## 093018-reinvigorating-trade-and-inclusive-growth

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---

### Executive summary and core findings
- Trade integration can play a much larger role in boosting shared prosperity; current focus on trade tensions risks obscuring untapped benefits from further trade reform.
- Opportunities provided by information technology and other changes in the global economy are not yet reflected in modern areas of trade policy (services and electronic commerce).
- Greater openness in services and e-commerce would promote competition, lift productivity, and raise living standards, with particular gains for the rural economy, smaller enterprises, and women’s economic empowerment.
- Harnessing flexible approaches to WTO negotiations may be key to reinvigorating global trade reform; multilateral outcomes have lagged since the early 2000s despite exceptions such as the WTO Trade Facilitation Agreement.
- Building greater, more durable openness should be part of a broader effort to strengthen and reinvest in the global trading system, including addressing outstanding questions involving the WTO dispute system and the reach of subsidy disciplines.

### Historical progress and remaining gaps
- Tariff liberalization achievements:
  - Developing (advanced) economies cut their average tariffs from 31 percent (10 percent) in 1980 to 9 percent (4 percent) in 2015.
- Remaining impediments to trade:
  - Tariffs, regulatory differences, and other policy barriers still impede trade in goods.
  - Domestic policies continue to distort trade even as agreements extend “behind the border.”

### Trade growth trends and reform slowdown
- Global trade dynamics:
  - Global trade volumes grew at some 7 percent annually during the 1990s—double the rate of global GDP growth.
  - The ratio of trade growth to GDP growth fell to 1.5 during 2001–07 and to unity in the period after 2008.
- Causes and concerns:
  - A substantial part of the slowdown in trade growth represents a slower pace of trade reform following progress from the 1980s to the early 2000s.
  - New trade restrictions after the global financial crisis and recent tensions exacerbate the need to reinvigorate trade reform.

### Frontier policy areas with high growth potential
- Areas identified with high potential to lift global productivity and medium-term growth:
  - Electronic commerce (“e-commerce”)
  - Investment (including FDI)
  - Services trade
- Rationale and implications:
  - Services comprise some two-thirds of global GDP and employment and nearly half of global trade on a value-added basis.
  - Digital technologies make more services tradable across borders; trade and investment decisions are increasingly complements rather than substitutes.
  - The rise of global value chains and trade in inputs heightens the importance of regulatory cooperation, trade and investment facilitation, and enabling domestic policy environments.

### Risks, institutional considerations, and WTO context
- Risks:
  - International rules in these newer areas are less developed than in traditional areas.
  - Existing international obligations provide limited protection against backsliding from existing policies.
- WTO and negotiation context:
  - The WTO General Agreement on Trade in Services (GATS) addresses many aspects of investment in service sectors and applies to the digital delivery of services; GATS provides a built-in mechanism for pursuing regulatory cooperation on services.
  - Flexible negotiating approaches (including plurilaterals and “critical mass” agreements) have historical precedents and can be deployed inside the WTO to advance reforms when full multilateral agreement is not immediately possible.
  - Examples of flexible approaches: Tokyo Round “Codes”; the 1996 Information Technology Agreement (ITA) and its 2016 expansion; government procurement disciplines applied among Agreement on Government Procurement (AGP) participants.

### Trade and inclusiveness
- Inclusive potential of trade:
  - Trade can lower poverty and open opportunities to small firms, farmers, fishermen, and women.
  - E-commerce policies could help small firms export.
  - Distortions to agricultural trade affect market access and food price volatility, impacting poor farmers and consumers.
  - Limiting fisheries subsidies could help secure livelihoods of coastal communities and the sustainability of fish stocks.
  - Trade helps drive female employment and economic empowerment.
- Complementary policy needs:
  - Given potential adjustment pressures from trade and structural change, appropriate complementary domestic policies are important to support workers, communities, and regions undergoing adjustment.

### Negotiating approaches and policy recommendations
- Core recommendations:
  - Reinvest in an open, rules-based global trading system to serve the modern economy.
  - Use flexible negotiating approaches within the WTO system (including plurilaterals and critical-mass agreements) where full multilateral agreement is not initially feasible.
  - Ensure initiatives attract a diverse and representative set of members, are open to all, and serve to strengthen the global trading system.
  - Promptly address outstanding WTO institutional and legal questions (for example, the dispute system and subsidy disciplines) alongside cooperative actions to secure greater openness.
  - Recognize domestic policy coherence is critical when negotiating “behind the border” commitments, especially for services and regulatory cooperation.
  - Pair openness with domestic policies that facilitate healthy adjustment to trade and technology.

