Outreach D E V E L O P M E N T 33744 P U T T I N G K N O W L E D G E T O W O R K F O R D E V E L O P M E N T S J U L Y 2 0 0 3 TRADE FOR DEVELOPMENT W O R L D B A N K I N S T I T U T E Promoting knowledge and learning for a better world Editorial Board A B O U T T H I S I S S U E SWAMINATHAN S. AIYAR ECONOMIC TIMES OF INDIA, NEW DELHI, INDIA MICHAEL COHEN NEW SCHOOL UNIVERSITY, NEW YORK, USA T he Doha Development Agenda, which PAUL COLLIER emerged from the WTO ministerial confer- THE WORLD BANK, WASHINGTON, DC, USA ence in 2001, acknowledges the need to JOHN GAGE focus on developing country concerns regarding SUN MICROSYSTEMS, PALO ALTO, CALIFORNIA, USA global trade and its effect on poverty reduction and JOSEPH K. INGRAM THE WORLD BANK, SARAJEVO, BOSNIA development. KWAME KARIKARI On the eve of the WTO ministerial meeting in SCHOOL OF JOURNALISM AND COMMUNICATIONS, Cancun, major challenges remain and several issues THE UNIVERSITY OF GHANA, LEGON, GHANA need to be revisited. Our Special Report provides a VIRA NANIVSKA forum where prominent trade specialists can INTERNATIONAL CENTER FOR POLICY STUDIES, KIEV, UKRAINE express their views, present their research findings, PEPI PATRON CATHOLIC UNIVERSITY, LIMA, PERU and make recommendations. We intend this collec- tion of essays to serve as background reading for the J. ROBERT S. PRICHARD TORSTAR, TORONTO, CANADA development community at large, to acquire a better RAFAEL RANGEL SOSTMANN understanding of the issues that will be discussed in MONTERREY TECH UNIVERSITY SYSTEM, MONTERREY, MEXICO Cancun. ADELE SIMMONS The Special Report opens with an article by T. CHICAGO METROPOLIS, CHICAGO, IL, USA Ademola Oyejide, who examines the linkages VIVIENNE WEE between trade reform and growth. Sok Siphana pres- CENTRE FOR ENVIRONMENT, GENDER AND DEVELOPMENT, SINGAPORE ents a successful experiment in Cambodia, where Development OUTREACH is published three times a year by the World "mainstreaming" trade contributed to alleviating Bank Institute and reflects issues arising from the World Bank's many learning programs. Articles are solicited that offer a range of poverty. Kevin Watkins warns us that agricultural viewpoints from a variety of authors worldwide and do not represent support in the form of subsidies and tariffs in indus- official positions of the World Bank or the views of its management. trial countries is adversely affecting poor farmers in MARY MCNEIL developing countries. Julio Nogués, too, focuses on EXECUTIVE EDITOR agriculture, and points out that lack of coherence SUNETRA PURI between the trading system and the international CONTRIBUTING EDITOR financial system hurts agricultural exporters in ANNA LAWTON developing countries; he refers in particular to MANAGING EDITOR Argentina. Kennedy Mbekeani traces the positive MOIRA RATCHFORD impact that reforms in infrastructure will have on PUBLICATION DESIGN economic growth. Bernard Hoekman offers his view PHOTO CREDITS Cover: Bill Heinsohn/Getty Images; Page 5: Agence on the controversial concept of more favorable treat- France Presse/Greg Wood; Page 7: Reuters/Gary Way; Page 11: Reuters/Luc Grago; Page 13: Reuters Photo Archive/STR; Page 15: ment for developing countries. Richard Newfarmer Reuters Photo Archive/STR; Page 17: The World Bank/Anonymous; discusses the prospect of an international invest- Page 19: Reuters/Mark Baker; Page 22: Agence France Presse/Frederic J. Brown; Page 27: The World Bank/Curt Carnemark; ment agreement to expand trade and promote devel- Page 29: Agence France Presse/STR. opment. John S. Wilson examines the role of trade facilitation in the global context. Finally, Will Martin explains how China used the WTO as an instrument This magazine is printed on recycled paper, with soy-based inks. to tailor its own successful trade policies. ISSN 1020-797X © 2003 The World Bank Institute We welcome our readers to join the debate, and send us their opinions on the topic of trade for W O R L D B A N K I N S T I T U T E development. Promoting knowledge and learning for a better world World Bank Institute www.worldbank.org/wbi Frannie Léautier, Vice President www.worldbank.org/devoutreach The World Bank devoutreach@worldbank.org 1818 H Street NW Sunetra Puri Washington, DC 20433, USA C O N T R I B U T I N G E D I T O R Outreach D E V E L O P M E N T V O L U M E F I V E , N U M B E R T W O S J U L Y 2 0 0 3 P A G E 1 0 P A G E 1 3 P A G E 2 2 2 Development News 19 More Favorable Treatment of Developing Countries: Toward a New Grand Bargain SPECIAL REPORT: TRADE FOR DEVELOPMENT BERNARD HOEKMAN Special and differential treatment should be seen in the context of trade and development. The new "grand bargain" 3 Toward a Pro-Poor Trade Agenda must involve actions by developed countries as well as developing countries. URI B. DADUSH 22 An International Investment Agreement: 4 Trade Reform for Economic Growth and Promise and Potential Pitfall Poverty Reduction RICHARD NEWFARMER T. ADEMOLA OYEJIDE Trade liberalization, together with clear investment rules, holds Trade reform can stimulate growth in low-income countries if the largest potential for increasing investment in developing supply constraints are eliminated and market access barriers countries. are removed. 7 Mainstreaming Trade for Poverty 26 Trade Facilitation, WTO Rules, and Alleviation: A Cambodian Experience Capacity Building: What's at Stake? JOHN S. WILSON SOK SIPHANA In Cambodia, thanks to the mainstreaming strategy, trade To serve as an engine for trade facilitation, WTO must design became part of key government policies and has contributed to specific measures best suited for the target country along with the country's vibrant economy. its commitment and agreement. 10 Farm Fallacies That Hurt the Poor 29 China and the WTO: Policy Reform and KEVIN WATKINS Poverty Reduction Agricultural subsidies in industrialized countries are detrimental to poor farmers in developing countries. The Doha WILL MARTIN round provides an opportunity to establish new rules of the Since joining WTO, China has implemented most of the game in agricultural trade. required trade liberalization, becoming one the world's biggest trading countries. But substantial work will be needed on 13 Agricultural Protectionism: Debt Problems complementary financial and social policies. and the Doha Round JULIO J. NOGUÉS 35 KNOWLEDGE RESOURCES Argentina is an example of how agricultural protectionism can have sizable negative macro-economic and poverty effects, and lead to debt problems. 38 BOOKSHELF 16 GATS Negotiations Must Focus on 40 CALENDAR OF EVENTS Services Liberalization: The Case of SADC KENNEDY K. MBEKEANI To make a difference in the SADC region, it is important that services liberalization keep pace with trade liberalization. The article focuses on key issues to be discussed at GATS. D E V E L O P M E N T N E W S News highlights on development issues from around the world China, Egypt join WTO's Information Technology Agreement CHINA AND EGYPT, ON 24 APRIL 2003, joined a WTO agreement on removing all tariff barriers to information technology products such as personal computers and tele- com equipment. The Committee of Participants on the Expansion of Trade in Information Technology Products approved the participation of the two countries, which became the 58th and the 59th members of the WTO's Information Technology Agreement (ITA). From the 29 participants that negotiated the ITA during WTO's First Ministerial Conference in Singapore in December 1996, membership has now risen to 59 that account for 95 per- cent of world trade in IT products. This WTO agreement is helping push the information technology revolution forward. Beginning in 2000, most of the world trade in information technology products (worth continues to mount that the Earth is getting significantly $828 billion in 2001 for office and telecom equipment, a warmer, and that some changes in climate are inevitable. large part of which are IT products) became completely For more on the Prototype Carbon Fund visit: free of tariffs under ITA. Participation in the ITA means www.prototypecarbonfund.org/splash_noflash.html that the country must eliminate tariffs and all other duties and charges on covered IT imports from all WTO members. Horn of Africa gets first Country For more information visit: www.wto.org Innovation Day Emission reduction initiative AT THE END OF FEBRUARY, a mix of civil society repre- gets new donor sentatives met in Addis Ababa to compete for award fund- ing and share knowledge in the first Development THE COMMUNITY DEVELOPMENT CARBON FUND Marketplace Country Innovation Day in the Horn of Africa. (CDCF) was advanced in May with an agreement between Bringing together social entrepreneurs from Ethiopia, the Ministry for the Environment and Territory of Italy and Sudan, and New South Sudan, the three-day forum focused the World Bank. According to the terms of the agreement, on empowerment of community-based organizations, Italy will contribute $7.7 million to the Bank's newly estab- strengthening NGO networks, and establishing a bridge lished Community Development Carbon Fund (CDCF) and among these communities. The integrated package of receive in return certified emission reductions from small peace building and civil society empowerment was sup- projects in least developed countries and poor communi- ported by approximately $500,000 in awards. Award fund- ties in all developing countries. These projects will meas- ing came from the World Bank, Canada's bilateral aid urably improve the quality of life of the communities agency, CIDA, Ethiopia and Global HIV/AIDS Program, involved. The CDCF is focusing on a flexibility mechanism Ireland Aid, UNDP, and Oxfam UK. Additional Country of the Kyoto Protocol, the Clean Development Mechanism, Innovation Days are scheduled in the upcoming months in which will allow OECD countries to fulfill some of their Egypt, Central Asia, Belarus-Ukraine-Moldova, Peru, greenhouse gas emission reduction commitments through Guatemala, Brazil, and Vietnam, as well as a global compe- projects in the developing world. tition currently open to all in the The Italian signing follows a development community. Canadian government commitment For more information, visit Visit us on the web at: of $2.5 million to the CDCF. Carbon www.worldbank.org (click on www.worldbank.org/devoutreach finance activities have taken on a Opportunities, click on Grants, click new sense of urgency as evidence on Development Marketplace). 2 Development Outreach W O R L D B A N K I N S T I T U T E S P E C I A L R E P O RT Toward a Pro-Poor Trade Agenda BY URI B. DADUSH can result in increased financial costs and aggravate debt problems, with reference to Argentina. AS THIS ISSUE of Development Outreach goes to press, the Third, any agreement in the Doha round is not neces- fate of the Doha Development Agenda hangs in the balance. sarily a pro-poor development outcome. Some authors Most of the important deadlines Ministers set for them- point to possible pitfalls in the system. Bernard Hoekman selves in November of 2001 in Doha Qatar--on agriculture, points out that trade preferences without MFN access for TRIPS and health, implementation issues (including tex- the products produced by other developing countries will tiles), special and differential treatment, and dispute set- not benefit the majority of the world's poor, since most of tlement--have come and gone without agreement. Though the world's poor live outside the LDCs. Richard some progress has been made (for example on facilitating Newfarmer, for example, finds that an international agree- WTO accession for the Least Developed Countries), the ment on investment would be beneficial for developing missed deadlines reflect the struggles of the international countries only if an agreement leverages market access in community in reforming the trading system to make it more products of concern to developing countries and if com- supportive of development and poverty reduction. panion domestic policy reforms are undertaken. This issue of Development Outreach touches upon all of Other authors write eloquently on these same themes the controversial issues in the Doha Development Agenda. through the lens of quite diverse country experiences. Sok We are pleased that such a distinguished panel of interna- Siphana points out that lessons can be learnt from tional experts has taken up the challenge to write concise Cambodia's experience in implementing its trade policy. papers that highlight pro-poor development outcomes of Kennedy Mbekeani presents the case of Southern Africa the Doha Development Agenda. Not everyone will agree Development Committee (SADC) countries, which high- with the positions taken by the authors on the difficult lights the need for greater liberalization of the services trade issues they analyze­but all aspire to search for pro- sectors and a more favorable outcome from the GATS for poor development results. the less developed regions of the world. Will Martin shows Several common themes stand out. First, market access how the Chinese experience of accession to the WTO can be for developing countries is essential to promote pro-poor helpful for many other developing countries seeking to development. However, benefits from trade reforms and gain membership in the WTO. liberalization would be more effective if combined with Negotiators are dealing with hard issues, many left over appropriate complementary policies. For example, from earlier rounds­tariff peaks and escalation that have Ademola Oyejide underscores the importance of a stable protectedparticularinterestsattheexpenseofdevelopment, macroeconomic framework as well as sound infrastructur- agricultural barriers that have protected powerful and rela- al and institutional support, and argues that these can help tively wealthy farm voices while denying market access to the mitigate any short-term costs. John Wilson emphasizes world's poor farmers, and closed services markets­includ- measures to increase transparency, streamline trade pro- ing labor services­that have not realized their development cedures, and build capacity that would facilitate trade and potential. These are also the issues that affect developing reduce transaction costs. countries most profoundly. A trade round that makes Second, reforming agriculture is central to develop- progress in these areas can improve the lives of the world's ment. Kevin Watkins highlights the costs inflicted upon poor. We hope this issue of Development Outreach contributes developing country markets from rich country protection to an understanding of possible pro-poor outcomes. of agriculture. Measures such as subsidies, high tariffs and export dumping seek to undermine poverty reduction Uri B. Dadush is Director, International Trade Department, efforts. Julio Nogués shows how agricultural protectionism The World Bank J U L Y 2 0 0 3 3 SPECIAL REPORT Trade Reform for Economic Growth and Poverty Reduction BY T. ADEMOLA OYEJIDE The full efficiency, output and associated welfare gains of trade reform tend to accrue in the long run. The substitution WIDESPREAD POVERTY is clearly the major challenge for effectsandthemoreefficientre-allocationanduseofresources low-income developing countries. It is characterized not only resulting from relative price changes take time to work them- by insufficient incomes, but also by limited access to land and selves out. The time taken may vary by sector (in a given econo- capital, poor health and education, and the scarcity of eco- my) and across countries due to differences in the efficiency nomic and social infrastructure. Given the pervasive nature of with which particular markets function and the extent to which poverty in these cases, rapid and sustainable economic growth supply response capacity constraints may be binding. is generally viewed as the primary vehicle for poverty reduc- The realization of the growth effect of trade reform in a low- tion. The basic proposition is that if the economies of low- income country is contingent on two sets of conditions, one income countries grow rapidly enough and their income dis- internal and the other external. Internally, trade reform is most tributions are not unusually skewed against the poor, poverty effective when it is combined with the maintenance of macro- reduction should occur. If, in turn, trade reform stimulates economic stability and sound institutions. In addition, the lib- growth, this should promote poverty alleviation. In my note, I eralizing country must have the appropriate infrastructural and will bring the issue of trade and development into focus by institutional support for generating adequate supply responses. examining the linkages between trade reform and growth, and The growth benefits of trade reform are likely to be limited or the mechanisms through which growth impacts upon poverty. elusive in low-income countries which lack a supportive policy environment and whose entrepreneurs are constrained by Trade reforms and economic growth weaknesses in the institutional and market infrastructure for production and trade. On the external front, a supportive envi- IN CONCEPTUAL TERMS, TRADE POLICY WORKS by inducing ronment may also be crucial. In particular, external market substitution effects in the production and consumption of access constraints may deny a low-income country the full goods and services through changes in prices. These effects, growth benefits of its trade reform. in turn, change the level and composition of exports and Since developed countries constitute the main export mar- imports. In particular, the changing relative prices induced by kets of low-income countries, developed-country market trade reform cause a re-allocation of resources from less effi- access barriers limit their export opportunities. Currently, cient to more efficient uses. In addition trade reform expands global market access barriers penalize low-income countries the set of economic opportunities by enlarging market size because their exports are concentrated in products character- and increasing the effects of knowledge spillovers. These are ized by highly restrictive market access conditions. External the key components of the effects of trade reform, which market access barriers are especially high in agriculture and together induce growth of output. labor intensive manufactures with tariff peaks (i.e. tariffs in 4 Development Outreach W O R L D B A N K I N S T I T U T E excess of 15 percent) and tariff escala- tion constituting special problems. With tariff escalation, tariffs rise with the level of processing; this has the effect of reducing the demand for processed imports from low-income countries, preventing appropriate structural adjustment in developed countries and frustrating the diversifi- cation of low-income countries into high value-added exports. In addition, production-related support for agri- culture in developed countries boosts their own output and this displaces low-income country exports in devel- oped-country markets. Furthermore, the unwanted production surpluses of developed countries are typically dumped into world markets, with the aid of export subsidies, where they depress prices. A coherent program for enhancing the growth benefits of trade reform in low-income countries consists of at least two components. One is to expand external market access oppor- tunities for the exports of low-income countries. Another is to help relax their supply response capacity con- straints so that they can take fuller advantage of the new opportunities. By J U L Y 2 0 0 3 5 TRADE REFORM IS TYPICALLY PART OF A COMPREHENSIVE REFORM PROGRAM, WHICH ALSO INCLUDES APPROPRIATE COMPENSATORY AND MITIGATING MEASURES. reducing or eliminating biases against the exports of low- costs and trade-offs implicit in a growth strategy that is driv- income countries in developed country markets, part of the en by trade reform. In the long run, however, evidence sug- first component would be achieved. By extending multilateral gests that in countries, which have experienced trade-led duty-free and quota-free market access, with generous and growth, the income growth of the poor has, on average, kept flexible rules of origin, to all exports of low-income countries, pace with the overall average income growth. More specifical- the developed countries would help to achieve the remaining ly, trade-led growth can reduce rural poverty when it expands part of the first component. This would help to eliminate the employment in small-holder agriculture and can lower urban deficiencies of existing preferential