Showing papers in "The World Economy in 2004"
TL;DR: In this article, the authors present a brief overview of the various coalitions that played an important role at Cancun and examine some of the causes behind the impasse in the negotiation process and suggest ways in which future outcomes could be improved.
Abstract: In large measure, the voice that developing countries were able to exercise in Cancun was a result of their effective coalition formation. In this paper we present a brief overview of the various coalitions that played an important role at Cancun. The greater part of this paper focuses on one among these various coalitions: the G20 on agriculture. The G20 presents an especially fascinating case of a coalition that combined a great diversity of members and apparently incompatible interests. All theoretical reasoning and historical precedent predicted that the group would collapse in the endgame. And yet the group survived. We investigate the sources of the unity of this group and trace them to a process of learning that allowed the group to acquire certain structural features and develop strategies that helped to cement it further. While our central dependent variable is the cohesion of the G20, we also address the derivative question of the costs and benefits of maintaining such coalitions. The Cancun coalitions give us an excellent case of coalitions that managed to retain their cohesion, but also ended up with a situation of no agreement rather than a fulfilment of even some of their demands. We examine some of the causes behind the impasse in the negotiation process and suggest ways in which future outcomes could be improved.
208 citations
TL;DR: This article examined the extent to which institutions' functioning disables a greater participation of the Middle East and North Africa (MENA) in the world economy using a large sample of countries over the 1990s and found that the impact of an improvement in the quality of institutions may result in a sensitive increase of FDI inflows and manufactured exports.
Abstract: Using a large sample of countries over the 1990s, this paper examines the extent to which institutions’ functioning disables a greater participation of the Middle East and North Africa (MENA) in the world economy. It focuses on the impact on manufactured exports and FDI attractiveness and considers a broad index of political risk as well as indices targeted toward specific aspects of governance (corruption, government effectiveness and the rule of law). The results are robust to different econometric approaches and lend strong support to the hypothesis that the functioning of institutions may disable the participation of MENA countries in the world economy. They suggest that the impact of an improvement in the quality of institutions may result in a sensitive increase of FDI inflows and manufactured exports. That increase is comparable to the one resulting from liberalisation policies. Hence, although institutional reforms can take time, they deserve the necessary efforts given their outcomes as compared to other reforms.
172 citations
TL;DR: In this article, the authors examined the impact of changes in the real exchange rate and its volatility on FDI and found that the depreciation of the currency of the host country attracted FDI, while the high volatility of the exchange rate discouraged FDI.
Abstract: In the light of the importance of foreign direct investment (FDI) for the promotion of economic development, this paper examines the impact of the changes in the real exchange rate and its volatility on FDI. Examining Japan's FDI by industries, we found that the depreciation of the currency of the host country attracted FDI, while the high volatility of the exchange rate discouraged FDI. Our results suggest the need to avoid over-valuation of the exchange rate and to maintain stable but flexible exchange rate in order to attract FDI.
168 citations
TL;DR: In this paper, the authors argue that it is more difficult to benefit from FDI than to attract FDI and that the mobilisation of domestic resources remains by far, more important than attracting FDI for financing investment and stimulating economic growth.
Abstract: For FDI to help alleviate absolute poverty and stimulate economic growth in developing countries, two conditions have to be met. First, developing countries need to be attractive to foreign investors. Second, the host-country environment in which foreign investors operate must be conducive to favourable FDI effects with regard to overall investment, economic spillovers and income growth. This paper argues that it is more difficult to benefit from FDI than to attract FDI. The widely perceived concentration of FDI in few developing countries tends to obscure that, in relative terms, various small and poor countries are fairly attractive to FDI. Yet, the mobilisation of domestic resources remains by far, more important than attracting FDI for financing investment and stimulating economic growth. Furthermore, high inward FDI is no guarantee for poverty alleviation and positive growth effects. In particular, the empirical evidence suggests that host-country conditions typically prevailing in poor countries, including weak institutions and an insufficient endowment of complementary factors of production, constrain the growth-enhancing and poverty-alleviating effects of FDI. The crux is that creating an environment in which FDI may deliver social returns will take considerable time exactly where development needs are most pressing.
