2014 Study Tour organised by UNCTAD's virtual institute

Post by Trade, Investment and Development Observatory.

Saving the multilateral trade system

Opinion article by: Juan Gonzalo Perez* (jperezg@eafit.edu.co)
International Business students at Universidad EAFIT, Medellin, Colombia

The General Agreement on Tariffs and Trade (GATT) was created during the Uruguay rounds in 1986 and later in 1995 became the World Trade Organization (WTO) and ever since the multilateral trade system has pursued a number of deals aiming to increase liberalization of trade. Its main functions include, administering WTO trade agreements, acting as a forum for trade negotiations, handling trade disputes, monitoring national trade policies, providing technical assistance and training to developing countries and cooperating with other international organizations.

Throughout its history the WTO has had many hitches getting all of the members to agree on the same issues. However, last week during the ninth ministerial conference in Bali, Indonesia, and after a tough week of negotiations they have finally come to a deal that will keep the WTO thriving. The agreement is a step forward towards trade facilitation and it is the first comprehensive agreement since the Doha Round in 2001. However, only a small set of limited measures have been agreed on. The most vital thing is that the WTO will still have a starring role in trade and the package managed to include the interest of least developed counties (LDCs), developing countries as well as developed countries.

The first issue in the agreement was trade facilitation. The agreement will allow member to trade goods more easily, reducing import and export bureaucracy and therefore allow countries to access more markets. It is estimated that the agreement will increase world trade in about 1 trillion dollars.

The second part of the deal reached was agricultural subsidies. This was the most complicated issue due to the fact that LDCs and developing countries stood up to defended their agricultural subsidies. India and the United States stalled in this issue because they were both trying to defend their own interest.

While the United States was concerned that subsidies will distort trade due to production surpluses, developing economies (Including India) were pushing for an ambitious trade facilitation agreement, including adequate safeguards to run their food security programs. LDCs had a four point agenda that included duty and quota free market access, operationalization of the waiver concerning preferential treatment to services and service suppliers of LDCs, preferential rules of origin and establishment of mechanism to monitor special and differential treatment.

Achieving such a deal was not easy and almost impossible due to the fact that in order for the agreement to pass it needed the consensus of the 159 members of the WTO. So when the negotiations were about to fail and with only few hours left to close the ministerial conference in Bali, both countries agreed to allow LDCs and developing countries to continue subsidizing their agricultural industries as long as they don't affect global trade.

In the short term, this agreement will bring the WTO back to play a role in global trade and it is a step forward towards trade liberalization. However, it is going to be long before the institution regains its authority, and if they want to stay relevant they need to do better in topics like investment, agriculture and services.

The chains of being useful

Opinion article by: David Ricardo Murcia Sánchez*
Political Sciences student at Universidad EAFIT, Colombia

It is common to think in international organizations such as UN or the WTO as mighty institutions that are powerful and wise to know the way out of the multiple problems that the society face on a daily basis. But, as they often fail to present satisfactory results for everyone, criticism grows, and it questions their usefulness. Yet, before any judgment, there is the need to evaluate if it is not an extra-limitation of the cult to technicians that Western Society has spread around the world.

Indeed, such was Max Weber’s deep worry, back in the 19th century (Weber, 2000). More recently, Carl Schmitt (Schmitt, 1998) has showed the clear perils of taking social issues as a matter of technical intervention. That fear, especially from the former, arose from the possible loss of equilibrium in the human (political) relations that are constantly changing. That is why, the fact that even if the technical system is perfected, its answers will always be late; the social changes never stop.

The previous expresses an internal contradiction of such institutions between the desires of the peoples who trust them and their capabilities to fulfill them. The problem may be in what is expected of institutions, because technical methods are been developed incessantly. Desires should be taken as follows: not hoping an everlasting correct answer or a heavenly mechanism to solve every problem. Institutions, and their technical mechanisms, in this course of ideas, are constrained by the need of being useful. Therefore, there could be a solution to break those chains: not to hope for an easy and immediate answer, but to hope for a slowly constructed suggestion that provides with the social actors an idea of how to confront the problems they have. In sum, the use of technique should be calming companions of the society’s natural struggles.

