A New Trade Facilitation Agreement

                                                Comments due March 4, 2016

As the global economy struggles to emerge from its chronic slow-growth stall, policymakers are increasingly focused on an energetic opportunity to help jump-start economic growth: the adoption of the landmark Trade Facilitation Agreement (TFA) that is now nearing ratification and implementation. By helping reduce trade costs and by helping enhance customs and border agency cooperation, a recent WTO report has found, the successful implementation of the TFA’s provisions could boost developing-country exports by between $170 billion and $730 billion per year. The OECD has calculated that the implementation of the TFA could reduce worldwide trade costs by between 12.5 percent and 17.5 percent.

Buoying the spirits of those who hailed the broad support for TFA at December’s ministerial conference of the World Trade Organization (WTO) in Nairobi, 68 countries have already ratified the agreement. The number of county-by-country ratifications is fast approaching the total of 107 required for the TFA to go into effect. Adopted in December 2013 at the WTO’s conference in Bali, the TFA is the WTO’s first-ever multilateral accord, having won approval from all 162 WTO member nations. The agreement contains provisions for expediting the movement, release and clearance of goods traveling across borders. It also sets out measures to promote cooperation among customs and border authorities on customs compliance issues.

A recent seminar at the World Bank Group – convened by the Trade Facilitation Support Program (TFSP) of the Trade and Competitiveness Global Practice (T&C) – explored the provisions of the TFA and learned of the increasingly active role of the private sector in supporting the TFA’s enactment. Awareness and momentum are building as a new coalition of private-sector firms – the Global Alliance for Trade Facilitation – mobilizes business support for TFA’s effort to speed and strengthen cross-border commerce. As the seminar heard from Norm Schenk, who serves as the chairman of the International Chamber of Commerce’s (ICC) Commission on Customs and Trade Facilitation, members of the alliance plan to meet in Washington this week to explore strategies for promoting the TFA’s adoption.

As a mechanism for business engagement in the TFA process, the Geneva-based coalition was launched as a platform for public-private cooperation to advance the implementation of key provisions of the TFA, said Schenk, who in addition to his ICC role is the vice president of global customs policy and public affairs for the express delivery firm UPS. Organizations supporting the alliance include the ICC, the World Economic Forum and the Center for International Private Enterprise. The alliance also seeks synergies with the work of such international bodies as the World Customs Organization, the WTO and United Nations Conference on Trade and Development (UNCTAD).

The alliance aims to build a broader understanding of the benefits of trade facilitation; establish multi-stakeholder dialogues on trade; mobilize public-private partnerships by engaging local businesses and associations; provide technical and financial assistance in support of capacity-building; and pursue benchmarking and evaluation based on established business metrics.

Launched by T&C in 2014, the TFSP now offers support to almost 50 countries that have committed to implementing reforms to align with the TFA. By helping developing countries implement trade facilitation reforms, the TFSP aims to stimulate increased cross-border trade and investment, thus spurring job creation in the economies of all trading nations. As the TFSP’s leader, Bill Gain, told the seminar, the program is central to the WBG’s support for implementation of the TFA, complementing the WBG’s broader efforts on trade facilitation. Total WBG support for trade facilitation – including both “hard” and “soft” infrastructure – is currently more than $7 billion.

The TFSP has worked with client countries that are focused on such priorities as setting up or strengthening national trade facilitation committees; conducting legal analyses of gaps in the way their national regulations would comply with the TFA; strengthening specific measures like advance rulings, post-clearance audits and simplified procedures for expedited shipments; and implementing national “trade portals.” The TFSP is supported by seven donor partners: the European Union, the United Kingdom, Norway, Switzerland, Australia, Canada and the United States.

As the TFA advances toward adoption, T&C and the TFSP are committed to helping client countries anticipate how to implement its provisions, and are eager to continue a wide-ranging dialogue with the Global Alliance for Trade Facilitation. Three ideas of where we could focus our collaboration include:

• Data, analytics and diagnostics. Through the TFSP, we have conducted detailed assessments of the gaps that need to be addressed for the full implementation of the TFA in 41 countries, based not just on reviews of legislation but on operational assessments of what is required. The Global Alliance, through its private-sector focus, could be in a strong position to complement this with data gathered by private-sector operators on trade facilitation performance at the country level. That could help analyze the problems that need to be faced, and it could also support the continuing monitoring of reform.
• Supporting reforms to implement the TFA at the country level. Diagnostics and analytics are the first step. The real challenge is implementing lasting reform at the country level. We could work with the Global Alliance to pilot collaboration at the country level, building on our respective strengths, to support reform.
• Improving global collaboration and advocacy on the TFA. The World Bank Group, along with the WTO and a number of other international organizations, was a founding member of the “Annex D” group of organizations supporting the implementation of the TFA. The informal group collaborates on assistance at the country level, disseminates information about experiences in implementing TFA reforms, and advocates for effective implementation. Working with the Alliance on this global agenda related to the TFA could help strengthen our respective efforts.

