Infrastructure Development and Regulatory Reform in Sub‐Saharan Africa: The Case of Air Transport

This paper analyses the main policy issues raised by regulatory reform in air transport in sub‐Saharan Africa. Its basic premise is that improving ait infrastructure is of paramount importance for the region as it tries to integrate more thoroughly into the world economy. On the basis of the experience of OECD countries with privatisation, liberalisation, and regulatory design, the author analyses progress being made in sub‐Saharan Africa and identifies three important case studies: the restructuring of the regional airline of Francophone Western Africa, the sell‐off of the state‐owned airline of Kenya, and the overall reform process in South Africa, by far the largest market in the sub‐continent. The analysis highlights the importance of regional dynamics in the upgrading of the air transport industry in developing and emerging areas. Sub‐Saharan Africa has made smaller progress in this respect than, for instance, Central America. As the start of the Millennium Round and the first WTO air transport review approach, these issues will gain policy priority for all countries, and may become powerful bargaining tools for non‐OECD countries to press for more open access into OECD markets for the South's traditional exports.     

Productivity Versus Employment: Quantifying the Economic Effects of an EU–Japan Free Trade Agreement

The European Union and Japan recently entered into negotiations over a bilateral free trade agreement intended to stimulate growth and create wealth. Since customs duties are already low, the success of the liberalisation process hinges on the elimination of non‐tariff barriers. The purpose of this paper is to shed light on two possible liberalisation scenarios: a less ambitious liberalisation and a comprehensive liberalisation. In contrast to classic studies, our paper builds on the modern trade literature, accounting for the dominance of intra‐industry trade in both economies and the existence of heterogeneous firms. Furthermore, we model a search‐and‐matching labour market, allowing us to quantify employment effects of trade liberalisation. We find that a comprehensive liberalisation increases Japanese GDP by 0.86 per cent, whereas the EU experiences only an additional 0.21 per cent of real GDP growth. Most of the growth in real GDP is due to firms' efficiency gains, whereas unemployment is reduced by only a small amount. Other world regions experience small reductions of GDP due to trade diversion effects.     

Mini‐symposium on the WTO Non‐agricultural Market Access (NAMA) Negotiations

NAMA liberalisation alone will not be sufficient to achieve the development goals of the Doha Round. The structure of developing countries’ economies and weaknesses in their infrastructure and institutions mean that adjustment to liberalisation is often costly and export responses slow. To make NAMA work, developing countries will need technical and financial support to raise their ability to adapt to greater openness and globalisation pressures and to increase their export capabilities. Although developing countries should decide how to raise their ability to adjust and to increase exports, bilateral donors and multilateral agencies will need to fund NAMA support programmes. The WTO, however, is not the appropriate or competent international agency to provide or disburse such funding. It can provide technical advice and offers a negotiating vehicle for industrial countries to signal that the development aims of the Doha Round are recognised in substantive terms. If industrial countries support developing countries’ NAMA‐related adjustment costs in addition to offering NAMA tariff cuts, the chances of a successful Doha agreement and genuine pro‐development outcomes will be boosted significantly.     

Liberalisation of the internal market: Efficiency advantages and requirements

The expected welfare effects of the completion of the internal European market by 1992 will differ markedly from one member country to another. What requirements must be met for liberalisation of the internal market? How could the disparities in the distribution of welfare effects be lessened?     

International Growth Spillovers,Geography and Infrastructure

There is significant academic evidence that growth in one country has a positive impact on growth in neighbouring countries. This paper contributes to this literature by analysing the heterogeneous strength of growth spillovers across world regions and by investigating the contribution of transport and communication infrastructure to explain this heterogeneity and promote neighbourhood effects. By defining neighbourhood on the basis of membership of regional trade agreements, we focus on spillovers that work through regional integration and trade. The analysis finds significant evidence for heterogeneity in growth spillovers, which are strong between OECD countries and essentially absent in sub‐Saharan Africa (SSA). We further find strong interaction between infrastructure and being a landlocked country. This suggests that growth spillovers from regional ‘success stories’ in SSA and other lagging world regions will depend on first strengthening the channels through which such spillovers can spread – most importantly connective infrastructure such as transport and telecommunication links.     

