New Articles

Simon Paris, Chair of the World Trade Board & CEO of Finastra, Provides a Snapshot of this year’s World Trade Symposium

world trade

Simon Paris, Chair of the World Trade Board & CEO of Finastra, Provides a Snapshot of this year’s World Trade Symposium

Protecting world trade from the current vicious cycle of trade tensions makes it imperative that those in a position to effect change – public and private sectors – work together; quickly and cohesively. Chairman of the World Trade Board and CEO of Finastra, Simon Paris, discusses three ways in which committed organizations can bring about a new pro-trade paradigm, even against the backdrop of today’s protectionist narrative, to lift people out of poverty globally and enable long-term growth and prosperity for all.

Across the globe, protectionist rhetoric and policy initiatives have become increasingly normalized. Tensions and tariffs continue to escalate with the World Trade Organization estimating that $339.5bn1 in trade is now at risk from import restrictions – the second highest level ever recorded. Amidst this trend, we as business leaders, policy makers, and engaged thinkers must deepen our commitment to free and open trade benefiting communities and workers.

The path to open trade and ensuing economic growth is under shadow. The global economic uncertainty2 risk index hit an all-time high this year. Ongoing friction between the United States and China has not only caused a tangible 12% drop in US imports from China, but triggered aftershocks across other Asian economies as a result of closely integrated supply chains3. Japan and Korea have made headlines with their own trade war that risks their trade relationship worth about $85 billion a year4 and the future economic relationship between the United Kingdom and the European Union amidst Brexit is uncertain.

In response free traders should commit to three acts of solidarity, with the aim of reversing – or as an absolute minimum, reducing – the pervasive change that continues to threaten trade as we know it.

Three commitments that will drive change

Firstly, we must be persistent in our reinforcement of the pro-trade narrative; uniting to protect and promote open trade as the unequivocal foundation for global prosperity and economic inclusion. Secondly, we must continue to investigate ways in which we can reduce the SME funding gap, currently estimated at $1.5 trillion5, which is precluding both innovation and financial independence on a global scale. It is imperative that we seek out new ways to free up finance or neutralize the perceived risk of lending to small firms. At a time where the least developed countries represent less than 1% of world exports6, we must find solutions that unlock the latent value within SMEs to stimulate competition, innovation and economic growth, and reduce the disparity of wealth in a sustainable way.

Finally, we must examine how open technology can act as the enabler for inclusive, sustainable trade. As global supply chains become increasingly complex, our goal should not be measured on a binary figure of turnover or profit, but on the ethical and sustainable impact of our technological innovation; our technological social responsibility (TSR). How can we use technology, collectively, to ascertain the provenance of materials, improve the health and wellbeing of workers in remote locations, reduce the cause and effects on environment pollution of long-distance transportation or minimize the impact of waste and disposal? How can we use open finance technologies – and by this, I include open systems, open software, open APIs, open standards and open partner networks – to transform supply chains and encourage the formulation of more relevant and inclusive trade models, in support of ethical trade?

Protecting against threats, known and unknown

A global marketplace helps ensure a sustainable model of financial inclusion that protects future generations against wealth disparity and isolation. I believe that it is only through a powerful combination of forward-thinking policies, collaborative mindsets and funding, underpinned by open finance technology, that we can deliver the change so desperately required, that promotes equality and opportunity, and reverses the trend of poverty and protectionism. It is time to find solutions to today’s threats to open trade and together protect against further polarization and the unseen threats of tomorrow.

Simon Paris will be opening the third World Trade Symposium, held in the Grand Hyatt, New York on 6-7 November. The event brings together policy-makers, trade finance luminaries and thought leaders to openly collaborate and effect change. Register Today!


1. https://www.wto.org/english/news_e/news19_e/trdev_22jul19_e.htm

2. http://policyuncertainty.com/

3. https://www.oecd.org/newsroom/international-trade-statistics-trends-in-first-quarter-2019.htm

4. https://www.nytimes.com/2019/08/28/business/japan-south-korea-trade.html

5. https://www.wto.org/english/news_e/spra_e/spra241_e.htm

6. https://www.wto.org/english/res_e/statis_e/wts2019_e/wts2019_e.pdf

__________________________________________________________________________

Simon takes responsibility for Finastra’s strategic direction and growth. His leadership steers the company as it realizes its open platform vision, encouraging industry-wide collaboration to spark innovation and transform the next generation of financial services.

A firm believer in the principles of doing well by doing good, Simon chairs the World Trade Board and is passionate about how technology and open trade can drive financial inclusion and improve people’s lives.

