Multilateralising 21st Century
Regionalism
Richard Baldwin
Professor of International Economics
Graduate Institute, Geneva
University of Oxford
OECD Global Trade Forum, Paris 2014
Multilateralising Regionalism:
20th vs 21st century
Basic ‘logic thread’ of talk:
• 20th & 21st century globalisation are different,
• So 20th & 21st century trade are different,
• So 20th & 21st century RTAs are different,
• So 20th & 21st multilateralisation are different.
Main message:
- Mistake to think about MR21 in same terms as
MR20.
- A few blue-skies ideas at the end.
Globalisation changed
20%
0%
0%
G7 nations’ share of global GDP, 1820 – 2010.
5%
6 Risers,
9%
3%
1970
10%
1820
1839
1858
1877
1896
1915
1934
1953
1972
1991
2010
10%
China,
19%
2010
1820,
22%
RoW
30%
2005
20%
40%
2000
30%
G7, 47%
50%
1995
2010,
50%
40%
60%
1990
50%
70%
1985
60%
1990,
65%
1980
70%
80%
1975
1988,
67%
World manufacturing share
80%
Source: unstats.un.org; 6 risers = Korea, India,
Indonesia, Thailand, Turkey, Poland
G7 nations’ share of global manufacturing, 1970
– 2010.
Globalisation’s 1st & 2nd unbundlings:
3 cascading constraints
Cost of moving:
High
High
High
=
Preglobalised
world
High
=
1st
unbundling
=
2nd
unbundling
Steam revolution
High
Low
Stage A
Stage B
Stage C
ICT revolution
High
Low
Low
Stage
A
Stage
B
Stage C
Globalisation as 2 unbundlings
1st unbundling:
Steam revolution & transport costs.
2nd unbundling:
ICT revolution & coordination costs.
20th vs 21st century trade
Stage
A
Stage
B
Goods crossing
borders
Stage
A
Stage
C
Stage A
Stage C
Stage
B
Stage
C
Goods, know-how,
ideas, capital & people
crossing borders
“Trade-investment-services-IP nexus”
Stage B
20th vs 21st century trade
20th century trade:
Trade helps sell goods.
21st century trade:
Trade helps make goods.
21st century trade needs different disciplines
1) “Supply-chain disciplines”
Connecting factories
- Tariffs;
- Transportation services;
- Business mobility;
- Communication services.
2) “Offshoring disciplines”
Doing business abroad
- International investment;
- Application of home’s technology abroad;
- Local availability of business services.
Bay B
20th vs 21st regionalism
20th century RTAs:
Mostly about tariff preferences.
21st century RTAs:
Mostly about underpinning GVCs.
Keystone difference: 20th vs 21st RTAs
Lack of discrimination technology
Lack of discrimination technology
• 21st century RTAs are much less discriminatory.
• Many 21st century provisions impinge on:
–
–
–
–
Firms
Services
Capital
Knowhow
• KEY: Hard to define nationality of these in modern
world.
• Thus RTA provisions tend to be nondiscriminatory.
• Unilateral reform embedded in an RTA.
20th vs 21st discrimination ‘technology’
20th century RTAs:
“Rules of origin” fairly easy to enforce.
21st century RTAs:
Rules-of-origin for firms, services,
capital, and IP hard to enforce.
Different politics
20th century RTAs:
“My market for yours”.
21st century RTAs:
“Southern reform for Northern factories”.
Multilateralisation is different
Multilateralising 20th century RTAs:
• Mostly about reducing discrimination.
Multilateralising 21st century RTAs:
• Most about realising network externalities
via common rules.
So what?
•
•
•
•
Globalisation is different;
Trade is different;
RTAs are different;
Multilateralisation is different.
Topline messages:
• Old regionalism concepts are mis-leading, or
insufficient when thinking about 21st RTAs and
megaregionals.
• Multilateralising 21st century regionalism is about
maximising network externalities via common rules.
Questions:
1. Whose rules?
- US, Japan, EU, China?
- Developing country appropriateness?
2. Which rules need multilateralisation?
Conceptual framework
What should be multilateralised?
1. Diversity of preferences.
- Favours little multilateralisation.
2. Network externalities & scale economies.
- Favours multilateralisation at higher-than-bilateral level.
Organise thinking: What to multilateralise?
Harmonization
cost
High
National
rules
Low
Non-issue
Low
Mega-regional or global
multilateralisation
Spontaneous
adoption of global
rules
High
Gain from
common rules
More research needed
Economics research:
1. Identify RTA provisions with negative spillovers for
third-nations.
2. Look for impact of common rules (i.e. network
effects of RTAs).
Legal research
• How different are the deep provisions in existing
RTAs?
• Can a ‘lowest common denominator’ be identified?
Blue skies ideas
Global discussions: Fragmented and fraught with
misunderstandings
• GVC role in development.
– Africa & South America vs Asia & Central Europe
• Impact of megaregionals (TPP, TTIP).
Why not hold APEC-like (but global) discussion on
megaregionalism and its multilateralisation?
 Why not let WTO organise this?
Invert the order
Today trajectory:
- Complete TPP, TTIP, EU-Japan, etc.
