Outgrowing resource dependence theory and some recent developments

Many policy makers are concerned about dependence on resource exports. This paper examines four changes that reduce this dependence: (i) accumulation of capital and skills; (ii) changes in protection policy, particularly reductions in the burden of protection on exporters; (iii) differential rates of technical change; and (iv) declines in transport costs. Developing countries as a group have made enormous progress in diversifying their exports away from resources in recent decades, a development that appears to have been aided by accumulation of capital and skills and by dramatic reductions in the cost of protection to exporters, but slowed down by technological advances that favored agriculture.Environmental Economics&Policies,Economic Theory&Research,Fiscal&Monetary Policy,Payment Systems&Infrastructure,Decentralization,Economic Theory&Research,Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Achieving Shared Growth,Fiscal&Monetary Policy

Outgrowing Resource Dependence: Theory and Evidence

Many policy makers are concerned about dependence on resource exports. This paper examines three changes that reduce this dependence: (i) accumulation of capital and skills; (ii) changes in protection policy, particularly reductions in the burden of protection on exporters; and (iii) differential rates of technical change. Developing countries as a group have made enormous progress in diversifying their exports away from resources in recent decades, a development that appears to have been aided by accumulation of capital and skills and by dramatic reductions in the cost of protection to exporters, but slowed down by technological advances that favored agriculture.

What would happen if all developing countries expanded their manufactured exports?

Despite the achievements of the export-oriented economies of East Asia, many policymakers doubt that a development path led by manufactured exports is feasible for all developing countries. The author examines what happens if all developing countries, rather than merely a few, expand manufactured exports. He considers two driving forces for export expansion: the liberalization of trade barriers, and productivity growth in the production of manufactured exports. With only trade liberalization, the static welfare gains are small (with the standard Armington specification used in the analysis). Even the export growth rates are far too small to replicate the essential East Asian experience. And when all developing countries participate in static trade liberalization, the small welfare gains diminish slightly. Under the more realistic assumption of dynamic export growth driven by productivity gains for manufactured exports, the welfare effects are much greater and the efforts of developing countries are mutually reinforcing. Because of strong South-South trade links, and developing countries'dependence on manufactured imports, developing countries buy more manufactured goods from each other. The author accepts the view of export pessimists that a country expanding its manufactured exports will receive depressed prices for those exports. But his results differ because he uses a general equilibrium framework with intra-industry trade rather than a partial equilibrium model of the export market. The general equilibrium model captures the fact that developingcountries still import most manufactured goods, often from each other. They will suffer, but they will also benefit, from declining prices. So they are better off if they all expand those exports.Trade Policy,Poverty Assessment,Economic Theory&Research,Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT

Reducing carbon dioxide emissions through joint implementation of projects

Efficient reduction of carbon dioxide emissions requires coordination of international efforts. Approaches proposed include carbon taxes, emission quotas, and jointly implemented energy projects. To reduce emissions efficiently, requires equalizing the marginal costs of reduction between countries. The apparently large differentials between the costs of reducing emissions in industrial and developing countries, implies a great potential for lowering the costs of reducing emissions by focusing on projects in developing countries. Most proposals for joint implementation of energy projects emphasize installing more technically efficient capital equipment, to allow reductions in energy use for any given mix of input, and output. But such increases in efficiency are likely to have potentially important second-round impacts: 1) Lowering the relative effective price of specific energy products. 2) Lowering the price of energy relative to other inputs. 3) Lowering the price of energy-intensive products relative to other products. The author explores the consequences of these second-round impacts, and suggests ways to deal with them in practical joint-implementation projects. For example, the direct impact of reducing the effective price of a fuel is to increase consumption of that fuel. Generally, substitution effects also reduce the use of other fuels, and the emissions generated from them. If the fuel whose efficiency is being improved, is already the least emission-intensive, the combined impact of these price changes is less likely to be favorable, and may even increase emissions. In the example the author uses, increase in coal use efficiency was completely ineffective in reducing emissions, because it resulted in emission-intensive coal being substituted for less polluting oil and gas.Montreal Protocol,Environmental Economics&Policies,Climate Change,Economic Theory&Research,Markets and Market Access,Environmental Economics&Policies,Energy and Environment,Carbon Policy and Trading,Montreal Protocol,Climate Change

