The Future of the WorId

Trading System
Ganeshan Wignaraja
Principal Economist,
Office of Regional Economic ntegration
Asian Development Bank
University of Asia and the Pacific
6 October 2011
The views expressed in this presentation are those of the author and do not necessarily reflect the views and policies of the Asian
Development Bank, or its Board of Covernors or the governments they represent.
ontents
. Leveling off
. The Future of the World Trading
System
. FTA Use in the Philippines
Definitions
WorId Trade Organization (WTO)
international organization that deals with the rules of trade between nations
established in 1995; currently has 153 members and several observers
WTO Agreements
promotes multilateralism; spells out the principles of liberalization and the
permitted exceptions
has individual countries' commitments to lower customs tariffs and other
trade barriers, and to open and keep open services markets; sets
procedures for settling disputes
not static; are renegotiated from time to time
Free trade agreement (FTAs):
any preferential trade agreement among countries regardless of their
location
also called regional trade agreements (RTAs) or preferential trade
agreements (PTAs)
Customs Union
agreement between two or more (usually neighboring) countries to remove
trade barriers and reduce or eliminate customs duties on mutual trade
a customs union (unlike an FTA) generally imposes a common external-
tariff on imports from non-member countries
. Leveling off
Rapid Growth of World Exports
Source: WTO, World Trade Report 2011
Asian Exports Bouncing Back
5ort Growth
1
($ value, y-o-y, %)
ASEAN-4 = ndonesia, Malaysia, Philippines, and Thailand; NE-3 = newly industrialized economies (Hong Kong, hina; Republic of Korea; and
Singapore); PR = People's Republic of hina; y-o-y = year-on-year.
1
3-month moving average.
Source: ADB, Asia Economic Monitor, July 2011.
Asian Giants Lead Export Growth
Source: Wignaraja (2011b)
Giants' growing contribution to
global goods trade
Source: Wignaraja (2011b)
WTO History
1995: onclusion of the Uruguay Round and
the birth of the WTO
Rules based system of international trade
WTO functions negotiations, disputes,
monitoring
Doha Round history
2001: Doha Round launched
2003: ancun Ministerial onference
2005: Hong Kong Ministerial onference
2008: Geneva "mini-ministerial collapse
2010, November: G-20 statement: 2011 represents a
"critical window of opportunity, albeit narrow.
2011, May: Negotiation on a Doha light "LD plus
agreement using a "three lane approach.
2011, July: "LD plus approach losses steam
2011, December: 8th Ministerial onference, Geneva
. The Future of the
World Trading System
1. onclude Doha: t's mportant
Promise of $155 Bn in world income but
slow progress
Problems include:
Agriculture and NAMA contentious
153 members makes closure difficult
WTO negotiating machinery complicated
Deep Doha deal difficult but economic
case to persevere
2. Two-track work plan leading to
December 2011 ministerial
Track 1: Doha Round agenda items:
Now: "LD only package agreed by December 2011
Future: oncluding Doha round post December 2011
Track 2 Non-Doha round agenda items
Now: Non-Doha items at December 2011 ministerial
Aid for Trade, LDC specific issues, Improving Trade
Policy Review Mechanism, Improving monitoring of
protectionism, Transparency mechanism for FTAs
Future: Non-Doha Round post December 2011
Climate change, food security, currency exchange
3. nitiate Post-Doha Agenda Early
Effective aspects include dispute settlement,
global monitoring and administration of past
agreements
Time is ripe for strategic thinking.
Options include:
Negotiating smaller sector-specific deals
Reforms to WTO negotiating machinery
mproving coherence between FTAs and WTO
4. Region-wide FTAs:
A Bottom-up Approach?
RW FTAs are a tool of liberalization
For now, 2 competing processes:
ASEAN + 3 or +6
Trans Pacific Partnership (TPP) agreement
Linked agreements, variable coverage of
members and issues
Eventual convergence
Framework to move Doha forward with
contentious issues resolved
5. Make Aid for Trade
(AFT) Effective
Liberalization works best when supported
by AFT
Scarce future AFT flows likely and
effectiveness important
Asia's experience suggests:
Regional approach backed by national
strategies optimal
Blending grants with less concessionary funds
mproved monitoring and evaluation
. FTA use in the Philippines
.1
17.3
2.3
.7
7.
77.3
.2
28.
.7
2.
23.
2.8

1
2
3

7
8
!hiIi55ines Ja5an !#C Korea Singa5ore ThaiIand
Use FTAs Use+plan to use FTAs
ADB study: Philippines' FTA use is lagging
FTA Use in Asia
(% of responding firms)
Source: Kawai and Wignaraja (2011a)
ADB study: Lack of info and
delays/admin costs impede FTA use
#easons for Im5ediments !hiIi55ines
Lack of information 70.1
DeIays and admin costs 30.6
Use of ! schemes/ITA 26.9
#ent-seeking 23.1
Too many ecIusions 14.9
SmaII margin of 5reference 13.4
ConfidentiaIity of information 12.7
NTMs in FTA 5artners 9.0
Number of respondent firms 134
(% of responding firms)
Source: Kawai and Wignaraja (2011a)
Policy implications
FTA as trade policy tool - shift of trade to regional
FTA partners
Provide greater access to FTA information (with
SME-focused outreach) and support to upgrade
business
onduct broad-based consultations (before,
during, after FTA negotiations)
mprove administrative capacity to address
issues in second generation FTAs
Better surveillance of NTMs
Resources
Kawai, M. and G. Wignaraja (eds, 2011a), Asia's Free Trade Agreements:
How is Business Responding? UK: Edward Elgar Press.
http://www.adbi.org/files/2011.01.31.book.asia.free.trade.agreements.pdf
____________ (2011b), "Asian FTAs: Trends, Prospects and hallenges,
Journal of Asian Economics, February.
Wignaraja (2011a), "Economic Reforms, Regionalism and Exports:
omparing hina and ndia, East-West Center Policy Studies No. 60,
Honolulu: East-West enter, July.
http://www.eastwestcenter.org/sites/default/files/private/ps060.pdf
____________ (2011b), "Will ndia overtake hina in the next decade?,
Voxeu.org, http://www.voxeu.org/index.php?q=node/7036.
Aid for Trade in the Asia-Pacific: Its Role in Trade-Driven Growth, Report
from the o-hairs of the Regional Technical Group on Aid for Trade for the
Asia-Pacific. http://aric.adb.org/aid-for-trade-asia/
ADB, Asia Economic Monitor, July 2011.
http://aric.adb.org/pdf/aem/jul11/Jul_AEM_complete.pdf
WTO, World Trade Report 2011.
http://www.wto.org/english/res_e/booksp.../world_trade_report11_e.pdf
Thank you!
Ganeshan Wignaraja
!rinci5aI conomist, O#I
Telephone: (63-2) 632-6116
Email: gwignaraja@adb.org
Asian Development Bank
Office of Regional Economic ntegration (ORE)
6 ADB Avenue, Mandaluyong ity
1550 Metro Manila, Philippines