh STOP it! - Junk food and the WTO

After plain packaging of Tobacco products, Junk food seems to be the next issue that WTO members are grappling with. Concerns on moves by Chile to introduce food safety regulations that require the "STOP" sign on junk food were raised by other members in the TBT Committee meeting at the WTO. The IELP blog has touched upon it here.

"Pursuant to the amendment, certain categories of food would need to bear labels designated to inform and encourage consumers to avoid excessive intake which may lead to obesity and related non-communicable diseases.  Moreover, products containing a critical amount of certain substances (e.g. fat, sugar, salt) would have to bear labels such as “high in salt”, “high in calories” or equivalent warnings. These warnings would need to be placed in the middle of an octagonal icon (i.e. a STOP sign) occupying no less than 20% of the main surface of the package, be located in the upper right corner, and have a size of at least 4 square centimetres."

Would this be the next dispute at the WTO challenging a domestic regulatory measure?
Article 2.2 of the TBT Agreement states:

" Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade.  For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create."

Is the 'STOP" measure creating an "unnecessary obstacle to international trade? Is it more trade-restrictive than necessary to fulfil a legitimate objective? How would the junk food industry react to this? How would member countries facing similar problems that Chile claims to be facing react? A WTO Panel perhaps would perhaps decide the contours of the permissible regulation?

Tuesday, March 19, 2013

International Law Girls back into circulation


voices on international law, policy, practice

Great to have IntLawGrrls back into circulation after a brief gap. More voices on international law, policy and practice...

Monday, March 18, 2013

Antigua case - An illogical ruling?

I have blogged about the US Online Gambling case here.

Stewart and Stewart, while making a detailed analysis of the dispute here, argue that the measure of cross-retaliation in this case is an illogical step and could harm the WTO system.
"As explained above, this case presents a unique situation in which a WTO member has responded to an adverse WTO ruling by seeking to amend its WTO commitments to make clear that its obligations do not apply to the domestic policy which had been found problematic. To obtain this amendment, the U.S. was required to provide compensation to all affected WTO members, not only those who would have been entitled to retaliate if they had brought the original dispute. As noted above, the U.S. was able to reach agreements with each of the countries that requested compensation except for Antigua. If agreement had been reached with Antigua, or if arbitration under Article XXI of the GATS had settled the amount of compensation to be provided, the U.S. would now be in compliance with its amended WTO obligations even with its domestic gambling policies still in place, and Antigua (along with other countries) would be compensated for the withdrawn concession.

Instead, because WTO rules permit Antigua to withdraw benefits for the on-going violation under the DSU even as arbitration under the GATS remains suspended, the U.S. is now faced with the prospect of open-ended retaliation for on-going violations it is unable to address through a renegotiation of its commitments. In short, the U.S. may have to pay two times to resolve one problem – once to amend its obligations to reflect what it thought it had originally agreed to when it negotiated the GATS, and once as a result of retaliation authorized in the course of a dispute launched before that amendment was made."
The above submission raises the important point of domestic policy space to amend past commitments in the context of a dispute.This piece however seems to support Antigua. Interesting...

Sunday, March 17, 2013

Antigua, the U.S and a rule based system of dispute settlement

The proceedings of the WTO Dispute Settlement Body in a recent meeting throws light on the Online Gambling case (DS 285). While WTO watchers are keenly awaiting Antigua's proposed moves in relation to the cross-retaliation in this case, the use of cross-retaliatory measure in the field of IP has evoked strong reactions.

Some excerpts from the meeting indicate the strong, divergent viewpoints held as well as possible outcomes:

"Dominica, speaking on behalf of Antigua and Barbuda, said that Antigua and Barbuda was disappointed at the lack of compliance by the US and its failure to identify a single measure designed to implement the DSB’s recommendations and rulings.  Furthermore, Antigua and Barbuda was concerned that, at the January 2013 DSB meeting, the US had used terms such as “theft of intellectual property” and “government-authorised piracy” in relation to the lawful and expressly authorised use of trade remedies provided for in the WTO agreements. 

