WTO

WTO: World Trade Statistical Review 2017

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On 28 July 2017 the WTO issued the latest annual statistical report World Trade Statistical Review 2017. This publication examines trends in trade in goods and services and trade policy developments including restrictive trade practices.

World merchandise exports have risen by around 32% in value since 2006 to USD 16 trillion in 2016, and exports of commercial services have increased by around 64% in the same period, reaching USD 4.77 trillion in 2016. However trade growth in terms of volume of merchandise showed its lowest growth since the financial crisis, at 1.3% in 2016. This was half the growth rate of the previous year. This is due partly to low growth of world GDP at 2.3%, down from 2.7% in 2015. Growth in world trade is expected to rise slightly in 2017 to 2.4%.

In recent years the ratio of global trade growth to GDP growth has fallen to around 1:1 from an average of around 1.5:1 since 1946. In 2016 the ratio was 0.6:1, falling below 1 for the first time since 2001.

International trade is still concentrated within a few countries with the highest ten trading nations accounting for more than half the global trade in merchandise and commercial services. The share of developing countries in world merchandise trade is 41% and their share of trade in commercial services is 36%. Trade between developing countries is rising and accounted for more than half their total exports in 2015. However those countries classified as least developed countries (LDCs) still have a share of less than 1% in exports of merchandise and commercial services.

Digital trade

The increasing use of new technologies is expected to have a positive impact on digital trade in future with opportunities for entrepreneurs and small businesses. To analyze these trends and formulate good policy in the area improved statistics are necessary. The WTO and OECD have therefore put together an inter-agency task force to take the issue forward.

Trade policy trends

From mid-October 2016 to mid-May 2017 WTO members implemented 74 new trade restrictive measures, a decrease on the amount recorded in the previous annual report. Trade restrictive measures include new tariffs on import or exports; increases in existing tariffs; import bans or quantitative restrictions; more complex customs regulation or procedures; or restrictive changes to local content requirements. The measures could be temporary or permanent.

In the same period WTO members introduced 80 measures to facilitate trade. However the trade coverage of the import-facilitating measures is more than three times the amount in value of the estimated trade coverage of the import restrictive measures. Trade facilitating measures include the elimination or reduction of tariffs on imports or exports; simplified customs procedures; elimination of import or export taxes; or elimination of quantitative restrictions on imports or exports.

Trade facilitation agreement

The report notes that the WTO’s Trade Facilitation Agreement (TFA) entered into force in February 2017. The agreement aims to save trade costs for WTO members by simplifying and standardizing customs procedures and facilitating the flow of goods across borders.

Developing countries are permitted to set their own timetable for implementation according to their capacity. They can also obtain access to capacity-building resources to enable them to implement the agreement. The WTO has established a Trade Facilitation Agreement Facility to assist developing countries in assessing their needs and finding potential development partners. Developing countries are requested to set out the provisions of the TFA that they can implement immediately, the provisions that will require more time for implementation and those that may require capacity building support. The various commitments therefore provide a road map for the full implementation of the agreement by all WTO members.

WTO: Amendment to Trade Policy Review mechanism

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On 26 July 2017 the General Council of the World Trade Organization (WTO) approved the first ever amendment to the Trade Policy Review Mechanism. The mechanism provides for periodic reviews of the trade policies and practices of WTO member states and the monitoring of the global trading environment.

Owing to the increase over the years in the number of member states of the WTO an adjustment to the cycle of Trade Policy Reviews (TPRs) has been agreed to ensure the continued effectiveness of the mechanism. Currently WTO members are the subject of a TPR once every two, four or six years depending on the size of the economy. Following the amendment the frequency of reviews will change to once every three, five or seven years, with the largest economies reviewed the most frequently. The change will be phased in, commencing from 2019.

In addition to this change WTO members also agreed to revise the timeline relating to the question and answer process for TPRs. Members choosing to provide early written answers to questions from other WTO members will be given one more week for preparing their answers. The WTO Secretariat intends to develop an information technology system that will allow the question and answer process to be managed more efficiently. A regular practice is also to be introduced for members to provide brief reports on changes to their policies during trade monitoring meetings.

WTO and OECD: Aid for Trade monitoring report

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The sixth aid-for-trade monitoring report has been published by the WTO and OECD under the title “Aid for Trade at a Glance: Promoting Trade Inclusiveness and Connectivity for Sustainable Development. The Aid for Trade initiative, launched in 2005, aims to help developing countries participate in global trade by assisting with the supply side and addressing trade-related infrastructure constraints. The report notes that more than USD 300 billion has been devoted to programs and projects since the initiative was launched.

The focus of the latest edition is on physical and digital connectivity. Trade connectivity is essential for inclusiveness, sustainable growth and reduction of poverty. Digital networks are essential to trade and are interlinked with the physical trade infrastructure. Without an affordable internet connection the market place of the world-wide web cannot be accessed. The report points out that around 3.9 billion people remain offline.