160 citations
TL;DR: In this paper, economic aspects of the Kyoto Protocol, the Treaty adopted to control emissions of the greenhouse gases that contribute to climate change, have been surveyed, with particular attention to the long-term conception of the Treaty and its use of market-oriented instruments unprecedented in an international treaty of this scope.
Abstract: This paper surveys economic aspects of the Kyoto Protocol, the Treaty adopted to control emissions of the greenhouse gases that contribute to climate change. The first part focuses upon the structural aspects of the agreement, with particular attention to the long-term conception of the Treaty and its use of market-oriented instruments unprecedented in an international treaty of this scope. The second part then examines the actual commitments adopted for the first period, and the impact of US withdrawal upon the economics of these commitments as mediated through the ‘flexible mechanisms’. It is noted that the emerging behaviour of states under Kyoto is very different from that assumed in economic modeling studies—countries are focusing first upon domestic action and will resort to the mechanisms mainly as a fallback option to secure compliance, not as a route to minimizing costs irrespective of other considerations. This may have important implications for understanding the practical economics of designing international market mechanisms, and for the next steps that might be considered under Kyoto.
153 citations
TL;DR: In this article, a comprehensive assessment on the use of anti-dumping laws is presented, which shows that new users are even more important than previously thought, with implications for the Doha negotiations.
Abstract: While tariff barriers have decreased worldwide through various GATT rounds, anti-dumping has surged to play a crucial role as the most important non-tariff barrier. After much debate and opposition, anti-dumping is on the agenda of the Doha round of multilateral trade negotiations and it is one of the most important issues, especially for developing countries as they are the main targets of this policy instrument. With this prospect, it is important to assess the relevance of anti-dumping not only by focusing on traditional users but by analysing the experience of new users, which are now major players in the field. This paper improves upon existing studies by providing a comprehensive assessment on the use of anti-dumping. First, data on the time pattern of worldwide implementations of anti-dumping laws are presented. This time profile shows interesting relationships with legal developments in GATT and WTO dispositions. Second, usual sources of data are complemented with various other sources. This allows the inclusion of recent heavy users like China, Russia, Taiwan and Ukraine, which are ignored in similar studies but important for their trade volumes. This enlarged and updated dataset shows that new users are even more important than previously thought, with implications for the Doha negotiations.
125 citations
TL;DR: In this paper, the authors study the impact of changing relative market access in an enlarged EU on the economies of incumbent Objective 1 regions and explore the relation between market access and economic activity empirically, using data for European regions.
Abstract: We study the impact of changing relative market access in an enlarged EU on the economies of incumbent Objective 1 regions. First, we track the impact of external opening on internal spatial configurations in a three-region economic geography model. External opening gives rise to potentially offsetting economic forces, but for most parameter configurations it is found to raise the locational attractiveness of the region that is close to the external market. Then, we explore the relation between market access and economic activity empirically, using data for European regions, and we simulate the impact of EU enlargement on Objective 1 regions. Our predicted market-access induced gains in regional GDP and manufacturing employment are up to seven times larger in regions proximate to the new accession countries than in “interior” EU regions. We also find that a future Balkans enlargement could be particularly effective in reducing economic inequalities among the EU periphery, due to the positive impact on relative market access of Greek regions.
109 citations
TL;DR: In this article, the impact of R&D investment in the high-tech sector on productivity growth within the traditional industries was investigated, and it was found that the average rate of return in hightech firms is much greater than that estimated for other industries.
Abstract: This study sets out to estimate the impact of R&D on productivity within the private sector, with further analysis of the different impacts of R&D within high-tech and traditional manufacturing firms. We also attempt to examine the spillover effects from R&D investment in the high-tech sector on productivity growth within the traditional industries. Using a sample of 136 large manufacturing firms during the period 1994–2000, we develop an extended version of the Cobb-Douglas production function model, and our findings suggest that Taiwan's R&D investment had a significant impact on firm productivity growth, with output elasticity standing at around 0.18. When the sample is divided into high-tech and traditional firms, the R&D output elasticity in high-tech firms is significantly greater than that found in traditional firms. In addition, the average rate of return in high-tech firms is much greater than that estimated for other industries. Besides, our empirical results show that, although significant, the impact of R&D investment from the high-tech sector, on the productivity growth of traditional firms, is rather limited.
