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Caribbean Trade and Development Digest – June 10-16, 2018

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Welcome to the Caribbean Trade & Development Digest for the week of June 10-16, 2018! We are happy to bring the trade and development headlines from across the Caribbean Region and the world from last week:

REGIONAL

‘Tremendous Anxiety” over (Bahamas) WTO Accession

The Bahamas Tribune: The Chamber of Commerce’s chairman yesterday warned there was “tremendous anxiety” over the WTO accession amid the absence of analysis on its likely impact. Read more 

CSME necessary; Consultation raises concerns over architecture

CARICOM: Stakeholders at the just-concluded Stakeholder consultation on the CARICOM Single Market and Economy (CSME) agree that there is value in, and benefits to be derived from the CSME. Read more 

ECLAC chief calls for ‘new narrative’ on international cooperation for C’bean development

Jamaica Observer: The Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), Alicia Bárcena, has called for a “new narrative” on international cooperation for the region’s development. Read more 

CARICOM, Cuba to strengthen cooperation

Jamaica Gleaner: The Caribbean Community (Caricom) and the Government of Cuba have both pledged to continue to strengthen relations in matters related to trade and the arts. Read more 

Jamaica, other CARICOM countries to benefit from new Mexico-FAO initiative

Jamaica Observer:  At least 14 Caribbean Community (CARICOM) countries will design multiple projects to mobilise resources from international sources allowing them to improve the resilience and adaptation of their agriculture, food systems and rural communities to change climate. Read more

Blame Governments, not CARICOM

Barbados Today: Blaming the Caribbean Community (CARICOM) Secretariat for the gaps in implementation of the CARICOM Single Market and Economy (CSME) is unfair, former Prime Minister of Jamaica Bruce Golding has argued. Read more 

Integrity Commissions of Guyana, other Caribbean countries want corruption on CARICOM agenda

Demerara Waves: Guyana’s Integrity Commission is among several other similar bodies in the Caribbean that have called on the 15-nation Caribbean Community (CARICOM) to put  graft and corruption on their agenda and craft Commissioner harmonised legislation to tackle the scourge. Read more 

CARICOM unhappy with single market and economy system

New Amsterdam News: Leaders, former leaders and top officials from across the Caribbean assembled in Guyana last week to review the state of play, progress and problems associated with the decades-old Caribbean Single Market and Economy system, and most said the slow pace of implementation was frustrating them terribly. Read more 

Minister Greene pleased with CARICOM meeting

Antigua Observer: Foreign Affairs, Immigration and Trade Minister Chet Greene is pleased with the outcome of a CARICOM Council meeting for Trade and Economic Development (COTED) in Guyana, which concluded yesterday. Read more

New fund launched to assist CARPHA deal with outbreaks and health emergencies

Jamaica Observer: A fund has been launched to provide financial support and assistance to the Trinidad-based Caribbean Public Health Agency (CARPHA) to manage outbreaks and emergencies with health and humanitarian consequences across the risk management cycles. Read more 

INTERNATIONAL

WTO chief warns of global downturn if trade dispute escalates 

The Economic Times: If the trade conflict between the United States and other countries intensifies, it could negatively impact the global economy and there are indications this is already happening, the head of the World Trade Organization warned in newspaper. Read more 

Opportunities beckon as Singapore and Rwanda ink agreements

The Straits Times: More business and investment opportunities are under way for Singapore and Rwanda, as both countries signed a bilateral investment treaty (BIT) and an air services agreement (ASA) on Thursday. Read more 

India moves ahead with tariffs on US goods

CNN Money: The country has proposed hiking tariffs on 30 US products in order to recoup trade penalties worth $241 million, according to a revised World Trade Organization filing. Read more 

USTR Issues Tariffs on Chinese Products in Response to Unfair Trade Practices

USTR: The Office of the United States Trade Representative (USTR) released a list of products imported from China that will be subject to additional tariffs as part of the U.S. response to China’s ‘unfair’ trade practices related to the forced transfer of American technology and intellectual property.  Read more 

 

EU-Mercosur Trade Talks Resume in Montevideo, Though 2018 Timeframe Remains Unclear

ICTSD Bridges: Trade negotiators for the EU and Mercosur resumed formal talks last week, with officials announcing “constructive progress” thereafter while stopping short of announcing a timeframe for concluding the long-awaited trade deal. Read more 

