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11. Reconciling Climate Change and Trade Policy

Author:
Arvind Subramanian, Aaditya Mattoo, Dominique van der Mensbrugghe, and Jianwu He
Publication Date:
11-2009
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
There is growing clamor in industrial countries for additional border taxes on imports from countries with lower carbon prices. A key factor affecting the impact of these taxes is whether they are based on the carbon content of imports or the carbon content in domestic production. Our quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high income countries but with serious consequences for trading partners. For example, China's manufacturing exports would decline by one-fifth and those of all low- and middle-income countries by 8 percent; the corresponding declines in real income would be 3.7 percent and 2.4 percent. In contrast, border tax adjustment based on the carbon content in domestic production, especially if applied to both imports and exports, would broadly address the competitiveness concerns of producers in high income countries without seriously damaging developing-country trade. Therefore, as part of a comprehensive agreement on climate change, new WTO rules could be negotiated that would prohibit the extreme form of action while possibly allowing trade actions based on domestic carbon content as a safety valve.
Topic:
Climate Change, Environment, International Trade and Finance, and Treaties and Agreements
Political Geography:
China

12. Reconciling Climate Change and Trade Policy

Author:
Arvind Subramanian, Aaditya Mattoo, Dominique van der Mensbrugghe, and Jianwu He
Publication Date:
12-2009
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
There is growing clamor in industrial countries for additional border taxes on imports from countries with lower carbon prices. While this paper confirms the findings of other research that unilateral emissions cuts by industrial countries will have minimal carbon leakage effects, output and exports of energy-intensive manufactures are projected to decline, potentially creating pressure for trade action. A key factor affecting the impact of any border taxes is whether they are based on the carbon content of imports or the carbon content of domestic production. The paper's quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high income countries but with serious consequences for trading partners. Border tax adjustment based on the carbon content in domestic production would broadly address the competitiveness concerns of producers in high income countries and less seriously damage developing country trade.
Topic:
Climate Change, Economics, Energy Policy, Environment, and International Trade and Finance
Political Geography:
China

13. Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization

Author:
Arvind Subramanian and Aaditya Mattoo
Publication Date:
02-2008
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
Two aspects of global imbalances—undervalued exchange rates and sovereign wealth funds (SWFs)—require a multilateral response. For reasons of inadequate leverage and eroding legitimacy, the International Monetary Fund (IMF) has not been effective in dealing with undervalued exchange rates. We propose new rules in the World Trade Organization (WTO) to discipline cases of significant undervaluation that are clearly attributable to government action. The rationale for WTO involvement is that there are large trade consequences of undervalued exchange rates, which act as both import tariffs and export subsidies, and that the WTO's enforcement mechanism is credible and effective. The WTO would not be involved in exchange rate management, and our proposals do not entail the WTO displacing the IMF: Rather, they would harness the comparative advantage of the two institutions, with the IMF providing the essential technical expertise in the WTO enforcement process. On SWFs, there is a bargain to be struck between countries with SWFs, which want secure and liberal access for their capital, and capital-importing countries that have concerns about the objectives and operations of SWFs. The WTO is the natural place to strike this bargain. Its services agreement, the General Agreement on Trade in Services (GATS), already covers investments by SWFs, and other agreements offer a precedent for designing disciplines for SWFs. Placing exchange rates and SWFs on the trade negotiating agenda may help revive the Doha Round by rekindling the interest of a wide variety of groups, many of whom are currently disengaged from the round.
Topic:
Foreign Exchange, International Organization, International Trade and Finance, and Markets

14. Multilateralism Beyond Doha

Author:
Arvind Subramanian and Aaditya Mattoo
Publication Date:
10-2008
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
There is a fundamental shift taking place in the world economy to which the multilateral trading system has failed to adapt. The Doha process focused on issues of limited significance while the burning issues of the day were not even on the negotiating agenda. The paper advances five propositions: the traditional negotiating dynamic, driven by private sector interests largely in the rich countries, is running out of steam; the world economy is moving broadly from conditions of relative abundance to relative scarcity, and so economic security has become a paramount concern for consumers, workers, and ordinary citizens; international economic integration can contribute to enhanced security; addressing these new concerns–relating to food, energy and economic security-requires a wider agenda of multilateral cooperation, involving not just the WTO but other multilateral institutions; and despite shifts in economic power across countries, the commonality of interests and scope for give-and-take on these new issues make multilateral cooperation worth attempting.
Topic:
International Relations, Economics, Globalization, International Political Economy, International Trade and Finance, Markets, and Privatization
Political Geography:
Middle East

15. Multilateralism beyond Doha

Author:
Arvind Subramanian and Aaditya Mattoo
Publication Date:
10-2008
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
A fundamental shift is taking place in the world economy to which the multilateral trading system has failed to adapt. The Doha process focused on issues of limited significance while the burning issues of the day were not even on the negotiating agenda. The paper advances five propositions: (1) the traditional negotiating dynamic, driven by private-sector interests largely in the rich countries, is running out of steam; (2) the world economy is moving broadly from conditions of relative abundance to relative scarcity, and so economic security has become a paramount concern for consumers, workers, and ordinary citizens; (3) international economic integration can contribute to enhanced security; (4) addressing these new concerns-relating to food, energy, and economic security-requires a wider agenda of multilateral cooperation, involving not just the World Trade Organization but other multilateral institutions as well; and (5) despite shifts in economic power across countries, the commonality of interests and scope for give-and-take on these new issues make multilateral cooperation worth attempting.
Topic:
Security, Economics, International Trade and Finance, Treaties and Agreements, and World Trade Organization
Political Geography:
United States, China, and Europe