Volume 4

Economiquity

3/2009

 

 

 

Multilateralism is the cure

Given the current global economic slowdown, most of the nations are resorting to protectionist measures - for instance, tightening on lending to foreign entities, increasing tariffs, curbs on outsourcing to other countries, etc. by the European Union, USA, India and many others. Taking into account the economic crisis, these responses are natural if not justifiable. However, the moot question is whether this is a step in the right direction and whether it will help overcome economic uncertainty. Read More...

WTO Issues

Regional Economic Cooperation

Developmental Issues

 


Multilateralism is the cure

Given the current global economic slowdown, most of the nations are resorting to protectionist measures - for instance, tightening on lending to foreign entities, increasing tariffs, curbs on outsourcing to other countries, etc. by the European Union, USA, India and many others. Taking into account the economic crisis, these responses are natural if not justifiable. However, the moot question is whether this is a step in the right direction and whether it will help overcome economic uncertainty.

Many experts fear a repeat of the Great Depression of the 1930s, which was deepened by trade protectionism. The present crisis is undoubtedly deepening with time and no early signs of recovery (till the end of 2010) are visible.

According to a recent World Bank forecast, the slowdown can push as many as 53 million people into poverty. Recession further threatens social and political stability. The major risk today is of WTO members resorting to trade protectionist measures which are not necessarily in violation of their WTO commitments. There is also scope for frequent application of anti-dumping measures and safeguards. The WTO Secretariat reported that in the first half of 2008, the number of initiations of new anti-dumping investigations showed a sharp 39% increase over the corresponding period of 2007.

Recent economic initiatives by the US portray protectionism vividly. For instance, the US Congress has recently voted in favour of President Obama’s $787 bn economic stimulus package containing the controversial Buy American clause. The Act also prohibits US banks and firms receiving federal bailout money from hiring people on H-1B visas. This is obviously a move to force these concerns to hire American citizens for all vacancies. It will certainly invite disputes at the WTO involving those countries which are members of the agreement on government procure.

India is not a member of this agreement, but our grouse will be about the barrier to employ foreign IT workers in institutions which are receiving state doles.

Pressure from Canada, the European Union and several prominent US corporations, has led to lawmakers in Washington clarifying that Buy American clause must not violate international trade agreements.

In conclusion, a stimulus package to bail out crisis-ridden industries might have a therapeutic effect on the economy and therefore is desirable. However, protectionist clauses attached to such bailout packages might prove counterproductive. These tend to halt the global welfare, augmenting movement of human and physical capital and consumer goods across nations. Cautious usage of protective restraints would be much appreciated.

At this time of crisis, it is necessary to generate global support instead of adopting the protectionist approach. One should also look at reviving the Doha round. Another proposal doing the rounds is that countries should notify the WTO about all protectionist measures with a plan to roll them back within two years. While our Commerce Minister, Kamal Nath, thinks that this proposal makes sense, who will bell the cat?


WTO Issues

The Debate on Environmentally Motivated Unilateral Trade Measures in the WTO: The Way Forward
The links between trade and environment are complex and multifaceted. The relationship between international trade and environment has only recently attained a prominent place in the trade agenda, although it has been a concern of environmentalists for some time. In the aftermath of the Rio Declaration and with the advent in the 1990s of some disputes touching on trade and environment, environmentalists demanded a restraint on the pursuit of free trade. While some environmentalists tend to identify liberal trade with environmentally-destructive unrestrained economic growth, many free traders label the states’ resort to environmentally motivated unilateral trade measures either as “disguised protectionism” or “irrational fanaticism.

Coupling trade and environment in the WTO through environmentally motivated unilateral trade measures cause disagreements between countries of different levels of development. The developing countries and economies in transition Members voice a concern over the proclivity of high-income countries to use unilateral trade measures as an inducement or threat to realize discriminatory environmental regulations in less wealthy countries. Thus, they challenge the legality of such measures under the WTO rules. It is with this background that the WTO initiated negotiations and discussion on important aspects of the trade and environment link ─ one of them being the clarification of the status of unilateral trade measures taken on environmental grounds.

Both before and after the initiation of the negotiations and discussion, WTO Members have propagated different approaches to resolve the trade and environment conflict. Two major approaches dominate the discussion and negotiations for the clarification of the status of environmentally motivated trade measures in the WTO: the status quo approach (arguing that unilateral trade measures are already recognized by the GATT system and thus there is no need for further progress on the issue) and the environmental integrative approach (which insists that the rules are not broad enough to accommodate environmental values, and thus proposes various mechanisms to govern the overall relationship of trade rules with environmental rules.) …………

http://papers.ssrn.com/

Despite Globalisation
Signals emitting from the World Economic Forum in Davos indicate bleak future for trade liberalisation, a key tool of globalisation. Although a select few individuals in all the countries of the world benefited from globalisation, as states only the rich countries have benefited, the poor countries have been losers.