### Box 1 — Structure of the GATS (highlights)
- Scope and modes of supply:
  - Mode 1: Cross-border supply (including digitally delivered services).
  - Mode 2: Consumption abroad (often associated with tourism).
  - Mode 3: Commercial presence (FDI, foreign affiliates).
  - Mode 4: Presence of natural persons (temporary movement of service suppliers).
- Core obligations and commitments:
  - MFN obligation applies across the service sector and all modes of supply.
  - Member-specific commitments include “market access” (absence of six, mostly ‘quota-type’ limitations) and “national treatment.”
  - Market access and national treatment commitments are specific to the member, the service sector, and the mode of supply; subject to any limitations in the member’s schedule.
- Interaction with broader trade reform:
  - The Uruguay Round outcome did not lead to significant liberalization in services (with some exceptions).
  - GATS (Article XIX) required successive negotiations beginning in 2000 to achieve progressively higher liberalization; these mandates were integrated into the Doha Round but delivered no concrete results two decades on.
- Policy avenues identified:
  - Address gaps between GATS commitments and actual policy, possibly with standstill and “rollback” provisions.
  - Deepen and expand specific commitments under GATS across service industries and modes of supply.
  - Promote capacity building and regulatory cooperation (government procurement in services; trade-distorting subsidies in services; cross-border data flows; mutual recognition of professional credentials).

### Box 2 — CPTPP Chapter on Electronic Commerce (highlights)
- Objectives and scope:
  - Promote the free flow of data and prevent “localization requirements” of technologies and servers, while allowing legitimate public policy objectives.
  - Ensure companies and consumers can access and move data freely, subject to safeguards such as for privacy.
- Data localization and cloud services:
  - Prohibits forcing businesses to build data storage centers or use local computing facilities in CPTPP markets.
  - Allows restrictions for a “legitimate public policy objective” provided measures are not a disguised restriction or “greater than required.”
- Source code and content discrimination:
  - Prohibits measures forcing suppliers to share software source code with governments or commercial rivals.
  - Prohibits customs duties on digital products distributed electronically (software, music, video, e-books, games).
  - Prevents discriminatory taxation or blocking that favors national producers of digital products.
- Facilitation and legal frameworks:
  - Encourages paperless trading and provides for electronic authentication and signatures.
  - Requires legal frameworks consistent with UNCITRAL Model Law on Electronic Commerce 1996 or the United Nations Convention on the Use of Electronic Communications in International Contracts.
- Consumer protection and privacy interoperability:
  - Requires consumer protection laws related to fraudulent and deceptive online activities and measures against unsolicited commercial electronic messages (spam).
  - Promotes interoperability between diverse privacy regimes.

