William Krist's Blog, page 19
March 9, 2023
Tricks of The Trade: Strengthening EU-African Cooperation on Trade in Services
Despite the growing importance of services in the global economy, Europe’s trade cooperation with Africa is almost exclusively focused on commodities and other primary goods. Services – which range from banking and insurance to transport – are largely missing from Europe’s trade and development cooperation agenda with Africa. Yet the services sector has outstripped the primary and secondary sectors in their contribution to African output, making up more than half of the continent’s gross domestic product (GDP). The rapid expansion of information and communication technology (ICT) and the digital economy, the ‘servicification’ of manufacturing, and the cross-border fragmentation of production processes make trade in services more important than ever before for industrialisation and integration processes.
Services not only enhance participation in trade and global supply chains, they also contribute to more equal and diversified growth. More women, young people, and micro enterprises operate in the services sector than in agriculture or manufacturing. Expanding opportunities in services is therefore particularly important for creating more inclusive employment. The high costs of energy, transport, logistics, and other backbone services across Africa make the production of goods and services expensive, impeding the competitiveness of firms across all sectors. Trade in services is a powerful tool to increase the efficiency and reliability of services, which in turn brings down production costs across the economy and facilitates diversification – and its importance goes beyond trade to offer possibilities for structural transformation.
A stronger services trade between the European Union and Africa would allow European multinationals to near-shore their production processes and diversify away from Asia-focused supply networks. As barriers to trade in services are embedded in domestic regulations, trade agreements covering services entail a degree of cooperation and shared understanding. Improved trade in services would also allow the EU to influence regulatory models across various sectors. China and other non-Western powers wield significant economic influence in Africa, which they can use to shape regulatory processes and influence standards in their favour. Faced with geopolitical competition with China, the EU should be wary of this influence. In this regard, trade cooperation on services could be a powerful means for the EU to nurture a shared understanding with African countries on economic, environmental, digital, and social goals.
No modern trade partnership can exclude services, which are central to the value of what businesses trade. While the so-called first-generation free trade agreements reached in the 1970s and 1980s only liberalised and addressed standards in the goods trade, services became an integral part of the ‘new generation’ agreements that emerged in the mid-1990s. These new agreements included goals for so-called deep integration, which covers a variety of issues beyond tariffs, including services, investment, competition, intellectual property rights, environmental standards, and other domestic policies that affect international competitiveness. More than 90 per cent of all free trade agreements signed in the 21st century cover services, making it the most widespread area of deep integration.
The 2018 African Continental Free Trade Area (AfCFTA) agreement includes a protocol on trade in services, which aims to liberalise services markets and improve their domestic regulation. The agreement provides an unprecedented opportunity for African countries to strengthen their domestic regulations to support more open and efficient services markets. It also offers an occasion for the EU to encourage intra-regional trade by supporting the AfCFTA negotiations, and to build on the agreement to create new opportunities for diversifying EU-Africa trade.
This paper explores the implications of cooperation on trade in services for the Europe-Africa relationship. The first section sets out the complex nature of the services trade and addresses misconceptions around it. The second section analyses the importance of the services trade for the industrialisation and integration objectives set out in the African Union’s (AU) Agenda 2063. The third section discusses the EU-Africa trade relationship, including the benefits for Europe of a more efficient African services sector and the existing obstacles and policy frameworks that govern services trade between the EU and Africa. The fourth section explains how the AfCFTA offers new opportunities for promoting more open and effective regulation of services markets. The paper concludes with recommendations for how Europe and Africa can enhance their cooperation on trade in services.
Tricks-of-the-trade
To read the full policy brief, please click here.
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March 1, 2023
Fight Against Climate Change Will Worsen Existing Inequality in Global Trade: CSE and DTE
Developed countries of the world are reneging on free trade in the name of climate change, says a new analysis and the subject of its latest cover story by Down To Earth (DTE) magazine.
Armed with massive subsidies and tariffs, the US and EU are leading this trend towards protectionism. This may change the global trade system as we know it.
Avantika Goswami, the writer of the DTE report and programme manager for climate change at the New Delhi-based think tank Centre for Science and Environment (CSE), said:
In the race to build low-carbon economies, countries are introducing policies to speed up the transition from fossil fuels, promote manufacturing of clean energy technologies and decarbonise industries. On the face of it, this race appears to be part of the global effort to cut greenhouse gas emissions. But they have also sparked fears of trade wars, as governments on the pretext of climate action try to reshore green industries and dominate the global supply chain of goods and technologies essential to avert a climate catastrophe.
CSE, which helps publish DTE, recently organised an international webinar on the subject, which was addressed by Rob Davies, former minister of trade and industry in South Africa; Paul Butarbutar, executive director, Indonesia Centre for Renewable Energy Studies; Katie Gallogly-Swan, economic affairs officer, UNCTAD; Apratim Sahay, senior policy manager, Green New Deal Network; Sunita Narain, director general, CSE and editor of DTE; and Goswami.
A new trade order
In August 2022, the US passed the Inflation Reduction Act (IRA) — a bill offering about $370 billion in subsidies, mainly through tax credits over 10 years, for renewable energy, electric vehicles, energy-efficient appliances, carbon capture and storage and clean hydrogen.
This has rankled other green technology manufacturing powers like the EU, South Korea and Japan, which fear that their companies may jump ship and expand business in North America.
“Developing countries like India cannot match the IRA’s scale of subsidies. If we take the example of electric vehicles (EVs) in our country, there are three incentive schemes that are offered — the Faster Adoption and Manufacturing of Electric Vehicles (FAME II) with an outlay of Rs 10,000 crore; and two Production-Linked Incentive (PLI) schemes of Rs25,398 crore (automotive sector including EVs) and Rs 18,100 crore (battery storage), respectively,” Goswami said.
There is also the question of access to critical minerals. Prices of minerals in the global market are set by the big players.
China is the biggest buyer today. Once the US enters this race for its own domestic manufacturing on a large scale, India will have to aggressively scale up its EV production to command prices on its own terms.
CSE experts suggest that India should focus on the EV sectors in which it has a ready domestic market — two-wheelers and three-wheelers, which constitute 63 per cent and 34 per cent of the domestic EV market.
It can also become a hub for recycling of spent batteries, which will enable it to recover the processed critical minerals that it is currently lacking.
In December 2022, the EU reached a provisional agreement on a Carbon Border Adjustment Mechanism (CBAM) — a tax on imports of goods like steel and aluminium from countries with lax emission reduction rules.
The CBAM has been criticised by BRICS countries, and India’s finance minister has warned the country’s firms to reset themselves and be ready for “tariff walls coming up newly in the name of climate change”.