market access schemes poverty when it is associated with increased output and export and significantly increase the export growth of low-income of labor-intensive manufactures such as textile and clothing. counties. As for the second component, low-income coun- The existence of possible negative, though short-term, tries need assistance to address their export supply response effects of trade reform implies that while trade-led growth capacity constraints through investment in the building of should eventually reduce poverty, it may not do so from the appropriate economic and social infrastructure. start. Because some of the poor may suffer and some of the non-poor may fall into poverty in the transitional period, Trade-led growth and poverty trade reform is typically part of a comprehensive reform pro- alleviation gram, which also includes appropriate compensatory and mitigating measures. These would offer social safety nets, ECONOMIC GROWTH that is induced by trade reform has a including retraining opportunities, targeted specifically at special feature, which may be important for poverty allevia- addressing the short-term costs of trade reform. tion. This derives from the observation that trade reforms have costs that have to be incurred well before the related Conclusion stream of benefits can be realized. The resource reallocation, which is an integral part of the reform process, is not costless. TRADE REFORM CAN STIMULATE GROWTH in low-income As workers are displaced from less efficient enterprises, some countriesiftheirsupplyresponsecapacityconstraintsareelim- amount of transitional unemployment and output loss may be inated and the external market access barriers, which they face, experienced. There is also an inherent distributional problem. particularly in the developed countries, are removed. Trade-led The economic agents that have to bear the "burden" of the growth can, in turn, aid poverty reduction in low-income coun- reform may not necessarily be the ones who reap its benefits or tries if the associated trade reform is part of a comprehensive the sharing of the cost may not occur in the same proportion as program, which incorporates appropriate complementary and the sharing of benefits. In effect, while trade reform tends gen- mitigating measures for addressing its short-term costs. S erally to promote economic growth, it is also likely to generate both winners and losers; hence the impact of trade-led growth T. Ademola Oyejide is Professor of Economics, Department of on poverty reduction may not necessarily be unambiguous. Economics, University of Ibadan, Nigeria, and Executive Director, Conceptually, growth induced by trade reform may affect Development Policy Center. the poor through the associated changes in the prices of their consumption baskets, changes in their wages and employ- ment, as well as changes in government taxing and spending References: behavior. For instance, a reform which benefits poor farmers Bhagwati, J. and T.N. Srinivasan (2001), "Trade and Poverty in Poor by increasing their producer prices may hurt the urban poor Countries", mimeo. Columbia University. by raising their food prices; whereas a reform which lowers Helleiner, G. K (ed) (1992), Trade Policy, Industrialization and Development: the domestic prices of imported food would be beneficial to New Perspectives, Oxford University Press, New York. poor consumers while penalizing the local poor food produc- Krueger, A. and A. Berg (2002), "Trade, Growth and Poverty", Annual Bank ers with low prices. When trade reform leads to the growth of Conference on Development Economics, Washington, April 29­30. economic sectors that employ more of the poor and pays them Oyejide, T. A. (2002), "The Mechanics of Trade Policy Reform in Developing higher wages, it tends to promote poverty alleviation. But if Countries: a Literature Survey", mimeo, University of Ibadan. the same reform results in retrenchment in a previously pro- Rodrik, D. (2001), "Globalisation, Growth and Poverty: Is the World Bank tected economic activity that employs many of the poor, their Beginning to Get It?" mimeo, Harvard University. poverty status may worsen. Finally, if a trade reform leads to Winters, L. A. (2002), "Trade Policies for Poverty Alleviation" mimeo, the reduction of government revenue, social expenditure may University of Sussex. fall with a negative impact on the poor. These are examples of some of the possible short-term 6 Development Outreach W O R L D B A N K I N S T I T U T E SPECIAL REPORT Mainstreaming Trade for Poverty Alleviation A Cambodian Experience BY SOK SIPHANA sionally substitute for aid in the development process. Nonetheless, trade liberalization and reform cannot work and THERE IS AMPLE EVIDENCE that trade and investment have never worked as stand-alone policies or measures. In reform and deeper integration with the global economy, other words undertaking trade reforms and developing trade undertaken within a comprehensive development strategy, policies in isolation without the presence of mutually sup- are key strategic elements for achieving higher economic portive policies will not bring about the full benefits resulting growth, a necessary condition for poverty reduction. The link- from trade reform and liberalization. Trade needs to be main- ages between trade policies and poverty have been addressed streamed into the development plan of the country. recently at length by several papers (World Bank, McCulloch, For a Least Developed Country (LDC) like Cambodia where Winters and Ciero 2001). These are convincing arguments one third of its population live below the poverty line, trade that trade may facilitate international diffusion of knowledge, priority areas of action need to be reflected in poverty reduc- thereby speeding up growth, and may complement or occa- tion and national development plans and strategies. J U L Y 2 0 0 3 7 Preliminary government studies suggest self-employed. The Government's that economic growth has helped reduce National Poverty Reduction Strategy poverty, but that the proportional bene- notes that people are poor because of fits to the rich have been greater than While the challenges for inadequate human and physical the benefits to the poor (RGC 2000a). resources, or the opportunity to gener- Cambodia to bring Concern has also been expressed that ate income and/or accumulate economic growth has yet to impact on economic growth and resources. Cambodia's recent violent many of those living far below the history has resulted in many disadvan- reduce poverty seem poverty line. In that respect, Cambodia taged groups, including internally dis- has worked arduously for the last few enormous, so are also placed people, returning refugees, dis- years with its development partners to the hope and the abled people, widows, and orphans. The better understand the potential impacts poor generally are disadvantaged by of trade reforms on the poor, and to possibilities that have inadequate food supplies, poor health, develop mechanisms, which truly sup- been generated from the physical disabilities, lack of access to port pro-poor growth. land, insecure land titles, lack of skills, Integration Framework Here, I will highlight the main fea- inadequate information, and poor tures of Cambodia's trade policies while success. Cambodia's access to input and product markets. putting into perspective its implement- success will mean ing aspects focusing on the poverty Implementing the Trade reduction linkage as well as the develop- liberation: liberation from Mainstreaming Strategy ment dimension. It will attempt to share hunger, poverty and some experiences of the trade main- CAMBODIA WAS VERY SUCCESSFUL in income constraints, streaming process, including positive its mainstreaming efforts. Trade, once and negative moments, the lessons liberation from an obscure section in national policy learned and obstacles encountered and documents, found its preeminence in ignorance, and liberation measures taken to overcome them. key government policies like the Second from fear, especially from Socio-Economic Development Plan Why Cambodian people the fear of dying when (SEDP II, 2001-2005), the National are poor Poverty Reduction Strategy (NPRS), the still young. In Governance Action Plan (GAP), and THE FOUNDATIONS of the Cambodian the words of Nobel even in the Legal and Judicial Reform economy are household economic units, Strategy paper. Externally the main- laureate Amartya Sen which employ and provide incomes for streaming efforts focused on encourag- the majority of the population. Cambodia "....economic growth, ing broad-based economic cooperation is an agrarian economy with 80 percent which brings about and resource mobilization through oftheworkforceemployedintheagricul- regional and global economic linkages. ture sector. The production of rice, for a high standard of living, The United Nations Development household consumption and trade, is the is interpreted too often in Assistance Framework (UNDAF 2001- major economic output for most of the 84 2005), the UNDP Country Co-operation materialistic terms. But percent of households located in rural Framework (2001-2005), and the ADB areas. Households supplement rice pro- we need to pay attention and World Bank's Country Assistance duction with other economic activities Strategies all have the trade agenda to its human aspect too. such as fishing, production of vegetables, embedded in them. fruit and other cash crops, the gathering For developing countries Now mainstreamed into the NRSP, of forest products, and off farm employ- and LDCs alike, economic the role of trade will be firmly situated ment. The landless depend on gathering within Cambodia's coherent national activities, on communal or State land, growth should be looked policy context and its trade-related tech- and paid employment. at as an effective force of nical assistance needs will be better About 36 percent of the population identified, prioritized and sequenced, on liberation." lives in poverty. Poverty incidence is the basis of sound policy diagnosis, and highest (44 percent) in households H.E. Cham Prasidh, therefore stand a much better chance of where agriculture is the primary source Minister of Commerce, being financed by donors and agencies. of income. Some 90 percent of the poor Cambodia live in rural areas, and there is a strong Impact on export correlation between poverty and remoteness from urban locations. ONE OF THE MOST RECENT newcomers About three quarters of the poor are in the international trade of garments 8 Development Outreach W O R L D B A N K I N S T I T U T E has been Cambodia­a non-WTO member country and an services--tourism, sawn timber, remittances of expatriate LDC. It has been one of the fastest growing garment exporters Cambodian workers, and rubber. Other exports are small, over the past 8 years--in 1995 the exports of garments were though a number show strong promises (e.g. shoe manufac- about $26 million and in the years 2000 to 2002 the corre- turing, rice, fish, specialty agriculture and agro processing, sponding annual figure exceeded $1 billion. In early 2002 handicraft. See Tables 1 and 2). Cambodia ranked number 16 amongst the top suppliers of Bearing in mind its narrow export base, Cambodia has garments into the U.S. market. worked hard both to boost the productivity of its current Cambodia is today an established supplier of low price, exports and to move up the value-chain. For example, medium quality garments, employing around 220,000 workers improvements in rice seeds, irrigation, and farming methods in 185 factories, out of which only 23 are Cambodian-owned. would go a long way in increasing both labor and land produc- Almost 90 percent of the garment manufacturers are foreign- tivity and strengthening Cambodia's export capacity in this owned, coming from Hong Kong (China), P. R. China, product. Likewise, Cambodia has begun making a shift to Singapore, Taipei, South Korea, Malaysia, Thailand, Indonesia, higher value agricultural production (spices, nuts and seeds, Bangladesh, England, Germany, Australia, Canada and the fruits, etc.) and more processing (e.g. milling of exported United States. rice, extraction of essential oils, processing of wood, etc.) Foreign trade wise exports of garments dominate the sec- which would also bring more value from exports to the coun- tor (nearly $1,303 million in 2002 out of the total foreign trade try. In this regard, bringing the country trade regime in line of $1,467 million) followed by three or four products and with the WTO rules and disciplines, lowering the costs of trade facilitation, strengthening the trade promotion capacity, improving the investment environment are some of the CAMBODIA FOREIGN TRADE 1996­2002 areas Cambodia needs to look at carefully to implementing TABLE 1 TOTAL EXPORTS IMPORTS BALANCE its pro-poor export led 3500 growth strategy. 3082 Concretely, the Govern- 3000 2649 ments of Cambodia and 2473 2500 Thailand are working on joint 2000 1922 1887 development strategies, 1500 1467.4 1354 which are sector specific, i.e., 1323 1194 1226 1000 tourism, agricultural and 795 735 industrial sectors. They are 500 378 411 defined through the assess- 0 ment of comparative and -500 competitive advantages of the -1000 two countries. Through this 1996 1997 1998 1999 2000 2001 2002 bilateral economic coopera- tion Cambodia can secure another source of regional TABLE 2 TOTAL USA EU OTHERS development support to help sustain overall economic 1400 1308.8 growth. Using Cambodia's GAP and taking advantage of 1200 1119.8 existing infrastructure facili- 1000 964.8 923.1 ties in neighboring countries, Cambodia is envisaging set- 792.6 800 729.9 ting up 3 Export Processing 650.0 600 zones as soon as possible next 512.2 to Thailand's border in 400 355.2 358.2 287.9 308.8 Poipet, Koh Kong, and Pailin 223.9 220.9 200 with the potential to create 106.8 112.3 137.8 80.1 74.8 62.9 26.5 26.0 100,000 jobs and approxi- 1.5 0 0.5 mately $60 million of annual 1995 1996 1997 1998 1999 2000 2001 2002 wages. c o n t i n u e d o n p a g e 3 2 J U L Y 2 0 0 3 9 SPECIAL REPORT Farm Fallacies that Hurt the Poor BY KEVIN WATKINS Devastating subsidies to worthy social objectives. President Bush signed the controversial 2002 APART FROM WRINGING their hands, THE UNDERLYING PROBLEM is this. Farm Act claiming that it would protect endorsing human development goals, Each year, industrialized countries pro- small family farmers. The French min- and promising more aid, what can gov- vide over $300 billion in support to ister for agriculture, Henri Gaymard, ernments in rich countries do about agricultural producers­roughly six has made even more grandiose claims poverty in poor ones? Answer: get seri- times the amount they spend on aid. To on behalf of the Common Agricultural ous about reforming their farm policies. put this figure in context, it is more than Policy (CAP). He recently declared it an Industrial country agricultural support the total income of the 1.2 billion people integral part of the `European model' for is destroying the livelihoods of poor in the world living on less than $1 a day. a social market. farmers across the developing world, High levels of agricultural support All of which is abject nonsense. In the reinforcing an unequal pattern of glob- translate into increased output, fewer real world, farm subsidies are tightly alization in the process. imports, and more exports than would linked to output and the size of land- Two years ago developing countries otherwise be the case. Small farmers in joined the Doha round of World Trade developing countries suffer damage Organization (WTO) negotiations on the through various channels. Subsidized clear understanding that it would create exports undercut them in global, and GINI COEFFICIENTS FOR AGRICULTURAL the conditions for agricultural trade even local, markets, driving down SUPPORT AND NATIONAL INCOME (SELECTED COUNTRIES) reform. Northern governments solemn- household incomes. Meanwhile, those ly promised to improve access to their seeking access to northern markets own markets, cut support to agriculture, have to negotiate some of the world's 100 and stop the subsidized dumping of agri- highest trade barriers. INCOME FARM cultural surpluses. Keeping that promise The US and the EU are the `subsidy DISTRIBUTION SUBSIDIES is vital if the WTO talks are to live up to superpowers', accounting for over 60 < US 79 their billing as a `development round'. percent of rich country agricultural < EU 77 < Britain 71 Unfortunately, one of two less benign support spending. Europe spends more < France 69 outcomes now looks likely: no deal at all, in absolute terms--and its subsidies Brazil 60 > or a deal that perpetuates the present represent a larger share of the value of distortions and inequalities. farm output. However, the US spends Why does this matter to the world's more per farmer. It also concentrates UK 36 > France 32 > poor? Partly because three-quarters of subsidies on a narrower range of com- them--about 900 million people--live modities. EU and US subsidies matter and work in rural areas, most of them as to the rest of the world because of their small farmers. And partly because dominant position in global markets. northern agricultural policies are Whatever their wider differences, 0 destroying the markets on which they the U.S. and the EU have one thing in depend. common: political leaders that like to Source: World Bank, World Development Indicators (2002); Oxfam calculations justify agricultural support by reference 10 Development Outreach W O R L D B A N K I N S T I T U T E holdings, not to social need. That is why the biggest 7 per cent of farms receive over 50 per cent of farm subsidies, both in the US and the EU. Subsidy distribution to agricul- tural producers in Europe and America is more unequal than income distribution in Brazil, one of the world's most unequal coun- tries. To make matters worse, many of the benefits end up with corpo- rate exporters or get capitalized into rising land values and input prices. If industrial country farm subsi- dies were purely of domestic con- cern they could be written-off as an act of reckless extravagance guided by perverse economics. Sadly, the subsidy fest for the world's richest agricultural producers hurts some of its poorest. Take the case of cotton. When it comes to harvesting subsidies, America's 25,000 cotton barons are first among equals. In 2001 they received $3.6 billion in govern- ment support--three times US aid to Africa. Because the US is the world's largest cotton exporter, accounting for 40 percent of the world market, these subsidies low- ered world prices: by around one quarter according to the International Cotton Advisory Committee. Farmers in Africa have suffered the consequences. In West Africa alone 10-11 mil- lion people depend on cotton culti- vation as a source of income. The crop is also a major source of for- eign exchange and government revenue. Lower world prices caused by American subsidies mean that desperately poor households have seen their incomes fall, with atten- dant consequences for poverty. In Benin, the price decline associated with American subsidies translates into a 4 percent increase in the incidence of poverty, or 250,000 people falling below the poverty line. Meanwhile, foreign exchange losses have eroded the benefits of development assistance: Burkina Faso loses more because of US sub- sidies than it gets in debt relief. What makes the cotton case so J U L Y 2 0 0 3 11 egregious is that West Africa is a far more efficient producer ble the total agricultural budget for Mexico. than the US. Fewer than 10 per cent of America's producers would be competitive on world markets without support. But The Doha round opportunity in 2001/2002 the subsidy provided to American cotton farm- ers exceeded the total national income of countries like THE DOHA ROUND PROVIDES A REAL OPPORTUNITY to Burkina Faso and Mali. In a bizarre throwback to the princi- establish new rules of the game in agricultural trade. There are ples of Bolshevik state planning, it also exceeded the value of four basic requirements: a prohibition on export dumping, cotton output. In cotton, as in other areas of agricultural trade, deep cuts in production subsidies, improved market access, market outcomes owe less to comparative advantage than to and a provision allowing developing countries to protect their comparative access to subsidies. agricultural systems for food security reasons. To be fair, even the US is hard-pressed to match the EU's Prohibiting export dumping ought to