72 citations
TL;DR: However, there is little evidence that FDI served to speed up income convergence across countries This was the case for two reasons First, FDI flows remained highly concentrated and second, the benefits from FDI appear to have accrued principally where conditions were already conducive to investment and growth as discussed by the authors.
Abstract: FDI's spectacular growth, in diverse forms, during the past two decades represented an important force generating greater economic integration FDI increased substantially in relation to global productive capacity, cross border mergers and acquisitions component of FDI put domestic corporate laggards on notice, and the spread of FDI to non-tradable service sectors generated the possibility that these traditionally low productivity sectors would be brought closer to the standards of international efficiency Yet, FDI did not perform an integrating role in a more fundamental sense There is little evidence that FDI served to speed up income convergence across countries This was the case for two reasons First, FDI flows remained highly concentrated Second, the benefits from FDI appear to have accrued principally where conditions were already conducive to investment and growth Hence, though cross-country disciplines through bilateral, regional and multilateral efforts are important in reducing the distortions that lead to misallocation of capital, domestic efforts to raise absorptive capacity will ultimately be critical Efforts to increase labour mobility, as foreseen, for example, under GATS, could have a significant effect in raising the benefits from FDI as the more mobile labour serves to bridge the cultural, institutional and contractual differences across nations
72 citations
TL;DR: In this paper, the authors examined the effects of EU integration in the 1990s on the FDI relations in Europe and found that the completion of the Single Market, the 1995 enlargement and the so-called Eastern enlargement are characterised by a substantial, positive anticipation effect in the period between the announcement and the formal establishment of each integration step.
Abstract: This paper examines the effects of EU integration in the 1990s on the FDI relations in Europe. We find that the completion of the Single Market, the 1995 enlargement and the so-called Eastern enlargement are characterised by a substantial, positive anticipation effect in the period between the announcement and the formal establishment of each integration step. Neither the Single Market Programme nor the previous enlargement exhibited any further positive effects on intra-EU FDI volumes after their establishment.
70 citations
TL;DR: The most remarkable success of the World Trade Organization in recent years has been the expansion of WTO Membership and the continued stream of applications of countries to accede to the WTO as discussed by the authors.
Abstract: One of the most remarkable success es of the World Trade Organization in recent years has been the expansion of WTO Membership and the continued stream of applications of countries to accede to the WTO. Of the 43 countries that have applied to accede the WTO under Article XII since January I, 1995, approximately one half are countries in the process of trans ition from a planned to a market economy. Ten of the 14 countries that have already completed their accession process and between 9 and 13 countries —depending on whether East Asian countries are included or not — of the 28 countries negotiating their accession are trans ition countries. Clearly, the WTO represents a powerful attraction for countries in transition (CIT) which treat their WTO membership as a “stamp of approval” of their policies and the admission into the international community — a feat quite important for CrT that have been isolated from world markets for more 50 years.
TL;DR: The authors compare the claims made in this debate with the outcomes of trade agreements, and find that the debate has exaggerated the effects of trade on economies and the labour market, and conclude that changes in trade policy have had modest impacts on the labor market.
Abstract: The rules governing trade and capital flows have been at the centre of controversy as globalisation has proceeded. One reason is the belief that trade and capital flows have massive effects on the labour market – either positive, per the claims of international financial institutions and free trade enthusiasts, or negative, per the ubiquitous protestors at WTO, IMF and World Bank meetings demanding global labour standards. Comparing the claims made in this debate with the outcomes of trade agreements, this paper finds that the debate has exaggerated the effects of trade on economies and the labour market. Changes in trade policy have had modest impacts on the labour market. Other aspects of globalisation – immigration, capital flows and technology transfer – have greater impacts, with volatile capital flows creating great risk for the well-being of workers. As for labour standards, global standards do not threaten the comparative advantage of developing countries nor do poor labour standards create a ‘race to the bottom’.
TL;DR: In this article, the authors synthesize detailed trade flow and econometric analysis to show that ASEAN and China are experiencing intensified export competition in prominent third markets such as Japan and the US.
