International Provision Of Trade Services Trade And Fragmentation

The author examines the special role that trade liberalization in services industries can play in stimulating trade in both services, and goods. International trade in goods requires inputs from such trade services as transportation, insurance, and finance, for example. Restrictions on services across borders, and within foreign countries add costs, and barriers to international trade. Liberalizing trade in services could also facilitate trade in goods, providing more benefits than one might expect from analysis merely of the services trade. To emphasize the point, the author notes that the benefits for trade are arguably enhanced by the phenomenon of fragmentation. The more that production processes become split across locations, with the fragments tied together, and coordinated by various trade services, the greater the gains from reductions in the costs of services. The incentives for such fragmentation can be greater across countries, than within countries, because of the greater differences in factor prices, and technologies. But the service costs of international fragmentation can also be larger, especially if regulations, and restrictions impede the international provision of services. As a result, trade liberalization in services can stimulate the fragmentation of production of both goods, and services, thus increasing international trade, and the gains from trade even further. Since fragmentation seems to characterize an increasing portion of world specialization, the importance of service liberalization is growing apace.

February 2001 By reducing the costs of such trade services as transport, insurance, and finance, liberalizing trade in services can generate benefits in the markets for every kind of trade they facilitate. It can also stimulate the fragmentation of production of both goods and services, thus increasing international trade and the gains from trade even further. Deardorff examines the special role that trade liberalization in services industries can play in stimulating trade in both services and goods. International trade in goods requires inputs from such trade services as transportation, insurance, and finance, for example. Restrictions on services across borders and within foreign countries add costs and barriers to international trade. Liberalizing trade in services could also facilitate trade in goods, providing more benefits than one might expect from analysis merely of the services trade. To emphasize the point, Deardorff notes that the benefits for trade are arguably enhanced by the phenomenon of fragmentation. The more that production processes become split across locations, with the fragments tied together and coordinated by various trade services, the greater the gains from reductions in the costs of services. The incentives for such fragmentation can be greater across countries than within countries because of the greater differences in factor prices and technologies. But the service costs of international fragmentation can also be larger, especially if regulations and restrictions impede the international provision of services. As a result, trade liberalization in services can stimulate the fragmentation of production of both goods and services, thus increasing international trade and the gains from trade even further. Since fragmentation seems to characterize an increasing portion of world specialization, the importance of service liberalization is growing apace. This paper--a product of Trade, Development Research Group--is part of a larger effort in the group to improve trade policy in goods and services. The author may be contacted at [email protected].

This paper focuses on the sluggish growth of world trade relative to income growth in recent years. The analysis uses an empirical strategy based on an error correction model to assess whether the global trade slowdown is structural or cyclical. An estimate of the relationship between trade and income in the past four decades reveals that the long-term trade elasticity rose sharply in the 1990s, but declined significantly in the 2000s even before the global financial crisis. These results suggest that trade is growing slowly not only because of slow growth of Gross Domestic Product (GDP), but also because of a structural change in the trade-GDP relationship in recent years. The available evidence suggests that the explanation may lie in the slowing pace of international vertical specialization rather than increasing protection or the changing composition of trade and GDP.

Global supply chain integration is not only a rapidly growing feature of international trade, it is responsible for fundamentally changing trade policy at international and domestic levels. Given that final goods are produced with both domestic and foreign suppliers, Ka Zeng and Xiaojun Li argue that global supply chain integration pits firms and industries that are more heavily dependent on foreign supply chains against those that are less dependent on intermediate goods for domestic production. Hence, businesses whose supply chain would be disrupted as a result of increased trade barriers should lobby for preferential trade liberalization to maintain access to those foreign markets. Moreover, businesses whose products are used in the production of goods in foreign countries should also support preferential trade liberalization to compete with suppliers from other parts of the world. Fragmenting Globalization uses multiple methods, including time series, cross-sectional analysis of the pattern of Preferential Trade Alliance formation by existing World Trade Organization members, a firm-level survey, and case studies of the pattern of corporate support for regional trade liberalization in both China and the United States. Zeng and Li show that the growing fragmentation of global production, trade, and investment is altering trade policy away from the traditional divide between export-oriented and import-competing industries.

For a long time, the GATT led a life of its own as a self-contained regime. The evolution from tariff to non-tariff barriers brought about increasing overlaps with other regulatory areas. WTO rules increasingly interface with other areas of law and policy, including environmental protection, agricultural policies, labour standards, investment, human rights and regional integration. Against this backdrop, this book examines fragmentation in international trade regulation across a wide array of regulatory fields. To this end, it uses a conceptually coherent theoretical framework which is based on the effort to bring about greater coherence among different policy goals and fields, and thus to embed the multilateral trading system within the broader framework of international economics, law and relations. It will appeal to those interested in a forward-looking discussion of the most pressing issues of the international trade agenda.

Changing Patterns of Global Trade outlines the factors underlying important shifts in global trade that have occurred in recent decades. The emergence of global supply chains and their increasing role in trade patterns allowed emerging market economies to boost their inputs in high-technology exports and is associated with increased trade interconnectedness.The analysis points to one important trend taking place over the last decade: the emergence of China as a major systemically important trading hub, reflecting not only the size of trade but also the increase in number of its significant trading partners.

This flagship publication examines different aspects of the nature and role of international trade in the era of hyperglobalization and considers related policy challenges that will need to be addressed if trade is to contribute to a more stable and inclusive global economic order. Research provides authoritative data and analysis on trade, investment, finance and technology. UNCTAD offers solutions to the major challenges facing developing countries, particularly the poorest and most vulnerable nations. Beyond tailored analysis and policy recommendations, UNCTAD research also generates global standards that govern responsible sovereign lending and borrowing, investment, entrepreneurship, competition and consumer protection and trade rules.