Regionalism and Developing Countries: A Primer

The paper discusses regionalism from the standpoint of developing countries surveying the more significant recent contributions surrounding the contentious debate about identifying resulting benefits for Southern partners in the recent wave of North-South Preferential Trading Agreements (PTAs).regional integration;Trade creation;Trade diversion;political economy

Regionalism and Developing Countries: A Primer

The paper discusses regionalism from the standpoint of developing countries surveying the more significant recent contributions surrounding the contentious debate about identifying resulting benefits for Southern partners in the recent wave of North-South Preferential Trading Agreements (PTAs).regional integration, Trade creation, Trade diversion, political economy

Export quota allocations, export earnings and market diversifications

Non-tariff barriers (NTBs) present a growing threat to a liberal world-trading system and slow the reallocation of production of mature industries from developed to developing countries. Among NTBs, voluntary export restraints (VERs) are proliferating and constitute a major element of the"new protectionism". It has been repeatedly observed that export markets which are not currently part of the VER agreement often follow suit and enter into a VER agreement. Exporting countries may then wish to prepare themselves for this eventuality by actively promoting export diversification towards non-restricted countries as a precautionary measure against future restrictions. Section II of this paper briefly describes how export diversification is typically achieved. In Section III, a simple model is set up that analyzes the implications of the two tier quota allocation rule. Section IV briefly examines alternative instruments and motivations for achieving export diversification. Implications are also drawn for policy actions by nonrestricted countries and the suggestion made that the recent increase in anti-dumping cases may be linked to this two-tier quota allocation practice.Economic Theory&Research,Markets and Market Access,Access to Markets,Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT

FDI, the Brain Drain and Trade: Channels and Evidence

This paper explores the links between the patterns of migration (high vs. low-skill), trade policy, and foreign direct investment (FDI) from the standpoint of sending countries. A skeleton general equilibrium model with a non-traded good and sector-specific labour is used to explore the effects of the skill-composition of exports on FDI. The model suggests that if exports are low-skill intensive, emigration of high- skill labour leads to positive FDI, suggesting that migration and FDI are complements. Cross-sectional analysis using FDI and emigration data for 103 migration-sending countries over the period 1990-2000 finds some support for this conjecture.brain drain, FDI, migration, trade

Fiscal spending and economic performance : some stylized facts

This paper complements the cross-country approach by examining the correlates of growth acceleration in per capita gross domestic product around"significant"public expenditure episodes by reorganizing the data around turning points, or events. The authors define a growth event as an increase in average per capita growth of at least 2 percentage points sustained for 5 years. A fiscal event is an increase in the annual growth rate of primary fiscal expenditure of approximately 1 percentage point sustained for 5 years and not accompanied by an aggravation of the fiscal deficit beyond 2 percent of gross domestic product. These definitions of events are applied to a database of 140 countries (118 developing countries) for 1972-2005. After controlling for the growth-inducing effects of positive terms-of-trade shocks and of trade liberalization reform, probit estimates indicate that a growth event is more likely to occur in a developing country when surrounded by a fiscal event. Moreover, the probability of occurrence of a growth event in the years following a fiscal event is greater the lower is the associated fiscal deficit, confirming that success of a growth-oriented fiscal expenditure reform hinges on a stabilized macroeconomic environment (through a limited primary fiscal deficit).Public Sector Expenditure Analysis&Management,Fiscal Adjustment,Economic Conditions and Volatility,Debt Markets,Achieving Shared Growth

Welfare costs of U.S. quotas on textiles, steel, and autos

This paper deals with the problems of partial equlibrium analysis by presenting estimates from a static ten sector computable general equilibrium (CGE) model of the U.S. economy calibrated to the year 1984. Following the introduction, the paper is organized as follows. Section 2 outlines the model. Section 3 details the sources of estimates of premia on preexisting QRs (quota rents) in 1984 and the sources for the parameters describing demand and supply elasticities. Welfare and employment estimates of QR removal are presented by industry and in the aggregate in Section 4. Conclusions follow in Section 5.Economic Theory&Research,Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Trade Policy,Access to Markets