be the most straight- capacity for double standards in agriculture. Consider the CAP forward objective. Unfortunately, the EU's lamentable pro- sugar regime. Europe is among the world's highest cost pro- posals for a 45 percent export subsidy cut would leave it with ducers of sugar. It is also the world's biggest exporter of white some $4 billion in the dumping arsenal. For its part, the US sugar. The reason: subsidies and tariffs. EU farmers are paid has refused to bring either its $7 billion-plus subsidized three times the world price for sugar, and EU taxpayers and export credit program, or the commercial dumping compo- consumers then foot the bill for dumping the resulting surplus nents of its food aid program, under WTO export disciplines. ­7 million tons of it--on world markets. Non-subsidizing The EU has single-handedly dashed hopes for early progress exporters such as Malawi and Thailand suffer the twin conse- towards improved market access. It has proposed that tariff cuts quences of lower prices and lost market shares. Meanwhile, be based on the failed formula adopted in the Uruguay Round, high tariffs keep the EU's own market firmly out of bounds. with average tariffs cut by 36 per cent. Applied to a sector with many tariff peaks exceeding 100 percent, it is hard to see how Unfair tariffs and export dumping this will facilitate the "substantial improvement in market access" promised at Doha. IMPORT RESTRICTIONS IN AGRICULTURE DENY developing On the question of subsidy cuts there is every prospect of a countries an opportunity to exploit an obvious area of com- EU-US deal­but not one that will benefit developing countries. parative advantage. Average agricultural tariffs in the EU and Efforts to reform the CAP have been stymied by political differ- the US are some five times higher for agricultural goods than ences between member states. Meanwhile, the 2002 US Farm for manufactured goods. And tariff peaks in excess of 100 per Act not only increases budget support for agriculture, but also cent are common, notably in tariff lines such as sugar, beef, strengthens the links between farm support and production. dairy produce and processed fruit. Instead of cutting support, both the EU and the US are Escalating tariffs--duties that rise with each stage of pro- repackaging subsidies into payments permitted under WTO cessing--are another standard feature of the agricultural poli- rules (which they wrote). Nominally, these payments have to be cy landscape. If Latin American tomato exporters make the `non-trade distorting', or decoupled from production deci- mistake of processing the vegetable into sauce, the tariff they sions. But these multi-billion programs will generate produc- face rises by a factor of six percent. Average EU tariffs on fully tion by providing farmers with three key benefits: liquidity, processed foods are twice as high as on products in the first capital, and guarantees against risk. stage of processing. Tariff escalation serves the deeply perni- Another source of Trans-Atlantic consensus is the view that cious purpose of keeping poor countries trapped in low value- developing countries should have only limited rights to protect added segments of the agricultural trading system. their farmers through import controls. Both sides want to see Excluded from rich country markets, small farmers also any special WTO provisions in this area restricted to the poor- suffer in domestic markets. In their development rhetoric, est countries, and to a narrow range of specified `food security' most northern governments recognize that smallholder agri- crops. The problem here is that the EU and the US continue to culture is vital to poverty reduction. Yet the same governments see the WTO as a useful vehicle for prizing open developing systematically undermine the local markets of food producers country markets, providing outlets for export dumping. through subsidized export dumping. So where does this all leave us? One possible outcome is In Africa, farmers are being pushed out of urban markets that the latest bout of EU-US brinkmanship in agriculture will by heavily subsidized EU wheat and dairy exports, undermin- block any deal, jeopardizing the entire Doha round. This ing incentives for production and creating a dangerous would have devastating consequences for poverty reduction dependence on imports. But the problems are not confined to efforts--not to mention the future of the rules-based multilat- the world's poorest countries. Mexico has some 2 million eral system. The other, more likely, scenario is a deal that fails maize farmers working on land in rain-fed areas, many on to address the real problems facing poor farmers in develop- ecologically fragile hillsides. Regional integration is exposing ing countries. It all calls to mind the old Swahili proverb: thee farmers to competition for US maize imports. Many are `When the elephants fight, the grass gets crushed; when the losing their livelihoods. This outcome owes less to market elephants make love, the grass gets crushed'. S realities than to market subsidies. Last year, US maize farmers received $3.2 billion in government support--more than dou- Kevin Watkins is Head of Research at Oxfam 12 Development Outreach W O R L D B A N K I N S T I T U T E SPECIAL REPORT Agricultural Protectionism Debt Problems and the Doha Round BY JULIO J. NOGUÉS tectionism increases financial costs; and analyze dynamic and poverty effects. Although this article draws on the experience THROUGH FINANCIAL CHANNELS, agricultural protection- of Argentina, I believe the analysis applies to other indebted ism imposes costs on efficient producers that are higher than countries, particularly in Latin America, which are also net those associated with negative allocative effects and export agricultural exporters. In conclusion, I will offer one sugges- losses usually estimated. The link between protectionism and tion for the Doha negotiations. finance has a direct relationship with the WTO Marrakech Agreement of establishing coherence between international Agricultural protectionism and exports trade and financial matters (WTO 1995). Here, I will call attention to the fact that for efficient agricultural exporters ARGENTINA IS AN EXAMPLE of how agricultural protection- there is little if any coherence between the trading system and ism can have sizable negative macro-economic and poverty the international financial system that they face. I will also effects. The reason is that its exports are still composed pre- present some numbers on the export losses from agricultural dominantly of primary agricultural goods and agro-based protectionism; describe the channels through which this pro- manufactures (around 20 and 30 percent of total exports J U L Y 2 0 0 3 13 respectively). Clearly, under a well functioning multilateral early 90s. First, implementation of the URAA has been mired trading system, Argentina would proceed with its develop- with protectionist effects that go beyond what negotiators had ment and growth through exports of these products and, later, in mind (OECD 2001, and Diakossavas 2001). Second, many would move into other types of exports. But agricultural pro- regional trade agreements have diverted exports and robbed tectionism implies increasing difficulties and uncertainties efficient exporters of important export and growth opportuni- for efficient exporters who continue to see their access to for- ties (Nogués 2003). Unfortunately, the prospects that this sit- eign markets reduced and/or their terms of trade decline. uation will change any time soon are rapidly vanishing (WTO What is the magnitude of these losses? Let me start with the 2003). Let me now turn to a discussion of the financial costs of traditional estimates and then move to financial considera- agricultural protectionism. tions. Keeping in mind the well-known limitations of general equilibrium models, recent estimates by van der Mensbrugghe Agricultural protectionism (2002) presented in the following table, simulate the effects on and financial costs exports of alternative liberalization scenarios for trade in goods. From other estimates such as those presented in Porto (2003), IN ORDER TO SEE how agricultural protectionism leads to debt approximately three-quarters of the changes are explained by problems, recall that in economies with open capital accounts higher exports of agricultural and agro-based products. the market clearing interest rate for sovereign bonds, is These estimates indicate not surprisingly, that the approximately equal to the risk free international interest rate increase in exports would be the greatest under a dismantling plus the premium for country risk. On the margin at this rate, of trade barriers agreed in the WTO. The simulations also foreign investors are willing to lend. Therefore, if protection- indicate that a free trade agreement with the EU would have an ism increases risk, the cost to efficient country producers from impact on exports that is not that different than the impact of high agricultural trade barriers are higher than what has usual- a global agreement; this increase is approximately equal to 50 ly been claimed by the literature. percent of 2002 exports. This is an indication of the huge There are two main channels through which agricultural damage inflicted upon Argentina by the EU´s protectionist protectionism can increase financial costs and worsen debt agricultural policies. problems. First, to the extent that this protectionism reduces The literature has also stressed the negative impact of agri- exports, the trade-output ratio of the efficient exporters is cultural protectionism on the instability of international also reduced. Lower exports reduce the capacity to repay prices. A pioneering article by Sampson and Snape (1980) external debt, and this increases interest rates. Second, high showed how Europe's variable import levies destabilized inter- international price variability and an excessive concentration national agricultural prices. More recently Gardner (2002) has of exports in a few commodities increase vulnerability. also addressed this issue and supported the conclusion that an I will concentrate here on the first of these channels. A important liberalization of agricultural trade would and reduce growing number of analytical and econometric studies have the variability of international agricultural prices perhaps by as analyzed the determinants of country risk. The following are much as 50 percent (see also Nogués 2003). some of the explanatory variables that have been uncovered by In spite of the Uruguay Round Agreement on Agriculture these studies: a) growth expectations: the higher the growth (URAA), protectionism has continued to increase since the expectations, the lower the risk of investing in an economy; b) degree of solvency: the higher the burden of the debt and the lower the capacity to generate exports, the ARGENTINA: Export Impact of Alternative Trade Agreements higher the degree of perceived insolvency; c) struc- tural problems: the more serious the structural problems such as systematic fiscal deficits, the high- FTAA NAFTA EU GLOBAL er the country risk; d) contagion: risk is increased Change from base (million dollars) whenotheremergingmarketsfacefinancialdifficul- ties, and lenders "fly to quality"; and, e) political Brazil -3,400 800 -1,700 -5,600 uncertainty: when there are important differences NAFTA 2,400 2,800 -800 900 on economic policies among leading politicians, or Rest of LAC 4,800 500 -200 2,800 when different forms of corruption including politi- cal corruption are rampant, risk is increased. European Union 900 600 23,200 10,200 By how much does agricultural protectionism increase risks? Nogués and Grandes(2001) studied Rest of World 1,400 1,000 -3,000 9,700 the determinants of Argentina's risk with the explanatory variables discussed above, and found Total 6,200 5,800 16,300 81,000 that all of them had contributed in a statistically sig- nificant way to the widening of the spread of sover- eign bonds (in this case the floating rate bond over Source: van der Mensbrugghe (2002) the U.S. treasury bond of the same maturity). Here I want to focus on the role played by the solvency vari- 14 Development Outreach W O R L D B A N K I N S T I T U T E able, which we measured as the ratio of debt service to exports. We found that the elasticity of country risk with respect to this variable is 0.68. With this estimate, the impact of agricultural protectionism on financial costs can be simulated. For example, assuming that agricultural pro- tectionism results in foregone exports equivalent to 25 percent of current exports, from earlier comments a con- servative estimate, then country risk can increase between 10 percent and 20 per- centdependingonwhetherweassumean elasticity with respect to the solvency variable of 0.5 percent or 1.0 percent. This impact of agricultural protectionism on country risk and financial costs is siz- able. For example, the average country risk during 2000 was 672 basis points but according to our estimate, with higher exports, it could have been at least 10 percent lower. When this difference is multiplied by the stock of debt, the added interest costs can be very high. Just to give an idea, at the end of 2000, the total stock of debt (private and public) was in the order of $280 billion dollars. Agricultural protectionism, slower growth and increasing poverty nessed a massive increase of agricultural support granted to agriculture including subsidies by OECD countries; between border measures, export subsidies and TWO ADDITIONAL CONSEQUENCES 1997 and 1999 this assistance increased domestic assistance, as well as the elim- can be linked to agricultural protection- from $329 billion dollars to $362 billion ination of tariffs on manufactured ism: slower and more unstable GDP dollars. Much of this assistance was pro- exports. growth, and increased poverty. vided to compensate OECD country Ashismeasureofpoverty,Portochose Slower and more unstable growth. farmers from the negative income the proportion of people living below the Higher interest rates slow growth rates effects of declining international agri- poverty line. His conclusion is that: "for- and this is precisely what happens when cultural prices (OECD, 2000). Obviously eign trade reforms would cause a decline agricultural protectionism increases the this counter-cyclical protectionism led inpovertyofupto11percentfromanini- degree of insolvency in the countries to further increases in measured risk of tial head count of 25.7 percent to a post that are efficient producers. Nogués and efficient country producers. policy rate of 22.8 percent" or around Grandes (2001) show a clear and statis- Impact on poverty. Paradoxically, there 100,000 persons. For reasons explained tically significant negative correlation is very little knowledge on the impact above, this is a lower bound estimate. between the level of country risk and the that agricultural protectionism has on GDP growth rate. Clearly, the disman- the poverty rate of the countries that are Suggestions for the tling of agricultural protectionism efficient producers. This lack of knowl- Doha Round would improve export performance and edge is a handicap and illustrates the therefore, expected GDP growth; both of weak negotiating ability of Argentina CLEARLY, agricultural protectionism these effects would lower country risk. and other indebted countries in bilater- has had significant negative effects on Regarding price instability, I recall al and multilateral forums. Recently, Argentina that go beyond the static wel- that between 1997 and 2000 Argentina's Porto (2003) has estimated the impact fare losses that have been traditionally the export prices of its agricultural and that the elimination of agricultural pro- estimated by general equilibrium mod- agro-based manufacturers declined by tectionism by the U.S. and the EU would els. My analysis has been focused on the 25 percent and 24 percent respectively. have on Argentina's poverty rate. The Not coincidentally these years also wit- estimates include the elimination of all c o n t i n u e d o n p a g e 3 3 J U L Y 2 0 0 3 15 SPECIAL REPORT GATS Negotiations Must Focus on Services Liberalization The Case of SADC BY KENNEDY K. MBEKEANI Key issues for SADC countries THE COUNTRIES THAT COMPRISE the Southern Africa THE CHALLENGE FOR SADC COUNTRIES is how to establish Development Community (SADC) countries have recognized their specific needs in the framework of GATS Article IV, the economic benefits to be derived from autonomous leading to transfer of technology and capacity building. reforms in sectors such as financial services, telecommunica- Experience shows that in some areas, like construction serv- tions and transport, which may be viewed as infrastructural ices, developing country suppliers maximize their capacity backbones of any economy. These sectors have a significant building when engaging in joint ventures and partnerships impact on growth and efficiency across a wide range of user with foreign firms in the delivery of service. This measure-- industries and overall economic performance. Availability of the requirement to establish joint ventures--is considered a infrastructure services may lead to export capacity building in limitation on trade liberalization. other sectors, including the attraction of private investment. Implementation of Article IV provisions at the horizontal For example, improved transport services will contribute to level appears to be difficult. Developing countries seem to be the efficient distribution of goods within the SADC region, better positioned to make progress in negotiations on and has a significant impact on the region's ability to partici- increasing participation in the trade of services when they pate in global trade. Improvements in social services, such as focus on how to implement GATS Article IV in the sectors of education and health, are necessary in building human capi- their interest, and in articulating the associated sector-spe- tal, which is key to long run economic growth. cific issues and measures of their immediate concern. In the absence of services liberalization, the implementa- Areas of interest to SADC countries include movement of tion of the SADC Trade Protocol, which aims at creating a natural persons, construction, tourism and energy services. SADC free trade area, could result in negative effective pro- Movement of Persons. A number of SADC countries are tection for goods. The SADC countries include Angola, interested in a further liberalization of movement of persons Botswana, Democratic Republic of Congo, Lesotho, Malawi, (mode 4) on a sectoral basis, and in addressing issues that are Mauritius, Mozambique, Namibia, Seychelles, South Africa, impeding market access--including issuance of visas, admin- Swaziland, Tanzania, Zambia and Zimbabwe. These member istrative procedures, lack of transparency and economic states, in 2001, started implementing a free trade agreement needs tests. A new approach is necessary to make progress in and are about to start negotiations on services liberalization. the negotiations on mode 4. This approach should be handled For trade liberalization in the SADC region to have any mean- at a level of detail, so that the negotiations would not be over- ing it is important that services liberalization keep pace with taken by non-trade concerns. Some of the issues include set- trade liberalization. ting minimum sufficient international rules that would limit The low number of proposals in GATS negotiations by negative trade impact on the movement of natural persons, SADC countries reflects the difficulty the countries face to and would be compatible with the overall development objec- clearly identify negotiating objectives on services--a problem tives of developing countries, and sectors or categories of pro- that has to be addressed. On the other hand, the main concern fessions where liberalization of the movement of persons is of SADC countries in most sectors is capacity-building and critical for the export of services from developing countries. technology transfer rather than access to markets. This article Tourism. The tourism sector constitutes one of the most attempts to identify key issues of interest to SADC countries important sources of foreign exchange. For many SADC coun- in the GATS negotiations and how the countries can ensure a tries, in particular the least developed SADC countries favorable outcome. (Malawi, Mozambique, Tanzania and Zambia), tourism is probably the only