1. Regional ‘ Think 20 ’ Seminar ‘ The G20 Leaders ’ Process Five Years On: An Assessment From an Asian Perspective ’

2. John Ravenhill Australian National University Presentation for the Lowy Institute G20 Regional “Think 20” Workshop, Sydney, 23-24 May 2013 Trade, Investment and the G20 2

3. ROBUSTNESS OF THE GLOBAL TRADE REGIME 3

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7. Oct 2008 to Oct 2009 a Nov 2009 to May 2010 a Mid-May to mid-Oct 2010 b Mid-Oct 2010 to April 2011 b May to mid-Oct 2011 c Mid-Oct 2011 to mid-May 2012 d Mid-May to mid-Oct 2012 d Cumulative total d Share in total world imports 0.80.40.20.5 0.90.33.5 Share in G-20 imports 1.00.50.30.6 1.10.44.4 Share of Trade Covered by Import-Restricting Measures 2008-12 (%) WTO Secretariat 7

8. Why Successful? G20 Pittsburgh Commitment Fear of Sanctions? Reputational Concerns? Domestic Interests in a World of Global Value Chains 8

9. WTO Robustness & Implications Bicycle Analogy Incorrect? but Failure of Legislative Function vs Success of Judicial Activism? 9

10. TRADE AND INVESTMENT POLICY IMPLICATIONS OF VALUE CHAINS 10

11. Value Chains have produced “a new paradigm where products are nowadays ‘Made in the World’” Pascal Lamy 2012 11

12. Emergence of Value Chains Transport Revolution: Containerization, Air Freight Increasing Liberalization of Trade and Investment Regimes New Business Model where companies concentrated activities at most profitable points: R&D, design, control of brand name, distribution (manufacturing outsourced) 12

13. Market-Driven Regionalization? Government Facilitation: –Unilateral Liberalization –Export-Processing Zones and Duty-Drawback Arrangements –Sectoral Liberalization: ITA –Infrastructure –Competitive Exchange Rates –Regional Cooperation 13

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15. Mutual Adjustment Process One of agreed indicators: external imbalances ‘composed of the trade balance and net investment income flows and transfers’ 15

16. Policy Consequences: (1) How we calculate global imbalances Overall US trade deficit with China would be 40% less if measured in VA terms 16

17. Policy Consequences (2) Relevant Trade Policies 1.If it ain’t broke, don’t fix it 2.Washington Consensus Redux 17

18. (1) Room for Improvement Need to update, revitalize ITA Limits to Export-Processing Zones & Need to Universalize/Bind Tariff Reductions Behind-the Border Agenda –Product standards, etc. [But not the US WTO Plus Template?] Services 18

19. Liberalize to Gain Entry to Value Chains Necessary? Certainly not Sufficient to gain major share of benefits –Apple profit on iPhone c. 60 percent of retail price. China value added < 1 percent. –To capture larger share of value added, avoid middle income trap, need domestic upgrading 19

20. Value Chains and Investment No simple correlation: –Buyer driven chains –Investment may be from Third Parties 20

21. A Case for a WTO-based Investment Treaty? Long history of failure in investment negotiations (from ITO to MAI) Bilateral Investment Treaties (& Their Multilateralization) 21

22. Number of TreatiesDisputes submitted to ICSID Brunei Darussalam80 Cambodia211 China1271 Hong Kong15n.m.* Indonesia622 Japan160 Korea901 Laos23n.m.* Malaysia673 Myanmar6n.m.* Philippines352 Singapore410 Taiwan23n.m.* Thailand390# Table 1: Bilateral Investment Treaties Concluded by East Asian States, May 2011 * Non-Member 22

23. Multilateralization of Investment Treaties? Equivalent Content? Move to plurilateral agreements: ASEAN Comprehensive Investment Agreement; China, Japan, Korea agreement Inclusion of investment chapters in PTAs 23

24. In Conclusion: Need new measure of trade Revitalized ITA, Behind the Border Issues, Services Need to link trade to agenda that addresses interests of developing economies in upgrading (also includes facilitation of structural adjustment in industrialized world) Need to find out from business community exactly what impedes their management of supply chains 24

25. Regional ‘ Think 20 ’ Seminar ‘ The G20 Leaders ’ Process Five Years On: An Assessment From an Asian Perspective ’