WITA’s Friday Focus on Trade – May 19, 2023




WITA Webinar: Pop Up Briefing on the House Select Committee Hearing on U.S. – China Competitiveness and Trade

On Friday, May 19, WITA hosted an pop-up briefing on the recent hearing by the House Select Committee on the Chinese Communist Party titled, Leveling the Playing Field: How to Counter the Chinese Communist Party’s Economic Aggression. Trade experts discussed the hearing, and its implications for U.S. trade relations between the world’s two largest economies and the world. 
Featured Speakers:
Peter Harrell, Attorney, Peter Harrell LLC; Non Resident Fellow, Carnegie Endowment for International Peace; former Senior Director for International Economics and Competitiveness, National Security Council
Claire E. Reade, Senior Counsel, Arnold & Porter; former Assistant US Trade Representative for China Affairs
Kelly Ann Shaw, Partner, Hogan Lovells and former Deputy Assistant to the President for International Economic Affairs and Deputy Director of the National Economic Council
Clete Willems, Partner, Akin Gump; former White House Deputy Assistant to the President for International Economics
Moderator: Michael Smart, Managing Director, Rock Creek Global Advisors; former Director for International Trade and Investment, National Security Council
05/19/2023 | Washington International Trade Association

Why the Gender Gap in International Trade Needs to Close Faster

In 2013, Connie Stacey had a business idea: to create a clean, green and quiet replacement for fossil-fuel-powered generators. Stacey, 48, had worked in information technology previously and thought she could use battery technology as an alternative to diesel or gasoline. Her version would be bigger than the batteries in mobile phones, require no technicians or engineers to use, and could be infinitely scalable. She built a prototype, named it the Grengine, and started a company called Growing Greener Innovations to build and market it.
Then came the challenges, first in terms of scaling her product and then delivering it to global markets. She ran into a barrier so many women entrepreneurs face: securing financing. As of 2022, only 2% of venture capital worldwide went to women-owned businesses, with most of those funding decisions made by men.1 Stacey’s challenges securing financing also underscored the soft discrimination some women face. “I had already built the prototype and there were people who asked me, ‘But who actually invented it?’”
Then there was the issue of bringing her product to the global market. Only 15% of businesses engaged in international trade are led by women, according to the World Trade Organization (WTO).2
Stacey finally found success in 2018, when she entered a contest sponsored by the US Department of Defense, where the innovations themselves were the main focus rather than the founders or their fundraising. Stacey won in the energy-efficiency and grid technologies category, and that gave her the momentum she needed. She won awards from 14 other organizations from 2018 to 2023, as well as contracts to supply the Grengine to clients ranging from Canada’s military to a mine in Saskatchewan and a golf resort in Wales.
Today, Stacey exports to six countries, which puts her in that small minority of women-led businesses engaged in international trade identified by the WTO.
The imbalance in international trade is one of many inequalities that comprise a global gender gap that will take another 135 years to close at the current pace of policy reform, according to the World Economic Forum (WEF).
05/16/2023 | Sally Jones | Ernst & Young

Economic Impact of Adopting Digital Trade Rules: Evidence from APEC Member Economies

As digitalisation changes the way that international trade is conducted, policymakers are turning their attention to the impact it has on their economies and are recognising the need to reconsider and update the rules that govern international trade today. Increasingly, economies are including provisions aimed at strengthening digital trade in trade agreements and entering agreements focused on strengthening digital collaboration. These provisions cover various areas such as facilitating the free flow of data and provision of digital services across borders as well as protecting privacy and consumer rights in crossborder digital transactions. Policymakers and trade negotiators consider that such provisions support robust, interoperable frameworks and the flow of digital goods and services are beneficial to the growth of the digital economy in the region and overall economic development.
However, research on the effect of adopting digital trade rules on economic growth has been more limited to-date. This study seeks to contribute to this research, including by constructing a novel methodology to estimate bilateral digital trade flows for APEC member economies and their largest trading partners.The aim is to support APEC policymakers in making evidence-based policy decisions when considering the design of future digital trade policies.
There is currently no generally accepted definition of digital trade – it has been interpreted broadly by some and narrowly by others. At its broadest, some policymakers consider digital trade to encompass (i) trade in goods and services such as goods sold over the Internet and e-commerce platforms and digital content such as software, books, music, films and apps as well as trade in digitally-enabled services including legal, financial, education and consultancy; (ii) electronic facilitation of trade, such as the acceptance of electronic trade documents and, possibly, the adoption of ‘regtech’ solutions as technology evolves; and (iii) the transmission of data across borders, both as a direct business activity and to support other business activities.
03/31/2023 | Asia-Pacific Economic Cooperation Committee on Trade and Investment

Trade Integration in Africa: Unleashing the Continent’s Potential in a Changing World

