TRADE POLICY AND SUSTAINABLE DEVELOPMENT MEETING
Geneva, 6 -- 8 October 2015
THE TRADE SLOWDOWN, TRADE DISTORTIONS, AND THE TPP
Implications for Developing Countries
Session-4
M r. S im o n E V E N E T T
Academic Director, St. Gallen MBA Programme
University of St. Gallen (HSG)
and
Director
Professor of International Trade and Economic Development
Swiss Institute for International Economics, St. Gallen
The Trade Slowdown, Trade
Distortions, and the TPP
Implications for Developing Countries
Simon J. Evenett
October 2015
Agenda in this presentation
•
What key recent developments in the world trading system
are of interest to developing countries?
•
Focus in this presentation on:
1. The Global Trade Slowdown.
2. Trade distortions as if the real world really mattered.
3. The Signing of TPP.
The Global Trade Slowdown
Simon J. Evenett
October 2015
Export volumes flat
1.4
1.2
1
0.8
0.6
0.4
0.2
0
20
00
20
01
20
02
20
03
World exports
20
04
20
05
20
06
20
07
20
08
20
09
Industrial country exports
20
10
20
11
20
12
20
13
20
14
Developing country exports
Source: CPB World Trade Monitor, latest data available (July 2015)
20
15
Export prices down
1.2
1
0.8
0.6
0.4
0.2
0
20
00
20
01
20
02
20
03
World exports
20
04
20
05
20
06
20
07
20
08
20
09
Industrial country exports
20
10
20
11
20
12
20
13
20
14
Developing country exports
Source: CPB World Trade Monitor, latest data available (July 2015)
20
15
It’s not just a commodity price story
1.2
1.1
1
1
0.8
0.9
0.6
0.8
0.4
0.7
0.2
0.6
0
20
00
20
01
20
02
20
03
Fuels (LHS axis)
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
Primary commodities excluding fuels (LHS axis)
20
12
20
13
20
14
20
15
Manufactures (RHS axis)
Source: CPB World Trade Monitor, latest data available (July 2015)
Regional price variation probably reflects
commodity composition of exports
1.2
1.0
0.8
0.6
0.4
0.2
0.0
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
Emerging economies
Emerging Asia
Latin America
Africa and Middle East
20
10
20
11
20
12
20
13
20
14
Central and Eastern Europe
Source: CPB World Trade Monitor, latest data available (July 2015)
20
15
Doubts about one leading explanation:
Changing Chinese sourcing patterns
Source: Constantinescu, Mattoo, and Ruta (18 January 2015).
Trade Distortions—with a special
focus on the LDCs
Simon J. Evenett
October 2015
The LDC export boom before the crisis
450
400
350
USD billions
300
250
200
150
100
50
0
2000
2001
2002
2003
2004
2005
2006
Worldwide total LDC exports
2007
2008
2009
2010
Pre-crisis trend
2011
2012
2013
Impact of foreign trade distortions and
trade reforms on a LDC exporter
Traditional market
access barrier
LDC
Exporter
i
Importer j
Bailed out nonexporting firms
Exporter
k
Export
incentives
Trade distortions faced by LDC exporters
100%
90%
117, 21%
155, 27%
168
80%
209
Rest of World
70%
Japan
USA
60%
84, 15%
9
10
12
16
20
50%
37, 7%
25
40%
27
326
41, 7%
30%
64
82, 14%
53, 9%
Non-export subsidies (state aids)
Export tax or restriction
Export subsidy
Local content requirement
Migration limit
Other
Russia
Brazil
China
Argentina
EU28
India
Rest of World
G20
20%
Tariff increase
LDCs
102
10%
0%
G20-ROW
split
More LDC exports to third markets face
subsidised foreign rivals
Higher share is better news for LDCs
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
2009
2010
2011
2012
2013
Share of LDC exports benefiting from foreign liberalisation
Share of LDC exports unaffected by import restrictions
Share of LDC exports unaffected by third party export incentives
Share of LDC exports unaffected by importer bailouts
LDC trading partners responsible for
most adverse export incentives
Rank
Trading
partner
Number of adverse
export incentives
Number of products
(tariff lines) covered
% tariff lines exported
by LDCs covered by
these schemes
1
Brazil
3
347
75.93
2
China
6
262
57.33
3
India
23
239
52.30
4
Uruguay
7
89
19.47
5
Egypt
1
44
9.63
6
Thailand
1
33
7.22
7
Colombia
1
4
0.88
8
EC
1
3
0.66
9
USA
1
2
0.44
10
Switzerland
1
1
0.22
G-20 members indicated in red.
Foreign trade distortions reduced LDC
exports by 31% during 2009-2013
450
70
USD billions, nomimal dollars
60
Billions of US dollars
20.6%
400
50
40
30
20
350
300
11.2%
250
5.7%
200
150
100
50
10
0
0
2009
2010
Export loss $bn
2011
2012
2013
Export gain $bn
Worldwide total LDC exports
Pre-crisis trend
LDC exports absent crisis-era trade distortions
The Signing of TPP
Simon J. Evenett
October 2015
How should outsiders react to the
signing of TPP.
Reasons not to panic:
1. We don’t know all the details yet.
2. Ratification still has to take place.
3. Date coming into force is, even on the most optimistic
accounts, not before 2017.
4. Long phase-in times for some products.
5. Lots of products enter major TPP members are zero tariffs
and are bound there by WTO obligations (see next slide).
Many imports into the larger TPP members
haven’t faced tariffs for years
TPP
member
Percent of imported
merchandise goods
where TPP member
gave up tariffs after
Uruguay Round
Percent of imported
agricultural goods
where TPP member
gave up tariffs after
Uruguay Round
Australia
18.8
31.3
Canada
35.8
46.1
Japan
55.9
34.1
USA
47.4
30.2
Source: WTO World Tariff Profiles 2014. Available at
https://www.wto.org/english/res_e/booksp_e/tariff_profiles14_e.pdf
TPP inflicts small losses on outsiders
TPP Outsider
Loss in
Loss as
GDP (2007 % of GDP
US$
billion)
Number of days of
economic growth
needed to make up
loss
China
-34.7
-0.2
11.2
India
-2.7
-0.1
2.7
Indonesia
-2.2
-0.1
11.3
Korea
-2.8
-0.1
18.1
Thailand
-2.4
-0.1
63.6
Russia
-1.4
0.0
N.A.
Europe
-3.7
0.0
3.5
Sources: For second and third columns see figure 2.5 of
http://www.pecc.org/state-of-the-region-report-2014/265-state-of-the-region/2014-2015/595-chapter-2-can-rcep-and-the-tpp-be-path-ways-to-ftaap .
To calculate the data in the fourth column the GDP growth forecasts from this week’s World Economic Outlook
were used along with the baseline GDP reported in the source for columns two and three.
Implications for Developing Countries
Simon J. Evenett
October 2015
Recommendations
1.
•
•
2.
3.
Follow trade slowdown carefully. Key questions are:
How much of it is commercial policy-induced as opposed to other
more macroeconomic drivers?
How much commercial policy will change as a result of the
slowdown.
– Will excess capacity in key commodity sectors trigger trade
distortions as they are in steel?
Spread of state export incentives is worrying—suggests larger
distortions on export side than previously thought.
Don’t overreact to TPP—follow the signatories’ performance to see if
there evidence that binding behind-the-border policies pays.
– Binding and reform are related but distinct policy choices.