Who wins from textile market liberalization?
Apart from consumers, that is. A graphic from this year’s Global Economic Prospects report of the year-on-year growth of textile exports in relation to overall merchandise export growth. Who got the biggest trade boost from the end of textile and garment import quotas? You might be surprised
The biggest gains in terms of the boost to merchandise trade were in Bangladesh, Cambodia, Jordan, India, Pakistan, Sri Lanka, and Turkey, while the largest losses were those of Kenya, Nepal, Myanmar, Mongolia, and Tajikistan. The data shows the year-on-year increase for the first half of 2005 (first six months of the new non-quota system) in exports to the former restricted markets of the USA and Europe. Click on the thumbnail.
Note that the “losers” are not, in any case, big textile or garment exporters (although Nepal has an important garment and traditional textile sector).
Tags for this entry: trade Time to buy Western Union (NYSE: FDC). The World Bank’s Global Economic Prospects for 2006 has just appeared (a 2.8mb pdf file, but ‘lighter’ versions are available here). It analyzes the huge flows of worker’s remittances, showing that even the recorded flows to developing countries are bigger than the development assistance budgets of developed countries. But, for WTO, migration may be the next ‘agriculture’. “International remittance flows to developing countries are expected to rise to $167bn (€143bn, £97bn) this year, twice the amount of official aid paid by governments, the bank said in its Global Development Prospects report. Unreported flows mean that remittances are probably 50 per cent greater than the recorded number, at a conservative guess, the bank said. Up to 45 per cent of total remittances are paid by migrant workers in other poor countries, it said.”(Financial Times) In the terms of the WTO’s General Agreement on Trade in Services, the temporary movement of workers—such as construction workers or nurses or ships-hands—from one customs territory to another is known as the ‘fourth mode’ of services delivery. But it’s been one of the hardest issues to deal with in WTO; in part because many developing countries are just as obstinately opposed to liberalizing this vital trade as the developed countries. Here’s just a taste from the Overview of the report that indicates the fascination and the difficulty of this huge, but so-far largely underground issue for the multilateral trading system: “Over the past two decades, barriers to cross-border trade and financial transactions have fallen significantly, while barriers to the cross-border movement of people remain high. Despite its economic benefits, migration remains controversial and, for some people, threatening. In part, this is because migration, like trade and capital movements, has distrib- utional consequences, whereby net gains for society may mask important losses for some individuals and groups. But migration also sparks resistance because the movement of people has economic, psychological, social, and political implications that the movement of goods or money do not.” Global Economic Prospects, 2006 If, as I still expect, the Doha round begins finally to dismantle the absurd, historical protection of industrial country agriculture, migration may be the next major challenge for the multilateral trading system. Tags for this entry: trade A long article by Alan Beattie, World Trade editor of the Financial Times, today assesses the disappointing state of the Doha round WTO negotiations as Ministers from 149 member countries (welcome, Saudi Arabia) prepare for their conference in Hong Kong. Beattie’s conclusion is a guarded endorsement of the multilateral approach; risky and slow but less prejudicial to developing countries and more valuable than a trading system organized on bilateral lines. Beattie seeks answers to the question: “Is the game worth the candle?” He quotes the great … Chairman of BP and first WTO Director-General, Peter Sutherland: “We are now facing an extremely dangerous situation” the aggrieved … Zambian Ambassador Dipak Patel: “This is supposed to be a development round, not a market access round” the agricultural … Austrian farm minister, Joseph Pröll: “I do not want see the process of brinkmanship being replaced by one of blamesmanship” and, the antagonistic. Dr Razeen Sally at LSE: “These are all symptoms of the increasing UN-isation of the WTO” He also briefly quotes my article on the remaining wiggle room How does he answer his question? What value should we put on the multilateral trading system? As any economist would, Beattie considers the opportunity cost, with a warning that we may bear it if the Doha round fizzles: “In the end, the developing countries will have more to lose than rich nations from the undermining of the WTO as a negotiating forum. But the continual delay and intransigence mean that even their patience has been sorely tried. A failed or weak agreement on Doha could be the last effort of its kind.”