Impact of Domestic Policies on Trade Focus for 04

Impact of Domestic Policies on Trade the Focus of 2004 WTR

Benefits from good trade policy may be attenuated or even undermined if governments pursue deficient policies in other areas of economic activity, according to the 2004 World Trade Report published by the WTO Secretariat.

While trade policy can have a positive impact on a country’s growth and development prospects, the Report stresses the importance of ensuring coherence in policy formulation, pointing out that inconsistencies in policy stances or neglect in particular areas can diminish valuable trading opportunities. The Report also demonstrates how trade policy itself can be part of the solution in these areas.

This year’s World Trade Report, the flagship publication of the WTO, is the second report in a new series “designed to deepen public understanding of trade and trade-related policy issues and to contribute to more informed consideration of the options facing governments” writes WTO Director-General Supachai Panitchpakdi in his foreword to the Report.

The need for coherence is illustrated with reference to several key issues, including macroeconomic policy, the quality and cost of infrastructure services, policies affecting domestic market structures, and the integrity of institutions.

“Governments cannot hope to reap the real benefits of open trade if they fail to secure macroeconomic stability, supportive infrastructure, properly functioning domestic markets and sound institutions,” said Director-General Supachai. “These things go hand in hand. Failure or neglect in one area spells disappointment in others.”

The Report also examines the role of international cooperation in securing policy coherence. Effective cooperation in the economic field helps to secure greater gains from trade, manage policies better in areas where the actions of a government in one country have a significant impact on other countries, and facilitate resource transfers. But effective cooperation has to be built on common interests.

“Tremendous gains can flow from mutually beneficial international cooperation,” the Director-General said. “But more cooperation is not always better than less. Cooperation should not be forced upon governments where there is no shared perception of a common interest, nor should efforts to cooperate serve as a surrogate for getting on with what needs to be done at home. In the WTO, we will miss opportunities for mutual gain if we fail to clinch deals from which we all benefit. However, we shall not advance our cause if we pretend to cooperate without working out equitable solutions in the face of highly diverse circumstances, needs and priorities among our Members. This is our challenge in the months ahead.”

The Report comprises two sections. The first section begins with an overview of recent trade and trade policy developments. This overview was published as a Press Release (PRESS/378) on 11 June 2004. The first section of the Report also contains three essays on topics of particular current interest. The topics selected this year are non-reciprocal preferences and the multilateral trading system, the liberalization of services trade through the temporary movement of labour, and geographical indications. Each of these issues is directly or indirectly implicated in the Doha negotiations. They are subjects in respect of which many Members hold strong views. The essays seek to shed light on the underlying policy issues, the policy challenges, and the threats and opportunities embedded in each subject area.

The second section of the Report starts with a brief discussion of how the notion of coherence is deployed in the analysis of interdependent policies across a wide range of issues and economic activities. The analysis then goes on to consider the interaction between trade and macroeconomic policy. This is followed by an examination of the role of infrastructure in trade and economic development, with a particular focus on transport, telecommunications, finance and business services. Next comes a consideration of domestic market structures and what role governments might play in securing well functioning markets. The fourth issue covered is governance and institutions, which looks at the nature of institutions and how they influence economic outcomes. Finally, the Report closes with a discussion of the role of international cooperation in promoting policy coherence.

This report may be purchased from the WTO Bookshop or through the WTO online bookshop.

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