, 369 pages

369 Pages·2000·18.45 MB·English

by  World Bank Group

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Pu EDITEBDY
JOHNN ASH
WENDYT AKACS
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Trade Policy Reform
Lessonsa nd Implications
WORLDB ANK
REGIONALA ND
SECTORALS TUDIES
Trade Policy Reform
Lessonsa nd Implications
EDITEDB Y
JOHNN ASH
WENDYT AKACS
The World Bank
Washington,D .C.
© 1998 The International Bank for Reconstruction
and Development / The World Bank
1818 H Street, N.W., Washington, D.C. 20433
All rights reserved
Manufactured in the United States of America
First printing September 1998
The World Bank Regional and Sectoral Studies series provides an outlet for work that
is relatively focused in its subject matter or geographic coverage and that contributes
to the intellectual foundations of development operations and policy formulation.
Some sources cited in this publication may be informal documents that are not readily
available.
The findings, interpretations, and condusions expressed in this publication are
those of the author and should not be attributed in any manner to the World Bank,
to its affiliated organizations, or to the members of its Board of Executive Directors
or the countries they represent.
The boundaries, colors, denominations, and other information shown on any map
in this volume do not imply on the part of the World Bank Group any judgment on
the legal status of any territory or the endorsement or acceptance of such boundaries.
The material in this publication is copyrighted. Requests for permission to
reproduce portions of it should be sent to the Office of the Publisher at the address
shown in the copyright notice above. The World Bank encourages dissemination of
its work and will normally give permission promptly and, when the reproduction is for
noncommercial purposes, without asking a fee. Permission to copy portions for
classroom use is granted through the Copyright Clearance Center, Inc., Suite 910,
222 Rosewood Dr., Danvers, Massachusetts 01923, U.S.A.
John Nash is a principal economnist in the Environmentally and Socially Sustainable
Development Unit, Europe and Central Asia Regional Office, the World Bank.
Wendy Takacs is a professor of economics at University of Maryland, Baltimore
County, and a professorial lecturer at Johns Hopkins School of Advanced Interna-
tional Studies.
Cover design by Sam Feirro.
Library of Congress Cataloging-in-Publication Data
Trade policy reform: lessons and implications / edited by John Nash,
Wendy Takacs.
p. cm. - (World Bank regional and sectoral studies)
Based on 1995 final of the UNDP/World Bank Trade Expansion
Program
Includes bibliographical references and index.
ISBN 0-8213-3983-4
1. Developing countries-Commercial policy. 2. Economic
development. I. Nash, John D., 1953- . II. Takacs, Wendy E.
III. UNDP/World Bank Trade Expansion Program. IV. Series.
HF1413.T733 1998
382'.091724-dc2l
98-10663
CIP
Contents
Preface and Acknowledgments xi
Contributors xv
Acronyms and Abbreviations xvii
1. Lessons from the Trade Expansion Program I
John Nash and Wendy Takacs
Macroeconomic Stability 1
Foreign Exchange Allocation 3
Credibility of Reforms 7
Fiscal Impacts 8
Benefits to Agriculture 10
Avoiding Special Protection 12
Expanding Exports 14
Factor Markets 17
Regional Arrangements 29
Trade Reform and Foreign Aid 24
Lessons for Technical Assistance 26
Bibliography 27
2. Macroeconomic Management and Trade Reform:
A Political Economy Perspective 31
Jaime de Melo
Macroeconomic Disequilibrium and Trade Restrictiveness 34
The Economics of Reform Packages 37
The Political Economy of Reforms 43
Stabilization and Reform in the TEP Countries 47
Some Political Economy Comparisons 54
Conclusion 58
Bibliography 59
v
vi TradeP olicyR eform
3. Exchange Rate Arrangernents during Trade Liberalization 63
Paul Collier
Exchange Rate Policy during Trade Liberalization with a
Preexisting Foreign Exchange Market 63
Reform of Exchange Rate Mechanisms 70
Designing Better Foreign Exchange Markets 78
Conclusion 80
A Brief Summary of Experiences in Selected Countries 82
4. Rethinking the New Regionalism 87
Arvind Panagariya
Discriminatory Liberalization: Mercantilists Were Right 89
The Generalized System of Preferences: One-Way Preferences 96
North-South Integration: Two-Way Preferences 107
Outsiders: To Join or Not to Join? 119
Renewed South-South Integration 136
Regionalism and Harmonization 140
Conclusion 142
Bibliography 143
5. Fiscal Implications of Trade Reform 147
Ron Hood
Trade Policy and the Fiscal Deficit 148
Country Experiences 175
Complementary Tax Reforms 181
Exemptions 185
Conclusion 186
Bibliography 187
6. Duty Drawback Mechanisms: The System in Taiwan (China)