economic sector which provides concrete 16 Development Outreach W O R L D B A N K I N S T I T U T E and quantified growing trading opportunities. It is one of the prevent anti-competitive practices in their tourism sectors. fundamental pillars of their economic development. The predatory practices and anti-competitive behavior in Most countries in the region have already liberalized the international tourism produce two main effects on the eco- tourism sector. However, to ensure that trade is taking place nomic sustainability of the tourism of SAD countries: unbal- in a fair and competitive environment, other multilateral anced trade benefits, and the deepening of the leakage effect. measures may be necessary for disciplining anti-competitive Their combined impact minimize the positive impacts of practices in the tourist originating countries. The competition spillover and multiplier effects inherent to tourism, and issue and the treatment of anti-competitive behavior are at undermine the financial capacity of enterprises and the abili- the core of the problems of efficiency, viability and sustain- ty of countries to earmark necessary resources to maintain ability of tourism in SADC countries. Ability to deal with those and upgrade basic infrastructure and quality standards in aspects and to counter their effects is of decisive importance. order to satisfy in an adequate way competitive conditions and Moreover, the inadequacy or absence of a domestic legal international demand. framework on competition in SADC countries, and the lack of SADC countries may need to ensure the following: multilateral disciplines and mechanisms within the GATS adequate coverage and consistency commitments in all framework, affect the ability of SADC countries to deal with or tourism activities; prevention of predatory behavior with anti-competitive practices by dominant integrated suppliers in the originating markets; effective access to and use of dis- tribution systems and information networks on a non-discriminatory basis; and the implementation of an adequate framework for sustainable develop- ment in tourism. Energy Services. The countries of the region can expect to find them- selves under pressure to liberalize in many sub-sectors of energy services, and it may be necessary to gain a better understanding of the implications and opportunities of the liberalization of energy markets for energy producing countries. Energy is central to achiev- ing the interrelated economic, social and environmental aims of sustainable human development, and energy serv- ices play a crucial role in providing efficient access to energy in support of development. SADC countries are thus faced with the challenge of achieving more reliable and efficient access to energy through the enhanced availabil- ity of energy services. To ensure that the link between market access and development is clearly established, access to the region's energy markets should be made conditional on: transfer of technology and manage- rial know-how; acceptance by foreign suppliers of public services obligations; and setting up of alliances between for- eign and domestic firms, including SMEs. J U L Y 2 0 0 3 17 These principles could be included as negotiated addition- Conclusion al commitments in the sector. On the other hand, developing countries should create a favorable environment for foreign SUSTAINABLE AND EFFECTIVE INTEGRATION of the SADC and domestic suppliers by setting up a transparent regulatory countries into the processes of liberalization of the world framework, which ensures fair competitive conditions for all economy rests upon creating a supportive domestic and inter- operators, especially access to the network. national policy and regulatory environments. Fair trade will Construction. SADC countries view the construction serv- not be achieved in the imperfect markets, where information ices sector not only as a key infrastructure service but also as a will not be equally available to all, where dominant players will tool for upgrading welfare. Development of this sector direct- impose their own terms of doing business and where the rest ly contributes to the attainment of the development goals. The will have no tools to address the anti-competitive practices. strengthening of domestic and export supply capacity relies Among all these concerns, asymmetries in the level of devel- upon the ability of SADC countries to upgrade continuously opment and the weak position of the SADC countries in the their technological capacity. global services trade are the most essential problems to be SADC countries may seek to attach the requirements of addressed. As a minimum, the assessment should demon- associations and joint ventures, so as to include local compa- strate conditions under which SADC countries could expect to nies in the design and implementation of construction proj- achieve a balanced growth and the specific obligations, which ects. This has proved to be the most effective way of obtaining they will be able to sustain. access to transfer of technology. Domestic environment is predominantly open in SADC Construction is one sector that SADC countries can request countries but suppliers of services are not benefiting from the for sector liberalization of movement of natural persons in same opportunities as in the developed country markets. exchange for market access. The movement of foreign nation- Further liberalization along the traditional lines is not likely als in developed countries is often subject to visa and residen- to bring the net benefits to developing countries and con- cy requirements, and economic needs tests, even for project tribute to their balanced growth, unless issues such as move- related work of short duration, and frequently with little ment of natural persons, technology transfer and capacity transparency with regard to the criteria applied in the building are properly addressed in the negotiations. S issuance of visas and work permits, which often appear to penalize nationals of developing countries. Kennedy K. Mbekeani is Senior Research Fellow, Botswana Institute for Development Policy Analysis 18 Development Outreach W O R L D B A N K I N S T I T U T E SPECIAL REPORT More Favorable Treatment of Developing Countries Toward a New Grand Bargain BY BERNARD HOEKMAN resolved. The medium-term viability of the global trading system is dependent on an effective mechanism that allows all ALTHOUGH THE PRINCIPLE of more favorable treatment for developing countries (that is, the majority of the WTO mem- developing countries is firmly embedded in the WTO, there is bership) to integrate more fully and benefit from increased considerable dissatisfaction with the existing provisions international trade--this is vital for economic growth, devel- regarding differential treatment, by both developed and opment and poverty alleviation. developing countries alike. In terms of the current Doha trade Currently, special and differential treatment (SDT) provi- negotiations, it is among the more important issues to be sions in the WTO call for preferential access to markets for all J U L Y 2 0 0 3 19 developing countries, exemptions (transitory and perma- do not receive significant tariff preferences in products for nent) from certain rules, and promises of technical and which they tend to have a comparative advantage. Preferences financial assistance. There are good reasons for SDT--very often exclude important items such as textiles or agricultural small or low income economies lack the institutional develop- products and are subject to binding limits on the value of ment or minimum scale to manage the full panoply of WTO exports that benefit from lower tariffs, including so-called rules or, at least, might find the returns to creating the insti- `competitive needs' tests. Combined with complex adminis- tutions to apply them effectively outweighed by the costs. They trative requirements and red tape, including documentation may also lack the resources to overcome natural obstacles to of origin, the effect is to reduce the value of preferences. trade, giving rise to a case for preferential access to markets While recent programs such as the EU Everything but Arms and development assistance. initiative give duty and quota free access to Least Developed The Doha Ministerial Declaration called for a review of all Countries (LDCs) for virtually all products, this does not SDT provisions in the WTO, with a view to "strengthening extend to larger countries --such as Brazil, China, Indonesia, them and making them more precise, India, Malaysia, Pakistan and Thailand-- effective and operational." In the course which tend to be granted only limited of 2002, developing countries made 88 preferences, if any. specific suggestions to do so, calling for An obvious way to strengthen SDT improved preferential access to devel- would be for developed countries to oped country markets, exemptions from THE DEBATE ON extend duty- and quota-free market specific WTO rules, and making the pro- access to all developing countries. SPECIAL AND vision of technical and financial assis- However, this is not feasible politically-- tance a binding commitment. Despite DIFFERENTIAL the most that may be possible is to intensive talks and numerous meetings, extend such treatment to LDCs and sim- TREATMENT SHOULD no agreement proved possible on ilarly small and poor countries. This strengthening SDT provisions. One rea- BE SEEN IN THE BROADER would be beneficial in helping target son for this was that many proposals SDT on those who need it most, but from CONTEXT OF TRADE sought to convert non-binding (unen- a global poverty reduction point of forceable) language--so-called best- AND DEVELOPMENT. view--which must be taken in light of the endeavors provisions--into binding Millennium Development Goals--a good WHAT IS NEEDED IS A NEW obligations that could be enforced case can be made that preferences through WTO dispute settlement proce- "GRAND BARGAIN," should focus on the poor, wherever they dures. Another reason for lack of agree- are geographically located, and not on a INVOLVING ACTIONS ment is a difference in views on what limited set of countries. In absolute types of exemptions make economic BY DEVELOPED terms, most poor people live in coun- sense. tries that are not LDCs--e.g., China and COUNTRIES AND The issues that were brought forward India. Research suggests that the poor in the SDT context are very difficult, if DEVELOPING COUNTRIES confront tariffs on world markets that not impossible, to separate from the are more than twice as high as those broader question of making the WTO confronting non-poor producers more supportive of development. The (World Bank, 2002). Reversing this sit- premise of this article is that the debate uation would not only be very beneficial on SDT should be seen in the broader to developing countries, but also to context of trade and development. What is needed is a new developed country consumers. `grand bargain', involving actions by developed countries and Given that unilateral deep trade preferences are unlikely to developing countries. This bargain must encompass greatly be extended to larger economies, action is required to liberal- improved market access for all developing countries, mecha- ize trade in goods and services in which developing countries nisms to ensure that the huge differences in the level of devel- have a comparative advantage on a nondiscriminatory basis. A opment among WTO members are recognized in the imple- binding commitment by developed countries to abolish mentation of agreements, and increased development assis- export subsidies, decouple agricultural support and signifi- tance ("aid for trade"). What follows sketches the outlines of a cantly reduce--ideally abolish--tariffs on labor-intensive possible package. products of export interest to developing countries on a nondiscriminatory basis should therefore be a key element of Market access for disadvantaged an improved SDT regime. Such an approach is generally not countries regarded as SDT in the WTO--the focus has been mostly on preferential, "better-than-MFN" access--but from a develop- TRADE PREFERENCES have been a mainstay of SDT since the ment viewpoint, acceptance of ambitious liberalization late 1960s. Unfortunately, practice suggests that preferences benchmarks would provide a strong signal of commitment to generally deliver little. In many cases, developing countries poverty alleviation by developed countries. 20 Development Outreach W O R L D B A N K I N S T I T U T E Implementation of WTO rules twofold: action at the national level to determine trade-relat- ed technical assistance needs in the context of domestic pri- IN ADDITION TO MARKET ACCESS, SDT in the WTO has tra- ority-setting processes--e.g., the Poverty Reduction Strategy ditionally included derogations from some WTO rules for all Paper (PRSP); and a commitment by developed countries to developing countries, with application determined through fund the priorities that are identified. self-declaration by members that they are a developing coun- try. Given that some WTO disciplines may not be appropriate The quid pro quo for very small or poor countries--the regulatory institutions that are required may be unduly costly or not a development A WILLINGNESS BY DEVELOPING COUNTRIES to make lib- priority--there is a need for `differentiation' between devel- eralization commitments will be necessary to move forward oping countries in determining the reach of those WTO rules, on the three elements of the SDT "package" sketched out especially if implementation requires investment of substan- above. Such reciprocity is needed in particular on the market tial resources. There are broadly two options that could be access side as far as large or middle-income countries are used to operationalize greater country differentiation: concerned, for reasons noted previously. This can be done in More narrowly defining eligibility for rule-related SDT a way so that negotiating credit is granted to countries that provisions that are broadly applicable across all agree- have already implemented significant unilateral, autonomous ments to those that need it most--e.g., the poorest/smallest reforms--e.g., through the adoption of a formula approach to countries; or tariff negotiations that uses the level and extent of reduction Setting objective country criteria on an agreement-by- in tariff bindings as the focal point of liberalization commit- agreement basis that link implementation by countries to ments. Given that many developing countries either have not the attainment of preconditions and the availability of bound tariffs at all or have relatively high tariff bindings, this technical assistance. will automatically imply that credit is given for past reductions The first of these options has the advantage of simplicity in applied tariffs. and transparency, but requires renegotiating the current clas- sifications used in the WTO--which distinguish between the Conclusion LDCs and all other developing countries. A good case can be made for greater differentiation, given that many countries THE HEART OF MOVING FORWARD ON SDT is to put in place that define themselves as developing have per capita incomes a mechanism that will effectively promote the interests of that are many multiples of the poorest countries. However, developing countries, with an emphasis (priority) on the this has been a politically sensitive issue in the WTO. The sec- needs of the poorest countries. Greater differentiation must ond option would allow the issue of defining general eligibili- be part of a new grand bargain--the existing two-fold develop- ty to be avoided, but is likely to involve significant transaction ing country classification system of LDCs (UN-defined) and costs as it would be country-agreement-specific. Whatever other developing countries (self-declared) has resulted in an approach is chosen, substantial thought and discussion is ineffective mechanism for all. needed to assess the implications of alternative approaches. All three major dimensions of SDT--improved access to export markets for developing countries, greater differentia- Renegotiation of certain WTO tion in the implementation and enforcement of WTO rules, disciplines especially those requiring significant institutional capacity and investments; and expanded development assistance ("aid MANY OF THE PROPOSALS that have been made on SDT for trade")--can be brought together in a package that also implicitly, if not explicitly, reflect a perception by developing includes commitments by developing countries to make mar- countries that some WTO agreements--e.g., agriculture, ket access concessions. SDT cannot be a one-way street. TRIPS--are not supportive of development. Rather than seek Differentiation implies acceptance on the part of the more opt-outs under the guise of SDT, a preferable approach is to advanced countries that they are not eligible for exemptions renegotiate these agreements. A clear signal that such renego- from implementing negotiated agreements, and a willingness tiation can be considered would help move the SDT debate by all developing countries--both low and middle-income--to forward. engage in the exchange of trade policy commitments. The longer-term viability of the trading system requires that its Aid for trade core principles and rules apply to all members. S THE THIRD COMPONENT of SDT in the WTO is development Bernard Hoekman is Research Manager, International Trade assistance. Market access and better rules are necessary but Department, The World Bank. The views expressed in this paper not sufficient. Greater technical and financial assistance is are personal and should not be attributed to the World Bank. needed to strengthen the institutional and trade capacity of low-income countries to increase the benefits of better access This article draws on joint work with Caglar Ozden, Costas to markets. Post-Monterrey, high-income countries have Michalopoulos, Susan Prowse and Alan Winters. pledged to provide additional aid. The key need now is J U L Y 2 0 0 3 21 SPECIAL REPORT An International Investment Agreement Promise and Potential Pitfalls BY RICHARD NEWFARMER investment" that will expand trade. Can new multilateral ini- tiatives on investment policy promote more--and more pro- Among the many questions that WTO ministers will take up ductive--investment and hence more rapid development? in their September meeting in Cancun, Mexico, is the issue of And, can a negotiation that includes this area lead to reciproc- an international investment agreement. Ministers in the ity that will expand developing countries' opportunities? Doha declaration chose to launch negotiations on a multilat- The drive to include an international investment agree- eral framework covering investment, "subject to a decision to ment in the WTO accords comes against a backdrop of one of be taken by explicit consensus on modalities at the Cancun the most impressive waves of foreign direct investment in Ministerial in 2003". Its purpose was "to secure transparent, history. Foreign direct investment to developing countries stable and predictable conditions for long-term cross border grew from less than $30 billion in 1990 to nearly $180 billion 22 Development Outreach W O R L D B A N K I N S T I T U T E in 1999, and since then have levelled off to about $160 bil- lion (see chart at right). FDI grew rapidly until late 1990s, and then leveled off... Whether an international investment agreement con- Portfolio equity Net inward FDI tributes to achieving the goal of increasing investment Inward FDI to developing countries depends on its additive effects to existing international 250 rules through two main channels: increasing market access for 200 investors to enhance competition; and augmenting protection of investors' rights to reduce risk and thereby raise relative 150 risk adjusted returns. billions 100 US$ 50 Increasing market access for investors 0 AS WITH TRADE BARRIERS, countries around the world 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 have progressively dismantled restrictions on incoming Source: World Bank Global Development Finance 2003 foreign investment, as nationalist fears of many govern- ments have given way to aggressive pursuit of foreign ...and held up after 1999 in spite of falling debt flows investment. Countries as diverse as China, Mexico, and most recently, Korea have progressively lowered policy bar- Inward FDI Debt riers to entry in sector after sector to bring in new sources of FDI and debt flows