In Antigua and Barbuda’s view, the use of such intemperate and dismissive language by the US was a fundamental challenge to the WTO and a reputational assault both on the DSB that had given the approval for intellectual property (IP) suspensions and on Antigua and Barbuda that had sought its right to exercise it.  Antigua and Barbuda called on members to defend the WTO’s fundamental principles and to ensure that its rulings are applied equally by all countries despite their size. 
The United States noted that Antigua and Barbuda had assured the DSB that it would notify and provide specific details about how it would implement the suspension of concessions and that Antigua and Barbuda would not encourage or allow itself to become a haven for IP piracy. With regard to the status of the dispute, the US did not agree with Antigua and Barbuda’s view that the US had been unwilling to negotiate in good faith.  The US had been following the established, multilateral WTO process for responding to the DSB’s findings and had, in 2007, begun the process of modifying its Schedule of Specific Commitments under the General Agreement on Trade in Services (GATS).  The US had offered substantial compensatory adjustments in other service areas and every member had agreed to the compensation package except Antigua and Barbuda.  The US had also sought to offer Antigua and Barbuda elements other than new services concessions.  The US remained open and ready to engage with Antigua and Barbuda to find a solution."
What will the result be n this case:

1. A negotiated, amicable settement or a compensatory package?

2. Protracted dispute settlement proceedings on what constitutes compliance and claims of compliance and non-compliance?

3. A strong cross-retaliatory move by Antigua suspending rights of US IP holders?

4. Proceedings disputing the validity of the measures undertaken to cross-retaliate?

5. No action by Antigua and letting the dispute seeing no end?

Will it also be a case where the "rule-based" nature of the dispute settlement will be established? Or will it go the way that political economy of relations often force it to? The dispute in many ways is the test of the multilateral institutions rule based dispute settlement system - in terms of its efficacy, remedies and compliance.

Saturday, March 16, 2013

Tobacco Plain Packaging - A classic WTO dispute?

I had blogged yesterday about UK's moves to introduce plain packaging. Parallelly, the TRIPS Council at the WTO was the venue for the continued challenge to the proposed plain packaging measures of New Zealand with the Dominican Republic and Honduras maintaining that employment opportunities and TRIPS obligations must be the main consideration on deciding the fate of plain packaging measures.

ICTSD summarised the proceedings thus:

"Members at the TRIPS Council meeting also addressed a proposed New Zealand law that, if implemented, would require plain packaging for tobacco products. (See Bridges Weekly, 27 February 2013) The controversial legislation would require standardised packaging without trademarks, a drab monotone design, and prominent health warnings on cigarette packaging, with only a small line of text to distinguish one brand from another. 
At this week’s meeting, the Dominican Republic - whose main export is tobacco - took the lead in commenting on the draft legislation, saying that it would hinder employment and would force producers to compete based on price instead of quality.  
In response, New Zealand said it would continue developing the planned legislation - which is currently in the drafting stage - but may wait to see the outcome of the dispute before implementing it, echoing recent comments made by the country’s prime minister, John Key. It also recalled that the 2001 Doha Declaration says that TRIPS does not and should not prevent members from taking measures supportive of public health. 
The plain packaging regime is a part of “a long policy development process,” New Zealand added, noting that smoking is its single largest cause of preventable death."
Public health objectives, domestic policy space, long term development process vis a vis employment opportunities, growth of less develop countries and intellectual property law obligations. The stage is set for a classic WTO dispute!

Friday, March 15, 2013

After Australia and New Zealand, UK proposes to introduce tobacco plain packaging

After Australia and New Zealand, reports that tobacco plain packaging would be implemented in U.K is doing the rounds bringing stocks of major tobacco companies down. The Guardian reported the move recently here. The plain packaging may come into effect later this year in the U.K.

"Ministers are to introduce plain packaging for cigarettes along the Australian model with legislation this year, after becoming convinced that the branding is a key factor in why young people start to smoke. 
The legislation, to be announced in the Queen's speech in May, is also expected to ban smoking in cars carrying anyone aged under 16 years. Ministers acknowledge that the ban is likely to be difficult for the police to enforce, but they believe peer group pressure will have an impact similar to the ban on drivers using mobile phones."
Will the plain packaging moves spread to other countries? How will major tobacco companies react? How will countries that rely on tobacco manufacturing for employment generation and national growth react? How will the panels established at the WTO decide on concerns of public health objectives in the context of intellectual property rights and trade?

Thursday, March 14, 2013

Trade policy and interests

A provocative piece on how trade policy must be negotiated is found in Huffington Post's piece here. Alleging that trade negotiations and agreements now are favoring investors, global investors and access to markets. It concludes that labour and environmental rights and interests are sidelined and need to be part of the trade policy paradigm.
"In actual fact -- not a thought experiment at all -- we now negotiate our trade agreements in the interests of investors and global companies. They prioritized their interests: higher profit margins, "flexibility" to do what they want, maximum possible trade, and a shield against local, regional or national policies that might reduce their economic prospects. 
They actually do use the WTO and various trade tribunals to enforce investor interests, independent of any national courts or political accountability. The global economy can grow and produce great wealth. And to be sure, this is no mean feat. 
Economic growth could arguably align with public interest, at least in a trickle down sort of way. Please hold your fire on this one, for a moment."
One may not entirely agree with the analysis out there, but some food for thought? Are trade agreements only exposition of business interests and not "national" or "public interests"? It brings us back tot he question of what interests the state represents as well as the multiplicity of stakeholder interests.

