(Based loosely on Bagwell, Bown and Staiger Is the WTO Passé? ) Robert W. Staiger. September

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1 W F UK T A? I WTO? (Based loosely on Bagwell, Bown and Staiger Is the WTO Passé? ) Robert W. Staiger Dartmouth College September Staiger (Dartmouth College) I WTO? September / 38

2 Introduction Individuals are the ultimate drivers of globalization, but governments set the rules of the game the rules can be very important to the outcome Staiger (Dartmouth College) I WTO? September / 38

3 Introduction Individuals are the ultimate drivers of globalization, but governments set the rules of the game the rules can be very important to the outcome Since its inception, the GATT/WTO has been a place where governments come to agree on the rules of globalization The rules solve problems that would arise under law of the jungle these rules define the World Trading System Staiger (Dartmouth College) I WTO? September / 37

4 Introduction Individuals are the ultimate drivers of globalization, but governments set the rules of the game the rules can be very important to the outcome Since its inception, the GATT/WTO has been a place where governments come to agree on the rules of globalization The rules solve problems that would arise under law of the jungle these rules define the World Trading System The GATT/WTO is member-driven, and has traditionally been about shallow integration seeking mutually advantageous trade liberalization as judged by the member governments a focus on tariffs and other trade impediments imposed at the border Staiger (Dartmouth College) I WTO? September / 37

5 The World Trading System according to the GATT/WTO Purpose (WTO Preamble):...Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services... = To raise standards of living and expand the production of and trade in goods and services Means (WTO Preamble):...contributing to these objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations,... = MFN, reciprocal tariff negotiations, together with rules that secure the property rights over market access implied by negotiated tariff commitments Staiger (Dartmouth College) I WTO? September / 38

6 Challenges to the World Trading System With the most recent wave of globalization... rise of offshoring and global supply chains rise of large emerging economies...the WTO seems to be stumbling Staiger (Dartmouth College) I WTO? September / 38

7 Challenges to the World Trading System With the most recent wave of globalization... rise of offshoring and global supply chains rise of large emerging economies...the WTO seems to be stumbling...a clear evolution from shallow to deep integration initial negotiations over Transatlantic Trade and Investment Partnership (TTIP) between the United States and the EU the completed negotiation of the Trans Pacific Partnership (TPP) to some extent in the WTO Staiger (Dartmouth College) I WTO? September / 38

8 Challenges to the World Trading System With the most recent wave of globalization... rise of offshoring and global supply chains rise of large emerging economies...the WTO seems to be stumbling...a clear evolution from shallow to deep integration initial negotiations over Transatlantic Trade and Investment Partnership (TTIP) between the United States and the EU the completed negotiation of the Trans Pacific Partnership (TPP) to some extent in the WTO...and a strong backlash against at least some dimensions of globalization from those who have not shared in the gains from those who feel their country s sovereignty has been eroded Staiger (Dartmouth College) I WTO? September / 38

9 What s at Stake? What s at stake? the future path of globalization which international institutions will set the rules of globalization what trade-offs we will face in our globalized world Staiger (Dartmouth College) I WTO? September / 37

10 What s at Stake? What s at stake? the future path of globalization which international institutions will set the rules of globalization what trade-offs we will face in our globalized world What can Brexit negotiations achieve? an articulation of the appropriate limits of deep integration Staiger (Dartmouth College) I WTO? September / 37

11 What s at Stake? What s at stake? the future path of globalization which international institutions will set the rules of globalization what trade-offs we will face in our globalized world What can Brexit negotiations achieve? an articulation of the appropriate limits of deep integration As Paul Romer once said... A crisis is a terrible thing to waste. Staiger (Dartmouth College) I WTO? September / 37

12 Do We Need a New Global Order? Now more than ever, globalization s challenges demand a nuanced response based on a solid understanding of the problems Staiger (Dartmouth College) I WTO? September / 38

