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ABOU T THIS ISSUTE T Editorial BoardSWAMINATHAN S. AIYARECONOMIC TIMES OF INDIA, NEW DELHI, INDIA

MICHAEL COHENNEW SCHOOL UNIVERSITY, NEW YORK, USAT n he Doha Development Agenda, which PAUL COLLIER

emerged from the WTO ministerial confer- THE WORLD BANK, WASHINGTON, DC, USA

ence in 200o, acknowledges the need to JOHN GAGEfocus on developing country concerns regarding SUN MICROSYSTEMS, PALO ALTO, CALIFORNIA, USA

global trade and its effect on poverty reduction and JOSEPH K. INGRAMTHE WORLD BANK, SARAJEVO, BOSNIA

development. KWAME KARIKARI

On the eve of the WTO ministerial meeting in SCHOOL OF JOURNALISM AND COMMUNICATIONS,

Cancun, major challenges remain and several issues THE UNIVERSITY OF GHANA, LEGON, GHANA

need to be revisited. Our Special Report provides a VIRA NANIVSKAforum where prominent trade specialists can INTERNATIONAL CENTER FOR POLICY STUDIES, KIEV, UKRAINEforum where prominent trade specialists can

express their views, present their research findings, PEPI PATRON

and make recommendations. We intend this collec- CATHOLIC UNIVERSITY, LIMA, PERUJ. ROBERT S. PRICHARD

tion of essays to serve as background reading for the TORSTAR, TORONTO, CANADA

development community at large. to acquire a better RAFAEL RANGEL SOSTMANN

understanding of the issues that will be discussed in MONTERREY TECH UNIVERSITY SYSTEM, MONTERREY, MEXICO

Cancun. ADELE SIMMONS

The Special Report opens with an article by T. CHICAGO METROPOLIS, CHICAGO, IL, USA

Ademola Oyejide, who examines the linkages VIVIENNE WEE

between trade reform and growth. Sok Siphana pres- CENTRE FOR ENVIRONMENT, GENDER AND DEVELOPMENT, SINGAPORE

ents a successful experiment in Cambodia, where Development OUTREACH is published three times a year by the World

"mainstreaming" trade contributed to alleviating Bank Institute and reflects issues arising from the World Banks manylearning programs. Articles are solicited that offer a range of

poverty. Kevin Watkins warns us that agricultural viewpoints from a variety of authors worldwide and do not represent

support in the form of subsidies and tariffs in indus- official positions of the World Bank or the views of its management.

trial countries is adversely affecting poor farmers in MARY MCNEIL

developing countries. Julio Nogues. too, focuses on EXECUTIVE EDITOR

agriculture, and points out that lack of coherence SUNETRA PURI

between the trading system and the international CONTRIBUTING EDITOR

financial system hurts agricultural exporters in ANNA LAWTON

developing countries; he refers in particular to MANAGING EDITOR

Argentina. Kennedy Mbekeani traces the positive MOIRA RATCHFORDimpact that reforms in infrastructure will have on PUBLICATION DESIGN

economic growth. Bernard Hoekman offers his view P?HOTO CREDITS Cover: Bill Heinsohn/Getty Images; Page 5: AgenceFrance Presse/Greg Wood; Page 7: Reuters/Gary Way; Page 11:

on the controversial concept of more favorable treat - Reuters/Luc Grago; Page 13: Reuters Photo Archive/STR; Page 15:

ment for developing countries. Richard Newfarmer Reuters Photo Archive/STR; Page 17: The World Bank/Anonymous;

discusses the prospect of an international invest- Page 19: Reuters/Mark Baker; Page 22: Agence Francediscusses th prospect ofan internatinal invest-Presse/Frederic J. Brown; Page 27: The World Bank/Curt Carnemark;

ment agreement to expand trade and promote devel- Page 29: Agence France Presse/STR.

opment. John S. Wilson examines the role of trade

facilitation in the global context. Finally, Will Martinexplains how China used the WTO as an instrument This magazine is printed on recycled paper, with soy-based inks. i)

to tailor its own successful trade policies.

We welcome our readers to join the debate, and ISSN 1020-797X © 2003 The World sank Institute

send us their opinions on the topic of trade for W O R L D B A NK I N S T I T U T E

development. Pron-hng k-Id9 . o-d I-ni9 for bette. -orld

World Bank Institute www.worldbank.org/wbiFrannie Leautier, Vice President www.worldbank.org/devoutreachThe World Bank devoutreach@worldbank.org

/ W I/ 1818 H Street NWSunetra Puri Washington, DC 20433, USA

CONTRIBUTING EDITOR

THE WORLD BANK

DEVELOPMENT

V O L U M E F I V E, N U M B E R TWO W J U L Y 2 0 0 3

I. I E I I I, I;I E I I IIG E''

2 Development News I9 More Favorable Treatment of DevelopingCountries: Toward a New Grand Bargain

SPECIAL REPORT: TRADE FOR DEVELOPMENT BERNARD HOEKMANSpecial and differential treatment should be seen in thecontext of trade and development. The new "grand bargain"

3 Toward a Pro-Poor Trade Agenda must involve actions by developed countries as well asdeveloping countries.

URI B. DADUSH

4 Trade Reform for Economic Growth and Z2 An International Investment Agreement:P Redct.nPromise and Potential PitfallPoverty ReductionRICHARD NEWFARMER

T. ADEMOLA OYEJIDEAn investment agreement will promote development only if it

Trade reform can stimulate growth in low-income countries if leverages serious market access in agriculture, labor-intensivesupply constraints are eliminated and market access barriers manufactures and other areas of interest to developingare removed. countries.

7 Mainstreaming Trade for Poverty 2 TAlleviation: A Cambodian Experience Cap ac ilding W T' at s, andSOK SIPHANA Capacity Building: What's at Stake?

JOHN S. WILSONIn Cambodia, thanks to the mainstreaming strategy, tradebecame part of key government policies and has contributed to To serve as an engine for trade facilitation, WTO must designthe country's vibrant economy. specific measures best suited for the target country along with

its commitment and agreement.io Farm Fallacies That Hurt the Poor

KEVIN WATKINS 29 China and the WTO: Policy Reform andAgricultural subsidies in industrialized countries are Poverty Reductiondetrimental to poor farmers in developing countries. The Doharound provides an opportunity to establish new rules of the WILL MARTINgame in agricultural trade. Since joining WTO, China has implemented most of the

required trade liberalization, becoming one the world's biggest13 Agricultural Protectionism: Debt Problems trading countries. But substantial work will be needed on

and the Doha Round complementary financial and social policies.JULIO J. NOGUES

Argentina is an example of how agricultural protectionism canhave sizable negative macro-economic and poverty effects, and 35 KNOWLEDGE RESOURCESlead to debt problems.

38 BOOKSHELFi6 GATS Negotiations Must Focus onServices Liberalization: The Case of SADC 40 CALENDAR OF EVENTSKENNEDY K. MBEKEANI

To make a difference in the SADC region, it is important thatservices liberalization keep pace with trade liberalization.The article focuses on key issues to be discussed at GATS.

SPECIAL REPORT -

Tm ;sit l- eformfor Irsviomic Growth

and I weruy Reduction

BY T. ADEMOLA OYEJIDE The full efficiency, output and associated welfare gains of

trade reform tend to accrue in the long run. The substitution

WIDESPREAD POVERTY is clearly the major challenge for effects andthe more efficient re-allocationanduse of resources

low-income developing countries. It is characterized not only resulting from relative price changes take time to work them-

by insufficient incomes, but also by limited access to land and selves out. The time taken may vary by sector (in a given econo-

capital, poor health and education, and the scarcity of eco- my) and across countries due to differences in the efficiency

nomic and social infrastructure. GLven the pervasive nature of with which particular markets function and the extent to which

poverty in these cases, rapid and su stainable economic growth supply response capacity constraints may be binding.

is generally viewed as the primary vehicle for poverty reduc- The realization of the growth effect of trade reform in a low-

tion. The basic proposition is that if the economies of low- income country is contingent on two sets of conditions, one

income countries grow rapidly enough and their income dis- internal and the other external. Internally, trade reform is most

tributions are not unusually skewed against the poor, poverty effective when it is combined with the maintenance of macro-

reduction should occur. If, in turn, trade reform stimulates economic stability and sound institutions. In addition, the lib-

growth, this should promote poverty alleviation. In my note, I eralizing country must have the appropriate infrastructural and

will bring the issue of trade and development into focus by institutional support for generating adequate supply responses.

examining the linkages between trade reform and growth, and The growth benefits of trade reform are likely to be limited or

the mechanisms through which growth impacts upon poverty. elusive in low-income countries which lack a supportive policy

environment and whose entrepreneurs are constrained by

Trade reforms and economic growth weaknesses in the institutional and market infrastructure forproduction and trade. On the external front, a supportive envi-

IN CONCEPTUAL TERMS. TRADE ['OLICY WORKS byinducing ronment may also be crucial. In particular, external market

substitution effects in the production and consumption of access constraints may deny a low-income country the full

goods and services through changes in prices. These effects, growth benefits of its trade reform.

in turn, change the level and composition of exports and Since developed countries constitute the main export mar-

imports. In particular, the changing relative prices induced by kets of low-income countries, developed-country market

trade reform cause a re-allocation of resources from less effi- access barriers limit their export opportunities. Currently,

cient to more efficient uses. In addition trade reform expands global market access barriers penalize low-income countries

the set of economic opportunities by enlarging market size because their exports are concentrated in products character-

and increasing the effects of knouledge spillovers. These are ized by highly restrictive market access conditions. External

the key components of the effects of trade reform, which market access barriers are especially high in agriculture and

together induce growth of output. 4 labor intensive manufactures with tariff peaks (i.e. tariffs in

4

t ,~ _,'-' ,t9

.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ N~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-4%

excess of 15 percent) and tariff escala-tion constituting special problems.With tariff escalation, tariffs rise withthe level of processing; this has theeffect of reducing the demand forprocessed imports from low-incomecountries, preventing appropriateS~ structural adjustment in developedcountries and frustrating the diversifi-

cation of low-income countries intohigh value-added exports. In addition,production-related support for agri-culture in developed countries booststheir own output and this displaceslow-income country exports in devel-

-- ^' ^' _ oped-country markets. Furthermore,.. - - 1 j _ the unwanted production surpluses of

developed countries are typicallydumped into world markets, with theaid of export subsidies, where they

depress prices.A coherent program for enhancing

the growth benefits of trade reform inlow-income countries consists of atleast two components. One is toexpand external market access oppor-tunities for the exports of low-incomecountries. Another is to help relaxtheir supply response capacity con-straints so that they can take fulleradvantage of the new opportunities. By

TRADE REFORM IS TYPICALLY PART OF A COMPREHENSIVEREFORM PROGRAM, WHICH ALSO INCLUDES

APPROPRIATE COMPENSATORY AND MITIGATING MEASURES.

reducing or eliminating biases against the exports of low- costs and trade-offs implicit in a growth strategy that is driv-income countries in developed country markets, part of the en by trade reform. In the long run, however, evidence sug-first component would be achieved. By extending multilateral gests that in countries, which have experienced trade-ledduty-free and quota-free market access, with generous and growth, the income growth of the poor has, on average, keptflexible rules of origin, to all exports of low-income countries, pace with the overall average income growth. More specifical-

the developed countries would help to achieve the remaining ly, trade-led growth can reduce rural poverty when it expandspart of the first component. This would help to eliminate the employment in small-holder agriculture and can lower urbandeficiencies of existing preferential market access schemes poverty when it is associated with increased output and exportand significantly increase the export growth of low-income of labor-intensive manufactures such as textile and clothing.

counties. As for the second component, low-income coun- The existence of possible negative, though short-term,

tries need assistance to address their export supply response effects of trade reform implies that while trade-led growthcapacity constraints through investment in the building of should eventually reduce poverty, it may not do so from theappropriate economic and social infrastructure. start. Because some of the poor may suffer and some of the

non-poor may fall into poverty in the transitional period,

Trade-led growth and poverty trade reform is typically part of a comprehensive reform pro-alleviation gram, which also includes appropriate compensatory and

mitigating measures. These would offer social safety nets,

ECONOMIC GROWTH that is induced by trade reform has a including retraining opportunities, targeted specifically at

special feature, which may be important for poverty allevia- addressing the short-term costs of trade reform.tion. This derives from the observation that trade reformshave costs that have to be incurred well before the related Conclusionstream of benefits can be realized. The resource reallocation,which is an integral part of the reform process, is not costless. TRADE REFORM CAN STIMULATE GROWTH in low-income

As workers are displaced from less efficient enterprises, some countries if their supply response capacity constraints are elim-

amount of transitional unemployment and output loss may be inated and the external market access barriers, which they face.

experienced. There is also an inherent distributional problem. particularly in the developed countries, are removed. Trade-led

The economic agents that have to bear the "burden" of the growth can, in turn, aid poverty reduction in low- income coun-

reform may not necessarily be the ones who reap its benefits or tries if the associated trade reform is part of a comprehensive

the sharing of the cost may not occur in the same proportion as program, which incorporates appropriate complementary and

the sharing of benefits. In effect, while trade reform tends gen- mitigating measures for addressing its short-term costs. 'A.

erally to promote economic growth. it is also likely to generateboth winners and losers; hence the impact of trade-led growth T. Ademola Oyejide is Professor of Economics, Department of

on poverty reduction may not necessarily be unambiguous. Economics, University of Ibadan, Nigeria, and Executive Director,

Conceptually, growth induced by trade reform may affect Development Policy Center.

the poor through the associated changes in the prices of their

consumption baskets, changes in their wages and employ-ment, as well as changes in government taxing and spending References:

behavior. For instance, a reform which benefits poor farmers Bhagwati, J. and T.N. Srinivasan (2001), "Trade and Poverty in Poor

by increasing their producer prices may hurt the urban poor Countries", mimeo. Columbia University.

by raising their food prices; whereas a reform which lowers Helleiner, G. K (ed) (1992), Trade Policy, Industrialization and Development:

the domestic prices of imported food would be beneficial to New Perspectives, Oxford University Press, New York.

poor consumers while penalizing the local poor food produc- Krueger, A. and A. Berg (2002), "Trade, Growth and Poverty", Annual Bank

ers with low prices. When trade reform leads to the growth of Conference on Development Economics, Washington, April 29-30.

economic sectors that employ more of the poor and pays them Oyejide, T. A. (2002), "The Mechanics of Trade Policy Reform in Developing

higher wages, it tends to promote poverty alleviation. But if Countries: a Literature Survey', mimeo, University of Ibadan.

the same reform results in retrenchment in a previously pro- Rodrik, D. (2001), 'Globalisation, Growth and Poverty: Is the World Bank

tected economic activity that employs many of the poor, their Beginning to Get It?" mimeo, Harvard University.

poverty status may worsen. Finally, if a trade reform leads to Winters, L. A. (2002), "Trade Policies for Poverty Alleviation" mimeo,

the reduction of government revenue, social expenditure may University of Sussex.

fall with a negative impact on the poor.These are examples of some of the possible short-term ,

6 Development Outreach WOR LI) BANK INS TIT U I E

Mainstreaming Tradefor Poverty Alleviation

A Cambodian Experience

BY SOK SIPHANA sionally substitute for aid in the development process.Nonetheless, trade liberalization and reform cannot work and

THERE IS AMPLE EVIDENCE that trade and investment have never worked as stand-alone policies or measures. Inreform and deeper integration with the global economy, other words undertaking trade reforms and developing tradeundertaken within a comprehensive development strategy, policies in isolation without the presence of mutually sup-are key strategic elements for achieving higher economic portive policies will not bring about the full benefits resultinggrowth, a necessary condition for poverty reduction. The link- from trade reform and liberalization. Trade needs to be main-ages between trade policies and poverty have been addressed streamed into the development plan of the country.recently at length by several papers (World Bank, McCulloch, For a Least Developed Country (LDC) like Cambodia whereWinters and Ciero 2ooi). These are convincing arguments one third of its population live below the poverty line, tradethat trade may facilitate international diffusion of knowledge, priority areas of action need to be reflected in poverty reduc-thereby speeding up growth, and may complement or occa- tion and national development plans and strategies.

