While globalization has fulfilled some of its early promise to open markets, spur growth, encourage innovation, and remove tariffs, taxes, and other trade barriers between nations over the last two decades, many hurdles and painful costs have festered.Two candidates running for president, Republican businessman Donald Trump and Sen. Bernie Sanders, a self-described Democratic socialist, have successfully made the damaging consequences of globalized U.S. trade policy — such as job outsourcing, wage erosion for mainstream workers, and corporate avoidance of taxes — central to their widespread populist appeal. This week, Harvard Law School (HLS) will host the decennial academic conference of the World Trade Organization (WTO), bringing together scholars, government officials, legal practitioners, and representatives from around the world to discuss the present challenges facing the WTO and the future of trade. The WTO, which began in 1995, oversees the crafting and implementation of multilateral trade agreements and rules, monitors their compliance, and resolves disputes among 162 countries.The lead organizer of the event, Mark Wu ’96, is an assistant professor at HLS who specializes in international economics and trade law. He spoke with the Gazette about the most pressing issues affecting trade and the WTO, and how he sees the future of trade policy.GAZETTE: What’s the history and purpose of this event?WU: The WTO is the intergovernmental organization that governs world trade. Every decade, the Appellate Body, its highest court, convenes a series of worldwide conferences to discuss the issues and challenges that it faces. This conference provides a rare opportunity for the Appellate Body members and senior WTO officials to have a vibrant exchange with its stakeholders. It draws together a diverse set of officials from government, academia, law firms, companies, nonprofit and international organizations, and think tanks. More than 175 people from over a dozen countries spanning five continents, including nearly 50 Harvard alumni, will assemble in Cambridge for this discussion. They harbor different views about whether the WTO dispute-settlement system is working well or not. The conference offers a chance for them to air their views and listen to others whose opinions may differ.GAZETTE: Is this a pivotal moment for the WTO?WU: Since its founding two decades ago, the WTO has had some major achievements, but also faces major challenges. One function that is working well is dispute settlement. This is in contrast to its negotiating function, which is floundering. Since 2001, trade ministers have tried, unsuccessfully, to conclude the WTO’s Doha Round, focused on a development agenda. Last December, those multilateral negotiations broke down in Nairobi [Kenya]. Meanwhile, smaller subsets of WTO countries are working to craft new trade deals among themselves, such as the Trans-Pacific Partnership (TPP) between the United States, Japan, and 10 other countries. However, it’s far from clear whether the TPP will be ratified. This leaves the WTO facing the question of: what next? And it raises the question of what the potential implications for WTO dispute settlement will be if its negotiations cannot be successfully restarted.More broadly speaking, global trade has experienced a slowdown since the financial crisis. Economists are engaged in a debate over how much of this slowdown is structural versus cyclical. But it’s clear that things are not quite the same as they used to be, and the WTO needs to figure out how to adjust.GAZETTE: What do you expect will be the central and or most vigorously debated issues on the agenda? Generally, what are the positions of the key stakeholders on those issues?WU: One of the debates, I expect, will be over what the growth of new trade deals such as the TPP will mean for WTO dispute settlement. Another is likely to be over questions about how to handle tensions arising from countries, such as China, whose economic structure differs dramatically. Another point of disagreement is over whether rules negotiated 20 years ago should be interpreted dynamically to fit the changing context. Some think that in light of the stalled negotiations, this is the preferred approach. Others, however, think that more judicial restraint is required, especially for an international treaty.GAZETTE: What areas need immediate attention? Why haven’t the rules been updated since 1995?WU: Two key areas are services and digital trade. The service economy has exploded since the mid-1990s. But trade in services is not nearly as open worldwide as trade in goods. Also, consider how quickly technology has evolved since the mid-1990s. Trade rules have yet to be updated to address many of the new phenomena arising from digital technologies.What’s made it difficult to update the rules is the fact that WTO negotiations have traditionally operated on the basis of consensus. Countries often have not wanted to move forward on one issue without tying it to progress in another area. In addition, geopolitical power has shifted since 1995, making it more difficult to reach a consensus even among the major trading powers.GAZETTE: Will the outcome of the 2016 U.S. election impact the WTO and trade more broadly? If so, how, and is this a concern for stakeholders?WU: Yes, definitely. It’s not just the WTO that is facing questions about its future. This presidential campaign has illustrated how the American public is itself torn about the direction of this country’s trade policy. Should the U.S. seek to create new trade agreements? If so, what type? Where and with whom should these agreements be made? How the American public decides these difficult questions will have a major impact on the WTO. There is growing concern that the U.S. will focus its negotiating energy primarily on the TPP and other regional agreements, or turn increasingly protectionist. Neither scenario would be good for the WTO as an institution.GAZETTE: Given the lack of progress on the Doha Round, can WTO remain relevant, or are regional trade agreements the future?WU: The WTO is not going away. It will continue to provide the baseline rules for world trade. It will continue to be an important forum for resolving trade disputes. But getting a major multilateral trade round restarted will be a big challenge.Personally, I think the era of the big multilateral trade deals may be nearing its end. Or at the very least, it’s going on a long hiatus. Therefore, WTO rules will likely be supplemented by regional trade agreements and other smaller agreements among subsets of countries in the WTO. We all will have to learn to adjust to a more complicated legal regime, in which the WTO plays a role but does not have the only relevant set of rules.