### Box 5 — Benefits from Market Access Reforms (examples and quantified impacts)
- Channels and impacts:
  - Tariffs and productivity:
    - Each percentage point reduction in Brazil’s tariffs increased Argentine firms’ technology spending by between 1 and 1.5 percent (Bustos, 2011).
  - Tariff uncertainty and trade:
    - Detailed Australian estimates: reducing both applied and bound rates to zero would increase the variety of traded products more than four times as much as setting only applied rates to zero (Handley, 2014).
  - Non-tariff barriers and trade:
    - A one-day customs delay has been estimated to decrease imports as much as a 1 percent increase in the distance between the importing and exporting countries (Djankov and others, 2010).
    - A 10 percent increase in customs delays can reduce exporters’ foreign sales by nearly 4 percent (Volpe Martincus and others, 2015).
    - Full implementation of the Trade Facilitation Agreement is estimated to reduce Members’ trade costs by an average of 14 percent—greater than the reduction from a hypothetical elimination of all remaining tariffs worldwide (WTO, 2015).
- Remaining market access barriers and measures:
  - G20 applied MFN tariffs: 15 percent in agriculture and 4 percent for other goods (advanced economies).
  - G20 applied MFN tariffs: 16 percent in agriculture and 9 percent for other goods (emerging economies).
  - Tariff escalation: rates on finished goods average 9 percentage points above those on raw products (World Bank, 2015).
  - Emerging market and developing countries: applied tariffs average about 10 percent while WTO ceiling bindings are about 30 percent.
  - Non-tariff measures: quantity- and price-control NTMs affect over 40 percent of imports.
- Welfare and tariff-reform effects:
  - Elimination of remaining tariff barriers is estimated to permanently increase welfare levels by 0.6 percent in EMDEs and 0.7 percent in AEs, on average (Spearot, 2016).
  - Between 2001 and 2013, PTAs reduced average applied tariffs by 0.3 percentage points; WTO scheduled commitments and unilateral liberalization reduced them by 1.1 and 1.3 percentage points, respectively (Bureau and others, 2016).
- Policy recommendations reiterated:
  - Reduce tariff and nontariff barriers, promote transparency, and enhance policy stability.
  - Target higher tariff rates to bring down averages and variation, with attention to agriculture.
  - Address tariff escalation and close gaps between bound and applied rates; allow longer transitional periods for the smallest and poorest developing countries.
  - Pursue complementary tariff reductions by groups of WTO members with a critical mass, applied MFN.
  - Increase participation in the Agreement on Government Procurement to strengthen transparency commitments.
  - Fully implement the Trade Facilitation Agreement to lower trade costs (average reduction of 14 percent).
  - Use flexible negotiation approaches exemplified by the ITA, TFA, and AGP.

### Box 6 — Fisheries Subsidies Negotiations at the WTO (highlights)
- Negotiation background and aims:
  - Since 2001, WTO members have negotiated to discipline subsidies that contribute to overcapacity and overfishing, including subsidies to IUU fishing.
  - Aim to produce a “triple win” for trade, development and the environment by reducing trade-distortive subsidies and promoting sustainable fisheries management.
  - Objective to protect the sustainability of fish stocks by redirecting public funds away from payments that encourage production and toward better fisheries management.
- Scope and trade-offs:
  - Debate focuses on subsidies to industrial fisheries, including on the high seas, and the role of subsidies in artisanal and small-scale fisheries in developing Members.
  - Negotiators seek to balance support for poor and vulnerable communities reliant on fisheries with responsibilities to avoid supporting unsustainable fishing levels.
- 2017 Ministerial Decision:
  - Mirrors the language of SDG Target 14.6.
  - Targets completion of negotiations by the 12th WTO Ministerial Conference in 2019.
  - Calls for comprehensive disciplines to prohibit subsidies to IUU fishing and other subsidies that contribute to overcapacity and overfishing, with special provisions for developing country and LDC Members.

### Box 7 — GATT/WTO: Selected Experience with Alternative Negotiating Approaches
- Types of approaches and illustrative outcomes:
  - Plurilateral “codes” (Tokyo Round): several later became full multilateral agreements; binding among signatories and subject to GATT dispute settlement.
  - Plurilateral agreements remaining plurilateral (AGP): obligations of participants extend only to other participants; AGP is open to new participants.
  - “Critical mass” agreements: negotiated by a subset of members with benefits extended MFN to all members (example: ITA expansion).
  - Unbundled multilateral agreements (TFA): Trade Facilitation Agreement (2013) unbundled from broader Doha agenda and binding on all WTO members; allows multi-speed implementation and provides implementation assistance.
  - Ministerial decisions: example—elimination of farm export subsidies agreed in 2013.
- Outcomes, lessons, and recent initiatives:
  - 2013: TFA negotiated.
  - 2015: ITA expansion deal and agreement to ban all forms of agricultural export subsidies concluded.
  - 2017: Many members launched discussions on 21st century trade issues like e-commerce and investment facilitation.
  - These initiatives remain open for any WTO member to join.
  - Success in these cases resulted from combining continuity and reform; the WTO can adapt and deliver results when members cooperate.
- Key statistics and precise figures:
  - ITA (2015): 53 participants.
  - ITA (2015): accounting for 90 percent of world trade in the covered products.
  - ITA (2015): elimination of tariffs on a further 201 products.
  - Commitments in 1997: around 70 WTO members.
  - TFA concluded: 2013.
  - Trade facilitation part of the Doha Development Agenda agreed: 2001.
  - Example years of member actions cited: 2013, 2015, 2017.