China and the Global Economy

                                                Comments due by Feb. 26, 2016

Weighed down by currency fluctuations, stagnant demand and volatility among commodities, international trade ultimately will hamper and constrict global economic growth this year, according to a report released Monday by the Organisation for Economic Cooperation and Development.

The OECD releases a handful of reports each year to highlight its short- and long-term growth projections, and Monday's report marks the second consecutive downward revision of note in the last few months.

In part because of a "deeply concerning" negative trend in trade growth, the organization bumped down its 2015 economic expansion estimate to only 2.9 percent from September's 3 percent, OECD Secretary-General Angel Gurría said in a statement Monday. That September headline number already had been bumped down from a 3.1 percent projection in June.

For comparison's sake, the global economy grew by more than 3.3 percent in 2014 and by nearly 3.2 percent the year before. Should 2015's projection hold, it would be the worst year for global growth since 2009.

"Since the crisis, we have become used to a familiar pattern: springtime optimism followed by downgrades in growth forecasts as the year progresses. 2015 is no different," Gurría said. "Global trade, which was already growing slowly over the past few years, appears to have stagnated and even declined since late 2014, with the weakness centering increasingly on emerging markets, particularly China. This is deeply concerning, as robust trade and global growth go hand in hand.

"Over the past five decades, there have been only five other years in which trade growth has been 2 percent or less, all of which coincided with a marked downturn in global growth," Gurría said, noting that "the slowdown in China" is "hitting activity in key trading partners."International trade is expected to expand by only 2 percent this year, according to the OECD. That's down significantly from the 3.4 percent trade growth seen in 2014 and would be one of the worst expansion numbers the world has seen in years.

China for years has been considered an international commerce titan, but the country's import and export numbers have been going downhill fast in recent months. Trade data released Sunday showed Chinese exports in October were down 6.9 percent year over year, markedly worse than the 3.7 percent shortfall seen in September. Imports, meanwhile, plunged 18.8 percent year over year.

Exporting nations who have relied on Chinese firms and consumers to buy their products have mostly fallen on hard times in response. Russia and Brazil, in particular, are examples of nations who have slipped deeper into recession as Chinese demand cools. The OECD projects the Russian economy will contract 4 percent this year, while the Brazilian economy will shrink 3.1 percent.

But those countries are essentially getting hit with an economic double whammy from China. Not only are Chinese industries buying smaller quantities of their goods, but because China accounts for such a huge percentage of global commodity consumption, a slowdown there will affect prices around the world. Commodity exporters like Brazil and Russia are now forced to sell their products at a cheaper rate worldwide just to make a sale, which means their profit margins even outside of China are vulnerable.Both nations are heavy exporters of raw materials and commodities like iron ore and crude petroleum. Brazil exports more products to China than it sends to any other nation, according to the Observatory of Economic Complexity. And China is the second-most popular destination for Russian exports, according to the OEC.

"Europe and the U.S. are small industrial commodity users compared to China. China consumes almost 50 percent of global industrial commodity consumption. And so if China slows down, the demand for industrial commodities goes down," Swiss investor Marc Faber said in an interview earlier this year on CNBC's "Trading Nation." "It affects all of the resource producers."

America is largely shielded from trade fluctuations because its economy is primarily consumer-driven rather than export-dependent. The OECD notably didn't revise U.S. growth down at all in its latest series of projections, highlighting America's reliance on consumer spending rather than trade to push its economy forward.That includes Canada as well. America's neighbor to the north slipped into a recession earlier this year in part because of pricing and demand volatility for some of its primary exports. Minerals, metals and precious metals – all of which have been vulnerable to price fluctuations in recent months – account for nearly 41 percent of Canada's exports, according to the OEC.

Still, a weakened and volatile international marketplace can change the dynamics of how the U.S. does business on a global scale. Data from the Census Bureau in September showed China surpassed Canada as America's No. 1 trade partner so far this year in terms of goods alone.

Canada had long enjoyed a trade relationship with the U.S. that no other country could match, but China this year managed to shake Canada loose. American imports of Canadian goods were down more than 10.5 percent in the first nine months of the year compared with the same window last year, largely a result of further depressed oil prices in 2015.

Canadian trade with the U.S. could have been bolstered by the controversial Keystone XL pipeline extension project that had been batted around for years before President Barack Obama ultimately declined to grant his necessary approval last week. The pipeline would have stretched nearly 1,200 miles and helped to connect oil facilities in Western Canada with the Gulf Coast. Conservatives counting on the deal to generate temporary jobs and bolster America's diminished oil industry were far from pleased with Obama's move.

"The long-term growth of the U.S. economy is intimately linked to our trade and investment relationships with Canada and Mexico," Matthew Rooney, director for economic growth at the George W. Bush Institute, said in a statement Friday. "How can it not be in our national interest to build the roads, bridges and pipelines that carry those goods and services?"

