wto 2€¦ · g7 world export share 1950, 55% 1988, 67% 45% 50% 55% 60% 65% 70% 1948 1958 1968 1978...
TRANSCRIPT
WTO 2.0
Richard BaldwinGraduate Institute, Geneva & University of Oxford
11 March 2013, WTO Secretariat, Geneva
Paradox• WTO nations keep joining, but liberalisation
happens everywhere but Geneva.• Solution:
– WTO is fine for 20th century trade governance; – Becoming irrelevant for much of 21st century trade
governance.
My argument• Globalisation changed
Trade changed: “21st century trade” New demand for trade disciplines New political economy of liberalisation
• WTO did not change Governance shifted away from WTO
• Mega-regionals creating parallel governanceFragmented & exclusionary system possible/likely
run by old Quad (US, EU, Japan & Canada)
• What can be done?
Globalisation changed
1991, 52%
20%
30%
40%
50%
60%
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
Source: WTO database
G7 world export share
1950, 55%
1988, 67%
45%
50%
55%
60%
65%
70%
1948 1958 1968 1978 1988 1998 2008Source: World Databank from 1960; Maddison pre-1960
G7 world GDP share
Bay BBay A
Bay C
Steam revolution
1st unbundling: transportation cheaper
Bay B
Bay A
Bay C
ICT revolution
Bay BBay A
Bay C
2nd unbundling: transmission cheaper
1) Dispersion of production stages.2) Regional clustering (Factory Asia)Coordination constraint eased, butFace-2-face constraint binds.
1) Global dispersion of production. 2) Local clustering into factories.Transportation constraint eased, but coordination constraint binds.
Trade changed
Bay B
Bay A
Bay C
Bay B
Bay A
Bay C
Bay B
Bay A
Bay C
21st century trade = 1) Two-way flows of goods, know-how,
investment, technicians & services; “The nexus”.
2) Firm’s tangible & intangible assets abroad; “offshoring”.
20th century trade = Goods crossing borders
20th: Trade system for selling goods
21th: Trade system for making goods
New governance demands
7
Bay B
Bay A
Bay C
1) Seamless supply chains (supply chain disciplines):Intermediates tariffs, NTBs, transportation & ICT infrastructure, service barriers, business mobility, etc.
2) Doing business abroad (offshoring disciplines)“Behind the border barriers” (BBB) reform, property rights, local business climate, capital mobility, competition policy, SOEs, etc.
New political economy• 20th century trade = Selling things.
– Political economy = exchange of market access.• 21th century trade = Making things.
• Developing nations industrialise by joining a supply chain, not building one.
– Protectionism becomes destruction-ism• Offshoring killed import substitution.
– Political economy = Northern factories for Southern reforms.
• NB: No factories on offer in Geneva
• China is different: ‘My market for your factories & technology’
WTO did not change,Governance shifted away from WTO
• Supply chains tend to be regional, so governance response tends to be regional.– Deep RTAs, BITs, unilateral pro-biz reforms.
• Deep RTA = trade agreement + offshoring agreement.
Mega-regionals• Political economy is more asymmetric:
– Hi-tech HQ nations vs factory nations.• Mega-regionals:
– TPP, EU-US, EU-Canada, Japan-EU, Canada-Japan – Old Quad + offshoring partners.– Tentative prediction: China, India, Brazil won’t
join.• Trajectory of world trade governance
– WTO pillar for 20th century trade– Fragmented & exclusionary pillar for 21st century
trade (Quad de facto in charge).
ERGO• The WTO’s future:
– A) Stay on the 20th century side track;• Allow fragmentation of global trade governance &
exclusion of some major WTO members.
– B) Seek to multilateralise the new supply-chain-trade disciplines.
Case for WTO 2.0• Nature of 21st century trade disciplines is
different (supply-chain and offshoring disciplines).
• Nature of international organisation different too.
WTO 1.0 & 2.0 logic• WTO 1.0 logic (help sell goods):
– Enable & lock in exchange of market access & prevent obvious ‘cheating’ on market opening (subsidies, etc.).
– Win-win, all sell more.
• WTO 2.0 logic (help make goods):– Help developing nations commit to supply-chain
and offshoring disciplines.– Win-win, hi-tech firms more competitive, low-
wage nations industrialise rapidly.