An inspiring and trusted Fintech thought leader, Simon speaks regularly at large-scale events including the annual World Trade Symposium, Paris FinTech Forum and The Milken Asia Summit. He is a strong advocate for diversity and inclusion, with refreshing and candid views on equality in the workplace. He was also named in Bank Innovation’s ‘Innovators to Watch’ list for 2018.

Simon joined Finastra (formerly Misys) as President in 2015, was appointed Deputy Chief Executive Officer in 2017 and became Chief Executive Officer in June 2018. He brings more than 20 years of sales, management and global leadership expertise to the company, having previously held the role of President, Industry Cloud, at SAP. Prior to that he was a senior consultant with McKinsey & Company.

He holds a degree in Business Administration (MBA) from the INSEAD Business School in France and a Bachelor’s degree in Business & European languages from the European Business School.

carousel

CAROUSEL RETALIATION: TARIFF UNCERTAINTY ON ANOTHER RIDE

The Ride Music Starts

On October 2, a World Trade Organization (WTO) arbitrator rendered a decision that authorizes the United States to apply retaliatory tariffs on as much as $7.5 billion worth of European exports each year until WTO-illegal European subsidies to its aircraft industry are removed.

In a press release issued that day, the U.S. Trade Representative (USTR) announced that beginning October 18, the United States would apply WTO-approved tariffs on a list of EU products. The list includes 10 percent duties on civil aircraft, but also 25 percent duties on goods we consume directly including butter, various cheeses, clementines, clams, green olives and single-malt Irish and Scotch Whiskies.

Before their next cocktail party, U.S. shoppers might stock up to beat the tariffs, but they may not want to go overboard buying Parmigiano Reggiano. That’s because the Administration is reportedly considering what is known as “carousel” retaliation – a regular rotation of goods targeted for tariffs, designed to impose maximum pain. The United States and Europe have been on this ride before.

Theme Park Rules

In a trade dispute, the parties first enter into consultations. If they are unable to come to an agreement, the complainant may request a WTO panel to review the dispute. Once the panel issues a report, the WTO Dispute Settlement Body (DSB) will adopt it, unless a party appeals it or all DSB members vote against adoption.

If there is an appeal, the Appellate Body reviews the case and delivers its findings, together with the panel report as modified by the appeal, to the DSB. If the complaining party wins, the losing party is given a “reasonable” period of time to implement the decision. The original panel may be called upon to determine if the losing party implemented the ruling in the agreed timeframe. If not, there are two alternatives for the party bringing the case: seek compensation or retaliate. In the latter case, the complainant estimates its loss, the losing party can seek arbitration on the level, and the DSB authorizes the final amount.

Such countermeasures should be “equivalent” to the injury caused and “related to” the economic sector of the illegal measure, with the goal to induce the removal of the offending measure. Often the offending party will, in fact, withdraw the measure before the imposition of authorized retaliatory measures.

US wins 7.5 billion dispute against EU on Airbus illegal subsidies

Beef and Bananas – How Carousel Started

In some cases, applying tariffs on imports isn’t enough to induce compliance. When the United States, Ecuador, Honduras, Guatemala and Mexico won their case in the WTO challenging the legality of Europe’s banana import policy, the European Union (EU) failed to comply with the ruling, even in the face of nearly $200 million in U.S. tariffs.

U.S. banana exporters, increasingly frustrated with the EU’s lack of compliance with the WTO ruling, looked to Congress to enact a new tool to increase the pressure. They found allies in U.S. livestock exporters, who had won a WTO case that a European ban on U.S. imports of meat produced with hormones was inconsistent with the EU’s WTO obligations. As with the banana case, the EU had employed delaying tactics to stall implementation of the panel decision against it.

Riding a New Horse

Two months after USTR imposed retaliatory tariffs in the beef hormone dispute, a group of Senators introduced S.1619, the Carousel Retaliation Act of 1999. Proposed as an amendment to Section 301 of the Trade Act of 1974, its provisions would have required USTR to “carousel” or rotate its product retaliation list when an offending country does not implement a WTO decision. More specifically, USTR was to rotate items 120 days after the first retaliation list and every 180 days thereafter, with the ability to opt not to do so if compliance is imminent or rotation is deemed unnecessary. The bill language ultimately became part of the Trade and Development Act of 2000.

While banana and meat producers were supportive, other industries were not. Some argued that frequently rotating the products subjects to tariffs would be challenging for retailers. The EU contended the method was WTO inconsistent, though the WTO never ruled on the matter.

