Differential and More Favorable Treatment of Developing Countries and the International Trading System

This article argues that "differential and more favourable treatment"of developing countries in the General Agreement on Tariffsand Trade (GATT) has been a logical consequence of their owninward-looking policies and the GATT's implicit mercantilism,the latter implying that liberalization, being costly, shouldnot be demanded of relatively poor countries. Time has, however,reduced both the appeal of the protectionist model of developmentand the willingness of developed countries to accord differentialtreatment. The upshot has been pressure on more advanced developingcountries to "graduate" and a growing literature recommendingfuller and more equal participation of developing countriesin the GATT. The case for fuller and more equal participationis not self-evident. It needs to be assessed on its merits interms of the prospects for improved market access abroad andmore efficient policy at home. The analysis indicates that thepotential benefits should not be oversold. On balance, however,the most advanced developing countries would probably gain fromactive and more equal participation in both GATT and the multilateraltrade negotiations while the remaining developing countrieswould benefit from graduation by the more advanced.     

Balance of Payments and Related Issues in the Uruguay Round of Trade Negotiations

Little attention has been paid to the balance of payments provisionsof the General Agreement on Tariffs and Trade (GATT), despitethe fact that they directly influence the trade policies ofthe developing countries. This article suggests that there isa need to reconsider these provisions in the context of theongoing Uruguay Round of multilateral trade negotiations. Thearticle traces the historical evolution of GATT practices ontrade restrictions for balance of payments purposes. With thegeneral introduction of more flexible exchange rate arrangements,the original rationale for temporary barriers to safeguard acountry's external financial position appears to have lost itsforce. Recent theoretical and empirical work has demonstratedthat neutral or export promoting trade strategies are more effectivefor development than the import substitution frequently advocatedby economists in the 1950s and 1960s. The current debt problemsof developing countries strengthen the argument for a relativelyopen trade and payments regime to attain balance of paymentsviability. The article suggests that stronger internationaldiscipline over trade restrictions for balance of payments purposeswould contribute to and presuppose other necessary improvementsin the multilateral trading system which are already on theagenda of the Uruguay Round.     

GATT Safeguards and Voluntary Export Restraints: What Are the Interests of Developing Countries?

Exports from developing countries are frequently the targetsof trade protection to offset injury to domestic producers.A safeguard clause of the General Agreement on Tariffs and Trade(GATT), Article XIX, authorizes such protection, but voluntaryexport restraints (VERS), which are not authorized or controlledby the GATT, are often used in its place. A call for a "comprehensiveagreement on safeguards" was one outcome of the 1986 Punta delEste ministerial meeting. The spread of VERS is often taken to be a threat to the interestsof developing countries. The costs of VERS to developing countryexporters may have been overestimated, however, and as a consequence,developing countries may be at risk of conceding too much, perhapsin terms of a relaxation of the conditions of application ofArticle XIX, in an attempt to ban or directly control VERS.The central issue is the extent to which VERS are adopted toavoid invocation of Article XIX. If so, there is no valid casefor developing countries to pay anything for a ban on VERS.A better course for them would be to press for more rigor inGATT articles used as threat, which would enhance their bargainingposition in setting the conditions for VERS.     

THE MULTIFIBRE ARRANGEMENT AND ITS EFFECTS ON DEVELOPING COUNTRIES

The MFA provides for bilateral quotas against textile and clothingexports from developing countries. Thus, although it is administeredunder the auspices of GATT, the MFA derogates two GATT principles:nondiscrimination and the avoidance of quantitative restrictions.The impact of the MFA on developing countries is examined inthe article. Four important short-term effects of the MFA onexporting developing countries are (a) the forgoing of exports,(b) the transfer of quota rents, (c) the shift to unrestrictedexporters, and (d) the upgrading of products. In the long termthe MFA discourages newcomers from becoming successful exportersof textile and clothing products. Although it also encouragesforeign investment in unrestricted developing countries, ingeneral the MFA is harmful to current and potential exportersof textiles and clothing in developing countries, and it benefitsdomestic producers of textiles and clothing in the importingindustrial countries.      