The poor have no option but to trust their economic managers that their pain will be over as soon as the process of freeing the market and integrating it to global economy is complete. But their dreams seem to remain unfulfilled. The economic recession and slowdown, especially in the global North, is a glaring example of economies running on false promises and prescriptions: the surgery was successful, the patient is dead.

Taking a cue from developed world, our policy makers should assert their right to give globalisation human and social dimensions by bypassing the IFIs' conditionalities. Without protecting vulnerable people and without offering adequate cover to those who might lose due to those policies, markets and globalisation will turn out to be the forces of instability and chaos rather than peace and prosperity as they professed. This is as true for the losers in the developed world as it is for the poor and the powerless in the developing world.

http://www.worldtradereview.com/

Regional Economic Cooperation

EPAs and Benchmarking Development
The Economic Partnership Agreements (EPAs) being negotiated between the EU and Africa pose a major challenge for African countries since they are essentially free trade agreements. As such, the issue of development benchmarks has often been discussed. Many realize the need to stringently monitor the implementation of EPAs where these are signed, and to put in place brakes on the liberalization process if the desired development goals are not being attained.

This paper proposes three concrete development benchmark indicators. They draw on the EU’s own indicators when graduating countries out of their Generalised System of Preferences (GSP) schemes: the Development Index; Export Concentration/Diversification; and Import Concentration. The logic used in this paper is that countries have to graduate out of a certain level of vulnerability before they implement a further stage of liberalisation, or before they qualify to liberalise. The paper proposes legal language that can be utilised in an EPA text. It finally also provides some figures for certain African countries, illustrating how these countries measure on the indicators.

http://www.southcentre.org/

Re-considering Asian Financial Regionalism in the 1990s
This paper on Regional Economic Integration focuses on topics relating to regional cooperation and integration in the areas of infrastructure and software, trade and investment, money and finance, and regional public goods. The Series is a quick-disseminating, informal publication that seeks to provide information, generate discussion, and elicit comments.

A common view holds that the trend toward Asian financial regionalism is a relatively new phenomenon that became significant after the Asian financial crisis of 1997/98. This paper challenges this view by exploring and analyzing financial regionalist projects in Asia throughout the 1990s. As they demonstrate, Asian countries, especially Japan, have held a strong desire to establish an Asia-only regional cooperation framework at least since the early 1990s. The basic policy stance of the United States (US), in contrast, was to participate in Asian forums and/or itself to propose and establish regional groupings with itself as a member. This competition is crucial to understanding the rise and fall of various regionalist projects.

The analysis of Asian financial regionalism from the standpoint of the membership sheds new light on studies of regionalism. Among the important theoretical implications of this empirical study is that by exercising “blocking power” over a regionalist project, an outside power is not simply killing the proposal, but is participating in the proposed regional framework and seeking to influence it. Regionalism can be best understood as a project under which a relatively minor power seeks to establish a framework that excludes more influential states in order to increase its influence within the group.

http://aric.adb.org/

Developmental Issues

What Will Climate Change Mean For Groundwater Supply In Africa?
One of the key uncertainties surrounding the impacts of a changing climate in Africa is the effect that it will have on the sustainability of rural water supplies. Of Africa’s population of 900 million, roughly 60% live in rural areas and most – perhaps 80% – rely on groundwater-based community or household supplies for domestic and other water needs (JMP, 2008). Understanding the impacts of climate change on groundwater resources is, therefore, of critical importance, yet is often ignored in development debates – including those on water supply and management.

This Background Note attempts to fill in some of the gaps and identify the most pressing research needs. The main focus is on domestic supply – water used for drinking, cooking and washing – but the note also deals briefly with groundwater irrigation and climate change.

http://www.odi.org.uk/

Are We Serious About Achieving Food Security?
The focus of the agricultural policy should be on protecting the interest of farmers and on their capacity building. For this, import of food items should be discouraged so that farmers may get better price and be encouraged to grow more food. Availability of enough certified wheat seed should be arranged before sowing season.

During wheat growing season, priority should be given to wheat growing areas to minimise load shedding; availability of fertilizer for wheat crop should be ensured in time; wheat support price should be announced as soon as wheat growing season starts; sugar cane crushing should start in time so that wheat planting in such areas is not delayed and payment to sugar cane farmers should be ensured in time.

If implemented, will not only take the country out of food crisis but also serve as a sound basis for export of commodities.

http://www.worldtradereview.com/

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