13 Do We Need a New Global Order? Now more than ever, globalization s challenges demand a nuanced response based on a solid understanding of the problems Important to understand why GATT worked the economic environment it is best suited for whether changes in the economic environment imply the need for changes in design of trade agreements Staiger (Dartmouth College) I WTO? September / 38

14 It All Depends on How We Got Here Two interpretations of how we arrived here Staiger (Dartmouth College) I WTO? September / 38

15 It All Depends on How We Got Here Two interpretations of how we arrived here One possibility: the rise of offshoring and BRICS has altered (deepened) the kinds of rules needed to avoid the law of the jungle Shallow integration in deep trouble, its problems not fixable A trade-off between sovereignty and globalization now unavoidable Staiger (Dartmouth College) I WTO? September / 38

16 It All Depends on How We Got Here Two interpretations of how we arrived here One possibility: the rise of offshoring and BRICS has altered (deepened) the kinds of rules needed to avoid the law of the jungle Shallow integration in deep trouble, its problems not fixable A trade-off between sovereignty and globalization now unavoidable A second possibility: the rise of offshoring and BRICS has created major new challenges for the WTO, but the kinds of rules needed to avoid the law of the jungle are still the same Shallow integration is in trouble, but its problems are fixable A trade-off between sovereignty and globalization is avoidable, but only if the WTO is supported and its approach strengthened Staiger (Dartmouth College) I WTO? September / 38

17 It All Depends on How We Got Here Two interpretations of how we arrived here One possibility: the rise of offshoring and BRICS has altered (deepened) the kinds of rules needed to avoid the law of the jungle Shallow integration in deep trouble, its problems not fixable A trade-off between sovereignty and globalization now unavoidable A second possibility: the rise of offshoring and BRICS has created major new challenges for the WTO, but the kinds of rules needed to avoid the law of the jungle are still the same Shallow integration is in trouble, but its problems are fixable A trade-off between sovereignty and globalization is avoidable, but only if the WTO is supported and its approach strengthened To evaluate these possibilities, first need to understand how GATT worked Staiger (Dartmouth College) I WTO? September / 38

18 How GATT Worked GATT created in 1947 to solve the central problem of the day under the law of the jungle : not how to get to free trade, but... Staiger (Dartmouth College) I WTO? September / 38

19 How GATT Worked GATT created in 1947 to solve the central problem of the day under the law of the jungle : not how to get to free trade, but... the problem of cross-border policy externalities Haberler Report Staiger (Dartmouth College) I WTO? September / 37

20 How GATT Worked GATT created in 1947 to solve the central problem of the day under the law of the jungle : not how to get to free trade, but... the problem of cross-border policy externalities Haberler Report Externalities lead to ineffi cient choices, and cross-border policy externalities lead to internationally ineffi cient policies GATT s purpose: to reduce tariffs and expand market access to levels that internalized the negative externalities that large countries imposed on one another under their law-of-the-jungle trade policy choices Staiger (Dartmouth College) I WTO? September / 37

21 How GATT Worked GATT created in 1947 to solve the central problem of the day under the law of the jungle : not how to get to free trade, but... the problem of cross-border policy externalities Haberler Report Externalities lead to ineffi cient choices, and cross-border policy externalities lead to internationally ineffi cient policies GATT s purpose: to reduce tariffs and expand market access to levels that internalized the negative externalities that large countries imposed on one another under their law-of-the-jungle trade policy choices but economics a crucial point: under the law of the jungle, only trade policies, not domestic policies, will be set ineffi ciently Staiger (Dartmouth College) I WTO? September / 37

22 The GATT Bargaining Forum Economists propose two methods to correct such ineffi ciencies: tax the choices that lead to (negative) externalities; or let the parties bargain to effi cient choices Staiger (Dartmouth College) I WTO? September / 38

23 The GATT Bargaining Forum Economists propose two methods to correct such ineffi ciencies: tax the choices that lead to (negative) externalities; or let the parties bargain to effi cient choices In creating GATT, countries did not create a supranational taxing authority to pursue the first method They created a bargaining forum to pursue the second method Staiger (Dartmouth College) I WTO? September / 38