All these reasoning could be vain if it is not applied to calm down the frustration felt towards WTO Doha Round. The delay in a new agreement cannot be blamed on technical mistakes, because international institutions are constructed to help different parties to keep the discussions no matter if the level of the disagreement on the process, the expected answer, or even any answer, are actually reached. Guaranteeing the continuity a stable struggle when actors are not ready for a conclusion must be considered, as it is, an achievement.

References

Schmitt, Carl. (1998). La era de las neutralizaciones y despolitizaciones. En C. Schmitt, El concepto de lo político. Madrid: Alianza. pp. 107-122.

Weber, M. (2000). ¿Qué es la burocracia?. Ediciones el aleph.com. Disponible en la URL: http://www.cholonautas.edu.pe/modulo/upload/Weber%20-%20Que%20es%20la%20burocracia.pdf. [consultado el 12 de diciembre de 2013]

Servicios, Comercio y Desarrollo

Artículo de Opinión por Juan Gonzalo Perez* (jperezg@eafit.edu.co)
* Estudiante de Negocios Internacionales, Universidad EAFIT, Medellín, Colombia.

Diariamente y de forma inconsciente consumimos bienes de carácter no materia e intangibles que pertenecen al sector terciario de las economías, estos bienes se denominan servicios y desde 1980 al 2012 el comercio de estos ha presentado un incremento promedio del 8%; jugando así un papel muy importante en el desarrollo de los países. Actualmente, el comercio de servicios representa el 20% del total del comercio mundial y crece más rápido que el comercio de mercancías. Según análisis realizados por la Conferencia de Las Naciones Unidas para el Comercio y el Desarrollo (UNCTAD), en el año 2011 los servicios tuvieron una contribución del 74,4% y 74,1% al Producto Interno Bruto (PIB) y al empleo mundial, respectivamente.

El incremento en el comercio de servicios ha beneficiado a las economías desarrolladas en materia de valor agregado al PIB y a la creación de empleo, pues este sector representa el 70% del PIB de estas economías. Por ejemplo, Según cifras presentados por la UNCTAD, el 79% del valor agregado que va al PIB de Estados Unidos proviene de los servicios y emplea el 80% de la población. Actualmente, Estados Unidos es el exportador e importador número uno de servicios en el mundo.

En cambio en los países con economías en vía de desarrollo, los servicios representan el 50% del PIB. Si bien es un porcentaje importante de exportaciones de servicios, estas economías no han logrado generar los mismos beneficios que en países desarrollados; ya que enfrentan retos como: el alto costo y poca disponibilidad de capital, deficiencia en servicios relacionados con la infraestructura, falta de capital humano, además, la falta de atención en el desarrollo del sector de servicios se está viendo reflejada en la alta participación del sector informal de servicios en el comercio.

Según la UNCTAD, los servicios a nivel mundial crecen a un promedio del 8% anual y las categorías más importantes en exportación de servicios son el transporte y el turismo, con una participación del 20% y 23% respectivamente.

En el caso Colombiano las tendencias son similares, en la última década el país presento un crecimiento promedio del 10% en la exportación de servicios. Es más, en el año 2012 el país exporto 46% en servicios turísticos y un 28% en servicios de transporte. No obstante, el país presenta un déficit en la balanza de comercial de servicios de $5,3 billones de dólares. (UNCTAD)

El crecimiento en el sector servicios representa una gran oportunidad para la creación de empleo y crecimiento económico de Colombia, según cifras del Ministerio de Industria y Turismo, en Colombia se han creado 95 mil empleos y se recibieron ingresos operacionales de $1,5 Billones de dólares en el 2012.