Export restrictions and price insulation during commodity price booms

For individual countries, variable trade barriers can be used to reduce the volatility of domestic relative to world prices. If this is done by countries accounting for a large share of the market, its effect is offset by increases in world price volatility. This study shows the nature of the resulting collective action problem, with the policy being ineffective on average in stabilizing domestic prices while increasing the volatility of the income transfers from terms-of-trade changes. A simple approach to assessing the contribution of insulation to the price increases is developed and used with new estimates of agricultural distortions to assess its contribution to the price spikes in 1972-74 and 2006-08 for rice and wheat. The analysis suggests that 45 percent of the increase in rice prices in 2006-08, and 30 percent of the increase in wheat prices, was due to insulating behavior. One sign of progress since 1972-74 was a substantial reduction in the extent of price-insulating behavior by the industrial countries. This provides little stabilizing benefit in the rice market because countries not classifying themselves at the World Trade Organization as developing account for only 3 percent of world rice consumption. But it does offer some benefit for the wheat market where non-developing countries account for 27 percent of consumption.Markets and Market Access,Emerging Markets,Access to Markets,E-Business,Commodities

The Doha development agenda : what's on the table?

The outlines of a potential agreement, emerging after seven years of negotiations, imply that Doha offers three key benefits: reduced uncertainty of market access in goods and services; improved market access in agriculture and manufacturing; and the mobilization of resources to deal with the trade problems of least developed countries. WTO Members have offered to make large reductions in legally bound levels of protection in goods and services. The reductions in currently applied levels of protection are smaller. For the least developed countries, the proposed"duty free and quota free"access will only add significantly to their access under existing preferential access arrangements if industrial and developing country members include vital tariff lines. The initiatives on trade facilitation and aid for trade can play a valuable catalytic role in promoting reform and mobilizing assistance, but substantial effort is still needed to translate notional benefits into actual gain.Free Trade,Agribusiness,Trade Policy,International Trade and Trade Rules,Debt Markets

Agricultural Trade Reform Under the Doha Agenda: Some Key Issues

A successful agreement on agriculture is essential for an overall agreement under the WTOÂ’s Doha trade negotiations. Reaching agreement has been difficult, and as of August 2007, much still remains to be done if a successful agreement is to be reached. We consider three of the most controversial areas of the agricultural negotiations: the relative importance of domestic support, market access and export subsidies; three market access issues of sensitive-product exceptions sought for all countries, the additional special product exceptions sought for developing countries, the proposed special safeguard mechanism; and the domestic support issue. We show that decisions made on reform in these areas will have a critical influence on whether the negotiations achieve their objectives of promoting trade reform and reducing poverty.Trade policy, WTO, Doha Development Agenda, multilateral negotiations, computable general equilibrium modeling

Agricultural trade reform and the Doha development agenda

Anderson and Martin examine the extent to which various regions, and the world as a whole, could gain from multilateral trade reform over the next decade. They use the World Bank's linkage model of the global economy to examine the impact first of current trade barriers and agricultural subsidies, and then of possible outcomes from the World Trade Organization's Doha round. The results suggest moving to free global merchandise trade would boost real incomes in Sub-Saharan Africa and Southeast Asia (and in Cairns Group countries) proportionately more than in other developing countries or high-income countries. Real returns to farm land and unskilled labor and real net farm incomes would rise substantially in those developing country regions, thereby alleviating poverty. A Doha partial liberalization could take the world some way toward those desirable outcomes, but more so the more agricultural subsidies are disciplined and applied tariffs are cut.TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Environmental Economics&Policies,Economic Theory&Research,Poverty Assessment,World Trade Organization

Reducing distortions in international commodity markets : an agenda for multilateral cooperation

Global commodity markets are affected by a variety of government policies that may expand or lower overall supply and as a result affect world prices for the specific products concerned. Market failures and market structures (market power along the value chain) also affect supply. This paper briefly reviews a number of factors that may distort international commodity markets with a view to identifying elements of an agenda for multilateral cooperation to reduce such distortions. Much of the policy agenda that arises is domestic and requires action by national governments. But numerous policies -- or absence of policy -- generate international spillovers that call for the negotiation of international policy disciplines. Independent of whether distortions are local or international in scope, the complexity of prevailing market structures and their impacts on efficiency call for much greater monitoring and analysis by the international community.Markets and Market Access,Economic Theory&Research,Emerging Markets,Access to Markets,Free Trade