Notes on Detecting the Effects of Non Tariff Measures

Alternative approaches to estimating the effects of non-tariff measures (NTMs) on trade flows are discussed and evaluated critically. Recent econometric studies point to three results: (i) NTM restrictiveness measures based on an aggregate of ‘core’ NTMs are more restrictive than existing tariffs and, because of export composition towards agricultural products, in the aggregate, these ‘core’ NTMs limit market-access most for low-income countries; (ii) Proxies for individual NTMs, have a negative effect on the volume of bilateral trade for the detailed product under scrutiny; (iii) harmonization of standards is trade enhancing. Case studies confirm several of these patterns, and also that perceived severity of NTMs varies across products and across destinations for a given product. Across broadly-defined imports at the section level, NTMs are more restrictive than the corresponding tariffs with two-thirds of the AVE estimates in the 25%-50% range. Technical regulations and non-automatic licensing are the most used single-NTM measures and the restrictiveness of technical regulations increases with income per capita.Latin America, international trade, Export diversification

Industrial organization implications of QR trade regimes : evidence and welfare costs

Quantitative restrictions (QRs) are the most common form of protection in many developing countries. Often this type of protection emerges during balance of payments crises but, once in place, is not removed. Students of developing countries'foreign exchange regimes have long noted that QRs have deleterious effects beyond those that would emerge from calculations relying strictly on the"tariff equivalent"of quotas. So far most analysis has concentrated on quantifying the cost of rent-seeking activities which allegedly accompany QRs. The purpose of this paper is to extend this analysis by parametrizing two stylized observations that have often been noted about the manufacturing sector of QR-riddenforeign trade regimes: (a) unrealized economies of scale; and (2) lack of competition among domestic firms. The first arises because of the small size of the domestic market; the second arises because of the made-to-measure protection of QR trade regimes. This paper reviews evidence on linkages between firm behaviour, firm size and restrictiveness of the trade regime in semi-industrial developing countries and reports on simulations from a three sector model that explores the sensitivity of numerical estimates to the parameters describing foreign trade and firm behavior under increasing returns of scale.Economic Theory&Research,Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Trade Policy,Access to Markets

Do wage distortions justify protection in the U.S. auto and steel industries?

This paper models endogenous union-induced labor market distortions in applied general equilibrium. It also investigates systematically the impact of labor market distortions under different market structure assumptions. The paper describes how to model labor market distortions with and without labor union activity and how model economies of scale are modelled and how they represent pricing practices. It describes the data and benchmarking for the counterfactual simulations and reports on the welfare costs of VERs under constant returns to scale and no wagedistortions. It also evaluates the distortionary costs of protection created by VERs both with and without labor market distortions and, with and without imperfectly competitive behavior. This step-by-step approach helps isolate the contribution of each distortionary component. It asks what would be the likely benefits of optimal wage and tariff policies in the auto and steel industries.Environmental Economics&Policies,Economic Theory&Research,Health Economics&Finance,Access to Markets,Markets and Market Access

Product differentiation and foreign trade in CGE models of small economies

In recent years, two classes of computable general equilibrium (CGE) trade models have been used to investigate external sector policies: single country and and multicountry trade models. The authors examine the treatment of exports and imports in recent single country CGE models of small economies. They present a simple, one sector analytical model that captures the major features of the multi sector counterpart used in applied models. They show that applying the same assumption about product differentiation to imports as to exports gives rise to a well behaved, price taking economy and normally shaped offer curves. They illustrate the one-sector model with a numerical example which shows the implications of the choice of weights used as a proxy for the domestic price index in computations of real exchange rate indices. The model also shows the role of foreign trade elasticities in the popular Australian model, with traded and nontraded goods. Trade substitution elasticities on the import side play a crucial role in determining the direction of change in real exchange rate during terms of trade perturbations.Environmental Economics&Policies,Economic Theory&Research,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Economic Stabilization,Macroeconomic Management