Showing papers in "The World Economy in 2000"

How much damage will climate change do? Recent estimates

Abstract: Two reasons to be concerned about climate change are its unjust distributional impact and its negative aggregate effect on economic growth and welfare. Although our knowledge of the impact of climate change is incomplete and uncertain, economic valuation is difficult and controversial, and the effect of other developments on the impacts of climate change is largely speculative, the authors find that poorer countries and people are more vulnerable than are richer countries and people. A modest global warming is likely to have a net negative effect on poor countries in hot climates, but may have a net positive effect on rich countries in temperate climates. If one counts dollars, the world aggregate may be positive. If one counts people, the world aggregate is probably negative. Negative impacts would become more negative, and positive impacts would turn negative for more substantial warming. The marginal costs of carbon dioxide emissions are uncertain and sensitive to assumptions that partially reflect ethical positions, but are unlikely to be larger than $50 per tonne carbon.

E-commerce, WTO and developing countries /

Abstract: ................................................................................................................iii

Agri‐environmental Pelationships and the Choice of Policy Mechanism

Abstract: T HE main goal of international trade liberalisation is to establish a trading environment in which all firms compete on an equal footing. This includes a concern that all firms should pay the full costs of the inputs that are used in the production process. Where the production generates external costs, the Polluter Pays Principle has been widely accepted as indicating that the firm should bear the costs of environmental regulation (OECD, 1972). While for many years agriculture stood outside of most negotiations on international trade, it has taken a key role since the inception of the Uruguay Round of trade negotiations (Ingersent et al., 1995). In this context, agricultural policy has come under scrutiny to examine whether it is in conflict with trade liberalisation. Following the conclusion of the Uruguay Round trade negotiations, policies are exempt from commitments to reduce aggregate measures of support (AMS) if they fall into the ‘green box’ by meeting a number of criteria specified in Annex 2 of the Agreement on Agriculture. Policies have both to meet policy-specific criteria and to meet more general criteria that ‘they should have no, or at most minimal, trade distortion effect or effects on production’, that they must be financed by government (rather than involving transfers from consumers), and that they shall not provide price support to producers. Tangermann (1996, pp. 332–3) comments that these general criteria may prove to be more binding than the policy-specific ones. It is sometimes argued that agriculture in some places is different; that agriculture receives support in respect of the contribution that agricultural land management makes in protecting the quality of the rural environment and in supporting rural communities in other ways. While these policies, by their very nature, do affect the level of production, it is argued that they should not be regarded as trade-distorting subsidies and should be permitted within the rules

Pharmaceutical Patents, Prices and Welfare Losses: Policy Options for India Under the WTO TRIPS Agreement

Abstract: C ONCERNS on the effect of product patents on the prices of medicines have been acute in many developing countries which, up to the entry into force of the World Trade Organisation (WTO) Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) in 1995, could and did disallow such patenting in their national patent laws. With TRIPS, all Members of (and those seeking accession to) the WTO, have to make available, with limited exceptions, both product and process patents in every sector, including pharmaceuticals. More specifically, TRIPS provides that all WTO members have to receive product patent applications for pharmaceuticals from the date of establishment of the WTO, i.e. January, 1995. It is important to note that even under the TRIPS regime, patents are to be granted only on applications received from 1995 onwards for new, patentable pharmaceutical inventions. Thus, prices of existing pharmaceuticals already on the market, or even those covered by patent

A Non-Technical Introduction to Bargaining Theory

Abstract: This article presents some principles of bargaining theory in a non-technical language in order to make them accessible to people outside the academic community. These principles are presented keeping in view several real-life situations confronting Presidents and Prime Ministers, policy makers and planners, executives, civil society and military leaders, and not the least, managers, be they of the government, households, NGOs or businesses, big or small. The author cautions that this is an introductory note aimed merely to facilitate an understanding of the main principles and to illustrate the scope for their application, with a potential which, if comprehended and harnessed fully, could contribute significantly to peaceful progress at all levels.