Movements of People for Movements of Goods?

Whilst it is well established to think of international tourism as a type of exports, namely ‘home’ exports, the potential of tourism flows as an engine for fostering trade among countries is a poorly studied topic. In this paper, we show that this relationship can be studied at a very detailed level by exploiting the disaggregation of existing information on international trade and inbound tourism. We consider a sample of 25 countries belonging to the European Union, a region that has been interested by common shocks such as the establishment of the euro as the new currency for many countries and the liberalisation in the air transport market. We carry out a panel data analysis by means of which we assess whether international tourist arrivals by a given country activate additional exports towards the same country. We find not only that tourism can promote exports, but also that this effect displays important differences depending on whether or not consumption goods are considered. This finding is consistent with the idea that the experience of tourists in a given destination reduces the fixed costs of trade, thus facilitating access to the advantages of international trade for more peripheral economies.     

European market integration and the political economy of corporate adjustment: OTE and Telecom Italia, 1949–2009

Despite the common challenges posed by European market integration and liberalisation, the behaviour of telecommunications operators across Europe suggests a variety of modes of adjustment and paths to privatisation. The article examines the puzzle of divergent responses to liberalisation by OTE and Telecom Italia (TI), casting light on their distinct paths to privatisation and internationalisation. The cases are considered in the context of the Varieties of Capitalism frame, which challenges the perspective that global market integration will lead to convergence in strategies and structures. Thus, the article suggests that the observed differences are largely explained by the domestic actors' preferences, and to a much lesser extent attributed to the globalising forces of technological change and competition.     

Africa's marginalisation in world trade

Since 1975 the Lomé Conventions have granted trade preferences to African exports to the European Union, Africa's main trading partner. The liberalisation of trade foreseen by the Uruguay Round means that these preferences will disappear, leading to net reductions in African exports. What lessons should the countries of Africa draw from this?     

Restructuring Soviet Transport: a Study in Similarities and Contrasts

The nation states created by the disintegration of the former Soviet Union inherited transportation systems ill suited to the needs of market economies. Technologies were often outmoded, too energy intensive and not well adapted to the on–time delivery of small shipments characteristic of a modem consumer society. Furthermore, similarly to much of the rest of the Soviet economy, the transport sector was burdened with unwieldy and diffxcult–to–manage vertically integrated monopolies that were largely unresponsive to customer needs. Policies to solve these problems will vary from mode to mode. For water and highway transport, simple pro–competitive policies that emphasize easy entry, little regulation and prompt privatization should be appropriate. Because of network coordination and specialized infrastructure requirements, rail and air transport will need less fragmented approaches. One positive aspect of the transport situation in the former Soviet Union, slightly reducing the pressures for immediate reforms, the substantial capacity put in place by the old regime–a consequence of the former command/control economy being one of the most transport intensive in the world     

Wozu noch objektive Marktzugangsbeschr?nkungen im stra?engebundenen ?PNV?

In Germany the legal framework for operating road-based public passenger transport (bus, tram and underground) is quite restrictive. Competition is restricted by a route licensing regime, administered by state agencies. According to the Carriage of Passengers Act, an applicant has to meet several subjective and objective requirements. Two reform proposals to amend the Carriage of Passengers Act are currently debated in the German parliament. Both draft bills include an abolishment of the objective entry barriers for long-distance services, i.e. a liberalisation of the intercity bus markets. In contrast, the short-distance markets, e.g. urban and suburban bus transport, shall be exempted from entry liberalisation. The present article shows that this exemption is not justified from a normative economic viewpoint.     