24 The GATT Bargaining Forum Economists propose two methods to correct such ineffi ciencies: tax the choices that lead to (negative) externalities; or let the parties bargain to effi cient choices In creating GATT, countries did not create a supranational taxing authority to pursue the first method They created a bargaining forum to pursue the second method For bargaining to be effective, need secure property rights over (in this case) market access Govs agreed to bargain over tariffs (shallow integration), but what about domestic policies? Staiger (Dartmouth College) I WTO? September / 38

25 GATT s Shallow Integration Approach For tariff commitments to imply secure market access, need rules to ensure that Govs use tariffs, not domestic policies, to respond to trade pressures... various escape clauses and flexibilities for tariffs nondiscrimination clause for domestic policies and a nonviolation right Staiger (Dartmouth College) I WTO? September / 38

26 GATT s Shallow Integration Approach For tariff commitments to imply secure market access, need rules to ensure that Govs use tariffs, not domestic policies, to respond to trade pressures... various escape clauses and flexibilities for tariffs nondiscrimination clause for domestic policies and a nonviolation right...and that when Govs respond to trade pressures with tariffs, they do not reimpose externalities if raise tariffs, must compensate impacted trading partners Staiger (Dartmouth College) I WTO? September / 38

27 GATT s Shallow Integration Approach For tariff commitments to imply secure market access, need rules to ensure that Govs use tariffs, not domestic policies, to respond to trade pressures... various escape clauses and flexibilities for tariffs nondiscrimination clause for domestic policies and a nonviolation right...and that when Govs respond to trade pressures with tariffs, they do not reimpose externalities if raise tariffs, must compensate impacted trading partners Responding to trade pressures by weakening domestic standards Race to the Bottom Shallow integration A major race to the bottom would undermine GATT bargaining forum; possibility of race to the bottom mitigated by nondiscrimination clause and policed by nonviolation claims Staiger (Dartmouth College) I WTO? September / 38

28 A Market for Market Access To exchange market access, need to agree on price/terms of exchange could bargain freely, but that can be cumbersome Staiger (Dartmouth College) I WTO? September / 38

29 A Market for Market Access To exchange market access, need to agree on price/terms of exchange could bargain freely, but that can be cumbersome To minimize haggling over price, GATT adopted norm of reciprocity: if A wants to buy $10 million worth of market access from B, then A must supply $10 million worth of its own market access if B wants to buy the $10 million worth of market access that A is offering, then B must supply the $10 million worth of its own market access that A wants Staiger (Dartmouth College) I WTO? September / 38

30 The Power of Reciprocity Under reciprocity, if tariffs of A and B are ineffi ciently high to the same broad degree... the market for market access should clear and the reciprocity norm should work well to speed up bargains Staiger (Dartmouth College) I WTO? September / 38

31 The Power of Reciprocity Under reciprocity, if tariffs of A and B are ineffi ciently high to the same broad degree... the market for market access should clear and the reciprocity norm should work well to speed up bargains In 1947, aftermath of Smoot-Hawley Tariff Wars tariffs still ineffi ciently high across the board Staiger (Dartmouth College) I WTO? September / 38

32 The Power of Reciprocity Under reciprocity, if tariffs of A and B are ineffi ciently high to the same broad degree... the market for market access should clear and the reciprocity norm should work well to speed up bargains In 1947, aftermath of Smoot-Hawley Tariff Wars tariffs still ineffi ciently high across the board And over 6 decades things worked remarkably well Staiger (Dartmouth College) I WTO? September / 38

33 The Power of Reciprocity Under reciprocity, if tariffs of A and B are ineffi ciently high to the same broad degree... the market for market access should clear and the reciprocity norm should work well to speed up bargains In 1947, aftermath of Smoot-Hawley Tariff Wars tariffs still ineffi ciently high across the board And over 6 decades things worked remarkably well But reciprocity also served a more subtle role... Staiger (Dartmouth College) I WTO? September / 38