WTO 2.0 structureProvocative conjectures• S&D: No special & differential treatment for
supply-chain and offshoring disciplines.• Membership: No clear logic for universal
membership & complexity argues for more limited membership.– ?“World industrial supply-chain organisation”
• Coverage: Intermediates tariffs to zero, Beyond TRIPs, Beyond AD/CVM, Beyond Customs cooperation, GATS, TRIMs, Investment, Capital Movement.
Conclusion• Doha deadlock + Mega-regionals are likely to
transform world trade governance.• Need to start thinking ahead about shape of
global trade governance.• My paper contain many
assertions/conjectures where reasonable people disagree.
• My goal is to provoke more/clearer thinking on where WTO is going.
Thanks for listening• My CEPR Policy Insight “WTO 2.0”:
– Summary on VoxEU.orghttp://www.voxeu.org/article/wto-20-thinking-ahead-global-trade-governance(link to PDF on this page)
17
2 types of trade, 2 types of institutions
20th century trade
20th century trade: Goods made in one nation sold in another
21st century trade: “Nexus”: International flows of goods, services, capital, know-how, managers, technicians
Baldwin (2012). “WTO 2.0”, CEPR Policy Insight
Which issues for WTO 2.0?Revealed preference evidence from RTAs (share with given provision)
Source: WTO database on RTA provisions
0% 50% 100%
AgricultureAnti-Corruption
Approximation of LegislationAudio Visual
Civil ProtectionCompetition Policy
Consumer ProtectionCultural Cooperation
Data ProtectionEconomic Policy Dialogue
Education and TrainingEnergy
Environmental LawsFinancial Assistance
HealthHuman Rights
Illegal ImmigrationIllicit Drugs
Industrial CooperationInformation SocietyInnovation Policies
InvestmentIPR
Labour Market RegulationMining
Money LaunderingMovement of Capital
Nuclear SafetyPolitical Dialogue
Public AdministrationRegional Cooperation
Research and TechnologySME
Social MattersStatisticsTaxation
TerrorismVisa and Asylum RoW legally
enforceable
EU legallyenforceable
Japan legallyenforceable
US legallyenforceable
Visa
IPR
Movement of capital
Investment
Which issues covered in WTO 2.0?Revealed preference evidence from US RTAs (share with given provision)
0% 80%AD
CustomsCVM
Export TaxesFTA Agriculture
FTA IndustrialGATS
Public ProcurementSPS
State AidSTETBT
TRIMsTRIPs
AgricultureAnti-Corruption
Approximation of…Audio Visual
Civil ProtectionCompetition Policy
Consumer ProtectionCultural Cooperation
Data ProtectionEconomic Policy Dialogue
Education and TrainingEnergy
Environmental LawsFinancial Assistance
HealthHuman Rights
Illegal ImmigrationIllicit Drugs
Industrial CooperationInformation SocietyInnovation Policies
InvestmentIPR
Labour Market RegulationMining
Money LaunderingMovement of Capital
Nuclear SafetyPolitical Dialogue
Public AdministrationRegional Cooperation
Research and TechnologySME
Social MattersStatisticsTaxation
TerrorismVisa and Asylum
US LE frqUS AC frq
Provision in WTO 1.0 but deeper commitments in the RTAs
Provision not in WTO 1.0 (maybe in WTO 2.0)
Legally enforceable
Legally enforceable
Source: WTO database on RTA provisions
Ditto for US, Japan, EU & RoW
0%
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sylu
m
RoW ACfrq
RoW LEfrq
US Japan
EU All others
80%
At least 2/3rd of US & Japan RTAs have legally binding provisions
• Tariffs to zero, • Beyond TRIPs, • Beyond AD, • Beyond CVM, • Beyond Customs cooperation, GATS, TRIMs, • Investment, • Movement of Capital.
Membership & SDT• Successful IOs turn lose-lose into win-win.• Institutions & rules depends on the basis for
cooperation.• GATT:
Exploitation GATT
Smoot-Hawley ExploitationHigh
Low
High LowT a r i f f s
T a
r i f
f s
Nation A
Nation B
GATT answers• Spillovers global, so membership global.• Cooperation disciplines selfish behaviour, so
SDT is a ‘gift’ and thus sensible politically and morally.
Universal membership• WTO 1.0 logic: free market most efficient
– non-discrimination with universal members is natural implication.
• Supply-chain trade is more highly concentrated and not a ‘free market’ outcome.
• Logic of universality is weaker.• Politics suggests membership only for those
heavily engaged in supply-chain trade.
