Gadgets Make the World Go Round: 15 Yrs of ITA

During these dark days of Doha Round deadlock, good news from the WTO is hard to come by. But, even your ever-pessimistic correspondent has managed to fetch--wait for it--reasonably good news involving the WTO. Although many people do not know of it, the Information Technology Agreement (ITA) signed under the auspices of the WTO way back in 1996 was a seminal event in the formation of global value chains in  the electronics industry. By gradually encompassing more and more countries in tariff-free arrangements in the production of electronic goods, disparate nations have benefited. To use commercial lingo, ITA enabled both Super Mario and Samsung to each have their own (export) Galaxy.

Just to show you how I am in such a generous mood, I will even let Mr. Doha Round Failure himself, WTO Director-General Pascal Lamy, fill you in on ITA's importance:

The 21st century is the era of information and communication technology, and the ITA has played a vital role in promoting affordable access to those technologies. This sector is crucial for the world economy – not only due to its considerable size, but also because it is an important driver of productivity, innovation and, ultimately, economic growth. Over the past 15 years, world exports of IT products have almost tripled in value since 1996, and reached an estimated US $1.4 trillion in 2010, accounting for 9.5 percent of world merchandise trade. Together, ITA participants account for 96 percent of world trade in IT products. And because they provide duty-free treatment to imports on a most-favoured-nation basis, they have created opportunities for exporters in all WTO members, including those in least-developed countries.

With the most recent participation of Colombia, the ITA has now grown to include 74 WTO members, and the majority of them are developing participants. Developing countries have consistently increased their participation in world trade of IT products since 1996, accounting for approximately 64 percent of exports and 51 percent of imports in 2010. While a growing share of the investment in both the production and use of these products is made by developed country IT industries, IT spending is increasing considerably in some emerging economies, such as China, India and countries of the Association of Southeast Asian Nations (ASEAN). These investments have been the catalyst that has allowed countries as diverse as China, Costa Rica, and some ASEAN countries to develop their capacity for manufacturing IT products and become important players in global production networks. In addition, other developing nations used these IT products and technologies as tools to become key players in other areas. For example, access to affordable IT equipment was instrumental in enabling India to become a powerhouse in consulting services, software development and other services. 

Good stuff, and there's much more information on the ITA's history, mechanics and future in the publication I excerpted Lamy from. As ever there's far too much interesting stuff to read if you're interested at all in international political economy. Rest assured that, sometimes at least, the WTO works.

Read More

PRC Inc. Boycotts World Bank-IMF Meet in Tokyo

In case you missed it, there's been very interesting news these past few days over the mass boycott of Chinese banks, presenters and other participants who were originally scheduled to be at the upcoming World Bank-IMF meetings to be held in Tokyo starting this coming Tuesday. Those expressing uncertainty over attendance include the "big four" state-owned banks the Agricultural Bank of China, the Bank of China, China Construction Bank and the Industrial and Commercial Bank of China. What's more, other banks have also pulled out of a big financial services shindig in Osaka scheduled for month's end. From the WSJ:

Japan's territorial dispute with China appears to be spilling onto the stage of global finance meetings. Several big Chinese banks say they've canceled participation in the high-profile annual meeting of the World Bank and International Monetary Fund to be held in Tokyo next week as well as in the constellation of events taking place alongside. Some of the banks say they've also pulled out of another big financial-industry conference scheduled to take place in the western Japanese city of Osaka at the end of the month. 

You have to wonder how ready China is to assume more matters concerning global governance if it displays this kind of petulance. Sure the United States isn't perfect in this respect--its non-economic pet peeves spilling over into the economic realm usually deal with "human rights," and "weapons of mass destruction"--but China is on the outside looking in wishing to be among the big boys instead of being on the inside already alike the US. Moreover, it needs the support of other Asian nations if it wants to play a larger role in global governance, so its actions are rather childish:

China has long sought a more important role in such global forums, even as its dynamic economy has been playing an increasingly significant part in bolstering global growth. But some experts warn that letting bilateral spats spill into key economic and financial areas may be a sign China isn't quite ready to be at the international leaders' table.

"The point is really about China being a global player," said Fraser Howie, a Singapore-based co-author of "Red Capitalism," a book on China's financial system. "China may rightly demand a seat at the head table, but what signal does it send when they go off in a huff over these types of issues. Such boycotts are pointless." China has argued for more say for emerging markets in the matters of both the IMF and the World Bank.

Methinks China has much growing up to do. Even if Japan is equally culpable over the East China Sea dispute, it seldom links that issue to economic ones in the way the Chinese apparently do

Read More

Why the US Ain't in the Inter-Parliamentary Union

Here's another factoid you can use to embarrass even the most vaunted international relations pooh-bahs alike my blogging colleagues (especially of the garden-variety American sort): Ask them whether the United States is a member of the Inter-Parliamentary Union composed of nations that have legislatures. The response you'll probably get involves something along the lines of (1) "I didn't even know there was such as thing" and (2) "as a global promoter of democracy, the US is probably a member of it."

