Export prospects of Middle Eastern countries : a post-Uruguay Round analysis

Exports in the Middle Eastern countries should increase from $800 million to$900 million as a result of the tariff cuts agreed on in the Uruguay Round, according to the author.This represents an annual expansion of less than 1 percent. Projected gains are small because the erosion of tariff preferences that Middle Eastern countries received in OECD markets offset the positive effects of reduced most-favored-nation tariffs on nonpreference-receiving products. And petroleum, the main Middle Eastern export--which generally faces zero or low tariffs--is unaffected by the Uruguay Round reductions. Egypt's projected gains (about $20 million, or under 0.5 percent of total exports) are concentrated largely in agricultural exports to the European Union and manufactures in the United States. Israel should experience net trade losses because of the erosion of its free trade preferences in the European Union and the United States. The Uruguay Round made major progress in removing nontariff barriers that Middle Eastern exports face, especially in agriculture, textiles, and clothing. But with the removal of the Multifibre Arrangement, international trade in textiles and clothing will become much more competitive. Middle Eastern countries must adopt measures to cut costs and increase efficiency to remain viable exporters. As a result of what was achieved in the Uruguay Round, the average OECD nontariff barrier coverage ration for Middle Eastern exports should fall from a current 10 percent to between 1 and 2 percent. Net food importing countries could be adversely affected by the higher international food prices expected to result from the Uruguay Round agreement. There is a clear priority for net food importers to adopt reforms stimulating domestic production. Prospects for increased trade in the Middle East are constrained by the similar comparative advantages and export profiles of many Middle Eastern countries. The most favorable prospects for intraregional trade appear to be between countries such as Cyprus, Israel, Lebanon, and Turkey--net energy importers--and the rest of the region.Trade Policy,Economic Theory&Research,Agribusiness&Markets,Environmental Economics&Policies,Export Competitiveness,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Economic Theory&Research,Trade Policy,Agribusiness&Markets,Export Competitiveness

Do natural resource-based industrialization strategies convey important (unrecognized) price benefits for commodity-exporting developing countries?

Two objectives of international commodity policy have been to reduce instability in exporter's earnings and importer's prices through international (buffer stock) agreements and to encourage further processing of domestically produced commodities by developing countries. However, it appears that little attention has been given to potential interrelations between these objectives. Using the World Bank's commodity processing classification scheme this study shows that a major structural shift occurred from the mid-1960s to late 1980s in the composition of developing countries'exports toward most processed commodities, and this change was reflected to varying degrees in all major developed country import markets. However, the developing countries actually responsible for the further processing often were not major producers of the primary commodity. This finding suggests that internal constraints to commodity processing may often be more important than external barriers like escalating tariffs. This study also established that the shift resulted in developing countries receiving considerably more stable agricultural materials and ores and metals export prices--and to a lesser extent prices for foodstuffs--as well as more favorable long-term price changes. Both factors should further enhance efforts by developing countries to encourage local processing of domestically produced primary commodities.Crops&Crop Management Systems,Environmental Economics&Policies,Economic Theory&Research,Trade Policy,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT

Are partner-country statistics useful for estimating"missing"trade data?

Because many developing countries fail to report trade statistics to the United Nations, there has been an interest in using partner-country data to fill these information gaps. The author used partner-country statistics for 30 developing countries to"estimate"actual (concealed) trade data and analyzed the magnitude of the resulting errors. The results indicate that partner-country data are unreliable even for estimating trade in broad aggregate product groups such as foodstuffs, fuels, or manufactures. Moreover, tests show that the reliability of partner-country statistics degenerates sharply as one moves to more finely distinguished trade categories (lower-level SITCs). Equally disturbing, about one-quarter of the partner-country comparisons take the wrong sign. That is, one country's reported free-on-board (f.o.b.) exports exceed the reported cost-insurance-freight (c.i.f.) value of partners'imports. Aside from product composition, tests show that partner-country data are equally inaccurate for estimating the direction of trade. Why are partner-country data so unreliable for approximating"missing"data? Evidence shows: 1) problems in reporting or processing COMTRADE data; 2) valuation differences (f.o.b. versus c.i.f.) for imports and exports; 3) problems relating to entrepot trade, or exports originating in export processing zones; 4) problems associated with exchange-rate changes; 5) intentional or unintentional misclassification of products; 6) efforts to"conceal"trade data for proprietary reasons; and 7) financial incentives to purposely falsify trade data. The author concludes that efforts to improve the general quality, or availability, of trade statistics using partner-country data holds little or no promise, although this information may be useful in specific cases where the trade statistics of a certain country are known to incorporate major errors. Significant progress in ugrading the accuracy, and coverage, of trade statistics can be achieved only by improving each country's procedures for data collection.ICT Policy and Strategies,Trade Policy,Economic Theory&Research,Environmental Economics&Policies,Statistical&Mathematical Sciences,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Trade Policy,Environmental Economics&Policies,Economic Theory&Research,ICT Policy and Strategies

