Domestic purchase requirements for import license allocations in Mali

This paper investigates the incentive system facing importers under a linking arrangement and their likely behavior. It analyzes the impact on imports, consumption, and domestic production and the social costs under the assumption that all the relevant"industries"(production of the product in the domestic market, importing and distribution) are competitive, in the sense that there are a large number of firms involved and nothing deters new firms from entering the market. It focuses on the interaction of the linking arrangement with price controls, because the products in question also have been subject to this additional regulation. The overlapping regulations pose problems of timing in the liberalization process. The paper also investigates the operation of the linking arrangements when domestic production is monopolized. The conclusion is that the ranking of the policy instruments as a means of obtaining certain objectives may switch if the domestic industry is not competitive.Markets and Market Access,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Environmental Economics&Policies,Economic Theory&Research,Access to Markets

The economic impact of export controls : an application to Mongolian cashmere and Romanian wood products

Countries sometimes use export controls on raw materials to encourage domestic processing. The motivation is usually to assure raw materials at low prices for domestic industries, although exports are sometimes controlled in an attempt to increase export earnings (by promoting exports of higher value-added processed goods rather than raw materials). The problem is, export controls hurt raw material producers and cause economic distortions that result in net losses to the country. The impact of raw material export controls on total export earnings is ambiguous: the decline in raw material export when production is discouraged by lower prices may outweigh the effect of increased exports of processed goods. The author develops a simple partial equilibrium model of export controls on raw material to investigate the impact of export restrictions and to estimate the potential magnitude of the transfers between groups and the net costs of the export-control regimes. The author's estimates of the magnitude of transfers and costs of export controls on raw cashmere (in Mongolia) and wood production (in Romania) indicate that the transfers and costs may be substantial. The author finds that (under reasonable assumptions about elasticities of supply) export controls can transfer significant profits from the raw materials producers to the processing industries, causing significant net losses to the economy and a substantial net decrease in export earnings. Quantitative export controls will be even more distortive if processing industries have any monopsony (single-buyers) power. This is quite likely in developing countries with small industrial bases - or in economies in transition, where central planning has left a legacy of very large firms in highly concentrated industries. With monopsony power in the processing industry, both output and exports of final products can be reduced by quantitative export controls on raw material inputs. The quantitative control bestows effective monopsony power on the processing firm and encourages it to exploit this monopsony power by reducing output. If the raw materials could be freely exported, processors would not be able to effectively exercise monopsony power.Markets and Market Access,Water and Industry,Economic Theory&Research,Environmental Economics&Policies,Access to Markets

The high cost of protecting Uruguay's automotive industry

Domestic content requirements are regulations that mandate minimum percentages of domestic value-added, or domestic components for products sold within the country, or provide strong incentives to substitute domestic for imported inputs. The author developed a model to investigate the distortions, costs, and transfers among groups caused by the combination of domestic content and compensatory export requirements. This model was applied to the protection scheme for Uruguay's automobile industry. The author found that the protective regime keeps vehicle prices and domestic production costs high and transfers large sums to special interest groups. Higher finished vehicle prices encourage more output from domestic assembly operations, but domestic content and compensatory export requirements discourage domestic assembly. The net effect could either encourage or discourage domestic assembly operations, depending on the net impact of the regulations. Trade in this industry should be liberalized. Care should be taken not to inadvertently increase effective protection of the assembly industry by, for example, phasing out domestic content and compensatory export requirements on kits faster than those on finished autos, thus temporarily encouraging domestic assembly.Economic Theory&Research,Environmental Economics&Policies,Access to Markets,Markets and Market Access,Water and Industry

How import protection affects the Philippines'motor vehicle industry

The motor vehicle industry in the Philippines is regulated and protected by the provisions of development programs for cars, commercial vehicles, and motorcycles. Each program virtually prohibits the import of completely built-up vehicles, specifies minimum local content requirements for vehicles assembled in the country from imported completely knocked-down kits, and requires that firms assembling kits export to earn foreign exchange to cover the cost of the kits. Similar protective regimes have existed in a number of countries, especially in Latin America. The author develops a model to illustrate the economic impact and welfare cost of import prohibitions, local content requirements, and export requirements. She applies that model to Philippine data. Her results indicate that the protective regime in the Philippines imposes substantial costs on consumers and encourages the allocation of resources to relatively high-cost activities. Eliminating all of the restrictions overnight may lead to adjustment problems, but gradual liberalization could limit these problems. The proportion of domestic content required, the percentage of compensatory exports required for kits, and the tariff rates on kits could be lowered in stages, according to a preannounced schedule, to allow gradual adjustment. The prohibition on imports of assembled vehicles could be replaced by a tariff and phased out gradually. To avoid proportionately more protection of the assembly industry, the tariff on finished autos could be phased out more quickly than the other tariffs, to avoid sending false signals to the domestic industry about the direction of adjustment. To avoid increasing the effective rate of protection on assembly operations during liberalization, elimination of the domestic content and compensatory export requirements should be accompanied by decreases in the tariff rates on assembled vehicles.Economic Theory&Research,Environmental Economics&Policies,Water and Industry,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Rules of Origin