USTR ultimately did not pull the trigger to rotate its retaliatory tariff list in either the banana or beef cases as the matters got bound up in a separate dispute over U.S. tax benefits for foreign sales corporations (FSC). The EU had previously won a case against FSC and the U.S. amended its law in November 2000 in response. The EU challenged whether that revision brought the measure into WTO compliance. The United States and EU agreed informally that the EU would not pursue sanctions in the FSC case, but if the United States revised its product lists under the carousel provisions, all bets were off. Ultimately, the WTO ruled the revised U.S. law was not compliant, the United States lost its appeal, and the issue was not resolved until five years later.

Others Get on the Ride

The United States develops retaliation lists with an eye to maximizing pain on the trading partner that committed the foul, while trying to minimize the inevitable adverse impact on its own consumers and firms. Mexico has adeptly turned this practice against the United States in response to practices it viewed as inconsistent with WTO or NAFTA obligations.

NAFTA provisions governing retaliation state that an injured party should first “seek to suspend benefits in the same sector” as that covered by the restrictive measure. If it is not practical or effective to suspend benefits in the same sector, the injured party “may suspend benefits in other sectors.”

During the original NAFTA negotiations, the United States and Mexico agreed to phase out restrictions on cross-border passenger and cargo services. In 1995, however, the United States announced it would not lift restrictions on Mexican trucks and, in 2001, a NAFTA dispute panel found the U.S. to be in breach of its obligations. After years of negotiation and a false start with a U.S. pilot program, Mexico retaliated in 2009 on more than $2 billion worth of U.S. goods.

Mexico used a carousel approach, rotating different products on and off the retaliation list. The first list of 89 products went into effect in March 2009. The list was revised in August 2010, by removing 16 of the listed products and adding 26 more, bringing the total number of products on the updated list to 99. Through this method, Mexico was able to target key pain points, leading the U.S. to institute another pilot program in 2011, and Mexico to remove its tariffs.

More recently, when the Trump Administration moved forward with 25 percent tariffs on Mexican steel imports and 10 percent tariffs on Mexican aluminum imports in June 2018, Mexico responded with retaliatory tariffs on $2.7 billion of U.S. goods that included various steel products but also pork legs, apples, cheese and other agricultural products that had seen significant growth in export value and market share in Mexico.

In March 2019, Mexico’s Deputy Economy Minister Luz Maria de la Mora stated that if the United States did not repeal the tariffs, her government would have an updated list in its “carousel” of U.S. targets ready in about two months, noting that Mexico would bring in some new products and remove others. In early May, she announced the revised list was ready and under final review, but the United States agreed in mid-May to remove its tariffs, hoping to boost the chances of ratification of the U.S.-Mexico-Canada (USMCA) agreement.

Round and Round We Go

Perhaps symbolic of the differences that the United States and Europe are trying to bridge, in America carousels turn counterclockwise and in England and much of Europe, they rotate clockwise.

Some observers see the recently announced U.S. retaliation list against the EU as more restrained than expected. Tariff rates of 100 percent had been possible and some of the announced exemptions were not anticipated. We’ll soon know more about the Trump Administration’s thinking on a carousel approach and how the Europeans will respond. There are no height restrictions to get on this tariff retaliation ride, but riders may need to buckle up.

__________________________________________________________________

Leslie Griffin is Principal of Boston-based Allinea LLC. She was previously Senior Vice President for International Public Policy for UPS and is a past president of the Association of Women in International Trade in Washington, D.C.

This article originally appeared on TradeVistas.org. Republished with permission.

Multilateral Trade Negotiations Continue

Austria is the latest country to step up and contribute to support developing and least-developed countries (LDCs) and thier participation in global trade efforts. A total of 400,000 EUR was donated last week to assist in financing trade workshops with an overall vision of successful implementation of WTO agreements, according to a release from WTO.

I firmly believe that the multilateral trading system, particularly the World Trade Organization, plays an essential role in boosting international trade and helping improve the livelihoods of millions of people in both developed and developing economies. Through our contribution to the Trust Fund, we aim to help developing economies integrate into world trade and contribute more actively to the world economy,” Austria’s Federal Minister for Digital and Economic Affairs, Margarete Schramböck, said.

This donation is one of many over the last 15 years from the country of Austria, totaling $15 million EUR towards funds for the WTO. As more developing countries are educated and supported in trade education initiatives, global trade efforts will present more opportunities for industry players.