to developing countries 200 capital, increase competition to spur productivity growth, 150 and accelerate the pace of technological progress. UNCTAD 100 has shown that between 1991 and 2001 roughly 95 percent of billions the 1393 regulatory changes that were made to national FDI 50 regimes served to create a more favourable environment for US$ 0 FDI (Figure 1). The vast majority of these changes were -50 introduced autonomously rather than in the context of 1995 1996 1997 1998 1999 2000 2001 2002 international negotiations. Source: World Bank Global Development Finance 2003 Today, nearly all countries have removed entry restric- tions and limitations on foreign equity shares in manufac- In part because regulatory changes become more favorable turing. The main restrictions on FDI are centered in servic- More favorable to FDI Less favorable to FDI es--that is, in finance, telecommunications, power, trans- 250 port, ports, wholesale and retail trade, real estate, and busi- changes 200 ness and legal services (Hoekman and Saggi, 2000). The potential benefits to unilateral reductions in these 150 policy barriers to entry are substantial. Allowing foreign regulatory 100 investors to compete in telecommunications, for example, of has revolutionized service in developing countries. The 50 World Bank's Global Economic Prospects 2002, using conser- Number 0 vative assumptions about the effects reforms of trade and transportation, communications, financial services, and 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 other private services, showed that broad and simultaneous Source: UNCTAD, 2002 services reforms could produce income gains for develop- However, BITs do not add much ing countries of more than 9 percent (World Bank, 2001: 171-172). Realizing this high potential requires more than FDI inflows before and after signing BITs 0.3 liberalization of entry; it requires a regulatory framework that, to the extent possible, actively fosters competition and annual 0.2 of disciplines natural monopolies in network industries; and flow 0.1 it requires pro-poor regulation that ensures, where appro- Share FDI 0 priate, universal access and cross-subsidies to the poor or -3 -2 -1 0 1 2 3 disadvantaged regions (see World Bank, 2001: pp 77 ff). Years before Year Years after Including these reforms to national investment regimes signing signed signing in a new international investment agreement has two Note: Share of home country FDI flowing to host country with BIT potential benefits that may lead to greater investment. First, Source: World Bank Global Economic Prospects 2003 much as with the logic of a trade negotiation, the negotiation S P R I N G 2 0 0 2 23 process may lead to greater liberalization of investment developing countries send a positive signal to potential foreign regimes than can be accomplished unilaterally. Second, if investors that policy changes are locked in, that investments investment is not negotiated in isolation, but as part of a enjoy protection in an international agreement, and that broader set of trade negotiations, then the traditional mecha- investors have recourse to WTO rules in event of a dispute. nism of reciprocal access concessions can help generate sup- Would an international investment agreement increase port for greater openness at home and abroad. For example, investment? One way to test this proposition is to look at the exporters in developing countries who obtain improved consequences of enhancing investor protections through access to foreign agricultural markets can be a countervailing bilateral investment treaties for flows of FDI among signatory force against those who resist the elimination of investment countries. BITs customarily provide a definition of invest- barriers in telecommunications. At the same time, the need to ment coverage, provide investor protections such as against fight these domestic political economy battles makes a coun- expropriation, require national treatment for post-entry try a credible negotiator for improved access. The process, if it establishments, stipulate compensation for the expropriation works, can produce a double benefit: liberalizing countries of their investments, and provide for a dispute resolution would benefit from increased competition associated with mechanism. In some cases, treaties proscribe any govern- foreign direct investment, and their firms would have ment action that would reduce the value of the private invest- improved access to foreign markets. ment, even if it were environmental or other regulations, and A pre-requisite for entering into an investment agreement establish grounds for compensation. BITs are usually stronger is that each country is to ensure that any domestic policy com- than the international agreement contemplated in the WTO mitment make sense through the lens of promoting national because they allow investors to sue governments in front of an development. While the upside benefit to autonomous liber- international arbitration panel (see World Bank, 2003). alization in services (among other areas) is usually high, it Hallward-Dreimeier (2002) analyzed bilateral flows of OECD may not be for a particular country. Fortunately, the modality members to 31 developing countries over two decades. Her under discussion is a GATS-like positive list that would let analysis found that, controlling for a time trend, BITs had vir- policymakers set their own pace for liberalization and avoid tually no independent effect in increasing FDI to a signatory commitments in any sector where it felt uncomfortable. This country from a home country. Said differently, countries provides an unusual degree of flexibility to all governments-- signing a BIT were no more likely to receive additional FDI even if it slows the pace of multilaterally agreed liberalization. than countries without such a pact. Even comparing flows in From the narrow perspective of market access for the 3 years after a BIT was signed to the 3 years prior, there was investors, an international agreement is less urgent. Since no significant increase in FDI (see charts on page 23, bottom most restrictions on pre-establishment market access are in panel). This evidence suggests that protections resulting from services, a multilateral vehicle for realizing the twin benefits a multilateral investment agreement will, by itself, have little from an international agreement already exists for services, impact in achieving the objective of increasing investment namely the General Agreement on Trade in Services (GATS). flows. The agreement allows countries to designate those sectors it It is worth asking whether enhanced investor protections, wishes to liberalize and maintain entry restrictions in other in combination with reductions in trade reforms that permit sectors a government feels is important. In any case, the fact liberalized investment access and more open flows of goods, that market access could be widened under the GATS in pre- would lead to increases in foreign direct investment. One cisely the area where most restrictions remain limits the addi- example is NAFTA. NAFTA is a comprehensive arrangement tive value of any new investment agreement--save for the that includes significant investor protections in combination reciprocal access it leverages in other sectors. with broad-based tariff reductions and border liberalizations. A key issue--which can only be determined during the Chapter 11 of the NAFTA agreement allows investors to sue the negotiation process--is the value of an investment agreement government in event of regulatory or other actions that might in leveraging reciprocal commitments among trading part- diminish the value of a foreign investment. Lederman, et al ners. If an investment agreement is reciprocated with new (2003) found that NAFTA did increase foreign investment, market access in markets of importance to developing coun- but their study does not attempt to distinguish the role of tries--in agriculture, labor-intensive manufacturers and even enhanced investor protections from access to the Mexican services--it may produce the much sought-after double bene- market and its other resources in increasing the flow of FDI. fit (World Bank 2002). If not, its benefits to developing coun- To the extent that Chapter 11 provided investors with addi- tries in market access provisions will not add much to existing tional comfort over and above the existing investment cli- agreements and to unilateral actions to open markets. mate, its protections would have offset these disadvantages. In a multilateral context, the aspiration of Doha is precise- Increasing investor protections ly to combine global reductions in border barriers for goods and services with increases in investor protections. To be A SECOND POSSIBLE CHANNEL to increase investment sure, the experience of regional arrangements is less relevant flows--distinct from wider market access--is through increas- to the extent that the preferential trade access diverts invest- ing investor protections. A multilateral set of disciplines on ment into the preferential market and/or to the extent that investment protection would arguably help participating trade openness dominate the effects of additional investor 24 Development Outreach W O R L D B A N K I N S T I T U T E protections. Nonetheless, the potential for some as yet negligible in terms of new investment flows--even as it poten- unquantified synergy between more open markets and agreed tially exposes them to state-state investment dispute resolu- investment protections exist. Much as with our conclusions tion procedures. If, however, negotiating partners, particu- above on the anticipated benefits for liberalizing market larly OECD countries, see a multilateral investment agree- access, this section leads us to conclude that the benefits to ment as worthy of concessions that reduce their barriers to developing countries of a multilateral set of disciplines for trade in agriculture, textiles, and other areas of importance to investment rest largely on whether the process of negotiations developing countries, an investment agreement with careful- secures commitments for new market access in agriculture ly delimited dispute settlement provisions might well con- and other goods of interest to developing countries. tribute to a pro-poor Doha outcome. S Dispute resolution merits careful Richard Newfarmer is Economic Advisor, International Trade scrutiny Department and Development Prospects Group, The World Bank. BENEFITS FLOWING FROM a multilateral investment agree- ment also can entail costs if a contractual agreement is broken References --as it should. It is important that parties to an agreement Gestrin, Michael, and Alan M. Rugman. 1993. "The NAFTA's Impact on the understand the contractual liabilities they assume when they North American Investment Regime." C.D. Howe Commentary No. 42, sign onto commitments. The Working Group on Trade and Toronto: C.D. Howe Institute. March. Investment has reached consensus that, in contrast to the Hallward-Driemeier, M. 2002. "Bilateral Investment Treaties: Do They Increase provisions in bilateral investment treaties, individual foreign FDI Flows?" Background Paper for Global Economic Prospects 2003: Investing investors will not be allowed to sue foreign governments for to Unlock Global Opportunities. The World Bank. Washington D.C. abrogation of protections; rather the home government of the Hoekman, Bernard M., and K. Saggi. 1999. "Multilateral Disciplines for investor would file an appeal under normal WTO dispute res- Investment-Related Policies." Policy Research Working Paper No. 2138. olution procedures. World Bank, Development Research Group. Washington, D.C. Important differences notwithstanding, the rising number Lederman, D.W. Maloney, W.and L. Serven. 2003. Lessons from NAFTA for of suits under bilateral investment treaties argues that coun- Latin America and Caribbean. The World Bank. Washington D.C. April (draft). tries should thoroughly discuss remedies in advance. For Mattoo, Aaditya. "Developing Countries in the New Round of GATS Negotiations: example, the a tribunal in Stockholm required the govern- Towards a Pro-Active Role." World Economy, Vol. 23, No. 4, 471-489. ment of the Czech Republic to pay one company, Central Peterson, Luke. 2003a. "Research Note: Emerging Bilateral Investment European Media (CME), $350 million for violation of a bilat- Treaty Arbitration and Sustainable Development." International Institute for eral investment treaty that deprived CME from a stake in an Sustainable Development (IISD) Invest New Bulletin, April. English language TV station in Prague (see Peterson, 2003 a Peterson, Luke. 2003b. "Czech Republic Hit With Massive Compensation Bill and b). Several separate cases under NAFTA similarly have in Investment Treaty Dispute." Invest New Bulletin, March 21 prompted investor suits against all three governments-- Rugman, Alan M., and Michael Gestrin. 1994. "NAFTA's Treatment of Canada, U.S., and Mexico; unrelated cases in each of the three Foreign Investment." In Alan M. Rugman, ed., Foreign Investment and countries, for example, have contended that environmental NAFTA, pp. 47-79. Columbia: University of South Carolina Press. regulations reduced the value of their companies; and in some Sauvé, Pierre, and Christopher Wilkie. 2000. "Investment Liberalisation in cases judgments awarded hefty damages to investors. GATS." in Sauvé, Pierre and Robert M. Stern, eds., GATS 2000: New WTO remedies are different. A WTO panel could "instruct Directions in Services Trade Liberalisation, pp. 331-363. Washington, D.C.: Centre for Business and Government, Harvard University and the Brookings the offending member to bring the inconsistent measure tin Institution Press. conformity with its WTO obligations"; and, failing that, "pre- Stein, Ernesto and Christian Daude. 2001. "Institutions, Integration and vailing states is free to resort to...unilateral counter-meas- Location of Foreign Direct Investment." New Horizons for Foreign Direct ures...suspension of the treaty...and temporary compensa- Investment, pp. 101 ­128. Paris : OECD. tion or suspension of concessions (WTO 2002: 20). What Stern, Robert M. 2002. "Quantifying Barriers to Trade in Services," in Bernard would be the appropriate remedy for a government that M. Hoekman, Philip English, and Aaditya Mattoo, eds., Development, Trade imposed a regulation that effectively expropriated an enter- and the WTO: A Handbook. Washington, D.C : The World Bank. prise? This question has received too little attention to date. World Bank. 2001. Global Economic Prospects 2002 Investing to Unlock Global Opportunities. Washington: World Bank Conclusions World Bank. 2002. Global Development Finance. Washington, D.C. THE BENEFITS OF A MULTILATERAL investment agreement World Trade Organization. 2002. Report (2002) of the World Group on the Relation ship Between Trade and Investment to the General Council, 9 for developing countries hinge critically on the increased December 2002. Geneva: WTO. market access an investment agreement might leverage for UNCTAD. 1998. Bilateral Investment Treaties in the mid-1990s. New York: their exporters and on the additional domestic reforms that it United Nations. spurs at home. If reciprocal concessions in areas of interest to UNCTAD. 2002. World Investment Report. New York: United Nations. developing countries are not forthcoming, the value of an investment agreement to developing countries is likely to be J U L Y 2 0 0 3 25 SPECIAL REPORT Trade Facilitation, WTO Rules, and Capacity Building What's at Stake? BY JOHN S. WILSON and measures trade facilitation using four broad indicators. Each one is constructed using country-specific data for 19 THE RELATIONSHIP BETWEEN ECONOMIC GROWTH, trade members of the Asia Pacific Economic Cooperation (APEC) to facilitation, and development is relatively simple in theory. build the following measures: 1) port efficiency; 2) customs Measuring the benefits of trade facilitation based on empiri- environment; 3) regulatory environment; and 4) e-business cal evidence, particularly in relation to capacity building pri- usage. The relationship between these indicators and trade orities, is much more challenging. Economic theory suggests flows is estimated using a gravity model. The findings suggest that development is enhanced through income growth--which that enhanced port efficiency among these countries has a is driven through increased trade. Expansion of trade is large and positive effect on trade and that regulatory barriers achieved, at least in part, through programs to lower transac- reduce trade prospects. Improvements in customs and greater tion costs in goods and services crossing borders. This might e-business use significantly also improve trade, however, to a involve streamlined administrative procedures at ports and lesser degree than the effect of increased efficiency of ports or customs posts, for example. Expansion of trade may also be streamlined regulations. For APEC as a whole, it is estimated achieved through modernized transport services and infra- that a program to raise capacity "half-way" to the APEC aver- structure brought about through privatization. A broader def- age in all areas among those below average would yield an inition of trade facilitation that aligns most directly with mod- increase in intra-APEC trade of about $254 billion dollars. ern commerce also includes regulatory reform, harmoniza- This is about a 21 percent rise in total intra-APEC manufac- tion of standards, and conformance to international regula- tures trade. About $117 billion of the gain (and 10 percent of tions (Woo and Wilson 2000). the increase in trade) comes from the improvement in port Trade facilitation is increasingly part of a trade policy efficiency. About $139 billion of the total gain comes from the debate in both "behind and at the border" issues. During the improvements "at the border" in port efficiency and customs Singapore Ministerial of the World Trade Organization (WTO) environment. An additional $116 gain might come from (1996) the subject in a broad context was added as a new issue improvements "inside the border" in regulatory harmoniza- for possible negotiation. Decisions on the modalities for such tion and e-business usage. negotiations, including talks on measures to increase trans- The large increase in trade with improved `port efficiency' parency, streamline administrative requirements, among is due in part to the strong correlation found between trade other subjects, must be made at the Ministerial Conference of and port logistics. In addition, countries such as Mexico and the WTO in Mexico in September 2003. At the center of dis- China are very large intra-APEC traders. They have much cussions is the role of trade disciplines in promoting trade room for improvement in port logistics and related infra- facilitation goals. In reaching decisions on negotiations, what structure. Large exporters such as the U.S., Japan, and Korea can be expected from expanded trade disciplines and how will would see the greatest increase ($38 billion, $22 billion, and countries determine priorities for capacity building? $9 billion, respectively). Many developing countries (Russia, Hong Kong, Chile, and Chinese Taipei) would also experience Trade facilitation in a modern context large double-digit increases in exports to the Asia Pacific region (36 percent, 28percent, 20 percent and 15 percent, A LIMITED NUMBER OF EMPIRICAL STUDIES of trade facili- respectively) with capacity building efforts. These results sug- tation exist to inform policy decision making (see references). gest that attention to improvements in port efficiency appears Recent work at the World Bank (Wilson, Mann and Otsuki most productive in the Asia Pacific. Moreover, the study sug- 2003) examines the relationship between trade facilitation gests that unilateral action to raise capacity can also boost and trade flows in the Asia-Pacific region. The study defines exports. Country priorities and impact of various measures 26 Development Outreach W O R L D B A N K I N S T I T U T E can be examined, as one way of informing development goals. at the Bank in a data set covering 75 countries is under prepa- For example, Thailand's port efficiency indicator is near ration to further refine this analysis. In sum, these results the APEC average. A small improvement to the APEC average should clearly be considered alongside other analytical tools would increase Thailand's efficiency through imports by some and factors, but can provide one new