Former WTO DG and current UNCTAD Secretary-General Supachai Panitchpakdi on “regionalism for development“:

[D]eveloping countries should strengthen regional cooperation with other developing countries, and proceed carefully with regard to North-South bilateral agreements…

Bilateral FTAs often transform formerly non-reciprocal trade preferences between developed and developing countries into symmetric market access regulations; thus, the cornerstone of the post-war international trade system, the special and different treatment of developing countries, is continuously being eliminated…

developing countries often have to accept far-reaching commitments regarding formerly classical domestic policy without being adequately compensated in terms of warranted market access and market success…

Simultaneous participation in many FTAs with different rules and implementation horizons makes policy coordination in developing countries increasingly difficult…

[In South-South PTAs,] initial foreign competition within the region may be less difficult to handle, the technological gap vis-à-vis competitors from more advanced countries outside the region may be easier to close, and the probability of finding a level playing field is greater.  In other words, the regional market often sets less exclusive benchmarks than competition with mature suppliers, so that even production at the infant industry stage can be successfully broadened.

I’m not convinced that preserving SD&T or opening trade between similar countries are critical to economic development, but UNCTAD has a 240 page report that makes the case. I just have to find time to read it!

[HT: Emmanuel]

CGD’s Kim Elliott criticizes Paul Collier’s trade policy recommendations:

[H]e overemphasizes the role that preferences can play in boosting Africa’s chances to cross the competitiveness threshold, while underestimating the potential for the Doha Round of global negotiations to do any good.

As Collier notes, sub-Saharan apparel exports to the United States grew sharply after the African Growth and Opportunity Act (AGOA) was passed in 2000, allowing duty-free exports of apparel and other goods. But apparel exports sank after the quotas restraining China and other competitive suppliers expired in 2005. 

Renewed restraints on Chinese exports appear to have slowed the decline, but those restrictions expire at the end of next year and the future for sub-Saharan apparel exports remains very uncertain.

This suggests that the current preference margin (the difference between the zero tariff on AGOA-eligible exports and the average 15 percent on other apparel exports) is not sufficient to overcome Africa’s other competitiveness problems and that the focus should be on improving infrastructure, skills, regional integration and other supply-side constraints. Given the importance of the rural sector in Africa, Collier also said too little about the need to expand AGOA to cover key agricultural products, including sugar, peanuts, and tobacco. This would extend the benefits of AGOA beyond the five countries responsible for nearly 90 percent of apparel exports…

And what of the costs of a Doha Round failure, which Collier applauds as opening the door for a trade policy focused on the bottom billion?… Collier is right that middle-income countries such as Brazil and Thailand would capture the bulk of these gains, but what of the West African cotton farmers whose plight he laments in his book? Perhaps most import, however, are the consequences of failure for the system of rules that protect the smallest and poorest countries from arbitrary discrimination by rich countries if the WTO loses its credibility. Yes, some new rules, such as those strengthening protection for intellectual property are potentially anti-poor, but the WTO rules provide substantial flexibility and offer a far better deal for developing countries than what they face under unilateral pressure and bilateral negotiations with much larger, richer trading partners.

The WTO hosted a debate between Gary Hufbauer and Jagdish Bhagwati on the merits of PTAs. See video at the WTO Forum. (Windows Media Player required.)

Audio of the roundtable debate from the WTO’s multilateralising regionalism conference is now available.

Shorter Jagdish Bhagwati: We should primarily solve regionalism by driving MFN tariff rates to zero. But I’m open to attacking the problem by whatever means available.

Shorter Richard Baldwin: Over the last fifty years, the GATT succeeded by flexibly adapting to trading challenges. Regionalism has been relatively tame thus far, it’s here to stay, and it’s the new challenge that must be tackled. The WTO can’t pretend to innocently stand aside. It must engage the issue and adapt.

Shorter Arsene Balihuta: Countries say one thing at the WTO and do another while cooking up spaghetti. While developed countries negotiating in Geneva are still beholden to mercantilism and protectionism, it’s even uglier when they turn to preferential trade agreements driven by the “mercantilist thirst for captive markets.” We should empower the WTO to persuade those cooking spaghetti outside Geneva to keep in mind that they must inevitably return to multilateralism.

Shorter Eirik Glenne: Regionalism is unavoidable and suboptimal. We know it’s a problem. Addressing these problems is going to take a long time, and the WTO will have to acquire new authority to address PTAs.

Shorter Mario Matus: The WTO is going in the right direction at the wrong speed. Chile needs to reduce poverty faster, so we’re increasing trade faster. We opened unilaterally, then negotiated PTAs which comprehensively cover issues beyond tariffs. For example, we bilaterally negotiated with Canada to end the use of anti-dumping measures. We complement the DSM by bilateral means – where rules overlap, we defer to the WTO. But Chile is still active in the WTO and very keen to promote its succcess. We need a successful Doha to mitigate some of the dangers we face.