On the European Responsibility in the Agricultural Multilateral Trade Negotiations: Modelling the Impacts of the Common Agricultural Policy

The present round of multilateral trade negotiations is still deadlocked over agricultural trade. The European Union (EU) is urged by its trading partners to open its agricultural markets. Economic evaluations of trade liberalisation scenarios unanimously conclude that a substantial opening of agricultural markets is required for a successful (welfare‐improving) Doha Round. In this paper, we perform new evaluations to identify precisely the contributions of the European farm policy and to examine the robustness of these evaluations in the representation of this complex policy. Using the same specifications as in major previous studies, our first simulations show that the EU has a major responsibility in delivering significant gains to the developing countries. On the other hand, when we conduct the same experiments with a more relevant calibration and modelling of the European farm policy instruments, the gains that these developing countries may reap from the EU liberalisation are considerably reduced. Accordingly the current charge against the EU is simply inopportune.     

Die Verkehrsinfrastruktur in Deutschland: marode und unterfinanziert

In German transport infrastructure provision, political decision-making and a lack of user charges are the main reasons for inefficiencies, such as underinvestment, misallocation of funds and congestions. In the last decades, transport policy in Germany has focused on network extensions, while maintaining and renewing the infrastructure have been neglected. Additional financial resources will be needed to restore the quality of the federal, state and local transportation networks, in order of magnitude of yy7.2 billion p.a. in the next 15 years. Although the government collects about yy45 billion in taxes and infrastructure charges from road transport, it is unable to fund the transport infrastructure adequately. Several committees have suggested new concepts to provide sufficient funding, continuity and efficiency for renewing the transport infrastructure, and different options of raising more funds are under discussion (launching a fund, increasing general or energy taxes, extending road charges). Special attention is paid to the political economy of public funding and both tax and charge resistance which are considered to be the main obstacle rather than a lack of ideas or scientific knowledge. In the end, German transport infrastructure does not only need additional money but also structural reforms to increase efficiency in the infrastructure sector.     

Adjustment Costs and the Sequencing of Trade Liberalisation

A common feature of trade agreements between countries is that the integration of markets proceeds in stages. This paper examines conceptually the role played by adjustment costs in determining the best way to structure an agreement between two countries when there are multiple sectors to be liberalised. Adjustment costs to liberalisation of industries might influence the timing of liberalisation, with the analysis bearing similarity to why tariff reductions tend to be phased in over time. When two industries have no ‘spillover effects’, trade agreements with sequential liberalisation will be less costly to sustain. However, if the liberalisation of one industry influences permanently the flow of benefits from liberalising the other industry, simultaneous liberalisation may be easier to sustain.     

Open Skies over the Middle East

The dynamism of air traffic markets in the Middle East obscures the persistence of restrictions on international competition. But how important are such restrictions for passenger traffic? This paper uses detailed data on worldwide passenger aviation to estimate the effect of air transport policy on international air traffic. The policy variable is a quantitative measure of the commitments under international agreements. The paper analyses, for the first time, not only bilateral agreements, but also plurilateral agreements such as the one among Arab states. The analysis finds that more liberal policy is associated with greater passenger traffic between countries. Higher traffic levels appear to be driven by larger numbers of city‐pairs being served, as well as by more passengers travelling along given routes. To demonstrate the quantitative implication of the estimates, two liberalisation scenarios in the Middle East are evaluated. Deepening the plurilateral agreement among Arab states would lead to a 30 per cent increase in intraregional passenger traffic. Widening the agreement to include Turkey would generate significantly larger gains because current policy vis‐à‐vis Turkey is much more restrictive.     

Trade liberalisation and human capital adjustment

This paper highlights the way in which workers of different ages and abilities are affected by anticipated and unanticipated trade liberalisations. A two-factor (skilled and unskilled labour), two-sector Heckscher-Ohlin trade model is supplemented with an education sector which uses skilled labour and time to convert unskilled workers into skilled workers. A skilled worker's income depends on her ability, but all unskilled workers have the same income. Trade liberalisation in a relatively skilled labour abundant country increases the relative skilled wage and induces skill upgrading by the existing workforce, with younger and more able unskilled workers most likely to upgrade. But not all upgraders are better off as a result of the liberalisation. The older and less able upgraders are likely to lose. For an anticipated liberalisation we show that the preferred upgrading strategies depend on a worker's ability and that much of the upgrading will take place before the liberalisation. Hence some workers who would have upgraded had they anticipated the liberalisation will not if it is unanticipated, and adjustment assistance that applies only to post-liberalisation upgraders will fail to compensate some losers and distort the upgrading decisions of others.     