4~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~9

IL L 37

Preliminary government studies suggest self-employed. The Government's

that economic growth has helped reduce National Poverty Reduction Strategy

poverty, but that the proportional bene- notes that people are poor because of

fits to the rich have been greater than While the challenges for inadequate human and physical

the benefits to the poor (RGC 2cooa). , , resources, or the opportunity to gener-

Concern has also been expressed that Cambodia to brng ate income and/or accumulate

economic growth has yet to impact on economic growth and resources. Cambodia's recent violent

many of those living far below the reduce poverty seem history has resulted in many disadvan-

poverty line. In that respect, Cambodia taged groups, including internally dis-

has worked arduously for the last few enormous, so are also placed people, returning refugees, dis-

years with its development partners to the hope and the abled people. widows, and orphans. The

better understand the potential impacts poor generally are disadvantaged by

of trade reforms on the poor. and to possibilities that have inadequate food supplies, poor health,

develop mechanisms, which truly sup- been generated from the physical disabilities, lack of access to

port pro-poor growth. Integration Framework land, insecure land titles, lack of skills,

Here, I will highlight the main fea- inadequate information, and poor

tures of Cambodia's trade policies while success. Cambodia's access to input and product markets.

putting into perspective its implement- success will meaning aspects focusing on the poverty Implementing the Tradereduction linkage as well as the develop- liberation: liberation from Mainstreaming Strategyment dimension. It will attempt to share hunger, poverty andsome experiences of the trade main- . . CAMBODIA WAS VERY SUCCESSFUL in

streaming process, including positive Income constraints, its mainstreaming efforts. Trade, once

and negative moments, the lessons liberation from an obscure section in national policy

learned and obstacles encountered and ignorance, and liberation documents, found its preeminence in

measures taken to overcome them. key government policies like the Second

from fear, especially from Socio-Economic Development Plan

Why Cambodian people the fear of dying when (SEDP II, 2oo1-20o5). the National

are poor s Poverty Reduction Strategy (NPRS). thestill young. In Governance Action Plan (GAP), and

THE FOUNDATIONS of the Cambodian the words of Nobel even in the Legal and Judicial Reform

economy are household economic units, laureate Amartya Sen Strategy paper. Externally the main-

which employ and provide incomes for streaming efforts focused on encourag-

the majority of the population. Cambodia " economic growth, ing broad-based economic cooperation

is an agrarian economy with 8o percent which brings about and resource mobilization through

of the workforce employed in the agricul- regional and global economic linkages.

ture sector. The production of rice, for a high standard of living, The United Nations Development

household consumption and trade, is the is interpreted too often in Assistance Framework (UNDAF 2ooi-major economic output for most of the 84 2or5), the UNDP Country Co-operation

percent of households located in rural materialistic terms. But Framework (0oo1-2005), and the ADB

areas. Households supplement rice pro- we need to pay attention and World Bank's Country Assistance

duction with other economic activities to its human aspect too. Strategies all have the trade agendasuch as fishing, production of vegetables, embedded in them.

fruit and other cash crops, the gathering For developing countries Now mainstreamed into the NRSP.

of forest products, and off farm employ- and LDCs alike, economic the role of trade will be firmly situated

ment. The landless depend on gathering within Cambodia's coherent national

activities, on communal or State land, growth should be looked policy context and its trade-related tech-

and paid employment. at as an effective force of nical assistance needs will be betterAbout 36 percent of the population liberation." identified, prioritized and sequenced. on

lives in poverty. Poverty incidence is l the basis of sound policy diagnosis, and

highest (44 percent) in households H.E. Cham Prasidh, therefore stand a much better chance of

where agriculture is the primary source Minister of Commerce, being financed by donors and agencies.

of income. Some 90 percent of the poor Cambodialive in rural areas, and there is a strong Impact on exportcorrelation between poverty andremoteness from urban locations. ONE OF THE MOST RECENT newcomers

About three quarters of the poor are in the international trade of garments

8 DevelopmentOutreach ---..-. 3n 11Nk TFsr,tr

has been Cambodia-a non-WTO member country and an I services-tourism, sawn timber, remittances of expatriateLDC. It has been one of the fastest growing garment exporters Cambodian workers, and rubber. Other exports are small,over the past 8 years-in 1995 the exports of garments were though a number show strong promises (e.g. shoe manufac-about $26 million and in the years 2ooo to 2002 the corre- turing, rice, fish, specialty agriculture and agro processing.sponding annual figure exceeded $i billion. In early 2002 handicraft. See Tables i and 2).Cambodia ranked number i6 amongst the top suppliers of Bearing in mind its narrow export base, Cambodia hasgarments into the U.S. market. worked hard both to boost the productivity of its current

Cambodia is today an established supplier of low price, exports and to move up the value-chain. For example,medium quality garments, employing around 220,000 workers improvements in rice seeds, irrigation, and farming methodsin i85 factories, out of which only 23 are Cambodian-owned. would go a long way in increasing both labor and land produc-Almost go percent of the garment manufacturers are foreign- tivity and strengthening Cambodia's export capacity in thisowned, coming from Hong Kong (China). P. R. China, product. Likewise, Cambodia has begun making a shift toSingapore, Taipei, South Korea, Malaysia, Thailand, Indonesia, higher value agricultural production (spices. nuts and seeds,Bangladesh, England. Germany, Australia, Canada and the fruits, etc.) and more processing (e.g. milling of exportedUnited States. rice, extraction of essential oils, processing of wood, etc.)

Foreign trade wise exports of garments dominate the sec- which would also bring more value from exports to the coun-tor (nearly $i,3o3 million in 0oo2 out of the total foreign trade try. In this regard, bringing the country trade regime in lineof $1,467 million) followed by three or four products and withtheWTO rules and disciplines, loweringthe costs of trade

facilitation, strengthening thetrade promotion capacity,improving the investment

CAMBODIA FOREIGN TRADE 1996-2002 environment are some of theareas Cambodia needs to look

TABLE 1 OTUTM. *OTS n rIIst *RANCIE at carefully to implementingits pro-poor export ledgrowth strategy.

I , - - Concretely, the Govern-ments of Cambodia andThailand are working on jointdevelopment strategies,which are sector specific, i.e.,

35'' _ - s | tourism, agricultural andindustrial sectors. They are

: 1 iI* iI* l ii. |defined through the assess-| | | ~ | ment of comparative and

competitive advantages of thetwo countries. Through this

!!-. I. ; - 1 ' .' ' -'"-'- 1 _, 'l 'bilateral economic coopera-tion Cambodia can secure

TABLE 2 another source of regionalEJTOTAL EMJSA EEl' E OT"'RI development support to help

sustain overall economic!i J :||: -- growth. Using Cambodia's

GAP and taking advantage of; _ existing infrastructure facili-

ties in neighboring countries,Cambodia is envisaging set-

* ting up 3 Export Processing'"'' 31 -' | - zones as soon as possible next

n " -: - | | | | -.' to Thailand's border in--. *-,, f 1 * I Poipet, Koh Kong, and Pailin

. IL' L-- - i | |l | | |l | - ! | with the potential to createI~ ~ 1 f"l' *. * 1||_ J 11-_ 1 1||_ *1_ l_ ioo,ooo jobs and approxi-

mately $6o million of annualwages.

CONTINUED ON PAGE 32

J *' I V 2 0 ,, 3 9

Farm Fallacies thatHurt the Poor

BY KEVIN WATKINS Devastating subsidies to worthy social objectives. PresidentBush signed the controversial 2oo2

APART FROM WRINGING their hands, THE UNDERLYING PROBLEM is this. FarmAct claimingthat it would protect

endorsing human development goals, Each year, industrialized countries pro- small family farmers. The French min-

and promising more aid, what can gov- vide over $3oo billion in support to ister for agriculture, Henri Gaymard.

ernments in rich countries do about agricultural producers-roughly six has made even more grandiose claims

poverty in poor ones? Answer: get seri- times the amount they spend on aid. To on behalf of the Common Agricultural

ous about reforming their farm policies. put this figure in context. it is more than Policy (CAP). He recently declared it an

Industrial country agricultural support the total income of the 1.2 billion people integral part of the 'European model' for

is destroying the livelihoods of poor in the world living on less than $i a day. a social market.

farmers across the developing world, High levels of agricultural support All of which is abject nonsense. Inthe

reinforcing an unequal pattern of glob- translate into increased output. fewer real world, farm subsidies are tightly

alization in the process. imports, and more exports than would linked to output and the size of land-

Two years ago developing countries otherwise be the case. Small farmers in

joined the Doha round of World Trade developing countries suffer damage

Organization (WTO) negotiations on the through various channels. Subsidized

clear understanding that it would create exports undercut them in global, and GINI COEFFICIENTS FOR AGRICULTURAL

the conditions for agricultural trade even local, markets, driving down SUPPORT AND NATIONAL INCOME

reform. Northern governments solemn- household incomes. Meanwhile, those (SELECTED COUNTRIES)

ly promised to improve access to their seeking access to northern markets

own markets, cut support to agriculture, have to negotiate some of the world's lOg

and stop the subsidized dumping of agri- highest trade barriers. INCOME FARM

cultural surpluses. Keeping that promise The US and the EU are the 'subsidy DISTRIBUTION SUBSIDIES

is vital if the WTO talks are to live up to superpowers', accounting for over 6o < us 79

their billing as a 'development round'. percent of rich country agricultural < EU 77< Britain 71

Unfortunately, one of two less benign support spending. Europe spends more . <France 69

outcomes now looks likely: no deal at all, in absolute terms-and its subsidies Brazil 60>

or a deal that perpetuates the present represent a larger share of the value of

distortions and inequalities. farm output. However, the US spends

Why does this matter to the world's more per farmer. It also concentrates UK 38 >

poor? Partly because three-quarters of subsidies on a narrower range of com-

them-about goo million people-live modities. EU and US subsidies matter

and work in rural areas, most of them as to the rest of the world because of their

small farmers. And partly because dominant position in global markets.

northern agricultural policies are Whatever their wider differences, O

destroying the markets on which they the U.S. and the EU have one thing independ common political ~~~~~~~leaders that like to Source: World Bank. World Development

depend. commnon: political leaders that like to Indicators (2002). Oxfam calculationsjustify agricultural support by reference

lo DevelopmentOutreach \.RLEA tAR v;r,c; TB

_ 4 holdings, not to social need. That iswhy the biggest 7 per cent of farms

_ .~ _ \ X . '5, receive over 50 per cent of farmsubsidies, both in the US and the

tural producers in Europe andAmerica is more unequal thanincome distribution in Brazil, one

.-f. ._ Y ,, . . ' '~ ' ' of the world's most unequal coun-tries. To make matters worse, manyof the benefits end up with corpo-

i, ,' * . -z < Ds rate exporters or get capitalized intorising land values and input prices.

If industrial country farm subsi-fir F , ; ,~ {h ! ,dies were purely of domestic con-

- >= v # K ~~cern they could be written- off as anact of reckless extravagance guidedby perverse economics. Sadly, the'4 I, j subsidy fest for the world's richestagricultural producers hurts someof its poorest.

Take the case of cotton. When itN, 46 < comes to harvesting subsidies,

_ - ^ tJt '- America's 2s,000 cotton barons'.Er . , are first among equals. In 2ooi they

received $3.6 billion in govern-ment support-three times US aid

~_' ;- ~ to Africa. Because the US is theworld's largest cotton exporter,accounting for 40 percent of the

ts' E j world market, these subsidies low-ered world prices: by around one

- quarter according to the* -'_ International Cotton Advisory

- '*' . ' . ~ Committee. Farmers in Africa havesuffered the consequences.

In West Africa alone io-ii mil-lion people depend on cotton culti-vation as a source of income. Thecrop is also a major source of for-eign exchange and government

- revenue. Lower world prices causedJ r by American subsidies mean thatdesperately poor households have

if #seen their incomes fall, with atten-' *. if "+ dant consequences for poverty. In

- , - * Benin, the price decline associatedwith American subsidies translatesinto a 4 percent increase in the

- # B incidence of poverty, or 250.000. _ r- k .^ X . people falling below the poverty

line. Meanwhile, foreign exchangeA ID6 losses have eroded the benefits of

development assistance: Burkina- _ t , ,11 Faso loses more because of US sub-

sidies than it gets in debt relief.What makes the cotton case so

JLU L E 2 1, I 11

egregious is that West Africa is a far more efficient producer I ble the total agricultural budget for Mexico.

than the US. Fewer than to per cent of America's producers

would be competitive on world markets without support. But The Doha round opportunityin 2ooi/zoo2 the subsidy provided to American cotton farm-

ers exceeded the total national income of countries like THE DOHA ROUND PROVIDES A REAL OPPORTUNITY to

Burkina Faso and Mali. In a bizarre throwback to the princi- establish new rules of the game in agricultural trade. There are

ples of Bolshevik state planning, it also exceeded the value of four basic requirements: a prohibition on export dumping,

cotton output. In cotton, as in other areas of agricultural trade, deep cuts in production subsidies, improved market access,

market outcomes owe less to comparative advantage than to and a provision allowing developing countries to protect their

comparative access to subsidies. agricultural systems for food security reasons.

To be fair, even the US is hard-pressed to match the EU's Prohibiting export dumping ought to be the most straight-

capacityfordouble standards inagriculture. Considerthe CAP forward objective. Unfortunately, the EU's lamentable pro-

sugar regime. Europe is among the world's highest cost pro- posals for a 45 percent export subsidy cut would leave it with

ducers of sugar. It is also the world's biggest exporter of white some $4 billion in the dumping arsenal. For its part, the US

sugar. The reason: subsidies and tariffs. EU farmers are paid has refused to bring either its $7 billion-plus subsidized

three times the world price for sugar. and EU taxpayers and export credit program, or the commercial dumping compo-

consumersthenfootthe billfor dumpingthe resultingsurplus nents of its food aid program, under WTO export disciplines.

-7 million tons of it-on world markets. Non-subsidizing The EU has single-handedly dashed hopes for early progress

exporters such as Malawi and Thailand suffer the twin conse - towards improved market access. It has proposed that tariff cuts

quences of lower prices and lost market shares. Meanwhile, be based on the failed formula adopted in the Uruguay Round,

high tariffs keep the EU's own market firmly out of bounds. with average tariffs cut by 36 per cent. Applied to a sector with

many tariff peaks exceeding ioo percent, it is hard to see how

Unfair tariffs and export dumping this will facilitate the "substantial improvement in marketaccess" promised at Doha.