American businesses brace for pain from trade fight with China

CNN Money: President Donald Trump’s tariffs on Chinese goods are intended to help American companies that have been hurt by Beijing’s industrial policies. But in the short term, at least, many American businesses may be the ones feeling pain. Read more 

Japan enacts law to ratify Trans-Pacific trade deal

Nikkei Asian Review: The Japanese Diet on Wednesday enacted a law to ratify the 11-nation Trans-Pacific Partnership free trade deal, moving a step closer to completing domestic procedures. Read more 

Colombia has made request to join Pacific trade pact: Mexico

Reuters: Colombia has formally requested permission to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Mexico’s Economy Minister Ildefonso Guajardo said on Friday. Read more

Liberals (Canada) table legislation to ratify Trans-Pacific free trade deal

CBC: The Liberal government introduced legislation Thursday to ratify a free trade deal with 10 other Pacific nations that it says would see Canada get preferential access to some of the biggest and fastest-growing economies in the Asia-Pacific region. Read more 

Australia to start free trade agreement negotiations with the EU

Bloomberg: Australia will begin negotiations with the European Union on a free-trade agreement covering a market with 500 million people and worth $17.3 trillion, making it one of the country’s biggest potential deals. Read more 

Italy won’t ratify EU free-trade deal with Canada: farm minister

Reuters: Italy will not ratify the European Union’s free trade agreement with Canada, its new agriculture minister said on Thursday, ratcheting up an international trade spat and potentially scuppering the EU’s biggest accord in years. Read more

NAFTA talks to continue in tense atmosphere

CNBC: The U.S. and Canada agreed on Thursday to continue negotiating a new NAFTA deal, amid a tense trade environment that includes an announcement Friday of new U.S. tariffs on China. Read more 

EU and Mercosur complete latest talks

EU: The Parties achieved progress on several issues such as services and exchanges were constructive overall but there is still work to be done, notably on cars and car parts, geographical indications, maritime transport and dairy. Read more 

WTO members focus on subsidies for fishing in overexploited stocks at June meetings

WTO: WTO members in the Negotiating Group on Rules on 11-14 June held their second cluster of meetings on fisheries subsidies this year, where they exchanged views and information on subsidies for fishing in overexploited stocks.  Read more 

EIF symposium looks at how to make trade more inclusive for LDCs

WTO: Representatives from 42 least-developed countries (LDCs) met at the first Global Forum on Inclusive Trade for LDCs taking place at the WTO on 13-14 June 2018 to seek ways to further integrate the world’s poorest countries into the multilateral trading system. Read more 

Trade Policy Review: Colombia

WTO: The fifth review of the trade policies and practices of Colombia took place on 12 and 14 June 2018. Read more 

Merkel and leaders of six multilateral agencies call for enhanced global cooperation

WTO: German Chancellor Angela Merkel hosted a meeting with the heads of six multilateral agencies on 11 June in Berlin to discuss ways to foster international economic cooperation to address global challenges and improve the prospects for inclusive and sustainable growth. Read more 

Liked this issue? To read past issues of our weekly Caribbean Trade & Development Digest, please visit here. To receive these mailings directly to your inbox, please follow our blog.

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FDI inflows to SIDS grow for second consecutive year: UNCTAD Report

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Alicia Nicholls

Foreign Direct Investment (FDI) inflows to Small Island Developing States (SIDS) rose to $4.1 billion in 2017, representing the second consecutive year of growth and buoyed by an 9% increase in inflows to the ten Caribbean SIDS which grew to $2.7 billion. This is according to the United Nations Conference on Trade and Development (UNCTAD) in the recently released 2018 edition of its World Investment Report.

Although the majority of countries in the region saw declines in FDI inflows, robust increases in Barbados (+25 per cent to $286 million), Saint Kitts and Nevis (+50 per cent to $127 million), and Trinidad and Tobago (from -$17 million in 2016 to $179 million in 2017) were responsible for the growth of 9%.

In total $5 billion in FDI flowed to the Caribbean subregion in 2017. The Dominican Republic was the main recipient of these flows ($3.6 billion) thanks to trade-related investments and its telecommunications and energy sectors, and to a lesser extent, a modest increase in free trade zone activity, UNCTAD Reports. Inflows to Haiti tripled to $375 million, which though still modest may be a sign of positive things to come as several infrastructure and other projects are in the pipeline.