What do alternative measures of comparative advantage reveal about the composition of developing countries'exports?

Despite their extensive applications in research and policy studies, no product level comparisons had been made between Bela Balassa's"revealed"comparative advantage (RCA) index and indices associated with the National Bureau of Economic Research (NBER) that reflect the standard Hecksher-Ohlin theory of comparative advantage. The author conducted several empirical tests for developing countries'exports of manufactured products, partly to identify factors that often lead to differences between the two indices. The results show that products in which developing countries have achieved a revealed comparative advantage are highly concentrated in a broad group of labor-intensive products; for other items, their RCAs are generally below unity. Within the labor-intensive group, however, developing countries failed to develop a revealed comparative advantage for about half of the items. A regression model suggests that in the labor-intensive group, revealed comparative advantage falls as the requirements increase for natural resources, for physical capital, and for human capital - including higher per capita wages, and more professional or technical personnel.Economic Theory&Research,Environmental Economics&Policies,Water and Industry,Inequality,Banks&Banking Reform

Can preshipment inspection offset noncompetitive pricing of development countries'imports? The evidence from Madagascar

Many developing countries use preshipment inspection (PSI) firms to counter the adverse effects on their foreign trade of certain pricing and business practices. These firms may also perform some national customs functions, but their key responsibility is normally to verify that imports (and sometimes exports) meet quality and quantity standards and that prices are within established norms. Developing countries make substantial payments for PSI - charges appear to average about 1 percent of the value of the goods inspected - but have undertaken no comprehensive cost-benefit studies of PSI. Using data from Madagascar's experience, the author analyzes the impact of PSI on Madagascar's relative import prices. The results suggest that Madagascar paid considerably higher prices than other developing and industrial countries both before and after PSI was adopted. In other words, preshipment inspection failed to reduce Madagascar's import prices to the level of those paid by other importers. Extreme prices occur for all types of goods imported by Madagascar but are clustered in chemicals and basic manufactures. Evidence suggests that collaborative false invoicing by Madagascar importers and industrial country exports is one reason for the excessive prices both before and after adoption of PSI.Economic Theory&Research,Export Competitiveness,Environmental Economics&Policies,Access to Markets,Markets and Market Access

Asian trade barriers against primary and processed commodities

Many developing countries are being encouraged to shift toward increased processing and exports of domestically produced natural resource based products now exported in primary form. But in many major markets, the structure of tariffs and nontariff barriers militate against such efforts. Zero or low tariffs are generally applied to industrial countries'imports of primary (unprocessed) commodities; duties increase, or"escalate", as the level of processing or fabrication increases. Tariff escalation produces a trade bias against processed goods. In the past, such trade barrier escalation has been attributed chiefly to industrial countries. The authors examined the structure of restrictions in Asian countries and found that most Asian countries'tariffs incorporated more escalation than do tariffs in industrial countries. Apparently tariff escalation is often reinforced by nontariff barriers on processed goods, although supporting data for this finding are less firm. This issue should be viewed as a North-South issue, contend the authors. A bias against imports of processed goods is built into trade barrier escalation among Asian countries and should be addressed in regional initiatives to liberalize intra-Asian trade barriers. The authors make three recommendations for dealing with escalation issues in multilateral negotiations: Japan, and to a lesser extent, the Republic of Korea are the keys to successful negotiations on these issues, as they have a far greater import bias against processed commodities than do all other countries with which the authors compare them. That is, Japanese and Korean trade barriers incorporate far more escalation than do trade barriers in other countries studied. Disproportionately high cuts in trade barriers for unprocessed commodities are not the solution, as they would increase effective protection for processed goodss. Any approach to trade liberalization should deal with both tariffs and nontariff barriers, to ensure that a reduction in one type of restriction is not offset by a further tightening in the other. Several Asian countries apply both types of restrictions to commodity imports.TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Environmental Economics&Policies,Transport and Trade Logistics,Common Carriers Industry,Trade Policy