Al mismo tiempo los esfuerzos que está realizando el Gobierno Colombiano en materia de promoción de servicios son notables. De acuerdo al Embajador de Colombia ante la Organización Mundial de Comercio, Gabriel André Duque Mildenber , la política exterior colombiana está enfocada en buscar la reducción de fronteras por medio de la integración económica con reglas de juego claras en materia de comercio internacional a nivel global, regional y local. De manera que el comercio necesita fortalecerse por medio de las instituciones, especialmente ahora que el sistema de producción es mundial y las cadenas de valor global requieren cada vez más servicios que permitan un mejoramiento en la competitividad y la productividad del país.

Para concluir, es evidente que el comercio de servicios está incrementando de forma rápida y sus beneficios contribuyen al crecimiento, el empleo y la reducción de la pobreza. Sin embargo, para países en desarrollo, y en especial, para Colombia, es fundamental que se fortalezca la capacidad de oferta, se mejore la infraestructura de los servicios, y por último, se aprovechen los tratados de integración regional para ampliar la capacidad de oferta y expandir la exportación de los servicios.

Taking challenges: Absorbing economic benefits derived from trade and raising living standards.

Opinion article by: Catalina Tamayo Posada*(catalinatamayop1@gmail.com)
Economics student at EAFIT University, Medellin-Colombia.

The world, as it is today, is constantly changing in a scarcely imaginable way. New countries are economically emerging and they are changing all the structure of power in the world. An increase in the economical field should suppose an increase in the living standards of the societies. But, as some would argue, it has not been possible because of trade. But, is it?

Trade is a powerful weapon which can be extremely useful for a nation or it can actually destroy it. On the one hand, trade is a main factor in the search of new technologies; this is because companies do not want to be left behind and as a consequence they can increase their productivity. It can also be seen as an opportunity to specialize on what the country is good at, making it competitive in international markets. Adam Smith, the father of the economy, to this concern stated that “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage”(1776).

But, on the other hand, trade is growing and so is inequality. Most of the people are likely to blame trade for this problem, although trade is not the most important fact. “In general, technological change is found to be an important driver of inequality. It is also the case of other aspects of globalization like migration, FDI and other international capital flows contribute to increased inequality” (WTO, 2013:13).

Furthermore, trade must be followed by exceptionally well-design and coherent policies that lead towards sustainable development. Not to mention the need of a proper administration, free of corruption and focused on growing the living standards; the obligation to reinforce the institutions so that they can optimize all kinds of resources, economic and human resources, in order to make a more efficient and adequate distribution of the incomes resulting in the decrease of unemployment rates and therefore reducing the inequality. From a wider perspective, all of these effects, for the country, could be translated in economic growth, competitiveness, increases in FDI and sustainable development.

However, “Poor countries will usually need to create a range of other conditions before they can benefit from trade. Even the best conceivable trade policies aimed at reaping the benefits from trade are likely to be ineffective if unaccompanied by productive capacity and adequate infrastructure”. (The future of Trade, 2013:12). This means that it takes a huge effort to try to move forward and it also shows us that trade and investment go together and rely on each other.

Briefly, several challenges must be taken in order to truly get the benefits from trade and therefore eradicate poverty and raise living standards of the societies. This has been proved by the emerging economies.

References:

Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. Retrieved October 5, 2013 from the World Wide Web: http://www.econlib.org/library/Smith/smWN13.html

World Trade Organization (WTO). (2013). The Future of Trade: The Challenges of Convergence. Report of the Panel on Defining the Future of Trade.

Colombia: Los beneficios del comercio y su influencia en el desarrollo

Artículo de Opinión por Juan Gonzalo Perez* (jperezg@eafit.edu.co)
* Estudiante de Negocios Internacionales, Universidad EAFIT, Medellín, Colombia

En las últimas dos décadas Colombia ha orientado su política comercial en la firma de tratados de libre comercio (TLCs) buscando incrementar los intercambios comerciales para fomentar el crecimiento económico y el desarrollo del país. En la actualidad Colombia tiene acceso a mercados en más de 30 países y ha firmado alrededor de 10 tratados de libre comercio incluyendo con Estados Unidos, la Unión Europea y Corea del Sur, sin embargo, ¿Cuáles son los beneficios del incremento en el comercio y como este influye en el desarrollo del país?