Two Principles for the Next Round or, How to Bring Developing Countries in from the Cold

Abstract: T HE November 1999 WTO Ministerial meeting in Seattle was expected to usher in a new Round of negotiations, the ninth in a series that began in Geneva in 1947. Although WTO members proved unable to launch a Round, efforts will continue in 2000 to develop a negotiating agenda. In this paper I want to reinforce the call of the WTO’s Director-General, Mr. Moore, for the next set of negotiations to be a ‘development round.’ Basic notions of equity and a sense of fair play require that the next Round reflect developing country interests and concerns more than was the case in earlier Rounds. Seattle demonstrated that without greater balance the success of future negotiations will be imperiled. Dissatisfaction by developing countries regarding the extent to which their interests were reflected was a factor leading to the failure of the Ministerial meeting. The stakes are high. There is a growing gap between the developed and the less developed countries, highlighted in this year’s World Development Report (World Bank, 1999). The international community is doing too little to narrow this gap: aid per capita to the developing world has fallen by nearly a third in the 1990s. Too often, cuts in aid budgets are accompanied by the slogan ‘trade, not aid,’ exhortations for the developing world to participate fully in the global marketplace, and lectures about how government subsidies and protectionism distort prices and impede growth. All too often there is a hollow ring to these exhortations. As developing countries take steps to open their economies and

Industrial Policy and the WTO

Abstract: This paper reviews the objectives and instruments of industrial policy in a changing global context and multilateral rules and discipline. The authors provide an analytical review of the objective and justification for industrial policy pursued by countries. The importance of having an analytical framework is that it becomes the benchmark against which objectives, instruments and outcomes can be measured. The use of different instruments for industrial policy is reviewed. The paper assesses whether changes have been due to compliance to multilateral and/or regional commitments, and whether due to unilateral reform efforts. The authors focus on the role of industrial policy in the post Uruguay Round era with a view to the next round of WTO negotiations. The research examines both the theoretical and applied aspects of industrial policy before surveying the extent to which existing WTO rules affect a member's ability to pursue industrial policy objectives. The possibilities and implications of revising rules that affect the use of industrial policy instruments in the next round are examined. The paper concludes with a final section to review the implications for developing economies.

Convergence is not Automatic: Lessons from Ireland for Central and Eastern Europe

Abstract: For over 70 years Irish income per head remained at around 60 percent of the level prevailing in the country's dominant trading partner, the UK. Ireland began to converge rapidly over the last 15 years however, and parity has now been achieved with the UK and the overall EU. This paper analyses the changes in public policy that facilitated the turnaround in economic fortunes.

Developing Countries in the New Round of GATS Negotiations: Towards a Pro‐Active Role

Abstract: Developing countries need to ensure that multilateral rules and commitments on trade in services contribute to economically rational policy-making. This paper shows that their reluctant participation in past negotiations, and assumption of defensive positions, have not been conducive to the achievement of this goal. The next round of services negotiations requires a change in negotiating strategies. Rather than resist the liberalisation of domestic markets and seek a dilution of multilateral rules, they need to push aggressively for (i) liberalisation of domestic services markets, emphasising competition more than a change of ownership, (ii) development of improved rules for domestic regulations that encourage economic efficiency in remedying market failures and pursuing social goals, and (iii) effective liberalisation of foreign services markets by the elimination of both explicit restrictions and implicit regulatory barriers. At the same time, developed countries need to rise to the challenge of eliminating the barriers they maintain to exports from developing countries, so that we may witness not a bitter round of grudging concessions, but a virtuous cycle of mutually beneficial liberalisation. * This paper is a condensed version of Mattoo (1999), which has a more comprehensive discussion of developing country interests and references to the literature. Thanks go to Carsten Fink, Randeep Rathindran, and Arvind Subramanian for contributions to this paper, to Bernard Hoekman, Marcelo Olarreaga, Arvind Panagariya for insightful comments, and to Malina Savova for valuable research assistance. The views expressed are personal and should not be attributed to the World Bank.

Competition Policy and Intellectual Property Rights in Developing Countries

Abstract: C OMPETITION policy is a broad term, covering all aspects of government actions that affect the conditions under which firms compete in a particular market. The term competition law refers to legislation, judicial decisions, and regulations specifically aimed at avoiding the concentration and abuse of market power. However, many regulations stipulate exemptions from competition disciplines for purposes of achieving various social goals. Competition policy is therefore complex in its intentions and effects. Competition law has emerged as an issue for the WTO largely because exporting firms in the high-income developed economies argue that anticompetitive practices of competitors in foreign markets hinder their ability to penetrate those markets. Such practices may be largely private in nature and could be facilitated by the absence or weak enforcement of local competition laws. These issues have prompted a number of proposals for negotiating a limited agreement on multilateral principles and disciplines in competition law within the World Trade Organisation (WTO). However, the debate is contentious and no consensus has emerged on whether and how to address competition law and regulations within the WTO. We argue in this paper that developing countries would gain if a WTO agreement were reached that recognised the principle that competition law should promote open competition, emphasised international cooperation in competition

