Themes of trade research

Last week I attended a workshop at the WTO on research in trade organizations. It presented work from the World Bank, WTO and IMF on their areas of research. WTO Secretary General Pascal Lamy opened the event with some reflections on world trade.

He said that economic integration through markets was happening at unprecendented speed and that research was important to provide WTO members with accurate picture of these transformations in world economy. However, he saw a “widening gap” in reality of international trade and perspective of international negotiators. He perceived a “mercantilist approach” to negatiations which made sense in the past but not now, in a period where 2/3rds of trade is parts and components. Twenty years ago) the average import content of exports was 20%. Today it is 40%. Will it be 60% 20 years from now?

Emphasising the importance of trade research, he said:

“I still believe ideas is what drives this world,…not national interests…remains all the more the true because of the rapidity of change we are witnessing… basically changes in technology…thus the old way to regulate trade doesn’t make sense.i.e. exports great, imports bad”

Afterwards Christine Lagarde, the head of the IMF spoke about the main changes taking place in the world economy including

  1. Complete collapse that destroyed trade in 2008
  2. Potential protectionism on the back of recovery
  3. Difficulty surrounding multilateralism

She saw 3 areas of collaboration in trade research

  • Trade finance (80% of world trade reliles on this)
  • Monitoring of protectionism (rising in some corners of the world)
  • Global value chains – how fragmented they could be and how could add value

Aaditya Matoo of the World Bank presented a range of interesting ideas including:

Countries don’t export, companies do. We therefore need an understanding of how trade affects households and more about service sectors where our knowledge is inadequate.

Exports concentrated in few companies. e.g. in Bostwana 1% of companies export 90% of value in Botswana. A central conundrum of aid for trade: If large firms are the drivers of trade, should we assist them if they dont need the support or should we assist the SMEs “who need it but can’t use it”. V little evidence on what works in Aid for Trade and what doesn’t. Evaluation methods remain primitive. More rigorous methodologies needed.

Many firms enter export markets but few survice. Darwinian yes, but wasteful. Much energy is devoted by aid agencies to help firms enter markets (through trade fairs and trainings) but not staying in.

Countries don’t suffer, people do. Mobility of workers important to understand. Millions are unskilled are trapped as they are not allowed or able to migrate.

 

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