Setting the Trade Policy Agenda: What Roles for Economists?

Abstract

Economists have influenced the trade policy agenda for establishing multilateral trade rules, disciplines and procedures and for negotiating most -favored nation and preferential reductions in trade barriers and subsidies, in addition to affecting the agenda for unilateral policy reform. These roles are considered in turn, before focusing on the economists' contribution though quantifying the extent and effects of existing trade distortions and alternative reform initiatives. Many trade distortions remain, however, so the paper then looks at where trade economists' efforts in agenda-setting need to be focused in the years ahead.Keywords: trade rules, trade policy reform, cost of protection, empirical modelling of effects of trade policies JEL codes: F13, Q17iii NON-TECHNICAL SUMMARYWhat contribution has the economics profession made in setting the agenda for trade policy formation and its reform? Cynics would say little, on the grounds that almost every country still imposes trade barriers even though economists have articulated the virtues of free trade for more than two centuries. A shorter time horizon gives a more positive picture though, with substantial reductions in tariffs o n most manufactured goods by OECD countries following their hikes in the 1930s, and the lowering of trade barriers by many developing countries from the 1980s. This paper examines that post -war period, and then looks at the scope for strengthening the role s of trade economists.Economists since the 1930s have contributed to the trade agenda at the multilateral, regional and national levels. Their constitutional contributions to the multilateral rules and their exceptions include a tolerance for regional and other preferential trading arrangements. Most of the action is at the national level though, including in helping governments decide how to spread their resources between unilateral trade-policy setting and engagement in preferential and multilateral negotiations for better rules and improved access to markets. Underlying all of the trade liberalization efforts has been the economists' quantification of the extent and effects of trade distortions and reform initiatives, both before and after reforms have been implemented. An extensive examination of that contribution sets the scene for looking at where trade economists' efforts should be focused in the years ahead. They include countering the wave of anti-globalization sentiment, improving quantitative anal ysis of the effects of trade reforms, and contributing more to the WTO's dispute settlement procedures. The paper concludes by suggesting more attention needs to be given to the distributional effects of policy reform, so as to better understand the resistance to it and help design measures to reduce those forces. It would help too if individual policy analysts built stronger relationships with policy advisors and their masters.In terms of the more-immediate goal of influencing the Doha Development Agenda, the attention of analysts needs to focus on better modelling of...

Reducing Distortions To Agricultural Incentives : Progress, Pitfalls, And Prospects

“…7 For recent assessments of the role of economists and economic analysis in trade policy formulation, see Anderson (2005) and Evenett (2006). 8 Even though this violates the WTO's national treatment rule, it apparently is not an uncommon practice in poorer countries where it is claimed to be too expensive to collect VAT on farm products.…”