WTO Baseball

WTO Baseball

The WTO Baseball League, if you will, was created by 24 teams but quickly expanded. It gradually added more teams, who created more and more rules under a process of collective decisionmaking. The specifics of the game were clarified by both formal and informal processes, so teams and players understood what behaviors were acceptable and which were considered problematic. The position of the umpire or referees was also given greater prominence and additional rules as the decades went by. The entire League underwent a substantial transformation in 1995, with the introduction of an expanded set of rules, more clarity on the roles of the umpires, and even greater attempt to provide consistency across the game. The League was rebranded to reflect this change in emphasis. But cracks were already starting to show. While the approval of rule changes by consensus worked well in the early days, by the time of the rebranding exercise, the League included 76 teams. The total number of teams has now ballooned to 164 with more waiting to join. Trying to get approval from all for new activities has become impossible. Teams started discovering the power of the consensus rule and simply avoided allowing players to take the field at all. This has dramatically slowed the ability of the League to even hold games at all—often keeping play from happening for months or years on end. While the WTO Baseball League has a head and a set of staff dedicated to supporting the game, the chief has limited power as the teams hold all the control. As with real baseball leagues, there are some teams that are richer or more powerful than others. Some teams are barely competitive at all. The fan base or audience for WTO Baseball has also dwindled. There have been various proposals for ways to attract fans back into the seats, including additional outreach, marketing and PR. There has even been some tinkering with solutions to provide outcomes tailored to a subset of teams. Given the lack of innovation taking place in the game, many teams discovered that there were alternative venues for playing baseball. They started joining other Leagues and tweaking the rules. All are playing baseball, but the conditions and the rulebook vary.

Financing for Smaller Firms

Financing for Smaller Firms

Many of the ICC recommendations involve updating antiquated processes. Trade finance transactions are unnecessarily complex with, as the report shows clearly, complicated shuffling of mostly paper documentation. Firms attempting to work in multiple markets also face regulatory disconnects with unclear processes. To add to the mix, there are three primary product categories for trade financing with different demands and requirements for each: documentary business, supplier-side financing, and buyer-led financing. While unraveling these complex processes would be helpful, with significant gains available, it does not go far enough in providing basic financing to the millions of MSMEs that are currently underserved by the market. What is needed is a new approach that leverages a range of new technologies to reconceptualize the way that small businesses are evaluated and pull in new financing providers. By starting with an MSME-first approach, it is possible to reimagine the provision of capital and start to unlock and unleash the potential trapped inside small firms. The ICC report (full disclaimer—I was part of the conceptual team to help develop recommendations) begins to sketch out some of the conditions for a new ecosystem to support financing for MSMEs in the near term.

The Impending Collapse of a Key Digital Rule

The Impending Collapse of a Key Digital Rule

At the end of November, the 164 members of the World Trade Organization (WTO) will meet. In what was originally billed as an every-other-year obligation but has been less smooth in practice, trade ministers will be gathering in Geneva for MC12. There are a number of outcomes that are meant to flow from the session, including something on the apparently endless negotiations over fisheries subsidies, a few bits and bobs that might be pulled from various plurilateral initiatives, and maybe an announcement on trade and health. (Stay tuned for the Talking Trade update in the wake of MC12.) But what has not been noticed is that 2021 is likely to spell the end to a critically important digital trade rule. It goes by the innocuous name of the “customs moratorium on electronic transmissions.” It may be that the bland and unfamiliar phrasing has not captured imaginations. Or it may be that this provision has seemed to be under threat for so long that most have forgotten about it. Covid disruptions have not helped anyone focus on much. But now odds are high that the moratorium will actually fall at MC12. Companies and consumers will have an unexpected and potentially rude awakening to this apparently minor rule that did not ever get the support it needed.

China Applies to Join DEPA

China Applies to Join DEPA

Trade watchers have had two important pieces of news this week. First, Regional Comprehensive Economic Partnership (RCEP) has enough members on board to bring the agreement into force on January 1, 2022. Note that the initial membership includes 10 of the 15 signatories: Australia, Brunei, Cambodia, China, Japan, Laos, New Zealand, Singapore, Thailand, and Vietnam. (The remaining members will become active participants 60 days after they have completed domestic level ratification procedures and submitted their letter to the ASEAN Secretariat.) Over all the years of negotiations and the time spent moving from substantial conclusion to signature to approval at the domestic level inside member governments, there has been repeated skepticism over whether or not RCEP would ever see the light of day. As a result, companies have been quite slow to get ready. With the actual launch less than 60 days away, it is time to focus. Firms should be rapidly preparing to use the agreement now. The second piece of trade news, however, was an even bigger bombshell. China officially asked to join the Digital Economy Partnership Agreement (DEPA). This agreement is only recently in force between the three members Chile, New Zealand and Singapore. DEPA was originally designed by these three small open economies as a way to build consistency in approaches to the digital economy. The idea was to create a series of “modules.” Each module covered a specific topic such as paperless trading or Artificial Intelligence (AI). Some modules, particularly those like paperless trading or non-discrimination against digital products, have become a more regular feature embedded in many different types of agreements, and have stronger, more legally binding language in DEPA. Other modules, especially those on new and evolving topics like AI or digital identities, were designed to encourage cooperation between members.

US Trade Policy Under Biden: More of the Same

US Trade Policy Under Biden: More of the Same

United States Trade Representative (USTR) Katherine Tai gave what was billed as a major speech at CSIS outlining US trade policy on October 4. A careful review of China policy has been underway for months and Tai’s speech was to deliver the results of this study. At the end of her prepared remarks and a short round of questions, observers were left with few clues about the future trajectory of US policies and little detail beyond broad brush strokes already sketched over previous months. What was made clear is that US trade policy, in practice, is not likely to look substantially changed from paths pursued by the previous Trump administration. In fact, if Tai’s speech were read alongside similar policy statements made under the Trump team, it would be difficult to pick out who said what. First, Tai argued that China has failed to follow appropriate actions or adjust its bad behavior despite a long history of engagement. The approach used under the Trump administration, in particular the Phase 1 agreement, may not have been exactly the model she would have chosen (what model she might have thought more suitable was not discussed), but it remains in place. Tai did express distain for the term “Phase 1,” even as she essentially promised to follow it. Tariffs will continue to be imposed on Chinese imports, although the administration will restart the process of reviewing requests for exclusion. With limited details available on the process, however, it is unclear whether tariffs will be waived in large part, or only in limited circumstances. Nor was there any clarity on how long the process may take to conclude. Given the relatively limited time “left” on the Phase 1 agreement, even a short delay may deliver only modest benefits to US firms struggling to manage tariffs of up to 25% which have now been imposed, in some cases, for years.