IMPORT RESTRICTIONS IN AGRICULTURE DENY developing On the question of subsidy cuts there is every prospect of a

countries an opportunity to exploit an obvious area of com- EU-US deal-but not one that will benefit developing countries.

parative advantage. Average agricultural tariffs in the EU and Efforts to reform the CAP have been stymied by political differ-

the US are some five times higher for agricultural goods than ences between member states. Meanwhile, the 2oo2 US Farm

for manufactured goods. And tariff peaks in excess of ioo per Act not only increases budget support for agriculture, but also

cent are common, notably in tariff lines such as sugar, beef, strengthens the links between farm support and production.

dairy produce and processed fruit. Instead of cutting support. both the EU and the US are

Escalating tariffs-duties that rise with each stage of pro- repackaging subsidies into payments permitted under W'TO

cessing-are another standard feature of the agricultural poli- rules (whichtheywrote). Nominally, these payments have to be

cy landscape. If Latin American tomato exporters make the 'non-trade distorting', or decoupled from production deci-

mistake of processing the vegetable into sauce, the tariff they sions. But these multi-billion programs will generate produc-

face rises by a factor of six percent. Average EU tariffs on fully tion by providing farmers with three key benefits: liquidity,

processed foods are twice as high as on products in the first capital, and guarantees against risk.

stage of processing. Tariff escalation serves the deeply perni- Another source of Trans-Atlantic consensus is the view that

cious purpose of keeping poor countries trapped in low value - developing countries should have only limited rights to protect

added segments of the agricultural trading system. their farmers through import controls. Both sides want to see

Excluded from rich country markets, small farmers also any special WTO provisions in this area restricted to the poor-

suffer in domestic markets. In their development rhetoric, est countries, and to a narrow range of specified 'food security'

most northern governments recognize that smallholder agri- crops. The problem here is that the EU and the US continue to

culture is vital to poverty reduction. Yet the same governments see the WTO as a useful vehicle for prizing open developing

systematically undermine the local markets of food producers country markets, providing outlets for export dumping.

through subsidized export dumping. So where does this all leave us? One possible outcome is

In Africa, farmers are being pushed out of urban markets that the latest bout of EU-US brinkmanship in agriculture will

by heavily subsidized EU wheat and dairy exports, undermin- block any deal, jeopardizing the entire Doha round. This

ing incentives for production and creating a dangerous would have devastating consequences for poverty reduction

dependence on imports. But the problems are not confined to efforts-not to mention the future of the rules-based multilat-

the world's poorest countries. Mexico has some 2 million eral system. The other, more likely, scenario is a deal that fails

maize farmers working on land in rain-fed areas, many on to address the real problems facing poor farmers in develop-

ecologically fragile hillsides. Regional integration is exposing ing countries. It all calls to mind the old Swahili proverb:

thee farmers to competition for US maize imports. Many are 'When the elephants fight, the grass gets crushed: when the

losing their livelihoods. This outcome owes less to market elephants make love. the grass gets crushed'. ck

realities than to market subsidies. Last year, US maize farmers

received $3.2 billion in government support-more than dou- Kevin Watkins is Head of Research at Oxfam

1t Development Outreach WORL)LD BANK INS I I TUTF

Agricultural ProtectionismDebt Problems and the Doha Round

BY JULIO J. NOGUES t tectionismincreasesfinancial costs; and analyze dynamic andpoverty effects. Although this article draws on the experience

THROUGH FINANCIAL CHANNELS. agricultural protection- of Argentina. I believe the analysis applies to other indebtedism imposes costs on efficient producers that are higher than countries, particularly in Latin America, which are also netthose associated with negative allocative effects and export agricultural exporters. In conclusion, I will offer one sugges-losses usually estimated. The link between protectionism and tion for the Doha negotiations.finance has a direct relationship with the WTO MarrakechAgreement of establishing coherence between international Agricultural protectionism and exportstrade and financial matters (WTO 1995). Here, I will callattention to the fact that for efficient agricultural exporters ARGENTINA IS AN EXAMPLE of how agricultural protection-there is little if any coherence between the trading system and ism can have sizable negative macro-economic and povertythe international financial system that they face. I will also effects. The reason is that its exports are still composed pre-present some numbers on the export losses from agricultural dominantly of primary agricultural goods and agro-basedprotectionism;describethechannelsthroughwhichthispro- manufactures (around 2o and 3o percent of total exports

2 W~ ~ -, -., r

IV 2003 13

respectively). Clearly, under a well functioning multilateral I early gos. First, implementation of the URAA has been mired

trading system. Argentina would proceed with its develop- with protectionist effects that go beyond what negotiators had

ment and growth through exports of these products and, later, in mind (OECD 0ooi, and Diakossavas 0ooi). Second, many

would move into other types of exports. But agricultural pro- regional trade agreements have diverted exports and robbed

tectionism implies increasing difficulties and uncertainties efficient exporters of important export and growth opportuni-

for efficient exporters who continue to see their access to for- ties (Nogues 2oo3). Unfortunately, the prospects that this sit-

eign markets reduced and/or their terms of trade decline. uation will change any time soon are rapidly vanishing (WTO

What is the magnitude of these losses? Let me start with the 2oo3). Let me now turn to a discussion of the financial costs of

traditional estimates and then move to financial considera- agricultural protectionism.

tions. Keeping in mind the well-known limitations of general

equilibrium models, recent estimates by van der Mensbrugghe Agricultural protectionism(2002) presented in the following table, simulate the effects on and financiaf costsexports of alternative liberalization scenarios for trade in goods.

From other estimates such as those presented in Porto (2003), I N ORDER TO SEE howagriculturalprotectionismleadsto debt

approximately three-quarters of the changes are explained by problems. recall that in economies with open capital accounts

higher exports of agricultural and agro-based products. the market clearing interest rate for sovereign bonds, is

These estimates indicate not surprisingly, that the approximately equal to the risk free international interest rate

increase in exports would be the greatest under a dismantling plus the premium for country risk. On the margin at this rate,

of trade barriers agreed in the WTO. The simulations also foreign investors are willing to lend. Therefore, if protection-

indicate that a free trade agreement with the EU would have an ism increases risk, the cost to efficient country producers from

impact on exports that is not that different than the impact of high agricultural trade barriers are higher than what has usual-

a global agreement; this increase is approximately equal to 50 ly been claimed by the literature.

percent of 2002 exports. This is an indication of the huge There are two main channels through which agricultural

damage inflicted upon Argentina by the EU's protectionist protectionism can increase financial costs and worsen debt

agricultural policies. problems. First, to the extent that this protectionism reduces

The literature has also stressed the negative impact of agri- exports. the trade-output ratio of the efficient exporters is

cultural protectionism on the instability of international also reduced. Lower exports reduce the capacity to repay

prices. A pioneering article by Sampson and Snape (1980) external debt, and this increases interest rates. Second. high

showed how Europe's variable import levies destabilized inter- international price variability and an excessive concentration

national agricultural prices. More recently Gardner (2002) has of exports in a few commodities increase vulnerability.

also addressed this issue and supported the conclusion that an I will concentrate here on the first of these channels. A

important liberalization of agricultural trade would and reduce growing number of analytical and econometric studies have

the variability of international agricultural prices perhaps by as analyzed the determinants of country risk. The following are

much as 50 percent (see also Nogues 2003). some of the explanatory variables that have been uncovered by

In spite of the Uruguay Round Agreement on Agriculture these studies: a) growth expectations: the higher the growth

(URAA), protectionism has continued to increase since the expectations. the lower the risk of investing in an economy; b)

degree of solvency: the higher the burden of the debtand the lower the capacity to generate exports, the

ARGENTINA: Export Impact of Alternative Trade Agreements higher the degree of perceived insolvency; c) struc-ARGENTINA:ExportImpact ofAlternativeTradeAgreetural problems: the more serious the structural

problems such as systematic fiscal deficits, the high-k, V-1 er the country risk; d) contagion: risk is increased

Change from base (million dollars) when other emerging markets face financial difficul-ties, and lenders "fly to quality"; and, e) political

Brazil -3.400 800 -1.700 -5.600 uncertainty: when there are important differences

NAFTA 2,400 2.800 800 900 on economic policies among leading politicians, or

Restol LAC 4.800 500 -200 2,800 whendifferentformsofcorruptionincludingpoliti------ - - cal corruption are rampant, risk is increased.

_ _ i _ i _ i I _ _By how much does agricultural protectionismincrease risks? Nogues and Grandes(200o) studied

- _ I _i _ii iii Ii the determinants of Argentina's risk with the

explanatory variables discussed above, and found

lolal 6.200 5.800 16.300 81.000 that all of them had contributed in a statistically sig-

- . = _r. _ ___ . . ._ .......... , ,_ ,_ .. , _,.,,,,,_=,,,,_ .. = .nificant way to the widening of the spread of sover-Suture v3fl Ocr Mei;hruggfle 2002' eign bonds (in this case the floating rate bond over

1-SouLrce v3rn oer ME-n--hruggne (2002i - the U.S. treasury bond of the same maturity). Here I

- ... t.fl...~-C. ~ -- . . want to focus on the role played by the solvency vari-

14 Development Outreach IWORLD BANK INSTII'] I:TE

able, which we measured as the ratio ofdebt service to exports. We found that the 'AZERNDA WOWelasticity of country risk with respect to AC\this variable is o.68. With this estimate., *0 -the impact of agricultural protectionismon financial costs can be simulated. Forexample, assuming that agricultural pro- S-IBSIDIA1tectionism results in foregone exports ,equivalent to 25 percent of current SLo 3exports, from earlier comments a con- , -

servative estimate, then country risk canincrease between lo percent and 20 per- fllW Vcent dependingonwhetherwe assume an , ,elasticity with respect to the solvencyvariable of 0.5 percent or i.o percent.This impact of agricultural protectionism on country risk and financial costs is siz- .able. For example, the average countryriskduring0ooowas6 7 2basispointsbut 4/ ,

according to our estimate, with higher -exports, it could have been at least lo 'percent lower. When this difference ismultiplied by the stock of debt, the added , t -

interest costs can be very high. Just to ...give an idea, at the end of 2ooo. the totalstock of debt (private and public) was inthe order of $280 billion dollars.

Agriculturalprotectionism, slowergrowth and increasingpoverty nessed a massive increase of agricultural support granted to agriculture including

subsidies by OECD countries; between border measures, export subsidies andTWO ADD ITI ONAL CONSEQUENCES 199 7 and 1999 this assistance increased domestic assistance, as well as the elim-can be linked to agricultural protection- from $329 billion dollars to $362 billion ination of tariffs on manufacturedism: slower and more unstable GDP dollars. Much of this assistance was pro- exports.growth, and increased poverty. vided to compensate OECD country As his measure of poverty, Porto chose* Slower and more unstable growth. farmers from the negative income the proportion of people living below theHigher interest rates slow growth rates effects of declining international agri- poverty line. His conclusion is that: "for-and this is precisely what happens when cultural prices (OECD, zooo). Obviously eign trade reforms would cause a declineagricultural protectionism increases the this counter-cyclical protectionism led in poverty of up to i i percent from an ini-degree of insolvency in the countries to further increases in measured risk of tial head count of 25.7 percent to a postthat are efficient producers. Nogues and efficient country producers. policy rate of 22.8 percent" or aroundGrandes (200i) show a clear and statis- . Impact on poverty. Paradoxically, there ioo,ooo persons. For reasons explainedtically significant negative correlation is very little knowledge on the impact above, this is a lower bound estimate.between the level of country risk and the that agricultural protectionism has onGDP growth rate. Clearly. the disman- the poverty rate of the countries that are Suggestions for thetling of agricultural protectionism efficient producers. This lack of knowl- DoN a Roundwould improve export performance and edge is a handicap and illustrates thetherefore, expected GDP growth; both of weak negotiating ability of Argentina CLEARLY. agricultural protectionismthese effects would lower country risk. and other indebted countries in bilater- has had significant negative effects on

Regarding price instability, I recall al and multilateral forums. Recently. Argentina that go beyond the static wel-that between 1997 and 2000 Argentina's Porto (2003) has estimated the impact fare losses that have been traditionallythe export prices of its agricultural and that the elimination of agricultural pro- estimated by general equilibrium mod-agro-based manufacturers declined by tectionism by the U.S. and the EU would els. My analysis has been focused on the25 percent and 24 percent respectively. have on Argentina's poverty rate. TheNot coincidentally these years also wit- estimates include the elimination of all CO NT IN U ED ON PAGE 3 3

j U L V 2 0 0 3 15

GATS Negotiations Must Focuson Services Liberalization

The Case of SADC

BY KENNEDY K. MBEKEANI Key issues for SADC countries

THE COUNTRIES THAT COMPRISE the Southern Africa THE CHALLENGE FOR SADC COUNTRIES is how to establish

Development Community (SADC) countries have recognized their specific needs in the framework of GATS Article IV,

the economic benefits to be derived from autonomous leading to transfer of technology and capacity building.

reforms in sectors such as financial services, telecommunica- Experience shows that in some areas, like construction serv-

tions and transport, which may be viewed as infrastructural ices, developing country suppliers maximize their capacity

backbones of any economy. These sectors have a significant building when engaging in joint ventures and partnerships

impact on growth and efficiency across a wide range of user with foreign firms in the delivery of service. This measure-

industries and overall economic performance. Availability of the requirement to establish joint ventures-is considered a

infrastructure services may lead to export capacity building in limitation on trade liberalization.

other sectors, including the attraction of private investment. Implementation of Article IV provisions at the horizontal

For example, improved transport services will contribute to level appears to be difficult. Developing countries seem to be

the efficient distribution of goods within the SADC region, better positioned to make progress in negotiations on

and has a significant impact on the region's ability to partici- increasing participation in the trade of services when they

pate in global trade. Improvements in social services, such as focus on how to implement GATS Article IV in the sectors of

education and health, are necessary in building human capi- their interest, and in articulating the associated sector-spe-

tal, which is key to long run economic growth. cific issues and measures of their immediate concern.

In the absence of services liberalization, the implementa- Areas of interest to SADC countries include movement of

tion of the SADC Trade Protocol, which aims at creating a natural persons. construction, tourism and energy services.

SADC free trade area, could result in negative effective pro- Movement of Persons. A number of SADC countries are

tection for goods. The SADC countries include Angola, interested in a further liberalization of movement of persons

Botswana, Democratic Republic of Congo, Lesotho, Malawi, (mode 4) on a sectoral basis, and in addressing issues that are

Mauritius, Mozambique, Namibia, Seychelles, South Africa, impeding market access-including issuance of visas, admin-

Swaziland, Tanzania, Zambia and Zimbabwe. These member istrative procedures, lack of transparency and economic

states, in 2ooi, started implementing a free trade agreement needs tests. A new approach is necessary to make progress in

and are about to start negotiations on services liberalization. the negotiations on mode 4. This approach should be handled

For trade liberalization in the SADC region to have any mean- at a level of detail, so that the negotiations would not be over-

ing it is important that services liberalization keep pace with taken by non-trade concerns. Some of the issues include set-

trade liberalization. ting minimum sufficient international rules that would limit

The low number of proposals in GATS negotiations by negative trade impact on the movement of natural persons,

SADC countries reflects the difficulty the countries face to and would be compatible with the overall development objec-

clearly identify negotiating objectives on services-a problem tives of developing countries, and sectors or categories of pro-

that has to be addressed. On the other hand, the main concern fessions where liberalization of the movement of persons is

of SADC countries in most sectors is capacity-building and critical for the export of services from developing countries.

technologytransfer rather than access to markets. This article Tourism. The tourism sector constitutes one of the most

attempts to identify key issues of interest to SADC countries important sources of foreign exchange. For many SADC coun-

in the GATS negotiations and how the countries can ensure a tries, in particular the least developed SADC countries

favorable outcome. (Malawi, Mozambique. Tanzania and Zambia), tourism isprobably the only economic sector which provides concrete

i6 Development Outreach W'ORLI) BANK INSIrllUTE

and quantified growing trading opportunities. It is one of the prevent anti-competitive practices in their tourism sectors.fundamental pillars of their economic development. The predatory practices and anti-competitive behavior in

Most countries in the region have already liberalized the international tourism produce two main effects on the eco-tourism sector. However, to ensure that trade is taking place nomic sustainability of the tourism of SAD countries: unbal-in a fair and competitive environment, other multilateral anced trade benefits, and the deepening of the leakage effect.measures may be necessary for disciplining anti-competitive Their combined impact minimize the positive impacts ofpractices in the tourist originating countries. The competition spillover and multiplier effects inherent to tourism, andissue and the treatment of anti-competitive behavior are at undermine the financial capacity of enterprises and the abili-the core of the problems of efficiency, viability and sustain- ty of countries to earmark necessary resources to maintainability of tourism in SADC countries. Ability to deal with those and upgrade basic infrastructure and quality standards inaspects and to counter their effects is of decisive importance. order to satisfy in an adequate way competitive conditions andMoreover, the inadequacy or absence of a domestic legal international demand.framework on competition in SADC countries, and the lack of SADC countries may need to ensure the following:multilateral disciplines and mechanisms within the GATS . adequate coverage and consistency commitments in allframework, affect the ability of SADC countries to deal with or tourism activities;

. prevention of predatory behaviorwith anti-competitive practices by

/_ ( g dominant integrated suppliers in

S ~~~~~the originating markets;5D v*. effective access to and use of dis-tribution systems and informationnetworks on a non-discriminatoryIt ~~~~~basis: and

| the implementation of an adequater-^ - -,-- *framework for sustainable develop -

ment in tourism.

Energy Services. The countries of7' _the region can expect to find them-

selves under pressure to liberalize inmany sub-sectors of energy services,and it may be necessary to gain a betterunderstanding of the implications andopportunities of the liberalization ofenergy markets for energy producingcountries. Energy is central to achiev-ing the interrelated economic, socialand environmental aims of sustainablehuman development, and energy serv-ices play a crucial role in providingefficient access to energy in support ofdevelopment. SADC countries are thusfaced with the challenge of achievingmore reliable and efficient access toenergy through the enhanced availabil-

; -- ~ ~ " ity of energy services. To ensure thatthe link between market access andV " t development is clearly established,access to the region's energy markets

or should be made conditional on:. _ . transfer of technology and manage-

rial know-how:acceptance by foreign suppliers ofpublic services obligations; and

- - 7>w- . setting up of alliances between for-eign and domestic firms, includingS -- i MEs.

