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Abstract:
Consumer price inflation in the euro area declined steadily during most of the 1990s. However, in the last two years, both headline and core inflation have risen throughout the area, and sizable cross-country differences in inflation have re-emerged. This is illustrated by Figure 1, which shows the headline consumer price inflation rate for the euro area as a whole and for select member countries. As of October 2000, all euro area countries had headline inflation rates above the European Central Bank's 2 percent medium-term ceiling, with rates ranging from 2.1 percent in France and Austria to 6 percent in Ireland. In Greece, which will join the euro area on 1 January 2001, inflation was 3.8 percent. One factor, discussed prominently in policymaking circles, that may be contributing to cross-country differences in inflation is price level convergence or "inflation catch-up".

According to the argument, if prices expressed in a common currency are initially different across countries, convergence to a common level of prices implies higher inflation in countries where prices are initially low. There are several reasons to expect at least some price convergence in Europe. Progress toward a single market, including already completed trade liberalization and adoption of the single currency, should narrow differences in common-currency prices across countries, at least for traded goods. To the extent that the currency conversion rates chosen at the launch of the euro did not equate price levels across the euro area, scope remained for further price convergence after January 1999. The Balassa-Samuelson hypothesis provides another explanation why prices of nontraded goods might rise faster in poorer European countries.

Suppose that poor countries are initially low-price countries, and that economic integration creates pressure for European-wide convergence of productivity levels in making traded goods. In addition, suppose that productivity levels in making nontraded goods converge at a much slower rate, if at all. Under these assumptions, poor countries will find that their productivity growth is concentrated in the traded goods sector. The rise in output and wages in the traded goods sector that would result from a European-wide convergence of productivity, would then push up wages and hence prices in the nontraded goods sector of the poor countries, compared to the wealthier, high-price countries.

Abstract:
Frustrated with lackluster momentum in the WTO Doha Round and the Asia Pacific Economic Cooperation (APEC) forum, and mindful of free trade agreement (FTA) networks centered on the United States and Europe, Asian countries have joined the FTA game. By 2000, Asian countries had ratified 10 bilateral FTAs, and they are currently negotiating some 20 bilateral FTAs, many with non-Asian partners, including Australia, Canada, Chile, the European Union, India, and Qatar. China has been particularly active since 2000. It has completed three bilateral FTAs - Thailand in 2003 and Hong Kong and Macao in 2004 - and is initiating another 17 bilateral and regional FTAs. However, a regional Asian economic bloc led by China seems distant, even though China accounts for about 30 percent of regional GDP. As in Europe and the Western Hemisphere, many Asian countries are pursuing FTAs with countries outside the region. On present evidence, the FTA process embraced with some enthusiasm in Asia, Europe, and the Western Hemisphere more closely resembles fingers reaching idiosyncratically around the globe rather than politico-economic blocs centered respectively on Beijing, Brussels, and Washington.

Regional free trade agreements, China, trade liberalization, Asia, FTA strategy

Abstract:
Faster economic growth and expansion of exports in Central America in the 21st century will depend on many factors. These include efficient and modern standards systems and an end to technical barriers to trade. Regional efforts can be an efficient way to modernize standards systems.

After reviewing the current state of standards and trade in Central America, Hufbauer, Kotschwar, and Wilson suggest top priorities for reform from a trade policy perspective in a new and increasingly important area of public policy and development. They conclude that it makes sense to:
- Take a regional rather than a national approach to setting up accreditation, testing, and metrology infrastructure - to share equipment, experts, and information to get more bang out of limited funding.
- Promote regional bodies as venues for Central American countries to develop common positions in international discussions of the development of standards.
- Regionalize information-gathering efforts and use information technology to disseminate that information rapidly.
- Push for a sunset clause in international standards development, because standards have value only if adopted and used.

This paper - a product of Trade, Development Research Group - is part of a larger effort in the group to build capacity and explore links between trade, development, and standards. The authors may be contacted at ghufbauer@iie.com, bkotschwar@oas.org, or jswilson@worldbank.org.

Abstract:
After reviewing the current state of standards and trade in Central America, the authors suggest top priorities for reform from a trade policy perspective in a new and increasingly important area of public policy and development. They conclude that it makes sense to: a) take a regional rather than a national approach to setting up accreditation, testing, and metrology infrastructure - to share equipment, experts, and information to get more bang out of limited funding; b) promote regional bodies as venues for Central American countries to develop common positions in international discussions of the development of standards; c) regionalize information-gathering efforts and use information technology to disseminate that information rapidly; and d) push for a sunset clause in international standards developments, because standards have value only if adopted and used.

Administrative & Regulatory Law, Environmental Economics & Policies, Labor Policies, Trade and Regional Integration, Health Economics & Finance

Abstract:
The Doha Round is the longest-running trade liberalization negotiation in the postwar era. Despite its longevity, the end is not yet in sight as parties disagree on the depth of liberalization necessary in agriculture and nonagricultural market access (NAMA). This rift is prolonging the Round's completion and hindering the discussion of other important issues on the negotiating agenda, particularly services. To shed light on the debate concerning the benefits from Doha, this paper first estimates, using three metrics, the potential gains from liberalization in agriculture and NAMA resulting from the specific 'modalities' set forth in papers drafted by the chairs of the Doha negotiating groups. Next, the study estimates the benefits that could result from sector initiatives in chemicals, electronic/electrical goods, and environmental goods that go beyond the tariff cuts outlined in the negotiating modalities. Finally, prospective gains from liberalization of services barriers and improvements in trade facilitation are also analyzed. Overall, we estimate that the boost to global exports from concluding the Doha Round could range between $180 billion and $520 billion annually. Likewise, the potential GDP gains are significant, between $300 billion and $700 billion annually, and well balanced between developed and developing countries.

