Sustaining Trade Reform: Institutional Lessons from Argentina and Peru
By: Elías A. Baracat, J. Michael Finger, Raúl León Thorne, Julio J. Nogués,
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The principal finding of Sustaining Trade Reform is that the trade policy reforms introduced by Peru in the 1990s have continued over several changes in the presidency whereas similar reforms in Argentina have since been reversed. In both countries, the reforms included the introduction of new mechanisms for managing trade policy as well as the reduction of restrictions. Throughout the 2000s, Peru's liberalization expanded. The new institutions became more robust, and through them pressures for protection were effectively contained. At the same time, Argentine trade policy returned to the high-protection import substitution regime in place before the 1990s reforms. Multiple restrictions have been imposed in Argentina, mostly through a reversion to informal methods that abjure the governance characteristics that the 1990s reforms introduced.
The difference between the two cases cannot be explained by economic parameters such as resource endowments or external shocks. Peru's reforms manifest the buoyant and confident attitude toward the global economy that reform leaders were able to introduce into Peruvian politics. In the words of former president Alan García, there is an eagerness to 'climb up on the wave of global economic growth.' In comparison, Argentina's current development strategy sees international trade as detrimental to Argentina's interests unless participation by Argentine buyers and sellers is guided by government intervention.
The Peruvian case provides examples of successfully managing the politics of reform and the technical aspects of policy so as to establish transparent and participatory processes that weigh accurately the impact of trade policy on all affected domestic parties. The Argentine case demonstrates that the World Trade Organization (WTO) legal system is not an effective restraint on a government that wants to revert to an import substitution regime. In short, international cooperation-such as support from international organizations such as the World Bank and the WTO-has been useful when it has recognized and influenced domestic sovereignty over economic regulation; it has not been useful when approached as a matter of international regulation of national actions.
Trade in Value Added : Developing New Measures of Cross-border Trade
By Aaditya Mattoo, Zhi Wang, Zhi and Shang-Jin Wei, January 2013
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What is the ‘country of origin’ of an iPad? If you order a new model of iPad today from Apple’s online store, you will notice that your device will be shipped out of China by a company called Foxconn, so China is officially the country that exports iPads. Of course, the product is designed in California and uses lots of components from Japan, Korea and other countries. When a product is produced by a global production chain in which a number of countries participate in different stages of production and supply different parts and components that make the final product what it is, the concept of ‘country of origin’ is not very useful. The world is increasingly like this: more and more products traded internationally use parts and components from multiple countries before being assembled into the form of final products.Indeed, between one-half and three-quarters of overall world trade in goods and services consists of trade in intermediate goods (see Chapter 2 by Sébastien Miroudot and Norihiko Yamano).
In this volume, we take stock of what we know about this phenomenon based on a body of active and expanding research. Most of the work reviewed here was presented at a conference at the World Bank on this topic in 2011, and subsequently revised and expanded. First, we explore the implications for economic policies of the increasing divergence between countries that export a given product and the countries that provide the value added that goes into that product. Second, we examine several approaches to estimating domestic and foreign value added in a country’s exports (and imports). Third, we present ideas about modifying the existing national and international statistical infrastructure that can lead to better measurement of trade in value added. As this is still an evolving field, we hope that this volume will provide a framework for comparing existing approaches and also inspire new ones.
Greenprint: A New Approach to Cooperation on Climate Change
By Arvind Subramanian and Aaditya Mattoo, December 2012
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International cooperation on climate change has floundered. With mutual recrimination between rich and poor countries, the zero-sum arithmetic of a shrinking global carbon budget, and shifting economic and bargaining power from old CO2 emitters to new—what Aaditya Mattoo and Arvind Subramanian call the “narrative,” “adding up,” and “new world” problems—the wonder is not the current impasse but belief that progress might be possible at all.
Each of these problems must be addressed in a radically different way. First, the old narrative of recrimination must give way to a narrative based on recognition of common interests. Second, leaders must shift the focus away from cutting emissions to generating technology. Third, the old “cash-for-cuts” approach must be abandoned for one that requires contributions from each country calibrated in magnitude and form to its current level of development and future prospects.
Pathways to African Export Sustainability
By Paul Brenton, Olivier Cadot & Martha Denisse Pierola, June 2012
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African exporters suffer from low survival rates on international markets. However, this trend is not inevitable. The high failure rate of African exports is largely explained by Africa's low-income business environment and, once properly benchmarked, Africa’s performance in terms of exporter failure is no outlier. Moreover, African exporters show vigorous entrepreneurship, with high entry rates into new products and markets despite formidable hurdles created by poor infrastructure, landlocked boundaries for some, and limited access to major sea routes for others. African exporters experiment a lot, and they frequently pay the price of failure. What matters for policy is how to ensure that viable ventures survive. Research carried out for this book demonstrates that governments can and should help to reduce the rate of failure of African export ventures through a mixture of improvements in the business environment, as well as well-targeted proactive interventions.