JUt' ) 2 0u3 17

U. 4~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4

r~~ _ "-lfP

Thestprncilescoulb e as n ate ad t in C

wr't ' -,'

--~~~~~~~~~~~~~j -- ; -,Y!These~~~~ ~ ~~ prnipe col be4t inlue as neoitdadto- Cnlso

al commitments in the sector. On the other hand, developingcountries should create a favorable environment for foreign SUSTAINABLE AND EFFECTIVE INTEGRATION of the SADC

and domestic suppliers by setting up a transparent regulatory countries into the processes of liberalization of the world

framework, which ensures fair competitive conditions for all economy rests upon creating a supportive domestic and inter-

operators. especially access to the network. national policy and regulatory environments. Fair trade will

Construction. SADC countries view the construction serv- not be achieved in the imperfect markets, where information

ices sector not only as a key infrastructure service but also as a will not be equally available to all, where dominant players will

tool for upgrading welfare. Development of this sector direct- impose their own terms of doing business and where the rest

ly contributes to the attainment of the development goals. The will have no tools to address the anti-competitive practices.

strengthening of domestic and export supply capacity relies Among all these concerns, asymmetries in the level of devel-

upon the ability of SADC countries to upgrade continuously opment and the weak position of the SADC countries in the

their technological capacity. global services trade are the most essential problems to be

SADC countries may seek to attach the requirements of addressed. As a minimum, the assessment should demon-

associations and joint ventures, so as to include local compa- strate conditions under which SADC countries could expect to

nies in the design and implementation of construction proj- achieve a balanced growth and the specific obligations, which

ects. This has proved to be the most effective way of obtaining they will be able to sustain.

access to transfer of technology. Domestic environment is predominantly open in SADC

Construction is one sector that SADC countries can request countries but suppliers of services are not benefiting from the

for sector liberalization of movement of natural persons in same opportunities as in the developed countr-y markets.

exchange for market access. The mnovement of foreign nation- Further liberalization along the traditional lines is not likely

als in developed countries is often subject to visa and residen- to bring the net benefits to developing countries and con-

cy requirements, and economic needs tests, even for project tribute to their balanced growth, unless issues such as move -

related work of shor-t duration, and frequently with little ment of natural persons, technology transfer and capacitytransparency with regard to the criteria applied in the building are properly addressed in the negotiations.

issuance of visas and work permits, which often appear to

penalize nationals of developing countries. Kennedy K. Mbekeani is Senior Research Fellow, Botswana Institutefor Development Policy Analysis

iy DevelopmentOutreach gaORir) BANK INSTsTUTc

More FavorableTreatment of Developing

CountriesToward a New Grand Bargain

BY BERNARD HOEKMAN resolved. The medium-term viability of the global tradingsystem is dependent on an effective mechanism that allows all

ALTHOUGH THE PRINCIPLE of more favorable treatment for developing countries (that is, the majority of the WTO mem-developing countries is firmly embedded in the WTO. there is bership) to integrate more fully and benefit from increasedconsiderable dissatisfaction with the existing provisions international trade-this is vital for economic growth, devel-regarding differential treatment, by both developed and opment and poverty alleviation.developing countries alike. In terms of the current Doha trade Currently, special and differential treatment (SDT) provi-negotiations, it is among the more important issues to be * sions in the WTO call for preferential access to markets for all

W.~~~~~~I h4jj

ILIL 200 19

developing countries, exemptions (transitory and perma- do not receive significant tariff preferences in products for

nent) from certain rules, and promises of technical and which they tend to have a comparative advantage. Preferences

financial assistance. There are good reasons for SDT-very often exclude important items such as textiles or agricultural

small orlowincome economieslackthe institutional develop- products and are subject to binding limits on the value of

ment or minimum scale to manage the full panoply of WTO exports that benefit from lower tariffs, including so-called

rules or, at least, might find the returns to creating the insti- 'competitive needs' tests. Combined with complex adminis-

tutions to apply them effectively outweighed by the costs. They trative requirements and red tape, including documentation

may also lack the resources to overcome natural obstacles to of origin, the effect is to reduce the value of preferences.

trade, giving rise to a case for preferential access to markets While recent programs such as the EU Everything but Arms

and development assistance. initiative give duty and quota free access to Least Developed

The Doha Ministerial Declaration called for a review of all Countries (LDCs) for virtually all products, this does not

SDT provisions in the WTO, with a view to "strengthening extend to larger countries -such as Brazil, China, Indonesia,

them and making them more precise, India, Malaysia, Pakistan and Thailand-

effective and operational." In the course which tend to be granted only limited

of 2oo2, developing countries made 88 preferences, if any.

specific suggestions to do so, calling for An obvious way to strengthen SDT

improved preferential access to devel- would be for developed countries to

oped country markets, exemptions from THE DEBATE ON extend duty- and quota-free market

specific WTO rules, and makingthe pro- SPECIAL AND access to all developing countries.

vision of technical and financial assis- However, this is not feasible politically-

tance a binding commitment. Despite DIFFERENTIAL the most that may be possible is to

intensive talks and numerous meetings, TREATMENT SHOULD extend such treatment to LDCs and sim-

no agreement proved possible on ilarly small and poor countries. Thisstrengthening SDT provisions. One rea- BE SEEN IN THE BROADER would be beneficial in helping target

son for this was that many proposals CONTEXT OF TRADE SDT on those who need it most, but from

sought to convert non-binding (unen- a global poverty reduction point of

forceable) language-so-called best- AND DEVELOPMENT. view-which must be taken in light of the

endeavors provisions-into binding WHAT IS NEEDED IS A NEW Millennium Development Goals-a good

obligations that could be enforced case can be made that preferencesthrough WTO dispute settlement proce - "GRAND BARGAIN," should focus on the poor, wherever they

dures. Another reason for lack of agree- INVOLVING ACTIONS are geographically located, and not on a

ment is a difference in views on what limited set of countries. In absolute

types of exemptions make economic BY DEVELOPED terms, most poor people live in coun-

sense. COUNTRIES AND tries that are not LDCs-e.g.. China and

The issues that were brought forward India. Research suggests that the poor

in the SDT context are very difficult, if DEVELOPING COUNTRIES confront tariffs on world markets that

not impossible, to separate from the are more than twice as high as those

broader question of making the WTO confronting non-poor producers

more supportive of development. The (World Bank, 2oo0). Reversing this sit-

premise of this article is that the debate uation would not only be very beneficial

on SDT should be seen in the broader to developing countries, but also to

context of trade and development. What is needed is a new developed country consumers.'grand bargain', involving actions by developed countries and Given that unilateral deep trade preferences are unlikely to

developing countries. This bargain must encompass greatly be extended to larger economies. action is required to liberal-

improved market access for all developing countries, mecha- ize trade in goods and services in which developing countries

nisms to ensure that the huge differences in the level of devel- have a comparative advantage on a nondiscriminatory basis. A

opment among WTO members are recognized in the imple- binding commitment by developed countries to abolish

mentation of agreements, and increased development assis- export subsidies, decouple agricultural support and signifi-

tance ("aid for trade"). What follows sketches the outlines of a cantly reduce-ideally abolish-tariffs on labor-intensive

possible package. products of export interest to developing countries on anondiscriminatory basis should therefore be a key element of

Market access for disadvantaged an improved SDT regime. Such an approach is generally not

countrles regarded as SDT in the WTO-the focus has been mostly onpreferential, "better-than-MFN" access-but from a develop-

TRADE PREFERENCES have been a mainstay of SDT since the ment viewpoint, acceptance of ambitious liberalization

late 1960S. Unfortunately, practice suggests that preferences benchmarks would provide a strong signal of commitment to

generally deliver little. In many cases, developing countries poverty alleviation by developed countries.

20 Development Outreach Wx.O R L D B A N K I N S I I T U T E

Implementation of WTO rules twofold: action at the national level to determine trade-relat-ed technical assistance needs in the context of domestic pri-

IN ADDITION TO MARKET ACCESS. SDT in the WTO has tra- ority-setting processes-e.g., the Poverty Reduction Strategyditionally included derogations from some WTO rules for all Paper (PRSP); and a commitment by developed countries todeveloping countries, with application determined through fund the priorities that are identified.self-declaration by members that they are a developing coun-try. Given that some WTO disciplines may not be appropriate The quid pro quofor very small or poor countries-the regulatory institutionsthat are required may be unduly costly or not a development A WILLINGNESS BY DEVELOPING COUNTRIES to make lib-priority-there is a need for 'differentiation' between devel- eralization commitments will be necessary to move forwardopingcountries indeterminingthe reachofthose)WTO rules, on the three elements of the SDT "package" sketched outespecially if implementation requires investment of substan- above. Such reciprocity is needed in particular on the markettial resources. There are broadly two options that could be access side as far as large or middle-income countries areused to operationalize greater country differentiation: concerned, for reasons noted previously. This can be done in* More narrowly defining eligibility for rule-related SDT a way so that negotiating credit is granted to countries that

provisions that are broadly applicable across all agree- have already implemented significant unilateral, autonomousments to those that need it most-e.g., the poorest/smallest reforms-e.g.. through the adoption of a formula approach tocountries; or tariff negotiations that uses the level and extent of reduction

* Setting objective country criteria on an agreement-by- in tariff bindings as the focal point of liberalization commit-agreement basis that link implementation by countries to ments. Given that many developing countries either have notthe attainment of preconditions and the availability of bound tariffs at all or have relatively high tariff bindings, thistechnical assistance. will automatically imply that credit is given for past reductionsThe first of these options has the advantage of simplicity in applied tariffs.

and transparency, but requires renegotiating the current clas -sifications used in the WTO-which distinguish between the ConclusionLDCs and all other developing countries. A good case can bemade for greater differentiation, given that many countries THE HEART OF MOVING FORWARD ON SDT is to put in placethat define themselves as developing have per capita incomes a mechanism that will effectively promote the interests ofthat are many multiples of the poorest countries. However, developing countries, with an emphasis (priority) on thethis has been a politically sensitive issue in the WTO. The sec- needs of the poorest countries. Greater differentiation mustond option would allow the issue of defining general eligibili- be part of a new grand bargain-the existing two -fold develop-ty to be avoided, but is likely to involve significant transaction ing country classification system of LDCs (UN-defined) andcosts as it would be country-agreement-specific. Whatever other developing countries (self-declared) has resulted in anapproach is chosen, substantial thought and discussion is ineffective mechanism for all.needed to assess the implications of alternative approaches. All three major dimensions of SDT-improved access to

export markets for developing countries, greater differentia-Renegotiation of certain WTO tion in the implementation and enforcement of WlTO rules,disciplines especially those requiring significant institutional capacity

and investments; and expanded development assistance ("aidMANY OF THE PROPOSALS that have been made on SDT for trade")-can be brought together in a package that alsoimplicitly, if not explicitly, reflect a perception by developing includes commitments by developing countries to make mar-countries that some WVTO agreements-e.g., agriculture, ket access concessions. SDT cannot be a one-way street.TRIPS-are not supportive of development. Rather than seek Differentiation implies acceptance on the part of the moreopt-outs under the guise of SDT, a preferable approach is to advanced countries that they are not eligible for exemptionsrenegotiate these agreements. A clear signal that such renego- from implementing negotiated agreements. and a willingnesstiation can be considered would help move the SDT debate by all developing countries-both low and middle-income-toforward. engage in the exchange of trade policy commitments. The

longer-term viability of the trading system requires that itsAid for trade core principles and rules apply to all members. s4,

THE THIRD COMPONENT of SDT in the WTO is development Bernard Hoekman is Research Manager, International Tradeassistance. Market access and better rules are necessary but Department, The World Bank. The views expressed in this papernot sufficient. Greater technical and financial assistance is are personal and should not be attributed to the World Bank.needed to strengthen the institutional and trade capacity oflow-income countries to increase the benefits of better access This article draws on joint work with Caglar Ozden, Costasto markets. Post-Monterrey, high-income countries have Michalopoulos, Susan Prowse and Alan Winters.pledged to provide additional aid. The key need now is d

3 1. Y 2 0 21

An InternationalInvestment Agreement

Promise and Potential Pilfalls

BY RICHARD NEWFARMER investment" that will expand trade. Can new multilateral ini-

tiatives on investment policy promote more-and more pro-

Among the many questions that WTO ministers will take up ductive-investment and hence more rapid development?

in their September meeting in Cancun. Mexico, is the issue of And, can a negotiation that includes this area lead to reciproc-

an international investment agreement. Ministers in the ity that will expand developing countries' opportunities?

Doha declaration chose to launch negotiations on a multilat- The drive to include an international investment agree-

eral framework covering investment, "subject to a decision to ment in the WTO accords comes against a backdrop of one of

be taken by explicit consensus on modalities at the Cancun the most impressive waves of foreign direct investment in

Ministerial in 2oo3". Its purpose was "to secure transparent, history. Foreign direct investment to developing countries

stable and predictable conditions for long-term cross border grew from less than $3o billion in i990 to nearly $18o billion

22 Development Outreach WORLD BANK INSTITUTE

in 1999, and since then have levelled off to about $16o bil-lin(e* cata rgt. FDI grew rapidly until late 1990s, and then leveled off..lion (see chart at right).

Whether an international investment agreement con- E Portfolio equity H Net inward FDItributes to achieving the goal of increasing investment Inward FDI to developing countriesdepends on its additive effects to existing international 250rules through two main channels: increasing market accessfor 200investors to enhance competition; and augmentingprotection -Of investors rights to reduce risk and thereby raise relative 2 150 . § ¶ t :risk adjusted returns. 10 . K.,t.5o~ *

Increasing market access for investors0

AS WITH TRADE BARRIERS, countries around the world -a P .) .P, NS No N° 0) 0>

have progressively dismantled restrictions on incoming So.rce Worl Bank Global Development Finance 2003foreign investment, as nationalist fears of many govern-ments have given way to aggressive pursuit of foreign ... and held up after 1999 in spite of falling debt flowsinvestment. Countries as diverse as China, Mexico, andmost recently. Korea have progressively lowered policy bar- Inward FDI Debtriers to entry in sector after sector to bring in new sources of 200 FDI and debt flows to developing countriescapital. increase competition to spur productivity growth, 150and accelerate the pace of technological progress. UNCTAD

- 100has shownthat between 1gg1 and ?ooi roughly 95 percent of Xthe 1393 regulatory changes that were made to national FDI s 500 , ;..

regimes served to create a more favourable environment for 0 ,.FDI (Figure i). The vast majority of these changes were -50introduced autonomously rather than in the context of 1995 1996 1997 1998 1999 2000 2001 2002international negotiations. Source: World Bank Global Development Flnalnce 2003

Today. nearly all countries have removed entry restric-tions and limitations on foreign equity shares in manufac- In part because regulatory changes become more favorableturing. The main restrictions on FDI are centered in servic- X E More favorable to FDI H1 Less favorable to FDIes-that is, in finance, telecommunications, power, trans- o 250

port, ports, wholesale and retail trade, real estate, and busi- ,200ness and legal services (Hoekman and Saggi, 2ooo). 0

0~15The potential benefits to unilateral reductions in these X 150topolicy barriers to entry are substantial. Allowing foreign E 100

investors to compete in telecommunications, for example, ° *1W ., lhas revolutionized service in developing countries. The s 50 , ' 1, - .. fiWorld Bank's Global Economic Prospects 2002, using conser- 2 0vative assumptions about the effects reforms of trade and C" o t ° g' ,'transportation, communications, financial services, andother private services, showed that broad and simultaneous Source. UNCTAD. 2002

services reforms could produce income gains for develop- However, BITs do not add muching countries of more than 9 percent (World Bank, 20o1171-172). Realizing this high potential requires more than _ FDI inflows before and after signing BITsliberalization of entry; it requires a regulatory framework - 0 3that, to the extent possible, actively fosters competition and 0 2disciplines natural monopolies in network industries; and r D_ 01 . i N. . .4

it requires pro-poor regulation that ensures, where appro- 3 o 0 _

priate, universal access and cross-subsidies to the poor or -3 -2 -1 0 1 2 3disadvantaged regions (see World Bank. 2001: pp 7 7 ff). Years before Year Years after

Including these reforms to national investment regimes signing signed signingin a new international investment agreement has two Note: Sliare of niotine CoUntry FDI f owing to liost conijitrv with BITpotential benefits that may lead to greater investment. First, Source: World Banik Global cn/111,0nic Prmspccts 320)3

much as with the logic of a trade negotiation, the negotiation

S I R I N G 2 _ ( 2 23

process may lead to greater liberalization of investment developing countries send a positive signal to potential foreign

regimes than can be accomplished unilaterally. Second, if investors that policy changes are locked in, that investments

investment is not negotiated in isolation, but as part of a enjoy protection in an international agreement, and that

broader set of trade negotiations, then the traditional mecha- investors have recourse to WTO rules in event of a dispute.

