EMERGING POLICY ISSUES: LOCALISATION BARRIERS TO TRADE

Transcription

1 EMERGING POLICY ISSUES: LOCALISATION BARRIERS TO TRADE 78 th Session of the Steel Committee 12 May 2015 Susan Stone, Dorothee Flaig and James Messent Development Division Purpose of the Report 1. Measure the impact of localisation policies on global markets. Industry measures focus on quantitatively restricting imported inputs or provide price preferences for using domestic inputs. Government procurement uses a variety of methods, both at the national and sub-national level, to support the use domestic inputs. Data restrictions are usually via some kind of commercial presence requirements (e.g. processing using domestic servers). 2. Impact Analysis focuses on Industry input measures. Identify those measures which are: Currently in-force Binding Trade-focused (i.e. no investment or labour measures) OECD Trade and Agriculture Directorate 2 1

2 OECD Trade and Agriculture Directorate 3 Example India s Electricity LCR 84% of inputs to electricity sector to be sourced domestically Imported inputs to Electricity go down 48% Coal, Oil and Gas Output goes up 3.4% Electricity Prices increase 0.33% Output of electricity falls 0.26% Domestic Market Adjusts Domestic production costs go up 0.04% Domestic sales of Coal, Oil and Gas to households decline 2.7% India s exchange rate appreciates 0.3% International Markets Adjust Coal, Oil and Gas sector increases imports by 5% Exports of Coal, Oil and Gas Increase 0.05% India s Trade declines Net Outcomes Exports of Electricity decrease 0.35% India s PPI increases 0.07% 4 2

3 OECD Trade and Agriculture Directorate 5 Example: Brazil Communications Reallocation leads to suboptimal outcomes Manufacturing equipment As domestic use of manufacturing equipment increases in communications, it decreases in other sectors Imports of manufacturing equipment increase Price of manufacturing equipment rise (intermediate prices increase 0.04%) Labour demand in sectors using manufacturing equipment fall. Electronic equipment Same trends OECD Trade and Agriculture Directorate 6 3

4 Percent Agriculture Coal, oil, gas Other minerals Food products Textiles, etc. Transport products Manufacturing equipment Motor Vehicles Electronic equipment Other manufacturing Electricity Construction Transport Insurance Trade Business services Recreation Other services 12/05/ % Change in Imports of non- Communications Sectors Manufacturing equipment Electronic equipment Total of All Other 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% -0.10% OECD Trade and Agriculture Directorate 7 OECD Trade and Agriculture Directorate 8 4

5 Agriculture Coal, oil, gas Other minerals Food products Textiles, etc. Transport products Manufacturing equipment Electronic equipment Other manufacturing Electricity Construction Transport Water transport Insurance Trade Communication Business services Recreation Other services 12/05/2015 Exports of other Russian Sectors from MVH LCR 0% 0% 0% -2% -2% OECD Trade and Agriculture Directorate 9 Insights from the Model Ability to: Focus on Intermediates: For example, the restrictions on motor vehicles were applied to the import of intermediate goods only thus allowing the final demand market to operate with no such restrictions. Track the different response for Households For example, Argentina's LCR on insurance caused imported intermediates to drop 3.13% but household purchases of imported insurance products increased 0.035%. Capture price discrimination of different markets and subsequent affect on trade partners For example, Indonesia increases its exports of water transport services with the largest declines coming in exports of the EU and the rest of the OECD. OECD Trade and Agriculture Directorate 10 5

6 Insights from the Analysis Reallocation effects can concentrate production can undermine value chain objectives Difference in outcomes between intermediates and final demand LCRs can serve as a platform to increase exports. Influence of exchange rates can undermine competitiveness of other export sectors OECD Trade and Agriculture Directorate 11 Thank you for your attention Trade and Agriculture Directorate 12 6