Multilateralising 21 st Century Regionalism Richard Baldwin - PowerPoint PPT Presentation

Multilateralising 21 st Century Regionalism Richard Baldwin Professor of International Economics Graduate Institute, Geneva & University of Oxford Talk based on: Baldwin, Richard (2011). “21st Century Regionalism: Filling the gap between 21st century trade and 20th century trade rules”, CEPR Policy Insight No. 56. And http://www.oecd.org/tad/events/OECD ‐ gft ‐ 2014 ‐ multilateralising ‐ 21st ‐ century ‐ regionalism ‐ baldwin ‐ paper.pdf

Multilateralising Regionalism: 20 th vs 21 st century Basic ‘logic thread’ of talk: • 20 th & 21 st century globalisation are different, • So 20 th & 21 st century trade are different, • So 20 th & 21 st century RTAs are different, • So 20 th & 21 st multilateralisation are different. Main message: ‐ Mistake to think about MR21 in same terms as MR20. ‐ More economic & legal research needed.

Multilateralising regionalism • Old idea (2007 WTO conference; 2009 CUP book). • Basic thrust: Regionalism is here to stay (old debate is moot), so think about how to reduce tariff discrimination from RTAs. • Much progress: Rules of origin, rules of cumulation, integration of bilateral RTAs.

Multilateralising regionalism: 20 th & 21 st century RTAs • 20 th century RTAs mostly about tariff preferences. – MR is mostly about reducing discrimination. • Extend tariff preferences, rules of origin, rules of cumulation. • 21 st century RTAs are ALSO about deeper disciplines that support ‘global value chains’. – Many ‘deep’ RTA provisions are non ‐ discriminatory by nature, or much less obviously discriminatory. • More like ‘biased multilateralism’ than ‘preferential’. – Decimation technology weak: Nationality of firms, capital & services? • This is key premise of my paper. – Paper tries to think thru implications for policy & analysis.

GVC Revolution 80% 1988, 80% 1990, 67% 70% 65% World manufacturing share 70% 60% 60% 50% G7, 47% 50% 2010, 40% 40% 50% RoW 30% 30% 1820, 20% 20% China, 22% 19% 10% 10% 5% 6 Risers, 3% 9% 0% 0% 1970 1975 1980 1985 1990 1995 2000 2005 2010 1820 1839 1858 1877 1896 1915 1934 1953 1972 1991 2010 Source: unstats.un.org; 6 risers = Korea, India, Indonesia, Thailand, Turkey, Poland G7 nations’ share of global GDP, 1820 – 2010. G7 nations’ share of global manufacturing, 1970 – 2010.

Global GDP shares, 1960 ‐ 2012 80% 67% Post ‐ 1990: 70% • G7 share loss goes to 10 60% developing nations. G7, • RoW see little change. 50% 48% 40% RoW 10 30% gainers 27% 20% 10% 11% 0% 1990 China, Brazil, Mexico, Poland, India, Turkey, Russia, Korea, Indonesia, Venezuela

People in poverty (under $2/day) Millions under $2/day by national income class Lo- 1,600 Post 1993 middle 1,400 • Hi ‐ middle poverty plummets. 1993 1,200 ‐ 650 million fewer poor! 1,000 Hi- • Others’ poverty keeps rising. Middle 800 600 Low 400 200 - 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2010 1990

21 st century regionalism Starts late 1980s, early 1990s 250 2500 Applied tariffs, simple mean, 700 50 all goods (%) FDI 45 Number of 600 New 200 2000 offshoring and BITs South 40 Middle Asia 500 signed supply-chain 35 East & provisions in RTAs North 150 1500 1994 400 30 Africa Number of RTAs 25 300 100 1000 20 200 Sub- 15 Sahara n 50 500 10 100 East 1989 1988 Africa Asia & 5 0 Pacific 0 0 0 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004

Preference margins are small Import shares by preference margins, selected nations 100% 90% Above 10% or specific 80% 5% to 10% 70% 60% Below 5% 50% Partial preference 40% 30% No preference granted (MFN > 0) 20% MFN zero 10% 0% Source: Carpenter & Lendle (2010)

20 th vs 21 st century globalisation: 3 cascading constraints Cost of moving: Pre ‐ = High High High globalised world Steam revolution = 1 st Stage A Stage B High High unbundling Stage C Low ICT revolution = 2 nd Stage Stage High Stage C B A unbundling Low Low

20 th century comparative advantage Stage Stage Stage Stage Goods crossing A B A B borders Stage Stage C C • Goods = ‘bundle’ on national knowhow, labour, capital, institutions, etc. • National economies only connected via competition in goods markets.