UNCTAD cautioned, however, that FDI inflows to SIDS remain fragile and noted that several projects previously announced had not yet come to fruition. The intergovernmental body further noted that while policy developments to facilitate renewable energy projects were positive, the concentration of these might mean not all SIDS would reap the benefits.

Outflows

Four Caribbean countries also led SIDS globally with regard to FDI outflows, despite those countries each seeing declines in outflows. The Bahamas topped with outflows of $132.3 million, despite a 63.1% decline. In second place was Trinidad & Tobago which saw outflows of $84.2 (-143.6%). The Indian Ocean SIDS of Mauritius was third place ($61.5m, an increase of 1020%). In fourth and fifth place were Jamaica ($42.7m representing a 80% decline) and St. Lucia ($22.1m and a 208.1% decline).

Regional and global contexts

In the wider Latin America and Caribbean region, economic recovery buoyed an 8% increase in FDI inflows to $151 billion, reflecting the first increase in six years but still well below levels in 2011 during the commodities boom. Moreover, UNCTAD further tempered its prospects for FDI in Latin America and the Caribbean in 2018 due to macroeconomic and policy uncertainties.

The global scene is also much more subdued. Global FDI flows dropped 23% in 2017, a three-year low owing to a drop in cross-border mergers and acquisitions and despite growth in global trade and GDP. UNCTAD noted this negative outlook was of concern to policy makers, especially given the importance of FDI to many emerging economies’ sustainable industrial development.

FDI flows to developed economies were $712 billion, representing a fall of one third. FDI flows to developing economies, which accounted for 47% of global FDI inflows, up from 36% in 2016, remained steady rising to $671 billion in 2017.

The full report may be viewed here.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Caribbean Trade & Development Digest – June 3-9, 2018

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Welcome to the Caribbean Trade & Development Digest for the week of June 3-9, 2018! What a difference a week makes in the world of trade policy, it seems! From the CARICOM High Level Stakeholders’ Consultation on the implementation of the CARICOM Single Market to the tumultuous G7 Leaders’ Meeting, we are happy to bring the trade and development headlines from across the Caribbean Region and the world from last week:

REGIONAL

(Belize) Trade Minister Responds to CARICOM Sugar Call

Channel 5 Belize: On Tuesday, Briceño said G.O.B. should be doing more to export all Belizean sugar to CARICOM. According to Panton, Belize’s sugar has market access at duty free rates but what is lacking is market penetration. Read more

CSME implementation deficit not Secretariat’s fault – Golding

InewsGuyana: To blame the Caribbean Community (CARICOM) Secretariat for the gaps in implementation of the CARCIOM Single Market and Economy (CSME) was unfair, a former Prime Minister of Jamaica has said. Read more

St Vincent PM says T&T extracts most from CARICOM

Stabroek News: Stating that outstanding issues such as free movement of people and a co-ordinated foreign policy have to be resolved before CARICOM can move to a Single Economy, St Vincent and the Grenadines (SVG) Prime Minister Dr Ralph Gonsalves also cited Trinidad for drawing the most from the integration movement in an uneven relationship. Read more

Regional leaders have lost faith in CSME realisation

St. Lucia Times Online: CARICOM members have to become more practical in their approach to the concepts of the Caricom Single Market and Economy (CSME), St Vincent and the Grenadines Prime Minister Dr Ralph Gonsalves said Friday. Read more

Statement at the Conclusion of an IMF Staff Visit to Barbados

IMF: At the request of the newly elected Government of Barbados, an International Monetary Fund (IMF) team led by Bert van Selm visited Bridgetown on June 5-7, to have discussions on economic policies and possible IMF financial support of the government’s economic plan. Read more

Price hike expected due to trade tariffs

The Reporter: The cost of living in Belize could be taking another hit, as the price of various imported goods are in danger of going up due to an ongoing trade war among the United States, Mexico and Canada. Read more

Barbados pledges to play greater role in regional integration

CMC (via Jamaica Observer): Barbados on Tuesday said it would seek to play a greater role in the revitalisation of the regional integration movement, as the new government of Prime Minister Mia Mottley outlined its priorities for the next 12 months.  Read more

INTERNATIONAL 

Malaysia’s Mahathir calls for review of Trans-Pacific trade pact

CNBC: Malaysian Prime Minister Mahathir Mohamad called for a review of the Trans-Pacific Partnership trade agreement, saying smaller economies like Malaysia were at a disadvantage under the current terms. Read more

