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ASIA-PACIFIC RESEARCH AND TRAINING NETWORK ON TRADE ARTNeT CONFERENCE ARTNeT Trade Economists’ Conference Trade in the Asian century - delivering on the promise of economic prosperity 22-23rd September 2014 Round table discussion on What do trade policymakers need to know about trade and what can ARTNeT do about it? www.artnetontrade.org Missing Links in Trade Policy and ARTNeT’s role in bridging the gap Ajitava Raychaudhuri Department of Economics Jadavpur University Kolkata 700032 Main challenge is to understand the link between the real sector and the monetary sector so that shocks originating in the real sector could be traced through its transmission to exchange rate movement and monetary policy and vice versa. The classical neutrality does not hold for developing countries even in medium to long run since they have unemployed resources. Thus although one mentions regional integration in terms of more parts and components import, one hardly relates it with its link to credit availability or interest rate or inflation. One finds very few references to this by trade policy making. A similar point arises in the case of requirements for better trade facilitation to reduce trade costs. This brings the complementary question whether financing trade facilitation should be part of trade itself so that countries requiring massive investments in this field could substantially benefit leading to higher global efficiency in the long run. Trade policy and trade facilitation policy are viewed separately as if they are necessarily separable functions. This might be suboptimal in many cases. It is difficult to understand government policies to promote synergy between large and small enterprises in terms of inbound FDIs. One finds mention of supply chain but no clear signal as to the types of optimal government interventions which might promote this. Trade data on services still require more transparency. One may mention the fuzzy nature of the head travel in case of mode 2 (consumption abroad) as well as commercial presence data (mode 3) which are available for only few countries. Efforts to identify barriers to service trade are few and trade policy makers hardly highlight these. One needs more studies and policy discussions on this. Examples may be cited for perceptions as barriers in case of service trade in case of health and education The present shooting up of exchange rates for many currencies indicates need for optimal intervention so that it stays within a band. Standards have become more relevant after substantial liberal trade regimes have ushered in. Unfortunately, in many cases, these are discussed more in public economics models rather than trade models. This limits the policy space so that standards appear to be public policy issues in closed economy more. Debates are quite rich in terms of impact of trade on growth, poverty and inequality. What is not clear always is the role of trade policy in this context. Trade creates inequality due to skill differences in the tradable goods content is a well known argument. Liberal trade policy aggravates this in the short run is also acceptable. What is not clear is the role of trade policy in reducing this inequality. The problem is how to distinguish and measure the impact of trade policy in reducing this since other public policy also works on this. One may use econometric techniques to isolate the effect of trade policy, but that does not very clearly establish always the channels through which this works. One needs to focus on this issue more in the coming days, especially if trade and investment are to be connected