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Understanding the global trading system


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2019 Mar 2, 6:06pm   944 views  4 comments

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Where do my things come from? How trade works today

When we think about international trade, we traditionally think about a person or company producing all elements of a product in their home country and then exporting a final product to a consumer in a different country. This type of trade, however, only represents about 30% of goods and services trade today; the majority of trade (70%) is actually in intermediate parts, components, and services that form segments of global value chains (GVCs). The process of producing goods is often spilt across countries, with different elements carried out wherever the necessary skills and materials are available at competitive cost and quality.

For example, a T-Shirt may be manufactured in Viet Nam using fabric imported from the United States, and then exported to Canada to sell in local retail markets. At the other end of the technology spectrum, producing a smart phone requires many complex components sourced from all over the world, including for example, computer code from France, silion chips from Singapore, precious metals from Bolivia, and graphic design from the United States. While the final product may be assembled in China and then shipped to consumers all around the world, this example reveals that many products we think of today as being made “somewhere” are in fact the result of efforts by firms and individuals in many countries.

Traditional trade statistics do not capture this reality, which is why the OECD launched an initiative to measure trade in “value added” (TiVA) terms, deepening our understanding of how trade actually works. Using TiVA, we can better identify how much value each country and industry adds to a final product along the global supply chain. This approach provides a much more accurate picture of trade balances between countries and the contribution of trade to income and employment. Taking the example of the smart phone, traditional trade statistics would attribute 100% of a final Apple iPhone assembled in China to Chinese exports, whereas a value-added approach shows that China actually only retains around 4% of the total value of the iPhone – the rest of the value is attributed to other countries that provide inputs all along the supply chain.

This new sharing of production across countries has enabled many more countries to participate in global trade, with developing countries increasing their share of global exports and imports. While the new environment for trade creates new opportunities, it also increases the costs of trade barriers.

When goods and components cross borders many times in GVCs, even small tariffs can add up, and the costs of inefficient border procedures are multiplied. Trade facilitation –the transparent, predictable and straightforward procedures that expedite the movement of goods across borders – is becoming ever more important, and is especially critical for trade in perishable agricultural products or high-tech manufacturing components, both of which are highly sensitive to delays. Trade facilitation is becoming even more important in the digital era.

TiVA data also highlight how important services are to global trade. Services represent more than 50% of total global exports, and over 30% of manufactured goods exports and around 25% of agri-food exports in value added terms. This means that efficient services sectors are not just important in their own right – services contribute to as much as 80% of GDP in some countries – but they are also essential to a country’s competitiveness in other sectors as well.

Even though services generate more than two-thirds of global GDP, employ the most workers in major economies, create more new jobs than any other sector, and are critical to competitiveness, obstacles to trade in services remain pervasive. Regulatory reforms and liberalisation of trade and investment in services are needed to enhance competition and increase the productivity and quality of services.

Indeed, international trade can be strongly impacted by non-tariff barriers that originate from domestic regulations, or from limitations to foreign investment. The challenge is to meet policy objectives in ways that maintain the gains from trade.

Digital techonologies and related new business models are also now changing the way we trade. Digitalisation reduces the cost of engaging in international trade, connects a greater number of businesses and consumers globally, helps diffuse ideas and technologies, and facilitates the co-ordination of GVCs.

But even though it has never been easier to engage in trade, the complexity of international trade transactions has increased dramatically, posing new challenges for firms, individuals and governments. Emerging technologies like 3D printing are poised to further change how we trade in the future.

In this fast-evolving environment, challenges involve ensuring that the opportunities and benefits from trade can be realised and shared more inclusively. How countries trade with each other matters.

Rules of the road: the international trading system

Today’s multilateral trading sytem can be traced to the aftermath of World War II, when the desire for peace led governments to establish mechanisms for deeper economic co-operation. The General Agreement on Tariffs and Trade (GATT) was signed by 23 founding members in 1948.

Over the years, successive rounds of multilateral negotiations further reduced tariffs and new members joined the GATT. The Uruguay Round of trade negotiations concluded in 1993, establishing the World Trade Organization (WTO) to replace the GATT as a governing structure for global trade. The birth of the WTO in 1995 established new procedures for settling disputes and marked the first time global rules were set for agriculture, trade in services, and intellectual property.

WTO members launched the Doha Development Agenda (DDA) in 2001 with a goal of advancing trade rules and market opening, notably in agriculture, non-agriculture market access, and services. Following more than a decade of impasse, in 2013, WTO members reached agreement on the Trade Facilitation Agreement (TFA).