Trump against Rwanda in trade war over used clothes

Deutsche Welle: When East African countries announced a ban on the import of secondhand clothes to help their own textile industries, this irked US President Donald Trump. All but Rwanda have now backtracked. What’s at stake? Read more

Trump Wants Bilateral Nafta Talks But He Won’t Quit Accord

Bloomberg: President Donald Trump is seriously considering separate trade negotiations with Canada and Mexico but he doesn’t plan to withdraw from the North American Free Trade Agreement, White House economic adviser Larry Kudlow said. Read more

EU trade defence: stronger and more effective rules enter into force

European Commission: The changes which came into force last week are aimed at modernising the EU’s trade defence toolbox. Read more

EU-US Trade: European Commission endorses rebalancing duties on US products

European Commission: The College of Commissioners endorsed today the decision to impose additional duties on the full list of US products notified to the World Trade Organisation (WTO), as part of the EU’s response to the US tariffs on steel and aluminium products. Read more

EU and Chile complete third round of negotiations

European Commission: Negotiators met in Brussels from 28 May to 1 June for the 3rd round of negotiations for a new, modernised trade agreement between the EU and Chile. Read more

Azevêdo highlights ‘significant progress’ on trade finance, outlines further actions

WTO: Speaking at a meeting of the WTO Working Group on Trade, Debt and Finance on 8 June, Director-General Roberto Azevêdo highlighted the significant progress made in improving access to trade finance, in response to the persistent gaps in provision which affect small businesses and poorer countries in particular. Read more

Mexico initiates WTO dispute complaint against US steel, aluminium duties

WTO: Mexico has requested WTO dispute consultations with the United States regarding US duties on certain imported steel and aluminium products. The request was circulated to WTO members on 7 June. Read more

EU, Canada initiate WTO dispute complaints against US steel, aluminium duties

WTO: The European Union and Canada have requested WTO dispute consultations with the United States regarding US duties on certain imported steel and aluminium products. The requests were circulated to WTO members on 6 June. Read more

European Union files WTO complaint against China’s protection of intellectual property rights

WTO: The European Union has requested WTO consultations with China concerning certain Chinese measures which the EU alleges are inconsistent with China’s obligations under the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). The request was circulated to WTO members on 6 June. Read more

EU initiates new WTO compliance proceedings over Airbus subsidies

WTO: The European Union has requested WTO dispute consultations with the United States to address the EU’s claim that the EU and its member states have complied with the WTO ruling on subsidies to Airbus which was adopted by the Dispute Settlement Body on 28 May. The request was circulated to WTO members on 06 June. Read more

South Africa Looks to Deepen Trade Ties with Canada Following G7 Summit

Footprint to Africa: South Africa is looking to deepen its trade relations with Canada following discussions at the G7 Summit, an annual high profile event that brings together seven of the wealthiest nations in the world. Read more

Africa bids to unlock trade finance potential

Africa Business Magazine: Efforts to create a free trade grouping date back to the establishment of the African Economic Community under the Abuja treaty in 1991. In this context, therefore, the CFTA should be celebrated. Nonetheless, it remains more of a beginning than an end to overcoming intra-African trade barriers. Read more

UNCTAD launches World Investment Report 2018 

UNCTAD: Global flows of foreign direct investment fell by 23 per cent in 2017. Cross-border investment in developed and transition economies dropped sharply, while growth was near zero in developing economies and with only a very modest recovery predicted for 2018. Read more

COMESA, IOM sign cross border trade agreement

Africa Business Communities: COMESA and International Organization for Migration (IOM) have signed a co-delegation Agreement on the implementation of the small scale cross border trade initiative in five border posts within the region. Read more

BONUS – Trade Tensions Escalate 

The leaders of the Group of 7 (G-7) wealthiest countries (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) met in Charlevoix, Quebec, Canada on June 8-9 against a backdrop of escalating trade tensions between the US and major allies, Mexico, Canada and the EU over the former’s imposition of steel and aluminium tariffs and threats of retaliation by the latter.

The official communique was signed by six countries, the US excepted. Specifically, the six signatories to the communique expressed their support for free trade and the rules-based multilateral trading system and denounced protectionism as follows:

“We acknowledge that free, fair and mutually beneficial trade and investment, while creating reciprocal benefits, are key engines for growth and job creation. We recommit to the conclusions on trade of the Hamburg G20 Summit, in particular, we underline the crucial role of a rules-based international trading system and continue to fight protectionism. We note the importance of bilateral, regional and plurilateral agreements being open, transparent, inclusive and WTO-consistent, and commit to working to ensure they complement the multilateral trade agreements. We commit to modernize the WTO to make it more fair as soon as possible. We strive to reduce tariff barriers, non-tariff barriers and subsidies.”