IMF-related announcements and stock market returns: Evidence from financial and non-financial sectors in Indonesia,Korea, and Thailand

We examine the changes in daily financial sector stock returns in Indonesia, Korea, and Thailand in response to IMF-related news during the Asian crisis and compare them with those in non-financial sectors. We find that news of both program negotiations and approval increased financial sector returns in Indonesia and Korea, whereas only program approval is associated with higher returns in the financial sector in Thailand. Sectors such as cyclical consumer goods and non-cyclical services experienced higher returns in Thailand and Indonesia, while almost all sectors enjoyed higher returns in South Korea. We interpret the empirical results based on the characteristics of corporate governance and industrial development policies in these countries.     

Die Öffnung der Versicherungsmärkte bei OECD,EU und WTO — Mühsamer Abschied vom Finanzmarktprotektionismus der Bretton Woods Periode

The liberalization of international insurance trade has been pursued since 1948 by the OEEC, the EEC, the GATT and its successor organizations the OECD, the EU and the WTO. Modern multilateral trade policy was however not as successful for international insurance trade as it was for international merchandise trade. Significant progress was not made until the 1990s with the EU’s Single Market program. Likewise, negotiations currently being conducted by the WTO on the General Agreement on Trade in Services (GATS) have so far not led to any noticeable progress in the international insurance markets. Furthermore, the GATS framework agreement shows weaknesses that are characteristic of the liberalisation efforts of the immediate post-war years.     

DUMPING AND ANTIDUMPING: THE RHETORIC AND THE REALITY OF PROTECTION IN INDUSTRIAL COUNTRIES

A wide gap separates the rhetoric from the reality of protectionin industrial countries. Antidumping is the current realityof that protection. Protectionist interests stretch the definitionof dumping as far as they may to shelter actions against importsunder the antidumping umbrella. This article is about antidumping, in particular about the historyof antidumping regulation and its evolution under the GATT systeminto a major instrument of protection. The thesis is straightforward:antidumping is the fox put in charge of the henhouse—ordinaryprotection with a good public relations program. There is littlein its history to suggest that the scope of antidumping wasever more particular than protecting home producers from importcompetition, and there is much to suggest that such protectionwas its intended scope. The article has three sections. The first looks into the originsof antidumping regulation, the second examines contemporaryregulation (antidumping under the GATT), and the third summarizesthe significance of the first two.      

A SURVEY OF THE COSTS OF WORLD SUGAR POLICIES

The world sugar market has long been characterized by volatileprices and widespread intervention. Controls on domestic prices,demand, and supply have created an inefficient pattern of worldproduction, consumption, and trade. Without government controls,production would shift from the countries with higher cost,subsidized production (especially the European Community, Japan,and the United States) to the countries with lower costs (suchas Australia, Brazil, and Thailand). The resources saved couldthen be directed to other activities. Sugar policies in countries with high costs reduce world sugarprices quite substantially in the long run and increase pricevariability significantly; production controls in countrieswith low costs increase world prices somewhat and also increasetheir variability. What would happen if all interventions ceased? Average worldsugar prices would probably— but not definitely—rise. World prices would definitely vary less, and economicconditions would definitely improve, especially in developingcountries that depend heavily on sugar exports. But the prospectsfor substantial reform of the sugar market are not promising,even though the GATT Uruguay Round continues. This article putsforward some modest proposals for changing the existing interventionsto lessen economic distortions and reduce costs.      

The Economics of Law Enforcement: Quasi-Experimental Evidence from Corporate Takeover Law

This paper examines the impact of takeover law enforcement on corporate acquisitions. We use the European Takeover Directive as a natural experiment, which harmonizes takeover law across countries, while leaving its enforcement to the discretion of individual countries. We exploit this heterogeneity in enforcement quality across countries in a difference-in-differences-in-differences model, while employing an overall inductive research approach, following Karpoff and Whittry's (2018) recommendation. We find that acquirer returns increase in countries with improvements in takeover law, driven by better target selection and lower cost of financing. The increase in acquirer returns is lower in weak enforcement jurisdictions, which we identify by developing a novel Takeover Law Enforcement Index (TLEI). The findings show that takeover law can mitigate agency conflicts, but its true value depends on its enforcement. Our results are strongly robust to alternative model specifications.     

Developing Countries and a New Round of WTO Negotiations

This article summarizes some of the results and findings emergingfrom an ongoing World Bank research and capacity-building projectthat focuses on the World Trade Organization (WTO) negotiatingagenda from a developing country perspective. Recent researchsuggests that the potential gains from further multilateralliberalization of trade remain very large. The payoffs associatedwith attempts to introduce substantive disciplines in the WTOon domestic regulatory regimes are much less certain. This suggeststhat the focus of current and future negotiations should beprimarily on the bread and butter of the multilateral tradingsystem—the progressive liberalization of barriers to tradein goods and services on a nondiscriminatory basis. In addition,priority should be given to ensuring that rules are consistentwith the development needs of poorer countries and to helpingdeveloping countries implement WTO obligations.      