According to UNCTAD (United Nations Conference on Trade and Development), if applied at $44 per tonne, a CBAM will reduce global carbon emissions by not more than 0.1 per cent — but it will have an adverse distributional impact because it will decrease global real income by US $3.4 billion, with developed countries’ incomes rising by US $2.5 billion while developing countries’ incomes fall by US $ 5.9 billion. Other developed countries like the UK may follow suit and implement a carbon border tax.
When faced with the CBAM, developing countries need access to finance and technology to decarbonise their manufacturing sector so that export competitiveness is maintained.
For India, the EU is its third largest trading partner — the DTE report points out that India’s iron and steel and aluminium sectors would be the most exposed to CBAM, albeit to a lesser extent than other countries. India does not have one domestic carbon price – but it has an upcoming domestic carbon market, a national NDC and net zero target, and voluntary climate targets by industrial firms.
Whether or not this patchwork of market-based schemes and climate signals will create a case for Indian industry to avoid the tariff burden from CBAM is yet to be seen, Goswami said.
“A CBAM is directly attacking the market access of developing countries; and it could be expanded to all exports eventually. African countries are emitting the least, and the gain from imposing this tax on them would be minimal in terms of carbon emission reduction. We need to respond to these measures,” Davies said at the webinar.
As per UNCTAD, “policies like IRA and CBAM point to a missing developmental dimension in trade commitments, combined with growing evidence that industrialised economies are outsourcing pollution at the same time as they avail themselves of industrial policy tools to bolster their dominance within emerging green industries.”
Industrialisation has enabled sustained productivity growth in the EU and US, but industrial development has been an uphill battle for developing countries, in part due to trade agreements designed to constrain their policy space.
WTO — heavily influenced by developed countries — treats subsidies, tariffs and export bans as “trade distorting”. Thus, current trade rules prevent developing countries from using local content and technology transfer requirements,or tools like government procurement to stimulate domestic industries.
Now that rich countries are increasingly embracing industrial policy to ensure their economic resilience, it is difficult for them to prevent developing countries from implementing similar policies.
Katie Gallogly-Swan of UNCTAD echoed these sentiments expressed in DTE: “We need to reframe the trade rules for a time of climate change and address the long-standing concerns of developing countries. We need to strengthen the core principles of ‘special and differential treatment’ at WTO and ‘common but differentiated responsibilities’ in the UNFCCC process. A more positive agenda would support developing countries’ priorities, additional financing, green technology transfers, capacity building supporting environmentally sustainable economic diversification, and adequate policy and fiscal space to support their own integrated policies to advance towards their climate and developmental goals.”
Sunita Narain from CSE said: “We should look at what rules will work for us best (the developing world), and work for us in a climate-constrained world. We need to make sure we can combat emissions, and at the same time, have economic growth. In doing so, maybe for the first time we will end up making a trade deal which does not work against the environment, but for it; a deal that works for people.”
To read the full article, please click here.
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GTAGA: The Global Trade and Gender Arrangement, Decoded
In 2022, the Global Trade and Gender Arrangement (GTAGA) welcomed two new participants: Colombia and Peru. The news did not make headlines: the signing ceremony coincided with the World Trade Organization (WTO) Ministerial Conference in June, which attracted most of the trade-focused media attention.
The GTAGA has been heralded by many as “ground-breaking,” a “landmark,” and an innovative and comprehensive initiative. But is it really? What does it add to trade and gender provisions in existing agreements and how far can it go to redress gender inequalities in participating countries?
This article unpacks what GTAGA entails in practice, what officials from participating countries say about its potential, and what responses have emerged from the wider trade and gender community.
GTAGA’s origins and objectives
The idea of a GTAGA originated in the Asia–Pacific Economic Cooperation (APEC) Inclusive Trade Action Group (ITAG) and came into being in 2020, with Canada, Chile, and New Zealand as its first three participants. The non-binding arrangement, commonly known as GTAGA (pronounced “gee-TA-gah”), aims to promote “mutually supportive trade and gender policies to improve women’s participation in trade and investment and in furtherance of women’s economic empowerment and sustainable development.” It is a stand-alone text, not linked to a specific trade agreement. Current GTAGA participants are Canada, Chile, Colombia, Mexico, New Zealand, and Peru.
Alicia Frohmann, a trade policy specialist who delivers technical assistance on gender and trade in the Latin American region, told IISD that “Canada, Chile, and New Zealand agreed on GTGA in the aftermath of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which did not include gender specific provisions.”
GTAGA’s content
GTAGA is a cooperation-focused initiative, strongly geared toward improving women’s access to trading opportunities. While none of its provisions impose legally binding obligations on its participants, it does provide a framework that they can build on for the future.
In its five pages, the Arrangement acknowledges that “women’s enhanced participation in the labour market, the growth of women-owned enterprises and entrepreneurship, women’s economic autonomy and access to, and ownership of, economic resources contribute to prosperity, competitiveness, and the well-being of society.” GTAGA further notes “the importance of adopting, maintaining, and implementing gender equality laws, regulations, policies, and best practices” and recognizes the need for evidence-based trade interventions to respond to barriers limiting women’s opportunities in the economy.
GTAGA participants undertake to enforce their laws and regulations promoting gender equality and improving women’s access to economic opportunities. They reaffirm their obligations under other international agreements addressing women’s rights or gender equality and recognize that it is “inappropriate” to weaken or reduce the protection provided in domestic gender equality laws with a view to encouraging trade or investment.
GTAGA participants agree to encourage enterprises to incorporate gender equality standards, guidelines, and principles and to support the goal of promoting gender equality in the workplace. The Arrangement notes that temporary special measures relating to licensing and qualification requirements and procedures “aimed at accelerating de facto gender equality” are not to be considered discriminatory by GTAGA participating countries.
Similar to gender chapters in recent bilateral trade agreements between Brazil, Canada, Chile, and other economies, GTAGA sets out detailed possibilities for cooperation among its participants through dialogues, technical assistance, exchange of experts, and the sharing of information and best practice. Articles 8 and 9 set out a non-exhaustive list of activities, including capacity-building; access to education, including digital skills development; measures to foster leadership and entrepreneurship; business development; access to networks; trade missions; and government procurement.
The Arrangement establishes a working group to identify, coordinate, implement, and report on activities, as well as to interact with stakeholders. GTAGA further calls for the identification of a Contact Point for Trade and Gender in each participating country. A first periodic review of the Arrangement is scheduled for 2023, at which time participants are also due to look afresh at GTAGA’s legal form and consider whether to undertake negotiations for a treaty-level instrument on trade and gender.
What does GTAGA add to existing gender provisions?
GTAGA’s provisions show several parallels to gender chapters of other trade agreements, and its participants are all parties to trade agreements with provisions that explicitly refer to gender equality. This begs the question of what the Arrangement adds to what already exists.