*International Monetary Fund, World Bank, and World Trade Organization (excerpts from the content unit).*

### References _______________________________________________________________________________________ 37

### 093018-reinvigorating-trade-and-inclusive-growth - References _______________________________________________________________________________________ 37

### Executive Summary
- Trade integration can play a much larger role in boosting shared prosperity; current focus on trade tensions risks obscuring untapped benefits from further trade reform.
- Opportunities provided by information technology and other changes in the global economy are not yet reflected in modern areas of trade policy (services and electronic commerce).
- Greater openness in services and e-commerce would promote competition, lift productivity, and raise living standards, with particular gains for the rural economy, smaller enterprises, and women’s economic empowerment.
- Harnessing flexible approaches to WTO negotiations may be key to reinvigorating global trade reform; multilateral outcomes have lagged since the early 2000s despite exceptions such as the WTO Trade Facilitation Agreement.
- Building greater, more durable openness should be part of a broader effort to strengthen and reinvest in the global trading system, including addressing outstanding questions involving the WTO dispute system and the reach of subsidy disciplines.

### Historical progress and remaining gaps
- Tariff reductions since World War II through the early 2000s lifted living standards and reduced poverty, but the process remains incomplete.
- Exact tariff reductions cited:
  - Developing (advanced) economies cut their average tariffs from 31 percent (10 percent) in 1980 to 9 percent (4 percent) in 2015.
- Remaining impediments:
  - Tariffs, regulatory differences, and other policy barriers still impede trade in goods.
  - Domestic policies continue to distort trade even as agreements extend behind the border.

### Trade growth trends and reform slowdown
- Global trade growth and reform dynamics:
  - Global trade volumes grew at some 7 percent annually during the 1990s—double the rate of global GDP growth.
  - The ratio of trade growth to GDP growth fell to 1.5 during 2001–07 and to unity in the period after 2008.
- A substantial part of the slowdown in trade growth represents a slower pace of trade reform following progress from the 1980s to the early 2000s.
- New trade restrictions after the global financial crisis and recent tensions exacerbate the need to reinvigorate trade reform.

### Frontier areas with high growth potential
- Key modern policy areas with high potential to lift global productivity and medium-term growth:
  - Electronic commerce (“e-commerce”)
  - Investment (including FDI)
  - Services trade
- Rationale:
  - Services comprise some two-thirds of global GDP and employment and nearly half of global trade on a value-added basis.
  - Digital technologies make more services tradable across borders; trade and investment decisions are increasingly complements rather than substitutes.
  - The rise of global value chains and trade in inputs heightens the importance of regulatory cooperation, trade and investment facilitation, and enabling domestic policy environments.

### Risks and institutional considerations
- Risks:
  - International rules in these newer areas are less developed than in traditional areas.
  - Existing international obligations provide limited protection against backsliding from existing policies.
- Institutional context:
  - The WTO General Agreement on Trade in Services (GATS) addresses many aspects of investment in service sectors and applies to the digital delivery of services; GATS provides a built-in mechanism for pursuing regulatory cooperation on services.
  - Flexible negotiating approaches (including plurilaterals and “critical mass” agreements) have historical precedents and can be deployed inside the WTO to advance reforms when full multilateral agreement is not immediately possible.
  - Examples of flexible approaches noted:
    - Tokyo Round “Codes” applied initially only to adopting countries.
    - The 1996 Information Technology Agreement (ITA) and its 2016 expansion used a “critical mass” approach.
    - Government procurement disciplines apply only among participants in the Agreement on Government Procurement (AGP), but the agreement is open to non-participants.

### Trade and inclusiveness
- Trade’s inclusive potential:
  - Trade can lower poverty and open opportunities to small firms, farmers, fishermen, and women.
  - E-commerce policies could help small firms export.
  - Distortions to agricultural trade affect market access and food price volatility, impacting poor farmers and consumers.
  - Limiting fisheries subsidies could help secure livelihoods of coastal communities and the sustainability of fish stocks.
  - Trade helps drive female employment and economic empowerment.
- Need for complementary policies:
  - Given potential adjustment pressures from trade and structural change, appropriate complementary domestic policies are important to support workers, communities, and regions undergoing adjustment.

