Trade Agreements: The Important Role of Transparency

International trade can be inhibited in two ways; through the use of mechanisms that directly alter the flow of goods and poor transparency in the rules of trade. The former includes tariffs and other border measures, subsidies and non-tariff barriers. The effect on trade flows resulting from issues of transparency is indirect. When the rules of trade are unclear for firms considering investing in trade related activities, the risks associated with those investments increase and investment is inhibited. If there is less investment in trade related activities, trade flows will be reduced. Poor transparency exists in contingent protection measures such as anti-dumping – currently on the agenda of the Rules negotiations at the WTO and – customs and related procedures – on the agenda in the Trade Facilitation negotiations. Increasing transparency can have important trade liberalizing effects. Trade negotiators often focus on achieving a big result from reductions in border measures and subsidies where there may be considerable resistance from protectionist vested interests. If progress can be made in increasing the transparency of trade rules, a less ambitious result may be acceptable for the direct aspects of trade liberalization.