The creation of the African Continental Free Trade Area (AfCFTA) in 2018 established the world’s largest free trade area by population (1.3 billion) and with a combined GDP of $3 trillion as of 2022. The AfCFTA presents its members with an opportunity to take advantage of expanding trade to lift growth and living standards across the entire continent. This departmental paper examines the prospects for African trade integration in the context of a changing world amid climate change, risks of geopolitical fragmentation, technological progress, and Africa’s prospective demographic boom. It discusses policies to underpin successful implementation of the AfCFTA that, when combined with complementary reforms, would maximize the potential gains from enhanced trade integration in Africa.
Africa’s recorded cross-border trade has grown relatively modestly in recent decades, with limited growth in merchandise trade and an unchanged share of services trade in GDP. The continent’s exports to the rest of the world are dominated by commodities, while trade within the region is more diversified and includes a larger share of processed goods. These trade patterns are consistent with the continent’s limited integration in global value chains (GVCs), reflecting its fragmented trade policy landscape marked by multiple regional economic communities, a challenging trade environment with gaps in structural factors such as transport networks, customs and border processes, and access to finance. At the same time, there appears to be significant informal cross-border trade although it is hard to measure. These patterns, including the more diversified nature of intra-African trade, reflect the potential for significant gains for African trade from building regional value chains, unifying the trade policy landscape, and strengthening the trade environment.
AfCFTA implementation will entail large reductions in tariff and nontariff trade barriers among African countries. These reductions could increase the median merchandise trade flow between African countries by 15 percent and median real per capita GDP by 1.25 percent. If the reductions in tariff and nontariff barriers are combined with substantial improvements in the trade environment, the payoff to countries would be significantly higher. The paper finds that comprehensive reforms combined with the AfCFTA implementation could increase the median merchandise trade flow between African countries by 53 percent and with the rest of the world by 15 percent, and as a result raise the real per capita GDP of the median African country by more than 10 percent. This result resonates with findings in the literature that trade reforms could help reduce extreme poverty by an additional 30–50 million people across the continent.
The creation of the AfCFTA comes at a time when a changing global environment creates both opportunities and challenges for Africa. Greater trade integration can help the continent take advantage of the opportunities provided by technological change and demographic trends and enhance its resilience to shocks such as climate change and geopolitical fragmentation. In particular, greater trade openness would help countries adapt to climate change and to strengthen food security, including by improving the availability and affordability of food supplies. More diversified and broad-based trade would reduce the impact of disruptions in specific markets and products that could result from shifts in global trade patterns. Trade is the principal means through which the emergence of new technologies and digitalization, in combination with a rapidly growing labor force, could create new and higher paying jobs.
Seizing these opportunities will require investment in physical and human capital, a robust macroeconomic and business environment conducive to private sector-led growth, and a modernized social safety net that supports the most vulnerable during the transition to a higher growth trajectory.
05/05/2023 | Asmaa A ElGanainy et al. | International Monetary Fund


Trade Thoughts, From Geneva: Building On Research For Better Trade Outcomes

To craft impactful trade policies, political will and good intentions is just a starting point. Decisions about how best to allocate scarce political and economic resources must be rooted in analytically sound, policy-relevant, timely research and analysis. Yet, rising geopolitical tensions, rapid technological changes, unpredictable climate events and other pressing global challenges are making the difficult job of designing and implementing growth-enhancing trade policies even harder.
This is why academics, researchers and think tanks have much to contribute to help trade policymakers make better choices and deliver improved results, including at the World Trade Organization (WTO).
What does research say about the gains from trade?
Economic science has provided a strong foundation for trade policymaking ever since David Ricardo developed the theory of comparative advantage over two centuries ago. Since then, economists have shown that there is much more to the gains from trade than just specialization according to comparative advantage. In the new trade theory pioneered by Paul Krugman, international trade raises the productivity of firms by enlarging markets, allowing firms to reap economies of scale. And in the new-new trade theory pioneered by Marc Melitz, international trade brings about productivity gains by forcing the least productive firms to contract and leaving a greater share of the market for the most productive firms.
A recent paper by the Swedish National Board of Trade summarizes the latest policy research on the impact of trade in goods on productivity — a key driver of sustained growth — and inclusive economic prosperity. The paper lists six findings:
  1. There are stronger links between trade and productivity than previously thought, and trade reforms can have a bigger bang for their buck than anticipated 20 years ago.
  2. There is strong, consistent empirical evidence of productivity effects from improved access to intermediate goods, which is why it makes sense to remove trade barriers to inputs, parts and components.
  3. The most significant productivity effects relate to imports, but there are productivity gains associated with accessing export markets. Thus, trade agreements should focus on improving both import and export opportunities.
  4. When technological diffusion is associated with trade, and with opening up trade, this can greatly increase productivity.
  5. According to recent trade theory, international trade today largely takes place within industries rather than via inter-industry trade. This suggests that there are further potential trade opportunities available across segments of the value chain, not necessarily tied to clearly specific sectors.
  6. There are winners and losers associated with trade liberalization. This is why social adjustment policies and other public policies are key, even if more research is needed to determine the best policy designs.
Thus, as this paper suggests, there is abundant theoretical and empirical evidence that countries that turn their back on international trade do so at their own peril. However, research also finds that open and transparent trade policies are not a silver bullet. If they are to deliver, these trade policies must be integrated into broader strategies focusing on inclusive, sustainable and resilient economic growth and development.
05/16/2023 | Anabel González | World Trade Organization

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