Abstract: HINA’S initial opening to the world economy in the late 1980s followed by its relatively rapid trade liberalisation in the second half of the 1990s and its recent WTO accession has prompted extensive debate amongst the policy community in many countries. 1� Governments of the ASEAN group in particular have been extremely concerned at the prospect of FDI diversion and the loss of export market share in OECD economies to China. This paper summarises detailed empirical research by the authors intended to strengthen the basis of evidence on the important issue of export rivalry. In particular, we seek to elucidate the underlying properties of comparative advantage and export competition in the countries concerned, synthesising detailed trade flow and econometric analysis. Our econometric results indicate that, in the short run at least, ASEAN and China are experiencing intensified export competition in prominent third markets such as Japan and the US. More extensive trade flow analysis reveals, however, that in the long run globalisation can accommodate export growth by all the economies of East Asia, if aggregate growth can be sustained to facilitate the structural adjustments necessary for an optimal regional division of labour. More specifically, the path forward is not without potential rivalry, but wellinformed policy makers can anticipate emergent challenges and take the steps necessary to mitigate adjustment costs and promote longer-term efficiency. Whatever the ultimate course of development in East Asia, it is clear that the forces at work are complex and in many cases unprecedented. Policy makers relying on
TL;DR: The authors argue that the Kearney/foreign policy (KFP) index of globalisation is constructed by making some problematic assumptions about the measurement, normalisation and weighting of the variables included in the index.
Abstract: We argue that the Kearney/Foreign Policy (KFP) index of globalisation is constructed by making some problematic assumptions about the measurement, normalisation and weighting of the variables included in the index. We propose alternative measurement, normalisation and weighting rules, and using these rules, recalculate the ranking of the fifty countries, using the original KFP data. Specifically, we use, in various combinations: (i) variables ‘adjusted’ for geographical characteristics of countries; (ii) statistically optimal weights obtained by principal components analysis; (iii) a normalisation rule that treats different years of observations separately. We find that the country rankings change significantly when adjusted variables are used, indicating that the original KFP index is partially measuring geographical differences between countries.
TL;DR: A review of the experience during the past four decades offers virtually no examples of countries achieving sustained rapid growth (called miracles in this paper) without simultaneously experiencing sustainable rapid growth in trade in the presence of low or high but declining barriers to trade as discussed by the authors.
Abstract: The central theme of this paper is that sustained rapid growth cannot be achieved without rapid growth in trade. A review of the experience during the past four decades offers virtually no examples of countries achieving sustained rapid growth – called miracles in this paper – without simultaneously experiencing sustained rapid growth in trade in the presence of low or high but declining barriers to trade. Simultaneously, the claim that opening to trade leads to sustained income losses is unfounded. A review of the experience of the countries that have faced stagnation or declining per-capita incomes on a long-term basis – called debacles in this paper – reveals no connection to a sustained surge in imports.
TL;DR: In this paper, the authors argue that pipelines allow Gazprom to segment the Russian market from the European (including Turkey) market and that Russia has market power in the European market, and that if Russia were to fail to exploit this market power, by selling its natural gas to Europe at only full long-run marginal cost plus transportation costs, Russia would lose between $5 billion and $7.5 billion per year (almost two per cent of its GDP).
Abstract: Our analysis reveals that, from Russia's perspective, there is no economic rationale to unify the price of natural gas it sells domestically and in Europe. We argue that pipelines allow Gazprom to segment the Russian market from the European (including Turkey) market and that Russia has market power in the European market. If Russia were to fail to exploit this market power in its European market, by selling its natural gas to Europe at only full long-run marginal cost plus transportation costs, Russia would lose between $5 billion and $7.5 billion per year (almost two per cent of its GDP). If, instead, Russia were to raise its domestic prices to the prices it charges in Europe, Russian industry would incur very large investment adjustment and unemployment costs in the short run – adjustment costs that cannot be justified on the basis of comparative advantage. We estimate that the efficient world price would be achieved if Gazprom were to employ its optimal ‘two-part tariff’. The optimal two-part tariff would double Gazprom's annual profits in Europe, but it involves significant long-term risks for Gazprom of lost market share.
TL;DR: This paper provided an initial economic appraisal of developing country performance in the GATT/WTO dispute settlement system and found that developing country plaintiffs have had more success under WTO disputes than was the case under GATT.