### Negotiating approaches and policy recommendations
- Core recommendations for advancing trade reform:
  - Reinvest in an open, rules-based global trading system to serve the modern economy.
  - Use flexible negotiating approaches within the WTO system (including plurilaterals and critical-mass agreements) where full multilateral agreement is not initially feasible.
  - Ensure initiatives attract a diverse and representative set of members, are open to all, and serve to strengthen the global trading system.
  - Promptly address outstanding WTO institutional and legal questions (for example, the dispute system and subsidy disciplines) alongside cooperative actions to secure greater openness.
  - Recognize domestic policy coherence is critical when negotiating “behind the border” commitments, especially for services and regulatory cooperation.
  - Pair openness with domestic policies that facilitate healthy adjustment to trade and technology.

### Services trade (section highlights)
- Services sector:
  - Comprises some two-thirds of global GDP and employment.
  - Limited opening to foreign competition impedes trade and productivity growth throughout the sector and broader economy.
- Modes of supply emphasized:
  - GATS Mode 1: cross-border supply, including digitally delivered services.
  - GATS Mode 3: presence of commercial presence (FDI, foreign affiliates).
  - GATS Mode 4: temporary movement of natural persons to supply services.
- Policy imperative:
  - Address obstacles to tradability and foreign competition across modes to capture productivity and trade gains from services.

*International Monetary Fund, World Bank, and World Trade Organization (excerpts from the content unit).*

### Box 1. Structure of the GATS

### Box 1. Structure of the GATS

### Scope and modes of supply
- The GATS applies to the international provision of services through four modes of supply:
  - Cross-border supply (Mode 1), similar to the concept of merchandise trade;
  - Consumption abroad (Mode 2), the supply of a service in the territory of one WTO member to a consumer of another member (often associated with tourism)—policies in this area are generally open;
  - Commercial presence (Mode 3), the supply of a service to consumers in another (host) member by establishing a commercial presence, a concept closely linked to FDI and the operation of foreign affiliates;
  - Presence of natural persons (Mode 4), involving the supply of a service by an individual of one member temporarily present in the territory of another member.

### Core obligations and commitments
- Certain GATS obligations apply automatically across the service sector and to all modes of supply; these include:
  - The obligation to treat services and service suppliers from any WTO member no less favorably compared to those from any other WTO member (“MFN”).
- Member-specific commitments include:
  - “Market access” — the absence of six, mostly ‘quota-type’ limitations;
  - “National treatment” — treating foreign services and service suppliers no less favorably than domestic services and service suppliers.
- Market access and national treatment commitments are:
  - Specific to the member, to the service sector, and to the mode of supply;
  - Subject to any limitations contained in the member’s schedule.
- The GATS schedules now in force are, largely, those agreed in the Uruguay Round or, for newer WTO members, those agreed in the accession negotiations.

### Interaction with broader trade reform (as presented in the source)
- The GATS brings a critical framework for provisions on services trade but (with some exceptions) the Uruguay Round outcome did not lead to significant liberalization.
- In the Doha Round, services negotiations aimed to improve the GATS and to deepen country-specific GATS commitments, but were made dependent on negotiations in other areas; offers were exchanged but little negotiating progress was made.
- GATS (Article XIX) requires WTO members to “enter into successive negotiations, beginning [in 2000] and periodically thereafter, with a view to achieving a progressively higher level of liberalization.” This negotiating mandate was integrated into the broader Doha Round in 2001 but fell victim to disagreements over agriculture and other issues.
- Two decades on from early initiatives, negotiations on services trade rules mandated in the GATS itself have delivered no concrete results.

### Policy implications and avenues for progress mentioned in the source
- Areas suggested for advancing services openness and the GATS framework:
  - Addressing gaps between GATS commitments and actual policy, possibly with standstill and “rollback” provisions to discourage policy reversals.
  - Deepening and expanding specific commitments under the GATS to promote greater openness across a broad range of service industries and across multiple modes of supply.
  - Identifying vehicles to promote capacity building to assist governments in developing vigorous service sectors, and providing advice and support for service sector reforms more generally.
- The source highlights the need for greater international cooperation involving regulators to deliver both liberalization and enforceable agreements, and to improve the framework for services trade in areas such as:
  - Government procurement in services;
  - Trade-distorting subsidies in the service sector;
  - Cross-border data flows;
  - Mutual recognition of credentials in the area of professional services.

