Market Access, Export Subsidies, Domestic Support and the WTO Negociations: a Review and Synthesis

The aim of this review is to provide a preliminary assessment of the implementation of the Uruguay Round Agreement on Agriculture (URAA) in order to highlight the directions that might take the next stage of reform. A particular focus is made on the Quads countries. Our findings are that, in spite of the URAA arrangements, tariffs on agricultural products are still three times higher on average than on manufactured products. The tariffication process has often led to prohibitive duties and to an increase in tariff dispersion. Tariff rate quotas (TRQs) have not always been filled and market access has shown only limited improvement. Export subsidies still exist and domestic farm policies have often experienced only minor changes to match the Agreement requirements. These points, which have been identified as live issues for the next Round of Negotiations, are then debated in the rest of the document. We discuss in particular the modalities of ameliorating market access, with the definition of a more effective tariff cut and the improvement of TRQs' administration and efficiency. As far as exports are concerned, we tackle the issue of effectiveness of a new reduction of export subsidies, the status of export credit and of export restrictions. The more general question of state involvement in agricultural trade is also discussed. Finally, we pose the question of a deepening of the reduction of support to agriculture, with an elimination of the "blue box" and a new definition of the "green box" content.support to agriculture., export subsidies, market access, agriculture, trade negotiations, WTO

Trade and Foreign Exchange Liberalization,Investment Climate, and FDI in the MENA Countries

Despite some progress in economic policy – in macroeconomic stability in the 1980s, and in structural reforms in the 1990s – the MENA countries have failed to attract foreign direct investments (FDI). This may be due to several factors. In this paper we empirically verify from a panel of 72 countries – among which are 8 MENA economies – that, during the 1990s, the low level of trade and foreign exchange liberalization compared to East Asia and Latin America played a determinant role in the low level of total FDI in the MENA economies, particularly in manufacturing. The paper also highlights the role of other factors, such as physical infrastructure, political environment and macroeconomic conditions, in explaining total FDI flows to the different regions. These results stress the importance of accelerating the pace of reform in the MENA economies.

Exchange Rate Regime and Competitiveness of Manufactured Exports: The case of MENA Countries

In this paper, we show that MENA countries have been characterized by a significant overvaluation of their currency during the 70s and 80s. For this purpose, we have developed an indicator of misalignment based on the estimation of an equilibrium exchange rate ─ following Edwards (1989) ─ on a panel of 53 countries, among which 10 are MENA economies. Overvaluation has however decreased in the 90s, probably due to the flexibilisation of the exchange rate regime in some MENA countries and to a better macroeconomic management in others. Misalignment remains nevertheless higher than in other regions, which may be explained by the delay of the MENA region in adopting more flexible exchange rates, as well as in reforming their economy. Our study illustrates that overvaluation had a cost for the region in term of competitiveness. This has been done through the estimation of an export equation, which shows that manufactured exports have been affected by the overvaluation of the exchange rate. This finding partly explains the lower diversification of some economies at some period of time and highlights the need for improved management of the exchange rate regime. In fact, countries that had already a more diversified economy, have benefited, specially in the 90s, from the reduction of the overvaluation of their currency.

Total Factor Productivity and Technical Efficiency of Indian Manufacturing: The Role of Infrastructure and Information & Communication Technology

Drawing on a recent dataset of the Indian manufacturing industry for 1994 to 2008, this paper shows for eight sectors that core infrastructure and Information & Communication Technology (ICT) matter for Total Factor Productivity (TFP) and Technical Efficiency (TE).In the analysis, we use a range of advanced estimation techniques to overcome problems of non-stationary, omitted variables, endogeneity and reverse causality (such as System-GMM, panel cointegration and FMOLS). Estimation results suggest that the impact of core infrastructure is rather strong on TFP and TE (elasticity of 0.32 and 0.17 respectively), while the effect of ICT appears slightly smaller (0.12 and 0.08, respectively). This finding is of particular importance in the Indian context of infrastructure bottlenecks. It strongly supports the idea that a lack of infrastructure can hamper growth in developing countries. Our results also reveal that the impact of infrastructure and ICT varies among the industries. Interestingly, Transport Equipments, Metal & Metal Products and Textile, which are sectors relatively more exposed to foreign competition, are also found to be more sensitive to infrastructure endowment. This result can be extended to the Chemical industry for TE. This finding implies that improving core and ICT infrastructure would proportionally benefit more to these sectors, which could play a leading role in the competitiveness and the industrial growth of the Indian economy.infrastructure;Manufacturing Industry;India;Information and Communication Technology;total factor productivity;Technical efficiency

Reforms and Growth in MENA Countries:New Empirical Evidence

In this paper we empirically analyze the linkages among economic reforms, human capital, physical infrastructure, and growth for a panel of 44 developing countries over 1970-80 to 1999. For this purpose, we generate aggregated reform indicators using principal component analysis. We show that the growth performance of the MENA region has been disappointing because these economies have lagged behind in terms of economic reforms. However, our analysis also reveals that the growth dividend of some reforms has been small. This is the case when structural reforms are implemented in an unstable macroeconomic environment (which corresponds to the situation of the MENA countries in the 1980s), and when macroeconomic reforms are accompanied by a low level of structural reforms (as observed during the 1990s). Our result illustrates the complementarities between reforms as modeled by Mussa (1987) and Williamson (1994). Actually, after human capital and physical infrastructure, our analysis finds that macroeconomic and external stability are key variables for the reform process and for the growth prospects of the developing world.