- THEN discuss multilateralisation.
A better way:
- Study/discuss multilateralisation
- WHILE negotiating TPP, TTIP, etc.
END
• Thank you for listening.
Extra slides (for possible Q&A use)
Trade changed
60%
Index of intra-industry trade
USEU25
50%
40%
IntraAsean
30%
JapanAsean
20%
1986
10%
USChina
1962
1967
1972
1977
1982
1987
1992
1997
2002
2007
2012
0%
What is new?
North-South production sharing,
mostly in machinery sectors
21st century regionalism
Starts late 1980s, early 1990s
250
600
500
50
Number of
offshoring and
supply-chain
provisions in RTAs
400
300
2500
200
New
BITs
signed
FDI
45
2000
40
35
150
1500
Number of RTAs
30
100
50
1989
500
1988
0
10
5
0
1959
1964
1969
1974
1979
1984
1989
1994
1999
2004
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
South
Asia
1994
1000 20
15
0
Middle
East &
North
Africa
25
200
100
Applied tariffs, simple mean,
all goods (%)
0
SubSahara
n
Africa
East
Asia &
Pacific
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
700
21st century RTA provisions:
Offshoring & Supply-Chain Disciplines
Examples of supply-chain disciplines in RTAs
1. Customs
cooperation.
Provision of information; publication on the Internet of
new laws and regulations; training
2. Beyond WTO
GATS liberalisation.
Liberalisation of trade in services
3. FTA industrial.
Tariff liberalization on industrial goods; elimination of nontariff measures
4. Visa disciplines.
Business visa, etc.
Source: From WTO database on RTA provisions.
My classification of provisions.
21st century RTA provisions:
Supply-Chain & Offshoring Disciplines
Examples of offshoring disciplines in RTAs
1. TRIMs
Provisions concerning requirements for local content and
export performance of FDI
2. GATS
Liberalisation of trade in services
3. TRIPs
Harmonisation of standards; enforcement; national treatment,
most-favoured nation treatment
4. Competition Policy Measures to proscribe anticompetitive business conduct;
harmonisation of competition laws; establishment or
maintenance of an independent competition authority
5. IPR
Accession to international treaties not referenced in the TRIPs
Agreement
6. Investment
Information exchange; Development of legal frameworks;
Harmonisation & simplification of procedures; National
treatment; dispute settlement
7. Capital movement Liberalisation of capital movement; prohibition of new
restrictions
8. Approximation of
Application of EC legislation in national legislation
laws
Which Deep
RTA
provisionsm
matter?
Revealed
preference
evidence
from US
RTAs (share
with given
provision)
Visa and Asylum
Terrorism
Taxation
Statistics
Social Matters
SME
Research and Technology
Regional Cooperation
Public Administration
Political Dialogue
Nuclear Safety
Movement of Capital
Money Laundering
Mining
Labour Market Regulation
IPR
Investment
Innovation Policies
Information Society
Industrial Cooperation
Illicit Drugs
Illegal Immigration
Human Rights
Health
Financial Assistance
Environmental Laws
Energy
Education and Training
Economic Policy Dialogue
Data Protection
Cultural Cooperation
Consumer Protection
Competition Policy
Civil Protection
Audio Visual
Approximation of…
Anti-Corruption
Agriculture
TRIPs
TRIMs
TBT
STE
State Aid
SPS
Public Procurement
GATS
FTA Industrial
FTA Agriculture
Export Taxes
CVM
Customs
AD
0%
Legally enforceable
US LE frq
US AC frq
Not legally
enforceable
Provision not
in WTO 1.0
(maybe in
WTO 2.0)
Provision in
WTO 1.0 but
deeper
commitments
in the RTAs
80%
Source: WTO database on RTA provisions
Visa
Japan’s RTAs
in WTO
Database
Visa and Asylum
Terrorism
Taxation
Statistics
Social Matters
SME
Research and Technology
Regional Cooperation
Public Administration
Political Dialogue
Nuclear Safety
Movement of Capital
Money Laundering
Mining
Labour Market…
IPR
Investment
Innovation Policies
Information Society
Industrial Cooperation
Illicit Drugs
Illegal Immigration
Human Rights
Health
Financial Assistance
Environmental Laws
Energy
Education and Training
Economic Policy…
Data Protection
Cultural Cooperation
Consumer Protection
Competition Policy
Civil Protection
Audio Visual
Approximation of…
Anti-Corruption
Agriculture
TRIPs
TRIMs
TBT
STE
State Aid
SPS
Public Procurement
GATS
FTA Industrial
FTA Agriculture
Export Taxes
CVM
Customs
AD
0%
Movement
of capital
IPR
Japan (legally
enforceable)
Japan
(mentioned)
80%
Investment
EU
80%
0%
EU AC frq
0%
80%
EU LE frq
0%
AD
Customs
CVM
Export Taxes
FTA Agriculture
FTA Industrial
