WORLD TRADE ORGANIZATION (WTO)
18 JULY 2013
FAST-CHANGING NATURE OF WORLD TRADE POSES NEW POLICY CHALLENGES, REPORT SAYS.
The future of world trade, and the global trading system, will be shaped by a range of
economic, political and social factors, including technological
innovation, shifts in production and consumption patterns, and
demographic change, according to the 2013 World Trade Report published
by the WTO on 18 July 2013. Director-General Pascal Lamy said: “One
element clearly stands out in the Report, and that is the importance
of trade for development”. “The transformation of trade has been
underway for some time,” said WTO Director-General Pascal Lamy. “It is
manifested most clearly in wider geographical participation in trade
and the rise of international supply chain production. One element
clearly stands out in the Report, and that is the importance of trade
for development. The forecasts and reflections contained in this
report do not foresee a reverse of globalization. But we should
remember that the gains it brings could be nullified or at least
mitigated if short-term pressures are allowed to override long-term
interests, and if its social consequences in terms of the unevenness
of its benefits are neglected. This is why renewed efforts are needed
to revive the vibrancy of the global trading system.” One of the most
significant drivers of change is technology. Not only have revolutions
in transport and communications transformed our world but new
developments, such as 3D printing, and the continuing spread of
information technology will continue to do so. Trade and foreign
direct investment, together with a greater geographical spread of
income growth and opportunity, will integrate a growing number of
countries into more extensive international exchange. Higher incomes
and larger populations will put new strains on both renewable and
non-renewable resources, generating even greater need for careful
resource management. More effort must also be devoted to addressing
environmental issues, the report says. Economic and political
institutions will continue to have a significant role to play in
shaping international co-operation, including in trade, as will the
interplay of cultural customs among countries. Non-tariff measures
will gain in prominence and regulatory convergence will likely
constitute the greatest challenge to the trading system of the future.
The future of trade will also be affected by the extent to which
politics and policies successfully address issues of growing social
concern, such as the availability of jobs and persistent income
inequality, as well as environmental concerns, say the authors of the
World Trade Report 2013.
economic, political and social factors, including technological
innovation, shifts in production and consumption patterns, and
demographic change, according to the 2013 World Trade Report published
by the WTO on 18 July 2013. Director-General Pascal Lamy said: “One
element clearly stands out in the Report, and that is the importance
of trade for development”. “The transformation of trade has been
underway for some time,” said WTO Director-General Pascal Lamy. “It is
manifested most clearly in wider geographical participation in trade
and the rise of international supply chain production. One element
clearly stands out in the Report, and that is the importance of trade
for development. The forecasts and reflections contained in this
report do not foresee a reverse of globalization. But we should
remember that the gains it brings could be nullified or at least
mitigated if short-term pressures are allowed to override long-term
interests, and if its social consequences in terms of the unevenness
of its benefits are neglected. This is why renewed efforts are needed
to revive the vibrancy of the global trading system.” One of the most
significant drivers of change is technology. Not only have revolutions
in transport and communications transformed our world but new
developments, such as 3D printing, and the continuing spread of
information technology will continue to do so. Trade and foreign
direct investment, together with a greater geographical spread of
income growth and opportunity, will integrate a growing number of
countries into more extensive international exchange. Higher incomes
and larger populations will put new strains on both renewable and
non-renewable resources, generating even greater need for careful
resource management. More effort must also be devoted to addressing
environmental issues, the report says. Economic and political
institutions will continue to have a significant role to play in
shaping international co-operation, including in trade, as will the
interplay of cultural customs among countries. Non-tariff measures
will gain in prominence and regulatory convergence will likely
constitute the greatest challenge to the trading system of the future.
The future of trade will also be affected by the extent to which
politics and policies successfully address issues of growing social
concern, such as the availability of jobs and persistent income
inequality, as well as environmental concerns, say the authors of the
World Trade Report 2013.
Main points of the Report:
TRENDS IN INTERNATIONAL TRADE
•Dramatic decreases in transport and communication costs have been the
driving forces behind today’s global trading system. Geopolitics has
also played a decisive role in advancing and reinforcing these
structural trends.
•In the last 30 years, trade in merchandise and commercial services
have increased by about 7 per cent per year on average, reaching a
peak of $18 trillion and $4 trillion respectively in 2011. When trade
is measured in value-added terms, services play a larger role.
•Between 1980 and 2011, developing economies raised their share in
world exports from 34 per cent to 47 per cent and their share in world
imports from 29 per cent to 42 per cent. Asia is playing an increasing
role in world trade.
•For a number of decades, world trade has grown on average nearly
twice as fast as world production. This reflects the increasing
prominence of international supply chains and hence the importance of
measuring trade in value-added terms.
