Managing Openness: Trade and Outward-Oriented Growth after the Crisis

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Managing Openness

Figure 1.5. Combined G-20 Use of Selected Temporary Trade Barriers by Import Source, 1997–2009

3,500

unique HS06 product-exporter combinations

3,000 2,500 2,000 1,500 1,000 500

09 20

08 20

07 20

06 20

05 20

04 20

03 20

02 20

01 20

00 20

99 19

98 19

19

97

0

year China as exporter

developing economy as exporter (excluding China)

developed economy as exporter Source: Bown and Kee, chap. 6, this volume. Note: HS06 refers to the six-digit level of the Harmonized System.

WTO-consistent agreements—would be one step in this direction. Another possible line of action would be to ensure better access to the WTO dispute settlement system for Southern countries, so that they can continue to open desired markets in other developing economies. The New Trade Policy Agenda The emerging postcrisis environment poses a number of challenges and presents important opportunities for developing countries. Commodities trade is booming, largely to the benefit of developing countries. Demand for temporary workers is also rising because of shortages in labor markets in developed countries and increasingly in middleincome countries. The nature of production and trade is changing, with much of it taking place through production-sharing networks. This evolution opens new opportunities for countries that can latch onto these networks, but it will leave out less competitive countries. Finally, we can no longer ignore the impact of production and trade on the environment. While trade policy specialists are no strangers to commodity markets, a number of new dynamics will prove particularly important in the postcrisis environment

(Mitchell and Aldaz-Carroll, chap. 20, this volume). First, commodities have had a relatively less severe crisis: thanks to strong demand from developing countries—especially China—the drop in commodities trade was less than in other sectors, and the rebound has been stronger. Second, commodity markets are now more closely than ever linked to energy markets because of the increasingly important role played by biofuels. As a result, price prospects are strong in oil and agriculture markets alike (figure 1.6). Of course, all is not unmitigated good news for commodity exporters: stronger governance and efficient regulation will be necessary to manage commodity wealth and to avoid some of the negative impacts that have accompanied previous instances of high prices, such as the “Dutch disease.” A much newer issue on the trade policy agenda relates to the increasing importance of global production networks (GPNs). Their prevalence may have been one vector by which the global trade collapse was propagated, as final demand shocks were transferred to suppliers of intermediate inputs. Evidence based on Chinese processing trade shows that intranetwork trade suffered a disproportionately large fall during the crisis: it appears to be more sensitive to cyclical fluctuations than regular trade (Ma and Van Assche, chap. 21, this volume). Evidence of a “bullwhip” effect is


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