( FT Comment & analysis – The multilateral approach is called into question ) Tags for this entry: trade Isn’t there an easier way to do this? Why is it so hard to get global agreement? It shouldn’t be this hard, should it? Can an agreement possibly be worth all this agony? Why doesn’t WTO look at shorter, simpler negotiations on just the key questions? Who wants to spend a whole decade in a battle over colored boxes? The spat over who should take responsibility for lower ambitions at the Hong Kong ministerial conference has already started. USTR Portman is pointing the finger at China which has been relatively passive on multilateral issues. Tony Blair is about to tell to his fellow Europeans that they have billions of pounds of trade opportunities at stake that they might lose (my guess is that Chirac now has a Most estimates—“my own”:http://www.inquit.com/high-drama-and-low-politics included—put any agreement in the Doha round at late 2006: another year of this jousting by press-release. Will it really all be worth it in the end? The estimates of the value of an ambitious agreement vary a lot. In his recent eulogy for former WTO Director-General Dunkel, Pascal Lamy points out that estimates of the incremental net returns vary from $10 billion to $200 billion each year by 2015. But, he argues convincingly, this is not the full benefit of an agreement, because the costs of doing nothing are not zero. The alternatives describe a much wider range, between a loss of growth and economic security due to rising protection and the substantial gains that liberalization offers. What are the costs of agreement? The real costs are the adjustment costs that follow the changes in economic regulations as income and resources, no longer controlled by government on behalf of narrow interest, flow in different directions. But some of the losses are due simply to ‘friction’ as the wheels of the economy turn in another direction; there are low-cost ways to reduce friction, usually by taking a longer time to make the turn. What about the costs of five or seven years during which millions of people in business, unions, charities, lobbies, government agencies and parliaments and thousands of diplomats analyse, debate and demand or deny changes in trade and econonomic policies? That would be a cost if there are more productive things these people could be doing instead; but that’s not obviously true. Their expenses on travel and computers and the hundreds of tonnes of paper that a trade round generates must be taken into account. But even so, the cost is miniscule in relation to the potential gains. But couldn’t we economize on the time and effort, nonetheless? Is it really necesary to spend most of a decade on these agreements? In fact, yes; it is, for a couple of reasons. One reason it takes a long time to negotiate a comprehensive trade agreement is the same reason it takes at least a decade to put together an expedition to the moon, or to prepare for a modern Olympics. Multilateral trade agreements , are intrinsically huge enterprises that involve not just a few dozen Ministers but millions of actors in 150 countries around the world. The agreements are hard to reach because they oppose powerful interests within each country as well as among countries. They demand changes in national laws and regulations that were created after intense domestic lobbying in earlier years (governments take trade measures only to subsidise someone’s interest at the expense of others) and they often threaten disruption in business conditions and employment. The second reason is related to the first; the agreements can’t be manfuactured by experts and sold as a package. They are essentially collective goods that have to be created by broad consensus that takes time to create. When the negotiations start—usually several years before the ‘round’ kicks off—it’s difficult to say what exactly governments will agree to do in the future. Every WTO member (and each lobby within each member country) has different interests in detail but shares a common interest in a bigger, richer global market. Most of the decade-long negotiation is spent discovering where the compromises lie between those detailed differences so that the big-picture gains can be realized. We might imagine—as some analysts do1—global trade arrangements could be decided more quickly and efficiently by a small group of the most powerful countries; possibly even imposed by an economic ‘hegemon’. But a trade treaty imposed without consensus on the world today would have a poor prognosis. Parliaments would resent the imposition and not ratify it; markets would have no confidence about general compliance; it would be unlikely to endure. Consider, in any case, the failure of the OECD countries, after decades of effort, to reach agreements on investment or competition policy or agriculture before you bet on a cabal to efficiently manage global market affairs. In fact, there are many other examples of complex global regimes that manage an interface between global public goods and private interest, where just such seemingly-endless, occasionally bitter negotiations are the rule. Take the battle over the management of the Internet domain-name system for example. While ICANN bumbled along trying to manage this global regime using only US-delegated authority, the fight stayed mostly underground as far as most users were concerned. But a global asset demands global management: that’s the argument from Europe and elsehwere. How about making the WTO agreements less ‘comprehensive’? If we bit off less, couldn’t we chew it faster? Yes, but again the collective nature of the entreprise limits what can be done. Member governments simplified the Doha agenda half-way through, focussing on the most obvious and damaging barriers to doing business across borders and leaving more abstract issues such as competition policy on the shelf. But a collective agreement has to show something (‘sufficient’)for everyone. In an increasingly specialized global economy this ‘bundle’ is unavoidably big and complex. There is simply no chance of a collective agreement on a subject such as agricultural market reform—where the biggest gains accrue to specialized producers—unless it is balanced by a similar collective agreement on services, industrial markets and ‘development’ issues whose gains are distributed differently. What else can be done to improve the WTO? The managers of WTO business have been battling from the start, ten