Instability and Volatility of Capital Flows to Developing Countries

Abstract: Despite the recent recovery in capital flows towards developing countries, some of their characteristics have generated serious problems. As these flows are increasingly concentrated in a small group of emerging markets, most developing countries have been facing a severe scarcity of external resources, while for the minority endowed with some measure of access to international financial markets, volatility and sustainability remain the key issues. Financial liberalisation has helped to create new channels for resource transfers from the developed world, but it has also generated conditions wherein such transfers can easily be reversed with serious consequences in terms of instability. The present study depicts, discusses and analyses some of the issues related to capital movements between developed and developing countries. Section 2 is an overview of the recent controversies on external financial liberalisation. Section 2 is an surveys the post-1970 developments in capital inflows to developing countries, their main components and their contribution to development finance. Section 4 examines the instability and volatility of total inflows and their components using two different statistical measures. Section 5 concentrates on a particular type of capital movement, i.e. short-term, arbitrage-seeking capital flows to emerging market economies. This analysis requires specific conceptualisation, definition and data generation from balance of payments statistics. In Section 6 a similar analysis of volatility and instability of short-term inflows and outflows to emerging market economies is undertaken. The penultimate Section 7 discusses the policy implications of the foregoing analysis and is followed by a summary and conclusions.

Globalisation, Economic Policy and Convergence

Abstract: A NUMBER of recent contributions to the growth literature have emphasised the positive role played by the forces of globalisation in enabling poor countries to converge on the living standards of rich ones. These include Sachs and Warner (1995), Aziz and Wescott (1997), IMF (1997), World Bank (1997), Dollar and Burnside (1997), Edwards (1998) and Collier and Dollar (1999) and their general message is well captured by Sachs and Warner’s claim (1995, p. 3) that ‘open economies converge, and closed ones do not.’ In other words, if developing countries were to adopt a consistent policy package conducive to the preservation of an open economy, that would, according to all the authors cited above, at least be a necessary condition for convergence. There is some disagreement within the Washington consensus concerning exactly what the ingredients of this consistent policy package are, with Sachs and Warner laying primary emphasis on measures of trade policy openness, Collier and Dollar (1999) examining a broader range of policy instruments including social policy measures, and Aziz and Wescott (1997, p. 18) arguing that what matters is complementarity, with three separate elements needed in combination: ‘trade openness, macro stability, and a relatively low degree of government involvement in economic activity’. The IMF’s World Economic Outlook for May 1997 seeks to summarise the state of play by arguing that:

Market-based Instruments

Abstract: Economists have long recommended market-based instruments for efficient environmental policy-making – taxes, tradable permits, auctions of property rights, etc. So why is progress on them so slow? The reality is that any environmental policy faces many political, institutional and technical obstacles, but market-based instruments face more than most. Many relate to false perceptions, although some are real. Most have solutions, some do not.

Trade and Financial Reform in China: Impacts on the World Economy

Abstract: Despite the setbacks from the recent Asian currency crisis, the ascendancy of Asia as an economic centre of world economic activity is likely to continue into the 21st century. A key issue that will shape the role of Asia, and indeed the shape of the world economy in the 21st century, is the economic development of China. To date China has successfully weathered the currency storm in Asia and continues on a program of economic reform. If anything, the problems of Japan and Korea provide powerful lessons for other countries undergoing rapid economic growth and structural change. These lessons include the importance of a well developed financial sector with lending and investment decisions based on market signals rather than government directives. Whether China can further integrate smoothly into global markets and sustain the fast growth of the last few decades will be a crucial development in the world economy. In this paper, we explore the impacts of continued Chinese economic reform with a focus on the role of international financial flows both in the adjustment within China as well as in the transmission of Chinese reforms to the rest of the world.(This abstract was borrowed from another version of this item.)

Financial Services and the WTO: Liberalisation Commitments of the Developing and Transition Economies

Abstract: This paper analyses the results of the financial services negotiations under the General Agreement on Trade in Services (GATS) at the World Trade Organization (WTO). It shows that the negotiations have contributed to more stable and transparent policy regimes in many developing and transition countries, and that the commitments do not in any way compromise the ability of countries to pursue sound macroeconomic and regulatory policies. However, even though the number of countries that participated in the eventual agreement was impressive, the liberalizing content of commitments was in many cases quite limited. Numerical estimates suggest that, in general, the African and Eastern European participants made much more liberal commitments than the Asian and Latin American participants. On the whole, the outcome probably reflects the balancing by each participant of the benefits of unilateral bindings against the gain from retaining bargaining chips for future multi-sectoral negotiations. Certain aspects of the outcome raise concerns. First, there has been less emphasis on the introduction of competition through allowing new entry than on allowing (or maintaining) foreign equity participation and protecting the position of incumbents. Secondly, even where immediate introduction of competition was not deemed feasible, little advantage has been taken of the GATS to lend credibility to liberalization programmes by precommitting to future market access.