Former Chilean Foreign Minister Andrés Allamand—who served under the Chilean administration that helped develop the Arrangement—noted the benefits of developing a multi-country arrangement like GTAGA compared to negotiating bilaterally. The Arrangement “takes inspiration from trade and gender chapters,” he told participants at an OECD-organized meeting in June 2021.
GTAGA therefore “represents a second step, reinforcing and complementing countries’ commitment to gender issues and encouraging them to work together. Also, it allows us to go global, as the G in its name suggests,” Allamand said. Chilean officials serving under the current government concur with his comments, pointing out that they cannot always achieve as much as they would like with regard to gender equality in the country’s trade agreements. “Not all our trading partners are as committed to gender equality as we are,” a Chilean trade official told IISD in Geneva recently, explaining that “we can go further with an Arrangement such as this.”
An important feature, a Peruvian trade official affirmed, is that the Arrangement “is open to more interested countries to join, thus increasing the learning space and the number of cooperation activities that can be proposed among participants.” The official further highlighted the arrangement’s focus on cooperation, which “allows Peru to advance in the area of trade and gender in a manner that is in line with the circumstances that apply in the country, and to benefit directly from training activities and the exchange of experiences with leading countries on issues related to the empowerment of women through trade.”
Writing for TradeExperettes, an international network of women who are experts in trade and trade policy, former New Zealand trade negotiator Stephanie Honey noted that GTAGA “builds on what has gone before in terms of best-endeavours approaches to knowledge-sharing,” highlighting the arrangement’s working group as an example of how GTAGA also “adds new elements and a more solid platform for cooperation.”
A unique and potentially significant feature of GTAGA is its provision that participants will share experiences relating to policies and programs that encourage women’s participation in the economy through their reports to the World Trade Organization’s (WTO) Trade Policy Review (TPR) mechanism.
TPRs are monitoring exercises that every WTO member undergoes periodically. The WTO secretariat and the member under review each prepare a report on the country’s trading policies and macroeconomic environment. These inform the TPR meeting, during which the reviewed member undergoes a discussion with fellow WTO members, who can submit questions both in advance and during the meeting itself.
What has happened so far?
Trade Policy Reviews
Mexico and New Zealand have come before the WTO’s TPR Mechanism since joining GTAGA. New Zealand’s 2022 TPR report pays considerable attention to women’s economic participation and women’s rights, referring to developments in international trade forums and domestically. The domestic developments described include New Zealand’s world-leading equal pay legislation: the 2020 Equal Pay Amendment Act. Canada, Chinese Taipei, and Iceland picked up on the topic in the discussion during New Zealand’s TPR meeting in June, and no members stated that it was inappropriate to do so. The UK delegate commented that “we should all be thankful to New Zealand for highlighting the disproportionate impact of the COVID-19 pandemic on women and girls,” adding that “it is right and proper to draw attention to these important areas.”
Mexico’s TPR report devotes an entire section to policies and actions the country is implementing to improve the integration of small and medium-sized enterprises (SMEs) and women into the economy. At the meeting for Mexico’s TPR in November 2022, several WTO members, including Costa Rica, Saudi Arabia, and Turkey, commended Mexico for promoting women’s empowerment. Argentina and Chile welcomed Mexico’s TPR reference to measures in favour of women. The Nigerian delegate referred to “the steps taken by Mexico on the inclusion and participation of women and SMEs in Mexico’s economy and international trade.” Sri Lanka, for its part, noted that Mexico promotes women’s empowerment and the development of transport and logistics infrastructure as part of its trade strategy, but cited data indicating “that the use of trade as a tool to reduce poverty and socio-economic inequalities has not achieved the expected outcome in Mexico.”
TPR reporting on steps taken to favour women’s participation in trade is not, however, a new phenomenon. A 2019 WTO working paper found that over 75 WTO members had reported at least one trade policy targeting women’s economic empowerment in their TPRs between 2014 and 2018.
Seminars
GTAGA participants have organized three events since the Arrangement was signed. These include a 2021 session that Chile hosted on Unlocking Opportunities for Women Entrepreneurs. Last November, New Zealand hosted an event titled Women in STEM—Fixing the leaky pipeline. This brought together speakers and presenters from Canada, Chile, Colombia, Mexico, New Zealand, and Peru with an audience of around 120 people from more than 20 countries. Events planned for 2023/24 include a panel discussion on making the shift to digital, as well as a webinar on how to ensure gender equality, diversity, and inclusion in the private sector as part of a Responsible Business Conduct strategy.
Participation in GTAGA
Growing country membership…
One of the objectives of current GTAGA participants is to draw in new participating countries, with Argentina and Ecuador already poised to join. As the Arrangement is not linked to a specific trade agreement, it is open to other interested economies, a point that current participants emphasize. In the words of former Minister Allamand of Chile, “We want to increase GTAGA’s influence and scope.” At the June ceremony that welcomed Colombia and Peru into the GTAGA fold, ITAG Ministers invited fellow WTO members to “demonstrate their commitment to advancing inclusive trade” by joining GTAGA. New Zealand Minister for Trade and Export Growth Damian O’Connor has stated his country’s commitment “to assist anyone who wants to come on board.”
Officials of participating countries say that consultations within their countries on GTAGA’s content and on whether they should join were broad. Peru, for instance, consulted internally with different parts of its Ministry of Foreign Trade and Tourism, as well as with the ministry responsible for gender issues, the Ministry of Women and Vulnerable Populations (MIMP), a Peruvian official told IISD.
…but mostly private sector participation
Yet emphasis in the consultations appears to have been on private sector participation, with businesses involved in designing the content of the arrangement. Vicky Saunders, a Canadian entrepreneur, has described how in Canada, GTAGA built on broad consultations and an ecosystem-based approach to supporting women and non-binary people.
Rooted more in trade than gender equality
The Arrangement is rooted more in the trade than in the gender equality field. This, along with GTAGA’s currently small number of participants and that it does not seek to secure access to other countries’ markets, appear to confine knowledge of it to true “trade and gender” aficionados. IISD reached out to a wide range of women’s groups and networks, as well as others working for gender equality and women’s rights, and was unable to locate much knowledge of GTAGA among them or women’s affairs ministries, other than women’s business associations.
“I work on gender issues in Chile and have not heard of the GTAGA,” said a gender economist based there. A quest for information about GTAGA’s impacts among feminist groups in participating countries elicited many similar responses. “I was an advisor in the women’s ministry of at the time of the country’s signing it but didn’t know about the Arrangement,” one Peruvian official told IISD.
