Upload
diego-patton
View
220
Download
0
Tags:
Embed Size (px)
Citation preview
Boustead Annual Globalisation Lecture
University of Nottingham Malaysia
‘The WTO and Developing Countries’ Policy Space’
Chris MilnerSchool of Economics and GEP
University of Nottingham
The ‘Policy Space’ Issue• Criticism that WTO constrains or may in future constrain
policy options and actions of developing countries
– e.g. UNCTAD Trade and Development Report (2006), ‘…the rules and commitments of the international trading regime restrict the de jure ability of developing nations to adopt national development policy.’ (p167)
– might view any loss of choice and constraints on autonomy as undesirable
– but, more typically an issue because presented as restricting use of heterodox policies (e.g. Rodrik, 2004)
Positive and Normative Issues• How might the WTO constrain policy
space in developing countries?
• Does (or will) the WTO constrain policy space in developing countries?
• Should WTO constrain developing countries’ policy space (and by how much)?
Some Context• WTO commitments affect only trade and
trade-related aspects of ‘policy space’
• Actual trade policy space affected by other institutions and agreements– unilateral (e.g. structural adjustment reforms)– bilateral ( e.g. ACP countries and Economic
Partnership Agreements with the EU)– regional (e.g. membership of RTAs)
Potential WTO Influences on Policy Space
• Core rules of transparency, non-discrimination and reciprocity– binding of tariffs and lowering of MFN tariffs
• Constraints on instruments (e.g. NTBs, export subsidies)
• Recent disciplines on new and beyond border areas– services, TRIMs and TRIPs
Potential WTO Influences (continued)
• But also:– Exemptions to rules (e.g. regional integration,
preferences for developing countries)– Differentiation of rules for developing countries (e.g.
infant industries, balance of payments, export subsidies)
– Safeguards and defensive measures allowed– Protection of national interest through dispute
settlement mechanism and negotiating framework
Potential WTO Influences (continued)
• WTO rules seek to protect autonomy and enhance policy space, as well as constrain policy actions– defensive trade measures– protection of small countries through rules and
dispute settlement– enhancing bargaining power through coalition activity– improving export opportunities through reciprocity and
constraints on importing countries
Actual WTO Impact on Policy Space
• Membership of GATT/WTO has not had a major impact on bindings or tariffs of developing countries
• Other sources of tariff and NTB reforms (unilateral and regional)
• Very limited use of industrial and export subsidies
Binding Coverage and GATT/WTO Membership (Sub-Saharan African countries)
0102030405060708090
100
0 10 20 30 40 50 60 70
Membership (years)
Bin
din
g c
overa
ge (
%)
Bound and Applied Tariffs Compared: Sub-Saharan Africa (all products, 2005/2006)
0.0 50.0 100.0 150.0
All countries
Burkina
CAR*
Dem. Rep.
Guinea*
Lesotho
Namibia
Rwanda
South Africa
Togo
percent rate
Average (unwt) MFNApplied Tariff Total
Average (unwt) BoundTariff Total
Bound and Applied Tariffs Compared Across Product Groups: Burundi
(2006)
0 50 100 150
Animal products
Fruit, veg. & plants
Cereals etc
Sugars & confections
Cotton
Fish and products
Petroleum
Wood, paper etc
Clothing
Non-elect. machinery
Transport equipment
percent rate
Average appliedtariff
Average boundtariff
Actual WTO Impact(continued)
• Evidence of greater WTO influences on new members (e.g. Saudi Arabia, China, Vietnam)– though most developing countries are already
members– and membership is not compulsory!
• Concerns about future tightening and stricter implementation of rules– least developed countries exemptions from tariff-
cutting requirement in Doha negotiations– negotiable!
‘Policy Space’ and First Principles
• Possible positions:
– more trade policy choice is better than less?
– WTO rules restrict heterodox options, with harmful effects?
– there are positive net benefits from restricting the policy space?
More Policy Choice Is Always Better?
• Surely not – recall pre-trade reform conditions in sub-Saharan Africa– complex border taxation of imports– extensive use of NTBs– domestic firm entry restrictions– implicit and indirect taxation of exports– lack of transparency, pervasive rent-seeking,
under-utilisation of capacity, and random and systematic distortions to resource allocation
Effective Protection by Sector: Burundi (1984)
SECTOR RANGE OF RATES %
Agricultural Products -2 → 4
Food, drink and tobacco 86 → 2017
Leather and footwear -4 → 102
Textiles 12 → 124
Wood and paper products 43 → 7896
Metal products 16 →
Chemicals 9 →
Pharmaceuticals 1 →
Construction goods 63 → 72
Source: Greenaway and Milner (1990)
Selective SSA Information on Pre- and Post Reform NTBs and Exchange Rate Distortions
Pre-Reform (1) Post-Reform (2)
Country NTB Coverage Black Market Premium (average)
NTB Coverage
Black Market Premium (average)
Cameroon hundreds - hundreds -Cote d’Ivoire 38% - 38% -Ghana 100% 985% 2% 17%Kenya 71% 16% 0% 9%Madagascar 100% 37% 0% 13%Malawi 100% 51% Few 12%Mali 58% - 0% -Nigeria 100% 210% 17% 27%Senegal - - 15% -South Africa 55% 0% 23% 3%Tanzania 100% 242% 100% 119%Uganda - 303% 5% 79%Zaire 100% 71% 100% 9%
(1) Various years, usually 1980s (2) Various years, usually early 1990sSource: Dean (1995)
Restricts Heterodox Options?
• Challenge the interpretation of some of the claims made for protection (e.g. in India)
• Question whether some of the heterodox success cases (e.g. South Korea) would still have been successful with more orthodox policies
• Doubt whether many of the least developed countries have the human capital and institutional capacity to implement the East Asian model
Net Benefits of Restricting Trade Policy Space?
• Avoids costs of excessive protection and poor intervention
• Brings benefits of greater openness (subject to sensible timing, sequencing, phasing and adjustment support measures)
• Enhances policy space (export market access) if reciprocated by other countries
Overall Assessment and Conclusions
• WTO has not significantly affected developing countries’ policy space to-date
• The effects (constraints and enhancements) may increase in future– but scope for phased or gradual affects and
differentiation within WTO rules• Many of the key pro-development issues are
outside the WTO agenda– improving governance, institutions, human capital and
infrastructure
• Countries want to join the WTO club!
GATT/WTO Membership
0
20
40
60
80
100
120
140
160
180
total membership
new members