Shorter Sun Zhenyu: Regionalism is rampant, but the real future lies in multilateralism. The WTO is not well-positioned to stimulate the multilateralisation of regionalism. The most important task is to complete the Doha round to keep the system running.

Bilateral agreements are intrinsically more difficult to evaluate than either multilateral or unilateral liberalisations because of their second best nature ie the balance of costs and benefits is not a given… This problem of measurement is further complicated because increasingly RTA go beyond the simple dismantling of border barriers to trade in goods…

For administrations in developing countries where human capital is often the binding constraint the resource demands of negotiating one or more RTA alongside multilateral and unilateral trade policy-making are potentially much greater. This is a recipe for misunderstandings about implications of specific policy changes demanded by an agreement and in particular for economic and social development. All of this is further complicated by the possibility that each RTA negotiated by any given country could differ markedly from other RTAs under negotiation or in operation by or in that country.

Jim Rollo – The Challenge of Negotiating RTAs for Developing Countries: What could the WTO do to help? (pdf)

APEC leaders are threatening to look at “options and prospects” for a FTAAP in order to pressure recalcitrant countries at the WTO’s Doha negotiations. They’ve got the right outcome at heart, but I don’t think the FTAAP is credible leverage.

APEC leaders are threatening to look at “options and prospects” for a FTAAP in order to pressure recalcitrant countries at the WTO’s Doha negotiations. They’ve got the right outcome at heart, but I don’t think the FTAAP is credible leverage.

APEC leaders are threatening to look at “options and prospects” for a FTAAP in order to pressure recalcitrant countries at the WTO’s Doha negotiations. They’ve got the right outcome at heart, but I don’t think the FTAAP is credible leverage.

Greg Rushford criticizes Japan’s pursuit of preferential trade in the WSJ:

Japan’s FTAs (like those of Americans and Europeans) talk free trade but practice protectionism. All of Tokyo’s trade bilaterals exclude Japanese rice, where tariffs remain in the stratosphere… The WTO’s Doha Round with its pressures for genuine market opening are conveniently ignored.

The FTA between Japan and Indonesia runs to 938 pages containing rules of origin, exclusions for politically sensitive products, and protectionist specifications for 40% of local content on “sensitive” — read, politically sensitive — products. There are special rules and various product exclusions for vegetables, sugar, various dairy products, fruits, tobacco and much else. Japan won’t cut tariffs for any kind of pineapples from Malaysia, Brunei or Singapore, but will gradually reduce duties for some fresh and dried pineapples from Thailand and the Philippines. But while tariffs on Thai dried pineapples are at 6% in the first year, and will be phased out entirely in six years, the Philippines’ dried pineapples will be taxed at 7.2% at first, and won’t be duty free until year 11.

This is special-interest politics, not sound economics. The Japanese boast that their FTAs give them preferential access to oil from Brunei, natural gas from Indonesia, and export platforms for Japanese manufacturers in smaller Asian economies. To readers of a certain age, this has a familiar ring.

While it’s premature to hit the panic button, it’s sure time to sound the alarms. It’s simply wrong for the world’s leading economies to act as if they want Fortresses Asia, Europe and America. It’s truly a cause for concern that while the WTO’s Doha Round gets lip service, FTAs get done.

Greg Rushford criticizes Japan’s pursuit of preferential trade in the WSJ:

Japan’s FTAs (like those of Americans and Europeans) talk free trade but practice protectionism. All of Tokyo’s trade bilaterals exclude Japanese rice, where tariffs remain in the stratosphere… The WTO’s Doha Round with its pressures for genuine market opening are conveniently ignored.

The FTA between Japan and Indonesia runs to 938 pages containing rules of origin, exclusions for politically sensitive products, and protectionist specifications for 40% of local content on “sensitive” — read, politically sensitive — products. There are special rules and various product exclusions for vegetables, sugar, various dairy products, fruits, tobacco and much else. Japan won’t cut tariffs for any kind of pineapples from Malaysia, Brunei or Singapore, but will gradually reduce duties for some fresh and dried pineapples from Thailand and the Philippines. But while tariffs on Thai dried pineapples are at 6% in the first year, and will be phased out entirely in six years, the Philippines’ dried pineapples will be taxed at 7.2% at first, and won’t be duty free until year 11.

This is special-interest politics, not sound economics. The Japanese boast that their FTAs give them preferential access to oil from Brunei, natural gas from Indonesia, and export platforms for Japanese manufacturers in smaller Asian economies. To readers of a certain age, this has a familiar ring.

While it’s premature to hit the panic button, it’s sure time to sound the alarms. It’s simply wrong for the world’s leading economies to act as if they want Fortresses Asia, Europe and America. It’s truly a cause for concern that while the WTO’s Doha Round gets lip service, FTAs get done.