measure to inform deci- $4.4 billion. Thailand's customs capacity and e-business sion making--including development goals aligned with pos- usage are much further away from the APEC average. An sible new WTO obligations in trade facilitation. improvement halfway to the APEC average in customs envi- ronment would increase Thailand's imports by $2.4 billion. If Trade Facilitation and the WTO: the cost of improving customs is less than improving port What role? efficiency, then the net gain of focussing effort on customs might be preferable to capacity building programs exclusively TRADE FACILITATION INCLUDES a range of issues related to aimed at port efficiency. On the other hand, an improvement multilateral rules and was included in the work program of the halfway to the APEC average in e-business usage would WTO in 1996 at the Singapore Ministerial. The scope of pos- increase Thailand's imports by $7.9 billion, about 50 percent sible negotiations is relatively wide and includes subjects such more than the `border' measures taken together. New analysis as; documentation requirements, transparency in adminis- J U L Y 2 0 0 3 27 WHAT IS AT STAKE IN TRADE FACILITATION IS MOST CERTAINLY CENTERED ON A DEVELOPMENT DYNAMIC--NOT INSIDE THE CONTEXT OF ELABORATE NEW TRADE RULES. trative and customs procedures, valuation of goods, and fees question the value of new legal commitments in the WTO. imposed on imports, among others. The Doha Declaration of Concerns expressed center on the idea that additional rules the WTO in 2001 stated that decisions on the "modalities" for will exceed implementation capacities and increase the likeli- negotiation would be decided at the fifth Ministerial of the hood of dispute settlement action for failure to follow new WTO WTO in 2003. There continues disagreement on the merits obligations. Some developing countries also suggest that prob- and scope for possible talks on trade facilitation. Some devel- lems in implementing current obligations must be addressed oped countries, including the U.S. and European Union, before expanding the scope of WTO rules in other areas. believe there is merit in negotiations to tighten WTO disci- Finally, improving infrastructure, administrative reform, and plines. Proposals on how to improve and clarify trade rules related technical training to upgrade skills to facilitate trade is might include improved transparency such as the creation of costly. Many developing countries will require assistance in enquiry points, more systematic consultation between cus- covering capacity building costs over the long-term. toms administrations and traders, and the establishment of harmonized appeal procedures in disputes over import fees, Conclusion for example. There has also been discussions of simplified, standardized, and streamlined import/export procedures, IN SUM, TALKS ON WAYS to increase transparency, pre- new commitments on harmonized fees and charges on dictability, and streamline trade transactions could provide imports, reduction of data requirements at customs, expand- benefit to the international trading system. Negotiations are a ing pre-arrival processing and post-auditing procedures. beginning point ­ not an endgame with predetermined out- These are all associated with current GATT Articles VIII (fees comes. Lowered transaction costs and capacity building and formalities), Article X (publication and administration of improvements, as noted in the new research above and other regulations), and Article V (freedom of transit) empirical studies, can provide large gains to trade. Talks on (www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm). streamlined trade procedures, customs rules, and adminis- Supporters of negotiations also suggest a parallel program trative transparency are also timely and important, given the of technical assistance to developing countries alongside new need to bolster security after the tragedy of September 11, obligations undertaken. In contrast, some countries, such as 2001. Rapid implementation of new national security border India, Brazil, and several in Africa nations have expressed controls around the world is already underway. What is at strong reservations about launching new negotiations. They stake in trade facilitation is most certainly centered on a development dynamic--not inside the context of elaborate new trade rules. Institutional change and reform is complex and priorities differ across countries. Creative ways to manage OVERVIEW OF SIMULATION dispute settlement in this area are critical. There is a unique opportunity in 2003, however, to discuss a classic win-win BRING BELOW-AVERAGE COUNTRIES situation in which trade disciplines are strengthened, securi- HALF-WAY UP TO THE GLOBAL AVERAGE ty is enhanced, and developing countries gain the commit- ment of assistance to raise capacity in areas that matter more and more to success in modern international commerce. S $88.2 billion $116.9 billion (+7.3%) (+9.7%) John S. Wilson is Lead Economist, Development Research Group, The World Bank. $27.7 billion $21.6 billion (+2.3%) (+1.8%) This article draws in part upon "Trade Facilitation and Economic and Economic Development," John S. Wilson, Catherine Mann, and Tsunehiro Otsuki, World Bank Policy Research Working Paper #2988, World Bank, Port Efficiency Washington, DC, 2003. The findings, interpretations, and conclusions expressed in this article are entirely those of the author. They do not neces- Customs Environment sarily represent the view of the World Bank, its Executive Directors, or the E-business countries they represent. Comments by Yvonne Tsikata and Richard Regulatory Environment Newfarmer are gratefully acknowledged. Source: Wilson, Mann, Otsuki 2003 R e f e r e n c e s c o n t i n u e d o n p a g e 3 4 28 Development Outreach W O R L D B A N K I N S T I T U T E WHAT IS AT STAKE IN TRADE FACILITATION IS MOST CERTAINLY CENTERED ON A DEVELOPMENT DYNAMIC--NOT INSIDE THE CONTEXT OF ELABORATE NEW TRADE RULES. trative and customs procedures, valuation of goods, and fees question the value of new legal commitments in the WTO. imposed on imports, among others. The Doha Declaration of Concerns expressed center on the idea that additional rules the WTO in 2001 stated that decisions on the "modalities" for will exceed implementation capacities and increase the likeli- negotiation would be decided at the fifth Ministerial of the hood of dispute settlement action for failure to follow new WTO WTO in 2003. There continues disagreement on the merits obligations. Some developing countries also suggest that prob- and scope for possible talks on trade facilitation. Some devel- lems in implementing current obligations must be addressed oped countries, including the U.S. and European Union, before expanding the scope of WTO rules in other areas. believe there is merit in negotiations to tighten WTO disci- Finally, improving infrastructure, administrative reform, and plines. Proposals on how to improve and clarify trade rules related technical training to upgrade skills to facilitate trade is might include improved transparency such as the creation of costly. Many developing countries will require assistance in enquiry points, more systematic consultation between cus- covering capacity building costs over the long-term. toms administrations and traders, and the establishment of harmonized appeal procedures in disputes over import fees, Conclusion for example. There has also been discussions of simplified, standardized, and streamlined import/export procedures, IN SUM, TALKS ON WAYS to increase transparency, pre- new commitments on harmonized fees and charges on dictability, and streamline trade transactions could provide imports, reduction of data requirements at customs, expand- benefit to the international trading system. Negotiations are a ing pre-arrival processing and post-auditing procedures. beginning point ­ not an endgame with predetermined out- These are all associated with current GATT Articles VIII (fees comes. Lowered transaction costs and capacity building and formalities), Article X (publication and administration of improvements, as noted in the new research above and other regulations), and Article V (freedom of transit) empirical studies, can provide large gains to trade. Talks on (www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm). streamlined trade procedures, customs rules, and adminis- Supporters of negotiations also suggest a parallel program trative transparency are also timely and important, given the of technical assistance to developing countries alongside new need to bolster security after the tragedy of September 11, obligations undertaken. In contrast, some countries, such as 2001. Rapid implementation of new national security border India, Brazil, and several in Africa nations have expressed controls around the world is already underway. What is at strong reservations about launching new negotiations. They stake in trade facilitation is most certainly centered on a development dynamic--not inside the context of elaborate new trade rules. Institutional change and reform is complex and priorities differ across countries. Creative ways to manage OVERVIEW OF SIMULATION dispute settlement in this area are critical. There is a unique opportunity in 2003, however, to discuss a classic win-win BRING BELOW-AVERAGE COUNTRIES situation in which trade disciplines are strengthened, securi- HALF-WAY UP TO THE GLOBAL AVERAGE ty is enhanced, and developing countries gain the commit- ment of assistance to raise capacity in areas that matter more and more to success in modern international commerce. S $88.2 billion $116.9 billion (+7.3%) (+9.7%) John S. Wilson is Lead Economist, Development Research Group, The World Bank. $27.7 billion $21.6 billion (+2.3%) (+1.8%) This article draws in part upon "Trade Facilitation and Economic and Economic Development," John S. Wilson, Catherine Mann, and Tsunehiro Otsuki, World Bank Policy Research Working Paper #2988, World Bank, Port Efficiency Washington, DC, 2003. The findings, interpretations, and conclusions expressed in this article are entirely those of the author. They do not neces- Customs Environment sarily represent the view of the World Bank, its Executive Directors, or the E-business countries they represent. Comments by Yvonne Tsikata and Richard Regulatory Environment Newfarmer are gratefully acknowledged. Source: Wilson, Mann, Otsuki 2003 R e f e r e n c e s c o n t i n u e d o n p a g e 3 4 28 Development Outreach W O R L D B A N K I N S T I T U T E SPECIAL REPORT China and the WTO Policy Reform and Poverty Reduction BY WILL MARTIN countries (Ianchovichina and Martin 2002). Since joining the WTO, China has become a major player in the WTO, and par- AFTER A MARATHON, FIFTEEN-YEAR STRUGGLE China ticularly in the negotiations on the Doha Development Agenda. joined the WTO at the Doha Ministerial Meeting in November 2001. Clearly, China's entry was important simply by bringing The reform process a fifth of the world's population into the "world" trading sys- tem. By the time of accession, China had also become a major WHEN CHINA INITIATED THE PROCESS of joining the world player in world trade. When the process of (re)joining the trading system, it had seven years of experience with the world trading system began in 1986, China's share of world "open door" policy under its economic reform program. It trade was only 0.7 percent, but this had risen to almost 5 per- had made major progress in increasing exports of raw materi- cent in 2001, when China was the fifth largest exporter in the als and manufactured products, and the use of foreign direct world, and is expected to rise to at least 7 percent following investment. As the World Bank (1988) noted, the open door accession, making China one of the world's biggest trading policy, along with rural reforms and partial enterprise and price J U L Y 2 0 0 3 29 reforms, had contributed to a dramatic WTO, China had made enormous element in this will be a dramatic expan- improvement in the performance of the progress in reforming its foreign trade sion in China's exports of textiles and Chinese economy. However, many prob- regime (Lardy 2002). As is shown in clothing after the abolition of quotas on lems remained: the Foreign Trade Figure 1, tariffs declined continuously these exports in January 2005. Corporations created an air-lock after 1992. Weighted average tariffs fell Ianchovichina and Martin (2002) esti- between domestic and foreign markets; from 41 percent in 1992 to 12 percent at mate that exports of clothing will expand export patterns were inefficient; infor- accession, and will fall to just 6.8 percent by over 100 percent as a result of acces- mation flows between producers and after implementation of the WTO com- sion. Had she not joined the WTO, China markets were poor; and foreign exchange mitments. The coverage of nontariff bar- almost alone would have remained sub- markets were heavily distorted. riers fell from two thirds, to one-third in ject indefinitely to quotas on exports of During the process of accession to 1996and22percentin2001.Allnontariff these goods. Most of the reductions in the WTO, there was a dramatic improve- barriers except for state trading, which is tariffs and abolition of nontariff barriers ment in the performance of China's now subject to WTO rules, and is likely to required under the agreement had trade regime, and in economic per- cover less than 10 percent of imports, will already occurred by the time of acces- formance generally. A recent study be phased out. The dual exchange rate sion. However, there are some major undertaken by the World Bank and the system was abolished in 1994, removing reductions still to be implemented in the Development Research Center of the formerly substantial trade barriers motor vehicle industry, and on the for- China's State Council (DRC) has docu- implicit in this regime. Ianchovichina merly highly protected beverage and mented the extent of the reforms, and and Martin (2002) estimate the global tobacco sector. The key for the motor pointed to some of the priorities for welfare gains from China's accession at vehicle sector will be major restructur- policy reform if trade is to play a positive $74 billion per year, of which around $40 ing to increase efficiency, improve role in improving people's livelihoods billion accrues to China. product quality, and reap economies of and particularly in reducing poverty Substantial progress was made not scale. If this is done successfully, output (Bhattasali, Li and Martin 2003). just in foreign trade policies, but also in and both imports and exports of motor A key feature of the reform process critical behind-the-border areas need- vehicles and components are likely to since 1986, and particularly during the ed to support trade, including develop- expand substantially (Francois 2003). 1990s has been replacement of direct, ment of the legal system; enterprise There are likely to be some substan- quantitative policy instruments with restructuring; strengthening of service tial adjustments in agriculture, and indirect, price-based instruments more sector regulation; and agricultural and these are likely to have important impli- suited to a market economy. In the late rural reforms. Many of these reforms cations for poverty. The reductions in 1980s, around two thirds of China's were undertaken as part of the ongoing agricultural protection required by imports were subject to licenses or quo- process of making the changes needed accession are likely to be much smaller tas, foreign trading rights were restrict- to ensure China's development. than was predicted by many commenta- ed, foreign exchange was subject to sig- However, it is clear that the process of tors. This is partly because China's agri- nificant controls, and exports were par- WTO accession influenced the timing of culture was only quite lightly protected tially planned. As late as 1992, average many of the reforms. In fact, the needs (Huang and Rozelle 2003), and because tariffs were over 40 percent. of WTO accession may have helped China negotiated moderately high tar- By the time of its accession to the reformers to push through reforms iffs on some key products, such as rice, much earlier than would oth- wheat and maize. However, export sub- erwise have been feasible. sidies that were formerly important for THE EVOLUTION OF CHINA'S TARIFF RATES Certainly, the reform process maize and cotton had to be abolished, SINCE 1992 initiated by WTO accession and tariffs fell on products such as requirements in areas such as oilseeds, sugar and dairy products. As a China's Weighted Average Tariff legal reform was taken much key member of the WTO, China also has 45 further with the objective of the opportunity to press for reduction of 40 developing the legal structures the barriers against her exports of (pri- 35 needed to promote China's marily labor-intensive) agricultural 30 development (Long 2000). exports. This is particularly important 25 % because of the need to create rural 20 Future expansion employment in China. Martin (2001) 15 estimates that the weighted average bar- 10 QUANTITATIVE ANALYSIS riers facing China's exports of agricul- 5 undertaken as part of the tural products are four times as high as 0 Bank/DRC project found that those facing her nonagricultural 1992 1994 1996 2001 WTO the trade reforms required by exports--and this estimate that is China's accession will greatly undoubtedly conservative because of the expand China's trade. A key widespread presence of prohibitive tar- 30 Development Outreach W O R L D B A N K I N S T I T U T E iffs, whose effects are not captured. already faces seven times as many antidumping measures per Overall, there is likely to be some downward pressure on dollar of exports as the United States. The product-specific rural wages and incomes, with some--albeit small--adverse safeguards are new protection introduced as part of a WTO poverty impacts (Chen and Ravallion 2003). Attempts to deal agreement, and the textile safeguards include poorly defined with these problems by slowing down or reversing trade and potentially very damaging procedures on trade diversion. reforms would be very costly, even if they were possible under Within China, much has been done to protect those in WTO rules. Policies that deal with these poverty impacts urban areas who are disadvantaged by trade reform, but the directly by improving rural technology and infrastructure; social safety net remains "full of holes" in rural areas (Hussain expanding educational opportunities in rural areas, and 2003). Much needs to be done both to increase opportunities reducing the barriers to migration out of the rural sector are for rural residents, and to help protect them against adverse much more likely to be successful, and are explicitly consis- shocks, whether from external or internal developments. tent with WTO rules. China has committed to dramatic opening of its services Conclusion sector under the General Agreement on Trade in Services (GATS). In fact, Mattoo (2003) concludes that China's acces- OVERALL, IT IS CLEAR that China's accession builds on the sion offer is the largest liberalization of services ever under- progress made throughout reform process, while marking a taken under the WTO. Over half the sectors and modes of sup- turning point through the use of external commitments to ply have been liberalized, and considerable benefits to reform. While much--and particularly most of the required China's firms and consumers are likely. China's opening was trade liberalization--has already been done, some major not done unreservedly, however. Many reservations were adjustments will be required in formerly highly protected included on issues such as ownership structure and geograph- areas like automobiles and beverages and tobacco. Substantial ical location, as well as the rights inherent under GATS in further work will be needed on complementary policies in areas such as prudential regulation of the banking sector. areas such as improved regulation in financial and other sec- Liberalization of key service sectors involved in the logistics tors, and in increasing opportunities for and assistance to the chain seems likely to allow substantial reductions in costs to poor, and particularly the poor in rural areas. S firms, which are currently much higher than international norms in China. Luo and Findlay (2003) estimate potential Will Martin is a Lead Economist, Development Research Group, The costs savings equal to 10 percent of gross output value. World Bank. China has developed a