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Promising Policies for Persistent Problems in Trade

Kathryn Kotris, G20 Research Group
July 17, 2016

G20 trade ministers met on July 9-10, 2016, in Shanghai, China, where they reached agreements similar to those at their first meeting in Istanbul, Turkey, in October 2015. Despite these similarities, in the nine months between these meetings, global trade has not increased. Neither has the anticipated economic growth that the trade ministers' agreements sought to create through trade. On the contrary, anti-trade sentiments and creeping protectionism have emerged as serious threats to the landmark commitment made by the G20 leaders at the 2014 Brisbane Summit to increase global growth by 2.1% by 2018.

The themes of inclusiveness, implementation and investment established at Istanbul in 2015 have been carried forward by the Chinese host of the G20 into 2016 as a means to enhance economic growth, prosperity and repair global imbalances through trade and investment. At Shanghai, the trade ministers' statement struck the right tone and balance, by affirming the principle of inclusiveness through broadening the global trading sphere by supporting regional trade agreements, by increasing resourceful engagement with international organizations such as the World Bank, the International Monetary Fund, the Organisation for Economic Co-operation and Development, and the World Trade Organization (WTO), as well as civil society, the Business 20 and the Think 20. The timely launch of the WTO's World Trade Outlook Indicator at Shanghai provided valuable trade-related indices and statistics for designing strategic trade policy initiatives.

Coordinating efforts to enhance trade and investments through a multilateral approach extends to tracking compliance with existing agreements, notably enforcing the pledge for both standstill and rollback protectionist measures, which was extended to the end of 2018. Despite this renewed pledge, China responded defensively to accusations that its trade practices involving steel and other commodities have contributed to the oversupply of production materials, resulting in price discrimination and global imbalances. Citing a highly efficient economy with overall lower production costs, China claimed victimization by anti-dumping measures imposed by foreign countries. Airing these differences of interpretation of trade practices at high-level talks is crucial to the eventual elimination of unfair practices without invoking a judicial panel. However, the communiqué did not mention fluctuating currencies, which create price uncertainty in goods and services, perhaps due to the vulnerability of the European Union and British pound. China may not have had to respond, as in previous meetings, to accusations of benefitting from an artificial currency valuation.

In an effort to push forward their agenda, the trade ministers encouraged increased participation by other WTO members and issued timelines to complete plurilateral agreements including the Information Technology Agreement and its Expansion Agreement, the Trade in Services Agreement and, above all, the Environmental Goods Agreement. The frankness with which the U.S. and Chinese representatives reportedly discussed their different interpretations of trade practices, dumping in particular, did not hinder the oft-repeated emphasis to promote responsible business conduct. A firm agreement in principle and practice on what constitutes such conduct is essential for the G20 members as they strive to complete these highly complex agreements. Businesses conduct the global trade in goods and services, and they demand stability and an enforceable rules-based regime within which to operate.

A major development was the recent ratification of the WTO's Trade Facilitation Agreement (TFA) by the minimum required two thirds of member countries. The terms of the agreement are now being implemented. The Istanbul meeting in 2015 had successfully emphasized the importance of G20 members showing leadership by quickly ratifying and implementing the terms of the TFA. Most have done so. According to the WTO's World Trade Report released in October 2015, the TFA has the potential to increase global trade in merchandise by up to $1 trillion annually by removing inefficiencies, duplications and obstacles to the movement, release and customs clearance of goods. Under the TFA, developed countries will provide much-needed investment and technology transfers to developing countries, which will benefit tremendously by reaping more than half the gains through increased employment and productivity. Monitoring the progress of this agreement over time will be an essential task for the WTO and G20 members.

The three themes of the Istanbul and Shanghai meetings remain relevant. Inclusiveness involves resources from international organizations to supply statistical data, regulatory oversight for compliance, and assist with policy initiatives and legal positions. It is an imperative to success among trading regimes. The implementation of policies and procedures in new and existing trade agreements is better served by all stakeholders understanding these provisions, with the G20 providing exemplary leadership. Investments should include assisting small and medium-sized enterprises and developing countries, and enhance dispute settlement mechanisms and regulatory enforcement. In this time of increasing antiglobalization and political instability, it is vital that the G20 trade ministers fulfill their commitment to effectively communicate the value of open markets within an irreversibly globalized network. The newly established G20 Trade and Investment Working Group is a positive outcome of the Shanghai meeting and may strengthen the relationships among the trade ministers whose countries represent 80% of global trade.

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Kathryn KotrisKathryn Kotris has been a researcher for the G20 Research Group and the G7 and G8 Research Group since 2006. She is on the advisory board of the Pearson Centre for Progressive Policy and has been vice-president of compliance VP Compliance for Mortgage Architects since 2006. She graduated with honours from the University of Toronto with a bachelor of arts in political science and history.

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