Notwithstanding this slow progress, the multilateral trading system remains critical to global prosperity. WTO rules helped to prevent a slide into a 1930s-style trade war that would have greatly exacerbated the global economic crisis a decade ago. Changes in the global economy and the slowdown in trade call for strengthening the WTO. There are a number of ongoing efforts to strengthen and modernise the WTO, in particular with respect to its monitoring and surveillance functions, its dispute settlement function, and negotiations to ensure that firms in all countries are competing on a level playing field.

Today, the WTO still sets the basic rules of the game for cross-border trade in over 160 countries, and is complemented by a growing number of bilateral and regional trade agreements (RTAs) that tend to include deeper and wider commitments to integrate markets. In fact, more than 290 RTAs notified to the WTO are in force today (figure), and more than 30 new agreements are under negotiation.

Although RTAs operate alongside global multilateral agreements under the WTO, many are developing in ways that go beyond existing WTO multilateral rules, and have created a “spaghetti bowl” of preferential agreements. Areas covered by many new RTAs – from investment, to the movement of capital and persons, to competition, to e-commerce – are essential policy issues that must be addressed in today’s more interconnected markets. To the extent that they go beyond commitments made in the WTO and remain open to additional participation by countries committed to meeting their standards, RTAs can complement the multilateral trading system.

Governments have put a lot of effort into establishing and maintaining a global trading rulebook over the past 70 years; progressively opening markets and deepening economic integration.

Note: Scalable Vector Graphics in the link below

http://www.oecd.org/trade/understanding-the-global-trading-system/how-trade-works/

#Trade #Global #WTO #Logistics #SupplyChains

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1   anonymous   2019 Mar 3, 4:28am  

Why open markets matter

People trade and governments open markets because it is in their interest to do so. Trade and market openness has historically gone hand-in-hand with better economic performance in countries at all levels of development, creating new opportunities for workers, consumers and firms around the globe and helping to lift millions out of poverty. Relatively open economies grow faster than relatively closed ones, and salaries and working conditions are generally better in companies that trade than in those that do not. More prosperity and opportunity around the world also helps promote greater stability and security for everyone.

So does trade really benefit ordinary people?

Trade has contributed to lifting hundreds of millions of people out of poverty: the share of the world's population living on less than PPP USD 1.90 per day fell from around 35% in 1990 to less than 10% in 2015. Evidence on the impact of trade on poverty in developing countries over 1993-2008 shows that the change in the real income of the bottom 20% of the population is strongly correlated with the change in trade openness over the same period. Developing and emerging economies are playing a more important role today in trade than ever before, contributing to declining inequality among countries (though not always within countries).

Trade has delivered unprecedented access to goods and services, with a revolution in the availability of goods for low income households. Take the cost of purchasing a television set, for example: between 1980 and 2014, the price of a roughly comparable TV set fell by 73%, in part as the result of ambitious trade liberalisation efforts – and the smart television sets we buy today are vastly better than those available in the 1980s. Lower prices are particularly beneficial for poor households, which spend relatively more on heavily-traded products (for example, staples such as food and garments).

Not only does trade lower prices, it also provides jobs for millions of people around the world. In a large country like the United States, around 10% of the workforce is involved in producing goods and services that are exported and consumed abroad, which amounts to around 14 million American jobs. The share goes up to 20% for France, almost 30% for Germany, and 47% for a small open economy like Ireland.

Across all countries, the share of jobs that rely on trade is significantly higher when taking into account “indirect” exports (when a person or company sells a good or service to another actor in the domestic market that uses it as an input in its exports). In some countries like China these can out-number jobs in the exporting industries themselves. These indirect export channels are especially important for smaller firms.

Trade also plays a role in raising incomes and improving overall working conditions. Exporters in the United States, for example, on average pay wages that are 6% higher than non-exporters. And whether the measure is injuries on the job, child labour, informality, or effects on female labour, open economies significantly out-perform closed ones, and labour rights are generally better respected.

Trade also helps businesses become more productive and innovative

Trade openness also benefits firms, by giving producers access to bigger markets, allowing them to increase the scale of their production, and encouraging market competition and innovation. Firms that export tend to be more productive than those that do not.

Trade also allows new technologies to move more freely around the world, benefitting more companies and more people. Smaller businesses in particular stand to gain from spill-overs of technology and managerial know-how, as well as opportunities to scale up and enhance productivity. The more a country trades, the more technology and ideas spread; workers get more done, and higher productivity can lead to better wages.