The full text of the communique may be accessed here.

Liked this issue? To read past issues of our weekly Caribbean Trade & Development Digest, please visit here. To receive these mailings directly to your inbox, please follow our blog.

IMO Member Countries adopt pathway to reduce shipping carbon footprint

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Alicia Nicholls

Member countries of the United Nations specialised agency charged with regulating the shipping industry, the International Maritime Organisation (IMO), adopted the first greenhouse gas (GHG) emissions reduction framework for the shipping industry. This decision came at the 72nd session of the IMO’s Marine Environment Protection Committee (MEPC) held in London from April 9-13.

The Initial Strategy adopted by IMO member countries has set a target of halving greenhouse gas (GHG) emissions from ships by 2050 vis-a-vis emissions levels in 2008. This move brings the shipping industry closer in line with the goals of the Paris Climate Change Agreement signed by over 190 countries in 2015, but to which the shipping industry (like the aviation industry) is not bound.

Some 80% of the volume of global trade is carried by ships. The phenomenon of mega-ships has seen a doubling in container ship capacity, and improvements in engine efficiency have increased the ability to travel longer distances in shorter time. However, the industry is estimated to account for 2-3% of global GHG emissions, including carbon dioxide and sulphur. A study entitled “Greenhouse Gas Emissions from Global Shipping: 2013-2015” found that CO2 and other emissions from ships were increasing, despite increases in efficiency. Aside from the very real climate impact, emissions  from ships have public health risks for persons who live on or near the coast.

So what was decided?

Under the Initial Strategy, IMO States agreed:

  • To reduce total annual GHG emissions from international shipping by at least 50% compared to 2008
  • The peak and decline of GHG shipping emissions completely by the end of the century
  • To reduce the carbon intensity of ships through implementation of further phases of the energy efficiency design index for new ships
  • A working group will develop a program of follow-up actions to the Initial Strategy, and will consider ways to reduce shipping GHG emissions in order to advise the committee and will report at the next session of the MEPC in October 2018
  • The Initial Strategy is to be revised by 2023.

As noted by the IMO, achievement of these targets will require continued innovations in shipping design and technology to maximise energy efficiency and decarbonisation through use of alternative and renewable energy sources.

Agreement on the Initial Strategy did not come easy and reflects a compromise. Small Island Developing States, China and the European Union for example, had advocated for a more ambitious emissions reduction target of at least 70%, which scientists argue would put the sector more on track to meeting the Paris Agreement goal to limit global temperature increases to well-below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit increases to 1.5 degrees Celsius above pre-industrial levels.  Others like the US, Saudi Arabia and Brazil had argued for lower targets.

Some environmental groups have posited that the compromise target of 50% is not enough to bring shipping emissions in line with the target set out by the Paris Agreement.

Nonetheless, the Initial Strategy is an important milestone as, after years of delay, it represents the first pathway forward for reducing the shipping industry’s carbon footprint. In March this year, a  mandatory data collection system for fuel oil consumption of ships also came into force.

The full IMO press release may be viewed here.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

IMF: Trade tensions could derail global growth prematurely

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Alicia Nicholls

Currently strong global growth could be derailed by escalating trade tensions and retaliation. That is the word from the International Monetary Fund (IMF) in its latest World Economic Outlook (April 2018) entitled “Cyclical Upswing, Structural Change”. The lending agency has forecast global growth of 3.9% both for this year and the next, up from 3.8% in 2017, which was the most robust since 2011. Increased trade and investment has been a major propeller of this growth, according to IMF economists, which makes the current trade tensions between the United States and China a cause for concern.

GDP growth for Latin America and the Caribbean (LAC) is projected to be 2.0% in 2018 and 2.8% in 2019, up from 1.3% in 2017, but still below the projected global average. The IMF projects positive growth for all LAC countries (to varying degrees), with the exceptions of Dominica (-16.3%) which was ravaged by Hurricane Maria last year and Venezuela (-15%), which is currently in the throes of a deep economic crisis.

