Policymakers in past generations may have thought it was possible to treat trade and development as if these were distinct functions. Trade...
Policymakers in past generations may have thought it was possible to treat trade and development as if these were distinct functions. Trade dealt principally with the external sector, whereas development was seen as a largely domestic phenomenon. Decades of experience have worked from two directions to erase this distinction. On the trade side, the expanding scope in the subject matter of negotiations and disputes has led policymakers to realize just how far this topic overlaps with other fields of public policy. On the development side, countries that have placed great emphasis on promoting exports have generally done much better than those countries whose strategies have entailed the substitution of imports with domestic production. Far from being distinct fields of public policy, it is now widely acknowledged that these two areas are integrally related to one another. One of the chief tasks of a TPF is to promote the mainstreaming of trade policy into development policy, and to highlight those ways in which the two fields are intimately tied. Much more than an extended mission statement for a trade ministry, a TPF should ideally identify the areas in which the country may expand its capacity for production and trade, as well as the obstacles that it must overcome in order to achieve that end. A. MAGNITUDE AND SCOPE OF TRADE Trade policymaking is more complex and important now than it was in past generations because trade itself has changed both quantitatively and qualitatively. The share of trade in national economies has grown, and the scope of issues that fall within trade negotiations has widened considerably.
Even in its most traditional and narrow definition, trade is more important today than it was a generation ago. The globe was becoming steadily more trade intensive during the quarter century that preceded the financial crisis of 2008–2009, as can be seen from the data in figure 1. Whereas in 1985, trade accounted for about 15–20 per cent of typical countries’ GDPs, by 2008, it generally exceeded 30 per cent . This point held true for countries at all levels of economic development, even if the shifts from one year to the next were more volatile for the least developed than they were for the higher-income countries. The path since the financial Figure 1. Shares of GDP in economic sectors, 2013 (Value-added as a percentage of GDP) Source: Agricultural value-added as a percentage of GDP based on World Bank data at http://data.worldbank.org/indicator/ NV.AGR.TOTL.ZS; services value-added as a percentage of GDP based on World Bank data at http://data.worldbank.org/indicator/NV.SRV.TETC.ZS; services value-added as a percentage of GDP based on World Bank data at http://data.worldbank. org/indicator/NV.IND.MANF.ZS. “All other” calculated by the author as the residual. Note that data on all countries are included in this figure; developed and oil exporting countries are not excluded. 75 60 45 30 15 0 Least developed Agriculture Manufactures All other Services Middle income High income 10 TRADE POLICY FRAMEWORKS FOR DEVELOPING COUNTRIES: A MANUAL OF BEST PRACTICES crisis has been unsteady. The trade intensity of national economies seemed to be recovering immediately after that crisis, but the last few years have witnessed the stagnation of trade in the high-income countries and a decline for the developing countries. It is too soon to know whether this post-crisis downturn represents a temporary setback or the emergence of a new pattern, but either way, it speaks to the need for countries to redouble their efforts to engage in mutually beneficial exchanges of goods and services. The qualitative changes in the field of trade have been even more consequential. Trade policymaking may be defined as the development and execution of national laws and policies, as well as international agreements and initiatives, that are variously intended to facilitate, promote, prohibit, tax or regulate the cross-border movement of tradeables.
That basic definition can be applied to any country and any period of history, but the scope of its meaning has changed over time. The tasks and jurisdiction of a trade ministry in 1980 were little different from what they had been in 1880; in both periods, the chief focus was on tariffs and other border measures affecting the movement of goods. Following a generation of sweeping changes in the shape and scope of the trading system, and also in the larger world to which that system belongs, the responsibilities assigned to trade ministries are radically different today. That can be seen both in the range of issues that are defined to fall within the scope of trade negotiations and in the importance attached to the removal of domestic constraints. Put another way, trade ministries used to spend much of their time trying to identify and overcome the major barriers that other countries deliberately imposed on imports of goods, but today they must devote at least as much attention to addressing the interior barriers that their own country faces or even imposes (however inadvertently) on the production and export of goods and services. The expanded issue base of trade policy can be traced primarily to a redefinition of what is traded. Until a few decades ago, the only recognized tradeables were goods; trade meant only the movement of goods across borders, and the only available policy instruments were tariffs, quotas, licensing requirements, outright prohibitions and other measures that directly regulated exports and imports of merchandise at the port of entry or exit. As a consequence of technological changes and policy reforms, trade policy now deals with the cross-border movement of services, capital (i.e. investment), ideas (i.e. intellectual property),
and even people (i.e. the movement of persons as investors, managers, and service providers). The actions that countries take to promote their industries and the commitments that they make in trade agreements also go beyond and behind the border. Trade policy is now linked to more issues affecting the production, distribution, and use of goods (e.g. labour rights and environmental protection), and to still others in which the relationship is controversial and determined by politics (e.g. foreign policy and human rights). The subject matter of trade is not just arithmetically larger, as the widening scope means that the domestic and international politics of trade have grown geometrically more complex. Functions that could once be performed by a small cadre of tariff specialists now require not only a more highly trained and professional corps of trade negotiators, but also the effective support and participation of other domestic institutions that have jurisdiction and expertise in other, more esoteric areas of public policy.
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