nism of reciprocal access concessions can help generate sup- Would an international investment agreement increase

port for greater openness at home and abroad. For example. investment? One way to test this proposition is to look at the

exporters in developing countries who obtain improved consequences of enhancing investor protections through

access to foreign agricultural markets can be a countervailing bilateral investment treaties for flows of FDI among signatory

force against those who resist the elimination of investment countries. BITs customarily provide a definition of invest-

barriers in telecommunications. At the same time, the need to ment coverage, provide investor protections such as against

fight these domestic political economy battles makes a coun- expropriation, require national treatment for post-entry

try a credible negotiator for improved access. The process, if it establishments, stipulate compensation for the expropriation

works, can produce a double benefit: liberalizing countries of their investments, and provide for a dispute resolution

would benefit from increased competition associated with mechanism. In some cases, treaties proscribe any govern-

foreign direct investment, and their firms would have ment action that would reduce the value of the private invest-

improved access to foreign markets. ment, even if it were environmental or other regulations, and

A pre -requisite for entering into an investment agreement establish grounds for compensation. BITs are usually stronger

is that each country is to ensure that any domestic policy com- than the international agreement contemplated in the WTO

mitment make sense through the lens of promoting national because they allow investors to sue governments in front of an

development. While the upside benefit to autonomous liber- international arbitration panel (see World Bank, 2oo3).

alization in services (among other areas) is usually high, it Hallward-Dreimeier (2oo0) analyzed bilateral flows of OECD

may not be for a particular country. Fortunately, the modality members to 3a developing countries over two decades. Her

under discussion is a GATS-like positive list that would let analysis found that. controlling for a time trend, BITs had vir-

policymakers set their own pace for liberalization and avoid tually no independent effect in increasing FDI to a signatory

commitments in any sector where it felt uncomfortable. This country from a home country. Said differently, countries

provides an unusual degree of flexibility to all governments- signing a BIT were no more likely to receive additional FDI

even if it slows the pace of multilaterally agreed liberalization. than countries without such a pact. Even comparing flows in

From the narrow perspective of market access for the 3 years after a BIT was signed to the 3 years prior, there was

investors, an international agreement is less urgent. Since no significant increase in FDI (see charts on page 23. bottom

most restrictions on pre-establishment market access are in panel). This evidence suggests that protections resulting from

services, a multilateral vehicle for realizing the twin benefits a multilateral investment agreement will, by itself, have little

from an international agreement already exists for services, impact in achieving the objective of increasing investment

namely the General Agreement on Trade in Services (GATS). flows.

The agreement allows countries to designate those sectors it It is worth asking whether enhanced investor protections,

wishes to liberalize and maintain entry restrictions in other in combination with reductions in trade reforms that permit

sectors a government feels is important. In any case, the fact liberalized investment access and more open flows of goods,

that market access could be widened under the GATS in pre- would lead to increases in foreign direct investment. One

cisely the area where most restrictions remain limits the addi- example is NAFFTA. NA-FTA is a comprehensive arrangement

tive value of any new investment agreement-save for the that includes significant investor protections in combination

reciprocal access it leverages in other sectors. with broad-based tariff reductions and border liberalizations.

A key issue-which can only be determined during the Chapter 1i of the NAVFTA agreement allows investors to sue the

negotiation process-is the value of an investment agreement government in event of regulatory or other actions that might

in leveraging reciprocal commitments among trading part- diminish the value of a foreign investment. Lederman. et al

ners. If an investment agreement is reciprocated with new (2oo3) found that NAFTA did increase foreign investment,

market access in markets of importance to developing coun- but their study does not attempt to distinguish the role of

tries-in agriculture, labor- intensive manufacturers and even enhanced investor protections from access to the Mexican

services-it may produce the much sought-after double bene- market and its other resources in increasing the flow of FDI.

fit (World Bank !oo2). If not, its benefits to developing coun- To the extent that Chapter ii provided investors with addi-

tries in market access provisions will not add much to existing tional comfort over and above the existing investment cli-

agreements and to unilateral actions to open markets. mate, its protections would have offset these disadvantages.

In a multilateral context, the aspiration of Doha is precise-

Increasing investor protections ly to combine global reductions in border barriers for goodsand services with increases in investor protections. To be

A SECOND POSSIBLE CHANNEL to increase investment sure, the experience of regional arrangements is less relevant

flows-distinct from wider market access-is through increas- to the extent that the preferential trade access diverts invest-

ing investor protections. A multilateral set of disciplines on ment into the preferential market and/or to the extent that

investment protection would arguably help participating 4 trade openness dominate the effects of additional investor

24 Development Outreach WORLD BANK INSTITUVI L

protections. Nonetheless, the potential for some as yet negligible interms of newinvestmentflows-evenas itpoten-unquantified synergy between more open markets and agreed tially exposes them to state-state investment dispute resolu-investment protections exist. Much as with our conclusions tion procedures. If, however, negotiating partners, particu-above on the anticipated benefits for liberalizing market larly OECD countries, see a multilateral investment agree-access, this section leads us to conclude that the benefits to ment as worthy of concessions that reduce their barriers todeveloping countries of a multilateral set of disciplines for trade in agriculture, textiles, and other areas of importance toinvestment rest largely on whether the process of negotiations developing countries, an investment agreement with careful-secures commitments for new market access in agriculture ly delimited dispute settlement provisions might well con-and other goods of interest to developing countries. tribute to a pro-poor Doha outcome.

Dispute resolution merits careful Richard Newfarmer is Economic Advisor, International Tradescrutiny Department and Development Prospects Group, The World Bank.

BENEFITS FLOWING FROM a multilateral investment agree-

ment also can entail costs if a contractual agreement is broken References-as it should. It is important that parties to an agreement Gestrin, Michael, and Alan M. Rugman. 1993. 'The NAFTA's Impact on theunderstand the contractual liabilities they assume when they North American Investment Regime." C.D. Howe Commentary No. 42,sign onto commitments. The Working Group on Trade and Toronto: C.D. Howe Institute. March.Investment has reached consensus that, in contrast to the Hallward-Driemeier, M. 2002. "Bilateral Investment Treaties: Do They Increaseprovisions in bilateral investment treaties, individual foreign I FDI Flows?" Background Paper for Global Economic Prospects 2003: Investinginvestors will not be allowed to sue foreign governments for to Unlock Global Opportunities. The World Bank. Washington D.C.abrogation of protections; rather the home government of the Hoekman, Bernard M., and K. Saggi. 1999. "Multilateral Disciplines forinvestor would file an appeal under normal WTO dispute res- Investment-Related Policies." Policy Research Working Paper No. 2138.olution procedures. World Bank, Development Research Group. Washington, D.C.

Important differences notwithstanding, the rising number Lederman, D.W. Maloney, W.and L. Serven. 2003. Lessons from NAFTA forof suits under bilateral investment treaties argues that coun- Latin America and Caribbean. The World Bank. Washington D.C. April (draft).tries should thoroughly discuss remedies in advance. For Mattoo, Aaditya. "Developing Countries in the New Round of GATS Negotiations:example, the a tribunal in Stockholm required the govern- Towards a Pro-Active Role." World Economy Vol. 23, No. 4, 471-489.ment of the Czech Republic to pay one company, Central Peterson, Luke. 2003a. "Research Note: Emerging Bilateral InvestmentEuropean Media (CME), $350 million for violation of a bilat- Treaty Arbitration and Sustainable Development.' International Institute foreral investment treaty that deprived CME from a stake in an Sustainable Development (IISD) Invest New Bulletin, April.

English language TV station in Prague (see Peterson, 2003 a Peterson, Luke. 2003b. "Czech Republic Hit With Massive Compensation Billand b). Several separate cases under NAFTA similarly have in Investment Treaty Dispute." Invest New Bulletin, March 21

prompted investor suits against all three governments- Rugman, Alan M., and Michael Gestrin. 1994. "NAFTA's Treatment ofCanada, U.S., and Mexico; unrelated cases in each of the three Foreign Investment." In Alan M. Rugman, ed., Foreign Investment andcountries, for example. have contended that environmental NAFTA, pp. 47-79. Columbia: University of South Carolina Press.

regulations reduced the value of their companies; and in some Sauve, Pierre, and Christopher Wilkie. 2000. "Investment Liberalisation incases judgments awarded hefty damages to investors. GATS." in Sauve, Pierre and Robert M. Stern, eds., GATS 2000: New

WTO remedies are different. AW'1TO panel could "instruct Directions in Services Trade Liberalisation, pp. 331-363. Washington, D.C.:the offending member to bring the inconsistent measure tin Centre for Business and Government, Harvard University and the Brookingsthe offending member to bring the inconsistent ~Institution Press.conformity with its WTO obligations"; and, failing that, "pre-vailintawte its fre ob r esortto.. .aniltealcnte rea- Stein, Ernesto and Christian Daude. 2001. "Institutions, Integration andvailing states is free to resort to. ...................... .unilat eral counter-meas- Location of Foreign Direct Investment." New Horizons for Foreign Directures .. suspension of the treaty.. and temporary compensa- Investment, pp. 101 -128. Paris: OECD.tion or suspension of concessions (W'IO 2002: 20). What Stern, Robert M. 2002. "Quantifying Barriers to Trade in Services," in Bernardwould be the appropriate remedy for a government that M. Hoekman, Philip English, and Aaditya Mattoo, eds., Development, Tradeimposed a regulation that effectively expropriated an enter- and the WTO: A Handbook. Washington, D.C : The World Bank.

prise? This question has received too little attention to date. World Bank. 2001. Global Economic Prospects 2002 Investing to Unlock

Global Opportunities. Washington: World Bank

Conclusions World Bank. 2002. Global Development Finance. Washington, D.C.

THE BENEFITS OF A MULTILATERAL investment agreement World Trade Organization. 2002. Report (2002) of the World Group on theTHE BENEFIS OF A MUTILATERAL nvestmentagreement Relation ship Between Trade and Investment to the General Council, 9for developing countries hinge critically on the increased December 2002. Geneva: WTO.market access an investment agreement might leverage for

UNCTAD. 1998. Bilateral Investment Treaties in the mid-1990s. New York:their exporters and on the additional domestic reforms that it United Nations.spurs at home. If reciprocal concessions in areas of interest to UNCTAD. 2002. World Investment Report. New York: United Nations.developing countries are not forthcoming, the value of an

investment agreement to developing countries is likely to be *

J U L Y 2 0 0 3 25

Trade Facilitation, WTORules, and Capacity Building

What?s at Stake?

BY JOHN S. WILSON and measures trade facilitation using four broad indicators.Each one is constructed using country-specific data for 19

THE RELATIONSHIP BETWEEN ECONOMIC GROWTH, trade members of the Asia Pacific Economic Cooperation (APEC) to

facilitation, and development is relatively simple in theory. build the following measures: 1) port efficiency; 2) customs

Measuring the benefits of trade facilitation based on empiri- environment; 3) regulatory environment; and 4) e-business

cal evidence, particularly in relation to capacity building pri- usage. The relationship between these indicators and trade

orities, is much more challenging. Economic theory suggests flows is estimated using a gravity model. The findings suggest

that development is enhanced through income growth-which that enhanced port efficiency among these countries has a

is driven through increased trade. Expansion of trade is large and positive effect on trade and that regulatory barriers

achieved, at least in part, through programs to lower transac- reduce trade prospects. Improvements in customs and greater

tion costs in goods and services crossing borders. This might e-business use significantly also improve trade, however, to a

involve streamlined administrative procedures at ports and lesser degree than the effect of increased efficiency of ports or

customs posts, for example. Expansion of trade may also be streamlined regulations. For APEC as a whole, it is estimated

achieved through modernized transport services and infra- that a program to raise capacity "half-way" to the APEC aver-

structure brought about through privatization. A broader def- age in all areas among those below average would yield an

inition of trade facilitation that aligns most directly with mod- increase in intra-APEC trade of about $254 billion dollars.

ern commerce also includes regulatory reform, harmoniza- This is about a 2i percent rise in total intra-APEC manufac-

tion of standards, and conformance to international regula- tures trade. About $117 billion of the gain (and io percent of

tions (Woo and Wilson 2ooo). the increase in trade) comes from the improvement in port

Trade facilitation is increasingly part of a trade policy efficiency. About $139 billion of the total gain comes from the

debate in both "behind and at the border" issues. During the improvements "at the border" in port efficiency and customs

Singapore Ministerial of the World Trade Organization (WTO) environment. An additional $i16 gain might come from

(1996) the subject in a broad context was added as a new issue improvements "inside the border" in regulatory harmoniza-

for possible negotiation. Decisions on the modalities for such tion and e-business usage.

negotiations, including talks on measures to increase trans- The large increase in trade with improved 'port efficiency'

parency, streamline administrative requirements, among is due in part to the strong correlation found between trade

other subjects. must be made at the Ministerial Conference of and port logistics. In addition, countries such as Mexico and

the WTO in Mexico in September 2oo3. At the center of dis- China are very large intra-APEC traders. They have much

cussions is the role of trade disciplines in promoting trade room for improvement in port logistics and related infra-

facilitation goals. In reaching decisions on negotiations, what structure. Large exporters such as the U.S., Japan. and Korea

can be expected from expanded trade disciplines and how will would see the greatest increase ($38 billion, $22 billion, and

countries determine priorities for capacity building? $9 billion, respectively). Many developing countries (Russia,Hong Kong, Chile, and Chinese Taipei) would also experience

Trade facilitation in a modern context large double-digit increases in exports to the Asia Pacificregion (36 percent, 28percent. 2o percent and 15 percent,

A LIMITED NUMBER OF EM PI RICAL STUDI ES of trade facili- respectively) with capacity building efforts. These results sug-

tation exist to inform policy decision making (see references). gest that attention to improvements in port efficiency appears

Recent work at the World Bank (Wilson. Mann and Otsuki most productive in the Asia Pacific. Moreover, the study sug-

20o 3) examines the relationship between trade facilitation gests that unilateral action to raise capacity can also boost

and trade flows in the Asia-Pacific region. The study defines < exports. Country priorities and impact of various measures

26 Development Outreach WORL I) BANK INSTITT FLE

can be examined, as one way of informing development goals. at the Bank in a data set covering 75 countries is under prepa-For example, Thailand's port efficiency indicator is near ration to further refine this analysis. In sum, these results

the APEC average. A small improvement to the APEC average should clearly be considered alongside other analytical toolswould increase Thailand's efficiency through imports by some and factors, but can provide one new measure to inform deci-$4.4 billion. Thailand's customs capacity and e-business sion making-including development goals aligned with pos-usage are much further away from the APEC average. An sible new WTO obligations in trade facilitation.improvement halfway to the APEC average in customs envi-ronment would increase Thailand's imports by $2.4 billion. If Trade Facilitation and the WTO:the cost of improving customs is less than improving port What role?efficiency. then the net gain of focussing effort on customsmight be preferable to capacity building programs exclusively TRADE FACILITATION INCLUDES a range of issues related toaimed at port efficiency. On the other hand, an improvement multilateral rules and was included in the work program of thehalfway to the APEC average in e-business usage would WTO in 1996 at the Singapore Ministerial. The scope of pos-increase Thailand's imports by $7.9 billion, about 50 percent sible negotiations is relatively wide and includes subjects suchmore than the 'border' measures taken together. New analysis * as; documentation requirements, transparency in adminis-

iff,~~~~~~~~~~~,-7-7A

- -- t

J U L 203 27

WHAT IS AT STAKE IN TRADE FACILITATION IS MOST CERTAINLYCENTERED ON A DEVELOPMENT DYNAMIC-NOT INSIDE THE CONTEXT

OF ELABORATE NEW TRADE RULES.

trative and customs procedures, valuation of goods, and fees question the value of new legal commitments in the WT0.

imposed on imports, among others. The Doha Declaration of Concerns expressed center on the idea that additional rules

the WTO in wool stated that decisions on the "modalities" for will exceed implementation capacities and increase the likeli-

negotiation would be decided at the fifth Ministerial of the hood of dispute settlement action for failure to follow new WTO

WTO in zoo3. There continues disagreement on the merits obligations. Some developing countries also suggest that prob-

and scope for possible talks on trade facilitation. Some devel- lems in implementing current obligations must be addressed

oped countries, including the U.S. and European Union, before expanding the scope of WTO rules in other areas.