Trade can lead to structural changes, which requires adjustment assistance

A powerful driver of structural change, trade helps to reallocate resources to the sectors and areas where they can be most efficient. This is one of the key gains from trade, but also one of its costs. Not all of the gains from trade are immediate, and not every worker benefits. Losses can be sharp and concentrated on individuals, often those with the least capacity to adjust on their own. So as well as ensuring people are able to take advantage of opportunities from trade and technology, governments must also find ways to help those facing hard adjustment.

In the face of these concerns, governments can feel pressure to implement protectionist policies and measures – including tariffs, quotas and various forms of subsidies – as a way of 'saving' domestic jobs and enterprises. However, protection penalises those it aims to protect: jobs retained solely by protection are unlikely to be sustainable, nor to generate other jobs; protecting specific jobs or firms is a costly way of helping relatively few people, with costs (increasing over time) for jobs in other sectors, and for low income households facing higher prices. A better approach is a combination of domestic and international policies to foster inclusive growth and share the gains from trade.

While open markets can deliver gains, there are concerns that the current trading system is not working as it should to deliver these gains. Understanding the challenges and opportunities in global trade is critical in ensuring that gains can be realised for firms and families alike.

Scalable vector graphics in link below

http://www.oecd.org/trade/understanding-the-global-trading-system/why-open-markets-matter/
2   MisdemeanorRebel   2019 Mar 3, 10:01am  

Screw Open Markets. Whatever is in the general interest is important.

it's stupid to lose a million jobs and turn 100 towns into meth filled delapidated rustbelts over a ten cent difference in price.

Literally, it's stupid. Because the loss of social cohesion, tax revenue, wealth (small towns have cheap housing b/c no jobs), more than outweighs the ten cent savings on a $5 item.

Germany, the Left's first love, aggressive uses rules to protect their industry, manipulates the EU into passing laws that benefit German manufacturers by "standardization" that's deliberately written to exclude foreign products, and exempts most industry from the Energiewende, leaving the renewable tax burden to fall solidly on the residential and commercial users.

In fact, the vaunted "Chicken Tax" started in the 50s, long beforefactory farmed chicken, in order to protect less efficient West German farmers.

Radios, TV, and the vast majority of Cars were all made in the USA as late as the 80s and 90s. There was no critical shortage of TVs and Stereos, even the poorest Americans had one and usually more than one.
3   anonymous   2019 Mar 4, 11:59pm  

Challenges and opportunities in trade

The tensions we are now seeing in the international trading system have been building over decades. Many people are concerned that not everyone is playing by the agreed multilateral rules, that high levels of state support and protection remain in key sectors, and that new multilateral rule-making is not keeping pace with the business realities of today. Against this background, protectionism is on the rise.

But if the overwhelming consensus among economists is that trade is good for firms and families alike, and people trade because it is in their interest to do so, how did we get here? And how can the OECD support policy makers as they build a more open, inclusive and sustainable trading system?

Current challenges facing global trade, and how we got here

Current concerns about the trading system focus both on areas where multilateral trade rules exist but where fair international competition is hindered by continuing high barriers and state support, and areas where trade rule-making has not kept pace with changes to the global economy. Both these “gaps in the rulebook” are highlighted in calls for reform and modernisation of the World Trade Organisation (WTO), across both its monitoring and transparency and its negotiating functions.

Market distortions remain significant in key areas of global trade. For example, notwithstanding the 1995 WTO Agreement on Agriculture, agro-food products overall face higher trade barriers than industrial goods. Tariffs applied to agricultural products are on average three times higher than for industrial goods. Agro-food products are also more likely to face non-tariff measures. These include quotas (banned for other products) as well as regulations which, while aimed at legitimate public policy objectives, can nonetheless sometimes be more trade restrictive than necessary to achieve that objective. Support to agricultural producers remains high, with over two thirds provided via meaures that distort production and trade strongly. There is significant scope for reform of agricultural markets and trade, with considerable gains from even partial reform.

There are also growing concerns about rising government support across a range of industrial sectors, and that current trade rules on industrial subsidies are not able to effectively tackle this support and that new rules are needed to ensure a level playing field.

Part of this concern is related to rapid internationalisation of state-owned enterprises (SOEs). In some countries, SOEs benefit from preferential domestic treatment, or from cheap finance, including from commercial lenders perceiving an implicit government guarantee. While this can sometimes be justified within their national jurisdiction where there are public services these SOEs are expected to perform, the internationalisation of their operations calls for action to maintain a healthy competitive environment.

There are also important areas where multilateral rules are not keeping pace with changes in the global economy. A good example of this is trade in services. Since the 1995 WTO General Agreement on Trade in Services (GATS) the world has evolved dramatically, as a result of technological advances, changing business practices, and deeper global integration. New commitments and updated rules for services trade are needed that reflect 21st century trade.

