Daniel Witt, Member of the advisory board of Crystol Energy and President of the International Tax and Investment Center
With the many changes in both tax and trade policy from the new US Administration, many worry about the path forward. From another perspective, however, the good news is that progress is happening all over the world.
Even in the effective absence of the US from multilateral tax and trade discussions, regional economic cooperation is thriving—in Southeast Asia as regional coordination expands; in Africa as political will grows for the African Continental Free Trade Area and some African countries face significant tariffs on their exports; and notably in the Middle Corridor, which is enjoying renewed prominence in global trade as China and Europe increase their economic links.
This matters: tax, customs, and trade policy and administration are key components of the requisite soft infrastructure of regional cooperation that complements the hard infrastructure of railroads, airports, and seaports. The Middle Corridor is making such progress now not just because of upgrades in hard infrastructure that offer attractive alternatives, but because there is cooperation in both types of infrastructure. Similar progress is happening in other regions, now accelerated by dramatic changes in the global trading system.
Progress on tax cooperation and administration is serving as a catalyst for increased trade. A few years ago, this focus on regional cooperation was thought to hinder globalization. In today’s new reality, however, it is likely a sensible way forward—a way for countries to increase trade on a foundation of greater cooperation in tax and other forms of soft infrastructure that will benefit investors and promote trade, whatever the US’ position may be.
Increased regional cooperation expands the field and changes the game. Globalization is stumbling, but far from dead. Regional cooperation may help revive it. Developing countries have opportunities to turn the current highly volatile situation into a race to the top. Tax policies that drive economic growth are even more urgent in the current environment.
This article reflects the author’s personal views and insights, developed following discussions at ITIC’s 17th Silk Road Tax Forum held in Tbilisi. The forum welcomed over 100 participants from the public and private sectors across Mongolia, Central Asia, the Caucasus, and Turkey. The content does not necessarily represent the official views of Crystol Energy or any of the participating institutions.
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