believe there is merit in negotiations to tighten WTO disci- Finally, improving infrastructure, administrative reform, and

plines. Proposals on how to improve and clarify trade rules related technical training to upgrade skills to facilitate trade is

might include improved transparency such as the creation of costly. Many developing countries will require assistance in

enquiry points, more systematic consultation between cus- covering capacity building costs over the long-term.

toms administrations and traders, and the establishment of

harmonized appeal procedures in disputes over import fees, Conclusionfor example. There has also been discussions of simplified,standardized, and streamlined import/export procedures, IN SUM, TALKS ON WAYS to increase transparency, pre-

new commitments on harmonized fees and charges on dictability, and streamline trade transactions could provide

imports, reduction of data requirements at customs, expand- benefit to the international trading system. Negotiations are a

ing pre-arrival processing and post-auditing procedures. beginning point - not an endgame with predetermined out-

These are all associated with current GAT Articles VIII (fees comes. Lowered transaction costs and capacity building

and formalities), Article X (publication and administration of improvements, as noted in the new research above and other

regulations), and Article V (freedom of transit) empirical studies, can provide large gains to trade. Talks on

(www.wto.org/english/tratop_e/tradfa e/tradfa-e.htm). streamlined trade procedures. customs rules, and adminis-

Supporters of negotiations also suggest a parallel program trative transparency are also timely and important, given the

of technical assistance to developing countries alongside new need to bolster security after the tragedy of September ii,

obligations undertaken. In contrast, some countries, such as 2ool. Rapid implementation of new national security border

India, Brazil, and several in Africa nations have expressed controls around the world is already underway. What is at

strong reservations about launching new negotiations. They stake in trade facilitation is most certainly centered on a

development dynamic-not inside the context of elaborate

new trade rules. Institutional change and reform is complex

and priorities differ across countries. Creative ways to manage

OVERVIEW OF SIMULATION dispute settlement in this area are critical. There is a unique

BRING BELOW-AVERAGE COUNTRIES opportunity in zoo3, however, to discuss a classic win-win

HALF-WAY UP TO THE GLOBAL AVERAGE situation in which trade disciplines are strengthened, securi-ty is enhanced, and developing countries gain the commit-

ment of assistance to raise capacity in areas that matter more

$88.2 billion $116.9 billion and more to success in modern international commerce. &,

$88.2 billion LA $116.9 billion(+7.3%) (+9.7%) John S. Wilson is Lead Economist, Development Research Group,

The World Bank.$27.7 billion $21.6 billion(+2.3%) (+1.8%) This article draws in part upon "Trade Facilitation and Economic and

Economic Development," John S. Wilson, Catherine Mann, and Tsunehiro

Otsuki, World Bank Policy Research Working Paper #2988, World Bank,

* Port Efficiency Washington, DC, 2003. The findings, interpretations, and conclusions

* Customs Environment expressed in this article are entirely those of the author. They do not neces-sarily represent the view of the World Bank, its Executive Directors, or the

* E-business countries they represent. Comments by Yvonne Tsikata and Richard

E Regulatory Environment Newfarmer are gratefully acknowledged.

REFERENCES CONTINUED ON PAGE 34

z8 Development Outreach WORLD BANK INSTITUTE

China and the WTOPolicy Reform and Poverty Reduction

BY WILL MARTIN countries (Ianchovichina and Martin 2oo2) Since joining the

WTO. China has become a major player in the WTO, and par-AFTER A MARATHON. Fl FTE EN-YEAR STRUGGLE China ticularly in the negotiations on the Doha DevelopmentAgenda.joined the WTO at the Doha Ministerial Meeting in November

2001. Clearly, China's entry was important simply by bringing The reform processa fifth of the world's population into the "world" trading sys-

tem. By the time of accession, China had also become a major WHEN CHINA INITIATED THE PROCESS of joining the world

player in world trade. When the process of (re)joining the trading system. it had seven years of experience with the

world trading system began in i986, China's share of world "open door" policy under its economic reform program. It

trade was only 0.7 percent. but this had risen to almost 5 per- had made major progress in increasing exports of raw materi-

cent in 2ooi. when China was the fifth largest exporter in the als and manufactured products, and the use of foreign direct

world, and is expected to rise to at least 7 percent following investment. As the World Bank (1988) noted, the open door

accession, making China one of the world's biggest trading policy, along with rural reforms and partial enterprise and price

"' :, ~f WI FP PM 11

t' ' 2oOl9'';r3 ;L

7-Is ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 74t%_ IS

%%

t' L 2 0 U 3 29

reforms, had contributed to a dramatic WTO, China had made enormous element in this will be a dramatic expan-

improvement in the performance of the progress in reforming its foreign trade sion in China's exports of textiles and

Chinese economy. However, many prob- regime (Lardy 2002). As is shown in clothing after the abolition of quotas on

lems remained: the Foreign Trade Figure i, tariffs declined continuously these exports in January 2005.

Corporations created an air-lock after 1992. Weighted average tariffs fell lanchovichina and Martin (20o2) esti-

between domestic and foreign markets; from 41 percent in 1992 to 12 percent at mate that exports of clothing will expand

export patterns were inefficient; infor- accession, and will fall to just 6.8 percent by over ioo percent as a result of acces-

mation flows between producers and after implementation of the WTO com- sion. Had she not joined the WTO, China

markets were poor; and foreign exchange mitments. The coverage of nontariff bar- almost alone would have remained sub -

markets were heavily distorted. riers fell from two thirds, to one-third in ject indefinitely to quotas on exports of

During the process of accession to 1996 and 22percent in200l.Allnontariff these goods. Most of the reductions in

the WTO, there was a dramatic improve - barriers except for state trading, which is tariffs and abolition of nontariff barriers

ment in the performance of China's now subject to WTO rules, and is likely to required under the agreement had

trade regime, and in economic per- cover less than io percent of imports. will already occurred by the time of acces-

formance generally. A recent study be phased out. The dual exchange rate sion. However, there are some major

undertaken by the World Bank and the system was abolished in 1994, removing reductions still to be implemented in the

Development Research Center of the formerly substantial trade barriers motor vehicle industry, and on the for-

China's State Council (DRC) has docu- implicit in this regime. Ianchovichina merly highly protected beverage and

mented the extent of the reforms, and and Martin (20o2) estimate the global tobacco sector. The key for the motor

pointed to some of the priorities for welfare gains from China's accession at vehicle sector will be major restructur-

policy reform if trade is to play a positive $74 billion per year. of which around $40 ing to increase efficiency, improve

role in improving people's livelihoods billion accrues to China. product quality, and reap economies of

and particularly in reducing poverty Substantial progress was made not scale. If this is done successfully, output

(Bhattasali, Li and Martin 20o3). just in foreign trade policies. but also in and both imports and exports of motor

A key feature of the reform process critical behind-the-border areas need- vehicles and components are likely to

since 1986, and particularly during the ed to support trade, including develop- expand substantially (Francois 2003).

1990S has been replacement of direct, ment of the legal system; enterprise There are likely to be some substan-

quantitative policy instruments with restructuring; strengthening of service tial adjustments in agriculture, and

indirect, price-based instruments more sector regulation; and agricultural and these are likelyto have important impli-

suited to a market economy. In the late rural reforms. Many of these reforms cations for poverty. The reductions in

198os, around two tbirds of China's were undertaken as part of the ongoing agricultural protection required by

imports were subject to licenses or quo- process of making the changes needed accession are likely to be much smaller

tas, foreign trading rights were restrict- to ensure China's development. than was predicted by many commenta-

ed, foreign exchange was subject to sig- However, it is clear that the process of tors. This is partly because China's agri-

nificant controls, and exports were par- WTO accession influenced the timing of culture was only quite lightly protected

tially planned. As late as 1992, average many of the reforms. In fact, the needs (Huang and Rozelle 2003), and because

tariffs were over 40 percent. of WTO accession may have helped China negotiated moderately high tar-

By the time of its accession to the reformers to push through reforms iffs on some key products, such as rice,

much earlier than would oth- wheat and maize. However, export sub-

erwise have been feasible. sidies that were formerly important for

THE EVOLUTION OF CHINA'S TARIFF RATES Certainly, the reform process maize and cotton had to be abolished,

SINCE 1992 initiated by WTO accession and tariffs fell on products such as

requirements in areas such as oilseeds, sugar and dairy products. As aChina's Weighted Average Tariff legal reform was taken much key member of the WTO, China also has

45 - further with the objective of the opportunity to press for reduction of

40 - developing the legal structures the barriers against her exports of (pri-

35- _ needed to promote China's marily labor-intensive) agricultural

30 development (Long 2000). exports. This is particularly important

25- because of the need to create rural

20 -- I |Future expansion employment in China. Martin (2001)

15 -- | - ~~~~~~~~~~~~~~~~estimates that the weighted average bar-

n: - _w_* _ _ _ QUANTITATIVE ANALYSIS riers facing China's exports of agricul-f. -_ r- - w _ undertaken as part of the tural products are four times as high as

u-___ -- _ "Bank/DRC project found that those facing her nonagricultural

1992 1994 1996 2001 WTo the trade reforms required by exports-and this estimate that is

China's accession will greatly undoubtedly conservative because of the

expand China's trade. A key widespread presence of prohibitive tar-

30 Development Outreach WOR D i1NRK INSTITLUTF

iffs, whose effects are not captured. already faces seven times as many antidumping measures perOverall, there is likely to be some downward pressure on dollar of exports as the United States. The product-specific

rural wages and incomes, with some-albeit small-adverse safeguards are new protection introduced as part of a W'TOpoverty impacts (Chen and Ravallion 2oo3). Attempts to deal agreement, and the textile safeguards include poorly definedwith these problems by slowing down or reversing trade and potentially very damaging procedures on trade diversion.reforms would be very costly, even if they were possible under Within China, much has been done to protect those inWTO rules. Policies that deal with these poverty impacts urban areas who are disadvantaged by trade reform, but thedirectly by improving rural technology and infrastructure; social safety net remains "full of holes" in rural areas (Hussainexpanding educational opportunities in rural areas, and 2003). Much needs to be done both to increase opportunitiesreducing the barriers to migration out of the rural sector are for rural residents, and to help protect them against adversemuch more likely to be successful, and are explicitly consis- shocks. whether from external or internal developments.tent with WTO rules.

China has committed to dramatic opening of its services Conclusionsector under the General Agreement on Trade in Services(GATS). In fact, Mattoo (2003) concludes that China's acces- OVERALL. IT IS CLEAR that China's accession builds on thesion offer is the largest liberalization of services ever under- progress made throughout reform process, while marking atakenundertheWTO. Overhalf the sectors andmodes of sup- turning point through the use of external commitments toply have been liberalized, and considerable benefits to reform. While much-and particularly most of the requiredChina's firms and consumers are likely. China's opening was trade liberalization-has already been done, some majornot done unreservedly, however. Many reservations were adjustments will be required in formerly highly protectedincluded on issues such as ownership structure and geograph- areas like automobiles and beverages and tobacco. Substantialical location, as well as the rights inherent under GATS in further work will be needed on complementary policies inareas such as prudential regulation of the banking sector. areas such as improved regulation in financial and other sec-Liberalization of key service sectors involved in the logistics tors, and in increasing opportunities for and assistance to thechain seems likely to allow substantial reductions in costs to poor, and particularly the poor in rural areas.firms, which are currently much higher than internationalnorms in China. Luo and Findlay (2003) estimate potential Will Martin is a Lead Economist, Development Research Group, Thecosts savings equal to io percent of gross output value. World Bank.

China has developed a modern intellectual property rightssystem that takes into account the fundamental differences Referencesbetween its situation and that of the high-income economies Bhattasali, D., LI, Shantong, and Martin, W. (2002), WTO Acceession, policyfor whom production of intellectual property rights are cur- reform and poverty reduction: an overview, www.worldbank.org/trade

rently more important (Maskus 2003). China has used the Francois, J. and Spinanger, D. (2002), Regulated efficiency, WTO accessionflexibility inherent in the TRIPS agreement in areas such as and the motor vehicle sector in China, www.worldbank.org/trade.

pricing of pharmaceuticals to ensure that people have ade- Huang, J. and Rozelle, S. (2002), The nature of incentives to agriculture inquate access to essential pharmaceuticals. Maskus identifies China and impacts of WTO accession, www.worldbank.org/tradetwo potential areas of concern-one involving too much regu- Hussain, A. (2002), 'Coping and adapting to Job losses and declines in farm

lation, and another involving too little. The first is with pro- incomes' www.worldbank.org/tradeposals to patent software, which seem perhaps too protective lanchovichina, E. and Martin, W. (2002), 'Economic impacts of China's WTO

of producer interests for China's stage of development. The accession, www.worldbank.org/trade.

second area of concern relates to enforcement, where weak- Lardy, N. (2002), Integrating China into the World Economy, Brookings,

nesses in enforcement are likely to reduce China's access to Washington DC.

state-of-the-art technologies. Long, Yongtu (2000), 'On the question of our joining the World TradeFortunately. China-unlike Japan when it joined the Organization' The Chinese Economy 33(1):5-52.

GATT-was able to avoid a situation where major trading part- Luo, Y. and Findlay, C. (2002), 'Logistics in China: Implications of accessionners refused to apply Most-Favored-Nation treatment. to the WTO', www.worldbank.org/trade.

However, an unfortunate feature of the accession agreement is Martin, W. (2001), 'Implications of reform and WTO accession for China'sthe imposition of several types of trade-restricting measures. agricultural policies' Economics of Transition 9(3):717-42.

For up to 15 years, China may be treated as a non-market Maskus, K. (2002), 'Intellectual property rights in the WTO accession pack-

economy for antidumping policy decisions-a status that age: assessing China's reforms' www.worldbank.org/trade.makes China more vulnerable to the antidumping measures

Mattoo, A. (2002), 'China's accession to the WTO: the services dimension',than other WTO members. For up to twelve years after China s www.worldbank.org/trade.accession, trading partners can impose product -specific safe-

accdssagaionstCinga'sexprtnerscan F porseveradycar-sa eciftert fe- Messerlin, P. (2002), 'China in the WTO: antidumping and safeguards'guards against China's exports. For several years after the textile wwwoldbnortae.and clothing quotas are abolished, China's exports of these WorldBank.orgltradExaproducts may be subjected to special textile safeguards. The World Bank (1988), China: External Trade and Capital, World Bank,

antidumping measures are of particular concern because China .

J u I Y 2 0 0 3 31

References

Fairbanks M. and Lindsay s. (1997), Plowing the Sea: Nurturing the Hiddencontinued from page 9 Sources of Growth in the Developing World. Harvard Business School Press.

ITC (International Trade Center) (2002), Cambodia- Building Blocks for aCountry Action Plan for Textiles and Clothing, Geneva.

Challenges ahead JICA (2001), Study on Improvement of Marketing System and Post-harvestQuality Control of Rice in Cambodia, Japan International Cooperation Agency,

ACCESSION OF CAMBODIA TO THE WTO is part of the gener- Phnom Penh.

al strategy of trade policy of Cambodia, which is directed to Ministry of Commerce (2001a), Opportunities, Challenges and Commitments

effective integration of the country into the world economy for Cambodia's Accession to the WTO: Explanatory Notes Prepared for the

and global trading system. Plenary Session of the National Assembly, 19 July 2001, Phnom Penh.

Globalization does not come without difficulties, particu- Ministry of Commerce (2001), Cambodia: Integration and Competitiveness

larly for Least Developed Countries (LDC) like Cambodia. The Study Phnom Penh.

1997 regional financial crisis while sparing Cambodia from its Ministry of Commerce, National workshop on 'How to Develop Garment

direct immediate effects had nonetheless affected indirectly the Exports without Quotas", 28 November 2002, Phnom Penh.

country as seen from the sharp drop of foreign direct investment McCulloch, N., L. A. Winters and X. Ciero (2001), Trade Liberalization and

from the region. The ratification of the US-Vietnam Trade Poverty; A Handbook, DFID, London.

Agreement by the US Congress has no doubt created some NESDB (National Economic and Social Development Board) and Kasetsart

uncertainty as to the flow of FDI away from Cambodia. China's University Research and Development Institute (2001), The Jointentry into the WTO has dramatically changed the dynamic of Development Study for Economic Cooperation Plan between Thailand and

regional trade. The phase-out of Multi Fiber Arrangement Cambodia (TCJDS), Bangkok and Phnom Pent.

