wtr( world trade report)-2011
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WORLD TRADE REPORT
2011
The WTO and preferential trade agreements:
From co-existence to coherence
Group 5:
Abhishek Agarwal
Aditya Alok
Carol Karian
Swati Sinha
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Presentation Outline
1. World Trade in 2010
a) Introduction
b) The State of the World Economy and Trade in 2010
2. The WTO and Preferential Trade Agreements: From Co-existence
to Coherence
a) Introduction
b) Historical Background and Current Trends
c) Causes and Effects of PTAs: Is it all about Preferences?
d) Anatomy of Preferential Trade Agreements
e) The Multilateral Trading System and PTAs
f) Conclusions
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World Trade in 2010
a) Introduction
i. Putting the trade recovery into perspective
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World Trade in 2010
b) The State of the World Economy and Trade in
2010
i. Economic Growth
ii. Merchandise Trade in Volume Terms
iii. Merchandise and Commercial Services Trade in
Value Terms
iv. Sectoral Developments
v. Trade Balances and Exchange Rates
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The WTO and Preferential Trade
Agreements: From Co-existence to Coherence
SECTION- A
Introduction
i. Perspectives and insights in the World Trade
Report 2011
International production networks
Preferential trade flows and tariffs
A viable WTO agenda on PTAs
Beyond trade creation and trade diversion
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SECTION- B
Historical Background and Current
Trends
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Formation of PTAs
The nineteenth century: surging trade and expandingagreements
Early economic depression and the Great depression:
trade blocs
GATT and WTO: landmarks of broader and moreinclusive trade
The modern era: three new waves of regionalism
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Stylized Facts about PTAs
Changes over time
Cross regionalism
Type of Trade
Degree of market integration
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Trade flows related to PTAs
Value of World Trade between PTA members
1. Increased from US$537 million in 1990 to US$4 trillion in
2008
Has trade become more geographically concentrated?
1. Europe's total exports remained roughly constant at around
73 % from 1990 to 2009
2. Asia's intra-regional trade share increased from 42% to 52%
3. Chinas export to Japan has decreased while its export to the
world has increased
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How Preferential is trade?
EU and US reveal preference utilization rates of 87 and 92 per cent
16 % trade is preferential
Brazil grants high preference margin of 7% to its importers
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Key Facts
Almost 300 preferential trade agreements (notified and not
notified) were in force in 2010. On average, a WTO member
is party to 13 PTAs.
Non-preferential (MFN) tariffs are low, equal to 4% on
average in 2009. Most sensitive sectors remain sensitive
in PTAs: approximately 66% of tariff lines (products defined
by their customs codes) with MFN rates above 15% have not
been reduced in PTAs
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SECTION- C
Causes and Effects of
PTAs
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Motives for PTAs
To neutralize beggar-thy-neighbour trade policies
Gaining credibility
Non traditional motives
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The Standard Economics ofPTAs
Effect ofPTAs on trade
Supply chain arrangements
Natural trading partners
Political economy forces
Rules of origin and trade diversion
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Going beyond the StandardAnalysis
Deep integration
Deep integration and trade
The trade-offs involved
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SECTION- D
Anatomy of preferential tradeagreements
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Preferential tariffs and PTAs
The estimated average applied tariff across all products and
countries was 4% in the year 2009.
Most sensitive sectors remain sensitive in PTAs.
Approximately 66 per cent of tariff lines with MFN rates above
15 percentage points have not been reduced in PTAs.
If the preferential access enjoyed by other exporters is takeninto account, less than 13 per cent of preferential trade benefits
from a competitive advantage exceeding 2 percentage points.
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Patterns in the content of PTAs
Examining in detail the contents of a large sample
of PTAs.
Analyzing the Sectoral Coverage and
enforceability
Analyzing PTA commitments selected policy
areas
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Analyzing the Sectoral Coverageand enforceability
Methodology
Empirical evidence on PTA contentby income, policy area and over time
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Analyzing PTA commitments inselected policy areas
Services
Investments
Technical barriers to trade
Competition policy
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Production networks and deepPTAs
Empirical analysis confirms the positive
association between deep integration and
production networks.
The case of ASEAN: from regionalization to
regionalism
The case of Costa Rica
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SECTION- E
The Multilateral Trading Systemand PTAs
Systemic effects of preferential tariffliberalization
Deep PTA provisions and the multilateraltrading system
Regionalism and the WTO: historicalperspective
The relationship between PTAs and the WTO
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Multilateral Trading System
Sixty years ago, the multilateral trading system wascreated out of the ashes of World War II. In 1947,23 countries met in Geneva and founded amultilateral system based on rules and principles ofnon-discrimination
The multilateral trading system is regarded byWTO as the central pillar of dispute settlement tomake the business environment more stable andpredictable
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Systemic effects of preferentialtariff liberalization
Many mechanisms have been identified through
which PTAs could foster or hinder multilateral trade
opening
Groups of nations can always raise their collective
welfare by forming a trade bloc.
Fear of preference erosion
Political economy factors
Affect the pace at which preferential tariffs are extended to
non-members on a MFN basis
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Deep PTA provisions and themultilateral trading system
Deep integration provisions may be non-
discriminatory
The MFN clause
Several mechanisms supporting further
liberalization are found in PTAs
Effects of global production sharing
The WTO and PTA dispute settlement systems
relationship
Caveats: mechanisms generating negative systemic
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Regionalism and the WTO:historical perspective
The origins of the GATT
Preferential trading arrangements eventually becamethe basis for the GATT
Developments during the GATT years
Creation of the European Economic Community
(EEC)
PTAs in the Uruguay Round
Developments in the WTO
Committee on Regional Trade Agreements
Dispute settlement
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Relationship between PTAs andthe WTO
Coherence in international trade governance
Multilateral disciplines on PTAs: 3 core provisions
GATT Article XXIV
Enabling Clause
Article V of the GATS
Possible ways to improve coherence
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SECTION- F
Conclusions Regional and multilateral approaches to trade
cooperation need not be incompatible, but neither can
they be seen simply as substitutes
Growth shown in the recent trends of PTA
PTAs involve deep rather than shallow integration
Many of these agreements go beyond tariff commitment Countries may use trade cooperation as part of a
broader political agenda.
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Conclusions (Contd)
Growing Trade and Investment links among
countries
One country is affected by another country trade
action
Small developing countries want to import best-
practiced rules
Large developed countries want to export their
regulatory regimes through PTAs
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Conclusions(Contd)
Many recent PTAs include commitments in areas
such as competition policy, investment, and
movement of capital
One constraint to bear in mind is the political
feasibility of various options.
Focused on international production networks.
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