Abstract: Developing countries have been increasing their participation in the formal institutions and proceedings of the multilateral trading system. A prominent example is their more frequent involvement as defendants and plaintiffs in GATT/WTO trade disputes. This paper provides an initial economic appraisal of developing country performance in the GATT/WTO dispute settlement system. We measure the economic resolution of these disputes through trade liberalisation gains, and our results suggest that developing country plaintiffs have had more success under WTO disputes than was the case under the GATT. We also document evidence on potential determinants of this success: the capacity for plaintiffs to make credible retaliatory threats and the guilty determinations by GATT/WTO panels. Finally, there is also some evidence that developing countries have recognised the importance of retaliatory threats and have responded by changing their pattern of dispute initiation under the WTO to better take advantage of the instances in which they have sufficient leverage to threaten retaliation and induce compliance with GATT/WTO obligations.
TL;DR: In this paper, the authors examined the extent of aid (ODA) presently being diverted to GPG provision and whether such diversion skews aid-flows towards some recipients and whether diverting aid to the provision of GPGs crowds out aid for conventional development activities.
Abstract: This paper examines the concept of global public goods (GPGs) and in that context explores the extent of aid (ODA) presently being diverted to GPG provision and whether such diversion skews aid-flows towards some recipients and whether diverting aid to GPG provision crowds out aid for conventional development activities. These are examined on the basis of OECD data for the late 1990s. The main argument of this paper is that ODA should not be used for financing GPG provision by developing countries. Instead, it is suggested that other sources of financing the provision of GPGs should be developed keeping in view the various technologies by which the GPGs can be produced and design principles for supra-national institutions. Various arguments from Sandler, Barrett and Kanbur are considered. In particular, Kanbur’s suggestion of two tensions involving the principles of economies of scale, subsidiarity, economies of scope and specialization, is explored further. Some examples of issues where a GPG is produced as a joint product of actions by national governments are considered by looking at data on eight different indicators for 1995. Problems in using the joint product approach to GPG provision are also discussed.
TL;DR: In den 1990er Jahren waren the Portfolio Flows Institutioneller Investoren die dynamischsten Kapitalstrome in die Emerging Markets as discussed by the authors, and this position lokaler Investoren unabsichtlich durch unausgewogene Diversifikation und undurchsichtige Risiken verschlechtern.
Abstract: In den 1990er Jahren waren die Portfolio Flows Institutioneller Investoren die dynamischsten Kapitalstrome in die Emerging Markets. In dieser Arbeit leiten wir in einem Rahmen asymmetrischer Information funf Aussagen ab, stellen diese in einen Zusammenhang mit der existierenden empirischen Literatur und entwickeln daraus entsprechende wirtschaftspolitische Implikationen. Die undurchsichtige Informationslage auf den Emerging Markets behindert vor allem auslandische Marktteilnehmer. Daruber hinaus konnen Institutionelle Investoren - in Folge finanzwirtschaftlicher Offnung - die Position lokaler Investoren unabsichtlich durch unausgewogene Diversifikation und undurchsichtige Risiken verschlechtern. Schlieslich verstarken Institutionelle Investoren aus dem Ausland oft Investitionsbooms oder finanzielle Ansteckung. Deshalb sollten Kapitalverkehrs- und finanzielle Liberalisierung stets von sorgfaltiger Regulierung begleitet werden.
TL;DR: In this paper, the authors identify its sources for growth and specify production functions in each province by estimating translog production function, and four distinguishable regional growth patterns have contributed to China's economic growth.
Abstract: Regional diversity in the process of economic growth is the major concern in this paper. We will try to identify its sources for growth and to specify production functions in each province by estimating translog production function. This paper clarifies the following four facts: First, capital accumulation was a major source for growth in the earlier stage of the Chinese economy, especially in the eastern coastal region. Unexpectedly, capital accumulation is losing its ground over the years. Second, the employment structure of the economy in the eastern region has changed significantly and the shares of workers in the secondary and tertiary industries increased until 1992. Since 1992, these figures have not changed significantly despite China's continuous economic high growth. Third, four distinguishable regional growth patterns have contributed to China's economic growth. Finally, production technologies in each province vary both in the direction of factor intensity and in the elasticity of substitution between inputs.
TL;DR: In this paper, the authors evaluate aid by considering how effective aid has been in exerting leverage on policy choices and argue that donors should provide information and technical assistance to help governments to make policy choices, rather than dictating choices by imposing conditions.
