8 April 2009

OECD Says Advanced Developing Countries Need “Second Generation” Trade Reforms

This article is extracted from the 8 April 2009 edition of “WorldTrade Interactive”.

A recent policy brief from the Organization for Economic Cooperation and Development posits that trade reforms have aided growth in advanced developing countries….

The policy brief praises Brazil, Russia, India, Indonesia, China and South Africa (together known as the BRIICS) for the significant trade liberalization they have undertaken in recent decades. …

Nevertheless, major trade and behind-the-border policy challenges persist in these countries. The paper notes that until now progress in opening their markets has been achieved mostly through reductions in applied border measures, or “first-generation” reforms, which are easier to implement than second-generation reforms that tackle cumbersome domestic regulations. For example, product and labor market policies in India prevent the realization of economies of scale and improvements in productivity. In China, regulatory barriers on internal trade inhibit the mobility of resources. All the BRIICS countries face obstacles with respect to services regulation, regulation of food safety and technical standards, intellectual property protection, public procurement, customs administration and competition rules….

Interestingly, the policy brief suggests that the BRIICS countries should take these measures on their own, without waiting for initiatives like regional trade agreements or the Doha Round.

GATT and WTO commitments “have contributed little” to liberalization in these countries, the report states, and it is unclear whether preferential trade deals are likely to spur regional or global integration. On the contrary, unilateral liberalization, the method the BRIICS economies have largely relied on in the past, “turns out to be far more valuable.”