Longer-term prospects not as bright

However, it was not all positive news. While near-term global growth prospects remain positive, the IMF projects a slowing of growth in the medium-term. It was noted that ageing populations, lower rates of labor force participation and low productivity growth all made it unlikely that advanced economies would return to their pre-crisis per capita growth rates any time soon.

According to the IMF, some emerging and developing economies are likely to achieve longer-term growth rates comparable to their pre-crisis rates, but the outlook for commodities exporters was not as positive even though the outlook for commodities prices had improved somewhat. The IMF emphasised that economic resilience of these economies would be contingent on their diversification.

The IMF has also again sounded alarm about the rise in global private and public debt levels and the prospect of repayment difficulties due to monetary policy normalisation. This is an issue which is of particular relevance to the region, as some Caribbean countries are among the most indebted in the world.

Trade tensions could undermine current growth trajectory

During the press conference launching the report, IMF Economic Counsellor and Director of the Research Department, Mr. Maurice Obstfeld cautioned that while a slowing of growth is predicted in the longer term, “the prospect of trade restrictions and counter-restrictions threatened to undermine confidence and derail growth prematurely”.

Acknowledging the political imperatives driving the protectionist turn taken by some countries, namely public skepticism about the benefits of free trade and economic integration, Mr. Obstfeld noted that technology as opposed to trade was to blame. He further warned that fights over trade distracted from, rather than advanced the agenda of promoting growth whose benefits were more broad-based.

Multilateral system  in danger of being torn apart

In the report, the IMF warned that the multilateral system was in danger of being torn apart. Making the case against unilateral action, the IMF Economic Counsellor argued that inequitable trade practices were best coped with through “dependable and fair dispute resolution within a strong rules-based multilateral framework”.

He acknowledged that there was room to strengthen the current trading system and that plurilaleral agreements could be used as a “springboard” to more open trade. He also noted that multilateral cooperation was essential “to address a range of challenges in addition to the governance of world trade.”

The full press conference may be viewed here and the report may be downloaded here.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Global Governance: Why isn’t it working and what can be done?

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Javier

Javier D. Spencer

By Javier D. Spencer, Guest Contributor

At an exponential rate, the world is convulsing into a single space, which heightens the interconnectivity and interdependence of countries. As a result, it is evident that issues such as climate change, security, human rights among others, instantaneously alter global relations. It can be scary when you think about it, especially since matters arising are becoming more and more complex.

Our human response to address the complex issues at a global level is to increase the robustness of global governance through multilateralism. We could say that for almost every global issue (sometimes overlapping), there may be at least two or three global institutions created to address that one issue. This, evidently, creates a new global society that is constructed to bring order, reliability, predictability and transparency.

The New Global society eliminates a central authority and places emphasis on collaboration among states which will seek to encourage common practices and goals. However, as there is growing interdependence for economies to integrate into the global economy, we observe that global governance has acquiesced to the limitations and challenges of multilateralism. It is designed to promote international peace, stability and co-operation; but unfortunately, it does not work, as it should. For this reason, there are challenges arising in the dynamic global economy that undermines the effective institutional outcomes of global governance, including democratic deficits and accountability; representation and power; and compliance.

Democratic Deficits & Accountability

Democratic deficits are prevalent in global governance when nothing holds the institutions and regimes accountable to a democratic electorate. There is a divergence between ‘what is’ and ‘what ought to be’ in respect of trust by the masses in the governance regimes and institutions. For example, we have seen a proliferation of trade agreements, like the now defunct negotiations on the Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU, and the Trans-Pacific Partnership (TPP) (which was replaced by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) after the US withdrew from the TPP), that were being negotiated in secrecy. Secrecy violates the very basic concept of democracy. Citizens have the fundamental right to be aware and to be able to air their concerns on policies and legislation. The absence of this right results in the deficit as the perception of governance goes beyond the influence of the citizenry.

There is also a growing concern about lack of accountability at the global governance level.  Accountability includes transparency, consultation, evaluation, and correction. Transparency means that there is visibility present; eliminating decision-making done in secrecy. Additionally, consultation purports an explanation of intentions by one party, and flexibility to adjust plans that will negatively affect another party. Consultation then ushers in evaluation where there is an independent monitoring and assessment of activities; and in the final analysis, there is correction, which means that there are provisions for redress or reform.

Representation and Power

An overwhelming question on the issue of representation is, “whose interest do these organizations represent?”   Global Governance regimes were created by and for the most influential states that were too important to fail. Therefore, the goals and objectives are partially beneficial to the major actors in global system. For example, voting at the International Monetary Fund (IMF) remains weighted, which means that one state is does not equal to one vote. How is finance for economic development expected to be achieved? It automatically disenfranchises the global south in crucial development decisions.