modern intellectual property rights system that takes into account the fundamental differences References between its situation and that of the high-income economies Bhattasali, D., LI, Shantong, and Martin, W. (2002), WTO Acceession, policy for whom production of intellectual property rights are cur- reform and poverty reduction: an overview, www.worldbank.org/trade rently more important (Maskus 2003). China has used the Francois, J. and Spinanger, D. (2002), Regulated efficiency, WTO accession flexibility inherent in the TRIPS agreement in areas such as and the motor vehicle sector in China, www.worldbank.org/trade. pricing of pharmaceuticals to ensure that people have ade- Huang, J. and Rozelle, S. (2002), The nature of incentives to agriculture in quate access to essential pharmaceuticals. Maskus identifies China and impacts of WTO accession, www.worldbank.org/trade two potential areas of concern--one involving too much regu- Hussain, A. (2002), `Coping and adapting to job losses and declines in farm lation, and another involving too little. The first is with pro- incomes' www.worldbank.org/trade posals to patent software, which seem perhaps too protective Ianchovichina, E. and Martin, W. (2002), `Economic impacts of China's WTO of producer interests for China's stage of development. The accession, www.worldbank.org/trade. second area of concern relates to enforcement, where weak- Lardy, N. (2002), Integrating China into the World Economy, Brookings, nesses in enforcement are likely to reduce China's access to Washington DC. state-of-the-art technologies. Long, Yongtu (2000), `On the question of our joining the World Trade Fortunately, China--unlike Japan when it joined the Organization' The Chinese Economy 33(1):5-52. GATT--was able to avoid a situation where major trading part- Luo, Y. and Findlay, C. (2002), `Logistics in China: Implications of accession ners refused to apply Most-Favored-Nation treatment. to the WTO', www.worldbank.org/trade. However, an unfortunate feature of the accession agreement is Martin, W. (2001), `Implications of reform and WTO accession for China's the imposition of several types of trade-restricting measures. agricultural policies' Economics of Transition 9(3):717-42. For up to 15 years, China may be treated as a non-market Maskus, K. (2002), `Intellectual property rights in the WTO accession pack- economy for antidumping policy decisions--a status that age: assessing China's reforms' www.worldbank.org/trade. makes China more vulnerable to the antidumping measures Mattoo, A. (2002), `China's accession to the WTO: the services dimension', than other WTO members. For up to twelve years after China's www.worldbank.org/trade. accession, trading partners can impose product-specific safe- Messerlin, P. (2002), `China in the WTO: antidumping and safeguards' guardsagainstChina'sexports.Forseveralyearsafterthetextile www.worldbank.org/trade., and clothing quotas are abolished, China's exports of these World Bank (1988), China: External Trade and Capital, World Bank, products may be subjected to special textile safeguards. The Washington DC. antidumping measures are of particular concern because China J U L Y 2 0 0 3 31 References A Cambodian Experience Fairbanks M. and Lindsay S. (1997), Plowing the Sea: Nurturing the Hidden c o n t i n u e d f r o m p a g e 9 Sources of Growth in the Developing World. Harvard Business School Press. ITC (International Trade Center) (2002), Cambodia-- Building Blocks for a Country Action Plan for Textiles and Clothing, Geneva. Challenges ahead JICA (2001), Study on Improvement of Marketing System and Post-harvest Quality Control of Rice in Cambodia, Japan International Cooperation Agency, ACCESSION OF CAMBODIA TO THE WTO is part of the gener- Phnom Penh. al strategy of trade policy of Cambodia, which is directed to Ministry of Commerce (2001a), Opportunities, Challenges and Commitments effective integration of the country into the world economy for Cambodia's Accession to the WTO: Explanatory Notes Prepared for the Plenary Session of the National Assembly, 19 July 2001, Phnom Penh. and global trading system. Globalization does not come without difficulties, particu- Ministry of Commerce (2001), Cambodia: Integration and Competitiveness Study, Phnom Penh. larly for Least Developed Countries (LDC) like Cambodia. The 1997 regional financial crisis while sparing Cambodia from its Ministry of Commerce, National workshop on "How to Develop Garment direct immediate effects had nonetheless affected indirectly the Exports without Quotas", 28 November 2002, Phnom Penh. countryasseenfromthesharpdropofforeigndirectinvestment McCulloch, N., L. A. Winters and X. Ciero (2001), Trade Liberalization and from the region. The ratification of the US-Vietnam Trade Poverty: A Handbook, DFID, London. Agreement by the US Congress has no doubt created some NESDB (National Economic and Social Development Board) and Kasetsart uncertainty as to the flow of FDI away from Cambodia. China's University Research and Development Institute (2001), The Joint Development Study for Economic Cooperation Plan between Thailand and entry into the WTO has dramatically changed the dynamic of Cambodia (TCJDS), Bangkok and Phnom Penh. regional trade. The phase-out of Multi Fiber Arrangement Porter, Michael (1990), "The Competitive Advantage of Nations". New York. (MFA), or the elimination of quantitative restrictions on textile The Free Press. trade, by 2005 will further intensify the pressure on Cambodia to become more competitive in the textile and clothing indus- Royal Government of Cambodia (2002a), Implementing the Integrated Framework in Cambodia, Ministry of Commerce, Phnom Penh. try. Moreover, the recent political upheavals in a few other ASEAN countries did not bore well in term of confidence of Royal Government of Cambodia (2002b), 2nd Socioeconomic Development Plan (2001-2005), Ministry of Planning, Phnom Penh. investors in the region. Successes or failures of Cambodia will depend to a large Sok, Siphana (2001), Globalization and Cambodia: History and Perceptible Trends, Paper presented at the Globalization Conference: Business and Law extent not only on its ability to balance its rights and obligations Perspectives, June 27-28, 2001, Phnom Penh. underthemultilateraltradingsystembutaswellonhowwellthe country could position itself to take advantage of the broad Sok, Siphana (2002), Formulation of a Legal and Judicial Reform Strategy for Cambodia, Ministry of Commerce and Cambodia Legal Resources opportunities and challenges of regionalism and globalism. Development Center, Phnom Penh. Cambodia is a good example of a country that has, despite Sok, Siphana (2002a), "Experiences of Cambodia's accession to the WTO: its dramatic past and existing shortcomings, emerged as a Status and Future Prospects", Paper presented at the regional seminar on vibrant economy thriving on the `Competitiveness' paradigm. facilitating the accession of ESCAP developing countries to the WTO, 18-21 From the early days of national rebuilding from the ashes of February 2002, UNCC, Bangkok. genocide, to capitalizing on its comparative advantage based Sok, Siphana (2003), Prospects for Multilateral Trade Regimes in ASEAN on cheap labor and exploitation of natural resources, to and the Potential Impact on the Mekong Region: Perspectives of Cambodia. embracing controversial value-added labor-textile export Paper presented at the 13th Asia Society Corporate Conference, 5-7 March linkages--thus creating a precedent in the annals of textile 2003, Ha Noi, Viet Nam. negotiations--to defining new dynamic strategic value-adding Sok, Siphana (2001), Global Economic Prospects and the Developing alliance with its neighbors Thailand and Vietnam, to optimiz- Countries: Making Trade Work for the World's Poor, Washington DC. ing its national branding as the Seventh Wonder of the World Sok, Siphana (2002), Decision on Accession of Least-Developed Countries, new tourism destination combined with its open skies policy, WT/L/508, December 10, 2002, Geneva. to capitalizing on a highly interactive form of Government- World Trade Organization (1999), Technical Note on the Accession Process, Private Sector Dialogue, to projecting the value as a new WT/ACC/ 7/Rev. 1, 19 November 1999, Geneva. organic agricultural country, to protecting intellectual prop- erty rights, and to revolutionizing the concept of trade main- streaming for poverty reduction and economic development. In sum, Cambodia, with this `Competitiveness' paradigm in place, is prime to ride the trend of regionalism and globalism and turn trade as a potent tool for poverty alleviation. S Sok Siphana is Secretary of State for Commerce, IF Focal Point, Cambodia. 32 Development Outreach W O R L D B A N K I N S T I T U T E WTO Negotiations for Development, July 23­24, Washington, D.C. Agricultural Protectionism Gardner, B. (2002). North American Agricultural Policies and Effects on c o n t i n u e d f r o m p a g e 1 5 Western Hemisphere Markets. Paper presented at the Seminar on "Agricultural Liberalization and Integration: What to Expect from the FTAA and the WTO?" Inter-American Development Bank: Washington D.C. years preceding the major crisis after the 2002 devaluation. I Nogués, J. J. and M. Grandes (2001). "Country Risk: Economic Policy, Contagion havedonethisbecauseIbelieveagriculturalprotectionismpar- or Political Noise?" Journal of Applied Economics, IV, 1:125-162. tially explains the crises that Argentina is facing. Having said Nogués, J. J. (2003). Agricultural Exporters in a Protectionist World: Assessing this, I want to make clear that protectionism contributed only a Trade Strategies for the MERCOSUR. Draft paper prepared for the Inter- fraction of the crisis, while the bulk was generated at home by American Development Bank: Washington DC. bad economic policies, including irresponsible fiscal deficits OECD (2000). Agricultural Policies in OECD Countries: Monitoring and (Nogués and Grandes 2001) and more recently, by several vio- Evaluation, OECD: Paris. lations of established institutions including the Constitution. OECD (2001). The Uruguay Round Agreement on Agriculture: An Evaluation What is to be done? I started this note by citing the of Its Implementation in OECD Countries, OECD: Paris. Marrakech Agreement of 1994, according to which the WTO, Porto, G. G. (2003). Trade Reforms, Market Access and Poverty in Argentina. the IMF and the World Bank should work to achieve greater Mimeo, World Bank: Washington DC. coherence in global economic policy making. This mandate Sampson, G. and R. Snape (1980). "Effects of the EEC´s Variable Import has never been defined carefully but, while agricultural protec- Levies," Journal of Political Economy, 88: 5. tionism persists at its current irrational levels, efficient coun- Van der Mensbrugghe, D. (2002). Quantifying Trade Policy Options for try producers face a multilateral trading system that is inco- Argentina. Draft paper, World Bank: Washington DC. herent with the international financial system. This incoher- World Bank (2002). Global Economic Prospects, World Bank: Washington DC ence will be maintained as long as the powerful protectionist agricultural lobbies remain unchallenged. WTO (1995). The Results of the Uruguay Round of Multilateral Trade How can this lobby be challenged? No indebted country Negotiations: The Legal Texts, WTO: Geneva. would be wise to announce that agricultural protectionism is WTO (2003). Negociaciones Sobre la Agricultura: Anteproyecto de increasing debt problems; if they did, the perceived level of Modalidades para los Nuevos Compromisos, TN/AG/W/1/Rev. 1, WTO: Geneva. country risk would automatically jump with the consequent negative effects on the economy. Therefore, the onus appears to be on the side of multilateral organizations. One possibility Protecting the Vulnerable that might be worth exploring is to make the WTO Working The Design and Implementation Group on "Trade, Debt and Finance" a negotiating group in of Effective Safety Nets the Doha Round. The idea is to have creditor and debtor coun- tries meet at the negotiating table in order to discuss the December 1-12, 2003 financial consequences of trade protectionism and the bene- Washington, D.C. fits that trade liberalization would have on the international financial system. By incorporating the interests of the credi- This two-week course aims at providing partici- tors, most of whom are from industrial countries, there would pants with an in-depth understanding of the con- be a domestic force fighting against the agricultural lobby; if ceptual and practical issues involved in the devel- my Government lowers the barriers that protect you, I have opment of safety nets interventions to protect poor greater chances of recouping my credits. In order to strength- and vulnerable population groups from income risk en the incentives in favor of lower barriers, indebted coun- and to ensure they have adequate access to essential services. tries facing payment difficulties could tie part of their debt repayments to trade liberalization measures taken by the Conducted in English, the course incorporates for- creditor countries. This proposal implies an important shift mal lectures together with practical case studies in the structure of incentives in favor of trade liberalization. and hands-on exercises enabling participants to After more than five decades of increasing agricultural pro- apply what they have learned to concrete situations tectionism, I believe that only a radical shift in the structure of incentives will start to reverse this trend. The proposal I have Application and Contact presented goes in that direction. S Yoko Kobayashi E-mail: Ykobayashi@worldbank.org Fax: 1-202-676-0961 Julio J. Nogués is Consultant and Professor, School of Government, Tel: 1-202-473-3571 Universidad Di Tella, Buenos Aires Address: 1818 H street, NW jnogues@infovia.com.ar Washington, DC 20433 Website: http://www.worldbank.org/wbi/socialsafetynets References Diakosavvas, D. (2001). The Uruguay Round Agreement on Agriculture in Practice: How Open Are OECD Markets? Paper presented at the World Bank Conference on Leveraging Trade, Global Market Integration, and the New J U L Y 2 0 0 3 33 Micco, Alejandro, Clark, Ximena and David Dollar (2002). "Maritime Trade Facilitation, WTO Rules... Transport Costs and Port Efficiency." World Bank Working Paper Series # c o n t i n u e d f r o m p a g e 2 8 2781. The World Bank: Washington, DC. National Statistical Coordination Board (1998). Yearbook of Labor Statistics. References NSCB: Philippines. Anderson, James E. (1979). "A Theoretical Foundation for the Gravity Organization for Economic Co-operation and Development (2001). Business Equation." American Economic Review 69: p.106-116. Benefits of Trade Facilitation. TD/TC/WP(2001)21 FINAL. OECD: Paris. Anderson, James E. and Eric van Wincoop (2003). "Gravity with Gravitas: A Otsuki, Tsunehiro, John S. Wilson, and Mirvat Sewadeh (2001a), "What Price Solution to the Border Puzzle." American Economic Review 93(1):170-192. Precaution? European Harmonisation of Aflatoxin regulations and African groundnut exports." European Review of Agricultural Economics 28(3):263-284. Asia Pacific Economic Co-operation (APEC) (1999). Assessing APEC Trade Liberalization and Facilitation: 1999 Update, Economic Committee, Otsuki, Tsunehiro, John S. Wilson, and Mirvat Sewadeh (2001b). "Saving Two September 1999. APEC: Singapore. in a Billion: Quantifying the Trade Effect of European Food Safety Standards on African Exports." Food Policy 26:495-514. Asia Pacific Foundation of Canada (1999). Survey on Customs, Standards and Business Mobility in the APEC Region. APF Canada: Vancouver. Pöyhönen, P. (1963). "A Tentative Model for the Volume of Trade between Countries." Welwirtschaftliches Archiv 90, (1):93-99. Australian Department of Foreign Affairs and Trade and Chinese Ministry of Foreign Trade and Economic Cooperation (2001). Paperless Trading: Benefits Tinbergen, J. (1962). Sharing the World Economy: Suggestions for an to APEC. Commonwealth of Australia. www.dfat.gov.au/publications/paper- International Economic Policy. Twentieth Century Fund: New York. less/paperless_trading.pdf. United Nations Conference on Trade and Development (2001). E-Commerce Balistreri, Edward J. and Russell H. Hillberry (mimeo). "Trade Friction and and Development Report. UNCTAD: Geneva. Welfare in the Gravity Model: How Much of the Iceberg Melts?" U.S. Wilson, John S., Catherine Mann, Yuen Pau Woo, Nizar Assanie, and Inbom International Trade Commission, Washington, DC. Choi (2002). Trade Facilitation: A Development Perspective in the Asia- Dollar, David and Aart Kraay (2002). "Growth Is Good for The Poor", Journal Pacific Region. Asia Pacific Economic Cooperation: Singapore. of Economic Growth, 7 (3):195-225. Wilson, John S., Catherine Mann, and Tsunehiro Otsuki (2003) "Trade Evenett, Simon J. and Wolfgang, Keller. (1998). "On Theories Explaining the Facilitation and Economic and Economic Development," World Bank Policy Success of the Gravity Equation." Journal of Political Economy 110(2):281-316. Research Working Paper #2988, World Bank: Washington, D.C. Feenstra, Robert C., James R. Markusen and Andrew K. Rose (1998). Woo, Yuen Pau and John S. Wilson (2000). Cutting Through Red Tape: New "Understanding the Home Market Effect and the Gravity Equation: The Role Directions for APEC's Trade Facilitation Agenda. Asia Pacific Foundation of of Differentiating Goods." National Bureau of Economic Research Working Canada: Vancouver. Paper: 6804. World Economic Forum (2000). Global Competitiveness Report. World Fink, Carsten, Aaditya Matoo and Cristina Ileana Neagu (2002). "Trade in Economic Forum: Geneva. International Maritime Services: How Much Does Policy Matter?" World Bank Economic Review 16(1):81-108 Fink, Carsten, Aaditya Matoo and Cristina Ileana Neagu (2002). "Assessing the Role of Communication Costs in International Trade." The World Bank To reach a unique international audience Working Paper Series #2929. The World Bank: Washington, DC. of business leaders, policy makers, government officials, Frankel, Jeffrey A., Ernesto Stein and Shang-Jin Wei (1997). Regional academics, economic journalists, research institutions, and Trading Blocs in the World Economic System, Washington, DC: Institute for civic organizations International Economics. Freund, Caroline and Diana Weinhold (2000). "On the Effect of the Internet advertise in on International Trade." International Finance Discussion Papers #693, Board of Governors of the Federal Reserve System. Outreach D E V E L O P M E N T Hertel, Thomas W., Terrie Walmsley; and Ken Itakura (2001). "Dynamic Effect of the "New Age" Free Trade Agreement between Japan and Singapore." Journal of Economic Integration 16(4):446-84. IMD (2000). World Competitiveness Yearbook. IMD: Lausanne. Mann, Catherine L., Sue E. Eckert, and Sarah Cleeland Knight (2000). Development Outreach is a flagship magazine in the field of Global Electronic Commerce: A Policy Primer. Washington: Institute for International Economics. global knowledge for development which reflects a range of viewpoints by renowned authors and specialists world- Maskus, Keith E. and John S. Wilson (2001). Quantifying the Impact of Technical Barriers to Trade: Can it be done? Studies in International wide. It is published three times a year, and distributed to Economics. Ann Arbor: University of Michigan Press. readers in more than 130 countries. The online version is Maskus, Keith E., John S. Wilson and Tsunehiro Otsuki (2001). "An available at: Empirical Framework for Analyzing Technical Regulations and Trade," in www.worldbank.org/devoutreach. Quantifying the impact of technical barriers to trade: Can it be done? Keith Maskus and John S. Wilson eds. For advertising rates, deadlines, and general information, Messerlin, Patrick A and J. Zarrouk (1999). "Trade Facilitation: Technical send an email to: devoutreach@worldbank.org Regulation and Customs Procedures." September 1999 for the WTO/World Bank Conference on Developing Countries in a Millennium Round. 