and Recommendations for Costa Rica 189
Chia-Sheng Wu and Shui-Chi Chuang
Duty Refunds in Taiwan (China) 190
The Duty/Tax Drawback System in Taiwan (China) 190
Comparison between the Systems in Taiwan (China)
and Costa Rica 199
Conversion to a Duty Drawback System 201
7. Safeguard Mechanisms: Their Design and Operation 211
J. Michael Finger with the assistance of Rebecca Hardy
Safeguards in GATT 211
Safeguards in TEP Country Reports 222
Conclusion 236
Bibliography 244
Contents vii
8. Labor Markets, Foreign Investment, and Trade Policy Reform 247
Ann Harrison and Ana Revenga
Wage and Employment Responses to Trade Reform 249
Labor Market Regulations 260
Trade Reform and Foreign Direct Investment 268
Bibliography 275
9. Trade Policy Reform and Agriculture 277
Alberto Valdes
What Kind of Changes? 281
Macroeconomic Variables 286
Reducing Antiexport Bias 288
Sectoral and Overall Growth 296
Reform in Other Sectors 298
Conclusion 305
Bibliography 308
10. Technical Assistance for Policy Reform: Lessons from the
Trade Expansion Program 309
Elliot Berg
Objectives, Instruments, and Outcomes 310
Lessons 315
Conclusions and Recommendations for the Future 323
Bibliography 326
Index 337
Appendix
A UNDP/World Bank Trade Expansion Program Output 329
Boxes
6.1 Example of Raw Material Duty Refund Criteria 190
Figures
3.1 Exchange Rate Overshooting in Trade Liberalization 65
3.2 Aided and Unaided Adjustment Paths 67
4.1 Welfare Effects of FTA with Tariffs and No Quotas 90
4.2 Welfare Effects of FTA with Quota on Country C 94
6.1 Suggested Flow Chart of Duty Drawback Operations 205
8.1 Trends in Employment 250
8.2 Trade Shares (X+M/GNP) for CMEA Countries, 1980-93 251
8.3 Trade Volumes (X+M), 1980-93 252
8.4 Trends in Real Wages in Manufacturing 253
8.5 Trends in Unemployment 254
viii TradeP olicyR eform
8.6 Real Exchange Rates in Mexico and Morocco, 1979-93 260
8.7 Trends in Foreign Investment 270
Tables
2.1 Disequilibrium Factors at Time of TEP Mission 34
2.2 Intemal Balance Indicators 48
2.3 External Balance Indicators 49
4.1 Gains from Trade under Unilateral Liberalization and
Free Trade Agreement 91
4.2 Morocco and Competitors' Exports 97
4.3 Exports of Partner Country to EC12 by Commodity Group 101
4.4 Morocco's Principal Exports to Partners for Five Products 105
4.5 The EC-Romania Association Agreement: Main Provisions
on Trade in Goods, 1993-2003 114
4.6 Tariffs and Liberalizing Reforms in Latin America and
the Caribbean 121
4.7 Exports from Country to Partner Region, 1985 124
4.8 Exports from Country to Partner Region, 1990 126
4.9 Exports from Country to Partner Region, 1993 128
4.10 Imports to Country from Partner Region, 1985 130
4.11 Imports to Country from Partner Region, 1990 132
4.12 Imports to Country from Partner Region, 1993 134
5.1 Import Duties and Trade, Chile, 1972-93 152
5.2 Import Duties and Trade, Ghana, 1976-92 156
5.3 Import Duties and Trade, Jamaica, 1976-93 160
5.4 Import Duties and Trade, Morocco, 1980-93 164
5.5 Import Duties and Trade, Turkey, 1976-92 168
6.1 Trade Development of Taiwan (China) 191
6.2 Refund Cases: Number, Amount Refunded, and
Industry Distribution, 1981-93 192
6.3 Duty Drawback System in Taiwan (China): Trade Volumes,
Duty Collections and Refunds, and Frequency of Use 193
6.4 Examples of Fixed Amount Duty Refund Rates 197
6.5 Examples of Fixed Percentage Duty Refund Rates 198
6.6 Comparison between the Export Contract System in
Costa Rica and the Export Products Duty Drawback
System in Taiwan (China) 202
7.1 Frequency of Use of GATT Provisions that Allow
Trade Restrictions 212
7.2 Costa Rica: Procedures for Adjusting the Level of Protection 224
7.3 Czechoslovakia: Procedures for Adjusting the Level
of Protection 226
Contents ix
7.4 Morocco: Procedures for Adjusting the Level of Protection 228
7.5 Peru: Procedures for Adjusting the Level of Protection 230
7.6 Romania: Procedures for Adjusting the Level of Protection 234
7.7 Safeguard Mechanisms in Place in TEP Countries, TEP
Recommendations for Modification 239
9.1 Evaluation of Trade Reforms at Time of TEP Missions 278
9.2 Macroeconomic Policy and Trade Reform 282
9.3 Measurement Concepts of Agricultural Protection 289
9.4 Bias against Agricultural Exports 291
9.5 Trade Policy Reforms, Overall GDP Growth, and
Agricultural GDP Growth 299
9.6 Summary of Conditions and Reforms in Other Sectors
of the Economy (proposed or effective) 302
10.1 Timeliness 321
A.1 UNDP/World Bank Trade Expansion Program-
Country Reports 330
A.2 UNDP/World Bank Trade Expansion Program-
Country Summaries 331
A.3 UNDP/World Bank Trade Expansion Program-
Occasional Papers 332
A.4 UNDP/World Bank Trade Expansion Program-
Other Products 333
A.5 UNDP/World Bank Trade Expansion Program
Country Reports by Title and Subject 334