Trade unsiloing as metrics synergy

is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:

The reports alleging our government’s insistence in not dwelling into our trading partners’ currency fray again belies the lack of intellectual design singularly contemplated regarding the orchestration of policy. This is despite the fact that most countries, our major trading partners included, have indicated with clarity their considerations. And the fact that we are fence-sitting perhaps explains why we are perceptively depreciating in other countries’ investment positioning (apart from our continuing lack of competitiveness and unmanageable red tape).

In any event, the 2010 G20 Report on Trade Measures makes pertinent points, finding that "governments have continued to exercise restraint over the imposition of new trade restrictions. The number of new measures imposed by G20 countries is still increasing, but more slowly than in the past and with a welcome decline so far this year in the initiation of new trade remedy actions (anti-dumping duties, countervailing measures and safeguards)."

This reminds us of an analogy that illustrates the proper employment of trade remedies, contingent on certain multipolar levels, whether it be in the formative, normative, or substantive sense. The toolbox analogy is commonly employed, particularly when defining the use of such mechanisms. Nevertheless, the analogy, while presenting in a certain sense a syllogism of available devices within which such rights, liabilities, and obligations are to be recognized, all of which it must be considered still fall within the parameters and restrictions laid down by general conceptions of what we consider to be sovereignty in its internal and external sense.

This inevitably comes to mind when one is considered to make a studied judgment on the rationality of the recourse to trade remedies under the WTO. The system does indicate an allomerism in the sphere of adjudication. Considerably, any trade policy should employ the synergy that is found beyond the "clinical isolation" concept, as well as the findings of the WTO panel for US -- AD/CVD on Products from China (DS379): "the status of the [International Law Commission’s Draft Articles on Responsibility of States for Internationally Wrongful Acts], and in particular whether as China argues we must as a matter of law interpret the provisions of the SCM Agreement at issue in conformity with language and concepts in certain provisions of the Draft Articles."

The multiplicity of choices available to states in the formulation of policy, therefore, does not rest at a binary level. The probabilities of the choices have arisen due in most part to the conceptual, as well as practical, implications brought about by the sovereignty characteristics of states. Claude Barfield of the American Enterprise Institute made an interesting point in his article "Overreach at the WTO": "Alternately, the WTO could adopt a variation of the so-called ‘political issue’ doctrine developed by the U.S. Supreme Court (which is meant) to provide a means for the judiciary to avoid decisions that have deeply divisive political ramifications...."

Which reverts us yet again to trade remedies. Dukgeun Ahn and William J. Moon’s argument for a new approach to causation standards, the "Cost of Production" test, is fascinating: "an additional tool that can be used as complement to Elasticity/ Partial Equilibrium Model. We propose the following hypotheses: Hypothesis 1 (H1) If the price of imports is less than the domestic marginal cost of production, we should see an immediate decline in production that is attributable to import surge. Hypothesis 2 (H2) If the price of imports is greater than the domestic marginal cost of production but lower than the domestic average cost of production, we should not observe immediate decline in production that is attributable to import surge; instead, we should expect decline sometime in the future. Hypothesis 3 (H3) If the import price is greater than the domestic average cost of production, we should not see an immediate nor future decline that is attributable to import increase."

In the end, the context of sovereignty and the horizontal restraints imposed by realpolitik will define, in a categorical if not conclusive sense, the outcome of policy formulation. Nevertheless, the probability that there would be a shift to a principle based or value based system has to be contemplated in the interpretation of the system, if not the rules, as well.

Hopefully, our trade officials will be cognizant of this urgent need for right-sizing and knowledge based acquisition of trade policy, taking a 30,000-foot view and unsiloing its mentality in the process. With such, a process-flow analysis that gives a definite value-add to trade and economic bottom- lines will come into play. This is not to reinvent the wheel. Rather, it is through the correct utilization of dynamic metrics, with integrated efficiencies, that could eventually result in a deliverable consisting of finance and trade driven economic synergistic interfaces. Plug-and-play paradigms notwithstanding, a 24/7 commitment to this should not necessarily lead to a turn-key solution. The crucial factor is whether our government is on board, as part of the solution and not the problem’s cause.