Trade and Trade Policy A Guide for Commonwealth Parliamentarians Dr Christopher Stevens, Overseas Development Institute Regional Workshop on Trade Policy for Pacific Parliamentarians Apia, 3-4 June 2010

Why do Parliamentarians need a guide? Because trade decisions have political effects: they favour some groups relative to others; they can advance or retard a development strategy; getting the right results requires buy-in from the people. Parliament is central to these decisions, but this is hard because: the effects of a trade decision are hard to follow: they flow along multiple channels; and they are often complex and indirect; the devil is in the detail. The Guide is a contribution to informed political decisions. Trade and Trade Policy: a Manual for Commonwealth Parliamentarians2

Mainstreaming trade policy: an example Yesterday we learned that: many PIC markets are agreeing FTAs with competitors; which may disadvantage the PICs unless they are proactive; but FTAs affect tax revenue (as tariffs are removed). So trade policy must be integrated with tax policy: there are alternatives to tariffs e.g. sales tax; but these will change the pattern of taxation on individuals: the tax burden on goods currently facing high tariffs may fall; the tax burden on goods currently facing low tariffs may rise. So there are two levels of political decision on: the most acceptable pattern of new taxes; whether the costs of not agreeing an FTA outweigh the costs of tax change. Such decisions need a political judgement on technical information. Trade and Trade Policy: a Manual for Commonwealth Parliamentarians3

Laying the foundations Development strategy is the starting point: what role can trade play to achieve a countrys goals: now (in terms of current exports and markets); in future (by moving up the value chain)? What policies will influence the impact of trade on these goals: core trade policy + tax policy, sectoral policies: agriculture, fisheries etc; enabling policies: transport, communications; transformational policies: education? Creating the institutions to ensure coherence – with Parliament a key player. Trade and Trade Policy: a Manual for Commonwealth Parliamentarians4

Building on the foundations Overload is the constant danger – so the first task is to prioritise: EU or region or Asia; WTO or FTAs? Preliminary questions in the priority areas: what are the objectives of any negotiation ; how much bargaining power have we – can we afford to walk away if the right terms are not forthcoming? Transforming goals into negotiating points: what precisely do you want in the agreement; what can you concede? Monitoring the results: the impact of any agreement will be set by what it actually says; which may run to hundreds of pages! Trade and Trade Policy: a Manual for Commonwealth Parliamentarians5

How the Guide can help The Guide moves from underlying questions to trade policy formulation. The chapters deal in turn with: why, and what, to trade; what lessons can be learned from the experience of the fastest-growing states; how can governments: influence the impact of trade on the electorate; shift their country to a more dynamic trade pattern, given that: it is the private sector that does most trading; many key forces affecting poor countries are outside direct control. How can these insights be brought to bear in actual trade policy negotiations: multilateral (Doha); Pacific regional groups, Economic Partnership Agreements (EPAs)? What special role do Parliamentarians have to play in this process? Trade and Trade Policy: a Manual for Commonwealth Parliamentarians6

A few of the messages One clear lesson: if trade is not dynamic it is stagnant – diversify or die. One very unclear lesson - how to do it: there are no wonder exports: broad product categories say little about the dynamic potential of exports: it all depends on which goods and services you export; there is a role for both the market and the state – it is the way they operate that counts; regional trade agreements can foster growth, but they may also hinder it. The big message of the Guide is that detail matters: the detail of trade agreements; the market niche in which a country trades; the place of a national firm in its global value chain. Which poses a challenge for Parliamentarians: to master the detail; to communicate it to the electorate. Trade and Trade Policy: a Manual for Commonwealth Parliamentarians7

Trade and Trade Policy A Guide for Commonwealth Parliamentarians Dr Christopher Stevens, Overseas Development Institute Regional Workshop on Trade Policy for Pacific Parliamentarians Apia, 3-4 June 2010