Abstract
A consequence of global trade liberalization is that domestic regulatory policies have become a focal point for efforts to reduce the costs of engaging in cross-border production and exchange. This article discusses the general challenges of reducing trade frictions created by regulatory differences, focusing specifically on the role trade agreements might play in addressing regulatory spillovers. A case is made for a greater focus on plurilateral cooperation under the umbrella of the WTO.
Highlights
With the establishment of the World Trade Organization (WTO) in 1995, much of the vision of the drafters of the 1948 International Trade Organization (ITO)Charter was realized, albeit some 50 years later. 1 The average level of tariffs for OECD member countries has fallen to the 3% range; for major emerging economies like China and India as well as many developing countries the average applied tariff is less than 10%
How do preferential trade agreements (PTAs) compare to the WTO? There is huge heterogeneity, but most PTAs do not do much more than the WTO, while the one outlier, the EU, goes far beyond the WTO in the area of regulatory cooperation
The gradual reduction of tariffs as part of a more general process to open economies to international trade and investment flows, in conjunction with technological changes that are permitting the digitization of products and increasing the share of services in global production, have greatly increased the impacts of differences in domestic regulation of products and production processes
Summary
With the establishment of the World Trade Organization (WTO) in 1995, much of the vision of the drafters of the 1948 International Trade Organization (ITO). Import restrictions to trade that were prevalent through the 1980s, policies to open markets to direct investment – including through privatization, and technological changes that greatly reduced the costs of international communications and transport, the result has been major changes in the structure of global production and trade. Examples of recent initiatives with a significant focus on regulatory matters include the negotiations on a Trans Pacific Partnership (TPP) between 12 Pacific countries and the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US that were launched in 2013 Both the TTIP and TPP initiatives illustrate that such new vintage agreements are difficult to conclude.
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