Supplying Compliance with Trade Rules

Trade agreements have become politicized because of public concerns that trade rules constrain regulatory decisions. How much international obligations constrain state behavior, however, is contested in the International Relations literature. This book seeks to explain whether, why, and how jurisdictions comply with inconvenient international obligations. It does so through detailed process tracing of European Union policies found incompatible with World Trade Organization rules: its ban on hormone-treated beef, its banana trade regime, its moratorium on the approval of genetically modified crops, its sugar export subsidies, and its anti-dumping duties on bed linen from India. It uses the adverse rulings as the “treatment” in a “natural experiment,” contrasting the policy-relevant politics before and after each ruling. The case studies are supplemented by a qualitative comparative analysis of all EU policies found to contravene WTO rules that had to be changed by the end of 2019. The book contributes to debates on the impact of international institutions, on the effectiveness of the WTO, and on the nature of the EU as an international actor. It argues that the preferences of policy makers (the “supply” of policy change) matter more than demands from societal actors in determining whether compliance occurs. It also argues that while policy change in response to adverse WTO rulings is the norm (good news for trade), WTO members do resist obligations that would compromise cherished policy objectives (good news for legitimacy). This volume contends that the EU’s compliance performance is like that of most WTO members; it is not a unique international actor.

The WTO Agreement on Subsidies and Countervailing Measures and Unilateralism of Special Economic Zones

ABSTRACT Many governmental incentives unilaterally offered in special economic zones affect competition in international markets and thus fall within the scope of the World Trade Organization’s Agreement on Subsidies and Countervailing Measures. Until very recently, products made in such zones could face countervailing duty investigations abroad on a charge of improper subsidization. In 2019, the World Trade Organization issued its first ruling focusing on the legality of certain special economic zone subsidies. In particular, the panel in India—Export Related Measures found fiscal preferences under an Indian scheme to be prohibited export subsidies. This article examines the status of special economic zone incentives under the multilateral subsidy regime, discusses the relevant anti-subsidy practice, and identifies ‘risky’ and ‘safe’ types of support measures that constitute unilateralism of zones in promoting economic activities.

Durability of Zambia’s Agricultural Exports

This paper establishes the determinants of the export durability of agriculture products in Zambia with specific attention to maize, sugar, cotton, and tobacco between 1996 and 2019. We find that approximately 39% of Zambia’s agricultural products were exported beyond the first year of trading and less than 10% lasted up to 6 years of trading. The mean and median duration of exporting agricultural products in Zambia was 1.7 years and 1 year, respectively. Among the products, maize had the highest export duration after the first year of trading, followed by sugar, tobacco, and cotton. Results of the discrete-time logit and probit models with random effects revealed that the duration of total agricultural products was significantly impacted by common colony, contiguity, partner’s gross domestic product (GDP), Zambia’s GDP, initial exports, and total exports. Of these factors, colonial history and Zambia’s GDP reduced export duration, while contiguity, partner’s GDP, initial exports, and total exports increased the durability of exports in Zambia. The effect of Zambia’s GDP was uniform across all individual agricultural products. Total exports also significantly impacted all other agriculture products in a similar manner except for maize. Export durability for cotton was significantly impacted by the Regional Trade Agreements (RTAs), while the export durability of tobacco was significantly impacted by distance, contiguity, and partner’s GDP. To increase the duration of agriculture exports, we propose the exporting of finished agriculture products (and not just raw materials), which have a higher market value and duration probability. Farmers also need support with export subsidies, increased foreign market access (especially to economies with higher buying power), and negotiated favorable trade terms in the region and around the globe.

WTO, A Multilateral Trade Institution or a Parallel Organisation: Reform Initiatives Addressing the WTO Agricultural Trade Distortions to Developing Countries

The World Trade Organisation (WTO) process and its ethos are fast losing their development objectives. The crisis, challenges and complexities in the implementation of WTO policies on agriculture and market access has not abated. Intellectuals, researchers and academics opine that the implementation of WTO policies have not only encouraged power and development divide between the Industrialised nations and the developing nations, it has worsened the rate of global economic inequality. Although the inclusion of agriculture in the Uruguay Round was taken as a major achievement, the commitment to minimum market access for most protected products, reducing export subsidies and a considerable measure of support, did not do much to lower agricultural protection. The promises made to the developing countries under the Doha Development Agenda (DDA) on agriculture, market access, reduction of subsidies/tariffs and implementation issues were limited and not fulfilled. Can the emerging WTO market capacities and alliances lead to a change in the decision-making process? This writing aims to critically analyse the existing WTO legal problems hindering market flows and the incidence of barriers to trade in agriculture being much higher than protection of developing countries farmers which has impacted their development.+ Keywords: WTO; Legal; Agriculture; Implementation; Inequality; Developing Countries; Doha Development Agenda; Decision-marking; Market Access; Development.+

Trade Agreements and Export Creation: An Empirical Analysis of Pakistan’s Exports at Industry Level