•Simulations show that in a dynamic economic and open trade
environment, developing countries are likely to outpace developed
countries in terms of both export and GDP growth by a factor of two to
three in future decades. By contrast, their GDP would grow by less
than half this rate in a pessimistic economic and protectionist
scenario, and export growth would be lower than in developed
countries.
FUNDAMENTAL ECONOMIC FACTORS AFFECTING INTERNATIONAL TRADE
•Demographic change affects trade through its impact on countries’
comparative advantage and on import demand. An ageing population,
migration, educational improvements and women’s participation in the
labour force will all play a role in years to come, as will the
continuing emergence of a global middle class.
•Investment in physical infrastructure can facilitate the integration
of new players into international supply chains. The accumulation of
capital and the build-up of knowledge and technology associated with
investment, particularly foreign direct investment, can also enable
countries to move up the value chain by altering their comparative
advantage.
•New players have emerged among the countries driving technological
progress. Countries representing 20 per cent of the world’s total
population accounted for about 70 per cent of research and development
(R&D) expenditure in 1999, but only about 40 per cent in 2010.
Technology spill-overs are largely regional and stronger among
countries connected by production networks. In addition to the
traditionally R&D intensive manufacturing sectors, knowledge-intensive
business services are emerging as key drivers of knowledge
accumulation.
•The shale gas revolution portends dramatic shifts in the future
pattern of energy production and trade as North America becomes energy
sufficient. Increasing water scarcity in the future in large swathes
of the developing world may mean that the long-term decline in the
share of food and agricultural products in international trade might
be arrested or even reversed.
•Ample opportunities exist for policy actions, at the national and
multilateral level, to reduce transportation costs and offset the
effect of higher fuel costs in the future – improving the quantity and
quality of transportation infrastructure, successfully concluding the
Doha Round negotiations on trade facilitation, introducing more
competition on transport routes, and supporting innovation.
•Improvements in institutional quality, notably in relation to
contract enforcement, can reduce the costs of trade. Institutions are
also a source of comparative advantage, and trade and institutions
strongly influence each other.
TRADE OPENNESS AND THE BROADER SOCIO-ECONOMIC CONTEXT
•Successful integration into global markets requires the constant need
for individuals and societies to cope with changes in the competitive
environment. These adjustments can put labour markets under strain and
can shape attitudes towards trade openness. Job losses in the
short-run can exert pressure on governments to use barriers to trade.
In the end, it is open economies with a well-trained workforce and a
business-friendly environment as well as an effective social
protection system that tend to be better placed to adjust
successfully.
•Societies’ transition to a sustainable development path requires
careful management of the multi-faceted relationship between trade and
the environment in order to maximize the environmental benefits that
open trade can bring. Competitiveness concerns may result in
governments incorporating trade-restrictive non-tariff measures into
environmental policies as a means of compensating affected firms and
sectors. Such green incentive packages may undermine their
environmental effectiveness and exacerbate their potentially adverse
trade effects.
•The expansion of trade needs to be supported by a stable financial
and monetary system – delivering a sufficient volume of trade finance
at an affordable cost, particularly for developing countries, and
macroeconomic policies that promote exchange rate stability.
PROSPECTS FOR MULTILATERAL TRADE CO-OPERATION
•Some of the main trends which will affect world trade in the coming
decades are the emergence of international value chains, the rise of
new forms of regionalism, the growth of trade in services, the greater
incidence of non-tariff measures, higher and more volatile commodity
prices, the rise of emerging economies, and evolving perceptions about
the link between trade, jobs and the environment.
•These trends will raise a number of challenges for the WTO. Trade
opening, especially in the context of non-tariff measures beyond WTO
disciplines, is taking place outside of the WTO. A greater focus on
regulatory convergence will therefore be required. Interdependence
between trade in goods and trade in services is increasing. Frictions
in natural resource markets expose some regulatory gaps. The emergence
of new players affects global trade governance in ways that need to be
better understood. Coherence between WTO rules and non-trade
regulations in other multilateral fora needs to be maintained.
•Addressing these challenges will involve reviewing and possibly
expanding the WTO agenda. Traditional market access issues will not
disappear but new issues, particularly with regard to non-tariff
measures, are emerging. Internal governance matters as well as the
role of the WTO in global governance may need to be addressed. An
important issue will be how to “multilateralize” the gains made in
preferential trade agreements and to secure regulatory convergence.
FULL DOCUMENT: http://www.wto.org/english/res_e/booksp_e/world_trade_report13_e.pdf
TRENDS IN INTERNATIONAL TRADE
•Dramatic decreases in transport and communication costs have been the
driving forces behind today’s global trading system. Geopolitics has
also played a decisive role in advancing and reinforcing these
structural trends.
•In the last 30 years, trade in merchandise and commercial services
have increased by about 7 per cent per year on average, reaching a
peak of $18 trillion and $4 trillion respectively in 2011. When trade
is measured in value-added terms, services play a larger role.
