Peter Gallagher

We indi­cated in our ear­lier paper on alter­na­tive frame­works for agri­cul­ture nego­ti­a­tions (Gal­lagher and Stoler (2008b)) the ini­tia­tive for product-oriented CMs would prob­a­bly come from com­mer­cial sources because such agree­ments inevitably have a mer­can­tilist cast. We showed from direction-of-trade data that there appear to be fea­si­ble con­cen­tra­tions of trade—where a rel­a­tively small num­ber of mar­kets rep­re­sents a high pro­por­tion of imports and exports of an agri­cul­tural product—that would meet the require­ment for a suf­fi­cient num­ber of par­tic­i­pants in a CM nego­ti­a­tion. But we thought the the chal­lenge would be to find fea­si­ble oppor­tu­ni­ties that offered worth while results for the par­tic­i­pants. The mer­can­tilist mar­ket access inter­ests of exporters and importers are dia­met­ri­cally opposed; they are not likely to com­ple­ment each other in an agree­ment on a sin­gle prod­uct or even a nar­row range of prod­ucts. Requests are likely to be one-sided and unrec­i­p­ro­cated.

We pointed to the poten­tial for ‘clus­ters’ of prod­ucts that could pro­vide the broader base of a rec­i­p­ro­cal agree­ment to be found within the data that we col­lected at the 4–6-digit level of the Har­mo­nized Sys­tem (HS). Within ‘cheese’ (for exam­ple), a cat­e­gory dom­i­nated by a small num­ber of exporters and a large num­ber of importers, there is a wide vari­ety of dis­tin­guish­able prod­ucts (‘hard’, ‘grat­ing’, ‘soft’, ched­dar, and ‘arti­sanal’) that reveal a much more diverse net­work of exchanges. The same econ­omy could find itself on the export side of one cheese trade and the import side of another (as Aus­tralia does with ‘ched­dar’ style and soft cheeses, for exam­ple).

Our model for this sug­ges­tion is the exist­ing, suc­cess­ful, CM agree­ments in WTO to which Peter Lloyd (and oth­ers) refer. The ITA and the Ser­vices CMs have been con­structed on top of a rich net­work of intra-industry exchange where the same economies find them­selves on both the export and import side of trades in the same four– or even six-digit sec­tor of the HS. The sig­nif­i­cant con­tri­bu­tion that intra-industry trade brings to trade, pro­duc­tion and, invest­ment growth, and to the oppor­tu­ni­ties for entre­pre­neurs to ben­e­fit from knowl­edge spillovers (spread­ing inno­va­tion) explains the long­stand­ing atten­tion of analysts.9 None of this requires a trade agree­ment, of course.

If any pol­icy favors intra-industry trade then it is likely to be CM agree­ments focused on a prod­uct group in which there are high lev­els of intra-industry trade. A CM may be a the best-adapted pol­icy frame­work for align­ing the reduc­tion of for­mal trade bar­ri­ers and joint action to facil­i­tate trade through co-operative mea­sures on e.g. cus­toms for­mal­i­ties and stan­dards or, as Tim Josling argues, for an agree­ment com­bin­ing both export and import bar­rier under­tak­ings. Typ­i­cally, pri­mary prod­ucts exhibit a low rate of intra-industry trade for obvi­ous rea­sons: there is sim­ply no point in trade within sim­ple prod­uct group in which prod­ucts have no ‘inter­me­di­ate’ com­po­nents. How­ever, sim­ply and elab­o­rately processed pri­mary prod­ucts do undergo intra-industry trade and the inten­sity of this trade is increas­ing rapidly, espe­cially in the food sec­tor, accord­ing to a sur­vey con­ducted for the World Bank’s World Devel­op­ment Report, 2009.

“Pro­por­tion­ally the largest rise in IIT is observed in the “Food and Live Ani­mals” sec­tor (SITC sec­tor 0), which exhibits a nine-fold rise from a GL index of 0.02 in 1962 to a GL index of 0.17 in 2006. Clearly, with the increas­ing sophis­ti­ca­tion and dif­fer­en­ti­a­tion of food prod­ucts, even agri­cul­tural goods are now sub­ject to con­sid­er­able IIT.” (Brul­hart, 2008)

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