This paper examinespatternsof export creation and diversion by analyzing Pakistan’s trade agreements at the two-digit industry level for all 88 export-oriented industries. We compare the net change in exports with nine free trade agreement (FTA) partners and the top15 partners with most-favored nation (MFN)status. We find that 45 industries account for USD4.1 billion inexport creation across all Pakistan’s FTA partners.Here, net exports increase after FTAs with both FTA and MFN partners. Conversely, export diversion worth USD137million occurs in 10 industries with all FTA partners as net exports to FTA partners rise while net exports to MFN partners fall. In the same manner, we find that net exports in 33 industries declined by USD500 million with FTA and MFN partners. The totalnet exports addition after FTAs was USD3.5 billion or,on average,USD350 million annually,accounting for about 1.4 percent of Pakistan’s total annual goods exports. On average, Pakistan has successfullycreatedexports in half itsexport-oriented industries, althoughhighly subsidized industries exhibit either export diversion or a net decline with both MFN and FTA partners. A difference-in-differenceanalysis shows that exports to China and Mauritius rose significantly while the remainingseven FTA partners did not have a significant increase in exports after the FTAs were implemented. In view of these findings, wesuggest revisiting the policy of export subsidies.

From Inefficient Behind-the-Border Policies to Inefficient Trade Agreements: A Two-Tier Asymmetric Information Model

We consider a general equilibrium model of international trade with two layers of informational asymmetries. Private information of Home producers on costs affects the design of ‘behind-the-border’ policies reflecting the political influence of inefficient producers. Home's supply is contracted, causing trade, and motivating the use of tariffs. Eliminating those instruments by means of a trade agreement may become impossible once Home has also private information on its redistributive concerns. Home, when subject to strong influence by inefficient producers, might be reluctant to adopt free trade, which may lead to limited tariff cuts and give a role for export subsidies.

Connecting the DotsCase Studies

This chapter illustrates the findings of this work with three case studies. It demonstrates how the understanding of extraterritoriality developed and defended here differs from and improves upon previous accounts. The chapter analyses bilateral cooperation in higher education between Ireland and Bahrain, the implications of a Special Economic Zone, run by Chinese shareholders in Nigeria, and export subsidies for sugar produced in the EU. The case studies cover a range of issues that implicate civil and political, as well as economic and social rights. In each of these case studies, I compare my account of jurisdiction as political power with previous accounts of jurisdiction and extraterritoriality in general. In detailing the disagreements, I show that the present approach is more successful than others in explaining extraterritorial human rights obligations of states. It allows us to assess very different scenarios according to the same principle: jurisdiction is required, and it is based on political power and the application of rules because this is what integrity and equality make it. The case studies show the present theory’s potential to supply plausible guidance in a principled manner, and across a very wide spectrum of cases.

Trump's Trade War: An Indian Perspective

This paper examines the implications of the Trump Administration's U.S. trade policy on U.S.–India relations and the Indian economy against the backdrop of strengthening political and strategic ties between the two countries, which have been strong since the beginning of this century. Trump's strategy of using tariffs as the bargaining chip in bilateral economic relations with India, while ignoring mutual geopolitical interests, has coincided with new protectionist tendencies in India under the Make in India strategy of the Modi government, setting the stage for a protracted bilateral trade dispute. U.S. safeguard duties on steel and aluminium have taken a toll on India's exports of these products to the United States, but these products account for a tiny share of India's total exports to the United States. The hard hit was Trump's termination of India's designation as a beneficiary developing nation under the Generalized System of Preferences (GSP). The GSP abolition is likely to have a much more significant effect on the Indian economy as exports under the program are heavily concentrated in the traditional labor-intensive industries. However, given the handsome mandate received by the Modi government at the May 2019 election and that the next election is four years away (2024), GSP abolition is unlikely to receive much weight in determining India's position in trade negotiations compared with the new protectionist policy stance stemming from the Make in India strategy. The WTO verdict on the U.S. complaint on India's manufacturing export subsidies, if upheld by the WTO Appellate body, would strengthen the U.S. position in negotiating a trade deal with India.

Micro to Macro: Optimal Trade Policy With Firm Heterogeneity

The empirical observation that “large firms tend to export, whereas small firms do not” has transformed the way economists think about the determinants of international trade. Yet, it has had surprisingly little impact on how economists think about trade policy. Under very general conditions, we show that from the point of view of a country that unilaterally imposes trade taxes to maximize domestic welfare, the self‐selection of heterogeneous firms into exports calls for import subsidies on the least profitable foreign firms. In contrast, our analysis does not provide any rationale for export subsidies or taxes on the least profitable domestic firms.

The Tax Burden CGE Analysis for Slovakia and Slovenia

In the paper, the static computable general equilibrium model for Slovakia and Slovenia is used for a tax burden analysis. There was considered simultaneous 1% increase in taxes on primary factors, on firms’ and government domestic and imported purchases, on import taxes, on output (or income) tax, on private domestic and imported consumption taxes and export subsidies. The direct tax burden as well as the allocative efficiency effects of a tax, the welfare effects and welfare decomposition of such change for both countries is analysed. The most sensitive sectors on tax rate changes is heavy manufacturing and processed food and the most distorting effect has the tax increase on private consumption tax. The government’s tax increase should generate return at least 105.75% of its costs in Slovakia and 101.92% in Slovenia, otherwise the welfare will decline.