Trade and gender experts note that this lack of awareness may also be due to the limited interactions between different policy communities, as well as the result of scarce resources. “Ministries charged with women’s affairs may have limited interest in trade but also they usually are faced with pressing issues that attract their priority attention, such as violence against women and reproductive health, and are often less well-resourced than trade ministries,” explained Frohmann. “It is hard to get them to engage on trade issues, partly because the trade community and the gender equality communities don’t talk to each other much.”
Dr. Suzy Morrissey, a gender practitioner from New Zealand, suggested that this situation also stems from questions in the gender equality community about the pertinence of trade-based initiatives claiming to promote gender equality. “To the extent that I am connected (reasonably well I would say), I am not aware that the GTAGA is a subject about which feminists/the gender equality community are enthused. I would posit that is because it is not an inequality-reducing agenda.” Indeed, many women’s rights advocates consider that to focus on women entrepreneurs capable of entering export markets is to prioritize a small minority of already privileged women.
Assessment
It is too early to measure the impact of the Arrangement, but based on its current trajectory, GTAGA’s effects may be limited. The work undertaken under the Arrangement’s cooperation provisions so far confirms that it is mainly oriented toward those women who wish to engage in international trade.
Work under GTAGA has the potential to go further, as the Arrangement itself indicates. Its text states that cooperation can extend to key areas for gender equality, such as valuing care work or women’s skills enhancement, which research consistently finds are essential for women’s empowerment. But these words have not been followed up by action. To effect real change, countries participating in the Arrangement must pursue these objectives with as much vigour as they dedicate to supporting women entrepreneurs. Inserting women-friendly references or measures into trade agreements can only do so much if they are unaccompanied by measures to address the range of domains in which gender inequalities play out.
Furthermore, no one appears to be paying heed to a logical end result of facilitating the access of more women-run or women-led companies from different countries around the world to international markets. Fernanda Vicente is based in Chile and is Chief Executive of Mujeres del Pacífico, Latin America’s largest community of women entrepreneurs. She has described GTAGA as a “silk thread that joins women businesses from its different member countries together.” But ultimately, these businesses will be competing against each other for foreign markets in the same way as other companies do. Ultimately, then, the perception that the Arrangement promotes a “more equitable system” and a “values-driven way of doing business” may be short-lived.
More broadly, to ensure that trade and trade rules enhance and do not undermine gender equality and women’s rights, participating countries must consider the impacts of trade on all women, including those who may be indirectly affected by trade rules. Participants have so far hardly considered this aspect. With rare exceptions, there is little indication that participating countries are considering how future trade agreements need to adapt if they are to contribute to broader gender-responsive and inclusivity objectives and support domestic efforts in favour of equality.
These criticisms aside, GTAGA does embody an interesting approach to cooperation on trade and gender. Being purely cooperative and unattached to a specific trade agreement insulates GTAGA from the horse-trading, each-for-its own nature of trade deals. The forum it provides for cooperation, mutual assistance, and experience-sharing may offer a way to ask the harder questions about the relationship between trade and gender, including the objectives and impacts of gender-responsive trade policies.
Describing GTAGA as ground-breaking and comprehensive may be overstating its case. But its existence has the merit of signalling the importance its participants attach to the matters at stake, and it could still be a positive vehicle for more significant engagement with the issues that sit at the nexus of trade and gender equality.
Caroline Dommen is a Senior Associate with the Economic Law and Policy Program, focusing on research and outreach related to trade and gender.
To read the full article, please click here.
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Setting the Record Straight on a ‘Worker-Centered’ Digital Trade Agenda
The AFL-CIO recently offered recommendations to the administration on how to extend its worker-centered approach to digital trade. The report claims the U.S. digital trade agenda has prioritized big technology firms at the expense of workers, consumers, and society, and that current U.S. digital trade policies encourage harmful activities.
These charges are unfounded. On the contrary, digital trade is critical to the success and growth of the American economy, a recent U.S. Chamber study found, and American workers have benefitted tremendously as the digital economy has generated high-wage jobs, innovative products, and market opportunities at home and abroad. Considering the benefits of digital trade:
Companies of all sectors and sizes are benefiting from digital trade. One of the chief claims in the AFL-CIO’s report is that large technology companies are the main beneficiaries of digital trade. Ask almost any company operating in today’s economy, and they are likely to disagree.
Industries of all sectors and sizes have reaped benefits of digital innovation. The U.S. Chamber study, entitled The Digital Trade Revolution: How U.S. Workers and Companies Can Benefit from a Digital Trade Agreement, found that a diverse range of firms, from transportation, warehousing, and agriculture to arts and entertainment have been empowered to seize new market opportunities abroad as a result of advances and investments in new digital technologies.
Services, which make up a majority of digital exports and the majority of U.S. jobs, have experienced strong growth in the U.S., but the potential for further expansion internationally is vast. U.S. digital exports — often called ICT-enabled or potentially ICT-enabled services in government reports — have more than doubled in the past 10 years, making it one of the country’s fastest growing export sectors, unleashing new opportunities for huge numbers of workers. More than 20 million Americans work in the business and professional services sector, a majority of which can be traded digitally.
Digital trade is transformative for small business exporters. Digital tools are allowing more small business exporters to expand their reach to international markets. Consider:
First, digital advertising plays an overlooked but critical role in allowing U.S. small businesses to economically reach potential foreign customers in a targeted fashion. Small businesses simply had no such tools in the pre-internet era: Print advertising in newspapers or direct mail were never feasible options for U.S. small businesses trying to tap even nearby and familiar markets such as Canada or Europe.
Second, modern digital tools are revolutionizing payment collection, cited by small business exporters as a top challenge. Uncertainty around international payment collection was a principal brake on small business exports even a few years ago, but such risks and foreign exchange complexities can now be managed in a cost-effective manner by digital payment services.
Third, international shipment firms, including express delivery companies, today provide comprehensive services that handle customs clearance procedures and costs for small business owners who lack the expertise and time to tackle the minutiae of such matters. The evidence supports the view that online channels reduce transaction costs associated with international trade significantly.
Another U.S. Chamber report, entitled Growing Small Business Exports: How Technology Strengthens American Trade, uncovered some surprising findings. Based on a national survey of more than 3,800 small businesses and a related economic analysis, the report produced a new estimate that 9% of U.S. small businesses currently export goods or services, a figure considerably higher than indicated by official statistics. The report estimated that small business exports supported more than 6 million U.S. jobs. Small businesses that export have been expanding the overseas markets they serve, the report found, from an average of seven countries in 2016 to 10 countries in 2018.