*International Monetary Fund, World Bank, and World Trade Organization (text excerpt).*

### Box 2. The CPTPP Chapter on Electronic Commerce

### Box 2. The CPTPP Chapter on Electronic Commerce

### Objectives and scope
- Seeks to promote the free flow of data and prevent “localization requirements” of technologies and servers, while allowing the pursuit of legitimate public policy objectives.
- Includes disciplines ensuring that companies and consumers can access and move data freely (subject to safeguards, such as for privacy).
- CPTPP countries retain the ability to maintain and amend regulations related to data flows, including those oriented to protecting privacy, but have undertaken to do so in a way that does not create barriers to trade.

### Data localization and cloud services
- Prohibits forcing businesses to build data storage centers or use local computing facilities in CPTPP markets.
- CPTPP countries have committed not to impose these kinds of ‘localization’ requirements on computing facilities, thus ensuring that information can travel across borders and business and consumers can benefit from the advantages of the “cloud.”
- Restrictions on data flows and localization requirements may be imposed for a “legitimate public policy objective,” including the protection of privacy, to the extent that that measure is not a disguised restriction to trade, or that it imposed restrictions “greater than required” to achieve the desired policy objective.

### Source code and content discrimination
- Prohibits measures that force suppliers to share software source code with governments or commercial rivals when entering a CPTPP market.
- Prohibits the imposition of customs duties on digital products, including products distributed electronically, such as software, music, video, e-books, and games.
- Prevents CPTPP countries from favoring national producers or suppliers of such products through measures such as discriminatory taxation or outright blocking or other forms of content discrimination.

### Facilitation of electronic commerce and legal frameworks
- Encourages CPTPP Parties to promote paperless trading between businesses and the government, such as electronic customs forms.
- Provides for electronic authentication and signatures for commercial transactions.
- Requires CPTPP members to maintain a legal framework for electronic transactions consistent with the principles of the UNCITRAL Model Law on Electronic Commerce 1996 or the United Nations Convention on the Use of Electronic Communications in International Contracts.

### Consumer protection and privacy interoperability
- Requires CPTPP members to adopt and maintain consumer protection laws related to fraudulent and deceptive commercial activities online and to ensure that privacy and other consumer protections can be enforced in CPTPP markets.
- Parties are required to have measures to stop unsolicited commercial electronic messages (spam).
- Recognizes that governments have different ways of implementing privacy protections, and promotes interoperability between those diverse legal regimes.

*Source: Box 2. The CPTPP Chapter on Electronic Commerce (from the supplied IMF/World Bank/WTO content).*

### Box 5. Benefits from Market Access Reforms: Examples

### Box 5. Benefits from Market Access Reforms: Examples

### Channels through which market access reforms affect trade and productivity
- Tariffs and productivity
  - Each percentage point reduction in Brazil’s tariffs increased Argentine firms’ technology spending by between 1 and 1.5 percent (Bustos, 2011; see also WTO, 2017).
  - Productivity gains arise from resources being reallocated to the most productive sectors and through the adoption of more advanced technologies.
- Tariff uncertainty and trade
  - Reducing the difference between applied and bound tariffs (reducing ‘tariff overhangs’) can have a very large impact on trade, particularly when combined with sunk costs of market entry.
  - Detailed Australian product-level estimates suggest that reducing both applied and bound rates to zero would increase the variety of traded products more than four times as much as setting only applied rates to zero (Handley, 2014).
  - Increasing the number of bound duties (covering currently ‘unbound’ tariff lines) would be important to reduce uncertainty.
- Non-tariff barriers (NTBs) and trade
  - A one-day customs delay has been estimated to decrease imports as much as a 1 percent increase in the distance between the importing and exporting countries (Djankov and others, 2010).
  - A 10 percent increase in customs delays can reduce exporters’ foreign sales by nearly 4 percent (Volpe Martincus and others, 2015).
  - Full implementation of the Trade Facilitation Agreement is estimated to reduce Members’ trade costs by an average of 14 percent—greater than the reduction from a hypothetical elimination of all remaining tariffs worldwide (WTO, 2015).