•Between 1980 and 2011, developing economies raised their share in
world exports from 34 per cent to 47 per cent and their share in world
imports from 29 per cent to 42 per cent. Asia is playing an increasing
role in world trade.
•For a number of decades, world trade has grown on average nearly
twice as fast as world production. This reflects the increasing
prominence of international supply chains and hence the importance of
measuring trade in value-added terms.
•Simulations show that in a dynamic economic and open trade
environment, developing countries are likely to outpace developed
countries in terms of both export and GDP growth by a factor of two to
three in future decades. By contrast, their GDP would grow by less
than half this rate in a pessimistic economic and protectionist
scenario, and export growth would be lower than in developed
countries.
FUNDAMENTAL ECONOMIC FACTORS AFFECTING INTERNATIONAL TRADE
•Demographic change affects trade through its impact on countries’
comparative advantage and on import demand. An ageing population,
migration, educational improvements and women’s participation in the
labour force will all play a role in years to come, as will the
continuing emergence of a global middle class.
•Investment in physical infrastructure can facilitate the integration
of new players into international supply chains. The accumulation of
capital and the build-up of knowledge and technology associated with
investment, particularly foreign direct investment, can also enable
countries to move up the value chain by altering their comparative
advantage.
•New players have emerged among the countries driving technological
progress. Countries representing 20 per cent of the world’s total
population accounted for about 70 per cent of research and development
(R&D) expenditure in 1999, but only about 40 per cent in 2010.
Technology spill-overs are largely regional and stronger among
countries connected by production networks. In addition to the
traditionally R&D intensive manufacturing sectors, knowledge-intensive
business services are emerging as key drivers of knowledge
accumulation.
•The shale gas revolution portends dramatic shifts in the future
pattern of energy production and trade as North America becomes energy
sufficient. Increasing water scarcity in the future in large swathes
of the developing world may mean that the long-term decline in the
share of food and agricultural products in international trade might
be arrested or even reversed.
•Ample opportunities exist for policy actions, at the national and
multilateral level, to reduce transportation costs and offset the
effect of higher fuel costs in the future – improving the quantity and
quality of transportation infrastructure, successfully concluding the
Doha Round negotiations on trade facilitation, introducing more
competition on transport routes, and supporting innovation.
•Improvements in institutional quality, notably in relation to
contract enforcement, can reduce the costs of trade. Institutions are
also a source of comparative advantage, and trade and institutions
strongly influence each other.
TRADE OPENNESS AND THE BROADER SOCIO-ECONOMIC CONTEXT
•Successful integration into global markets requires the constant need
for individuals and societies to cope with changes in the competitive
environment. These adjustments can put labour markets under strain and
can shape attitudes towards trade openness. Job losses in the
short-run can exert pressure on governments to use barriers to trade.
In the end, it is open economies with a well-trained workforce and a
business-friendly environment as well as an effective social
protection system that tend to be better placed to adjust
successfully.
•Societies’ transition to a sustainable development path requires
careful management of the multi-faceted relationship between trade and
the environment in order to maximize the environmental benefits that
open trade can bring. Competitiveness concerns may result in
governments incorporating trade-restrictive non-tariff measures into
environmental policies as a means of compensating affected firms and
sectors. Such green incentive packages may undermine their
environmental effectiveness and exacerbate their potentially adverse
trade effects.
•The expansion of trade needs to be supported by a stable financial
and monetary system – delivering a sufficient volume of trade finance
at an affordable cost, particularly for developing countries, and
macroeconomic policies that promote exchange rate stability.
PROSPECTS FOR MULTILATERAL TRADE CO-OPERATION
•Some of the main trends which will affect world trade in the coming
decades are the emergence of international value chains, the rise of
new forms of regionalism, the growth of trade in services, the greater
incidence of non-tariff measures, higher and more volatile commodity
prices, the rise of emerging economies, and evolving perceptions about
the link between trade, jobs and the environment.
•These trends will raise a number of challenges for the WTO. Trade
opening, especially in the context of non-tariff measures beyond WTO
disciplines, is taking place outside of the WTO. A greater focus on
regulatory convergence will therefore be required. Interdependence
between trade in goods and trade in services is increasing. Frictions
in natural resource markets expose some regulatory gaps. The emergence
of new players affects global trade governance in ways that need to be
better understood. Coherence between WTO rules and non-trade
regulations in other multilateral fora needs to be maintained.
•Addressing these challenges will involve reviewing and possibly
expanding the WTO agenda. Traditional market access issues will not
disappear but new issues, particularly with regard to non-tariff
measures, are emerging. Internal governance matters as well as the
role of the WTO in global governance may need to be addressed. An
important issue will be how to “multilateralize” the gains made in
preferential trade agreements and to secure regulatory convergence.
FULL DOCUMENT: http://www.wto.org/english/res_e/booksp_e/world_trade_report13_e.pdf