Digital trade supports millions of good American jobs. The AFL-CIO asserts that digital trade does nothing but spawn low-wage jobs abroad — a dubious charge belied by the benefits foreign governments are securing via digital trade — but somehow fails to see the millions of excellent jobs it’s creating here at home. The digital economy has proven a huge and growing source of employment in the U.S. with 7.7 million jobs and counting in all 50 states. The number of digital economy jobs has grown at an average rate of 2.7% over the last decade, compared to 1.6% for all jobs, and the digital economy has experienced wage growth of 5.9%, compared to 4.2%. As the U.S. Chamber’s Digital Trade Revolution explains:
“Jobs tied to the digital economy can be found in nearly every sector, and their number is growing at a faster rate than that of overall job growth over the last decade. These jobs pay well, and compensation growth for digital jobs exceeds that for all jobs generally.”
Should digital trade continue to prosper, the U.S. economy is poised to create many good, highly-compensated jobs right here at home.
Data flows sustain growth in almost every sector. The cross-border transfer of data underpins the U.S. and the global economy. No company, regardless of sector, can do business, let alone engage in international trade, without the ability to transfer data.
The AFL-CIO expresses concern in its report that “unfettered cross-border data flows” put worker and consumer privacy at risk. The group also maintains that data localization policies can not only be justified but should be authorized. Specifically, the report says:
“Governments should have the ability to require that individuals’ sensitive personal information… or data related to certain sectors… be kept onshore to ensure it is subject to strong and enforceable privacy standards and effective government oversight.”
However, contrary to these assertions, the ability to transfer data across borders does not impede data protection, nor do data localization policies guarantee privacy. How data is protected is more consequential than where it is stored, and mandating local storage of data is often counterproductive to data protection. In fact, it serves as a barrier to trade and poses a threat to economic growth and new market opportunities for American businesses.
Further, concerns that these principles are “rigid restrictions on the measures governments can adopt to promote legitimate public policy interests” are unfounded. Enshrining the commitments to protect cross-border data flows and prevent mandated data localization in trade agreements does not preclude policymakers in the U.S., or other governments, from passing robust federal privacy legislation, something the U.S. Chamber has pressed for.
The effort to “preserve robust public policy space” in digital trade agreements is code for making those agreements toothless and unenforceable. And given the U.S. role as a leading digital innovator, American workers and companies stand to gain tremendously from the continued ability to move data across national borders — and much to lose should digital protectionism spread. As the U.S. Chamber advocates in its Digital Trade Priorities, these policies can work hand in hand to uphold high standards in privacy, while at the same time promoting trade and innovation.
Ensuring high standard commitments: The “sweeping nature of these commitments” in U.S. agreements with Canada and Mexico or Japan alarms the AFL-CIO. What is, in fact, truly alarming is the number of onerous digital regulations cropping up from governments around the globe. A study by the Information Technology & Innovation Foundation found that “the number of data-localization measures in force around the world has more than doubled in four years. In 2017, 35 countries had implemented 67 such barriers. Now, 62 countries have imposed 144 restrictions— and dozens more are under consideration.” The experience of U.S. Chamber member companies affirms this trend and its widespread nature.
Many of those measures discriminate against U.S. companies. Others offer little to no flexibility to account for evolution in the digital economy. These provisions not only harm industry’s ability to do business but will result in lost jobs for American workers both at home and overseas.
American leadership on digital trade has resulted in high-standard digital provisions found in global pacts. Rather than facilitating an “unregulated status quo,” digital trade binds countries to principles that support a growing, innovative, and competitive economy. In fact, as the U.S. Chamber has written, these very commitments protect American workers and companies from harmful and discriminatory rules that target the U.S. economy more than any other.
U.S. workers, consumers, and industry have reaped the benefits of digital trade, proving that when offered the opportunity to compete on the global stage, American dynamism flourishes time and again. A worker-centered digital agenda should support that strength rather than stifle it.
Mary Kate Carter is Associate Manager of International Policy at U.S. Chamber of Commerce
John Murphy is Senior Vice President of International Policy. He directs the U.S. Chamber’s advocacy relating to international trade and investment policy.
To read the full trade agreement, please click here.
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2023 Trade Policy Agenda and 2022 Annual Report of the President of the United States on the Trade Agreements Program
I. INTRODUCTION
The Biden Administration promised to build the economy from the bottom up and the middle out, and we are doing just that. Unemployment is at its lowest rate in over 50 years. This Administration has seen more jobs created in two years than any other Administration has seen in four. Manufacturing is rebounding faster than it has in almost 40 years, while wages are rising, and rising even faster for lower- and middle-income workers. The American Rescue Plan, the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act were historic investments in America, and they are working.
The Biden Administration continues to believe that trade can—and should—be a force for good. Done right, and in coordination with other policy disciplines, it can grow the middle class, address inequality, tackle the climate crisis, and level the playing field by promoting fair competition. We remain committed to upholding a fair and open global trading system—one that puts working families first, raises living standards, ensures full employment, and promotes sustainable development.
We are continuing to rewrite the story on trade by bringing more people into the process and developing policies and initiatives that are resilient and sustainable and create broad-based growth. In 2023, our trade agenda will continue to focus on unlocking new opportunities for American workers and families—while also supporting and strengthening the middle class, driving decarbonization, and creating good-paying jobs across the American economy. In the aftermath of the COVID-19 pandemic and Russia’s brutal, illegal attack on Ukraine, it also means fortifying relationships with our partners and allies and strengthening critical supply chains to withstand shocks and disruptions to the system and to defend democratic values.
To realize this vision, we are continuing to forge the partnerships necessary to update and enforce the rules governing the global economy and trade.
In the Indo-Pacific and the Western Hemisphere, the United States is leading with a positive economic vision through the Indo-Pacific Economic Framework for Prosperity and the Americas Partnership for Economic Prosperity. With the European Union, we continue to deepen our relationship and intensify cooperation on pressing challenges, such as the People’s Republic of China’s (PRC) non-market policies and practices. Further, we are intensifying negotiations on a first-of-its-kind trade arrangement to address non-market excess capacity and the greenhouse gas emissions of imported steel and aluminum. We are also continuing to build out the Trade and Technology Council, and the Trade and Labor Dialogue under its umbrella, to pursue shared priorities, including supply chain resilience, challenges posed by non-market economies, inclusive digital trade, and the elimination of forced labor.
Additionally, in 2022, we kicked off ambitious initiatives with Taiwan and Kenya to deepen our trade and economic relationships with both partners, and we aim to make rapid progress on both initiatives in 2023. At the World Trade Organization (WTO), after working with WTO Members to deliver key outcomes during the Twelfth Ministerial Conference, the United States is driving the conversation on transforming the institution to be more responsive to the rapidly changing global economic environment and to the needs of everyday people.
Moreover, following the successful U.S. Africa Leaders Summit last year, the Administration will continue to strengthen our partnerships with the African continent and to support regional and continental integration efforts, with the well-being of workers, women, and youth to inform our work.