As a result of digitalization a larger number of low-value transactions and small shipments cross national borders, and goods are increasingly combined with services. Services therefore represent a growing share of exports of manufactured products.  New technology lowers the cost of supplying cross-border services and facilitates connections between parts of the supply chain. This does not eliminate comparative advantage or other constrains from information symmetries and trade barriers; but many of the constraints of international trade are being overcome and new business models are being created.

The 2030 Agenda for Sustainable Development has set targets for universal, affordable access to the internet. Although mobile broadband networks are available to more than 50% of people in the less developed countries (LDCs) the devices and network connections are still expensive and coverage is limited. The high costs of digital connections can be seen as trade costs that exclude firms and consumers from the online market for goods and services.

Measures are required to improve the supply side of digital connectivity including ICT infrastructure and availability of network coverage; and the demand side such as affordability and internet usage. This involves mobilizing additional finance to develop infrastructure, ICT services markets and regulatory environments. Aid for Trade supports governments in their efforts to bridge the digital divide.

There is also a digital trade policy divide. Developing countries must consider the trade policy aspects of digitalization. Digital connectivity alone is not sufficient without additional policies to develop the potential of e-commerce, including technical and financial assistance to develop human, institutional and infrastructure capabilities.

Commerce is hindered by border clearance delays and inadequate physical infrastructure. Digitalization of customs services can make the customs and border agencies more efficient. The report emphasizes the need to streamline customs services for micro, small and medium enterprises (MSMEs). Many of these concerns will be addressed by the WTO Trade Facilitation Agreement.

The Trade Facilitation Agreement aims to simplify and harmonize international trade procedures, speeding up the movement and clearance of goods. Complete implementation of the agreement could lower trade costs by 16.5% for low income countries and 17.4% for lower middle income countries. The TFA covers a range of trade facilitation measures including customs cooperation, customs procedures, freedom of transit, formalities, appeals procedures and fees and charges. Countries self-assess and declare their ability to implement each measure.

Services trade is important in growing connectivity as services support trade in goods, supply chains and manufacturing activities. They are also involved in the infrastructure enabling e-commerce and online services. Governments need to help promote the development of e-commerce strategies supporting trade logistics, development of e-commerce skills, adequate legal frameworks, online payments and access to finance. These combined with an increase in connectivity can increase e-commerce possibilities, generating economic growth and employment.

E-commerce can raise productivity in developing countries across all economic sectors, including MSMEs and enterprises owned by women, by connecting to customers and suppliers worldwide. Governments need to promote internet access and training to ensure that existing inequalities of access do not increase. The private sector is also important in supporting MSMEs and individuals to become connected to the global economy.

 

WTO: Monitoring report on G20 trade measures

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On 30 June 2017 the WTO issued its seventeenth monitoring report on G20 trade measures. The report indicates that the number of trade restrictions in the G20 countries has slightly increased in comparison to previous years.

The report notes that 42 new trade-restrictive measures were implemented by G20 countries between mid-October 2016 and mid-May 2017. The measures included new or increased tariffs, customs regulations and restrictions on rules of origin. The G20 countries also applied 42 measures to facilitate trade during the same period. These measures included the elimination or reduction of tariffs and simplification of customs procedures.

The report notes that the estimated trade coverage of the measures to facilitate trade was US$163 billion and that this was significantly greater than the estimated trade coverage of the trade restrictive measures, estimated to be US$47 billion. The report notes that the expansion of the Information Technology Agreement (ITA) is contributing significantly to trade facilitation.

The most frequently applied measures was the initiation of trade remedy investigations. These measures cover anti-dumping actions, countervailing duty measures and safeguard actions to protect domestic industry. The report presents these measures as a separate category. Although they represented 50% of all trade measures taken in the period covered by the report they cover a relatively small amount of trade, US$25 billion for trade remedy initiations and US$6 billion for terminations of measures.

The report notes that the G20 leaders should emphasize their commitment to open and mutually beneficial trade as a driver of economic growth. The G20 countries should contribute to improving the global trading environment by implementing the WTO Trade Facilitation Agreement, in force since February 2017. The countries are also urged to work together to achieve a successful outcome to the 11th WTO Ministerial Conference to be held in December 2017.

WTO: Measures to facilitate cross-border trade for MSMEs

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On 29 June 2017 the WTO’s Director General spoke during an informal dialogue on Micro, Small and Medium Enterprises (MSMEs). These entities face greater barriers to cross-border trading and WTO members have put forward some ideas to deal with the obstacles. Helping MSMEs to participate in trade flows will be a topic for discussion at the Global Review of Aid for Trade in July 2017.

MSMEs are important to the global economy because they are responsible for most of the job creation worldwide, are major employers of women and young people and foster entrepreneurship and innovation. Measures to assist more MSMEs to join global trade flows will build a more inclusive trading system by helping more agricultural firms and people in LDCs to benefit from trade, contributing to the achievement of the Sustainable Development Goals.

MSMEs face greater trade barriers than larger entities as they often do not have sufficient resources, ability to absorb risk or the necessary expertise. MSMEs have difficulty accessing trade finance and globally 58% of trade finance requests from MSMEs are rejected compared to 10% from multinationals.