Similarly, state-owned steelmaker PT Krakatau Steel said in a statement that the mechanism of the government investment stipulated in Government Regulation (PP) No. 23/2020 on the national economic recovery was still being discussed by the authorities.Read also: Government issues regulation on economic recovery program, focuses on SOEs, MSMEs“We hope to get the best mechanism to support the national economic recovery,” president director Silmy Karim said in the statement.Following the issuance of the regulation, the government plans to channel more than Rp 150 trillion (US$10.57 billion) into SOEs through several means, such as state capital injections (PMN), accelerated compensation payment and government investment guarantees. Several ailing state-owned enterprises (SOEs) are still in the dark over how to raise funds to finance their operations and pay debts despite trillions of rupiah worth of government guarantees.State-owned flag carrier Garuda Indonesia president director Irfan Setiaputra said the company was in talks with the Finance Ministry on how it would raise the funds needed to keep its business afloat.“The use of the funds is also still being discussed, but it’s supposed to be used as our working capital,” he told The Jakarta Post on Tuesday. The investment guarantee will be channeled especially to five companies, namely Garuda, train operator PT Kerata Api Indonesia (KAI), housing firm PT Perumnas, Krakatau Steel and agriculture holding PT Perkebunan Nusantara (PTPN), as some of them had been struggling to handle the impact of the COVID-19 pandemic on their businesses.Garuda will receive the biggest amount at Rp 8.5 trillion, while the other four SOEs will receive guarantees of amounts ranging from Rp 650 billion to Rp 4 trillion.On Wednesday, however, Finance Minister Sri Mulyani Indrawati stopped short of specifying the guarantees for Garuda and Krakatau Steel when she announced the new figure of the country’s COVID-19 stimulus budget, which has reached Rp 677.2 trillion from the initial Rp 641.17 trillion.Read also: BI, government to share debt burden to finance business rescue program“There are two SOEs, which Pak [SOE Minister] Erick Thohir will elaborate on, namely Garuda and Krakatau Steel, which will be given investment guarantees. The SOE minister will decide on the best scheme to support the two companies,” she said during a teleconference after a limited Cabinet meeting.Erick, however, was not among the high-ranking officials making statements in the briefing.Arya Sinulingga, an aide to Erick, said on Tuesday that the government would not inject money directly into the five SOEs but rather only provide guarantees for their loans.“This investment will not come from the state budget. The government merely provides a guarantee for Garuda and the other SOEs and they will seek external funding themselves [using the guarantee],” he said during an online press briefing.He said the raised funds could be in the form of bank loans or other means of fundraising, and that the companies would be responsible to pay the loans themselves.Garuda Indonesia is asking for a three-year extension on $500 million worth of global sukuk due on June 3 and going to ask for approval from bondholders for the extension during their meeting on June 10.Krakatau Steel, meanwhile, has been struggling to pay its debts even long before the outbreak hit the economy. Earlier this year, the company received the green light from its creditors, mainly local banks like state-owned Bank Mandiri and Bank Negara Indonesia, to restructure its loans totaling $2 billion in a bid to avoid bankruptcy.Read also: Krakatau Steel books first profit in eight yearsFinance Ministry State Assets Director General Isa Rachmatarwata said on May 20 that the investment would be channeled through the ministry’s special missions vehicle (SMV), as every SOE had different problems.Institute for Development of Economics and Finance (Indef) researcher Abra Talattov said on Wednesday that the SOEs receiving the government investment should work to raise their own funds, whether through bond issuance or bank loans.“Some of these SOEs have been having debt problems before the COVID-19 pandemic, so investors are likely to be more careful in investing in them due to their high-risk nature,” he told The Jakarta Post over the phone.Topics :
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