Another case in point is the daunting process of ensuring that developing countries, more specifically Least Developed Countries, are able to participate in international trade at the multilateral level. Although the Nairobi Decision on Rules of Origin and Export competition enables greater LDC participation, facilitation remains elusive. Interestingly, the Nairobi round is a successor to the Doha Round. The Doha Round, which was coined a being ‘development’ oriented failed miserably after many years of negotiations. The main aim of the Doha Round was to further liberalize trade, invest more in development, and address complex global issues. However, the rounds’ failure illumes the shortcomings of global governance regimes, especially for developing and least developed countries.

There are, however, proposed problems of increased representation at the global governance level. There will be an increased inefficiency, as more participants in the decision-making process could hinder coming to a single decision, due to the diversity of interests and goals. However, inadequate representation results in skewed authority and power within the governance regime. Ultimate power is given to whom it favourably represents and vice versa, representation reflects to the economies with economic dominance and power. It becomes a case where “the strong will do what they can and the weak must accept what they must”.

Compliance

If all states are sovereign, who ensures that states comply with these rules to yield an ideal outcome in the governance of the international system?   The enforcement problem arises because that is no authoritative international government since states value their autonomy. For instance, the United States has iterated its right to ignore any rulings from the WTO’s Dispute Settlement Body. Therefore, to what extent are states willing to sacrifice their political autonomy for a well-functioning international economy? None.

So, what’s next? Reform? How?

In order to align with the original mandate of international stability, peace, and cooperation, issues of democratic deficits and accountability; representation and power; and compliance must be addressed through speedy reform. The start of attaining reform is by identifying an effective global mechanism that provides strategic guidance. Global issues today are closely knitted into a web. Therefore, strategic guidance must view the international system as a whole.

At present, there are sufficient agencies created to tackle emanating issues. As such, there is no need to recreate the global governance regime. Instead, the existing structure needs to be appropriately matched to issues, in order to strengthen its efficacy.

This will certainly result in a change in the global agenda. An agenda that is inclusive, modern, flexible, agile, and resilient.  This envisioned modern-day agenda will mitigate the democratic deficit and increase accountability, linking leadership, vision and institution. An inclusive agenda fosters participation, which balances representation and power. Reform needs to happen faster.

Javier Spencer, B.Sc., M.Sc., is an International Business & Trade Professional with a B.Sc. in International Business and a M.Sc. in International Trade Policy. His professional interests include Regional Integration, International Business, Global Diplomacy and International Trade & Development. He may be contacted at javier.spencer at gmail.com.

WTO: Trade tensions could sabotage global trade growth momentum

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Alicia Nicholls

The World Trade Organisation (WTO) has predicted that global merchandise trade growth will remain strong in 2018 and 2019, but has cautioned that this momentum is contingent on the policy choices taken by governments.

This forecast was disclosed by WTO Director General, Roberto Azevedo, in a press conference held last week. According to Mr. Azevedo, global merchandise trade grew an estimated 4.7% in 2017 and is forecast by WTO economists to grow 4.4% in 2018 and by a more modest, 4.0% in 2019.

He noted that trade volume growth in 2017 was the most robust since 2011, with Asia being responsible for much of the recovery. He noted that South and Central America and the Caribbean made a positive contribution for the first time since 2013 due to Brazil’s economic recovery. The ratio of trade growth to GDP growth will be slightly lower in 2018 at 1.4 in 2018, down from 1.5 in 2017. Commercial services trade experienced strong growth in 2017 after two years of lacklustre growth.

The escalating global trade tensions, particularly between the US and China, cast a shadow over the forecast, as Director-General Azevedo strongly cautioned that continued positive trade growth could be “quickly undermined” if Governments turned to trade restrictive policies and engaged in retaliation. Mr. Azevedo pointedly stated that “a cycle of trade retaliation is the last thing the world economy needs”, noting that trade tensions may already be impacting business confidence and investment decisions. He further warned that missteps on trade and monetary policy “could undermine economic growth and confidence”.

In an appeal to WTO Member States to resort to the rules-based system as opposed to unilateral action, Mr. Azevedo added that “pressing trade problems confronting WTO Members is best tackled through collective action”.

The full WTO press release may be viewed here.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

 

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