Wednesday, March 13, 2013

Globalization and inequality - Middle path?

One of the questions about the impact of globalization is its impact on inequality? Does it aggravate it or lessen it? How should a State deal with pursuing a globalized agenda as well as addressing the inequities it breeds? Is there a path to find that equilibrium or are they incompatible goals?

Dani Rodrik in a not so recent interview asserted that globalization does lead to increasing inequality but also alluded to a possibility of open economies reducing inequality. 
"There is no question that globalization has aggravated inequality within countries.  But we need to think of globalization in this context as part of a cluster of developments: new technologies, greater emphasis on markets, decline in unionization, and fiscal paralysis of many states. All these have had the consequence of raising the returns to skills and talents and reducing the bargaining power of blue collar workers and those who are unable to move across national borders with the same ease as capital. 
But there are exceptions too.  One of the most encouraging trends in the last couple of decades is the decline in inequality in Brazil, Chile, and many other Latin American countries, which have traditionally been among the most unequal in the world. This shows that broad social programs as well as more narrowly targeted anti-poverty programs can still be pursued and are effective in open economies."
A welfare state pursuing globalization is a distinct possibility? If one does not seek extremities, there is perhaps a way which seeks an open economy based on a strong interventionist state to address poverty alleviation and inequality. How this balance is sought and implemented is where the problem lies. the devil is normally int he details and the path to finding that balance often leads to excesses. One would have to understand and contextualize the roles of the State and market to find this balance.

Tuesday, March 12, 2013

Future of the WTO - An expert view

A multi-stakeholder expert committee was formed by the DG, WTO to look into the challenges and future of the WTO. It was called the Panel on Defining the Future of Trade. It's report is expected in April 2013.

Talal Abu-Ghazaleh, one of its members, has offered some useful suggestions in his work titled "WTO at the Crossroads:A Report on the Imperative of a WTO Reform Agenda".

An interesting, easy read for those looking at the future of the multilateral trade institution.

Monday, March 11, 2013

Supply chain and barriers to trade

When one thinks of reduction of barriers to international trade the usual response is tariffs ad non-tariff technical barriers. Over the years negotiations have brought down tariff barriers to considerably low levels as compared to earlier times. However, experts contend that an important aspect of trade - supply chain management has not been given enough importance.

The World Economic Forum released a report recently that suggests that "concludes that they are far more significant impediments to trade than tariffs. In fact, reducing supply chain barriers could increase world GDP over six times more than removing all tariffs."
"If every country improved just two key supply chain barriers – border administration and transport and communications infrastructure and related services – even halfway to the world’s best practices, global GDP could increase by US$ 2.6 trillion (4.7%) and exports by US$ 1.6 trillion (14.5%). For comparison, completely eliminating tariffs could increase global GDP by US$ 0.4 trillion (0.7%) and exports by US$ 1.1 trillion (10.1%). The estimates of the impact of barrier reduction are conservative; they reflect improvements in only two of four major supply chain categories."
While the report itself details out individual case studies on how supply chain efficiencies can increase trade, I found one of the recommendations interesting:
"International trade negotiations usually take a silo approach, addressing policy areas in isolation. Lowering supply chain barriers requires a more holistic approach that spans key sectors that impact trade logistics, including services such as transport and distribution, as well as policy areas that jointly determine supply chain performance – in particular those related to border protection and management, product health and safety, foreign investment, and the movement of business people and service providers. A whole of the supply chain approach can be pursued through both multilateral and regional trade agreements."
Moving away from "silo" approaches to horizontal, platform approaches is the need of the day. Will we see more thought and effort to reduce supply chain barriers in the current round of negotiations? Is the Trade Facilitation Agreement the answer?

Sunday, March 10, 2013

Mac Index - Currency undervaluation and burgers

For those who are interested in currency exchange rates, undervaluation and burger prices across the world, The Economist has the hugely popular MacIndex. Find it here. There is a lot of difference of opinion of the rate of undervaluation in different studies, but this is an interesting visualization.

The Big Mac index

Select base currency:

US dollar
  • Chinese yuan
  • Euro
  • Japanese yen
  • Sterling
  • US dollar
  • Raw index
  • Adjusted index

Under(–)/over(+) valuation against the dollar, %

  • South America
  • Middle East
  • Asia south
  • Asia north
  • Europe
  • North America

Undervalued by:

  • >50%
  • 25-50%
  • 10-25%
–/+ 10%

Overvalued by:

  • 10-50%
  • 50-100%
  • >100%