Recent developments in international trade and in the use of trade policy instruments

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1 Recent developments in international trade and in the use of trade policy instruments Short courses for Permanent Missions in Geneva Organised by the Division on Technology and Logistics Delivered by the Division on International Trade in Goods and Services, and Commodities- Trade Analysis Branch Friday, 12 February

2 Structure of this short course: - Introduce two publications - Trade Slowdown - Regional Trade Agreements - Discussion - Questions and Answers Objective: to provide better understanding of what is happening to international trade, and to provide some insights on trade agreements. 2

3 Paragraph 18(d) of the Doha Mandate of UNCTAD XIII provides that UNCTAD should continue to monitor and assess the evolution of the international trading system and its trends from a development perspective 3

4 Purpose of the two publications: Inform by providing factual information on the trends in international trade flows and on the use of trade policy instruments. Format/Content: Published once a year (fall) a) Thematic part b) Series of trade and trade policy indicators Data is presented in a very intuitive format. Target audience: Trade practitioners/policymakers. Non-technical. Feedback, comments, suggestions most welcome. 4

5 FORMAT: Highlights Indicators More detailed discussion 5

6 Geography of trade

7 Network analysis in the trade of parts and components (2004 vs 2014) 7

8 South-South Trade Intraregional with China Other South-South Percentage over total trade East Asia Excl. China China Latin America South Asia Sub-Saharan Africa Transition Ec. W.Asia & N.Africa Source: UNCTAD calculations based on Comtrade data. 8

9 Export Market Share (2014) Export Market Share (2014) Developed 2014 Change to Developing Developing 2004 Motor Vehicles Chemicals Animal Products Transport Equipment Paper Prod, Publishing Machinery Various Precision Instruments Food Products Rubber/Plastics Metal Products Vegetable Products Basic Metals Non-Metallic Mineral Tobacco, Beverages Petroleum Products Electrical Machinery Mining and Metal Ores Wood Prod, Furnitures Tanning Oils and Fats Office Machineries Textiles Apparel Comunication Equip. Oil, Gas, Coal Percentage Source: UNCTAD calculations based on UN Service Trade database. Developed 2014 Change to Developing Developing 2004 Royalties and license fees Financial services Insurance services Cultural and recreational svcs Other business services Communications services Transportation Computer and information svcs Travel Construction services Source: UNCTAD calculations based on UN Service Trade database. Percentage

10 Change in Export Competitiveness top 20 markets (since 2011) 10

11 Export sophistication gap (2014) Much more sophisticated (0.3 to 1) More sophisticated (0.05 to 0.3) Similar sophistication (-0.05 to 0.05) Less sophisticated (-0.3 to -0.05) Much less sophisticated (-1 to -0.3) 11

12 Overall export performance (since 2011) Top 20% 20% to 40% 40% to 60% 60% to 80% Lowest 20% No data 12

13 Importing Region Developed Countries East Asia Latin America South Asia Sub-Saharan Africa Transition Economies W.Asia & N.Africa Developed Countries East Asia Exporting Region Latin America South Asia Sub- Saharan Africa Transition Economies W.Asia & N.Africa

14 Multilateral Liberalization MFN Tariffs (%) Preferential Liberalization Preferential Tariffs (%) Agriculture Simple avg. Weighted avg. Agriculture Simple avg. Weighted avg. Manufacturing Simple avg. Weighted avg. Manufacturing Simple avg. Weighted avg. Natural Resources Simple avg. Weighted avg. Natural Resources Simple avg. Weighted avg. Source: UNCTAD calculations based on UN COMTRADE and UNCTAD TRAINS data Source: UNCTAD calculations based on UN COMTRADE and UNCTAD TRAINS data 14

15 Free trade and remaining tariffs Free Trade MFN Preferential Percent of total trade Average Tariff on Non-Free Trade Simple Average Trade Weighed Percent Agriculture Agriculture Manufacturing Manufacturing Natural Resources Natural Resources Source: UNCTAD calculations based on UN COMTRADE and UNCTAD TRAINS data 15

16 Export restrictiveness (2014) Very Restrictive (more than 7.5%) Restrictive (5% to 7.5%) Average (2.5% to 5%) Almost Free (less than 2.5%) No data 16

17 True tariff water Most constrained (less than 5%) Very constrained (5% to 10%) Constrained (10% to 20%) Slightly constrained (20% to 30%) Not constrained (more than 30%) No data 17

