Structural transformation in the era of international production: Risks, Opportunities and Policy Challenges

Transcription

1 Structural transformation in the era of international production: Risks, Opportunities and Policy Challenges Piergiuseppe Fortunato WTO, Aid-for-Trade workshop, November 218

2 Trade and Structural Change To what extent has trade promoted structural change? Which countries/social groups have benefited from deeper trade integration? Under what conditions can trade really sustain the SDGs? Addressing to these question is crucial to dissipate the fog of war

3 The Times They Are a-changin'

4 The rise of the South? Share of world economy, RIBS BRICS BRICS

5 The rise of the South? Trade and Development Report 218 Share of BRICS versus RIBS in world economy, Total gross exports, selected country groups and China, B. Percentage of world gross exports Shares in top 2, TNCs profits, selected country groups and China, Percentage Trillions of current dollars RIBS BRICS Developed countries First-tier NIEs China Rest of the world Other developing coutries and economies in transition China First-tier NIEs Developed countries

6 Hollowing out of domestic value added in manufacturing (TiVA) Changes in value added shares in gross exports, (Percentage points) FOREIGN DOMESTIC Agriculture and extractives Manufacturing Services Argentina Brazil China India Indonesia Mexico Republic of Korea Russian Federation Saudi Arabia South Africa Turkey Rest of the World Developing economies Developed economies

7 Export structure by technological levels 1 A. Africa.6 B. Latin America and the Caribbean C. China E. West Asia F. South, South-East and East Asia a Medium- and high-skill and technology-intensive manufactures (percentage) Processed commodities and low-skill manufactures (percentage) Unprocessed commodities (percentage) Value of total exports (trillions of current dollars, right scale)

8 The Free Trade Delusion The rapid development of China (and more generally East and South-East Asia) has not triggered significant positive structural changes in the export structures of other developing regions; rather, it has intensified their role as providers of commodities GVCs fostered more participation to international trade & eased the access to markets, but many developing countries remained locked-in low value added activities (comparative advantage related to low labor cost) while firms at the top of the chains usually headquartered in AEs took the lion shares

9 Headquarters and owners gain producers lose (WIOD)

10 Trade and Development Report 218 Increasing Market Concentration- Trade is a big firms game Average shares of top 1 per cent, 5 per cent and 25 per cent exporters in country total export, C. Developed countries D. Developing countries Top 1% Top 5% Top 25% 4 Top 1% Top 5% Top 25%

11 Increasing rents - A winner takes-all global economy Table 2.3 Top 2, TNCs key indicators, (Trillions of dollars) Net sales or revenues Net income or profits Ratio of profit to revenue 5.7% 5.4% 6.8% 7.% Source: UNCTAD database of consolidated financial statements, based on Thomson Reuters Worldscope. Note: Data relate to annual averages.

12 Trade and Development Report 218 The Free Trade Delusion [cont.] - Rising profits, growing inequality Top 2, TNCs profit and the global labour income share, (Percentage of world gross product) Change compared to benchmark Top 2, TNCs net income Labour income Capital income excluding top 2, TNCs net income

13 New technologies and the role of intangibles New digital technologies (e.g. big data and cloud computing) are making pre- and postproduction segments more important where intangible assets are used more intensively Intangible assets are a source of market power and rents Most evident in platform-centred GVCs where control of data is an asset used to reshape the market and reinforce dominant positions thanks to network effect, asymettries of information and multisided practices (e.g. Uber, e-bay, RBB, Amazon ) True even in more traditional manufacture-centred VCs where increasing shares of returns are now related to the ownership of intangibles

14 Trade and Development Report 218 Payments related to the use of foreign IPR, selected country groups, A. Payments 1% 4 Percentage 9% 8% 7% 6% 5% 4% 3% 2% 1% $ billion % Other developing countries Ireland, Luxembourg, the Netherlands, Singapore and Switzerland Other developed countries Value (right scale)

15 The rules of the game Trade agreements are no longer about free trade. Paradoxically, even as tangible barriers to trade imposed by governments (such as tariffs and quotas) have been declining over the last 3 years or so, intangible barriers to competition rooted in free trade treaties have surged to the benefit of large firms. The objective of FTAs changed: From reducing barriers at the border to reducing (harmonizing) domestic regulations From reducing import protectionism to promoting investment protectionism the increased legal protection of intellectual property granted by stringent patent rules (e.g. TRIPS) establishment of state-investor dispute settlement mechanisms and international investor tribunals (e.g. ISDS) From broadening to scope for efficiency enhancing trade to broadening scope for intangible intra-firm trade (and therefore transfer pricing practices)

16 Trade and Development Report 218 The paradox of Free Trade Agreements WTO-plus and WTO-extra policy areas included in trade agreements (number of treaties) 3 Included Legally enforceable Tariffs on industrial goods Tariffs on agricultural goods Customs ExportTaxes Antidumping Technical barriers to trade Sanitary/Phytosynitary State aid GATS Countervailing measures TRIPs Public procurement State trading enterprises TRIMs Competition Policy Investment Movement of Capital IPR Environmental Laws Information Society Visa and Asylum Regional Cooperation Agriculture Labour Market Regulation Research and Technology Economic Policy Dialogue Industrial Cooperation Energy Education and Training Public Administration Statistics Consumer Protection Cultural Cooperation Political Dialogue SME Social Matters Financial Assistance Taxation Anti Corruption Data Protection Approximation of Legislation Health Innovation Policies Illicit Drugs Audio Visual Human Rights Mining Illegal Immigration Money Laundering Terrorism Nuclear Safety Civil Protection A. WTO-plus policy areas in trade agreements B. WTO-extra policy areas in trade agreements

17 Trade and Development Report 218 Payments related to the use of foreign IPR, selected country groups, A. Payments 1% 4 Percentage 9% 8% 7% 6% 5% 4% 3% 2% 1% $ billion % Other developing countries Ireland, Luxembourg, the Netherlands, Singapore and Switzerland Other developed countries Value (right scale)

18 Trade and Development Report 218 Income of the United States on direct investment abroad, selected countries, first quarter 2 to first quarter 218 (billons of dollars) A. Selected offshore financial centres B. Other economies 1 1 2Q1 22Q2 24Q3 26Q4 29Q1 211Q2 213Q3 215Q4 218Q1 2Q1 22Q2 24Q3 26Q4 29Q1 211Q2 213Q3 215Q4 218Q1 Germany China Japan Netherlands Ireland Luxembourg Bermuda Switzerland

19 Making Trade Work for Development Trade and Development Report 218 Need to rethink multilateralism in progressive ways (beyond the dichotomy between corporate cosmopolitanism and regressive nationalism) A Havana Charter for the 21 st Century Active macro policy a healthy trade system emerges from healthy economies that are creating decent jobs (austerity damages trade) Active distributional policy decent jobs pay decent wages and curtail corporate rent seeking (regressive tax policies damage trade) Active industrial policy productive investment, technological upgrading and strong productivity growth underpins healthy economies need policy space to manage these (rigged markets damage trade) Active infrastructure policy infrastructure is key to sustained growth but there is more to this than bankability of projects (poorly planned infrastructure damages trade)