Economics, Politics and Public Policy in East Asia and the Pacific
Author: Andrew Elek
When they meet in Singapore, APEC leaders can take pride in what their economies have achieved.
Goods, services, people and capital are moving a lot more freely around the region compared to 1989. Obstacles to trade and investment , including border barriers, have been reduced more rapidly than in any other region. Read more…
Author: Andrew Elek
Last month, Arvind Subramanian published a valuable piece in the Business Standard, New Delhi in which he recommends that the G20 should promote increased international financing of international public goods, such as technology to help cope with climate change or raise agricultural productivity. He also recommends that the World Bank should devote a considerably larger share of its financing to this purpose.
The first of these deserves strong support, but it is not certain that reforming the World Bank is the most appropriate means of enhancing the funding of international public goods.
Author: Andrew Elek
In the 21st century, economic integration means much more than ‘free trade’. Economic integration encompasses all of the ways national economies are connected in international markets, including trade in goods, services, ideas and information, along with essential and complementary international movements of people and capital and the coordination of public policies.
This market-driven integration can be accelerated by cooperation among governments to reduce the remaining impediments to international commerce.
Except for a small number of sensitive products, most goods and services face no, or very low, formal trade barriers.
These days, the problems of most concern of those engaged in international commerce are logistics, communications, especially the electronic exchange of data, coping with security concerns and coping with different regulations in other economies. There is a widespread awareness of shared potential gains from practical arrangements to reduce these costs and risks of international economic transactions. The effective constraint to designing and implementing such arrangements is the capacity to do so, rather than political will. Therefore, negotiations are not always necessary to promote mutually beneficial economic integration. Read more…
Author: Andrew Elek
The Organisation for Economic Co-operation and Development (OECD) has published a useful policy brief on trade policy developments in the BRIICs (Brazil, Russia, India, Indonesia, China and South Africa) (available here).
The report documents the considerable reduction in border barriers to trade by these economies. An interesting table on page 5 of the report assesses the relative contributions of unilateral, multilateral, preferential liberalisation and the contribution of donors policy conditionality. They attribute most of the opening to unilateral action, mostly before the late 1990. Since then bilateral and regional trade negotiations have increased in relative importance.
However, the table describes these as ‘trade-light preferential trade agreements’, noting that:
Author: Andrew Elek
If the presentations from Chinese and Australian speakers at recent ANU forums are anything to go by, there is hope of convergence towards a global solution to mitigating climate change. A progress report on negotiations leading up the Copenhagen summit indicated that a global target to limit the proportion of GHG in the atmosphere may be agreed, with all major emitters making some commitments within a legal framework.
A lot of work remains ahead within any framework agreed in 2009. But ideas canvassed at the Canberra sessions suggest that it may be possible to agree on the need for developing economies to go beyond measurable, reportable and verifiable mitigation action. The next step will be to set economy-wide commitments for all significant emitters.
Difficult burden-sharing negotiations will be needed after Copenhagen. Any attempt to measure and allocate responsibility for long-term historical emissions is doomed to failure. But it may be possible to agree on emissions budgets from 1990, based on the principle of equal emissions per head. Developed economies could also accept a fair, therefore high, share of the responsibility for financing costs of technological change and adaptation to already inevitable climate change.
My full report below, over the fold:
Read more…
Author: Andrew Elek
The GATT/WTO system has been a huge success. It has created a rules-based global trading order in which most products do not face significant traditional border barriers such as tariffs and quantitative restrictions; allowing a steadily growing number of economies to trade their way out of poverty.
At the same time, the renewed pressure to look for ways to protect economies from the effects of the global financial crisis has exposed some weaknesses. While most applied rates of protection are low, there is considerable scope for WTO-consistent protectionism. Applied rates can be raised to (the sometimes much higher) bound rates and there is insufficient discipline on contingent protectionism, such as anti-dumping and trade-distorting subsidies.
In a recent article, Mattoo and Subramanian note that even a successful Doha Round will not deal with this residual uncertainty. Therefore, they have proposed a ‘crisis round of trade negotiations’, to be completed within twelve months, to address this problem.
Author: Andrew Elek
Some early indications of the the new United States administration’s trade policy are emerging.
This week’s Bridges Trade News Digest summarises the new annual Trade Policy Report of the President. There are no big surprises. The document emphasises the need to ensure that firms and workers are able to adjust to change.
