Trade and Trade Policy A Guide for Commonwealth Parliamentarians

1. Trade and Trade PolicyA Guide for Commonwealth Parliamentarians Dr Christopher Stevens, Overseas Development Institute Regional Workshop on Trade Policy for Pacific ParliamentariansApia, 3-4 June 2010

2. Why do Parliamentarians need a guide? • Because trade decisions have political effects: • they favour some groups relative to others; • they can advance or retard a development strategy; • getting the right results requires buy-in from the people. • Parliament is central to these decisions, but this is hard because: • the effects of a trade decision are hard to follow: • they flow along multiple channels; and • they are often complex and indirect; • the ‘devil is in the detail’. • The Guide is a contribution to ‘informed’ political decisions. Trade and Trade Policy: a Manual for Commonwealth Parliamentarians

3. Mainstreaming trade policy: an example • Yesterday we learned that: • many PIC markets are agreeing FTAs with competitors; • which may disadvantage the PICs unless they are proactive; • but FTAs affect tax revenue (as tariffs are removed). • So trade policy must be integrated with tax policy: • there are alternatives to tariffs e.g. sales tax; • but these will change the pattern of taxation on individuals: • the tax burden on goods currently facing high tariffs may fall; • the tax burden on goods currently facing low tariffs may rise. • So there are two levels of political decision on: • the most acceptable pattern of new taxes; • whether the costs of not agreeing an FTA outweigh the costs of tax change. • Such decisions need a political judgement on technical information. Trade and Trade Policy: a Manual for Commonwealth Parliamentarians

4. Laying the foundations • Development strategy is the starting point: what role can trade play to achieve a country’s goals: • now (in terms of current exports and markets); • in future (by moving up the value chain)? • What policies will influence the impact of trade on these goals: • ‘core’ trade policy + tax policy, • sectoral policies: agriculture, fisheries etc; • enabling policies: transport, communications; • transformational policies: education? • Creating the institutions to ensure coherence – with Parliament a key player. Trade and Trade Policy: a Manual for Commonwealth Parliamentarians

5. Building on the foundations • Overload is the constant danger – so the first task is to prioritise: • EU or region or Asia; • WTO or FTAs? • Preliminary questions in the priority areas: • what are the objectives of any negotiation ; • how much bargaining power have we – can we afford to walk away if the right terms are not forthcoming? • Transforming goals into negotiating points: • what precisely do you want in the agreement; • what can you concede? • Monitoring the results: • the impact of any agreement will be set by what it actually says; • which may run to hundreds of pages! Trade and Trade Policy: a Manual for Commonwealth Parliamentarians

6. How the Guide can help • The Guide moves from underlying questions to trade policy formulation. • The chapters deal in turn with: • why, and what, to trade; • what lessons can be learned from the experience of the fastest-growing states; • how can governments: • influence the impact of trade on the electorate; • shift their country to a more dynamic trade pattern, given that: • it is the private sector that does most trading; • many key forces affecting poor countries are outside direct control. • How can these insights be brought to bear in actual trade policy negotiations: • multilateral (Doha); • Pacific regional groups, Economic Partnership Agreements (EPAs)? • What special role do Parliamentarians have to play in this process? Trade and Trade Policy: a Manual for Commonwealth Parliamentarians

7. A few of the messages • One clear lesson: if trade is not dynamic it is stagnant – diversify or die. • One very unclear lesson - how to do it: • there are no ‘wonder’ exports: broad product categories say little about the dynamic potential of exports: it all depends on which goods and services you export; • there is a role for both ‘the market’ and ‘the state’ – it is the way they operate that counts; • regional trade agreements can foster growth, but they may also hinder it. • The ‘big message’ of the Guide is that detail matters: • the detail of trade agreements; • the market niche in which a country trades; • the place of a national firm in its global value chain. • Which poses a challenge for Parliamentarians: • to master the detail; • to communicate it to the electorate. Trade and Trade Policy: a Manual for Commonwealth Parliamentarians

8. Trade and Trade PolicyA Guide for Commonwealth Parliamentarians Dr Christopher Stevens, Overseas Development Institute Regional Workshop on Trade Policy for Pacific ParliamentariansApia, 3-4 June 2010