Abstract: This paper evaluates aid by considering how effective aid has been in exerting leverage on policy choices. It is rather easy to demonstrate that if a country is unwilling to implement policy reforms, attaching conditions to aid will not ensure sustained reform. In this sense conditionality does not work. This ignores the fact that donors, through aid and conditions, can influence recipient policies. The argument of this paper is that if the analysis focuses on channels of influence, one can better identify ways to enhance aid effectiveness. Reform is a slow and difficult process and donors would be more effective ‘development partners’ if they see their role as being to support rather than force this process. In simple terms, donors should provide the information and technical assistance to help governments to make policy choices, rather than dictating choices by imposing conditions.
TL;DR: In this article, the authors argue for a new approach that puts the emphasis on efforts to improve the development relevance of WTO rules and create mechanisms which allow greater differentiation across WTO members in determining the applicability of WTO disciplines, complemented by non-discriminatory liberalisation of trade in goods and services in which developing countries have an export interest.
Abstract: The issue of special and differential treatment (SDT) for developing countries in the WTO has become a source of tension in North-South trade relations. The absence of an effective SDT regime clearly contributed to the failure of the Cancun Ministerial meeting of the WTO. This paper argues for a new approach that puts the emphasis on efforts to improve the development relevance of WTO rules and create mechanisms which allow greater differentiation across WTO members in determining the applicability of WTO disciplines; complemented by non-discriminatory liberalisation of trade in goods and services in which developing countries have an export interest. The former is key in allowing the WTO to expand its reach to new `behind the border? policies; and the latter is important to establishing a development dimension in multilateral trade negotiations.
TL;DR: In this paper, a case study of the twin political conflicts in Sri Lanka is presented, where the authors focus on the economic roots of the conflict and find that fundamental contradictions in the national development policy in the restrictive trade regime of Sri Lanka were at the heart of the country's political conflict.
Abstract: The escalation of political conflicts in many developing countries and their impact on economic development have been topical issues in recent development literature. The overwhelming emphasis on ‘ethnic conflicts’ in the literature has, however, precluded analysts from looking at political conflicts beyond their ethnic dimension, in the wider context of the development process. In particular, because of the preoccupation with ethnic roots as the prime source of these conflicts, reverse causation, running from economic policy to political conflict, has been virtually ignored in the debate. The purpose of this paper is to fill this gap through an in-depth case study of the ‘twin political conflict’ in Sri Lanka – the Tamil separatist war in the North and the Sinhala youth uprising in the South – with emphasis on its economic roots. The findings suggest that fundamental contradictions in the national development policy in the restrictive trade regime of Sri Lanka were at the heart of the country's twin political conflict.
TL;DR: This article reviewed the historical evidence on the relationship between globalisation and economic growth and found that trade liberalisation has been good for growth on average but successful capital liberalisation requires high institutional quality and that the developmental state may have an important role to play in early stages of development.
Abstract: This paper reviews the historical evidence on the relationship between globalisation and economic growth. Divergence in the growth of income and industrialisation in the twentieth century is documented but it is also noted that international income inequality appears to have decreased since about 1870 and that long-run trends in the Human Development Index are much less pessimistic about the experience of developing countries. It is argued that trade liberalisation has been good for growth on average but that successful capital liberalisation requires high institutional quality and that the developmental state may have an important role to play in the early stages of development. The recent claim by Robert Lucas that the 21st century will see a massive reduction in income inequality across countries in a globalised world economy is sceptically discussed in the context of empirical evidence that bad institutions are often persistent and that geography is still a major factor in explaining international income differences.
TL;DR: In this paper, the authors evaluated the impact of trade and FDI on growth in different country groups using a panel of 79 countries over the period 1970-98. And they found that trade has a general positive impact on all country groups, although the impact from imports is not significant in high-income countries.
Abstract: This paper evaluates the impact of openness on growth in different country groups using a panel of 79 countries over the period 1970–98. It distinguishes itself from many existing studies in three aspects: Firstly, both trade and FDI are included as measures of openness. Secondly, countries are classified into high-, middle- and low-income groups to compare the roles of trade and FDI in these groups. Thirdly, the possible problems of endogeneity and multicollinearity of trade and FDI are carefully dealt with in a panel data setting. The main findings are as follows. Total trade has a general positive impact on growth in all country groups, although the impact from imports is not significant in high-income countries. FDI has a positive impact on growth in high- and middle-income countries, but not in low-income countries. With the existing absorptive capabilities, low-income countries can benefit from both exports and imports, but not from FDI. These findings suggest that trade and FDI affect growth through different channels and under different conditions. The paper also discusses important policy implications.