The costs of trade are also an obstacle for MSMEs. Fixed costs connected with trade can be difficult for MSMEs as they have to deal with standards, border procedures and other non-tariff barriers. It has been estimated that increases in regulatory burdens have twice as much impact on MSMEs as on larger entities. The WTO has also found that variable costs are an issue and tariffs are considered by MSMEs to be a major obstacle.

Information

To help MSMEs organizations such as the WTO, UNDESA and ITC can help to disseminate information on regulations and standards in global markets. Last year the ePing notification alert system was launched to alert members about new measures and promote dialogue on addressing potential trade problems. These organizations could look at new ways to make available relevant data to their members.

Trade Finance

The WTO is working with the IMF and regional development banks to help MSMEs access resources required. Trade finance is a very low risk form of finance and the default risk on short term trade credit is only 0.02%. The issue of trade finance is to be discussed at the Global Review of Aid for Trade later in 2017.

Sharing experience

Local initiatives to support MSMEs could be shared with a wider audience to give an idea of the practical measures that work well and those that do not. Information sharing at a technical level could be constructive. This would also help the WTO to identify areas where it could be of help to MSMEs.

General measures to improve global trade

Measures to generally improve the trading system also help the firms facing the greatest barriers to participation in the system. So MSMEs are benefiting from the general work of the WTO including the Information Technology Agreement that facilitates access to new technologies. They also benefit from moves to strengthen capacity building to help people develop the skills and tools required to trade successfully.

WTO: Expanded Information Technology Agreement to be fully implemented soon

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According to a report published on the World Trade Organization (WTO) website on 1 November 2016 the majority of the participants in the expanded Information Technology Agreement (ITA) have implemented their tariff commitments under the agreement and full implementation will be achieved in the near future.

The expanded ITA provides for the elimination of the import tariffs and other duties and charges on a further 201 categories of information and communication technology products with immediate effect in some cases or over three years in most others. That means that more than 95% of the tariffs on these categories of products will be completely removed by 2019, with the remaining tariffs on a small proportion of products being eliminated by 2021 or at the latest 2023.

The products on which tariffs are to be eliminated under the expanded ITA are in total valued at more than USD 1.3 trillion in annual trade globally, in addition to the products covered under the original ITA concluded twenty years ago. The agreement will be implemented by 53 WTO members but the benefits of tariff elimination will extend to all WTO members so they will all be given duty-free access to the markets of the members eliminating the tariffs in relation to these products.

WTO publishes latest issue of World Tariff Profiles

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On 2 November 2016 the World Trade Organization (WTO) issued the latest expanded edition of its annual publication World Tariff Profiles. This publication provides tariff and non-tariff information on more than 170 economies worldwide and is issued in cooperation with UNCTAD and the International Trade Centre (ITC). The ITC is a joint agency of the WTO and UN aiming to assist small business exports in developing countries.

Tariff summaries

The publication gives summaries of average tariffs and more detailed analysis of various tariff categories. The detailed information refers not just to the tariffs a country imposes on goods imported into it but also the tariffs the country faces when exporting to its main trading partners.

Non-tariff measures

An expanded section of the report details non-tariff measures. This section points out that the impact of tariffs has been reduced by the rounds of multilateral tariff reductions and that non-tariff measures are therefore becoming more important. However the range of non-tariff measures and their complexity makes it difficult to identify their existence or application.

Quoting the Group of Eminent Persons on Non-Tariff Barriers the report notes that non-tariff measures can be defined as policy measures other than ordinary customs tariffs that can potentially have an economic effect on international trade in goods; change quantities traded; or both. Non-tariff measures include technical requirements relating to Sanitary and Phytosanitary (SPS) measures; and Technical Barriers to Trade aiming to protect health, safety or the environment.

The classification of non-tariff measures divides import-related measures into technical and non-technical measures. Non-technical measures include price control measures; measures affecting competition; distribution restrictions; subsidies (excluding export subsidies); restrictions related to intellectual property rights; and rules of origin. Statistical information is given in the report on three of the most well defined non-tariff measures, these being anti-dumping measures, countervailing duties and safeguard measures. These are similar to tariffs measures as they act through a tariff rate or price surcharge. Included as a separate category are export-related measures including export taxes, quotas or prohibitions.

Harmonized system for classification

The publication includes details on the new version of the Harmonized Commodity Description and Coding System that enters into force from 1 January 2017. This new version contains 233 amendments to the previous (2012) version. Some of these amendments clarify terms in product descriptions and notes; and others are structural changes modifying the product scope of headings and subheadings.

A large number of the changes were proposed by the Food and Agricultural Organization (FAO) of the UN and relate to fishery, fertilizers, agricultural machinery and forestry products, with additional subdivisions to improve the monitoring of trade in these products for food security reasons. Another set of amendments relates to environmental and social concerns with changes to the classification of chemical products such as chemical weapons, persistent organic pollutants, pesticides and narcotics.