Our Administration is also fully committed to continued enforcement of our existing trade agreements to hold our trading partners accountable. This includes utilizing the United States-Mexico-Canada Agreement’s Rapid Response Mechanism to raise labor standards across North America and drive a race to the top. We are also using other mechanisms to open, maintain, and enhance access to markets and address unfair trade practices that harm our workers and businesses and ensure that they enjoy the benefits that they were promised.
Finally, a vital element of our effort to build an inclusive trade policy agenda is understanding the effects of our policies on underrepresented and underserved workers and communities, and ensuring that they have a say in how our policies are designed and implemented going forward. We know that an important part of making trade work for all Americans is having a better understanding of the effects of past trade policies.
At the Administration’s request, the United States International Trade Commission (USITC) conducted a first-of-its-kind study of the distributional effects of goods and services trade and trade policy on U.S. workers. Through an extensive information gathering process, the investigation brought to light what many already knew: while trade has benefited many, devastating effects have been concentrated in certain communities. The report also illustrated the gaps around data, and particularly disaggregated data, that can further inform a more equitable trade policy. USTR will continue working with the USITC and other partners to design trade policy that addresses inequality and supports the goals and aspirations of all Americans. USTR will also continue to implement its Equity Action Plan to ensure that racial and gender equity is embedded in its ecosystem.
By placing workers and everyday people at the center of our trade policy, the Biden Administration will continue to use trade as a force for good, to build a durable and fair tomorrow by pursuing resilience, sustainability, and inclusive prosperity.
2023 Trade Policy Agenda and 2022 Annual Report FINAL (1)
To read the full trade policy agenda, please click here.
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February 28, 2023
Globalization and International Value Chains: 2000-2021
The disruptions in international supply chains that occurred during the COVID-19 pandemic and the escalation of economic and political tensions between the U.S. and China have given rise to claims that globalization has died or is at least moribund. In this note we will address three questions concerning the evolution of globalization from 2000 through 2021:
1. Did globalization decline during that period?
2. To what extent did North America and China decouple their supply chains?
3. Did regionalization (“nearshoring”) increase?
In its broadest sense, the term “globalization” captures the interaction of national economies through the movement of people, ideas, capital, technology, goods, and services. Globalization so defined has already crossed a threshold from which it will likely never return, barring a global conflict or a failure to respond adequately to climate change. Indeed, individuals across the world today are more connected than ever before. Consider, for example, that almost two-thirds of the world’s population owns a smartphone, or that the estimated number of international tourists in 2023 exceeds 1 billion. Such human interconnectivity will only increase over time as communication and transportation-related technologies continue to advance. There has also been rapid growth in services trade, and especially in intermediate services.1 When observed through this broad lens, globalization remains deeply rooted and change is one of its enduring characteristics.
Among the many facets of globalization, our focus is on international trade, and on global value chains (GVCs) in particular. The volume of trade flows in goods and services has withstood significant challenges in the past, and stands to do the same in the future, even as patterns of trade flows change. Already, many of the negative impacts of the COVID-19 pandemic and increased geopolitical tensions have been met with creative workarounds, demonstrating the resilience of international trade and global supply networks. Changes in the patterns of cross-border trade in goods and services do not indicate a decline in globalization. Our quantitative analysis provides strong evidence that value-added trade supporting the production of goods and services did not recede during 2000-2021, nor was there evidence of a global trend toward reshoring. Instead, the evidence suggests that 2021 was a high mark for the global exchange of goods and services as measured by international value-added production linkages. Regarding the question of whether there has been a decoupling between North America and China, our analysis finds no evidence of decoupling of value-added production linkages. In fact, we find that China and North America increased their value-added production linkages between 2017 and 2021, implying significantly greater linkages than those that could be estimated using gross trade statistics.
Our analysis utilizes the GVC Indicators database created by the University of International Business and Economics (UIBE) in Beijing. The GVC Indicators database breaks down value added into that which flows through GVCs, and that which does not.2 See the appendix for a description of the data and methodology. In the charts that follow, the term “forward GVC participation” captures the degree to which a country’s domestic value added is exported through global value chains. “Backward GVC participation” captures the extent to which a country’s final production includes value added that is imported from global value chains. For each measurement, a higher percentage indicates greater relative importance of value added that is imported or exported through GVCs compared to value added sourced domestically. Thus, higher levels of backward and forward GVC participation indicate greater global integration of production networks.
We concentrate on the world’s three major trading entities: China, the European Union (EU), and North America, defined as the three nations in the USMCA (Canada, Mexico, and the United States). Our calculations for the EU in all years include GVC activity for the 27 member countries as of 2021, and therefore exclude the United Kingdom. Value added originating from China, the EU, and North America accounted for 54% of worldwide value added involved in GVCs in 2021, and final production by the three entities accounted for 57% of GVC-involved final production. Other significant GVC trading nations in 2021 which are not included in our main analysis include India, Japan, Russia, and the United Kingdom.3 In our analysis, we address reshoring within North America and the EU while considering how each bloc’s linkages with China have evolved over time.
Figure 1 shows trends in forward and backward GVC participation for each region at intervals during 2000-2021. For purposes of comparison with China and to avoid overstating the degree of international production linkages for North America and the EU, we only consider only the external trade of those two blocs when measuring GVC-related activity. As can be seen in Figure 1, Panels a and b, in 2021 both backward and forward GVC participation in goods production stood at or near all-time highs for each region.45 Panels c and d show that the same holds true within the service sector, except for Chinese forward GVC participation. It is likely that the decline in China’s forward GVC participation in services reflects the effects of structural change in the Chinese economy. The service sector’s share of Chinese GDP grew from 39.8% to 53.3% from 2000 to 2021, growth that our analysis indicates came largely from domestic value chains. In other words, Chinese demand for intermediate services produced domestically outpaced foreign demand for Chinese intermediate services from 2000 to 2021. This caveat aside, Panels a through d provide evidence that the involvement of these three major blocs in global value chains stood near or at a historic high, and that globalization had not declined through 2021. While the data that we employ in our analysis only extends through 2021, we note that with the volume of world trade hitting a record estimated at $32 trillion in 2022, it is likely that the trend seen in Figure 1 continued and globalization had still not declined as of the beginning of 2023.6
Guy Erb is a former U.S. trade policy official and investment banker.
Scott Sommers is a PhD student in Economics at the University of Minnesota.
To read the full paper, see below.
Globalization and International Value Chains - Erb Sommers
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February 23, 2023
One Year of War in Ukraine: Assessing the Impact on Global Trade and Development
The war in Ukraine is causing immense human suffering. At the same time, it has delivered another severe challenge to the global economy already strained by the impact of the COVID-19 pandemic. However, the multilateral trading system has withstood this disruption relatively well so far.