WTO 2.0 answers• Very different basis of cooperation
Rip off
Strict
Lax
Engage Don’t engageAdvance-tech firm choices
Deve
lopi
ng n
atio
ngo
vern
men
t cho
ices
Supply-chain industrialisation
No supply-chain industry
No supply-chain industry
Membership & SDT• Spillovers not global, so logic of universal
membership is weak.– Start big supply-chain traders.– Most WTO members not involved in supply-chain
trade.
• SDT should not be included.– 1) SDT defeats the purpose of the cooperation
(protectionism is destruction-ism);
Implications• But why multilateral?• Network externalities
– 1) Better for MNCs – 2) Better for developing nations in supply chains
• Less lock-in to one high-tech partner
– 3) Better for nations wanting to join a supply chain
The big SCT exporters
Why new organisation? WTO 2.0• Existing WTO is not suited;
– Universal membership;– SDT in the ‘DNA’;– Most members have not ‘stake in the supply-chain
game’.
WTO 2.0 & WTO 1.0 relationship?• International law issues
The tight geographical clustering of manufactures export swings
Global supply-chain trade, 2009
Source: Baldwin and Lopez-Gonzales (2012).
2009
UK
Ger
man
yFr
ance
Italy
Aus
tria
Bel
gium
Bul
garia
Cyp
rus
Cze
ch R
Den
mar
kSp
ain
Esto
nia
Finl
and
Gre
ece
Hun
gary
Irela
ndLi
thua
nia
Luxe
mb
Latv
iaM
alta
NL
Pola
ndPo
rtuga
lR
oman
iaSl
ovak
iaSl
oven
iaSw
eden
Turk
eyR
ussi
aB
razi
lIn
dia
Taiw
anC
hina
Aus
tralia
Japa
nK
orea
Indo
nesi
aU
SM
exic
oC
anad
aR
oW
UK 82 2 1 1 1 2 1 2 1 2 1 1 1 1 1 12 1 22 1 5 4 1 1 1 1 1 2 0 0 0 0 0 0 0 0 0 0 0 0 1 1
Germany 2 79 3 2 10 5 2 2 8 5 2 3 3 3 9 2 3 6 2 3 4 5 2 4 6 5 3 2 1 1 0 1 1 0 0 1 1 0 1 1 2
France 1 1 84 1 1 3 1 1 1 1 2 1 1 1 2 2 0 4 1 3 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 1
Italy 1 1 1 85 1 1 1 3 1 1 1 1 1 3 1 1 1 4 1 7 1 1 1 2 1 4 1 1 0 0 0 0 0 0 0 0 0 0 0 0 1
Austria 0 1 0 0 72 0 1 0 1 0 0 0 0 0 3 0 0 1 0 1 0 1 0 1 1 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Belgium 1 1 1 0 0 66 0 2 1 1 0 0 1 1 1 1 1 7 0 1 3 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Bulgaria 0 0 0 0 0 0 75 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Cyprus 0 0 0 0 0 0 0 71 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Czech R 0 1 0 0 1 0 1 1 72 0 0 0 0 0 1 0 0 0 0 0 0 1 0 0 4 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Denmark 0 0 0 0 0 0 0 0 0 70 0 0 1 0 0 0 1 0 0 0 0 0 0 0 0 0 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Spain 1 1 1 1 0 1 0 1 1 1 85 1 0 1 1 1 0 1 0 2 1 1 6 1 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1
Estonia 0 0 0 0 0 0 0 0 0 0 0 70 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Finland 0 0 0 0 0 0 0 0 0 1 0 3 78 0 0 0 1 0 1 1 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Greece 0 0 0 0 0 0 1 3 0 0 0 0 0 72 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Hungary 0 0 0 0 1 0 0 0 1 0 0 0 0 0 59 0 0 0 0 0 0 0 0 1 2 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Ireland 1 0 0 0 0 1 0 0 0 0 0 0 1 0 0 54 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0
Lithuania 0 0 0 0 0 0 0 0 0 0 0 2 0 0 0 0 62 0 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Luxemb 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 38 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Latvia 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 1 0 78 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Malta 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 61 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