Willingness to complete the Doha Round is contingent on a better balance of gains and short-term costs, so offers no new hope for a speedy conclusion.
At the same time, the President has called for an end to payments to large agribusiness. Bridges Weekly welcomes the willingness to take on the farm lobby, but it is sceptical about whether the proposals will pass Congress, or whether they will have a direct effect on the Doha negotiations.
On another front, the President seems to have been able to assure the world that the “buy American” provisions in the stimulus package does not mean a reversion to protectionism. There are no reports of intents to retaliate, but economic nationalism still threatens.
Author: Andrew Elek
Deep global recessions can tempt governments to try and shield their own economies. Resentment by others can then lead to a cycle of retaliation which only deepens the economic downturn.
Despite the bitter lessons of the 1930s, it can all happen again. Well before employment is hit by the worst of the crisis, governments are already seeking to protect their producers using border barriers, subsidies among other options.
Aware of these risks, the leaders of the G20 economies committed themselves to refrain from raising new barriers to investment or to trade in goods and services.
Australia, France, Germany, India, Russia and the United States are, nonetheless, taking steps to shield their automobile makers from competition.
Author: Andrew Elek
The emergence of the G20 process creates new opportunities for international cooperation. The forum contains a much more diverse and representative group than the G7 and the inclusion of emerging economic giants gives it additional legitimacy.
The G20 is highly influential: if it can agree on matters of substance, other governments are more likely to follow its initiatives.
Its members can reinvigorate existing institutions or create new processes; for example, the G20 has already proved able to reach the high-level political consensus needed to insist on a reform of the governance of the IMF.
The communiqué of the initial meeting indicates that the G20 is expected to be an ongoing process which oversees the implementation of substantive work programs, covering a potentially broad agenda including energy security, climate change, food security, the rule of law, and the fight against terrorism, poverty and disease.
The productive engagement of more economies in the international economy is essential for dealing with several of these matters. Therefore the G20 will need to find ways to promote global economic integration.
Author: Andrew Elek
The financial crisis of some of the world’s richest economies has catalysed a long-overdue transformation in the oversight of global affairs. The November 15, 2008 summit was the first where emerging economic giants discussed problems and potential solutions as equal participants with the industrial leaders.
In a substantial communiqué, there was consensus on a wide range of issues which need to be addressed to speed recovery from the crisis and to make it possible to sustain global improvements in living standards in the longer term.
Importantly, the meeting also overcame the resistance to reforming the governance of the IMF and the World Bank. With adequate representation from emerging economies, it may become possible to boost the resources of the IMF to deal with future crises. The hope is that the IMF will achieve the legitimacy needed to offer advice to strong as well as weak economies, with some expectation of it being heeded.
Author: Andrew Elek
Many are looking ahead to the Copenhagen United Nations Conference on climate change with foreboding. An agreement adequate to stabilise the proportion of greenhouse gases (GHGs) in the atmosphere at sustainable level will be very difficult.
Ross Garnaut’s report on climate change to the Australian Government has clarified the issues. The report could prove influential in shaping an international consensus on stabilising proportion of GHG in the atmosphere at no higher than 550 parts per million by 2050, based on the principles of contraction and convergence he has proposed. After 2050, the share of emissions per country should be proportional to each country’s share of global population.
It will be very hard to agree on the rights to emit GHGs by each country in the years to 2050 consistent with this ambitious long-term goal.
The world needs to resolve a many-player, cost sharing game. Like any other cost-sharing game, such as paying taxes, there is a risk that free-riding by some can deter others from making any significant contribution.
Author: Andrew Elek
Rudd is on the right track with his vision for the region. He showed awareness of the complex issues and his approach is both thoughtful, sophisticated and the whole thing timely. Below is my piece with Philip Kelly on Kevin Rudd’s recent speech in which he articulated his ideas regional architecture:
On June 4, 2008, Australian Prime Minister Kevin Rudd declared that it is time to build an Asia Pacific community. In doing so, he was following in the footsteps of many who have been striving to build such a community for some time.
Sir John Crawford was thinking and writing about the need to think in these terms in the 1930s. Together with Saburo Okita, he instigated the Pacific Economic Cooperation Council in 1980 (PECC) which paved the way for APEC by 1989.