(MFA), or the elimination of quantitative restrictions on textile Porter, Michaes (19.0), 'The Competitive Advantage of Nations'. New York.trade, by 2005 will further intensify the pressure on Cambodia The Free Press.

to become more competitive in the textile and clothing indus- Royal Government of Cambodia (2002a), Implementing the Integratedto beome mre cmpetiive i thetextie andcloting idus- Framework in Cambodia, Ministry of Commerce, Phnom Penh.

try. Moreover, the recent political upheavals in a few other ramernm odiaMinistry of Sceconom Denh.

ASEAN countries did not bore well in term of confidence of Royal Government of Cambodia (2002b), 2nd Socioeconomic DevelopmentPlan (2001-2005), Ministry of Planning, Phnom Penh.

investors in the region.Successes or failures of Cambodia will depend to a large Sok, Siphana (2001), Globalization and Cambodia: Hlstory and Perceptible

extent not only on its ability to balance its rights and obligations Trends, Paper presented at tehe Globalization Conference; Business and Lawextet nt oly o it ablityto alace is rght andoblgatons Perspectives, June 27-28, 2001, Phnom Penh.

under the multilateral trading system but as well on howwell thecountry could position itself to take advantage of the broad Sok, Siphana (2002), Formulation of a Legal and Judicial Reform Strategy

for Cambodia, Ministry of Commerce and Cambodia Legal Resourcesopportunities and challenges of regionalism and globalism. Development Center, Phnom Penh.

Cambodia is a good example of a country that has, despite Sok, Siphana (2002a), "Experiences of Cambodia's accession to the WTO:

its dramatic past and existing shortcomings, emerged as a Status and Future Prospects", Paper presented at the regional seminar on

vibrant economy thriving on the 'Competitiveness' paradigm. facilitating the accession of ESCAP developing countries to the WTO, 18-21

From the early days of national rebuilding from the ashes of February 2002, UNCC, Bangkok.

genocide, to capitalizing on its comparative advantage based Sok, Siphana (2003), Prospects for Multilateral Trade Regimes in ASEAN

on cheap labor and exploitation of natural resources, to and the Potential Impact on the Mekong Region: Perspectives of Cambodia.

embracing controversial value-added labor-textile export Paper presented at the 13th Asia Society Corporate Conference, 5-7 Marchlinkages-thus creating a precedent in the annals of textile 2003, Ha Noi, Viet Nam.

negotiations-to defining new dynamic strategic value-adding Sok, Siphana (2001), Global Economic Prospects and the Developing

alliance with its neighbors Thailand and Vietnam. to optimiz- Countries: Making Trade Work for the World's Poor, Washington DC.

ing its national branding as the Seventh Wonder of the World Sok, Siphana (2002), Decision on Accession of Least-Developed Countries,

new tourism destination combined with its open skies policy, WT/L/508, December 10, 2002, Geneva.

to capitalizing on a highly interactive form of Government- World Trade Organization (1999), Technical Note on the Accession Process,

Private Sector Dialogue, to projecting the value as a new WT/ACC/ 7/Rev. 1, 19 November 1999, Geneva.

organic agricultural country, to protecting intellectual prop-erty rights, and to revolutionizing the concept of trade main-streaming for poverty reduction and economic development.In sum, Cambodia, with this 'Competitiveness' paradigm inplace, is prime to ride the trend of regionalism and globalismand turn trade as a potent tool for poverty alleviation. At

Sok Siphana is Secretary of State for Commerce, IF Focal Point,

Cambodia.

32 Development Outreach WORLD BANK INSTITUTF

WTO Negotiations for Development, July 23-24, Washington, D.C.AGRICULTURAL PROTECTIONISM

Gardner, B. (2002). North American Agricultural Policies and Effects oncontinued from page 15 Westem Hemisphere Markets. Paper presented at the Seminar on

"Agricultural Liberalization and Integration: What to Expect from the FTAAand the WTO?" Inter-American Development Bank: Washington D.C.

years preceding the major crisis after the 2002 devaluation. I Nogues, J. J. and M. Grandes (2001). "Country Risk: Economic Policy, Contagionhave done this because I believe agricultural protectionism par- or Political Noise?" Journal of Applied Economics, IV, 1:125-162.tially explains the crises that Argentina is facing. Having said Nogues, J. J. (2003). Agricultural Exporters in a Protectionist World: Assessing

this, I want to make clear that protectionism contributed only a Trade Strategies for the MERCOSUR. Draft paper prepared for the Inter-fraction of the crisis, while the bulk was generated at home by American Development Bank: Washington DC.

bad economic policies, including irresponsible fiscal deficits OECD (2000). Agricultural Policies in OECO Countries: Monitoring and(Nogues and Grandes 2ooo) and more recently, by several vio- Evaluation, OECD: Paris.

lations of established institutions including the Constitution. OECD (2001). The Uruguay Round Agreement on Agriculture: An EvaluationWhat is to be done? I started this note by citing the of Its Implementation in OECD Countries, OECD: Paris.

Marrakech Agreement of 1994. according to which the WTO. Porto, G. G. (2003). Trade Reforms, Market Access and Poverty in Argentina.the IMF and the World Bank should work to achieve greater Mimeo, World Bank: Washington DC.

coherence in global economic policy making. This mandateSampson, G. and R. Snape (1980). "Effects of the EEC's Variable Import

has never been defined carefully but, while agricultural protec- Levies," Journal of Political Economy 88: 5.

tionism persists at its current irrational levels, efficient coun-

try producers face a multilateral trading system that is inco- Argentina. Draft paper, World Bank: Washington DC.herent with the internatsonal financsal system. This incoher-herene wi bhe minternatinedaongl finasnthc powel psroc tio ini World Bank (2002). Global Economic Prospects, World Bank: Washington DCence will be maintained as long as the powerful protectionist

agricultural lobbies remain unchallenged. WTO (1995). The Results of the Uruguay Round of Multilateral TradeHow can this lobby be challenged? No indebted country Negotiations: The Legal Texts, WTO: Geneva.

would be wise to announce that agricultural protectionism is WTO (2003). Negociaciones Sobre la Agricultura: Anteproyecto deincreasing debt problems; if they did, the perceived level of Modalidades para los Nuevos Compromisos, TN/AG/W/1/Rev. 1, WTO:

country risk would automatically jump with the consequent

negative effects on the economy. Therefore, the onus appears

to be on the side of multilateral organizations. One possibility Protecting the Vulnerablethat might be worth exploring is to make the WTO Working The Design and ImplementationGroup on "Trade, Debt and Finance" a negotiating group in : of Effective Safety Netsthe Doha Round. The idea is to have creditor and debtor coun-

tries meet at the negotiating table in order to discuss the .. . December 1-12, 2003financial consequences of trade protectionism and the bene- Washington, D.C.fits that trade liberalization would have on the international

financial system. By incorporating the interests of the credi- This two-week course aims at providing partici-tors, most of whom are from industrial countries, there would pants with an in-depth understanding of the con-be a domestic force fighting against the agricultural lobby; if ceptual and practical issues involved in the devel-

my Government lowers the barriers that protect you, I have opment of safety nets interventions to protect poorgreater chances of recouping my credits. In order to strength- and vulnerable population groups from income risken the incentives in favor of lower barriers, indebted coun- and to ensure they have adequate access totries facing payment difficulties could tie part of their debt essential services.

repayments to trade liberalization measures taken by the Conducted in English, the course incorporates for-creditor countries. This proposal implies an important shift mal lectures together with practical case studies

in the structure of incentives in favor of trade liberalization. and hands-on exercises enabling participants toAfter more than five decades of increasing agricultural pro- apply what they have learned to concrete situationstectionism, I believe that only a radical shift in the structure of

incentives will start to reverse this trend. The proposal I have Application and Contact

presented goes in that direction. ,,v Yoko Kobayashi

E-mail: YkobayashiWworldbank.orgJulio J. Nogues is Consultant and Professor, School of Government, Fax: 1-202-676-0961Universidad Di Tella, Buenos Aires Address: 1818 H street, NWjnogues@infovia.com.ar Washington, DC 20433

Website: http://www.worldbank.org/wbi/socialsafetynetsReferences

Diakosavvas, D. (2001). The Uruguay Round Agreement on Agriculture in W 0 R L D B A N K I N S T I T U T EPractice: How Open Are OECD Markets? Paper presented at the World Bank Proooine knowledeend leornine fern beeerworldConference on Leveraging Trade, Global Market Integration, and the New

I I Y 2 11 1: 3 33

Micco, Alejandro, Clark, Ximena and David Dollar (2002). "Maritime

TRADE FACILITATION, WTO RULES ... Transport Costs and Port Efficiency." World Bank Working Paper Series #

continued from page uB 2781. The World Bank: Washington, DC.

National Statistical Coordination Board (1998). Yearbook of Labor Statistics.

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Anderson, James E. (1979). "A Theoretical Foundation for the Gravity Organization for Economic Co-operation and Development (2001). Business

Equation." American Economic Review 69: p.106-116. Benefits of Trade Faclitation. TD/TC/WP(2001)21 FINAL. OECD: Paris.

Anderson, James E. and Eric van Wincoop (2003). "Gravity with Gravitas: A Otsuki, Tsunehiro, John S. Wilson, and Mirvat Sewadeh (2001a), 'What Price

Solution to the Border Puzzle.' American Economic Review 93(1):170-192. Precaution? European Harmonisation of Aflatoxin regulations and Africangroundnut exports." European Review of Agricultural Economics 28(3):263-284.

Asia Pacific Economic Co-operation (APEC) (1999). Assessing APEC Trade

Liberalization and Facilitation: 1999 Update, Economic Committee, Otsuki, Tsunehiro, John S. Wilson, and Mirvat Sewadeh (2001b). "Saving Two

September 1999. APEC: Singapore. in a Billion: Quantifying the Trade Effect of European Food Safety Standardson African Exports.' Food Policy 26:495-514.

Asia Pacific Foundation of Canada (1999). Survey on Customs, Standards

and Business Mobility in the APEC Region. APF Canada: Vancouver. Poyhbnen, R (1963). "A Tentative Model for the Volume of Trade betweenCountries." Welwirtschaftliches Archiv 90, (1):93-99.

Australian Department of Foreign Affairs and Trade and Chinese Ministry ofForeign Trade and Economic Cooperation (2001). Paperless Trading: Benefits Tinbergen, J. (1962). Sharing the World Economy: Suggestions for an

to APEC. Commonwealth of Australia. www.dfat.gov.au/publications/paper- International Economic Policy. Twentieth Century Fund: New York.

less/paperless trading.pdf. United Nations Conference on Trade and Development (2001). E-Commerce

Balistreri, Edward J. and Russell H. Hillberry (mimeo). "Trade Friction and and Development Report. UNCTAD: Geneva.

Welfare in the Gravity Model: How Much of the Iceberg Melts?" U.S. Wilson, John S., Catherine Mann, Yuen Pau Woo, Nizar Assanie, and Inbom

International Trade Commission, Washington, DC. Choi (2002). Trade Facilitation: A Development Perspective in the Asia-

Dollar, David and Aart Kraay (2002). "Growth Is Good for The Poor", Journal Pacific Region. Asia Pacific Economic Cooperation: Singapore.

of Economic Growth, 7 (3):195-225. Wilson, John S., Catherine Mann, and Tsunehiro Otsuki (2003) "Trade

Evenett, Simon J. and Wolfgang, Keller. (1998). "On Theories Explaining the Facilitation and Economic and Economic Development," World Bank Policy

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Feenstra, Robert C., James R. Markusen and Andrew K. Rose (1998). Woo, Yuen Pau and John S. Wilson (2000). Cutting Through Red Tape: New

"Understanding the Home Market Effect and the Gravity Equation: The Role Directions for APEC's Trade Facilitathon Agenda. Asia Pacific Foundation of

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Paper: 6804. World Economic Forum (2000). Global Competitiveness Report. World

Fink, Carsten, Aaditya Matoo and Cristina Ileana Neagu (2002). "Trade in Economic Forum: Geneva.

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the Role of Communication Costs in International Trade." The World Bank

Working Paper Series #2929. The World Bank: Washington, DC.

Frankel, Jeffrey A., Ernesto Stein and Shang-Jin Wei (1997). Regional

Trading Blocs in the World Economic System, Washington, DC: Institute for : "* _

International Economics.

Freund, Caroline and Diana Weinhold (2000). "On the Effect of the Internet 5f1dY JU g mon International Trade." International Finance Discussion Papers #693,

Board of Governors of the Federal Reserve System.

Hertel, Thomas W., Terrie Walmsley; and Ken Itakura (2001). "Dynamic 'D E V E LO 0 P M E N TEffect of the "New Age" Free Trade Agreement between Japan and . r nk Ja 5Singapore." Joumal of Economic Integration 16(4):446-84. I I...IMD (2000). World Competitiveness Yearbook. IMD: Lausanne.

Mann, Catherine L., Sue E. Eckert, and Sarah Cleeland Knight (2000).

Global Electronic Commerce: A Policy Pnmer. Washington: Institute for If 11 1ROInternational Economics. * n_2_ re,

Maskus, Keith E. and John S. Wilson (2001). Quantifying the Impact of . ofihsIlallbhh sdautWzam li World-Technical Barners to Trade: Can it be done? Studies in International 11t_* ft-pf1t W * -W, mtlddIsEconomics. Ann Arbor: University of Michigan Press. O 1111111 own Is

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Empirical Framework for Analyzing Technical Regulations and Trade," in

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Regulation and Customs Procedures." September 1999 for the WTO/World

Bank Conference on Developing Countries in a Millennium Round.

34 Development Outreach WORLD BANK INSTITUTE

KNOWLEDGE RESOURCES

Lookingfor development information, networking professionals worldwide. Published by the Federation ofopportunities, likemindedpartners. aprofessional exchange? International Trade Associations (FITA), Really UsefulReaching those goals is as close as your computer screen. Sites for International Trade Professionals containsA network of development websites will take you to thefour informally written descriptions of 4 -5 web sites fromcorners of the world and willput you in touch with a FITA's International Trade Web Resourcesmulticultural cornucopia of knowledge. (http://fita.org/webindex) that are useful for international

trade, as well as some fun sites that enliven a business day.Visit: http://fita.org/usefuI/index.htmI

DEARDORFF'S GLOSSARY OF INTERNATIONALECONOMICSThis glossary attempts to cover all of the terms andconcepts from international economics, including both THE WORLD BANK TRADEinternational trade and international finance. The glossary . .-... RESEARCH ELECTRONICincludes definitions, links to definitions, and wherever . BULLETINappropriate links to other sites and documents that may This is a quarterly e-mailprovide additional information. There is a bibliography of T . .' publication containing abstractssources for some of the terms, including links to the papers ; ... of recent trade working papersthemselves where available (usually through JSTOR, for . , and other works. Additionalwhich access requires a subscription). There is also a information on the Bank's Tradepicture gallery of the diagrams of international economics, Research Team activities can beeach with its own page. There are also various lists of types found on the World Bank Trade Research websiteof terms that occur frequently. (www.worldbank.org/research/trade). This provides basicVisit: www-personal.umich.edu/-alandear/glossary/ information on research activities in progress, trade

working papers, other Bank trade publications, trade dataand links to other trade related web sites. You may also visitthe recently redesigned Trade Web at

THE WORLD TRADE www.worldbank. org/trade for additional information on.. -. _ -w ORGAN IZATION (WTO) trade and development, including the World Bank Institute's

- _ _ WTO is the only global activities in the area of capacity-building and training,-: -- --. international organization Integrated Framework, and related trade activities.

dealing with the rules of trade Visit: www.worldbank.org/research/trade/newletter.htmbetween nations. At its heart arethe WTO agreements,

negotiated and signed by the bulk of the world's tradingnations and ratified in their parliaments. The goal is to help . INTERNATIONAL TRADEproducers of goods and services, exporters, and importers 'B. _ . FORUMto conduct their business. The website includes . This is the online magazine of theinformation on the organization, news, trade topics, . . International Trade Center (ITC).resources, meetings, documents, community forums and - - ITC is the technical cooperationmore. agency of the United NationsVisit: www.wto.org Conference on Trade and Development (UNCTAD) and the

World Trade Organization (WTO) for operational, enterprise-oriented aspects of trade development. ITC supportsdeveloping and transition economies, and particularly their

a ha ~ - -_FEDERATION OF business sector, in their efforts to realize their full potentialINTERNATIONAL TRADE for developing exports and improving import operations.ASSOCIATIONS (FITA) Visit the magazine website at: www.tradeforum.org