Those hoping global growth would be jump-started by a massive U.S.-Canada pipeline project now will need to look elsewhere. And while the OECD expects trade and overall growth to pick up in 2016 and 2017, there's still a lot of time for conditions to turn south.

"The global outlook is something of a good news/bad news story," a team of researchers at IHS Global Insight wrote in a research note last month. "The good news is that the (known) threats to global growth will likely not kill the expansion. The bad news is that any acceleration could easily get delayed another year."  (US News)

TPP Is it helpful?

                                           
                                             Comments due by Feb. 19, 2016

Lawmakers and presidential candidates are having their say about the 12-nation Pacific Rim trade accord that is President Obama’s top economic priority in his final year in office. But lately the liveliest debate over the deal is among blue-ribbon economists.

On Monday, it was the critics’ turn: Economists from Tufts University unveiled their study concluding that the pact, called the Trans-Pacific Partnership, would cause some job losses and exacerbate income inequality in each of the dozen participating nations, but especially in the largest — the United States.

Supporting the authors at the National Press Club was Jared Bernstein, who was the top economic adviser to Vice President Joseph R. Biden Jr. during Mr. Obama’s first term.

Each side in the economists’ debate has criticized the economic model that the other used to reach its results, while opponents and supporters of the trade accord have quickly seized upon whichever analysis buttressed their own views.The conclusions of the Tufts economists contradict recent positive findings from the Peterson Institute for International Economics and the World Bank about the trade pact, which would be the largest regional accord in history and would bind nations including Canada, Chile, Australia and Japan.

Michael B. Froman, Mr. Obama’s trade representative, plans to join other trade ministers in Auckland, New Zealand, on Thursday for the formal signing of the trade deal, which they finished in October after years of negotiations.

The future of the deal, however, depends on the approval of a sharply divided Congress. The administration is believed to lack enough support for passage, though votes are not expected until after the November election. Some other nations are delaying their own ratification processes pending American action.

Election-year pressures are not helping the president’s cause, as leading candidates in both parties are opposing the trade agreement.

Donald J. Trump, the leading Republican candidate, told the conservative website Breitbart News over the weekend that as president he would stop what he called “Hillary’s Obamatrade.”

Hillary Clinton, the leading Democratic contender, has criticized the final agreement after praising it while it was being negotiated. She continues to be assailed by her main rival for the nomination, Senator Bernie Sanders of Vermont, for her early support.

Against this backdrop, the economists from prestigious universities and research institutions have been providing their takes and debating their differences just as intensely, though with more scholarly reserve.

The analysis from the Global Development and Environment Institute at Tufts was titled “Trading Down: Unemployment, Inequality and Other Risks of the Trans-Pacific Partnership Agreement,” and was written by the economists Jeronim Capaldo and Alex Izurieta, with Jomo Kwame Sundaram, a former United Nations economic development official.

The authors wrote that they used “a more realistic model” for their analysis, and that previous reports that projected economic benefits from the trade accord were “based on unrealistic assumptions such as full employment” and unchanging income distribution.

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The Tufts report projected that incomes in the United States would decline by a half-percentage point compared with the change expected without the Trans-Pacific Partnership. The Peterson Institute’s report, by economists from Brandeis and Johns Hopkins universities, projected that incomes would rise by half a percentage point.

The Tufts paper also projected that the overall economies of the United States and Japan would contract slightly. Employment in the United States would decline by 448,000 jobs; total job losses in the dozen nations would be 771,000 — a small share of the nations’ total work forces, yet hardly a selling point for leaders seeking to ratify the trade agreement.

The Obama administration has acknowledged that some jobs would be lost, especially in manufacturing and in industries that employ workers with lower skills, but it has said that those losses would be offset by new jobs created in export-reliant industries that pay more on average. The Peterson Institute report offered evidence for that argument, while concluding that there would be no net change in overall employment in the United States.

The other parties to the pact are Mexico, New Zealand, Peru, Malaysia, Vietnam, Singapore and Brunei.

“Economic gains would be negligible for other participating countries — less than one percent over 10 years for developed countries, and less than three percent for developing countries,” the Tufts report said.

It also had bad news for countries, including China, that are not parties to the Trans-Pacific Partnership, whose participants account for nearly 40 percent of the world economy.

“We project negative effects on growth and employment in non-T.P.P. countries,” the report said. “This increases the risk of global instability and a race to the bottom, in which labor incomes will be under increasing pressure.”

The authors’ explicit criticism of models and data used by other economists provoked swift counter-criticism. Robert Z. Lawrence, a professor of international trade and investment at the Kennedy School of Government at Harvard, and a senior fellow of the Peterson Institute, wrote a blog pieceon Monday expounding on why the institute’s analysis was “superior on all counts” and better suited to specifically gauging the impact of megatrade agreements.