34 Development Outreach W O R L D B A N K I N S T I T U T E K N O W L E D G E R E S O U R C E S Looking for development information, networking professionals worldwide. Published by the Federation of opportunities, likeminded partners, a professional exchange? International Trade Associations (FITA), Really Useful Reaching those goals is as close as your computer screen. Sites for International Trade Professionals contains A network of development websites will take you to the four informally written descriptions of 4-5 web sites from corners of the world and will put you in touch with a FITA's International Trade Web Resources multicultural cornucopia of knowledge. (http://fita.org/webindex) that are useful for international trade, as well as some fun sites that enliven a business day. Visit: http://fita.org/useful/index.html DEARDORFF'S GLOSSARY OF INTERNATIONAL ECONOMICS This glossary attempts to cover all of the terms and concepts from international economics, including both THE WORLD BANK TRADE international trade and international finance. The glossary RESEARCH ELECTRONIC includes definitions, links to definitions, and wherever BULLETIN appropriate links to other sites and documents that may This is a quarterly e-mail provide additional information. There is a bibliography of publication containing abstracts sources for some of the terms, including links to the papers of recent trade working papers themselves where available (usually through JSTOR, for and other works. Additional which access requires a subscription). There is also a information on the Bank's Trade picture gallery of the diagrams of international economics, Research Team activities can be each with its own page. There are also various lists of types found on the World Bank Trade Research website of terms that occur frequently. (www.worldbank.org/research/trade). This provides basic Visit: www-personal.umich.edu/~alandear/glossary/ information on research activities in progress, trade working papers, other Bank trade publications, trade data and links to other trade related web sites. You may also visit the recently redesigned Trade Web at THE WORLD TRADE www.worldbank.org/trade for additional information on ORGANIZATION (WTO) trade and development, including the World Bank Institute's WTO is the only global activities in the area of capacity-building and training, international organization Integrated Framework, and related trade activities. dealing with the rules of trade Visit: www.worldbank.org/research/trade/newletter.htm between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world's trading nations and ratified in their parliaments. The goal is to help INTERNATIONAL TRADE producers of goods and services, exporters, and importers FORUM to conduct their business. The website includes This is the online magazine of the information on the organization, news, trade topics, International Trade Center (ITC). resources, meetings, documents, community forums and ITC is the technical cooperation more. agency of the United Nations Visit: www.wto.org Conference on Trade and Development (UNCTAD) and the World Trade Organization (WTO) for operational, enterprise- oriented aspects of trade development. ITC supports developing and transition economies, and particularly their FEDERATION OF business sector, in their efforts to realize their full potential INTERNATIONAL TRADE for developing exports and improving import operations. ASSOCIATIONS (FITA) Visit the magazine website at: www.tradeforum.org FITA's Really Useful Sites Visit the ITC website at: www.intracen.org for International Trade Professionals is a bi-weekly email newsletter sent to 80,000 international trade J U L Y 2 0 0 3 35 K N O W L E D G E R E S O U R C E S TRADE AND DEVELOPMENT sectors. Therefore, ISO is able to act as a bridging CENTER organization to meet both the requirements of business The site is a joint initiative of the and the broader needs of society. ISO's work program WTO and the World Bank ranges from standards for traditional activities, such as Institute under a program called agriculture and construction, through mechanical Information Technologies for engineering, to medical devices, to the newest Development (ITD). The Trade information technology developments, such as the digital and Development Center was created to provide coding of audio-visual signals for multimedia information to the community of Internet users who have a applications. specific need for information on trade as it relates to social Visit: www.iso.ch and economic development. Features include: the Development Gateway, Advisory Center on WTO Laws, WTO Network online discussions, conferences, and more. Visit: www.itd.org ASSOCIATION OF SOUTHEAST ASIAN NATIONS (ASEAN) ASEAN is an association of ten countries in the South Asia ASIAN DEVELOPMENT BANK region. Its aims and purposes are ADB is a multilateral to accelerate economic growth, development finance institution social progress and cultural dedicated to reducing poverty in development in the region, and to Asia and the Pacific. ADB promote regional peace and stability. Check the website for provides assistance based upon programs, projects, meetings, and publications. considerations of economic Visit: www.asean.or.id viability, technical feasibility, and financial soundness. The website provides links to news, events, and publications. Visit: www.adb.org THE ECONOMIC POLICY INSTITUTE EPI is a nonprofit, nonpartisan think tank that seeks to broaden ASIA-PACIFIC ECONOMIC the public debate about strategies COOPERATION (APEC) to achieve a prosperous and fair The APEC forum is the primary economy. It provides research international organization for and education to promote a promoting open trade and prosperous, fair, and sustainable economy. EPI stresses real economic cooperation among world analysis and a concern for the living standards of 21 member "economies" working people, and makes its findings accessible to the around the Pacific Rim. APEC works in three broad areas: general public, the media, and policy makers. trade and investment liberalization, business facilitation, Visit: http://epinet.org economic and technical cooperation. The website provides links to databases and e-IAPS, publications, news, and events. Visit: www.apecsec.org.sg INSTITUTE FOR INTERNATIONAL ECONOMICS IIE is a private, nonprofit, nonpartisan research institution INTERNATIONAL STANDARDIZATION ORGANIZATION devoted to the study of ISO is a network of the national standards institutes of international economic policy. 146 countries, with a Central Secretariat in Geneva, Its agenda emphasizes global Switzerland. ISO is a non-governmental organization and macroeconomic topics, occupies a special position between the public and private international money and finance, trade and related social 36 Development Outreach W O R L D B A N K I N S T I T U T E issues, investment, the international implications of the free electronic notification service for journal tables of new technologies, globalization and the backlash against contents and new product announcements. it, reform of the international financial architecture, and Visit: www.wkap.nl new trade negotiations. In late 2001, the Institute helped create a new Center for Global Development to address poverty and development issues in the poorer countries. Visit: www.iie.com and www.cgdev.org OTHER USEFUL TRADE RELATED WEBSITES INSTITUTE FOR INTERNATIONAL ECONOMIC STUDIES IIES is primarily a research institute affiliated with Bureau of International Labor Affairs ­ ILAB Stockholm University. The goal of he Institute is to create www.dol.gov/ilab/welcome.html a research environment characterized by high Center for Economic Policy Research www.cepr.org competence in economic analysis of international issues. Three areas of research dominate the work of the European Bank for Reconstruction and Development www.ebrd.com Institute: macroeconomic analysis of open economies; foreign trade; and general economic theory and European Commission Trade News http://europa.eu.int methodology. The website provides links to publications, Export-Import Bank of the United States conferences, and seminars. www.exim.gov Visit: www.iies.su.se Inter-American Development Bank (IADB) www.iadb.org International Chamber of Commerce www.iccwbo.org INTERNATIONAL FOOD AND International Law Institute AGRICULTURAL TRADE www.ili.org POLICY COUNCIL International Trade Commission The IPC is dedicated to www.usitc.gov developing and advocating International Trade Data System www.itds.treas.gov policies that support an efficient and open global food system, that promotes the National Bureau of Economic Research (USA) www.nber.org economically and environmentally sustainable production and distribution of safe, accessible food supplies to the OECD (Paris) www.oecd.org world's growing population. The website provides links to OECD (Washington) programs, events and activities--in particular, the IPC www.oecdwash.org Recommendations for the Doha Agricultural Trade Organization of American States (OAS) Negotiations. www.oas.org Visit: www.agritrade.org Trade Compliance Center ­ US Department of Commerce www.mac.doc.gov United Nations Conference on Trade and Development www.unctad.org KLUWER United States Trade and Development Agency This is a service that provides www.tda.gov information products to United States Trade Representative www.ustr.gov academic and corporate researchers. Kluwer USTrade.Org www.ustrade.org publications consist of books, major reference works, and journals in print and multiple Washington International Trade Association www.wita.org online delivery formats. The topics cover the humanities World Customs Organization (WCO) and social sciences, environmental science, physical www.wcoomd.org sciences, behavioral sciences, engineering and computer World Trade Centers Association (WTCA) sciences and biosciences. The reader may subscribe for a http://iserve.wtca.org J U L Y 2 0 0 3 37 B O O K S H E L F STEERING BY THE STARS: BEING YOUNG IN SOUTH AFRICA, by WORLD BANK PUBLICATIONS 2003 Mamphela Ramphele, Tafelberg, 2002. The book captures some of the REGIONAL INTEGRATION AND struggles young people continue to DEVELOPMENT, by Maurice Schiff experience in post-apartheid South and L. Alan Winters. Africa. The book is set in the black township community of New The book examines regionalism Crossroads, Cape Town where from the perspective of developing violent homes, schools and streets add to the countries and presents a general insecurity, as is the case in many other South comprehensive account of existing African black communities. The stories in this book theory and empirical results. This illustrate life experiences for young people, bearing all the book incorporates the findings of scars of the legacy of the past. It is a testament formal analyses of the politics and dynamics of regionalism. about the resilience of people who have seen, heard and It considers the relationship between regionalism and experienced pain and anguish and yet kept hoping for a multilateralism and explores the economic advantages of better tomorrow. nondiscriminatory trade liberalization, which the authors argue should be exploited to the maximum extent. The book THE WORLD TRADE also provides rules of thumb for regionalism, rules that are ORGANIZATION: LAW AND not inviolable but which should not be violated lightly. PRACTICE, by Mitsuo Matsushita, Thomas Schoenbaum, Petros Mavroidis. Oxford University Press, DEVELOPMENT, TRADE AND 2003. THE WTO: A HANDBOOK, Edited by Bernard M. Hoekman, This book, written by an Philip English, and Aaditya Mattoo. outstanding team of WTO law specialists, provides a Developing countries are comprehensive overview of the law and practice of the increasingly confronted with the WTO. The authors explain the origins and development, need to address trade policy related via the GATT, of all of the substantive legal areas covered issues in international agreements, by the WTO as well as the sources of law and remedies of most prominently the World Trade the Dispute Settlement system. Organization (WTO). This handbook offers guidance on the design of trade policy reform, surveys key disciplines and the functioning of the World Trade Organization (WTO), and discusses numerous issues and options that confront WTO PUBLICATIONS ON TRADE developing countries in using international cooperation to improve domestic policy and obtain access to export Special Study No. 7, Adjusting to Trade Liberalization-- markets. Many of the issues discussed are also relevant in The Role of Policy, Institutions and WTO Disciplines. the context of regional integration agreements. Discussion Paper No. 1, Industrial Tariffs and the Doha Development Agenda. WTO Analytical Index - Guide to the WTO Law and Practice. STANDARDS AND GLOBAL WTO Basic Instruments and Selected Documents, Volume I. TRADE: A VOICE FOR AFRICA, Computer Based Training on General Agreement on Trade by John S. Wilson and Victor Abiola. in Services. The book reflects the World Bank's For hotlinks and order information visit: www.wto.org, and work on trade facilitation, click on New Publications. standards and capacity building in Sub-Saharan Africa. It provides in-depth case-by-case analysis of 38 Development Outreach W O R L D B A N K I N S T I T U T E five African countries--Kenya, Mozambique, Nigeria, WHAT CAN AFRICA EXPECT FROM ITS TRADITIONAL South Africa, and Uganda--and is intended to be a EXPORTS? resource for policymakers and the development by Francis Ng and Alexander Yeats. community in a new "behind the border" barrier to trade. TRADE FACILITATION: A DEVELOPMENT PERSPECTIVE IN THE ASIAN PACIFIC REGION, by John S. Wilson, FREE TRADE AREA MEMBERSHIP Catherine Mann, Yuen Pau Woo, Nizar Assanie, and Inbom AS A STEPPING STONE TO Choi. DEVELOPMENT: THE CASE OF ASEAN, by Emiko Fukase and Will LA NUEVA AGENDA DEL COMERCIO EN LA OMC, Martin. by Marcelo Olarreaga and Ricardo Rocha. This study investigates the DID DOMESTIC POLICIES MARGINALIZE AFRICA IN economic impacts of accession to INTERNATIONAL TRADE? by Alexander Yeats with Azita the ASEAN Free Trade Area (AFTA) Amjadi, Ulrich Reincke and Francis Ng. by the new members of Cambodia, the Lao PDR, Myanmar and Vietnam. The trade policies of these countries are WHAT MAKES EXPORTS BOOM? by Mark J. Roberts and examined, and a series of quantitative analyses were James R. Tybout. undertaken to evaluate the impacts of accession. TRADE PERFORMANCE AND POLICY IN THE NEW INDEPENDENT STATES, by Constantine Michalopoulos TRADE POLICY DEVELOPMENTS IN THE MIDDLE EAST and David Tarr. AND NORTH AFRICA, by Bernard Hoekman and Hanaa Kheir-El-Din, eds. THE URUGUAY ROUND: WIDENING AND DEEPENING THE WORLD TRADING SYSTEM, by Will Martin and L. The Middles East and North Africa region has great Alan Winters. potential for economic growth and prosperity in the 21st century. Yet this potential will not be realized unless THE URUGUAY ROUND AND THE DEVELOPING governments and private sector leaders in the region ECONOMIES, by Will Martin and L. Alan Winters, eds. forge parterships for development. An indispensable resource for all those working within the international THE URUGUAY ROUND: STATISTICS ON TARIFF development community, especially within the Middle CONCESSIONS GIVEN AND RECEIVED, by J. Michael East and North Africa region, this publication offers Finger, Merlinda Ingco and Ulrich Reincke policy and institutional alternatives to help both parties achieve that goal. WTO OBLIGATIONS AND BANK POLICY ADVICE: KEEPING UP WITH POST-URUGUAY ROUND RULES, by John Croome GLOBAL ECONOMIC PROSPECTS 2004 This is one of the key World Bank tools for analysis and advocacy of the global trade agenda. GLOBALIZATION, GROWTH AND POVERTY: BUILDING AN INCLUSIVE WORLD ECONOMY For hotlinks and summaries visit: This study shows that globalization has helped reduce www.worldbank.org/research/trade/pubs.html poverty in a large number of developing countries but it must be harnessed better to help the world's poorest, These publications can be purchased through most marginalized countries improve the lives of their the World Bank Info Center Bookstore, at citizens. http://publications.worldbank.org/ecommerce/ TRADE BLOCS This latest report analyzes both the political and economic benefits of regional trade blocs. J U L Y 2 0 0 3 39 C A L E N D A R JULY 2003 23­24 Annual Meetings of the World Bank and the International Monetary Fund 9­11 UNCTAD Expert Meeting: "Environmental Dubai, United Arab Emirates Goods and Services in Trade and Development" www.imf.org/external/am/2003/index.html Geneva, Switzerland www.unctad.org OCTOBER 15­16 OECD Investment Compact for South East Europe ministerial conference. 5­9 World Forum on Energy Regulation Vienna, Austria Organizer: Italian Regulatory Authority for www1.oecd.org/media/upcoming.htm Electricity and Gas Rome, Italy 29­31 UNCTAD Expert Meeting on Market Access www1.oecd.org/media/upcoming.htm Issues Geneva, Switzerland 14­17 World Knowledge Forum 2003 www.unctad.org Seoul, South Korea www.wkforum.org/wkf_eng/ AUGUST 16 World Food Day 10­16 Drainage Basin Security: Balancing Production, Washington, DC Trade and Water Use www.worldfooddayusa.org Stockholm International Water Institute www.feedingminds.org Stockholm, Sweden www1.oecd.org/media/upcoming.htm 17 International Day for the Eradication of Poverty New York, USA SEPTEMBER www.un.org/esa/socdev/poverty/poverty_link3.htm 10­14 Fifth WTO Ministerial Conference Cancun, Mexico www.wto.org Outreach Subscription Order Form D E V E L O P M E N T SUBSCRIBERS FROM DEVELOPING NAME COUNTRIES WILL CONTINUE TO RECEIVE THE MAGAZINE FREE OF CHARGE. TITLE ORGANIZATION SUBSCRIPTION FEE APPLIES TO READERS IN THE FOLLOWING DEVELOPED COUNTRIES: ADDRESS Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Kuwait, Luxembourg, CITY AND STATE OR PROVINCE Monaco, Netherlands, New Zealand, Norway, Oman, Portugal, Spain, Sweden, Switzerland, COUNTRY United Arab Emirates, United Kingdom, United States, and Vatican City. ZIP / POSTAL CODE PHONE FAX Please print or type all information E-MAIL YES, sign me up for Development Outreach Please do not send cash. Make checks payable to Development OUTREACH/ WBI. for 2003 for just $18 Check no.___________ in the amount of $________ is enclosed. (three issues per Mail order to: calendar year, January- Editor, Development OUTREACH December) The World Bank 1818 H Street, NW, Room J2-200 Washington, DC 20433 USA The KULT Program Partners Consortium is pleased to offer: Capacity Enhancement Opportunities for Education Business Entrepreneurs, Training Executives/Managers and Professional Trainers & Learning Technology Specialists HOW TO SURVIVE IN A GLOBAL TRAINING MARKET and AVOID BECOMING A DINOSAUR? INCREASE THE COMPETITIVE EDGE and ENSURE YOUR INSTITUTION's FINANCIAL HEALTH The Knowledge Utilization through Learning Technologies (KULT) Program was originally founded by World Bank Institute (WBI)/The World Bank. It has been transferred to, and is now managed by, the KULT Program Partners Consortium consisting of the Asian Institute of Management, University Science Malaysia, University of Surabaya, American University in Cairo, and SPAAC/ Human Empowerment Center of Egypt. These partner institutions will continue to offer KULT Program's international workshops, in collaboration with the International Society for Improving Training Quality (isitQ),--a professional and virtual network of KULT Program alumni. The following international workshops are offered: 6th International Workshop on: "Strategic Management and Marketing of Training (SMMT-6): Ensuring Sustainability and Financial Health of Training Institutions" Organized by: Asian Institute of Management (AIM) Manila, the Philippines: September 1-9, 2003--Website: www.kult-educ.org/wksp/smmt-6 2nd International Workshop on: "Enhancing Training Quality through Quality Customer Service: Caring for Clients Before, During and After Training (QCS-2)" Organized by: University of Surabaya (Ubaya) Bali, Indonesia: October 1-7, 2003--Website: www.kult-educ.org/wksp/qcs-2 5th Trainers Workshop on: "Improving Training Quality through Interactive Learning Technologies and Distance Mentoring (ITQ-5) A 5-phase learning activities, combining face-to-face/group training with online/Internet-based learning as well as distance mentoring/coaching spread over a 10-month period. Organized by: University Science Malaysia (USM) Penang, Malaysia: October 13-25, 2003 (1st face-to-face/group training) Surabaya, Indonesia: April 26 - May 1, 2004 (2nd face-to-face/group training) Website: www.kult-educ.org/wksp/itq-5 3rd International Workshop on: "Innovative Marketing Communications: Promoting and Selling Training in a Competitive Global Market (IMC-3)" Organized by: American University in Cairo (AUC) & SPAAC/Human Empowerment Center Cairo, Egypt: December 6-12, 2003--Website: www.kult-educ.org/wksp/imc-3 For more information on the Workshops and/or to obtain the Application Forms, please contact: Mr. Eric Wibisono, Sec. Gen., KULT Consortium Fax: (62-31) 298-1301 E-mail: ewibisono@ia.ubaya.ac.id KULT Program Partners Consortium: