The political economy of services trade liberalization: a case for international regulatory cooperation?

Little progress has been made since the creation of the WTOon expanding and deepening the coverage of services liberalizationcommitments. This paper identifies and discusses five hypothesesthat may explain the absence of dynamism: (i) technologicalchanges allowing ever more services to be traded cross-borderunaffected by policy; (ii) strong incentives to pursue liberalizationon an autonomous basis (unilaterally); (iii) perceptions thatbilateral or regional cooperation are a good substitute forthe WTO; (iv) standard political-economy factors, such as adjustmentcosts and resistance by incumbents to erosion of rents; and(v) concerns that the WTO will affect the ability of regulatorsto enforce national norms. We argue that all of these explanationsplay a role, and that some of these factors significantly impedethe scope for reciprocal exchanges of ‘concessions’—theengine of WTO negotiations.     

Multilateral trade cooperation: what next?

This paper first briefly describes the role of the WTO and itshistory. It then lays out a simple bargaining model of internationalnegotiations, which can be used for understanding the Doha Roundof talks. Using this, we distil what we regard as the majorpotential explanations for the difficulties in these talks.We then discuss a number of the systemic questions that confrontWTO members. We suggest that the WTO should concentrate on marketaccess, rather than on promoting a development agenda or onfurther expanding its coverage to deal with regulatory issuesor with other domestic policies.     

Determinants of the Export Structure of Countries in Central and Eastern Europe

The growth in exports from Central and Eastern Europe to Westernmarkets suggests that entrepreneurs have responded to changedincentives by restructuring their production to capture newmarkets. The absence of change in the structure of exports,however, suggests that these restructuring efforts have notbeen significant. This article analyzes the magnitude of thechange in export structure across the Central and Eastern Europeancountries in 1990–95, focusing in particular on tradewith the European Union. It finds that imports of intermediateinputs and machinery are an important determinant of the changesin export structure. Sourcing of inputs from abroad is a majorfactor underlying the expansion of exports to the European Union.Outward processing (subcontracting) arrangements and foreigndirect investment have a smaller impact. Except for Poland,inflows of foreign direct investment are statistically insignificantor negatively associated with measures of revealed comparativeadvantage. This suggests that foreign investors have chosensectors in which the Central and Eastern European countrieswere not relatively specialized under central planning.     

SPURIOUS INJURY AS INDIRECT RENT SEEKING: FREE TRADE UNDER THE PROSPECT OF PROTECTION*

In the literature on directly unproductive profit seeking or rent seeking, intervention-seeking by labor and industry groups is generally restricted to direct lobbying activity. However, import-competing producers may have an additional instrument to influence the decision to grant protection. Under well-established injury criteria for protection import-competing producers have an incentive, either collectively or individually, to feign injury. To the extent that the free-rider problem can be overcome, orchestrating the appearance of injury is an intervention-seeking activity that may be complementary to DUP lobbying. When the established indicators of industry well-being include variables controlled by the prospective beneficiaries, therefore, free trade under the prospect of protection is potentially accompanied by a concomitant spurious-injury distortion. Some of the positive and welfare implications of the theory of spurious injury are investigated in both a partial equilibrium framework and in the Heckscher-Ohlin model.     

Agricultural Tariffs or Subsidies: Which Are More Important for Developing Economies?

This article assesses the impact of the world price–depressingeffect of agricultural subsidies and border protection in OECDcountries on developing economies' exports, imports, and welfare.Developing economy exporters are likely to benefit from reductionsin such subsidies and trade barriers, whereas net importersmay lose as world prices rise. A simple partial equilibriummodel of global trade in commodities that benefit from domesticsupport or export subsidies is developed to estimate the relevantelasticities. Simulation results suggest that a 50 percent reductionin border protection will have a much larger positive impacton developing economies' exports and welfare than a 50 percentreduction in agricultural subsidies. Although there is significantheterogeneity across developing economies, the results suggestthat efforts in the Doha Round of negotiations should be directed at substantially reducing border protection.     

The General Agreement on Trade in Services: Doomed to Fail? Does it Matter?

Little progress has been made to date in using the GATS framework to lock-in already implemented unilateral reforms, let alone in inducing new liberalization. The same is true for rule-making efforts. A number of potential explanations for the lack of traction are identified and assessed. These include limited feasibility of using the reciprocity mechanism to mobilize domestic export interests; less need for reciprocity to achieve global welfare improvements in policy; weaknesses in domestic regulatory capacity; and uncertainty/asymmetries regarding the magnitude and distribution of costs and benefits of policy reforms. All these factors play a role in reducing the scope for the GATS to be an effective instrument to help governments overcome domestic and international policy externalities. Changes in negotiating modalities and focus could help strengthen the relevance of the GATS as an instrument of multilateral cooperation.     

Horizontal and vertical intra-industry trade between Eastern Europe and the European union

Horizontal and Vertical Intra-Industry Trade Between Eastern Europe and the European Union. — The share of intra-industry trade (IIT) in total trade between central and east European nations and the EU is broken down into various components. Vertical IIT is found to account for 80 to 90 percent of total IIT. Controlling for country-specific effects, it is positively associated with product differentiation, labor intensity of production, economies of scale, and foreign direct investment (FDI). Horizontal IIT is also positively correlated with FDI and product differentiation; however, a significant negative relationship is found for scale and labor intensity.