GATS
Public Procurement
SPS
State Aid
STE
TBT
TRIMs
TRIPs
Agriculture
Anti-Corruption
Approximation of…
Audio Visual
Civil Protection
Competition Policy
Consumer Protection
Cultural Cooperation
Data Protection
Economic Policy…
Education and Training
Energy
Environmental Laws
Financial Assistance
Health
Human Rights
Illegal Immigration
Illicit Drugs
Industrial Cooperation
Information Society
Innovation Policies
Investment
IPR
Labour Market…
Mining
Money Laundering
Movement of Capital
Nuclear Safety
Political Dialogue
Public Administration
Regional Cooperation
Research and…
SME
Social Matters
Statistics
Taxation
Terrorism
Visa and Asylum
US AC frq
AD
Customs
CVM
Export Taxes
FTA Agriculture
FTA Industrial
GATS
Public Procurement
SPS
State Aid
STE
TBT
TRIMs
TRIPs
Agriculture
Anti-Corruption
Approximation of…
Audio Visual
Civil Protection
Competition Policy
Consumer Protection
Cultural Cooperation
Data Protection
Economic Policy…
Education and Training
Energy
Environmental Laws
Financial Assistance
Health
Human Rights
Illegal Immigration
Illicit Drugs
Industrial Cooperation
Information Society
Innovation Policies
Investment
IPR
Labour Market…
Mining
Money Laundering
Movement of Capital
Nuclear Safety
Political Dialogue
Public Administration
Regional Cooperation
Research and…
SME
Social Matters
Statistics
Taxation
Terrorism
Visa and Asylum
0%
AD
Customs
CVM
Export Taxes
FTA Agriculture
FTA Industrial
GATS
Public Procurement
SPS
State Aid
STE
TBT
TRIMs
TRIPs
Agriculture
Anti-Corruption
Approximation of…
Audio Visual
Civil Protection
Competition Policy
Consumer Protection
Cultural Cooperation
Data Protection
Economic Policy…
Education and Training
Energy
Environmental Laws
Financial Assistance
Health
Human Rights
Illegal Immigration
Illicit Drugs
Industrial Cooperation
Information Society
Innovation Policies
Investment
IPR
Labour Market…
Mining
Money Laundering
Movement of Capital
Nuclear Safety
Political Dialogue
Public Administration
Regional Cooperation
Research and…
SME
Social Matters
Statistics
Taxation
Terrorism
Visa and Asylum
80%
AD
Customs
CVM
Export Taxes
FTA Agriculture
FTA Industrial
GATS
Public Procurement
SPS
State Aid
STE
TBT
TRIMs
TRIPs
Agriculture
Anti-Corruption
Approximation of…
Audio Visual
Civil Protection
Competition Policy
Consumer Protection
Cultural Cooperation
Data Protection
Economic Policy…
Education and Training
Energy
Environmental Laws
Financial Assistance
Health
Human Rights
Illegal Immigration
Illicit Drugs
Industrial Cooperation
Information Society
Innovation Policies
Investment
IPR
Labour Market…
Mining
Money Laundering
Movement of Capital
Nuclear Safety
Political Dialogue
Public Administration
Regional Cooperation
Research and…
SME
Social Matters
Statistics
Taxation
Terrorism
Visa and Asylum
US
RTAs: US, Japan, EU & RoW
Japan
80%
Jpn AC frq
US LE frq
Jpn LE frq
80%
All others
RoW AC
frq
RoW LE
frq
Source: Baldwin (2012), “WTO 2.0”, CEPR Policy Insight
Only beyond WTO measures
Visa
Movement of capital
IPR
Investment
Competition policy
RoW legally
enforceable
Visa and Asylum
Terrorism
Taxation
Statistics
Social Matters
SME
Research and Technology
Regional Cooperation
Public Administration
Political Dialogue
Nuclear Safety
Movement of Capital
Money Laundering
Mining
Labour Market Regulation
IPR
Investment
Innovation Policies
Information Society
Industrial Cooperation
Illicit Drugs
Illegal Immigration
Human Rights
Health
Financial Assistance
Environmental Laws
Energy
Education and Training
Economic Policy Dialogue
Data Protection
Cultural Cooperation
Consumer Protection
Competition Policy
Civil Protection
Audio Visual
Approximation of Legislation
Anti-Corruption
Agriculture
EU legally
enforceable
Japan legally
enforceable
US legally
enforceable
0%
50%
100%
Preference margins are small
Import shares by preference margins, selected nations
100%
90%
80%
70%
60%
Above 10% or
specific
5% to 10%
Below 5%
50%
40%
30%
20%
Partial preference
No preference
granted (MFN > 0)
MFN zero
10%
0%
Source: Carpenter & Lendle (2010)
Reverse trade diversion?!
Estimated extra trade due to RTA
Mercosur
AFTA
NAFTA
EEC
SAFTA
CACM
GCC
CEMAC
Euro-Meds
PATCRA
ECOWAS
CIS
EFTA
Andean
WAEMU
CER
CEFTA
SADC
COMESA
CARICOM
-100% -50%
Trade diversion (extra-RTA imports)
Trade creation (Intra-RTA)
0%
50% 100% 150% 200% 250% 300% 350% 400%
Figure 13: Recent estimates of trade
creation and trade diversion.
Source: Acharya et al. (2011).