:-. ------ R- FITA's Really Useful Sites Visit the ITC website at: www.intracen.org:- -* . - * ~ - for International Trade

Professionals is a bi-weeklyemail newsletter sent to8o,ooo international trade

JUL'YI \' 2'~J~ 1 35

KNOWLEDGE RESOURCES

TRADE AND DEVELOPMENT sectors. Therefore, ISO is able to act as a bridgingCENTER organization to meet both the requirements of business

9F s,K, .:.-E. The site is a joint initiative of the and the broader needs of society. ISO's work program

. . WTO and the World Bank ranges from standards for traditional activities, such asInstitute under a program called agriculture and construction, through mechanical

Information Technologies for engineering, to medical devices, to the newest

Development (ITD). The Trade information technology developments, such as the digital

and Development Center was created to provide coding of audio-visual signals for multimedia

information to the community of Internet users who have a applications.

specific need for information on trade as it relates to social Visit: www.iso.chand economic development. Features include: theDevelopment Gateway, Advisory Center on WTO Laws,WTO Network online discussions, conferences, and more.Visit: www.itd.org - ASSOCIATION OF SOUTHEAST

ASIAN NATIONS (ASEAN)R-EmL. _ ASEAN is an association of ten

countries in the South Asia

-- - - - '.. ASIAN DEVELOPMENT BANK L - region. Its aims and purposes areADB is a multilateral _ to accelerate economic growth,development finance institution - social progress and cultural

,, ___ S - dedicated to reducing poverty in development in the region, and to

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provides assistance based upon programs, projects, meetings, and publications.considerations of economic Visit: www.asean.or.idviability, technical feasibility,

and financial soundness. The website provides links tonews, events, and publications.Visit: www.adb.org THE ECONOMIC POLICY

. INSTITUTE-- - EPI is a nonprofit, nonpartisan

_ ' '9 .- think tank that seeks to broaden

A..FmEn.cCww.. ASIA-PACIFIC ECONOMIC -- - : the public debate about strategies

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* ' -: . . - != The APEC forum is the primary - . - -:--: . economy. It provides research

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_ _ promoting open trade and prosperous, fair, and sustainable economy. EPI stresses real

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trade and investment liberalization, business facilitation, Visit: http://epinet.orgeconomic and technical cooperation. The websiteprovides links to databases and e-IAPS, publications,news, and events.Visit: www.apecsec.org.sg - INSTITUTE FOR

INTERNATIONAL ECONOMICSIIE is a private, nonprofit,nonpartisan research institution

INTERNATIONAL STANDARDIZATION ORGANIZATION - - devoted to the study of

ISO is a network of the national standards institutes of international economic policy.

146 countries, with a Central Secretariat in Geneva, Its agenda emphasizes globalSwitzerland. ISO is a non-governmental organization and macroeconomic topics,

occupies a special position between the public and private international money and finance, trade and related social

36 Development Outreach WORI.D BANK INSTITLITF

issues, investment, the international implications of the free electronic notification service for journal tables ofnew technologies, globalization and the backlash against contents and new product announcements.it, reform of the international financial architecture, and Visit: www.wkap.nInew trade negotiations. In late 2ool. the Institute helpedcreate a new Center for Global Development to addresspoverty and development issues in the poorer countries.Visit: www.iie.com and www.cgdev.org

INSTITUTE FOR INTERNATIONAL ECONOMIC STUDIESIIES is primarily a research institute affiliated with Bureau of International Labor Affairs - ILABStockholm University. The goal of he Institute is to create www.doI.pv/ilabhweIcome.htmla research environment characterized by high Center for Economic Policy Researchcompetence in economic analysis of international issues. www.ceprorgThree areas of research dominate the work of the European Bank for Reconstruction and Developmentwww.ebrd.comInstitute: macroeconomic analysis of open economies;foreign trade; and general economic theory and hEtpen/europa.eu.intmethodology. The website provides links to publications, Export-Imprt Bank of the United Statesconferences, and seminars. www.exim.govVisit: www.iies.su.se Inter-American Development Bank (IADB)

www.iadb.org

International Chamber of Commercewww.iccwbo.org

INTERNATIONAL FOOD AND International Law InstituteFood &n.u Agric ... AGRICULTURAL TRADE

POLICY COUNCIL International Trade CommissionENTERHERE The IPC is dedicated to WWW.Usitc.gov

-_ ____ developing and advocating International Trade Data Systempolicies that support an

efficient and open global food system, that promotes the Naional Bureau of Economic Research (USA)economically and environmentally sustainable production (Paris)and distribution of safe, accessible food supplies to the www.oecd.orgworld's growing population. The website provides links to OECD (Washi on)programs, events and activities--in particular, the IPC DgECO wastntonRecommendations for the Doha Agricultural Trade Organization of American States (OAS)Negotiations. www.oas.orgVisit: www.agritrade.org Trade Compiiance Center - US Department of Commerce

www.mac.doc,gov

United Nations Conference on Trade and Developmentwww.unctad.org

KLUWER United States Trade and Development AgencyThis is a service that provides wwwtda.vinformation products to United States Trade Representativeacademic and corporate

.. - - tj .......researchers. Kluwer USTrade.Orgpublications consist of books,

maorreerncwrk,ntand multiple Washington International Trade Associationmajor reference works, and journals in print www.wita.orgonline delivery formats. The topics cover the humanities

World Customs Dijnization (WCO)and social sciences, environmental science, physical www.wcoomd.orgsciences, behavioral sciences, engineering and computer World Tade Centers Association (WTCA)sciences and biosciences. The reader may subscribe for a * http-J/iserve.wtca.org

I L L 3 i, ,, 3 37

BOOKSHELF

MamphelaRamphele STEERING BY THE STARS: BEING-,. YOUNG IN SOUTH AFRICA, by WORLD BANK PUBLICATIONS 2003

. ' ~'' ~ Mamphela Ramphele, Tafelberg 2002.

The book captures some of the REGIONAL INTEGRATION ANDstruggles young people continue to DEVELOPMENT, byMaurice Schiffexperience in post-apartheid South and L. Alan Winters.Africa. The book is set in the black REGIONAL INTEGRATION

township community of New AND DEVELOPMENT The book examines regionalismCrossroads, Cape Town where from the perspective of developing

violent homes, schools and streets add to the countries and presents ageneral insecurity, as is the case in many other South comprehensive account of existingAfrican black communities. The stories in this book theory and empirical results. Thisillustrate life experiences for young people, bearing all the book incorporates the findings ofscars of the legacy of the past. It is a testament formal analyses of the politics and dynamics of regionalism.about the resilience of people who have seen, heard and It considers the relationship between regionalism andexperienced pain and anguish and yet kept hoping for a multilateralism and explores the economic advantages ofbetter tomorrow. nondiscriminatory trade liberalization, which the authors

argue should be exploited to the maximum extent. The bookTHE WORLD TRADE also provides rules of thunib for regionalism, rules that areORGANIZATION: LAW AND not inviolable but which should not be violated lightly.PRACTICE, byMitsuo Matsushita,Thomas Schoenbaum, Petros

Mavroidis. Oxford University Press. DEVELOPMENT, TRADE AND2003. 1 THE WTO: A HANDBOOK,

I &\L) I . Edited by Bernard M. Hoekman,This book, written by an Y.j Philip English, and Aaditya Mattoo.outstanding team of WTO lawspecialists, provides a Developing countries are

comprehensive overview of the law and practice of the increasingly confronted with theWTO. The authors explain the origins and development, need to address trade policy relatedvia the GATT, of all of the substantive legal areas covered issues in international agreements,by the WTO as well as the sources of law and remedies of most prominently the World Tradethe Dispute Settlement system. Organization (WTO). This handbook offers guidance on the

design of trade policy reform, surveys key disciplines andthe functioning of the World Trade Organization (WTO),and discusses numerous issues and options that confront

WTO PUBLI CATI ONS ON TRADE developing countries in using international cooperation toimprove domestic policy and obtain access to export

* Special Study No. 7, Adjusting to Trade Liberalization- markets. Many of the issues discussed are also relevant inThe Role of Policy, Institutions and WTD Disciplines. the context of regional integration agreements.

. Discussion Paper No. 1, Industrial Tariffs and the DohaDevelopment Agenda.WWTO Analytical Index -Guide to the WTi Law and Practice. STANDARDS AND GLOBAL

• WTi Basic Instruments and Selected Oocuments, Volume 1. TRADE: A VOICE FOR AFRICA,• Computer Based Training on General Agreement on Trade byJohn S. Wilson and VictorAbiola.

in Services.*s 1r N , The book reflects the World Bank's

For hotlinks and order information visit: www.wto.org, and ' work on trade facilitation,

click on New Publications. J". e standards and capacity building in->-- _ Sub-Saharan Africa. It provides

4 or, E llE in-depth case-by-case analysis of

38 Development Outreach 'r(RLD BANK INSTITUTE

five African countries-Kenya, Mozambique, Nigeria, WHAT CAN AFRICA EXPECT FROM ITS TRADITIONALSouth Africa, and Uganda-and is intended to be a EXPORTS?resource for policymakers and the development by Francis Ng and Alexander Yeats.community in a new "behind the border" barrier to trade.

TRADE FACILITATION: A DEVELOPMENT PERSPECTIVEIN THE ASIAN PACIFIC REGION, byJohn S. Wilson.

FREE TRADE AREA MEMBERSHIP Catherine Mann. Yuen Pau Woo. NizarAssanie. and InbomAS A STEPPING STONE TO Choi.DEVELOPMENT: THE CASE OF

\ . . ASEAN, byEmiko Fukase and Will LA NUEVA AGENDA DEL COMERCIO EN LA OMC,L~'-J~rIIL.J Martin. by Marcelo Olarreaga and Ricardo Rocha.

This study investigates the DID DOMESTIC POLICIES MARGINALIZE AFRICA INeconomic impacts of accession to INTERNATIONAL TRADE? byAlexander Yeats with Azitathe ASEAN Free Trade Area (AFTA) Amjadi. Ulrich Reincke and Francis Ng.

by the new members of Cambodia, the Lao PDR, Myanmarand Vietnam. The trade policies of these countries are WHAT MAKES EXPORTS BOOM? by Mark J. Roberts andexamined, and a series of quantitative analyses were James R. Tybout.undertaken to evaluate the impacts of accession.

TRADE PERFORMANCE AND POLICY IN THE NEWINDEPENDENT STATES, by Constantine Michalopoulos

TRADE POLICY DEVELOPMENTS IN THE MIDDLE EAST and David Tarr.AND NORTH AFRICA, byBernardHoekmanandHanaaKheir-El-Din. eds. THE URUGUAY ROUND: WIDENING AND DEEPENING

THE WORLD TRADING SYSTEM, by Will Martin and L.The Middles East and North Africa region has great Alan Winters.potential for economic growth and prosperity in the Zlstcentury. Yet this potential will not be realized unless THE URUGUAY ROUND AND THE DEVELOPINGgovernments and private sector leaders in the region ECONOMI ES, by Will Martin and L. Alan Winters. eds.forge parterships for development. An indispensableresource for all those working within the international THE URUGUAY ROUND: STATISTICS ON TARIFFdevelopment community, especially within the Middle CONCESSIONS GIVEN AND RECEIVED, byJ. MichaelEast and North Africa region, this publication offers Finger, Merlinda Ingco and Ulrich Reinckepolicy and institutional alternatives to help both partiesachieve that goal. WTO OBLIGATIONS AND BANK POLICY ADVICE:

KEEPING UP WITH POST-URUGUAY ROUND RULES,byJohn Croome

GLOBAL ECONOMIC PROSPECTS 2004This is one of the key World Bank tools for analysis andadvocacy of the global trade agenda.

GLOBALIZATION, GROWTH AND POVERTY: BUILDINGAN INCLUSIVE WORLD ECONOMY For hotlinks and summaries visit:This study shows that globalization has helped reducepoverty in a large number of developing countries but itmust be harnessed better to help the world's poorest. These publications can be purchased throughmost marginalized countries improve the lives of their the World Bank Info Center Bookstore, atcitizens. http://publications.worldbank.org/ecommerce/

TRADE BLOCSThis latest report analyzes both the political and economicbenefits of regional trade blocs.

39

JULY 2003 23-24 Annual Meetings of the World Bank and theInternational Monetary Fund

9-11 UNCTAD Expert Meeting "Environmental Dubai, United Arab EmiratesGoods and Services in Trade and Development" www.imf.org/external/amGeneva, Switzerlandwww.unctad.org

OCTOBER15-16 OECD Investment Compact for South East

Europe ministerial conference. 5-9 World Forum on Energy RegulationVienna, Austria Organizer: Italian Regulatory Authority forwwwi.oecd.org/media/upcoming.htm Electricity and Gas

Rome, Italy29-31 UNCTAD Expert Meeting on Market Access wwwi.oecd.org/media/upcoming.htm

IssuesGeneva. Switzerland 14-17 World Knowledge Forum 2oo3www.unctad.org Seoul. South Korea

www.wkforum.org/wkf-eng/AUGUST

16 World Food Day10-16 Drainage Basin Security: Balancing Production, Washington, DCa

Trade and Water Use www.worldfooddayusa.orgStockholm International Water Institute www.feedingminds.orgStockholm, Swedenwwwl.oecd.org/media/upcoming.htm 17 International Day for the Eradication of Poverty

NewYork, USASEPTEMBER www.un.org/esa/socdev/poverty/poverty-link3.htm

10-14 Fifth WTO Ministerial ConferenceCancun, Mexicowww.wto.org

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The KULT Program Partners Consortiumis pleased to offer:

Capacity Enhancement Opportunities forEducation Business Entrepreneurs, Training Executives/Managers and

Professional Trainers & Learning Technology Specialists

HOW TO SURVIVE IN A GLOBAL TRAINING MARKET andAVOID BECOMING A DINOSAUR? nternationalK E I |T INCREASE THE COMPETITIVE EDGE and society for

tCons r i u m ENSURE YOUR INSTITUTION's FINANCIAL HEALTH Kraining_Quallty

The Knowledge Utilization through Learning Technologies (KULT) Program was originally founded by World BankInstitute (WBI)/The World Bank. It has been transferred to, and is now managed by, the KULT Program PartnersConsortium consisting of the Asian Institute of Management, University Science Malaysia, University of Surabaya,American University in Cairo, and SPAAC/ Human Empowerment Center of Egypt. These partner institutions willcontinue to offer KULT Program's international workshops, in collaboration with the International Society forImproving Training Quality (isitQ),-a professional and virtual network of KULT Program alumni.The following international workshops are offered:

6th International Workshop on: "Strategic Management and Marketing of Training (SMMT-6):Ensuring Sustainability and Financial Health of Training Institutions"Organized by: Asian Institute of Management (AIM)Manila, the Philippines: September 1-9, 2003-Website: www.kult-educ.org/wksp/smmt-6

2nd International Workshop on: "Enhancing Training Quality through Quality Customer Service:Caring for Clients Before, During and After Training (QCS-2)"Organized by: University of Surabaya (Ubaya)Bali, Indonesia: October 1-7, 2003-Website: www.kult-educ.org/wksp/qcs-2

5th Trainers Workshop on: "Improving Training Quality through Interactive Learning Technologies andDistance Mentoring (ITQ-5)A 5-phase learning activities, combining face-to-face/group training with online/Internet-basedlearning as well as distance mentoring/coaching spread over a 10-month period.Organized by: University Science Malaysia (USM)Penang, Malaysia: October 13-25, 2003 (1st face-to-face/group training)Surabaya, Indonesia: April 26 - May 1, 2004 (2nd face-to-face/group training)Website: www.kult-educ.org/wksp/itq-5

3rd International Workshop on: "Innovative Marketing Communications:Promoting and Selling Training in a Competitive Global Market (IMC-3)"Organized by: American University in Cairo (AUC) & SPAAC/Human Empowerment CenterCairo, Egypt: December 6-12, 2003-Website: www.kult-educ.org/wksp/imc-3

For more information on the Workshops and/or to obtain the Application Forms. please contact:

Mr. Eric Wibisono, Sec. Gen., KULT ConsortiumFax: (62-31) 298-1301 E-mail: ewibisono@ia.ubaya.ac.id

KULT Program Partners Consortium:

^ A N Arnmecrican Human

UNIVEP51TY SCIENCEnU A ive rsirEmpower entUNIVERSITY SCIENCE MALAMSIA y Centermin Cairo

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