### Remaining market access barriers and their measured impacts
- Tariff patterns and gaps
  - In G20 advanced economies, applied MFN tariffs average 15 percent in agriculture and 4 percent for other goods.
  - In G20 emerging economies, applied tariffs average 16 percent in agriculture and 9 percent for other goods.
  - Tariff escalation remains an issue: rates on finished goods average 9 percentage points above those on raw products (World Bank, 2015).
  - Among emerging market and developing countries, applied tariffs average about 10 percent while WTO ceiling bindings are about 30 percent, creating policy uncertainty.
  - For many members, tariff rates for substantial numbers of non-agricultural products remain unbound in the WTO.
- Quantified welfare and tariff-reform effects
  - Just the elimination of remaining tariff barriers is estimated to permanently increase welfare levels by 0.6 percent in EMDEs and 0.7 percent in AEs, on average (Spearot, 2016).
  - Between 2001 and 2013, PTAs reduced average applied tariffs by 0.3 percentage points, whereas WTO scheduled commitments and countries’ unilateral liberalization reduced them by 1.1 and 1.3 percentage points, respectively (Bureau and others, 2016).
- Non-tariff measures prevalence
  - Quantity- and price-control NTMs affect over 40 percent of imports, including in high-income countries (IMF-WB-WTO, 2017).

### Government procurement and other market-access dimensions
- Discrimination in government procurement policies is widespread.
- Participation in agreements that open procurement markets can promote competition, enhance transparency, and reduce corruption (Evenett and Hoekman, 2004; Anderson and others, 2016).
- Given that government spending in services typically outweighs goods purchases, opening procurement can be particularly effective to promote services growth (Chen and Whalley, 2011).

### Policy recommendations and feasible approaches
- Reduce tariff and nontariff barriers, promote transparency, and enhance policy stability.
  - Tariff reductions should target higher tariff rates more heavily to bring down averages and variation, with particular attention to agriculture.
  - Address tariff escalation and close gaps between bound and applied rates; longer transitional periods may be appropriate for the smallest and poorest developing countries.
  - Complementary tariff reductions could be pursued by groups of WTO members comprising some critical mass of global trade in particular sectors, with reductions applied MFN.
  - Increase participation of WTO members in the Agreement on Government Procurement to strengthen transparency commitments and pursue more ambitious commitments.
- Reduce NTBs and implement trade-facilitating reforms
  - Full implementation of the Trade Facilitation Agreement can substantially lower trade costs (average reduction of 14 percent).
- Use flexible negotiation approaches
  - Progress can be achieved through varied formats beyond large-scale undertakings, as exemplified by the Information Technology Agreement (ITA), the Trade Facilitation Agreement, and the Agreement on Government Procurement.
  - The WTO’s adaptable system and its dispute settlement mechanism have delivered results and can be tapped for future progress.

*Source: Box 5. Benefits from Market Access Reforms: Examples.*

### Box 6. Fisheries Subsidies Negotiations at the WTO

### Box 6. Fisheries Subsidies Negotiations at the WTO

### Background and objectives
- Since 2001, WTO members have been engaged in negotiations to discipline subsidies to the fisheries sector that contribute to overcapacity and overfishing, including subsidies to illegal, unreported and unregulated (IUU) fishing.
- The negotiations aim to produce a “triple win” for trade, development and the environment by reducing the trade-distortive effects of such subsidies in ways that promote economic development.
- A stated objective is to protect the sustainability of fish stocks by redirecting public funds away from payments that encourage production and toward better fisheries management, allowing the sector to regain profitability.

### Scope and key trade-offs
- Much of the debate focuses on subsidies to industrial fisheries, including those on the high seas.
- The role of subsidies in artisanal and small-scale fisheries in developing country Members also occupies an important role in the negotiations.
- Negotiators are seeking a balance between:
  - governments’ provision of support to poor and vulnerable communities where fisheries is a major source of jobs, nutrition and income; and
  - governments’ responsibility to husband the fisheries resources for future generations, including by avoiding support of unsustainable levels of fishing.