21 st century comparative advantage 1) Supply ‐ chain linkages: Cross ‐ border flows of goods, know ‐ how, ideas, capital & Stage A people. Stage B 2) Doing business abroad: Application of tangible & intangible assets in developing Stage C nations. • Goods = mixture of national knowhow, labour, capital, institutions, etc. (e.g. hi ‐ tech + low wages). • National economies connected via much richer flows: knowhow, goods, services, people, capital, etc.

Why it matters • OLD: Study national performance looking at national factors. – ‘Team Japan’ versus ‘Team Germany’  Regress growth/exports/etc on national right ‐ hand side variables. • NEW: Study national performance looking at regional and national factors. – ‘Factory Asia’ versus ‘Factory North America’  Regress growth/exports/etc on national & regional right ‐ hand side variables and/or allow interactions depending upon supply ‐ chain exposure.

21 st century trade needs different disciplines “Trade ‐ investment ‐ services ‐ IP nexus” 1) “Supply-chain disciplines” Necessary trade & service links Connecting factories - Trade policy barriers; Bay B - 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.

21st century regionalism: Disciplines as a package • Supply ‐ chain and offshoring disciplines work best when packaged together. • 21 st century RTAs are a convenient package. – Hi ‐ tech firms like the package; – Developing nations want to join GVCs. • “Deep RTAs” = 21 st century RTAs is solution. • WTO stuck on Doha, so 21st century regionalism: 1. Explosion of BITs 1990s. 2. Deep RTAs. 3. Unilateral liberalisation in developing nations.

What are 21 st century RTA provisions?

21 st century RTA provisions: Offshoring & Supply ‐ Chain Disciplines Examples of supply ‐ chain disciplines in RTAs 1. Customs Provision of information; publication on the Internet of cooperation. new laws and regulations; training 2. Beyond WTO Liberalisation of trade in services GATS liberalisation. 3. FTA industrial. Tariff liberalization on industrial goods; elimination of non ‐ tariff measures 4. Visa disciplines. Business visa, etc. Source: From WTO database on RTA provisions. My classification of provisions.

21 st 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

Lack of discrimination technology for deep RTA provisions • Supply ‐ chain disciplines assure rapid movement of goods, ideas, people and capital. • Goal of developing nation is to fosters supply ‐ chain industrialisation. • Discrimination is not usually useful. • Discrimination is difficult to determine for: – Services, capital, firms, communication. • Liberalisation often embedded in host nation regulations whose justification excludes discrimination.

Visa and Asylum Terrorism Taxation Legally enforceable US LE frq Which deep Statistics Social Matters US AC frq SME Research and Technology Mentioned RTA Regional Cooperation Public Administration Political Dialogue Nuclear Safety provisionsm Movement of Capital Money Laundering Mining Provision not Labour Market Regulation IPR matter? in WTO 1.0 Investment Innovation Policies (maybe in Information Society Industrial Cooperation Revealed Illicit Drugs WTO 2.0) Illegal Immigration Human Rights Health preference Financial Assistance Environmental Laws Energy Education and Training evidence Economic Policy Dialogue Data Protection Cultural Cooperation Consumer Protection from US Competition Policy Civil Protection Audio Visual Approximation of… RTAs (share Anti-Corruption Agriculture TRIPs TRIMs with given TBT STE Provision in State Aid SPS WTO 1.0 but provision) Public Procurement GATS deeper FTA Industrial FTA Agriculture Export Taxes commitments CVM Customs in the RTAs AD 0% 80% Source: WTO database on RTA provisions