De acuerdo con el reporte “El futuro del comercio: los retos de la convergencia”, presentado por Pascal Lamy, Ex Director de la Organización Mundial del Comercio (OMC), el comercio es parte de un círculo virtuoso de crecimiento y mejoramiento de oportunidades. La apertura de mercados permite que los consumidores tengan más acceso a productos y servicios a mejores precios. Así mismo, la importación de productos promueve la innovación de las empresas nacionales y exige el mejoramiento de las instituciones y las regulaciones del país (OMC, 2013).

Con base en estadísticas del 2008 al 2012 del DANE, los intercambios comerciales en Colombia se han incrementado de forma significativa. Las importaciones han crecido en un 67% mientras las exportaciones corresponden a un 62%. Los beneficios del crecimiento en el comercio se logran percibir desde el punto de vista del consumidor de clase media y alta, ya que puede acceder a una gran variedad de productos y servicios a precios más asequibles. El problema se presenta en que los productores nacionales en su mayoría no son competitivos en mercados internacionales, esto debido a la falta de innovación, regulaciones para proteger sus industrias frente a productos importados, apoyo institucional, y creación de valor agregado. Con base en lo anterior, es preciso decir que los beneficios del crecimiento del comercio no se están viendo reflejados en el mejoramiento de la industria pero parece ser que ha fomentado el desarrollo del país (DANE, 2013).

Según el reporte presentado por la OMC, ninguna nación se ha desarrollado y crecido sin los beneficios del comercio ya que son muchos los factores que determinan cuando y como el comercio puede tener los efectos beneficiosos. Además, los beneficios del comercio dependen del estado de desarrollo de los países. (OMC, 2013) Colombia es considerado un país en desarrollo, su ingreso per cápita, según base en cifras del DANE 2013, es de $6´151,668 pesos anuales, lo que equivale a un ingreso mensual de $512,539 pesos. Igualmente, la economía del país se considera estable con un crecimiento promedio, según Banco de la Republica, del 4,9% en los últimos tres años.

Por consiguiente, se podría considerar que Colombia puede aprovechar el intercambio comercio para acelerar su crecimiento, ya que se extiende el mercado de productos locales como también asegura mejores prácticas de producción y oportunidades de consumo (OMC, 2013).

En resumidas cuentas el reto está en que el país debe alinear los recursos y las actividades con las fortalezas relativas y comenzar a exportar con base en la especialización en sectores. Ahora, según la OMC, para que Colombia pueda beneficiarse verdaderamente del comercio debe buscar apoyo externo para la construcción de capacidad productiva, infraestructura y desarrollo de políticas e instituciones incluyendo sistemas sociales que permitan la inclusión y la redistribución de la riqueza.

Referencias:

World Trade Organization (2013). The future of trade: The Challenges of Convergence, Report of the Panel on Defining the Future of Trade. Ginebra: OMC.

DANE (2013). Anexos estadísticos Colombia. Bogotá: DANE.

Bando de la República (2013). Informe de la Junta Directiva al Congreso de la República. Bogotá.

The impact of trade on development

Opinion article by: Manuela Ramírez Cárdenas (mramir67@eafit.edu.co) *
International Business and Political Science Student at Universidad EAFIT, Colombia

After the Director-General of the WTO, Pascal Lamy, suggested at the organization’s 8th Ministerial Conference in 2011 the importance of the discussion of the world economy and trade related issues by the WTO and members of the multilateral trade system, the Panel on Defining the Future of Trade was created in 2012.

The panel met officially three times and held several meeting with different stakeholders to discuss issues such as the transformations of the world economy, the challenges of global trade opening during the 21st century, trade patterns, the current and future drivers of trade, and how trade can contribute to economic growth, sustainable development, poverty relief and job creation. The report of the panel titled The Future of Trade: The Challenges of Convergence was published earlier in 2013..