Global trade continued to increase in 2022, including for products greatly affected by the war, highlighting the resilience of the multilateral trading system. Early estimates suggest that trade growth was above the WTO trade forecast from April 2022 (around 3 per cent) and substantially higher than the more pessimistic predictions for 2022. This stability is also reflected in trade in supply chains, which grew by 4 per cent year-on-year in the second quarter of 2022, when measured in terms of trade in intermediate goods. Trade in products and by countries greatly affected by the war was remarkably resilient. Even in the short run and for unexpected disruptions, alternative suppliers filled in the gaps – at least for the majority of products affected by the conflict.
For the longer term, new simulations highlight the importance of strengthening the multilateral trading system. The latest simulations run by WTO economists modelling different scenarios for the global economy show that the gains from further multilateral liberalization are large. In line with this, the opportunity costs of decoupling into two rival blocs relative to more liberalization are estimated at 8.7 per cent of real income at the global level, varying between 6.4 per cent for developed countries, 10.1 per cent for developing countries and more than 11.3 per cent for least developed countries.
The benefits of reglobalization are not only about income gains but also about resilience and security for the supply of goods. The positive trade performance of countries dependent on imports from the conflict region was facilitated by their ability to switch their import supply to unaffected economies. For example, Ethiopia used to rely on Ukraine and Russia for 45 per cent of its wheat imports. The country reacted to the loss of most supplies from these two countries by increasing purchases from other producers, including the United States (shipments increased by 20 per cent in volume terms) and Argentina, which supplied 21 per cent of Ethiopia’s imported wheat, up from zero in the previous year.
Ukraine’s exports collapsed by 30 per cent in 2022 in value terms. The drop was relatively consistent across trade partners, although some neighbouring countries, such as Hungary and Poland, increased their imports from Ukraine. This was driven mostly by increased imports of agricultural products such as oilseeds, fats and oils, meat and dairy. Exports of cereals, which are central to the food security of many African economies, declined by 14.9 per cent, forcing these economies to adjust their trade patterns.
Increases in prices led Russia’s exports to expand by 15.6 per cent in value terms, but estimates suggest that Russia’s export volume might have slightly declined. The increase in Russia’s exports in value terms is driven mostly by goods in the primary sector such as fuels, fertilizers and cereals. The relatively limited increase in trade values in combination with the sharp increase in prices for these goods suggests a slight decline in export volume. In contrast, trade flows have fallen sharply for industrial goods, such as motor vehicles, pharmaceuticals and aircraft, where sanctions are likely to be particularly restrictive.
Prices rose for goods most affected by the war but by less than expected at the beginning of the war. Among these products, prices increased between 4.4 per cent for palladium – a key input in the production of catalytic converters in the automotive sector – and 24.2 per cent for maize. While these price increases are substantial, they are significantly lower than the gloomiest predictions. Simulations run by WTO economists in a scenario of cascading export restrictions on food forecast wheat prices increasing by up to 85 per cent in some low-income regions. However, the actual increase was 17 per cent.
The relative restraint by WTO members in imposing export restrictions likely played a key role in keeping price increases in check. The WTO’s latest trade monitoring report, covering mid-October 2021 to mid-October 2022, shows that regular (non-COVID-related) import-facilitating measures introduced by WTO members covered US$ 1,038.4 billion of trade, far exceeding the trade coverage of import-restrictive measures (US$ 163.5 billion). This, in combination with the limited price increases in grains, suggests that the success of the WTO’s 12th Ministerial Conference, which resulted in the Ministerial Declaration on the Emergency Response to Food Insecurity, has had a meaningful impact on reducing food insecurity.
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To read the full publication, please click here.
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February 17, 2023
MSC 2023: Protectonic Shifts – Global Trade Under Pressure
The European security architecture has been in ruins since the Russian war of aggression against Ukraine. Adherence to the rules of international law, recognition of state borders, respect for the sovereignty of states – all these foundations of the international order, as they have existed since the end of the Cold War, have been unhinged by Russia’s war of conquest and destruction against its neighbor.
Consequences for security of European states?
For the past year, Ukraine has been resisting Moscow’s unprecedented excesses of violence. It is supported by NATO member countries, the European Union, and some 20 other states, such as Japan and South Korea. With regard to military aid deliveries to Ukraine, Kiev’s supporter states are repeatedly faced with the same trade-off: How many and what weapons systems does Ukraine need to repel Russian aggression as well as defend its state sovereignty – and what are the risks of further drastic Russian escalation? What are the consequences of Russia’s war against Ukraine for the security of European states – and beyond? These are the main topics that will be discussed at the Security Conference. As always in Munich, on an open stage and in front of the whole world.
MSC 2023: Protectonic Shifts - Global Trade Under Pressure | BR24 Featured Speakers:
Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, European Commission
Katherine Tai, Trade Representative, United States of America
Oliver Zipse, Chairman of the Board of Management, BMW AG
Moderator: Zanny Minton Beddoes, Editor-in-Chief, The Economist
Video originally posted here.
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WITA’s Friday Focus on the Washington International Trade Conference
The conversations you may have missed at the 2023 Washington International Trade Conference, and information on upcoming events.
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2023 Washington International Trade Conference Videos
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02/13/2023 and 02/14/2023 | Washington International Trade Association
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February 8, 2023
PPI’s Trade Fact of the Week: U.S. Underwear Tariffs are Unfair to Women
FACT: U.S. underwear tariffs are unfair to women.
THE NUMBERS: Average U.S. tariff rates,* 2022 –
Women’s underwear 15.5%
All underwear 14.7%
Men’s underwear 11.5%
Steel 5.7%
All goods 3.0%
* “Trade-weighted,” combining tariffs collected on all imports, including those under MFN tariff rates, Chinese products subject to “301” tariffs, and FTA/preference products exempted from tariffs.
WHAT THEY MEAN:
Worst Valentine’s Day surprise ever: The U.S. tariff system taxes women’s underwear more heavily than men’s. Facts follow:
1. Steel vs. Underwear: First, tariffs are fundamentally a form of taxation, and tariffs on underwear are high. A Google search this morning finds “about 144,000” uses of the phrase “steel tariffs” and “about three” (3) of the phrase “underwear tariffs.” But despite the domestic and international controversy over steel tariffs, clothing tariffs in general and underwear tariffs specifically are lots higher. In 2021, automakers, building contractors, and other metal buyers ferried 28 million tons of steel in from abroad for $44 billion, and paid the Customs Service $2.5 billion in tariffs. Thus the “average” tariff on steel came to about 5%. Buyers of clothing, meanwhile, bought 5.5 million tons of clothes for $109 billion and paid $16 billion on it, for an average of 14.5%. Underwear makes up about a tenth of clothing imports — 519,000 tons or 3.4 billion articles, at $10.1 billion last year — and brought in $1.54 billion in tariff revenue. The average underwear tariff, therefore, was 14.7%* or about three times the rate on steel.
