Category Archives: Trade Agreement

New evidence on WTO membership after the Uruguay Round: an analysis at the sectoral level.

Magnus dos Reis (Unisinos), André Filipe Zago de Azevedo (CNPq), and I have a forthcoming paper at Open Economies Review that examines the effects of WTO membership on trade flows, with a special focus on sectoral trade flows. The full paper is available upon request.

Abstract

The creation of the World Trade Organization in 1995 brought several changes to the world trade system, including more stringent accession commitments, separate agreements for agricultural products and for textiles and garment. This study examines the effects of WTO membership on disaggregated sectoral trade flows and their extensive and intensive margins by means of a gravity model estimated by Poisson pseudo-maximum likelihood. We employ a panel dataset on bilateral imports for agriculture, textile, and manufacturing sectors for the 1995–2017 period. Our estimates suggest that WTO membership has succeeded in expanding trade flows for new members. Nevertheless, this growth occurred asymmetrically between developed and developing countries, and among the different types of products. In the period under review, developing countries benefited most from this WTO-promoted increase in world trade, in stark contrast to the findings of the extant literature for 1950–2000. The largest trade growth occurred in the agriculture sector, which is also at odds with earlier findings of growth in manufacturing products only. Furthermore, our results show that the increase in trade due to WTO liberalization took place exclusively in the extensive margin of trade, most of which also happened in the agricultural sector.

New Database on Trade Facilitation

The World Trade Organization (WTO) promoted the Agreement on Trade Facilitation (TFA) in order to foster international trade by simplifying cross-border trade procedures, which reduced not only transit time but also costs. When fully implemented, the TFA is expected to substantially reduce trade costs by 10%-18% (OECD, 2018 ) and at the same time to increase exports by more than 3 trillion dollars per year (WTO, 2015).

UNCTAD just released a real-time database that comprises standardized data from national trade facilitation committees (NTFCs). This allows scholars and practitioners to follow and study the implementation of the commitments made by each country under the TFA agreement. The video below provides more details on this interesting and promising database.

EU and Brexit

The bulk of the negotiations regarding the United Kingdom withdrawal from the European Union were concluded on December 24, 2020. The details are available here: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2531 .At a first glance, this seems to be a reasonable agreement that avoids most of the doomsday scenarios portrayed by many observers. Although there are several details to be worked on, the most important aspect of this agreement, in my opinion, is the creation of a Free Trade Area between the UK and the EU. This FTA should pose little friction on trade flows, unless significant red tape is created. An interesting question is whether this FTA agreement with the EU will facilitate or hamper the other trade agreements that are being negotiated by the UK.

The infancy of Mercosul (or Mercosur)

There are two very interesting books in pdf format about Mercosur by Paulo Roberto Almeida that can be downloaded for free.

The first book is titled “O Mercosul no Contexto Regional e Internacional ” (Edições Aduaneiras, 1993). It provides some background information about the foreign affairs in the Southern Cone of South America. And it goes over the fundamentals of the Mercosur. This book was written between the conclusion of the main negotiations of Mercosur and the implementation of the Mercosur. Thus, it provides an interesting perspective on the crucial issues and expected impacts of Mercosur, see for instance chapter 10.

The second book was published in 1998, three years after the the implementation of Mercosur. It is titled “Mercosul: Fundamentos e Perspectivas” (São Paulo: Editora LTr, 1998, 160 p.; ISBN: 85-7322-548-3). This book puts the Mercosur in the context of the century-old idea of Latin American Integration. Also, it goes over the implementation of the Mercosur and the first issues experienced by the member countries. Finally, in chapter 9, the author discusses the relationship between Mercosur and the (now defunct) FTAA-Free Trade Area of the Americas.

I strongly recommend these two books for scholars interested in learning more about the ambitious albeit problematic integration agreement that is the Mercosur (or Mercosul…).

The erratic Brazilian trade policy

The recent elections in South America indicate a major change in course for the Southern Cone countries and also for Bolivia. This change is not uniform across countries, and in some cases can be in opposite directions like the cases of Brazil and Argentina. Interestingly, the Brazilian trade policy experienced large changes over time, in part due to balance of payments constraints. Since the 2000s, Brazil did not pay much attention to Mercosur because of its large trade surpluses from the China-induced commodity boom. Nevertheless, the current government in Brazil sees Mercosur as a stumbling block to trade negotiations with other countries. The fundamental question is what are the goals of the current Brazilian trade policy? A key ingredient of any answer to this question is contained in an interesting article by Paulo Roberto Almeida that revisits the history of the Brazilian trade policy. This is a very nice and succinct paper that I recommend to everybody interested in learning more about Brazilian trade policy.

The past of Mercosur (or Mercosul)

The recent presidential elections in South America have raised concerns about the future of Mercosur, or Mercosul for Portuguese speakers. Although it is too early to make any reasonable prediction, it is interesting to note that Mercosur since its inception has been always more than just a trade agreement. This point has been overlooked by many analysts. And perhaps, this is the reason behind the survival of this agreement. An excellent starting point for those interested in learning more about Mercosur is a paper by Paulo Roberto Almeida titled “Regional Integration in Latin America: Historical Developments, Current Challenges, Especially in Mercosur”. This nice paper examines the evolution of the Southern Cone countries’ foreign policies since the early eighties. It goes over the foundation of the Mercosur in 1991 and the conflicts between member countries that that have taken place after 1999.