International Trade, World Trade Organization, Doha Round, Tariff Liberalization, Nontariff Barrier

Abstract:
Over the last three decades the global economy has expanded in a remarkable fashion. While nominal world GDP has increased four times, world bilateral trade flows have grown more than six-fold, and the stock of foreign direct investment (FDI) has grown by roughly 20 times since 1980. The sources of global trade and investment growth are well known - general economic expansion, policy liberalization, and better communications and technology - but the impact of each source is unclear. In this paper we attempt to uncover the contribution of policy liberalization to the rising ratios of US inward and outward FDI stocks to GDP over the last three decades.

The role of policy liberalization in fostering FDI expansion since the 1980s is murky. Policies related to FDI have undoubtedly been liberalized since the 1980s, but the changes are not easily quantified, making an assessment of their impact on FDI difficult. To get around this obstacle, we rely on stylized facts about US inward and outward FDI stocks and an unorthodox calculation method to approximate the role of policy liberalization on FDI growth.

Foreign direct investment, Policy liberalization, International economic integration

Abstract:
The relationship between standards, economic development, and trade is at the forefront of policy debate. Standards can accelerate economic efficiency and trade and also act as discriminatory barriers. This paper examines standards in the context of development in Central America. Key aspects of disputes over standards at the World Trade Organization are discussed, along with the reasons why standards matter to development and trade prospects for Central America. The paper recommends ways to leverage shared infrastructure in standards and assist these countries to implement their WTO obligations.

Abstract:
The Alien Tort Statute of 1789 (ATS) remained virtually dormant until it was revived by the 1980 decision of the Second Circuit in Filartiga vs. Pena-Irala. Since Filartiga, plaintiffs, who are neither US citizens nor residents, have invoked the ATS for a widening range of claims alleging large damages from acts committed outside the United States. ATS suits are increasingly targeting the deep pockets of multinational corporations. In an upcoming case, Sosa vs. Alvarez-Machain, the US Supreme Court will have to address whether the ATS grants federal courts a flexible power to create new torts corresponding to evolving norms in the 'law of nations'. The authors contend that a broad interpretation of the ATS will make US federal courts agents of judicial imperialism, doing great damage to foreign relations, as well as international trade and investment.

Abstract:
This article summarizes the economic payoff to the United States from its postwar trade opening and estimates the potential future gains from more opening going forward. To quantify these gains, we survey different methodologies and estimates. We find that trade opening since World War II has added between $800 billion to $1.4 trillion to the US economy, or about $7,000 to $13,000 per household. More speculative estimates of the potential additional gains from removing the rest of US trade barriers range from $400 billion to $1.3 trillion, or about $4,000 to $12,000 per household. Since trade opening permanently raises national income, these gains are enjoyed annually. Trade opening inevitably entails adjustment costs. We estimate that the lifetime cost of all worker dislocations that have been triggered by expanded trade in the United States could be as high as $54 billion, although probably less. The permanent gains from past and potential liberalization easily swamp the modest sums necessary to alleviate the temporary pains of adjustment. In the future as in the past, free trade can significantly raise income and quality of life in America.

Abstract:
This working paper draws on historical and contemporary data on tariffs, non tariff barriers, and transportation costs (for the United States and its major trading partners) to estimate the role of policy liberalization in US merchandise trade growth over the period 1980 to 2006. Both partial equilibrium analysis and computable general equilibrium analysis are used to make the estimates. Both methods indicate that roughly 25 percent of US trade growth since 1980 can be attributed to policy liberalization. Policy liberalization plays a larger role in US export growth (35 to 40 percent) than US import growth (25 percent). According to these estimates, policy liberalization accounts for almost all US merchandise growth in excess of growth that can be explained by expanding GDP in the United States and abroad.

International trade, policy liberalization, tariff liberalization, nontariff barriers, transportation costs

Abstract:
Trade and environment intersect in many ways. Aside from the broad debate as to whether economic growth and trade adversely affect the environment, there are linkages between existing rules of the World Trade Organization (WTO) and rules established in various multilateral environmental agreements. Controlling greenhouse gas emissions promises to be a top priority for both national and international agendas, and special attention must be given to the relationship between the WTO and the emerging international regime on climate change. This working paper examines the nexus of the WTO and climate change and discusses challenges and options.

World Trade Organization, WTO, climate change, global warming, border adjustments

Abstract:
Services trade has truly become an engine of world growth. Over the past two decades, international trade in services has grown faster than world merchandize trade, which in turn has grown faster than world output. A combination of policy liberalization and technological progress has facilitated trade in many previously untradable services. However, very little progress has been made towards new policy liberalization in the ongoing Doha Development Round. This article discusses trade in services in five sections. Following a short introduction, Section I presents data on the past growth of services trade flows and makes rough projections of future expansion. The second and third sections summarize the achievements of the WTO in the service field, both as a negotiating forum and a dispute settlement system. The third section also emphasizes how FTAs are now playing the leading role in services liberalization. The fourth section critiques the absence of progress in the Doha Round and the fifth section examines the hot issue of services outsourcing. The concluding section offers policy recommendations for containing a possible protectionist backlash and promoting new liberalization.