Both responses are embarrassing in the sense that, (1) even if the Inter-Parliamenary Union is obscure--hence my fondness of it--the folks who blather endlessly about democracy promotion are mostly unaware of its existence. What's more, (2) there has been no clamour on the part of these ostensible champions of democracy to regain lost US membership in the institution.

In any event, here's a neat description from a Congressional Report Service document on democracy promotion that I found while researching something related that speaks to this discrepancy of non-membership. From footnote 83:

The IPU was established in 1889 as an association of individual parliamentarians and the world’s first permanent multilateral political forum. The United States was one of the original participants in IPU activities begun in 1889 and formally joined in 1935 when the House and Senate enacted statutory authority for U.S. participation in the IPU (49 Stat. 425). Congressional participation in the IPU gradually diminished. In July 1997, Congress (through the Clerk of the House and Secretary of the Senate) notified the IPU that, given the diminished congressional  participation, the U.S. Congress could no longer justify the annual U.S. contribution of almost $1 million or 15% of the IPU annual budget and  had decided to reduce its membership status and proposed to make an annual donation of $500,000 to support the aims of the organization. The IPU Executive Committee did not accept the offer so, in 1998, Congress passed legislation to end U.S. participation on October 1, 1999 (ultimately attached to P.L. 105-277, Sec.  2503). It would presumably require new legislation to restore U.S. membership.

It is odd how American lawmakers in 1999 could not justify spending a million dollars annually on an institution that it was a founding member of that spoke to its avowed ideals. Meanwhile, they soon had little trouble justifying spending tens of billions annually year in and year out prosecuting (highly unsuccessful) misadventures in promoting democracy in places like Afghanistan and Iraq. While largely symbolic, what does US non-membership in the Inter-Parliamentary Union symbolize for these folks who endlessly bloviate about the importance of freedom?

Read More

Thou Shalt Obey Thy Lord Mandy on Globalization

On paper, I am not supposed to favourably regard Peter Mandelson, the third architect of the UK's third way along with Tony Blair and Gordon Brown. While I regard the latter two as rather odious at this point in time, I have yet to definitively suss why I remain a Lord Mandelson fan. Perhaps it's because his various machinations have ensured that he would never hold the UK's highest office--if he were such a brilliant schemer, then he would have become king instead of being exiled twice from British government.

And yet what a journey he's had! From being the EU trade commissioner to the de facto prime minister of the UK during the dying days of Brown's ill-fated time as PM, Mandelson can never be accused of being dull. I also find it remarkable that while Blair and Brown's underlings have subsequently bashed them to the high heavens, you don't see Mandy's acolytes doing the same. Perhaps the erstwhile Prince of Darkness commands loyalty through his actions.

Now, a few weeks ago Peter Mandelson came out swinging in his sort-of-retirement years against giving up on globalization in the pages of the FT. As you would expect, I was generally in agreement with what he had to say. Now, though, he's fleshed out more details in arguing that managing the social consequences via the third way has given way to the older question of defining the scope of globalization. In The Globalist, he begins by describing the age of high neoliberalism:

The two serious attempts to govern globalization in the first two-thirds of the 20th century — negatively through isolationistic, autarkic policies during the 1930s, and more positively through the Bretton Woods system between 1945 and the early 1970s — were both accounted to be failures. So we embarked on a third attempt — not to govern globalization as such, but to actively expand its reach.

The attempt at creating true governance structures was restricted chiefly to managing the social and economic consequences rather than trying to define and impose the desirable scope of globalization itself. To some extent this approach was intellectually underwritten by the IMF, World Bank and OECD, and in many — but not by any means all — of the economics departments and business schools of Western universities. In the Anglo-Saxon world, it simply became the conventional wisdom.

With the benefit of hindsight, Lord Mandy is backtracking and looks to salvage the more acceptable elements of contemporary globalization. All the while, better representation is necessary to improve the image of globalization:

Looking back, we can see that this approach did neither us, nor globalization itself, any favors. First, it was intellectually abstract and inflexible. In political terms, it often ignored the basic fact that preserving the conditions of open trade and open global markets is possible in a democracy only if we make those conditions sufficiently tolerable and beneficial that people do not vote to end them. Second, it oversold globalization, and ultimately made it harder to make a pragmatic case for openness.

It is not enough to pretend that globalization is simply irreversible and has to be tolerated. The reversals of the 1930s show that the direction of globalization can be changed by political and economic choices over which we have no shortage of control — if we choose to take them.

In the increasingly multipolar world in which we live, it is arguable that no single world view will emerge to define the way we manage globalization. But while the end of a world in which the West dictated the terms of globalization is not necessarily a tragedy, a world without a shared set of principles for managing globalization would be. I am not naïve about the prospects for global governance, but I would argue for new rules accepted by developing and developed countries alike, because "no rules" is not a sustainable option. 

It's good stuff from Peter Mandelson, who is honest enough to admit where policy shortcomings lay. For more, see a recent Institute for Public Policy Research (IPPR) publication that Mandelson helped in preparing about globalization.

Read More