Beyond Border Barriers: The Liberalisation of Services Trade in Tunisia and Egypt

Tunisia and Egypt have both recently undertaken significant steps toward trade reform. They have committed to a partnership agreement with the European Union. Both countries have also joined the WTO and are participating in Doha Round discussions on the liberalisation of non‐tariff barriers on both goods and services trade. These developments provide an interesting context within which to investigate not only the changes in welfare associated with reforms affecting the trade in goods, but also the impacts of services liberalisation. Using open‐economy computable general equilibrium models for both Tunisia and Egypt, this paper explores the reasons why structural differences in these two economies imply different opportunities and challenges with trade reform and services liberalisation. The gains from eliminating barriers at the border for goods trade are significantly greater for Tunisia than Egypt. Both countries, however, gain substantially from liberalisation of foreign direct investment in services. Furthermore, economic growth is more evenly distributed across sectors than with liberalisation of trade in goods alone. In addition to reporting on the impact of alternative policies on income, output, employment and trade, sector‐level effects are also considered.     

Liberalising Trade in the Agriculture Sector of a Small Island State: The Case of Fiji

This paper uses Fiji as a case study to investigate the impacts of three trade liberalisation policies – removal of sugar price subsidies, unilateral trade liberalisation and multilateral trade liberalisation, implied by the successful completion of the Doha Round. Removal of the sugar price subsidies has an adverse effect on real output, real national welfare and employment, but promotes growth of non‐agricultural exports in the long run. Unilateral trade liberalisation, in the form of tariff cuts in the agricultural sector, increases real output, real national welfare and non‐agricultural exports in the medium term. However, this growth is not sustained in the long term. The best outcome for Fiji is multilateral trade liberalisation which increases real output, real national welfare, non‐agricultural exports and employment. It is argued that reform of trade policies in less developed countries could come at a cost, therefore highlighting the need for compensating mechanisms to deal with the adverse impacts. Other measures to assist farmers to expand output in response to a rise in prices could include measures to reduce transport, storage and packaging costs, as well as institutional measures to enhance the functioning of input and factor markets.     

Will continuing liberalisation in the EC lead to instability in the EMS?

The liberalisation of capital movements and the creation of a market without internal frontiers within the European Community have far-reaching consequences for the European Monetary System. Sr. Wolfgang Schröder analyses the opportunities and risks associated with these developments.     

Trans-European networks: The white paper and beyond

The desire to enhance the gains from the internal market programme has led the European Union (EU) to emphasize the importance of the development of a coherent set of infrastructure networks in the telecommunication, transport and energy sectors. What steps must be taken to realise such trans-European networks? How can the massive financing problems be overcome?     

Transport costs and trade: Empirical evidence for Latin American imports from the European union

Abstract

This paper aims to investigate the relationship between trade flows and transport costs. In previous studies the cost of transport was considered as an exogenous variable. However, an expanding volume of trade also reduces the unit cost of transport and, therefore, the causal relationship between trade and transport costs may be operating in both directions. A transport-costs equation is estimated using data on transportation costs from the International Transport Data Base (BTI). The relationship between transport costs and trade is then analysed by applying a gravity model for sectoral imports for five Latin American Countries from the European Union. We investigate the endogeneity of the transport cost and trade variables by estimating simultaneously both equations. Our results show that, while higher distance and poor importer's infrastructure notably increase transport costs, a higher volume of trade has the opposite effect. Moreover, trade is significantly deterred by higher transport costs and fostered by cultural similarities.