18 NTMs in World Trade, by Sector Frequency Index Coverage Ratio Percent Agriculture Manufacturing Natural Resources SPS TBT Price Control Quantity Control Finance Export Other SPS TBT Price Control Quantity Control Finance Export Other SPS TBT Price Control Quantity Control Finance Export Other Source: UNCTAD calculations based on UN COMTRADE and UNCTAD TRAINS data 18

19 Real effective exchange rate Very strong appreciation (more than 20%) Appreciation (5% to 20%) No substnatial change (up to 5%) Depreciation (5% to 20%) Strong depreciation (more than 20%) No data 19

20 Trade Slow Down 20

21 Annual Growth Rate (%) Trade Elasticity Trade Slow Down Figure 1: World Trade Takes a Pause After a strong rebound global trade growth has been sluggish Figure 2: Trade Elasticity to Global Output Trade growth has become much less reponsive to output growth 35 GWP Growth Trade Growth Exports over GWP Source: UNCTAD calculations based on UNCTADSTAT data Source: UNCTAD calculations based on UNCTADSTAT data 1 21

22 Trade is an indicator of Globalization Globalization period: ( ) Rapid growth in emerging markets Favorable geopolitics New production models Technology/Innovation Lower trade costs Commodities boom De-Globalization: (2011-?) change in some of these trends, other factors? reflects in trade patterns and trade policy responses 22

23 23

24 Intermediates Imports over Manufacturing Exports (%) Tariff (%) Number of Measures in Force Figure 4: Shrinking Chains Trade for unit of output in on a downward trend Figure 5: Contrasting Trade Policies Tariffs have gone down, non-tariff measures not so China Korea (Rep. of) Rest of East Asia 60 6 Non-Tariff Measures Applied Tariff MFN Tariff Source: UNCTAD calculation based on COMTRADE data Source: UNCTAD calculations based on UNCTAD TRAINS and WTO I-TIP data 24

25 Policy implications Trade opportunities influence development perspective of many developing countries. Substantial risk of retrenching / economic fragmentation (inequality across countries/migration) Historically de-globalization periods have not been good but there are areas where trade opportunities still are strong GVC model to other geographic areas/sector Regional integration (Africa) Services trade Small enterprises (e-commerce) Not only about trade policy or trade costs. Need a new trade and development agenda. 25

26 Trade Agreements 26

27 Preferential Trade Agreements Extremely important (more than 75%) Very important (50% to 75%) Important (25% to 50%) Relatively important (10% to 25%) Not important (less than 10%) No data 27

28 Deep Trade Agreements Extremely important (more than 75%) Very important (50% to 75%) Important (25% to 50%) Relatively important (10% to 25%) Not important (less than 10%) No data 28

29 PTAs in Force Percentage Trade Agreements Trade under PTAs Goods only Goods and Services Deep Ag. Bilateral Pref. Unilateral Pref Source: UNCTAD calculations based on WTO Regional Trade Agreements Information System Source: UNCTAD calculations based on WTO RTAIS and UN COMTRADE database 0 29

30 Motives of PTA Facilitate trade, foster economic integration, geopolitics. Advantages vs multilateral approach: Political economy (bilateral concessions, limits free riding) Deeper integration (required by parties, GCV) Self selected clubs (only interested parties, easier to find mutual ground) 30

31 Predicted Value of Trade among PTAs Members Chart 3: PTAs and Trade Potential Not all PTAs deliver high level of trade among members EU PTAs create trade not as much as they facilitate trade 26 COMESA ECOWAS CIS MERCOSUR ASEAN NAFTA 24 Natural trading partners? Observed Value of Trade among PTASs Members Source: UNCTAD calculations 31

32 Kilometers (000) Chart 2: Regional No More Geographical distance among PTAs' members has increased Simple Average Trade Weighted Average Source: UNCTAD calculations 4 3 Types of PTAs: Regional (natural traders) Hub and Spoke (Bilateral) Mega Regionals (Rules) 32

33 Chart 4: Tariff Preferences Still Matter PTAs' members often have substantial tariff advantages vs non-members COMESA MERCOSUR CIS Agriculture Manufacturing Relative preferential margin to members (percentage) PTAs still provide substantial tariff advantages ECOWAS ASEAN NAFTA EU Source: UNCTAD calculations 33

34 Share of World Population Chart 5: Mega-Regionals Mega-regionals are substantially larger in all dimensions About creating and harmonizing large TPP TTIP 12 markets COMESA ASEAN CIS EU NAFTA 9 6 Trade deals not = to free trade ECOWAS MERCOSUR Note: Size of Circles is proportional to intra-ptas trade Share of World GDP Source: UNCTAD calculations 3 0 caution in assessing their impacts 34

35 Questions/comments: Thank you

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