34 What You Get... To appreciate, need to realize that all GATT bargains are nondiscriminatory if A negotiates a tariff cut with B, exporters from C also enjoy B s lower tariff how to handle free riders? several techniques, but reciprocity helps... Staiger (Dartmouth College) I WTO? September / 38

35 What You Get... To appreciate, need to realize that all GATT bargains are nondiscriminatory if A negotiates a tariff cut with B, exporters from C also enjoy B s lower tariff how to handle free riders? several techniques, but reciprocity helps... If a Gov offers as much market access as it secures abroad in negotiation, its own tariff cuts boost productivity of its exporters by enough to supply the new imports demanded by its trading partner minimal free riding on GATT market access bargains Staiger (Dartmouth College) I WTO? September / 38

36 ...Is What You Give In GATT/WTO bargaining, what you get is what you give Staiger (Dartmouth College) I WTO? September / 38

37 ...Is What You Give In GATT/WTO bargaining, what you get is what you give So yes, GATT worked, but only for those countries who bargained their own tariffs down: industrialized countries developing countries were given a pass from reciprocal bargaining Staiger (Dartmouth College) I WTO? September / 38

38 ...Is What You Give In GATT/WTO bargaining, what you get is what you give So yes, GATT worked, but only for those countries who bargained their own tariffs down: industrialized countries developing countries were given a pass from reciprocal bargaining As a group developing countries experienced few trade gains from 60 years of GATT/WTO-sponsored tariff negotiations Staiger (Dartmouth College) I WTO? September / 38

39 What About The Rest? The central message of Behind the Scenes at the WTO: the real world of international trade negotiations: Developed countries are benefitting from the WTO, as are a handful of (mostly upper) middle-income countries. The rest, including the great majority of developing countries, are not. It is as simple as that....based on interviews with WTO delegates and Secretariat staff but this position is also supported by econometric analysis = Task of shallow integration not complete Staiger (Dartmouth College) I WTO? September / 38

40 What About The Rest? The central message of Behind the Scenes at the WTO: the real world of international trade negotiations: Developed countries are benefitting from the WTO, as are a handful of (mostly upper) middle-income countries. The rest, including the great majority of developing countries, are not. It is as simple as that....based on interviews with WTO delegates and Secretariat staff but this position is also supported by econometric analysis = Task of shallow integration not complete average US tariff is 3.5%, EU is 5.2%, but... India is 48.6%, Brazil is 31.4%, South Africa is 19% and China is 10% And much of gain would likely go to developing/emerging countries But there s a catch... Staiger (Dartmouth College) I WTO? September / 38

41 The Challenge of the BRICS......developed countries may have already achieved the degree of openness that they desire Two latecomer issues then follow: bargaining power developed countries may have little left to offer developing countries in reciprocal bargains, hence diffi culty in negotiating reductions in developing country tariffs globalization fatigue developed country tariffs may be too low for world in which developing countries fully integrated into trading system Staiger (Dartmouth College) I WTO? September / 38

42 The Challenge of the BRICS......developed countries may have already achieved the degree of openness that they desire Two latecomer issues then follow: bargaining power developed countries may have little left to offer developing countries in reciprocal bargains, hence diffi culty in negotiating reductions in developing country tariffs globalization fatigue developed country tariffs may be too low for world in which developing countries fully integrated into trading system These two issues not unfamiliar: a struggle with latecomers in evidence from very early in GATT/WTO history Staiger (Dartmouth College) I WTO? September / 38

43 The Challenge of the BRICS......developed countries may have already achieved the degree of openness that they desire Two latecomer issues then follow: bargaining power developed countries may have little left to offer developing countries in reciprocal bargains, hence diffi culty in negotiating reductions in developing country tariffs globalization fatigue developed country tariffs may be too low for world in which developing countries fully integrated into trading system These two issues not unfamiliar: a struggle with latecomers in evidence from very early in GATT/WTO history But scale of latecomers problem in Doha is unprecedented Staiger (Dartmouth College) I WTO? September / 38