Housing Segmentation in Developing Countries in Transition: A Recent Case Study of Residential Development in Bangkok

This article utilizes case study research of the residential market in Bangkok to investigate residential development and market segmentation in developing countries with emerging market economies. The article first considers the process of economic reform and transformation before examining the entrepreneurial, legal, and institutional environments in Thailand and evaluating the pattern of urban growth in Bangkok. Segmentation studies are then presented by product type, price level, and spatial distribution before conclusions from the case study are generalized to developing countries in transition.     

A New Method for Estimating the Effects of Fuel Taxes: An Application to Thailand

This article proposes a new methodology for estimating the impactof fuel price and tax changes on the general price level andthe distribution of income and applies a model to Thailand usingdata for 1975–76 and 1981–82. Because the modelallows for pricing under international competition where taxincreases must be partially absorbed in reduced factor incomerather than always being passed on in higher consumer prices,the results are significantly different from those generatedby the more conventional cost-plus pricing rule. The inflationaryimpact of fuel tax changes is slight because of both the opennessof the economy and the low energy intensity of manufacturingand other production in Thailand. In contrast, taxes on importsengender price increases not only for imports but also for goodswhich substitute for imports. The model also indicates thatthe net effects of taxes on petroleum products (other than kerosene)are progressive in their distributional impact, relative toa tax on imports or consumption. A main policy conclusion ofthe study is that fuel taxes could be used to increase bothequity and allocative efficiency without inducing significantinflationary responses. It follows that in the current circumstancesof falling world oil prices, developing countries could generaterevenues needed for structural adjustment by increasing fueltaxes to maintain domestic petroleum price levels.     

Determination of inflation in an open economy Phillips curve framework: the case of developed and developing Asian countries

This paper investigates the determination of inflation in the framework of an open economy forward-looking as well as conventional backward-looking Phillips curve for eight Asian countries – Japan, Hong Kong, Korea, Singapore, Philippines, Thailand, China Mainland and India. Using quarterly data from the 1990s to 2005 and applying the instrumental variables estimation technique, we find that the output gap is significant in explaining the inflation rate in almost all the countries. Furthermore, at least one measure of international competitiveness has a statistically significant influence on inflation in all the countries. The differences in the developed and developing world are highlighted by the significance of agriculture related supply shocks in determining inflation in the case of developing countries. For all countries, the forward-looking Phillips curve provides a better fit compared to the backward-looking variant.     

Financial development,institutions and banks

This paper presents a framework for understanding the interactions between political and legal institutions, property rights protection, and their implications for financial development. Whereas the literature has answered questions on why some countries lag behind in terms of financial and economic development, the current study suggests how to get around some institutional attributes to spearhead financial intermediation and economic growth through a set of institutional, information, and banking reforms. It finds little support that common law legal heritage is more suitable than French civil law for some key features of financial development. It concludes that types of institutional and market reforms are more relevant to financial intermediation than legal systems. It proposes some ways forward to increase financial intermediation; and expects, over the long run, the proposed approach to financial development to be beneficial for a number of developing countries.     

Service Sector Protection: Considerations for Developing Countries

The inclusion of services in the Uruguay Round of multilateraltrade negotiations has focused attention on the protection ofdomestic service suppliers against competition from foreignsuppliers. Issues arising from these negotiations, however,may obscure another and more important issue: the case for unilateralliberalization. This article first surveys methods of protectionin the service sector, and then examines the likely cost ofprotection. Particular attention is given to developing countries.What evidence there is suggests that the costs of protectionmay be high. The article also discusses economic principlesthat could guide a review of policy toward international transactionsin the service sector. Quantitative restrictions or bans onforeign service suppliers—whether they wish to supplythrough trade or establishment—cannot easily be defendedin economic terms, and provide an obvious first target.     

Impact of Culture, Market Forces, and Legal System on Financial Disclosures

This study examines the impact of legal systems (LSs) on financial disclosures by firms from different countries. The results indicate that firms from common law countries are associated with higher financial disclosures compared to firms from code law countries. The findings also reveal that cultural values have an insignificant impact on financial disclosures by firms from common law countries, and the results on firms from code law countries provide mixed signals. The results for multinationals are similar to the results for the total sample. The cultural values have no impact on financial disclosures of multinationals from common law countries, and there are mixed signals for multinationals from code law countries.     