A primer on the MFA maze

It is generally agreed that the arrangements that have regulated trade in textiles and clothing have slowed the natural shift in comparative advantage from industrial countries to developing countries. But there is quite a bit of disagreement about how restrictive the Multi-Fibre Agreements (MFA) are. The authors address the potential sources of allocative inefficiency occasioned by the MFA and search for evidence that the MFA has indeed led to such inefficiency. In a theoretical section, they identify five sources of inefficiency relating to allocations across countries, across consumers, and among firms within constrained countries. In the empirical part of the paper, first they provide evidence of the restrictiveness of the quota arrangements from trends in import shares for aggregate categories of textiles and clothing, before and during the MFA. Then they provide evidence from a detailed examination of quota utilization rates and price differentials among EC importing countries. Among their findings: relatively high utilization rates across exporters suggest a relatively high degree (and stability) of quota bindingness across exporters; overshipment was highest for the most important (by shipment value) products; there is concentration among a few leading exports (China, Hong Kong, Taiwan, and Thailand) and a few importers (Benelux, Germany, and the United Kingdom); the data suggest a positive correlation between the coefficients of variation in prices and quota utilization rates for China, Hong Kong, and Korea suggesting that prices are related, as one would expect, to the degree of bindingness; and the data suggest that binding quotas would be associated with higher import prices.Economic Theory&Research,Environmental Economics&Policies,Markets and Market Access,Access to Markets,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT

Canagliflozin and renal outcomes in type 2 diabetes and nephropathy

BACKGROUND Type 2 diabetes mellitus is the leading cause of kidney failure worldwide, but few effective long-term treatments are available. In cardiovascular trials of inhibitors of sodium–glucose cotransporter 2 (SGLT2), exploratory results have suggested that such drugs may improve renal outcomes in patients with type 2 diabetes. METHODS In this double-blind, randomized trial, we assigned patients with type 2 diabetes and albuminuric chronic kidney disease to receive canagliflozin, an oral SGLT2 inhibitor, at a dose of 100 mg daily or placebo. All the patients had an estimated glomerular filtration rate (GFR) of 30 to <90 ml per minute per 1.73 m2 of body-surface area and albuminuria (ratio of albumin [mg] to creatinine [g], >300 to 5000) and were treated with renin–angiotensin system blockade. The primary outcome was a composite of end-stage kidney disease (dialysis, transplantation, or a sustained estimated GFR of <15 ml per minute per 1.73 m2), a doubling of the serum creatinine level, or death from renal or cardiovascular causes. Prespecified secondary outcomes were tested hierarchically. RESULTS The trial was stopped early after a planned interim analysis on the recommendation of the data and safety monitoring committee. At that time, 4401 patients had undergone randomization, with a median follow-up of 2.62 years. The relative risk of the primary outcome was 30% lower in the canagliflozin group than in the placebo group, with event rates of 43.2 and 61.2 per 1000 patient-years, respectively (hazard ratio, 0.70; 95% confidence interval [CI], 0.59 to 0.82; P=0.00001). The relative risk of the renal-specific composite of end-stage kidney disease, a doubling of the creatinine level, or death from renal causes was lower by 34% (hazard ratio, 0.66; 95% CI, 0.53 to 0.81; P<0.001), and the relative risk of end-stage kidney disease was lower by 32% (hazard ratio, 0.68; 95% CI, 0.54 to 0.86; P=0.002). The canagliflozin group also had a lower risk of cardiovascular death, myocardial infarction, or stroke (hazard ratio, 0.80; 95% CI, 0.67 to 0.95; P=0.01) and hospitalization for heart failure (hazard ratio, 0.61; 95% CI, 0.47 to 0.80; P<0.001). There were no significant differences in rates of amputation or fracture. CONCLUSIONS In patients with type 2 diabetes and kidney disease, the risk of kidney failure and cardiovascular events was lower in the canagliflozin group than in the placebo group at a median follow-up of 2.62 years

La libéralisation du commerce au Mali : une analyse du jumelage entre achats domestiques et attribution des licences d'importation

The government of Mali imposed an import licensing system for certain products in which prospective importers were required to purchase given amounts of domestic output to obtain import licenses. The arrangements have an impact equivalent to that of a tariff when the tariff revenue is transferred to the domestic industry as a subsidy. The cost of these linking arrangements may be greater or smaller than the cost of a tariff, depending upon the policy's objective and the structure of the protected industry. If price controls are also imposed on the same products the sequencing of the removal of controls becomes important.Le Mali a imposé, pour un certain nombre de produits, un système de licences d'importation qui oblige les importateurs à acheter une quantité donnée de produits maliens pour obtenir une licence d'importation. Ce système a le même effet qu'un droit de douane dont le produit serait transféré à l'industrie domestique sous forme de subvention. Le coût de ce jumelage est parfois supérieur, parfois inférieur, au coût d'un droit de douane, selon l'objectif de la politique économique et selon la structure de la branche d'activité protégée. Si, de plus, le prix des produits considérés est réglementé, la séquence suivie pour supprimer le contrôle des prix devient un élément important.E. Takacs Wendy. La libéralisation du commerce au Mali : une analyse du jumelage entre achats domestiques et attribution des licences d'importation. In: Revue d'économie du développement, 1e année N°3, 1993. pp. 81-101

Auctioning Import Quota Licences : An Economic Analysis

Published in connection with a visit at the IIES