years ago, to improve it’s record of decision making because they recognize that the trading system created by WTO rules is trying to catch up with much more rapid changes in market reality—and still falling behind. I’ve written an account of their efforts in my book WTO: The First Ten Years due out next month. They have greatly improved the openness and efficiency of the processes in Geneva by organizing meetings much more flexibly for overlapping groups of members with different degrees of interest and by making greater efforts to include all members in the final decisions. They’ve opened up almost all documentation to the public world wide using the internet. But Geneva is only a small part of the whole enterprise; the overall pace is dictated mostly by the enthusiasm or reluctance of Member governments for compromise, which in turn depends on national factors. What about WTO‘s ‘single undertaking’; is it really necessary? This is a new principle—only a decade old—for global treaties. It means that in WTO, every member has to accept every obligation in the agreements. There are no more ‘waivers’ of the rules for the convenience of the economically powerful (as there were during the first 40 years of the post-war trading system) and even the smallest economies must fulfil every obligation—usually after a long ‘grace period’. This is a tough rule that will certainly prolong the negotiation of future agreements because there’s no escape once the deal is done. Critics claim that the ‘single undertaking’ is unfair or inappropriate for the poor. But the prize is a seamless global system of trade rules that is uniquely enforceable against the most powerful economies with obvious commercial benefits in terms of predictability and coherence. 1 Dr Razeen Sally at LSE, for one. Tags for this entry: Director General Pascal Lamy’s overview of the state of the negotiations is a masterly summary followed by an evidently acceptable proposal for changing the expectations of, and preparations for, the Hong Kong ministerial conference. He uses the term ‘re-calibrate’, but it’s really a mater of re-framing the purpose of the meeting to make it part of a continuing process rather than a culmination. Lamy has chosen this report to the Heads of all Members’ delegations in Geneva to summarize what he has learned in the last few days in smaller meetings of the progress that has been made toward agreement and to assess the progress that might be made up to the Hong Kong meeting. The whole speech is worth reading. It’s free of rhetorical gestures, negotiators’ jargon and the complaints and self-justification that crept into the speeches of some of his predecessors (admittedly, he’s new in the job). Nor is it by any means a bleak assessment. “If we all agree that we cannot reach “Full Modalities” by Hong Kong, then we must necessarily recalibrate our expectations for our Conference. We must carefully reflect on what we want to achieve at and after Hong Kong, in order not to reduce the level of ambition of the whole Round. This probably means we are looking at having a range of numbers—the outer parameters—in the July 2004 Frameworks, and corresponding texts in the rule-making parts of the negotiations. This would still have to make up an overall package, and would have to be, by definition, balanced.”(WTO) By the ‘outer parameters’ Lamy means elements in the decisions that are not the ‘headline’ numbers such as the key thresholds and tariff cuts in the Agriculture market access negotiations or the formula parameters in the NAMA tariff cuts and the question of whether they apply to bound or ‘applied’ rates. On the whole, it’s what I’ve been expecting. Reports such as this in the Financial Times proclaiming that the ‘search for consensus has stalled‘ are a bit misleading (although not as silly as this ponderous collage from The Economist). The search goes on, the probing continues. That, of course, is purpose of the despairing tone in the official press releases. A more subtle danger Lamy must have in mind—but has not discussed in his speech—is that this approach means that the Hong Kong agreements—like the agreement achieved at the end of July 2004 (the ‘Framework’ agreement that got the round moving again after the Cancuún conference collapsed)— may seem to be a squib. That’s because The closer we get to the final package, the more closely the participants in the negotiations scrutinize matters of equity and balance and proportional contribution by all their trading partners. As negotiators begin to assemble the final collection of gains acquired and concessions made, every one of them will be reluctant to settle on even those parts of the package that are most remote from the core to ensure that the final balance is minted with the greatest possible precision. The effect of this common tactic in the last stages of a negotiation is to hide progress. Like an artist—this is a tortured simile since there’s more blood than art involved—who is unwilling to allow the world to see the work-in-progress as it approaches completion and critical appraisal, or like the players in a poker-game as the initial bluffs are called and the final stakes are revealed, negotiators play their hands ever closer to their chest as the time approaches to lay all cards on the table. Less is seen as the final rounds of play approach. But that does not mean less is going on … Tags for this entry: 
data usa tariffs india textile quotas
Workers’ remittances—bigger than aid flows
multilateralism services remittences migration labor
Survey of Doha’s costs and benefits
wto doha trade framework multilateralism hong kong
Why is it so hard to get a global trade agreement?
The Hong Kong Conference ‘re-framed’
Amusing, anecdotal, accurate 