Trends in nontariff barriers of developed countries : 1966-1986

While major concerns have been expressed about the spread of non-tariff barriers (NTBs) in developing countries, the lack of empirical information on the dimensions of the increase has affected the related policy debates. Using inventories of NTBs in developed countries compiled for 1966 and 1986, this study develops quantitative information on the major expansions of NTBs that occurred over this 20 year period. The paper finds that in 1966 NTBs affected 25 percent of developed countries imports, while in 1986 this share has increased to 48 percent. A second major point documented in the study is that the spread of NTBs has been uneven across countries and industrial sectors. Third, this study shows that the increased resort to discriminatory NTBs like"voluntary"export restraints (particularly in the U.S.) caused a significantly higher share of trade to be"affected"by NTBs than suggested by commonly used trade coverage ratios. The findings concerning the extent that NTBs have proliferated in some sectors (and countries) also increases the importance of establishing effective procedures for liberalization of these measures in multilateral trade negotiations like the Uruguay Round.Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Economic Theory&Research,Trade Policy,Transport and Trade Logistics

Nontariff measures and developing countries : has the Uruguay Round leveled the playing field?

In the policy environment prevailing before implementation of the Uruguay Round results, exports from developing countries face significant nontariff measures in industrial countries. Based on 1992 trade flows, the import coverage ratio of nontariff measures on this trade was more than 18 percent, compared with less than 11 percent for trade among industrial countries. Trade liberalization measures agreed to in the Uruguay Round will dramatically reduce the incidence of nontariff measures on developing country exports: the coverage ratio will drop to less than 4 percent on nonoil exports. This change has the dual effect of increasing export market opportunities for developing countries and of substantially reducing - if not eradicating - the relatively negative bias against developing country exports. These impressive results from the Uruguay Round are attributed to"tariffication"in agriculture, the abolition of the Multi-Fibre Arrangement (MFA), and the elimination of voluntary export restraints (VERs) under the safeguards agreement. But all these aspects of liberalization will not happen instantaneously when the Uruguay Round results come into force. Agricultural tariffication will occur immediately, but the MFA will be phased out over ten years and VERs will be eliminated over four years. Considering the extent of the liberalization presaged by these policy changes, the authors speculate about likely sources of pressure for measures to mitigate the effects of removing nontariff measures. They conclude that the greatest risks will probably come from safeguards and antidumping. The new safeguards agreement permits the use of quantitative restrictions to stem the flow of injurious imports, and although the agreement tightens existing GATT rules in some respects, it loosens them in others. The antidumping instrument has been used with increasing frequency by an increasing number of countries in the past two decades or more. The efforts of several governments in the Uruguay Round to impose additional controls on antidumping met with little success, and antidumping continues to offer considerable scope for imposing protectionist trade measures.Trade Policy,Globalization and Financial Integration,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Environmental Economics&Policies,Economic Theory&Research

Export profiles of small landlocked countries : a case study focusing on their implications for Lesotho