There are several aspects that are important to highlight about this report. The first one is that trade is without a doubt a positive practice that if implemented well can lead to growth, sustainable development, cooperation among states, and can have a direct positive impact on civil society. However, there is also the indisputable fact that some developing countries, since the opening of trade, have been negatively impacted and the gap of inequality between the rich and the poor grows wider every day.

The root of that problem is not trade itself; it is the fact that some developing countries lack certain conditions that are fundamental if a country wants to take advantage of the benefits of trade, among them: infrastructure, an educated population that can adapt to the changes and needs of the labor market, access to electricity, etc. Also, these countries face several local challenges, the first being that in most cases the local economy and industry is often precarious, and when faced with competitors that have a strong economic and productive system, then the outcome will unsurprisingly be negative. Additionally, some of these countries are plagued by corruption and governments that apply short-term policies that won´t be efficient in the long-term.

In the global scenario of open trade, the actions of governments become fundamental for a country that seeks to take advantage of the benefits offered by the multilateral trade system. Governments must create long term policies (perhaps adapt strategies that have been successful for other countries) that will allow them to create capacity building, educational opportunities, job creation, infrastructure, but most importantly they must implement policies that will allow them to develop locally first, so they can eventually become competitive in the global market and hopefully alleviate poverty and improve the living standards of the civil society.

Reference:

World Trade Organization. (2013). The Future of Trade: The Challenges of Convergence. Report of the Panel on Defining the Future of Trade.

Preferential Trade Agreements: Benefits and Risks

Opinion article by: Manuela Ramírez Cardenas* (mramir67@eafit.edu.co)
International Business and Political Sciences student at Universidad EAFIT, Colombia

The World Trade Organization’s report on the Future ofTrade (2013)  states that one of the dominant policy trends regarding that issue is the rising number of preferential trade agreements (PTAs). A PTA is an agreement between two or more countries, where they pact to reduce tariffs on specific goods during trade with one another. As stated in the report, there are currently an estimated 300 PTAs in operation, while several others are in negotiation; almost half of them are cross regional, two thirds are between developing and developed countries, and half of them are bilateral.

According to the WTO, preferential trade agreements offer several advantages that benefit not only their signatories but also other countries by the promotion of growth. PTA’s also facilitate a deeper integration at a multilateral level, are often more time efficient, and can reach consensus more easily between countries, a process that is otherwise difficult and time consuming at the WTO.

Not only that, but PTAs can have a positive impact in a country not purely in an economic sense. Other aspects of civil life can also benefit from them, ranging from issues such as the regulation of the environment to the protection of the labor force, for example: Professor Emilie M. Hafner-Burton, PhD, found that the commitment to PTA’s with hard human rights standards could effectively help reduce government repression and lead to better practices, as a state that participates in this type of agreement must comply with some basic international human rights principles.

Although the increasing number of PTAs is a trend that probably won’t slow down in the upcoming years, and that the benefits of this type of agreements cannot be denied, it is important to understand that there are risks inherent to them. According to the report, PTAs can have a negative impact as they might increase trade costs, lead to the segmentation of the economy due to regulatory divergence, they can be exclusionary as they might ignore smaller countries in a discriminatory way, they could fracture trade relations and ultimately they could corrupt the non-discriminating principle that is a core principle of the WTO.

To actually take advantage of the possible benefits of PTAs, the WTO recommends their members to engage in the exploration and ways of consolidation of PTAs within a multilateral trading system. By consolidating PTAS within the multilateral trading system, it is possible to regulate these types of agreements, mitigate the risks inherent to them and prevent the use of discriminatory practices regarding the exercise of trade.

References

World Trade Organization. (2013). The Future of Trade: The Challenges of Convergence. Report of the Panelon Defining the Future of Trade.

Hafner-Burton, Emilie M. (2005). Trading Human Rights: How Preferential Trade Agreements Influence Government Repression. Cambridge University Press on behalf of the International Organization Foundation, 59 (3), 593-629.

