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A Few Thoughts on Trade Policy and Growth

A Few Thoughts on Trade Policy and Growth. Alan V. Deardorff University of Michigan. What’s Needed for Growth?. Trade? It is probably necessary It is surely not sufficient The Doha Development Agenda Was a desirable attempt Fostered unrealistic expectations

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A Few Thoughts on Trade Policy and Growth

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  1. A Few Thoughts on Trade Policy and Growth Alan V. Deardorff University of Michigan

  2. What’s Needed for Growth? • Trade? • It is probably necessary • It is surely not sufficient • The Doha Development Agenda • Was a desirable attempt • Fostered unrealistic expectations • May have failed, in part as a result

  3. What’s Needed for Growth? • Investment? • Even more necessary • Perhaps sufficient, if you include enough • Physical capital • Human capital • Technology • Infrastructure • Institutions

  4. What’s Needed for Growth? • Foreign Direct Investment? • Not necessary • But surely a big help • If it complements a country’s own resources • If it stimulates domestic investment as well

  5. Trade Policy Options • The Doha Round • Why previous rounds helped little • “Special and differential treatment” • Free-riding on MFN missed the biggest gains for developing countries • Own protection remained high • Markets for their most likely exports remained closed

  6. Trade Policy Options • The Doha Round • Stops and starts in the Doha Round negotiations • Cancun Ministerial • Hong Kong Ministerial • Potsdam Meeting of G4: US, EU, Brazil, India • Geneva 2008 “last chance”

  7. Trade Policy Options • The Doha Round • Prospects • Under Bush • Under Obama

  8. Trade Policy Options • PTAs – Preferential Trade Agreements • Alternative to multilateral agreements • US-Canada FTA • Started 2nd wave of PTAs • Prompted by difficulties of Uruguay Round • Proliferation of PTAs • Prompted by difficulties of Doha Round

  9. “Regional” Trade AgreementsNotified to WTO Source: WTO

  10. Trade Policy Options • PTAs • Benefits • Trade creation • Larger markets • FDI

  11. Trade Policy Options • PTAs • Costs • Trade diversion • Reduced incentive for multilateral liberalization • Inclusion of issues other than trade • Labor standards • Environment • Intellectual property • Large partners may extract most of the benefits

  12. Trade Facilitation • What it entails • Reduced costs to • Crossing borders and reaching markets • Paperwork, delays, “facilitation payments” • Improved physical facilities • Ports • Transport, within and between countries

  13. Trade Facilitation • Part of Doha Development Agenda • Included as Singapore Issue • Along with Investment, Competition, and Government Procurement • Resisted by developing countries; guilt by association? • Agreement close as of Summer 2008

  14. Trade Facilitation • If Doha Round fails • Need to pursue trade facilitation by other means • Separate plurilateral agreement • Through World Bank and other institutions • Resources are crucial!

  15. Conclusion • Developing countries need for the trade agenda to keep moving forward. • Worry is that, in the current economic climate, it will instead move backwards.

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