Advances in our rules-based global trading system have been slow in recent years as efforts to establish new rules and assure compliance with existing rules have struggled. Last week, I participated in a panel discussion of the Information Technology & Innovation Foundation’s (ITIF) new report, entitled “The Global Mercantalist Index: A New Approach to Ranking Nations’ Trade Policies”. The report catalogues a troubling increase in favoritism of domestic companies at the expense of foreign companies and in turn the global trading system. It also further documents a trend highlighted last year by ITIF in its report “Localization Barriers to Trade: Threat to the Global Innovation Economy” and by the Peterson Institute for International Economics in its study entitled “Local Content Requirements: A Global Problem”.
Unfortunately, this growing trend is not offset by great advances in trade-liberalization. Recent efforts to craft new trade rules at the World Trade Organization (WTO) have stalled, and many wonder whether the WTO will still be able to secure implementation of a December 2013 “Bali trade package” – a small undertaking compared to earlier efforts to revise more comprehensively our global trade rules as part of the Doha Development Agenda.
Within this context, the ITIF’s reports calls for the creation of an annual “Global Mercantalist Index” that would rank countries based on a range of policies – such as forced technology transfer as a condition of market access, intellectual property (IP) theft, and restrictions on cross-border data flows – that threaten today’s global trading system.
Such a ranking could provide a useful snapshot of protectionist trends across a number of countries. In that regard, this survey complements a variety of other important efforts to identify or quantify existing and emerging challenges, including, for example, the recently released U.S. International Trade Commission (USITC) study on digital trade barriers, the U.S. Chamber’s annual Global IP Index, and the Organization for Economic Cooperation and Development’s (OECD) Services Trade Restrictiveness Index.
The report also provides a platform for discussing not just enforcement of existing trade rules but also what new trade rules and enforcement tools might be necessary to maintain fairness in the global trading system. Not all localization barriers may be inconsistent with existing WTO rules. However, existing rules offer a roadmap for negotiators. As the U.S. pursues an ambitious trade agenda- including Trans-Pacific and Trans-Atlantic trade deals and an ambitious investment treaty with China – the ITIF and other recent reports provide important fodder for establishing new rules to promote fair and non-discriminatory treatment of foreign companies.
The Bali trade package would have represented the first update to our global trading rules in 20 years. As we face another WTO impasse, we should press forward with bilateral, regional and plurilateral trade agreements that can address the increasing web of trade barriers. Meanwhile, the U.S. and its trading partners must vigorously enforce current trade rules that, as the reports highlighted above suggest, some of our trading partners may be flouting.