Moreoever, as digitalisation is changing what and how we trade, it is raising complex new issues for trade rules. From the increasingly blurred line between goods and services and between modes of services supply, to new issues related to smart products, 3D printing and data flows, there are calls for new negotiations on digital trade, to ensure that the multilateral rule-book is fit for purpose in the digital age.

Beyond fixing the rules where we have gaps and unfinished business, there is a need to do more to reinforce the existing rules. The best way to support the rules-based multilateral trading system is for members to do what they said they would do by implementing, monitoring and enforcing what has already been agreed.

Supporting policy-makers to build a more open, inclusive and sustainable trading system: the OECD trade toolbox

The OECD can help. We can provide the data and analysis to help policy-makers identify priorities for reform and to inform the design of new trade rules. We have longstanding work measuring government support and related market distortions in agriculture, fossil fuels, and fisheries and have recently begun measuring government support in industrial sectors, beginning with the aluminium value chain. In addition, the OECD compliles up-to-date indicators and detailed information on the level of restrictiveness in trade in services, measures how countries perform in terms of trade facilitation, monitors the use of officially supported export credits, and tracks export restrictions in the minerals and metals sectors.

In addition to addressing challenges in the international rulebook, there is much to be done domestically so that polices help deliver the benefits of trade for more people.

http://www.oecd.org/trade/understanding-the-global-trading-system/trade-challenges-and-opportunities/
4   anonymous   2019 Mar 19, 4:24am  

The 7 Countries That Create the Most American Jobs

U.S. international trade supports 39 million American jobs, about one of every five. The proportion has doubled since the original North American Free Trade Agreement (NAFTA) was signed in 1992 by Canada, Mexico and the United States.

The two U.S. partners in NAFTA alone support some 12 million American jobs, according to a new study by Trade Partnership Worldwide and issued Monday by the Business Roundtable. Every U.S. state has realized net employment gains directly attributable to trade and international trade has a net positive impact on both U.S. services and manufacturing jobs.

According to the study released this morning, assessing the impact of trade on U.S. jobs should account for “the direct and indirect effects of exports, the direct and indirect effects of imports, and the effects of additional trade-induced spending on U.S. output and consumption and, consequently, on jobs.”

Using that definition, jobs related to U.S. trade supported a net increase of 34.95 million jobs in the services sector and 1.78 million manufacturing jobs in 2017. Trade also supported a net increase of 1.5 million U.S. jobs in agriculture, forestry and fishing. The only sector showing a net decrease was energy (mining and utilities), with a net loss of 547,000 jobs primarily due to continued imports of crude oil and petroleum products.

Looking at America’s seven largest trading partners, here’s how many trade-related jobs each contributed to specific sectors in 2017 expressed as increases since 1992.

Canada
> Total jobs: 7.20 million
> Services: 6.55 million
> Manufacturing: 533,900
> Share of all U.S. jobs: 3.7%
> Share of trade-related U.S. jobs: 18.5%

Mexico
> Total jobs: 487 million
> Services: 4.47 million
> Manufacturing: 75,700
> Share of all U.S. jobs: 2.5%
> Share of trade-related U.S. jobs: 12.5%

China
> Total jobs: 7.33 million
> Services: 6.39 million
> Manufacturing: −530,700
> Share of all U.S. jobs: 3.7%
> Share of trade-related U.S. jobs: 18.8%

Japan
> Total jobs: 1.34 million
> Services: 1.22 million
> Manufacturing: −181,100
> Share of all U.S. jobs: 0.7%
> Share of trade-related U.S. jobs: 3.4%

South Korea
> Total jobs: 1.04 million
> Services: 934,200
> Manufacturing: −48,100
> Share of all U.S. jobs: 0.5%
> Share of trade-related U.S. jobs: 2.7%

European Union (27 countries)
> Total jobs: 5.71 million
> Services: 5.35 million
> Manufacturing: −118,200
> Share of all U.S. jobs: 2.9%
> Share of trade-related U.S. jobs: 14.7%

United Kingdom
> Total jobs: 1.20 million
> Services: 1.09 million
> Manufacturing: 51,500
> Share of all U.S. jobs: 0.6%
> Share of trade-related U.S. jobs: 3.1%

More: https://247wallst.com/economy/2019/03/18/the-7-countries-that-create-the-most-american-jobs/

The full report is available at the Business Roundtable website: New Study: International Trade Supports Nearly 39 Million American Jobs

https://www.businessroundtable.org/new-study-international-trade-supports-nearly-39-million-american-jobs

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