2. Tariff Rates: Second, the U.S. tariff system taxes women’s underwear at higher rates than men’s. To dip briefly into Customs-and-trade-policy jargon, underwear tariffs are published in Chapter 61 of the Harmonized Tariff Schedule** (“Knitted or Crocheted”), headings 6107 and 6108, and in Chapter 62 (“Other than Knitted or Crocheted”) headings 6207, 6208, and 6212. Together these five sections spread out over 17 pages and include 68 separate tariff “lines,” from line “61071100,” for men’s cotton underpants and briefs, to line “62129000,” a catchall for unclassifiable and possibly exotic things. The rates in these 68 lines range from 0.9% to 23.5%, diverging mainly along lines of class and gender. Among the products with clearly comparable female and male items, (a) aristocratic silks are lightly taxed, at 2.1% for women’s panties and 0.9% for male boxers and briefs; (b) the analogous working-class polyesters are heavily taxed, at 14.9% for men and 16.0% for women; and (c) middle-class cottons are, well, in the middle, at 7.6% for women and 7.4% for men. The highest rates fall on women’s products in heading 6212 with no obvious masculine counterpart: brassieres in a range from 4.8% (silk) to 16.9% (cotton or polyester), girdles 20%, and corsets 23.5%.
3. Costs: Third, tariffs on underwear, like consumer goods tariffs generally, are eventually paid by shoppers. Since Americans buy more women’s underwear than men’s, and since it is more heavily taxed, Customs raises more money from the women’s stuff. About three quarters of the $1.54 billion in underwear tariffs last year — $1.23 billion on $7.90 billion in imports, for an average rate of 15.5% — came from women’s underwear. Men’s brought in $306 million on $2.65 billion, for an 11.5% average. Peering a bit more closely, the $1.23 billion in lingerie tariffs came from 3.28 billion separate articles — i.e., about 37 cents per piece. The $306 million on men’s products came from 1.28 billion separate articles, or about 24 cents each. Markups, domestic transport costs, sales taxes, and so forth appear to have roughly tripled the prices of clothing*** from border to cash register last year, with tariffs amplified a bit at each stage. While precise figures would vary with the price of the item, on average the tariff system appears to add about $1.10 to the cost of each women’s underwear item, and 75 cents to men’s.
4. Comparisons: In international context, the U.S.’ underwear tariff rates as an overall average are pretty typical. But the U.S. system is (a) very unusual in taxing luxuries more lightly than mass-market goods, and (b) possibly unique in taxing women’s underwear more heavily than men’s. Most tariff systems have flat rates applying to all underwear: 5% in Australia, 10% in New Zealand, 18% in Canada, 20% in Colombia, also 20% in Jamaica, 25% (with an anti-poor twist, see below) in India, 30% in Thailand, an eyebrow-raising high 45% in South Africa, and so on. The Japanese and EU tariff systems in fact have a modest pro-female tilt, as they impose lower rates — zero in the Japanese case, 6.5% in the EU — on products in the 6212 heading, such as brassieres and corsets, as against flat rates of 9% and 12% for the rest.
As to the U.S., shifting from the jargon of customs and trade to that of policy analysis and evaluation: Seriously?! Boo! Do better! 
Nonetheless, we still wish readers a happy and romantic Valentine’s Day.
* Up from 12.0% in 2017. This increase to some extent reflects the “301” tariffs on Chinese-stitched brassieres, briefs, etc. imposed in 2019, but other factors are at work as well. Both China and zero-tariff Central America have also lost market share, while MFN suppliers in Bangladesh, Vietnam, Cambodia, Indonesia, and India have gained relative to both.
** Some other clothing items show up in Chapters 42 and 48 — respectively leather and rubber products — but underwear of these types have no specific tariff line, so left out of the analysis above.
*** Clothing spending by consumers was about $400 billion last year; import value at the border $110 billion; 98% of clothing is imported.
FURTHER READING:
The U.S. International Trade Commission maintains the U.S. Harmonized Tariff Schedule. Check Chapter 61, sections 6107 and 6108, and Chapter 62, sections 6207, 6208, and 6212 for underwear.
And the ITC’s Dataweb requires a bit of HTS expertise but appears unique in the world in allowing ordinary citizens to get not only tariff rates but very detailed information on U.S. exports, U.S. imports, and tariff collection, by product and country.
Background:
Is the anti-female tilt of underwear tariffs typical of the American tariff system, or a weird anomaly? Overall, the “class” bias, in which silks and cashmeres are taxed lightly while cottons are taxed heavily and polyester and acrylics most of all, is the norm for U.S. consumer goods tariffs. The “gender” bias, in which women’s underwear attracts higher tariffs than analogous men’s goods, seems less systematic though still the rule. Asked to study these questions in 2018, ITC economists concluded the following:
“… [T]ariffs act as a flat consumption tax. Since a flat consumption tax is a regressive tax on income, tariffs fall disproportionately on the poor. Across genders, we find large differences in tariff burden. Focusing on apparel products, which were responsible for about 75% of the total tariff burden on U.S. households, we find that the majority, 66%, of the tariff burden was from women’s apparel products. In 2015, the tariff burden for U.S. households on women’s apparel was $2.77 billion more than on men’s clothing. … . This gender gap has grown about 11% in real terms between 2006 and 2016. We find that two facts are responsible for this gender gap: women spend more on apparel than men and women’s apparel faces higher tariffs than men’s.”
ITC’s look at gender and class bias in the tariff system.
PPI’s Ed Gresser on U.S. consumer goods tariffs as taxation.
And Miranda Hatch in the BYU Law Review on the tariff system and gender bias.
Around the world:
The European Union tariff system has a 12% tariff on all briefs, panties, and boxers whether cotton, silk, or polyester, and whether designated “men’s and boy’s” or “women’s and girl’s,” and a lower 6.5% on brassieres and corsets.
Japan’s is 9% on comparable things and duty-free on brassieres and corsets.
Australia is at 5% all the way through.
India has an anti-poor tilt (many items get “25% or Rs25, whichever is higher,” in practice meaning >25% rates for anything costing less than $1.25 per item, so in practice cheap goods important to low-income families will be taxed more heavily than expensive luxuries), but no divergence in men’s and women’s rates.
Canada is 18% all the way through.
And Jamaica 20%.
And some trade-and-gender links:
WTO’s Informal Working Group on Trade and Gender.
… and a nine-expert panel (“Does Trade Liberalization Have Gender’s Back?”) from last December’s.
ABOUT ED
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
To read the full article, please click here.
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William Krist's Blog