NL 1 2 1 1 1 7 0 2 1 3 1 1 1 1 2 2 1 3 1 1 67 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Poland 0 1 0 0 1 1 1 0 2 1 0 1 0 0 1 1 3 0 2 0 0 77 0 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Portugal 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 80 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Romania 0 0 0 0 0 0 1 1 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 77 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Slovakia 0 0 0 0 1 0 0 0 2 0 0 0 0 0 2 0 0 0 0 0 0 1 0 0 66 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Slovenia 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 69 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Sweden 0 0 0 0 0 0 0 0 0 3 0 2 2 0 0 0 1 1 1 0 0 0 0 0 0 0 73 0 0 0 0 0 0 0 0 0 0 0 0 0 1
Turkey 0 0 0 0 0 0 2 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 1 0 0 0 82 0 0 0 0 0 0 0 0 0 0 0 0 0
Russia 0 1 1 1 1 0 5 0 1 0 0 2 2 2 2 0 17 0 2 0 1 2 0 1 4 1 1 2 93 0 0 0 0 0 0 0 0 0 0 0 1
Brazil 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 0 0 0 1 0 0 92 0 0 0 0 0 0 0 0 0 0 0
India 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 85 0 0 0 0 0 0 0 0 0 0
Taiwan 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 68 1 0 0 0 0 0 0 0 0
China 1 2 1 1 1 1 1 2 3 2 1 2 2 1 4 2 1 3 0 4 3 2 1 1 2 1 2 1 1 1 3 5 88 2 1 4 3 2 4 2 5
Australia 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 89 1 1 1 0 0 0 0
Japan 0 0 0 0 0 1 0 0 1 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5 1 0 92 2 1 0 1 1 2
Korea 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 2 0 0 0 0 0 0 2 1 0 0 78 1 0 1 0 1
Indonesia 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 1 85 0 0 0 0
US 2 1 1 1 1 2 0 2 1 3 1 1 1 2 2 12 0 3 1 1 3 1 0 0 1 1 2 1 0 1 1 3 1 1 1 2 1 91 11 10 5
Mexico 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 76 0 0
Canada 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 81 0
RoW 4 3 3 4 4 4 4 3 2 4 3 5 3 7 3 6 4 2 4 6 7 2 4 3 5 5 4 6 1 3 7 11 4 4 4 7 6 3 2 2 73
RTA coverage of SCT, 2009
Mega Regionals
0%
5%
10%
15%
20%
25% RTA trade coverage (% of world trade)
Trade & development changed• Build versus join a supply chain.
Trade changed
US-EU25
1986
Intra-Asean
Japan-Asean
US-China
0%
10%
20%
30%
40%
50%
60%
1962
1967
1972
1977
1982
1987
1992
1997
2002
2007
2012
Index of intra-industry trade
G7
1990
Asia
LatAm
0
1
1
2
2
3
3
4
4
519
6719
7019
7319
7619
7919
8219
8519
8819
9119
9419
9720
0020
0320
06
Vertical specialisation index
International trade politics changed• Developing nations seek pro-supply chain disciplines. • Unilateralism; BITs, FDI; deep RTAs.
BITs signed
per year
(right scale)
World FDI ($ billion)
1988
0
500
1000
1500
2000
2500
0
50
100
150
200
250
1959
1964
1969
1974
1979
1984
1989
1994
1999
2004
2009
South Asia
Sub-Saharan Africa
Middle East & North Africa
1993
East Asia & Pacific
0
5
10
15
20
25
30
35
40
45
50
19881990199219941996199820002002200420062008
Applied tariffs (%)
RTAs signed (bars, right scale)
Depth of
RTAs signed (line)
1990
0
5
10
15
20
25
30
35
0
50
100
150
200
250
1948
1958
1964
1970
1976
1982
1988
1994
2000
2006
Global manufacturing shares
1990, 65%
G7, 47%
4%
17%China
+ Korea
3%
5% five risers
RoW
0%
10%
20%
30%
40%
50%
60%
70%
80%
1970
1975
1980
1985
1990
1995
2000
2005
2010
Korea
India
TurkeyIndonesia
Poland
Thailand
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
1970
1975
1980
1985
1990
1995
2000
2005
2010
Wor
ld m
anuf
actu
ring
shar
e
KoreaIndiaTurkeyIndonesiaPolandThailand
US
ChinaJapan
Germany
Korea
ItalyUK
France0
200
400
600
800
1000
1200
1400
1600
1800
2000
1970
1975
1980
1985
1990
1995
2000
2005
2010
$ bi
ll 20
05
Regional clustering of stages• Distance still matters (people still expensive to move)
– Supply chains are regional not global; why?– Hypothesis: “Face-2-face” and “Face-2-machine” constraints.