Trends and Issues in Global and Regional Integration

1. Trends and Issues in Global and Regional Integration

2. A few trends

3. Rise of world trade: Merchandise

4. Rising Merchandise Exports

5. Rise of World Trade: North and South

6. The Asian Century? “ Source: Baldwin 2006

7. More than Asia: Emergence of BRICs… IMF, World Economic Outlook 2007

8. Emergence of BRICs… IMF, World Economic Outlook 2007

9. Rising China: Market shares trends in world trade(%) Source: Eurostat, IMF, all products in value, excluding intra-EU trade

10. Shares of global trade, by regions

11. Intra vs extra-regional trade

12. Growth of developing countries tradeHow impressive is the South-South growth?Exporters from the South are capturing the Southern markets that used to be served by exporters from the North.

14. The rise of financial flows

36. Issue 3: Is Regionalism a solution?

37. Types of «regional» economic arrangement:is there a logic of integration? Bilateral Agreements Free Trade Area Customs Union Common Market Economic and Monetary Union (e.g. EU) ?

38. Trade liberalization strategies (Ravenhill 2005)

39. Waves of regionalism after WWII

40. The number of PTAs exploded since the 1990s Cumulative number of agreements (EU-15 counted as single country Cumulative number of agreements (EU- 25 counted as single country Agreements not notified to the WTO Agreements notified to the WTO Source: World Bank Global Economic Prospects (GEP) 2005

41. The new wave? Changed context End of the Cold War Global interdependence Neo-liberal ideas in OECD countries (and GEMs) Signaling openness, market access Frustration with WTO/GATT Change of US, Japanese and EU attitudes

42. Current patterns and trends on regionalism/bilateralism Many South-South agreements Beyond the region (the R is losing significance!) Shallow and deep integration WTO+ in North-South Open regionalism and strategic forum-shopping?

43. Customs Intellectual Dispute Standards Transport cooperation Services Property Investment Settlement Labor Competition U.S.-Led US-Jordan No No Yes Yes Yes Yes Yes Yes No US-Chile Yes No Yes Yes Yes Yes Yes Yes Yes US-Singapore Yes No Yes Yes Yes Yes Yes Yes Yes US-Australia Yes No Yes Yes Yes Yes Yes Yes Yes US-CAFTA Yes No Yes Yes Yes Yes Yes Yes No US-Morocco Yes No Yes Yes Yes Yes Yes Yes No NAFTA Yes No Yes Yes Yes Yes Yes Yes Yes E.U.-Led EU-South Africa Yes Yes EU-Mexico Yes Yes Yes Yes Yes Yes Yes No Yes EU-Chile Yes Yes Yes Yes Yes Yes Yes No Yes South-South MERCOSUR No No Yes Yes No Yes Yes No Yes Andean Community No No Yes Yes No Yes Yes No Yes CARICOM Yes Yes Yes Yes No Yes Yes Yes Yes AFTA Yes Yes Yes Yes No Yes No No No SADC Yes Yes Yes No Yes COMESA Yes Yes Yes Yes No Yes Yes Yes Yes Other Japan-Singapore Yes No Yes Yes Yes Yes Yes Yes Yes Canada-Chile No No Yes Yes No Yes Yes Yes Yes Chile-Mexico Yes Yes Yes Yes Yes Yes Yes Yes RTAs go far beyond trade Source: GEP 2005

44. South-South RTAs predominate in number, but not in trade covered Number of RTAs Percent of World Trade Covered South-South South-South US US European Union European Union Source: GEP 2005

47. Cross-regional RTAs Source: WTO, Crawford and Fiorentino, 2005

48. The Political-Economy of Regionalism:Economic Debates Trade Diversion vs. Trade Creation Stumbling Bloc vs. Stepping Stone New rent-seeking (e.g. preference erosion) Domino Theory (Baldwin) / Export Discrimination (Dür)

49. Potential Effects Economic consequences More trade among members, but limited So far small drivers for trade reforms Not significant trade diversion (depends on tariff levels) Increased FDI Little overall effect on economic welfare (Ravenhill 2007, GEP 2005) But, Spaghetti-Bowl „transaction“ costs: Rules of Origin Political exemptions: labor mobility, specific sector protection (e.g. agriculture, services) Not well defined dispute resolution mechanisms Not much pressure to negotiate multilaterally

50. …regional agreements are a relatively small driver of trade reform Decomposing tariff reductions in response to multilateral, regional and own initiatives Av. Tariffs, 1983 and 2003 Decomposing 20% pt. decline 29.9 9.3 Source: GEP 2005 Source: Martin and Ng, 2004