Firm Productivity and Investment Climate in Developing Countries: How Does Middle East and North Africa Manufacturing Perform?

Firm productive performances in five Middle East and North African (MENA) economies and eight manufacturing industries are compared to those in 17 other developing countries. Although the broad picture hides some heterogeneity, enterprises in MENA often performed inadequately compared to MENA status of middle-income economies, with the exception of Morocco and, to some extent, Saudi Arabia. Firm competitiveness is a more constant constraint, with a unit labor cost higher than in most competitor countries, as well as investment climate (IC) deficiencies. The empirical analysis also points out how IC matters for firm productivity through the quality of infrastructure, the experience and education of the labor force, the cost and access to financing, and different dimensions of the government-business relationship. These findings bear important policy implications by showing which dimensions of the IC, in which industry, could help manufacturing in MENA to be more competitive in the globalization context.Manufacturing firms, productivity, investment climate, developing countries, Middle East and North Africa (MENA)

Assessing the Responsiveness of Private Investment to Economic Reforms: The Case of MENA Countries

During the 1980s and the 1990s, private investment in the Middle East and North Africa (MENA) has on average shown a decreasing or stagnant trend. This contrasts with the situation of the Asian economies, where private investment has always been more dynamic. In this paper, it is empirically shown for a panel of 39 developing economies--among which four MENA countries-- that in addition to the traditional determinants of investment--such as the growth anticipations and the real interest rate--government policies explain MENA's low investment rate. Insufficient structural reforms--which have most of the time led to poor financial development and deficient trade openness¬¬--have been a crucial factor for the deficit in private capital formation. The economic uncertainties of the region have represented another factor of the firm's decisions not to invest. These uncertainties have consisted of the external debt burden and various measures of volatility.cerdi

Governance and Private Investment in the Middle East and North Africa

This paper addresses the issue of the low level of private investment in the Middle East and North Africa (MENA) region, with special emphasis on the role of governance. Based on the existing literature, we have categorized what types of governance institutions are more detrimental to entrepreneurial investments. We have then estimated a simultaneous model of private investment and governance quality where economic policies concurrently explain both variables. Our empirical results show that governance plays a significant role in private investment decisions. This result is particularly true in the case of “Administrative Quality” in the form of control of corruption, bureaucratic quality, investment-friendly profile of administration, and law and order, as well as for “Political Stability”. Evidence in favor of “Public Accountability” seems, however, less robust. Our estimations also stress that structural reforms -- such as financial development and trade openness – and human development affect private investment decisions directly, and/or through their positive impact on governance. These findings bring new empirical evidence on the subject of private investment in the developing world and in MENA countries in particular.governance, private investment, institutions, Middle East and North Africa.

What Types of Perceived Governance Indicators Matter the Most for Private Investment in Middle East and North Africa

By using a simultaneous equations model, this paper establishes that the perceived quality of governance, which is measured by three different indicators “Quality of Administration”, “Public Accountability” and “Political Stability”, has a positive effect on the private investment decisions in the developing countries. Our model allows us to point out the fact that the mechanisms through which each type of indicator affects private investment are different. In addition to our primary result we also show that Middle East and North Africa (MENA) region could have attained a better private investment performance if it had reached a more advanced level of perceived institutions in last two decades. The low level of public accountability, among other governance deficiencies, was predominantly responsible for the deficiency in private investment in MENA.cerdi

Firms'productive performance and the investment climate in developing economies : an application to MENA manufacturing

Drawing on the World Bank Investment Climate Assessment surveys, this paper investigates the relationship between firm-level technical efficiency and the investment climate for 22 developing economies and eight manufacturing industries. The authors first propose three measures of firms'productive performance: labor productivity, total factor productivity, and technical efficiency. They show that, on average, enterprises in the Middle East and North Africa have performed poorly compared with other countries in the sample. The exception is Morocco, whose various measures of firm-level productivity rank close to the ones of the most productive economies. The analysis also reveals that the competitiveness of countries in the region has been handicapped by high unit labor cost, compared with main competitors like China and India. The empirical results show then? that the investment climate matters for firms'productive performance. This is true (depending on the industry) for the quality of various infrastructure, the experience and education level of the labor force, the cost of and access to financing, as well as different dimensions of the government-business relation. The analysis reveals that some industries, more exposed to international competition, are more sensitive to investment climate deficiencies. For some industries, this is also true for small and medium domestic enterprises that do not have the possibility to influence their investment climate or choose their location. These findings bear clear policy implications by showing that increasing firms'size and improving the investment climate (in particular of small and medium firms and industries more exposed to international competition) could constitute a powerful means of industrial development and competitiveness, in the Middle East and North Africa region in particular.Economic Theory&Research,Political Economy,Labor Policies,,Investment and Investment Climate