Exporting Services: A Developing Country Perspective
Edited by Arti Grover Goswami, Aaditya Mattoo, and Sebastian Saez, November 2011
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The past two decades have seen exciting changes with developing countries emerging as exporters of services. Technological developments now make it easier to trade services across borders. But other avenues are being exploited: tourists visit not just to sightsee but also to be treated and educated, service providers move abroad under innovative new schemes, and some developing countries defy traditional notions by investing abroad in services. More Information >>
Unfinished Business? The WTO's Doha Agenda
Edited by Will Martin and Aaditya Mattoo, November 2011
The Doha Development Agenda (DDA) is in limbo. After ten years of hard work by skilled negotiators, seeking to identify the interests of different participants and to reconcile them into an overall agreement, no conclusion is in sight. A Doha-weary world faces a difficult “trilemma”: to implement all or part of the draft agreements as they stand today; to modify them substantially; or to dump Doha and start afresh. At this critical juncture, this volume aims to provide a better empirical basis for informed choices. It addresses the questions that are relevant to each of the possible scenarios. What benefits precisely does Doha currently offer individual participants and what would be lost if Doha were abandoned? What are the implications of potential modifications proposed to the Doha drafts? And if the WTO did start afresh, what have we learnt from Doha about ways to go? More Information >>
The Great Recession and Import Protection: The Role of Temporary Trade Barriers
Edited by Chad P. Bown, July 2011
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The Great Recession of 2008–9 caused a negative shock to the global economy that is comparable with the Great Depression of the 1930s, and with it came an uncertainty that was especially endemic to the early periods of the crisis. There was particularly acute uncertainty regarding trade policy. Could the modern trading system withstand such a devastating economic blow? Specifically, would governments live up to their early-crisis pledge to refrain from protectionism? More Information >>
Where to Spend the Next Million? Applying Impact Evaluation to Trade Assistance
Edited by Olivier Cadot, Ana Margarida Fernandes, Julien Gourdon, Aaditya Mattoo, June 2011
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"A welcome trend is emerging towards more clinical and thoughtful approaches to addressing constraints faced by developing countries as they seek to benefit from the gains from trade. But this evolving approach brings with it formidable analytical challenges that we have yet to surmount. We need to know more about available options for evaluating Aid for Trade, which interventions yield the highest returns, and whether experiences in one development area can be transplanted to another. These are some of the issues addressed in this excellent volume." Pascal Lamy, Director-General, World Trade Organization "Five years into the Aid for Trade project, we still need to learn much more about what works and what does not. Our initiatives offer excellent opportunities to evaluate impacts rigorously. That is the way to better connect aid to results. The collection of essays in this well-timed volume shows that the new approaches to evaluation that we are applying to education, poverty, or health programs can also be used to assess the results of policies to promote or assist trade. This book offers a valuable contribution to the drive to ensure value for aid money." Robert Zoellick, President, The World Bank.
Supply Chains in Export Agriculture, Competition, and Poverty in Sub-Saharan Africa
by Guido Porto, Nicolas M Depetris Chauvin, Marcelo Olarreaga, March 2011
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Cash crops provide the livelihoods for millions of people in sub-Saharan Africa. This CEPR/World Bank book explores the effects of increasing competition in these markets. It finds that while competition improves welfare for farmers on the whole, policymakers should still consider the potential winners and losers in each case.
Trade Costs and Facilitation: Open Trade and Economic Development
Edited by Jean-Christophe Maur and John S. Wilson, January 2011
The need for countries to facilitate trade and to reduce the transactions costs plaguing trade is receiving a lot of interest in policy circles, and in particular in the WTO, where trade facilitation has been one of the few good stories in recent multilateral negotiations. Is this interest justified? What have economic theory and empirical findings to contribute to our understanding of the value of free trade? This authoritative two-volume set, edited by two leading scholars in the field, offers a collection of seminal articles that have led our economic thinking on these issues and encouraged a new and growing literature. This important work, along with an original introduction by the editors, will be of immense value to scholars and practitioners interested in the topic of trade costs and facilitation.
Trade Adjustment Costs in Developing Countries: Impacts, Determinants and Policy Responses
by Bernard Hoekman and Guido Porto, June 2010
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This book summarizes the state of knowledge in the economic literature on trade and development regarding the costs of adjustment to trade openness and how adjustment takes place in developing countries. The contributions by leading experts look at:
the magnitude of trade adjustment costs in the presence of frictions in factor markets;
the impacts of trade shocks and greater trade openness;
the factors that affect the way trade, especially exports, adjust;
trade adjustment assistance programs in the U.S. and compensation schemes for farmers in the EU.
Food Prices and Rural Poverty
by M. Ataman Aksoy and Bernard M. Hoekman, May 2010
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The impact of food price changes depend on the income sources of households and the second order responses of consumers and producers. This book tries to generate new information derived from household data on the income sources, behavior of food prices, and case studies on the impacts of food price changes on poor households and countries. The authors show that international price increases were not passed on to domestic food prices and international prices have been high only for 10 of the last 60 years. Food sales constitute one of the biggest cash incomes for poor rural households, and agricultural households, however defined, are much poorer than non agricultural ones. Net food sellers are also poorer than net food buyers so lower prices help richer net buyers and hurt the poorer net sellers. Impact of high food prices on the imports of poorer developing countries is very small, less than 1 percent of GDP.
Case studies on the impact of price changes show that poor households can gain in Vietnam with price increases and with price decreases in Bangladesh. They also show that households can change their net buying or selling status so the estimates based on one period household data can be very misleading. All these results suggest that increases in food prices might be good for the rural areas and for the poor which are predominantly located in these areas.
Agricultural Price Distortions, Inequality, and Poverty
by Kym Anderson, John Cockburn, Will Martin, March 2010
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Trade policy reforms in recent decades have sharply reduced the distortions that were harming agriculture in developing countries. Yet global trade in farm products continues to be far more distorted than trade in nonfarm goods, and in ways that reduce some forms of poverty and inequality but worsen others, so the net effects are unclear without empirical modeling.
Using a new set of estimates of agricultural price distortions, this book brings together economy-wide global and national empirical studies that focus on the net effects of the remaining distortions to world merchandise trade on poverty and inequality globally and in various developing countries. The global LINKAGE model results suggest that removing remaining distortions would reduce international inequality, largely by boosting net farm incomes and raising real wages for unskilled workers in developing countries, and would reduce the number of poor people worldwide by 3 percent. More about Distortions to Agricultural Incentives >>