44 The Challenge of the BRICS......developed countries may have already achieved the degree of openness that they desire Two latecomer issues then follow: bargaining power developed countries may have little left to offer developing countries in reciprocal bargains, hence diffi culty in negotiating reductions in developing country tariffs globalization fatigue developed country tariffs may be too low for world in which developing countries fully integrated into trading system These two issues not unfamiliar: a struggle with latecomers in evidence from very early in GATT/WTO history But scale of latecomers problem in Doha is unprecedented still needed: a substantial reorientation of trade patterns further away from North-North and toward North-South and South-South Staiger (Dartmouth College) I WTO? September / 38

45 ...And a Deeper Challenge A (shallow) problem with Shallow Integration: tariff asymmetries between industrialized countries and the BRICS Shallow integration is in trouble, but its problems are fixable A trade-off between sovereignty and globalization is avoidable, but only if the WTO is supported and its approach strengthened Staiger (Dartmouth College) I WTO? September / 38

46 ...And a Deeper Challenge A (shallow) problem with Shallow Integration: tariff asymmetries between industrialized countries and the BRICS Shallow integration is in trouble, but its problems are fixable A trade-off between sovereignty and globalization is avoidable, but only if the WTO is supported and its approach strengthened But shallow integration may face a deeper challenge: rise of offshoring/global supply chains Staiger (Dartmouth College) I WTO? September / 38

47 Why Offshoring May Have Changed Everything Offshoring may be changing nature of international policy externalities Staiger (Dartmouth College) I WTO? September / 38

48 Why Offshoring May Have Changed Everything Offshoring may be changing nature of international policy externalities Recall: for 1947-style globalization, economics under the law of the jungle, only trade policies, not domestic policies, will be set ineffi ciently But with offshoring, economics under law of the jungle, all policies, trade and domestic, may be set ineffi ciently depends on how offshoring has changed nature of international price determination Staiger (Dartmouth College) I WTO? September / 38

49 Why Offshoring May Have Changed Everything Offshoring may be changing nature of international policy externalities Recall: for 1947-style globalization, economics under the law of the jungle, only trade policies, not domestic policies, will be set ineffi ciently But with offshoring, economics under law of the jungle, all policies, trade and domestic, may be set ineffi ciently depends on how offshoring has changed nature of international price determination The rise of offshoring may have altered (deepened) the kinds of rules needed to avoid the law of the jungle Staiger (Dartmouth College) I WTO? September / 38

50 Why Offshoring May Have Changed Everything Offshoring may be changing nature of international policy externalities Recall: for 1947-style globalization, economics under the law of the jungle, only trade policies, not domestic policies, will be set ineffi ciently But with offshoring, economics under law of the jungle, all policies, trade and domestic, may be set ineffi ciently depends on how offshoring has changed nature of international price determination The rise of offshoring may have altered (deepened) the kinds of rules needed to avoid the law of the jungle Shallow integration in deep trouble, its problems not fixable A trade-off between sovereignty and globalization now unavoidable Staiger (Dartmouth College) I WTO? September / 38

51 Should Deep Integration be Embraced? So is sovereignty/globalization trade-off now unavoidable? Maybe, but before concluding that, we need a correct diagnosis of the problems faced by the WTO and the reasons for the rise of deep integration PTAs Staiger (Dartmouth College) I WTO? September / 38

52 Should Deep Integration be Embraced? So is sovereignty/globalization trade-off now unavoidable? Maybe, but before concluding that, we need a correct diagnosis of the problems faced by the WTO and the reasons for the rise of deep integration PTAs GATS an interesting test case Staiger (Dartmouth College) I WTO? September / 38

53 The Case Against Deep Integration It is possible that rise of offshoring has not changed the nature of international policy externalities... depends on subtle features of offshoring or has changed the nature of the policy externalities only temporarily... offshoring itself may be a transitory phenomenon, or its impact on nature of international policy externalities may be transitory and that the latecomers problem is key challenge for WTO, while deep integration PTAs largely reflect redirected Social Clause efforts Staiger (Dartmouth College) I WTO? September / 38

54 The Case Against Deep Integration It is possible that rise of offshoring has not changed the nature of international policy externalities... depends on subtle features of offshoring or has changed the nature of the policy externalities only temporarily... offshoring itself may be a transitory phenomenon, or its impact on nature of international policy externalities may be transitory and that the latecomers problem is key challenge for WTO, while deep integration PTAs largely reflect redirected Social Clause efforts If so, deep integration both unnecessary and misguided Staiger (Dartmouth College) I WTO? September / 38

55 The Case Against Deep Integration It is possible that rise of offshoring has not changed the nature of international policy externalities... depends on subtle features of offshoring or has changed the nature of the policy externalities only temporarily... offshoring itself may be a transitory phenomenon, or its impact on nature of international policy externalities may be transitory and that the latecomers problem is key challenge for WTO, while deep integration PTAs largely reflect redirected Social Clause efforts If so, deep integration both unnecessary and misguided And even if not, substantial unrealized gains from shallow integration likely remain for emerging market countries Staiger (Dartmouth College) I WTO? September / 38

56 Concluding Thoughts So the GATT/WTO s shallow integration approach is not passé Subject to some caveats, it receives strong support from basic economic principles It can be improved upon, but the effort to do so is worth it, and the stakes are high which international institutions will set the rules of globalization what trade-offs we will face in our globalized world As an international institution, the WTO provides the best hope for balance between globalization and national sovereignty Brexit negotiations can contribute toward an articulation of the appropriate limits of deep integration Staiger (Dartmouth College) I WTO? September / 38

57 The GATT/WTO Robert E. Hudec (1990):...The standard trade policy rules could deal with the common types of trade policy measure governments usually employ to control trade. But trade can also be affected by other domestic measures, such as product safety standards, having nothing to do with trade policy. When GATT was created in 1947,...governments would never have agreed to circumscribe their freedom in all these other areas for the sake of a mere trade agreement. Staiger (Dartmouth College) I WTO? September / 38

58 The GATT/WTO Robert E. Hudec (1990):...The standard trade policy rules could deal with the common types of trade policy measure governments usually employ to control trade. But trade can also be affected by other domestic measures, such as product safety standards, having nothing to do with trade policy. When GATT was created in 1947,...governments would never have agreed to circumscribe their freedom in all these other areas for the sake of a mere trade agreement. Staiger (Dartmouth College) I WTO? September / 38

59 James Meade and the Haberler Report An increased stimulus to the production of wheat in any of the countries of North America or of Western Europe by increasing the exportable surplus of North America and decreasing the import requirements of Western Europe would depress the world market for wheat. This might mean that a country like India or Japan would obtain cheaper imports of wheat (either because of a fall in the world price or because of a development of special sales or gifts for the disposal of surplus wheat by the United States), but a country like Australia or the Argentine which competed in the world export market for wheat would be damaged. In general, if one considers any particular agricultural product, a protective stimulus to its production in any one country by increasing supplies relatively to the demand for that product will tend to depress the world market for that product. This will damage the interests of other countries which are exporters of the product on the world market. But it will be to the national interest of countries which import the product from world markets. Staiger (Dartmouth College) I WTO? September / 37

60 James Meade and the Haberler Report Whether the initial protective stimulus confers a net benefit or a net damage to all other countries concerned depends, therefore, upon whether the country giving the protective stimulus to its own production is an exporter or an importer of the product; if it is an exporter it is conferring a benefit on the world by giving its supplies away at a cheap price; if it is an importer it is damaging the rest of the world by refusing to take their supplies. This general principle can be applied to a single country or to a whole region. It is because Western Europe and North America in combination are net importers of agricultural produce that we reach the general conclusion that a reduction of agricultural protectionism in these areas will on balance benefit the rest of the world...(gatt, 1958, pp , original emphasis, footnotes omitted). Staiger (Dartmouth College) I WTO? September / 37

61 Table 10.1 Source: Coneybeare, John A.C. (1987), Trade Wars: The Theory and Practice of International Commercial Rivalry, Columbia University Press, New York, p. 236 Staiger (Dartmouth College) I WTO? September / 38

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63 Table 5 Source: WTO (2007), World Trade Report: Six decades of multilateral trade cooperation: What have we learnt?, Geneva, p. 207 Staiger (Dartmouth College) I WTO? September / 38

64 Table 5 GATT/WTO 60yearsoftariffreductions (MFN tariff reduction of industrial countries for industrial products (excl. petroleum)) Implementation Period Round covered Weighted tariff reduction Weights based on MFN imports (year) 1948 Geneva (1947) Annecy (1949) Torquay ( ) Geneva ( ) Dillon Round ( ) Kennedy Round ( ) Tokyo Round ( ) (or 1976) Uruguay Round ( ) (or 1989)

65 Figure 1 Source: Bagwell, Kyle and Robert W. Staiger (2014), Can the Doha Round be a Development Round? Setting a Place at the Table, in Robert C. Feenstra and Alan M. Taylor (eds.), Globalization in an Age of Crisis: Multilateral Economic Cooperation in the Twenty-First Century, University of Chicago Press, January. Staiger (Dartmouth College) I WTO? September / 38

66 Figure 1: Reciprocal MFN Tariff Cutting t UK UK US t US t Brazil Brazil

67 Is tariff cutting done? Trade Policy under the WTO, 2012 Economy MFN Applied rate Binding rate Binding coverage Percent of MFN applied with tariff peaks (> 15%) G20 High-income Australia Canada European Union Japan Saudi Arabia South Korea United States Notes: WTO non-member Bound and applied MFN import tariffs under the WTO Quite low for high-income countries on average (result of GATT reciprocity negotiations)

68 Is tariff cutting done? Trade Policy under the WTO, 2012 Economy MFN Applied rate Binding rate Binding coverage Percent of MFN applied with tariff peaks (> 15%) G20 Emerging Argentina Brazil China India Indonesia Mexico Russia South Africa Turkey Notes: WTO non-member Potential work to be done to further reduce tariffs for Emerging economies

69 Is tariff cutting done? Trade Policy under the WTO, 2012 Economy MFN Applied rate Binding rate Binding coverage Percent of MFN applied with tariff peaks (> 15%) Developing, other Bangladesh Burma/Myanmar DR of Congo NA NA Egypt Ethiopia 17.3 ** ** 50.8 Iran 26.6 ** ** 45.7 Nigeria Pakistan Philippines Thailand Vietnam Notes: WTO non-member Potential work to be done to further reduce tariffs for Least developed countries Note: already 160 WTO members, but 500 million people (7 percent of global population) remain outside of the WTO

70 Is tariff cutting done? Economy MFN Applied rate Trade Policy under the WTO, 2012 Binding rate Binding coverage Percent of MFN applied with tariff peaks (> 15%) G20 High-income Australia Canada European Union Japan Saudi Arabia South Korea United States G20 Emerging Argentina Brazil China India Indonesia Mexico Russia South Africa Turkey Developing, other Bangladesh Burma/Myanmar DR of Congo NA NA Egypt Ethiopia 17.3 ** ** 50.8 Iran 26.6 ** ** 45.7 Nigeria Pakistan Philippines Thailand Vietnam Notes: WTO non-member Bound and applied MFN import tariffs under the WTO Quite low for high-income countries on average (result of GATT reciprocity negotiations) Potential work to be done for 1. Emerging economies 2. Least developed countries 3. Tariff peaks in high-income countries Note: 160 WTO members, but 500 million people (7 percent of global population) remain outside of the WTO