Household Survey Data and Pricing Policies in Developing Countries

In recent years, household survey data from developing countrieshave increasingly become available and have been increasinglyused to cast light on important questions of policy. The reformof prices, whether agricultural prices, consumer taxes, subsidies,or tariffs, has consequences for individual welfare and forgovernment revenues, and these can be investigated empiricallywith household survey data. The gainers and losers from pricechanges can be identified, and the magnitudes of their gainsand losses measured. Nonparametric estimation techniques providea straightforward and convenient way of displaying this information.The procedure is illustrated for the effects of rice pricingin Thailand using data from more than five thousand rural households.Estimates of the revenue effects of price reforms are harderto obtain, because they require estimates of supply and demandelasticities, estimates that are not easily obtained for manydeveloping countries. A procedure is presented for estimatingprice elasticities of demand from spatial price variation asrecorded in household survey data. The main innovations liein the appropriate treatment of quality variations and measurementerror. Applications of the procedure in Côte d'lvoire,Indonesia, and Morocco are reviewed.     

Ecology, History, and Development: A Perspective from Rural Southeast Asia

The process by which different ecological conditions and historicaltrajectories interacted to create different social and culturalsystems resulted in major differences in economic developmentperformance within Southeast Asia. In the late 19th century,Indonesia, the Philippines, and Thailand commonly experiencedvent-for-surplus development through exploitation of unusedlands. Nevertheless, different agrarian structures were created.Indonesia's development was mainly based on the exploitationof tropical rain forest under Dutch colonialism. It resultedin the bifurcation of the rural sector between rice-farmingpeasant proprietors and large plantations for tropical exportcrops based on hired labor. In the Philippines, exploitationof the same resource base under Spanish rule resulted in pervasivelandlessness among the rural population. Relatively homogeneouslandowning peasants continued to dominate in Thailand, wheredelta plains that were suitable only for rice production formedthe resource base for development. These different agrarianstructures associated with different social value systems haveaccounted for differential development performance across thethree economies in the recent three decades.      

International Control of Subsidies and Countervailing Duties

The range and number of cases of administered protection inthe 1980s suggests that it has begun to play an important rolein shaping international trade flows. As most of such casesare brought by the United States against developing countryexporters, they are also a matter of concern for developingcountries in the Uruguay Round of trade negotiations. The internationallynegotiated code on subsidies and countervailing duties is ambiguousin its definition of "legal" subsidies, and thus in the appropriateuse of countervailing duties. Because the code is applied atthe national level, there is considerable pressure by domesticproducers on administering agents to increase the use of suchprotective measures through the adoption of provisional measureswhile the investigation is being conducted, and through theinterpretation of criteria for coverage. Given that the mostsuccessful developing countries have been those which adoptthe most neutral policies toward imported and domestic goods,and between sectors domestically, the very biased applicationof the subsidies and the trade policy distortions common inthe countries examined, together with the frequency of countervailingactions against the subsidies, suggest that developing countrieswould benefit from abandonment of the subsidies.     

Textiles and Clothing in a New Round of Trade Negotiations

Because developing countries generally have a comparative advantagein the production of labor-intensive textiles and clothing,the liberalization of trade in these products is critical totheir prospects for increasing foreign exchange earnings. Thenew round of trade negotiations is likely to be less importantfor trade in textiles and clothing, however, than were the recentrenegotiations of the fourth Multifibre Arrangement (MFA). Asthe MFA remains in effect until July 1991, this limits the rangeof measures which can be altered in the interim. Nonetheless,textile trade will influence the process and outcome of thecurrent negotiations because of the overlap of textile tradedisputes with other broader trade issues. These include tariffs,the rollback of tariffs and quotas, voluntary export restraints,and other nontariff barriers, all of which have been appliedto textiles trade at various times. Each of these measures hasan influence on trade flows and a cost to both the importingand exporting countries. Any proponents of liberalization oftrade in textiles and clothing must not only be familiar withthese costs but also must be knowledgeable about the economicand political forces which have initiated and sustained theprotective measures. The following discussion suggests thatthere are groups and transitional approaches which may favorsome progress in textile trade liberalization in the currentround of negotiations.