World Bank demographic and country characteristic statistics identify 16 small landlocked countries that are similar to Lesotho. The authors attempt to determine what useful policy information can be derived from the recent trade performance of these"comparators."Among questions they pose are whether the trade profiles of the comparators suggest potentially promising export ventures for Lesotho, do they indicate directions for a geographic diversification of trade, or do they suggest products in which Lesotho might acquire a comparative advantage. The authors also use U.S. partner country statistics to evaluate Lesotho's export performance in this major market. The U.S. data indicate Lesotho lost competitive export shares for about three-quarters of its major clothing products during the late 1990s. The data show these losses were primarily to the North America Free Trade Agreement (NAFTA) countries in the Caribbean. Lesotho was competing on basically equal terms and did not fare well. But it is generallyheld that the most efficient clothing exporters are in the Far East and not Latin America. Lesotho's difficulties in competing with the latter have worrisome implications for its ability to compete with East Asian exporters when the Multifiber Arrangement is phased out. The comparative advantage profiles of the landlocked comparator countries suggest Lesotho's options for a greatly needed export diversification may be wider than is assumed. One or more of the comparator countries developed a comparative advantage in 110 four-digit SITC (non-clothing) manufactures which are generally labor-intensive in production. Many of these goods should also be suitable for production and export by Lesotho. International production sharing often involves the importation and further assembly of components in developing countries. This activity can significantly broaden the range of new products in which a country can diversify. Statistics show many landlocked comparator countries have moved into component assembly operations, and it appears this activity could contribute to Lesotho's export diversification and industrialization. But the quality problems associated with Lesotho's trade statistics makes it impossible to determine the extent to which local production sharing is occurring. A special effort is needed to tabulate reliable statistics on Lesotho's current involvement in this activity. Finally, the authors attempt to determine how the commercial policy environment in Lesotho compares with that in other countries. Policymakers previously had difficulty in addressing this issue, but several recent efforts to compile comprehensive cross-country indices of the quality of governance and commercial policies now provide relevant information. These statistics suggest domestic commercial policies make Lesotho relatively less attractive to foreign investment than many other developing countries. Less than 20 percent of all Latin American countries have a domestic commercial environment judged to be inferior to that in Lesotho, while the corresponding share for East Asia is under 30 percent. Overall, almost 70 percent of all developing countries appear to pursue commercial policies that make them as, or more, attractive to foreign investment than Lesotho.Markets and Market Access,Economic Theory&Research,Agribusiness&Markets,Environmental Economics&Policies,Trade Policy,Economic Theory&Research,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Environmental Economics&Policies,Trade Policy,Agribusiness&Markets

Nontariff barriers Africa faces : what did the Uruguay Round accomplish, and what remains to be done?

Perhaps the major accomplishment of the Uruguay Round is agreements reached on nontariff barriers (NTBs). All NTBs imposed under the Multifiber Arrangement (MFA) will be phased out over 10 years, and all"voluntary"export restraints will be abolished. OECD countries'NTBs on agricultural goods will be converted to tariffs and then reduced by an average of 36 percent. Agreement was also reached on limiting subsidies and other agricultural export incentives. As a result, the profile of OECD nontariff protection Africa faces will change dramatically. Formerly, about 11 percent of all sub-Saharan Africa exports encountered NTBs; now this ratio will fall to about 2 percent. Formerly, 83 percent of Reunion's pre-Uruguay Round exports were affected by NTBs; now none will. Some African countries, however, will be largely unaffected by the Uruguay Round's accomplishments. No NTBs on energy products were liberalized so coverage ratios for Angola, Congo, ad Nigeria are still high - but the measures applied (largely quantitative restrictions and special import charges) apparently do not raise the cost of imports significantly. The exclusion of fish from the agreement on agriculture also limited the potential benefits to countries like the Seychelles. Others simply faced no (or few) nontariff restrictions before the negotiations. The new developments are regarded as positive for developing countries as a group, although some countries may incur losses. Trade in textiles and clothing has been closely regulated for three decades through MFA quotas. Phasing these restrictions out will subject African countries to aggressive international competition. Whether they can maintain a viable textile and clothing export sector depends on whether they can achieve reforms aimed at cost-cutting. The MFA liberalization is heavily backloaded, with roughly half the restrictions being removed at the end of 10 years, so there is ample time for adjustment. Africa should also face more vigorous competition on footwear and ferrous metals when"voluntary"restraints on some other developing countries are lifted. Any losses in market share that may occur, however, may not reflect welfare changes, especially if African exports were heavily subsidized. Agriculture could also be harmed unless appropriate domestic policies are adopted. The tariffication (and reduction) of NTBs, along with limits on export subsidies, could raise international prices on some staples, which would hurt net food importers. Reforms to ensure that prices paid to domestic producers increase in line with international prices (thus stimulating a local supply response) could limit increases in the food import bill. In the post-Uruguay Round world, it is increasingly important to remove domestic constraints that prevent local producers from taking full advantage of new export opportunities."Unfinished business"includes further initiatives needed to address NTBs on fish, chemicals and energy products which the Round bypassed. Stricter regulations on safeguards and the use of antidumping duties are also needed to ensure that these measures are not substituted for those eliminated. But much of the unfinished business involves domestic reform needed to ensure that African countries can react to new export opportunities and competitive challenges.Environmental Economics&Policies,Economic Theory&Research,Trade Policy,Agribusiness&Markets,Export Competitiveness,Economic Theory&Research,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Environmental Economics&Policies,Trade Policy,Agribusiness&Markets