WITA’s Friday Focus on Trade | February 10, 2023




Trade Can Help Us Address Climate Change. Here’s How Trade Ministers are Working Together to Make that Possible

The Coalition of Trade Ministers on Climate launched on January 19, 2023. The four co-leads are Ecuador, the EU, Kenya, and New Zealand.
Ecuador’s Vice Minister for Trade, Daniel Legarda, will be a featured speaker at the 2023 Washington International Trade Conference, starting Monday, February 13. Tickets still available here.
The climate crisis is an unprecedented challenge, wreaking devastation across the globe. The latest science tells us that a staggering 1.6 billion people live in climate vulnerable hotspots, meaning that their homes, livelihoods and lives are already at risk. That number could double by 2050.
Time is of the essence. This is why at the November 2022 COP27 climate conference, governments emphasized the urgent need for immediate, deep and sustained reductions of global greenhouse gas emissions by all parties, across all sectors.
The climate crisis is a double-edged sword, with action needed both at global and local level. International cooperation is therefore vital, because no country can solve this crisis alone. Governments, businesses, international organizations, academia and citizens all need to work together. That is why we, as trade leaders from Ecuador, the European Union, Kenya and New Zealand, are launching with over 50 other countries a Coalition of Trade Ministers on Climate at the World Economic Forum’s Annual Meeting 2023 in Davos, Switzerland.
The Coalition aims to drive inclusive cooperation among trade ministers in the global response to climate change, including by engaging nationally and internationally with fellow ministers working on climate, environment, finance and development, among others. Connecting the dots is vital to find coherent global solutions.
Together, we aim to provide high-level leadership and guidance to boost international cooperation on climate, trade and sustainable development. We represent different regions, stages of development, trade circumstances and varying exposure to climate vulnerabilities. This diversity, coupled with a commitment to transparency and inclusivity, reflects our commitment to build trust and work together on climate change.
Tackling the climate crisis is an enormous endeavour, and trade can and should play a role in this massive global effort. The Coalition will promote trade and investment that fosters the diffusion, development, accessibility and uptake of goods, services and technologies that support climate change mitigation and adaptation in both developed and developing countries.
01/19/2023 | Valdis Dombrovskis, Moses Kuria, Damien O’Connor, Julio José Prado | World Economic Forum


Industrial Policy Nationalism: How Worried Should We Be?

Large scale industrial policy is once again at the top of the agenda for policy-makers in the world’s three largest economies: the United States, China, and the European Union (EU). Central to this current wave are renewable and low-carbon energy technologies and associated supply chains. The implications of this era of industrial policy will be deep and more disruptive, especially in four interrelated areas: geopolitics, energy transition, trade, and environmental justice. This post argues that the global economy is in the midst of an industrial policy renaissance and discusses how that’s upending global supply chains, reshaping industries from semiconductors to solar panels, and adding yet another layer of churn to an already turbulent global geopolitical and trade outlook.
Industrial policy is generally defined as government policy intervention in the private sector to bolster domestic strategic industries through a mix of subsidies, trade promotion, protectionism, and regulatory intervention. Industrial policy is not new, especially in the EU and China. Even the United States has had experience with it, particularly in the Cold War aerospace-defense complex and in sporadic and targeted attempts by various presidential administrations to lean into public-private partnerships and subsidize sectors from technology to export-oriented manufacturing.
The current industrial policy wave began in China in 2015 with the Made in China 2025 (MIC 2025) plan, which sought to bolster ten strategic sectors, including alternative vehicles and renewable energy. While a range wide of policy measures make up the MIC 2025 plan, the two broad categories are centered around heavy direct government investment and new guidelines to limit foreign competition. The next chapter in the industrial policy renaissance took place in the EU in 2019 with the implementation of the 1 trillion-euro EU Green Deal Investment Plan. The onset of the COVID-19 pandemic, immediately following the Green Deal announcement, led to another massive wave of EU public sector investment targeting key industries in the form of the NextGenerationEU (NGEU) Recovery and Resilience Facility (RRF).
China’s MIC 2025 plan has strong focus on advanced manufacturing, clean energy, and the digital economy, motivated heavily by efforts to close a gap in those areas with its major geopolitical and economic competitors. The EU Green Deal and NGEU focus on clean energy as well, as a path to achieving EU-wide greenhouse gas reduction targets in the “Fit for 55” plan, supporting workers transitioning from legacy fossil fuel extraction and basic manufacturing industries and building global champions in emerging decarbonization technologies.
The industrial policy renaissance reached the United States with the election of President Biden in November 2020. Like the EU, the Biden administration industrial policy push in 2021 and 2022 was heavily shaped by response to the COVID-19 pandemic economic shock and the energy transition. It was also motivated by a sense of threat regarding competitiveness and vulnerability toward China, a perception that was deeply elevated during the prior Trump administration, and was in many ways the mirror image of the geoeconomic insecurity embedded in MIC 2025 – particularly with respect to the 2022 CHIPS Act.
02/07/2023 | Robert (“RJ”) Johnston | Center on Global Energy Policy


