Trends and Issues in Global and Regional Integration
A few trends
Rise of world trade: Merchandise
Rising Merchandise Exports
Rise of World Trade: North and South
The Asian Century?
“
Source: Baldwin 2006
More than Asia: Emergence of BRICs…
IMF, World Economic Outlook 2007
Emergence of BRICs…
IMF, World Economic Outlook 2007
Source: Eurostat, IMF, all products in value, excluding intra-EU trade
0
2
4
6
8
10
12
14
16
18
20
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
EU25
USA
Japan
China
Rising China: Market shares trends trends in world trade (%)
Shares of global trade, by regions
Intra vs extra-regional trade
Growth of developing countries tradeHow impressive is the South-South growth?
Exporters from the South are capturing the Southern markets that used to be served by exporters from the North.
The rise of financial flows
• Issue 3: Is Regionalism a solution?
Types of «regional» economic arrangement:is there a logic of integration?
Bilateral Agreements Free Trade Area Customs Union Common Market Economic and Monetary Union (e.g. EU)
?
Trade liberalization strategies (Ravenhill 2005)
Waves of regionalism after WWII
The number of PTAs exploded since the 1990s
0
5
10
15
20
25
30
1958 1969 1976 1984 1989 1994 1999 2004
0
50
100
150
200
250
300
Source: World Bank Global Economic Prospects (GEP) 2005
Cumulative number of agreements (EU-15 counted as single country
Cumulative number of agreements (EU- 25 counted as single country
Agreements not notified to the WTO
Agreements notified to the WTO
The new wave?
Changed context• End of the Cold War• Global interdependence • Neo-liberal ideas in OECD countries (and GEMs)
– Signaling openness, market access– Frustration with WTO/GATT– Change of US, Japanese and EU attitudes
Current patterns and trends on regionalism/bilateralism
Many South-South agreements Beyond the region (the R is losing significance!) Shallow and deep integration WTO+ in North-South Open regionalism and strategic forum-shopping?
Standards Transport
Customs
cooperation Services
Intellectual
Property Investment
Dispute
Settlement Labor Competition
U.S.-Led
US-Jordan No No Yes Yes Yes Yes Yes Yes No
US-Chile Yes No Yes Yes Yes Yes Yes Yes Yes
US-Singapore Yes No Yes Yes Yes Yes Yes Yes Yes
US-Australia Yes No Yes Yes Yes Yes Yes Yes Yes
US-CAFTA Yes No Yes Yes Yes Yes Yes Yes No
US-Morocco Yes No Yes Yes Yes Yes Yes Yes No
NAFTA Yes No Yes Yes Yes Yes Yes Yes Yes
E.U.-Led
EU-South Africa Yes Yes
EU-Mexico Yes Yes Yes Yes Yes Yes Yes No Yes
EU-Chile Yes Yes Yes Yes Yes Yes Yes No Yes
South-South
MERCOSUR No No Yes Yes No Yes Yes No Yes
Andean Community No No Yes Yes No Yes Yes No Yes
CARICOM Yes Yes Yes Yes No Yes Yes Yes Yes
AFTA Yes Yes Yes Yes No Yes No No No
SADC Yes Yes Yes No Yes
COMESA Yes Yes Yes Yes No Yes Yes Yes Yes
Other
Japan-Singapore Yes No Yes Yes Yes Yes Yes Yes Yes
Canada-Chile No No Yes Yes No Yes Yes Yes Yes
Chile-Mexico Yes Yes Yes Yes Yes Yes Yes Yes
RTAs go far beyond trade
Source: GEP 2005
0
5
10
15
20
25
30
35
1990 1996 2002
0
50
100
150
200
250
1990 1996 2002
South-South RTAs predominate in number, but not in trade covered
South-South-SouthSouth
European European UnionUnion
USUS
South-South
European European UnionUnion
Percent of World Trade CoveredPercent of World Trade CoveredNumber of RTAsNumber of RTAs
USUS
Source: GEP 2005
Source: WTO, Crawford and Fiorentino, 2005
Cross-regional RTAs
The Political-Economy of Regionalism:Economic Debates
• Trade Diversion vs. Trade Creation• Stumbling Bloc vs. Stepping Stone
• New rent-seeking (e.g. preference erosion)• Domino Theory (Baldwin) / Export Discrimination
(Dür)
Potential EffectsEconomic consequences More trade among members, but limited So far small drivers for trade reforms Not significant trade diversion (depends on tariff levels) Increased FDI Little overall effect on economic welfare (Ravenhill 2007, GEP 2005)
But, Spaghetti-Bowl „transaction“ costs: Rules of Origin Political exemptions: labor mobility, specific sector protection (e.g.
agriculture, services) Not well defined dispute resolution mechanisms Not much pressure to negotiate multilaterally
…regional agreements are a relatively small driver of trade reform
Multilateral Agreements
25%
Regional Agreements
10%
Autonomous Liberalization
65%
Decomposing 20% pt. declineDecomposing 20% pt. decline
Source: Martin and Ng, 2004
0
5
10
15
20
25
30
1983 2003
Av. Tariffs, 1983 and 2003Av. Tariffs, 1983 and 2003
29.9
9.3
Decomposing tariff reductions in response to multilateral, regional and own initiatives Decomposing tariff reductions in response to multilateral, regional and own initiatives
Source: GEP 2005
Agreements with high external tariffs risk trade diversion
0 5 10 15 20 25
SAPTA
ECOWAS
COMESA
MERCOSUR
EAC
SADC
AFTA
NAFTA
Note: Tariffs are import-weighted at the country level to arrive at PTA averagesSource: UN TRAINS, accessed through WITS
Average weighted tariffs
Source: GEP 2005
Varieties of Regionalism: Europe
Source: WTO, Crawford and Fiorentino, 2005
Americas
Source: WTO, Crawford and Fiorentino, 2005
Source: WTO, Crawford and Fiorentino, 2005
Asia-Pacific
• Issue 4: Financial and Economic Crises and now what?
Contangion Effect
G20 country responses
G20 country responses
Economic Outlook
Questions abound
The future role of international cooperation: The emergence of the G20 The role of the IMF
How to tackle protectionism How to address national and global
imbalances Currency alignments Balance of payments deficits Budget deficits State policies, foreign aid and development