“I want to thank Austria for supporting WTO trade-related programmes aimed at enhancing the capacity of developing countries and LDCs to trade and to fully participate in multilateral trade negotiations. Austria’s generous donations are very welcome,” said Director-General Roberto Azevêdo.

Source: WTO

WTO: Global Customs Agreement Deal In a Fortnight

Los Angeles, CA – There is a “high probability” that a major deal on streamlining global customs rules will be implemented within two weeks now that the U.S., the European Union and India have reached a compromise agreement on agricultural subsidies.

India said it will sign the Trade Facilitation Agreement (TFA) as the U.S. and the EU have said they will accept India’s demand that it be allowed to stockpile food without observing the usual World Trade Organization rules on government subsidies and that developing countries be provided flexibility in fixing minimum support price for farm products.

India’s stand plunged the WTO into a crisis that effectively paralyzed the global trade group and risked derailing the customs reforms that are seen affecting an estimated $1 trillion to global trade.

“I would say that we have a high probability that the Bali package will be implemented very shortly,” said WTO Director-General Roberto Azevedo. “I’m hopeful that we can do it in a very short period of time, certainly within the next two weeks.”

Implementation of all aspects of the Trade Facilitation Agreement package, he added, “would be a major boost to the WTO, enhancing our ability to deliver beneficial outcomes to all our members.”

Azevedo made his comments ahead of the recent Group of 20 Leaders Summit in Brisbane, Australia.

The compromise U.S./EU/India agricultural subsidy deal included no major revision of the original WTO deal struck last December, which provided for India’s food stockpiling to be shielded from legal challenge by a “peace clause.”

A food security law passed by India’s last government expanded the number of people entitled to receive cheap food grains to 850 million.

India recently disclosed that its state food procurement cost $13.8 billion in 2010-11, part of the total of $56.1 billion it spends on farm support. Wheat stocks, at 30 million tons, are more than double official target levels.

The deal, which needs to be backed by all 160 WTO members, has resurrected hopes that the trade body can now push through those reforms, opening the way up for further negotiations.

11/19/2014

WTO Downgrades Trade Growth Forecasts

Geneva, Switzerland – The World Trade Organization has reduced its forecast for world trade growth in 2014 to 3.1 percent, a significant drop from the 4.6 percent it made in April.

In addition, it also cut its estimate for 2015 to 4.0 percent from its previous 5.3 percent forecast.

The downgrade “comes in response to weaker-than-expected GDP growth and muted import demand in the first half of 2014, particularly in natural resource exporting regions such as South and Central America,” the global trade group said.

Beyond the specific downward revisions, it said, “risks to the forecast remain predominantly on the downside, as global growth remains uneven and as geopolitical tensions and risks have risen,” while “international institutions have significantly revised their GDP forecasts after disappointing economic growth in the first half of the year,” said WTO Director-General Roberto Azevêdo.

When the last forecast was released in April 2014, conditions for stronger trade growth seemed to be falling into place after a two year slump that saw world merchandise trade grow just 2.2 percent on average during 2012–13, with leading indicators at the time pointing to an upturn in developed economies and Europe in particular.

“Although growth has strengthened somewhat in 2014, it has remained unsteady,” the WTO said with output in the US during the first quarter of this year falling by –2.1 percent, annualized rates and in the second quarter in Germany by –0.6 percent, “sapping global import demand.”

China’s GDP growth also slowed from 7.7 percent in 2013 to 6.1 percent in the first quarter of this year before rebounding in the second. The slow first quarter contributed to weak exports in trading partners.

“As a result of these and other factors, global trade stagnated in the first half of 2014, as the gradual recovery of import demand in developed countries was offset by declines in developing countries,” the WTO said.

Growth in trade and output “is expected to be somewhat stronger in the second half of 2014 as governments and central banks may provide policy support to boost growth, and as idiosyncratic factors such as harsh weather conditions in the US and a sales tax rise in Japan weighted on trade in the first half of this year begin to fade.”

However, the WTO said, “several risk factors on the horizon have the potential to produce worse economic outcomes.”

For example, it said, tensions between the European Union and the US on the one hand and the Russian Federation on the other over Ukraine have already resulted in trade sanctions on certain agricultural commodities, and the number of products affected could widen if the crisis persists.

At the same time, the continuing conflict in the Middle East “is also stoking uncertainty, and could lead to a spike in oil prices if the security of oil supplies is threatened.”

This is the moment, he said, “to remind ourselves that trade can play a positive role here. Cutting trade costs and broadening trade opportunities can be a key ingredient to reversing this trend,” said the WTO’s Azevêdo.

09/24/2014