TL;DR: The authors discusses the potential impacts of services trade liberalisation on developing countries and reviews existing quantitative studies, and concludes by evaluating econometric studies on linkage between services liberalisation and country growth rules, and briefly discusses some key sectoral issues in health services and transportation.
Abstract: This paper discusses the potential impacts of services trade liberalisation on developing countries and reviews existing quantitative studies. Its purpose is to distill themes from current literature rather than to advocate specific policy changes. The picture emerging is one of valiant attempts to quantify in the presence of formidable analytical and data problems yielding only a clouded image of likely impacts on trade, consumption, production and welfare emerging to the point that the policy implications of results are not always clear.
A central intuition would seem to be that with genuine two-sided (OECD/non-OECD) liberalisation in services that are seemingly considerably labour-intensive in delivery, the potential should be there for significant developing country gains from global liberalisation allowing full cross-border delivery. However, this picture is neither fully endorsed by available studies, neither is it explicitly contradicted. This seems to be the case for a number of reasons.
One difficulty with the studies is that the conceptual underpinnings of what determines trade in services and how this trade differs analytically from that of trade in goods (if at all) is an issue prior to assessments of impacts of liberalisation of trade in services on developing countries being discussed. Key issues here are the treatment of mobility for service providers (both firms and workers), and the differing analytical structures needed to analyse individual service items (banking, insurance, telecoms, etc.). Some recent analytical work suggests that liber-alisation in some service items, such as banking, need not always yield gains, and this contrasts with quantitative studies where analytical structures mirror conventional trade in goods treatments.
The discussion and measurement of barriers to service trade in both developed and developing countries is also problematic. One is talking of domestic regulation, entry barriers, portability of providers, competition policy regimes more so than only barriers at national borders, as with tariffs. Both representing and quantifying such barriers raise major difficulties, and these are also spelled out in the paper. Which barriers actually restrict trade, and which do not because they are redundant is one issue, for instance. It is also often misleading to represent barriers in simple ad valorem equivalent form. As a result, numerical modelling work on the effects of service trade barriers which is based on ad valorem equivalent modelling is often not fully convincing.
In addition, individual country results vary considerably across studies in ways that it is frequently hard for outsiders to understand. Studies do, however, point towards a tentative conclusion that effects are small and positive for developed and most developing countries if FDI flow changes accompanying service trade liberalisation are excluded from the analysis, but much larger and more variable across countries if they are present. This could be taken to suggest that mode 3 GATS liberalisation (roughly captured in some studies) might be important for developing countries; but mode 4 GATS liberalisation could be even more important given large barriers to labour flows across countries. Thus, if service trade liberalisation is thought of primarily as a surrogate for improved functioning of global factor markets in which more capital flows to developing countries and more labour flows from them to developed countries, then developing countries could benefit in a major way from genuine two-sided (OECD/non-OECD) liberalisation. Developing countries fear, however, that in global negotiations on services liberalisation where there is an asymmetry of power that largely one-sided liberalisation may be the outcome, and their gains will be correspondingly limited. The paper concludes by evaluating econometric studies on linkage between services liberalisation and country growth rules, and briefly discusses some key sectoral issues in health services and transportation.
TL;DR: In this article, the authors analyse the planned EPAs between the EU and Sub-Saharan Africa (SSA) from a development perspective, starting from the notion that the process of forming EPAs is unlikely to be reversed and examines the conditions that will maximise SSA's benefits from the EPAs.
