Trade and the global economic Trade and the global economic crisiscrisis

Richard BaldwinGraduate Institute, Geneva

18 December 2008BERR, London

EbookBaldwin&Evenett (eds)• Started 24 Nov (17 scholars

from around G20, 1 Dec deadline); posted 4 Dec; 10 Dec WTO launch.

• Three points of consensus in Ebook:

1) Use macro not trade measures

2) Wrap up Doha “Modalities”3) Establish WTO/IMF

surveillance mechanism.

=> World has changed already

Trade system stress• Your anxiety level.• Crisis coming to EMs via trade acc’t (manuf); to

the developing via commodity prices.• Fact: Not EM Keynesian trade shock; Manuf.

sector; stimulus limited effectiveness due to unbundling.

• Fact: Riding the tiger; EMs must react.– Many new ways boost jobs.

• Fact: Protectionist US Congress.• Fact: Anger at US causing recession.• My nightmare: “Echo Chamber”.

Trade system stress• Even without nightmare …

• Ruined atmospherics for trade talks & climate talks.

• “Temporary protection” turns permanent?

• G20 is largely about confidence building.– G20 failed on Doha Modalities, so they need to do

something else on trade. – It’s time for “Plan B”

Our “Plan B”• Last week’s Vox column stressing:

1) Early harvest (trade facilitation).Something for rich, EMs and developing.

2) Monitoring/Surveillance.WTO/IMF/ITC?

3) Modern BOP clauseCrisis Safeguard.

World has changed already

• This crisis: impossible & improbable.

Lamy & Plan B• 17 December 2008, Trade Negotiations

Committee, WTO press release.• Director-General Pascal Lamy told the Trade

Negotiations Committee on 17 December 2008 that “concluding the Round should remain our focus in 2009 but this endeavour takes place within a more global portfolio of WTO activities”.

• He proposed action “on the wider WTO front” like monitoring trade measures taken in relation to the financial crisis, trade finance and Aid for Trade.

Concluding• G20 gov’ts needs to boost confidence of

consumers and investors that governments can get their arms around the crisis.

• On trade … – G20 should support Lamy’s Plan B.– Help develop “early harvest”. – Support monitoring/surveillance of new trade

measures.– Provide leadership in Doha talks.

8

EndEnd

For more analysis & daily updates see:

http://VoxEU.org

Falling Trade flows

Japan

US

China

Euro area

0

50

100

150

200

250

Jan-2007

Feb-2007

Mar-2007

Apr-2007

May-2007

Jun-2007

Jul-2007

Aug-2007

Sep-2007

Oct-2007

Nov-2007

Dec-2007

Jan-2008

Feb-2008

Mar-2008

Apr-2008

May-2008

Jun-2008

Jul-2008

Aug-2008

Sep-2008

$ b

ill

5

Falling Trade flows

0

5

10

15

20

25

30

35

40

45

50

Jan-

2007

Feb-2

007

Mar-

2007

Apr-2

007

May

-200

7

Jun-

2007

Jul-2

007

Aug-2

007

Sep-2

007

Oct-20

07

Nov-2

007

Dec-2

007

Jan-

2008

Feb-2

008

Mar-

2008

Apr-2

008

May

-200

8

Jun-

2008

Jul-2

008

Aug-2

008

Sep-2

008

South AfricaIndonesiaBrazilRussiaKorea

Rising tariff protection

Developed Developing

Less Developed

0%1%2%3%4%5%6%7%8%9%

Developed nation exportsfacing higher tariffs into:

Developing Nations Less Developed Nations

ITC data

Share of trade in HS6 categories with higher average tariffs in 2008 vs 2007

But bindings may help• WTO bindings + FTA ‘commitments’

• Joe Francois numbers (VoxEU.org 17/12/08)

Francois numbers

Manufactured imports, bound & unbound

intra-EEA trade

intra-NAFTA trade

other OECD imports

"At risk"

Hong Kong, Singapore

Agriculture imports, bound & unbound

intra-EEA trade

intra-NAFTA tradeother OECD

imports

"At risk"

Hong Kong, Singapore

Francois numbers