Global Trade as a lever for growth and employment

Opinion article by: Nathalia Rios Ballesteros* (nriosba@eafit.edu.co)
Economics student at Universidad EAFIT, Colombia

According to the European Commission (2010) in the past few years, global trade has expanded rapidly. From the late 1990s until now, the value of world merchandise trade grew by 73%. This growth has been mainly driven by growth in incomes and demand, falling in transport and communication costs, significant increases in foreign direct investment (FDI) in emerging market economies, improvements in efficient economic policies along with the implementation of trade policies and reductions in tariff and non-tariff barriers without ignoring the increasing competitive pressures that drive the search and pace of innovation and the implementation of costcutting, outsourcing and economies of scale in many industries.

In this context, although it is difficult to make general statements about the impact of trade opening and its growth per se; trade should not be considered in isolation from national, international and global realities. In this sense, one can establish that “trade growth is not pursued for its own sake”[1]; it brings along a triple major benefit for the ongoing country: more economic growth; greater consumer welfare translated into higher incomes and lower prices of goods and increased in employment conditions – greater and better-paid jobs-.

As a matter of fact, U.S is the world's largest economy and the largest exporter and importer of goods and services nowadays, which implies an active and relevant role of trade as an important engine for its economic growth and employment market -considering that more than 30 percent of U.S. GDP is tied to international trade and investment, and more than one in five U.S. jobs are supported by trade according to the Trade Benefits America Coalition (2013)-. This is the reason why U.S. engagement in the international marketplace today, is more important to this nation’s economy than ever before, exhibiting and showing the key role that trade plays in the economic current situation of countries worldwide.

Moreover, trade openness stands as an important lever that lift developing countries out of poverty allowing them to reap and reproduce the benefits of globalization into their own economies, taking into account the strong increase in the share of this economies in the international trade flow . This rapid economic rise and increasing involvement in global trade of these emerging market economies -especially major performers such as the BRIC members- has made enormous contributions to growth, development and prosperity within these economies. As part of a comprehensive set of policies and internal circumstances, it has helped to lift millions out of poverty and spread the benefits of higher living standards through lower living costs. It has brought nations closer together, fostering mutual understanding and promoting world peace while equipping the involved countries with the necessary tools to meet the challenges carried along with the hazard of this economic activity; challenges towards jobless growth management, high unemployment, poverty, unequal distribution and allocation of resources, environment and sustainable development, and the role of trade routes as well as investment decisions in this context.

For all the above, and considering today’s climate of “weak economic recovery, high unemployment and pressure on public finances”[2], one of the effective solutions that governments might adopt to boost growth and employment could be to foster global trade thus keeping global markets open; which provides two important implications; a result and a challenge for the involved country. The result: better economic performance -trade and market openness becomes a more prevailing tool for generating better quality jobs and boosting the much-needed growth-; the challenge: to construct coherent national and international policy frameworks that seek and drive towards inclusive growth of trade among countries because “it is their design, not their absence, that makes the difference”[3].

References

European Commission. (2010). Trade as a driver of prosperity. Recuperado el 20 de 09 de 2013, de http://trade.ec.europa.eu/doclib/docs/2010/november/tradoc_146940.pdf

OECD Trade and Agriculture Directorate (TAD). (Mayo de 2012). Better policies for better lives. Recuperado el 17 de Septiembre de 2013, de http://www.oecd.org/tad/tradedev/50447052.pdf

Trade benefits America Coalition. (2013). Trade benefits America|. Recuperado el 20 de 09 de 2013, de http://tradebenefitsamerica.org/contact

World Trade Organization (WTO). (2013). The Future of Trade: The Challenges of Convergence. Report of the Panel on Defining the Future of Trade.

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[1] European Commission (2010)

[2] (OECD Trade and Agriculture Directorate (TAD), 2012)

[3] (World Trade Organization (WTO), 2013)