Abstract: This paper draws on Hinkle and Schiff (2003). It analyses the planned Economic Partnership Agreements (EPAs) between the EU and Sub-Saharan Africa (SSA) from a development perspective. It does not take a position on whether SSA should enter into EPAs with the EU. Rather, it starts from the notion that the process of forming EPAs is unlikely to be reversed and examines the conditions that will maximise SSA's benefits from the EPAs. If this notion is correct, then the analysis presented in the paper applies. On the other hand, Pascal Lamy, the EU Trade Commissioner, made a proposal at the May 2004 G-90 summit in Dakar that might lead to a change in the EPA process. He proposed that the G-90, a group consisting of ACP and non-ACP LDC countries, should not have to make concessions at the WTO Doha Round of multilateral trade negotiations, i.e., he proposed a ‘free round’ for the G-90. This proposal opens the door to the possibility that the same might apply to the ACP countries in the EU-ACP negotiations and that the EPA process might be reversed. The paper considers the key issues raised by the planned EPAs, their relationship to the WTO's Doha Round and the EU's Everything-but-Arms Initiative, the changes needed to make the EPAs internally consistent, the domestic reforms in SSA that would need to accompany trade liberalisation in both goods and services, and the potential effects of the EPAs on regional integration in SSA. The EPAs will pose a number of policy challenges for SSA countries, including: restructuring of indirect tax systems, reduction of MFN tariffs, liberalisation of service imports on an MFN basis and related regulatory reforms in the services sector, and liberalisation of trade in both goods and services within the regional trading blocs in SSA. The paper also finds that the EPAs provide an opportunity to accelerate regional and global trade integration in SSA. To realise the potential development benefits of the planned EPAs, two steps are essential. First, the EU must, as it has stated, truly treat the EPAs as instruments of development, subordinating its commercial interests in the agreements to the development needs of SSA. Second, the SSA countries need to implement a number of EPA-related trade policy reforms. However, the latter is far from certain, given the lack of reform momentum in SSA.
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TL;DR: The pathways by which health can make a difference economically include those based on the heightened effectiveness of labor, increased savings, more effective educational investments, and demographic change as discussed by the authors. But new evidence shows that investing in health, with the aid of the international community, could make a big difference in Africa's economic prospects.
Abstract: Among Africa’s problems, chronic poverty and poor health stand out Traditional development thinking has maintained that health improvements are a consequence of income growth But new evidence shows that investing in health, with the aid of the international community, could make a big difference in Africa’s economic prospects Moreover, some feasible, low-cost interventions would likely have high returns The pathways by which health can make a difference economically include those based on the heightened effectiveness of labor, increased savings, more effective educational investments, and demographic change
TL;DR: In this article, the authors examine the principal actors with an interest in, and influence over, trade policy, delineating where possible how their influence translated into the policy arena, and speculate on whether the framework developed in this paper is applicable to the very different circumstances prevailing in the post-Soeharto era.
Abstract: Indonesia since the late 1960s constitutes an excellent case study in the political economy of trade protection. There have been major changes in the overall policy regime, from liberalism to significant intervention, and back towards liberalism. There have been large, though declining, inter-industry variations in effective protection. There has been a lively domestic debate, much of it dominated by non-economists. Many actors at home and abroad have a stake in that debate. And, since the 1980s at least, trade policy interventions have been reasonably well documented and quantified. In this paper, we show how quantitative analysis may be employed to shed light on changes in the trade policy regime over time. We also examine the principal actors with an interest in, and influence over, trade policy, delineating where possible how their influence translated into the policy arena. Finally, we speculate on whether the framework developed in this paper is applicable to the very different circumstances prevailing in the post-Soeharto era.
TL;DR: In this paper, the impact of rules of origin on patterns of trade in the context of the pan-European system of diagonal cumulation was analyzed and the main body of the paper empirically explores the effect of the lack of cumulation in the textile industry on the countries of the Southern Mediterranean.
Abstract: This paper analyses the impact of rules of origin on patterns of trade in the context of the pan-European system of diagonal cumulation. The paper first highlights the importance of rules of origin in all preferential trading arrangements while arguing that those rules can easily lead to trade suppression and/or trade diversion. We then focus on the introduction of the pan-European system in 1997 and show evidence to suggest that the introduction of the system materially impacted on trade between the EU, and its CEFTA, EFTA and Baltic states partner countries. The main body of the paper then empirically explores the impact of the lack of cumulation in the textile industry on the countries of the Southern Mediterranean. The results suggest that rules of origin may indeed substantially constrain trade between non-cumulating countries, possibly by as much as 70–80 per cent in aggregate. While preferential trading agreements thus serve to increase intra-PTA trade through the liberalisation of trade barriers, they may also be doing so by effectively raising external barriers to trade through the use of constraining rules of origin. To the extent that they do so increases the likelihood of trade diversion and trade suppresion.