Industrial, Trade Policies Should Be Focused, Flexible

Namibia enjoys one of the most stable, peaceful political environments in Africa. The World Bank ranked Namibia 107th among 190 countries in its 2019 Doing Business Report. Therefore, a sustainable trajectory for the Namibian economy is one where reforms are implemented to raise Namibia’s potential growth rate.
The lack of financial and human capacity has been a key impediment to Namibia’s industrial development, in particular for small and medium-sized enterprises.
Skills gaps and skills mismatches are recurrent in Namibia, in part because institutions are not providing enough skilled human resources to meet the market demands.
Implementing flexible industrial and trade policies to promote competitiveness and facilitate long-run growth should continue to be a strategic policy focus area. Manufacturing is an engine of economic growth as industrial goods have a higher income elasticity of demand, especially in world markets. A successful industrial and trade policy should be focused, flexible and premised on the notion of embedded autonomy. Focused industrial and trade policy requires the prioritisation and rationalisation of interventions, and flexibility comes from learning from experience.
Focus and flexibility must be underpinned by embedded autonomy, which demands that the government elicits useful information from the private sector, which has the best knowledge of industrial and trade opportunities.
The government should urgently implement a reform that can boost Namibia’s export market in the short-term, while also creating the conditions for higher long-term sustainable growth. These growth reforms should promote economic transformation, support labour-intensive growth, and create a globally competitive economy. The current state of the Namibian economy is unsustainable. Low economic growth entrenches poverty and inequality. High-income inequality aggravates social fragmentation, and poses a risk to economic growth. Inequality contributes to extremely divergent views, which make compromises difficult. The resulting stalemate and policy uncertainty can contribute to economic weakness. A growth-oriented policy agenda must be accompanied by interventions that change how the benefits of growth are distributed, and fundamentally transform the systems and patterns of ownership.
02/06/2023 | Josef Kefas Sheehama | New Era Live


Have Trade Agreements Been Bad for America?

A false narrative has gone mainstream in America. It claims that trade agreements the United States entered into over the last 40 years, perhaps for nearly a century, were a mistake.
There is no nuance to this narrative. “I have visited the laid-off factory workers and communities crushed by our horrible and unfair trade deals,” said Donald Trump when he accepted the Republican nomination for president in July 2016. On his first full day in office, he canceled the last trade agreement the United States had signed—the Trans-Pacific Partnership (TPP). Six years later, US Trade Representative Katherine Tai targeted other free trade agreements. On October 7, 2022, she claimed that they impose “significant costs: concentration of wealth, fragile supply chains, deindustrialization, offshoring, and the decimation of manufacturing communities.” If she saw benefits from trade agreements—or trade itself for that matter—she did not cite them.
This anti-trade-agreement sentiment did not end after Trump left office. The Biden administration has considered no new trade agreements and even allowed the congressional mandate for trade negotiations to expire.
Before Trump and Biden, no administration took the position that the body of prior trade agreements entered into by the United States primarily caused harm to the United States. Today, the people in charge of US trade policy evidently believe that the liberal world order created by trade agreements under American leadership resulted in a new evil—globalization. Even a prominent columnist in the Financial Times, a bastion of the liberal international order, celebrates the demise of “neoliberalism” (and globalization) and a return to localization.
Of course, these statements would have much less currency if they had absolutely no factual basis. Relatively open markets bring international competition, and in all competitions some players come out ahead and some behind; in extreme cases, the losers suffer serious harm. Critics view the quest for efficiency—a motivating force in a market-driven world economy—as cold and inhuman. Just look around, they say. Gross inequality in income and wealth abounds. Factories are staffed by far fewer workers than they used to be. The share of manufacturing employment has plummeted. Communities surrounding closed plants have declined and, in some cases, fallen into despair. It is fair to ask whether trade agreements, designed to open markets further, were to blame for any of these problems.
12/31/2022 | Alan Wm. Wolff, Robert Z. Lawrence and Gary Clyde Hufbauer | Peterson Institute for International Economics


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