71 Is tariff cutting done? Economy MFN Applied rate Trade Policy under the WTO, 2012 Binding rate Binding coverage Percent of MFN applied with tariff peaks (> 15%) G20 High-income Australia Canada European Union Japan Saudi Arabia South Korea United States G20 Emerging Argentina Brazil China India Indonesia Mexico Russia South Africa Turkey Developing, other Bangladesh Burma/Myanmar DR of Congo NA NA Egypt Ethiopia 17.3 ** ** 50.8 Iran 26.6 ** ** 45.7 Nigeria Pakistan Philippines Thailand Vietnam Notes: WTO non-member Bound and applied MFN import tariffs under the WTO Quite low for high-income countries on average (result of GATT reciprocity negotiations) Potential work to be done for 1. Emerging economies 2. Least developed countries 3. Tariff peaks in high-income countries Note: 160 WTO members, but 500 million people (7 percent of global population) remain outside of the WTO

72 The Latecomers Problem E. Wyndham White on the bargaining power issue faced in the Torquay Round......A number of European countries with a comparatively low level of tariff rates considered that they had entered the Torquay negotiations at a disadvantage. Having bound many of their rates of duty in 1947 and 1949, what could these low-tariff countries offer at Torquay in order to obtain further concessions from the countries with higher levels of tariffs?...and on an early version of globalization fatigue: The Torquay negotiations took place under conditions of much greater stress than those which prevailed at the time of the Geneva or Annecy Conferences. Besides,...many of the countries...felt they needed more time to digest and to assess the effects of the concessions already made before making further cuts in their tariffs. (ICITO, 1952, pp. 9-10). Staiger (Dartmouth College) I WTO? September / 38

73 Figure 1 Source: The Economist Magazine (2013), Emerging economies: When giants slow down, July 27 Staiger (Dartmouth College) I WTO? September / 38

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75 Figure 1 Source: Johnson, Robert C. and Guillermo Nogueraz (2014), A Portrait of Trade in Value Added Over Four Decades, mimeo, January Staiger (Dartmouth College) I WTO? September / 38

76 Figure 1: Ratio of Value-Added to Gross Exports for the World with ROW without ROW

77 Figure 1 Source: Bagwell, Kyle and Robert W. Staiger (2014), Can the Doha Round be a Development Round? Setting a Place at the Table, in Robert C. Feenstra and Alan M. Taylor (eds.), Globalization in an Age of Crisis: Multilateral Economic Cooperation in the Twenty-First Century, University of Chicago Press, January. Staiger (Dartmouth College) I WTO? September / 38

78 Figure 1: Reciprocal MFN Tariff Cutting t UK UK US t US t Brazil Brazil

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80 Figure 1 Source: Antras, Pol and Robert W. Staiger (2012), Offshoring and the Role of Trade Agreements, American Economic Review, December Staiger (Dartmouth College) I WTO? September / 38

81 20 Percent deviation from mean concession Low input customization Medium input customization High input customization Tercile of Nunn s (2007) input customization measure Figure 1. Percent Deviation from Mean Concession by Tercile of Input Customization Measure

82 Figure 1 Source: Orefice, Gianluca and Nadia Rocha (2014), Deep Integration and Production Networks: An Empirical Analysis, The World Economy Staiger (Dartmouth College) I WTO? September / 38

83 PTAs Depth (Average PCA Top 5) FIGURE 1 Production Networks Trade and Deep Integration Source: Authors calculations on WTO PTA content and COMTRADE databases Production Network Trade (Billion US Dollars)

84 Table 1 Source: Nicita, Alessandro, Victor Ognivtsev and Miho Shirotori (2013), Global Supply Chains: Trade and Economic Policies for Developing Countries, International Trade and Commodities Study Series No. 55, UNCTAD, Geneva Staiger (Dartmouth College) I WTO? September / 38