### 2017 Ministerial Decision and timeline
- The 2017 WTO Ministerial Decision on Fisheries Subsidies:
  - mirrors the language of SDG Target 14.6;
  - targets completion of negotiations by the 12th WTO Ministerial Conference in 2019; and
  - calls for comprehensive disciplines to prohibit subsidies to IUU fishing and other subsidies that contribute to overcapacity and overfishing, with special provisions for developing country and LDC Members.

*IMF staff summary of Box 6. Fisheries Subsidies Negotiations at the WTO*

### Box 7. GATT/WTO: Selected Experience with Alternative Negotiating Approaches

### Box 7. GATT/WTO: Selected Experience with Alternative Negotiating Approaches

### Overview
- The WTO Agreement allows for various negotiating approaches beyond large-scale “single undertakings” such as the Uruguay Round outcome and the Doha Round agenda.
- Great progress has been made through other approaches, both before the Uruguay Round and since.

### Types of approaches and illustrative examples
- Plurilateral “codes” (Tokyo Round)
  - Several plurilateral “codes” from the Tokyo Round later became full multilateral agreements.
  - A subset of GATT members agreed on additional rules in areas including customs valuation, subsidies, and technical barriers to trade.
  - These “codes” were binding among the signatories and subject to GATT dispute settlement; with the conclusion of the Uruguay Round, these agreements became multilateral—binding on and enforceable by all WTO members.
- Plurilateral agreements remaining plurilateral (Agreement on Government Procurement)
  - The Agreement on Government Procurement (AGP) began as, and remains, a plurilateral agreement.
  - The AGP was introduced in the Uruguay Round.
  - Obligations of participants extend only to other participants (and not to non-participating WTO members).
  - The AGP is open to new participants and to further negotiation to improve existing commitments.
- “Critical mass” agreements
  - These are negotiated by a subset of WTO members, with benefits extended to all members.
  - The expanded Information Technology Agreement (ITA; 2015):
    - Commits its 53 participants (accounting for 90 percent of world trade in the covered products) to eliminate all tariffs (on an MFN basis) on a further 201 products.
  - Commitments made in 1997 by around 70 WTO members as a result of extended negotiations on Basic Telecommunications and Financial Services are applied on an MFN basis to all WTO members.
- Unbundled multilateral agreements (Trade Facilitation Agreement)
  - The WTO Trade Facilitation Agreement (TFA; 2013) is a fully multilateral agreement that was unbundled from a broader initiative.
  - Trade facilitation is part of the Doha Development Agenda agreed in 2001, but members concluded the TFA separately rather than waiting for conclusion of an overall Doha Round.
  - The TFA is binding on and enforceable by all WTO members; it uses innovative approaches to allow for multi-speed implementation by developing countries and LDCs, and provides for implementation assistance.
- Ministerial decisions
  - Example: WTO members agreed in 2013 to eliminate farm export subsidies.

### Outcomes, recent initiatives, and lessons
- The WTO can adapt and deliver results when its members work together:
  - 2013: WTO Members negotiated the Trade Facilitation Agreement.
  - 2015: Members concluded the Information Technology Agreement expansion deal and the agreement to ban all forms of agricultural export subsidies.
  - 2017: Many joined in launching discussions on key 21st century trade issues like e-commerce and investment facilitation.
- These initiatives remain open for any WTO member to join, even if some are not currently in a position to support them.
- Negotiating success in these cases resulted from combining continuity and reform.
- The fast-changing global trade landscape requires a parallel change in global trade governance if multilateral trade liberalization is to remain an engine of inclusive global growth.
- The WTO reflects the willingness of its members to cooperate and recognize that national economic interests are increasingly bound up with collective economic interests; whether the system continues to evolve, adapt and succeed is up to them.

### Key statistics and precise figures (as presented)
- ITA (2015): 53 participants.
- ITA (2015): accounting for 90 percent of world trade in the covered products.
- ITA (2015): elimination of tariffs on a further 201 products.
- Commitments in 1997: around 70 WTO members.
- TFA concluded: 2013.
- Trade facilitation part of the Doha Development Agenda agreed: 2001.
- Examples of member actions by year: 2013, 2015, 2017 (as cited in the summary paragraph).

*Source: Box 7. GATT/WTO: Selected Experience with Alternative Negotiating Approaches.*

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_Source: https://www.imf.org/-/media/files/publications/pp/2018/093018-reinvigorating-trade-and-inclusive-growth.pdf_