Anti-export Bias Research Articles

Trade Liberalisation and Labour Demand Elasticities: Empirical Evidence for Pakistan

Trade has predominantly contributed in the development of world economies for more than mere agricultural development and industrialisation. Trade involves many regions across the globe. The more the regions involved, the more will be the benefits. Trade is an interaction between economies for the exchange of goods, services, skills, knowledge and expertise, which is required for bringing in the desired changes like increase in the availability of choices, reduction of extreme poverty, and enhancement of physical and mental capability. As the wave of market oriented moves has spread over the economic sphere, global trend has also been witnessed in the liberalisation of capital account, foreign exchange, credit, domestic consumption and trading sector of many countries. The concept, which has been predominantly emphasised by the economies, is that of “trade liberalisation”, which has become the key element of any development policy since late 1970s after the fundamental change in the economic policy at global level. The concept of trade liberalisation stems from Neo-liberalism thinking that has advocated market oriented economic reforms for social order and economic prosperity that aims to improve efficiency and stability in the economy. Trade liberalisation process can be defined in many different ways. In the words of Krueger (1978), “any policy, which reduces the anti export bias will lead towards liberalisation of trade and reduction in import license premium is the fundamental step towards liberalised trade regime”.

Argentine trade policies in the XX century: 60 years of solitude

At the turn of the last century, the Argentine economy was on a path to prosperity that never fully developed. International trade and trade policies are often identified as a major culprit. In this paper, we review the history of Argentine trade policy to uncover its exceptional features and to explore its contribution to the Argentine debacle. Our analysis tells a story of bad trade policies, rooted in distributional conflict and shaped by changes in constraints, that favored industry over agriculture in a country with a fundamental comparative advantage in agriculture. While the anti-export bias impeded productivity growth in agriculture, the import substitution strategy was not successful in promoting an efficient industrialization. In the end, Argentine growth never took-off.

Growth and Current Account Deficit in Ethiopia: Challenges and Opportunities in a Growing Economy

Ethiopia’s economy has continued growing and the major drivers of growth have been the services and agriculture sectors. However in recent years, the role of the industry sector is improving. Of the total growth, about 50 percent was contributed by the service sector while the contribution of the industry sector was about 39 percent in 2015/16. The high expenditure of public investment has worsened the incidence of inflation. Yet resources have not been efficiently allocated as evidenced by low scores of macroeconomic management rating and resource allocation indices. The widening current account deficit has made external financing necessary of which external borrowing has been the main one. External debt burden measured by ratio of stock of external debt to GNI has reached to 33 percent and external debt services to export ratio has been still higher than other countries. Ethiopian currency, the birr, has appreciated and affected export earnings by increasing the anti-export bias. The poor logistics and port infrastructures have also made export costly and adversely affected the export sector. Besides services export became negative due to increasing payments on debt services and payments on services being performed by foreigners in the domestic economic activities such as construction sectors.

Real Exchange Rate Volatility, Economic Growth and International Trade in an Emerging Market Economy: Evidence from Nigeria

This study examined the long-run and short-run impacts of real exchange rate volatility and the level of economic growth on international trade in Nigeria using a vector error correction model on time series annual data from 1971 to 2012. The results revealed that in both short-run and long-run, exports and imports were chiefly influenced by real exchange rate, real exchange rate volatility, foreign income, gross domestic product, terms of trade and changes in exchange rate policies. The findings further revealed that exchange rate volatility depressed exports and imports in the long-run. The result from pair wise Granger causality test revealed unidirectional causality running from export to exchange rate volatility and from exchange rate volatility to import and a unidirectional causality flow from RGDP to imports and exports. This is an indication of poor performance of the export sector and the over dependence of the country on imported goods. The statistical significance of both real foreign income and real gross domestic product were indications that tariff measures would be ineffective and as a result the study believed that effective import substitution industrialization would significantly reduce pressure on the external sector and will actually increase economic activities and hence economic growth The study recommends the use of supportive fiscal and monetary policies that will provide a set of incentives aimed at removing anti-export bias barriers so as to promote exports, particularly non-oil exports and discourage import of consumer goods to stabilize the foreign exchange rate.

Foreign aid and export diversification in developing countries

This paper analyzes the effect of foreign aid on export diversification for a sample of developing countries while controlling for the effects of other factors that determine export diversification. We find that foreign aid not exceeding 20% of a country's GDP significantly promotes export diversification, while foreign aid in excess of 20% of GDP significantly impedes export diversification. The latter result corroborates evidence from related literature, which has shown that foreign aid can have an anti-export bias due to a Dutch disease effect. However, our results show that aid as a percent of GDP is below 20% in most low-income countries. This implies that in many low-income countries, varying amounts of additional aid can be used to enhance export diversification without causing a Dutch disease effect. As in the previous literature, we find that the level of development, infrastructure, transactions costs, and natural resources significantly affect export diversification. Our results are robust to the use of two different export diversification measures and different sub-samples.

Argentine Trade Policies in the XX Century: 60 Years of Solitude

At the turn of the last century, the Argentine economy was on a path to prosperity that never fully developed. International trade and trade policies are often identified as a major culprit. In this paper, we review the history of Argentine trade policy to uncover its exceptional features and to explore its contribution to the Argentine debacle. Our analysis tells a story of bad trade policies, rooted in distributional conflict and shaped by changes in constraints, that favored industry over agriculture in a country with a fundamental comparative advantage in agriculture. While the anti-export bias impeded productivity growth in agriculture, the import substitution strategy was not successful in promoting an efficient industrialization. In the end, Argentine growth never took-off .

From unilateral liberalization to regional free trade agreements: a Latin America perspective

This paper provides an overview of changes in Latin American trade regime. The inward-looking import substitution industrialization (ISI) approach to development was replaced in the 1990s by an outward-looking strategy. The protectionist policies of the ISI strategy generated an anti-export bias, but unilateral trade liberalization (UTL) reduced this bias considerably. An issue discussed is why the pro-ISI consensus of the 1960s was replaced by the pro-export consensus of the 1990s? There has been a surprising proliferation of (bilateral) free trade agreements (FTAs) during the 1990s. In the paper it is argued that UTL and FTAs are complementary strategies. Latin America has comparative advantages in natural resources. A new debate over the development strategy has emerged. Information and communication technologies (ICT) are seen as crucial to a country’s growth in the twenty-first century. So, how can Latin American countries incorporate such technologies into their economies. Is it possible to make the leap from producing natural resources to producing ICT? In today’s globalized world, it is essential for Latin American countries to increase its exports. This paper reviews actions on different fronts; some that should be carried at the domestic level, and also, measures at the external level which require that the developed countries provide better market access to Latin American exports.

The Paradoxes of Thailand's Pre-crisis Export Performance

Starting from the observation that Thailand succeeded in developing its exports in a spectacular way in the decades preceding the 1997 financial crisis, the author points to a number of apparent paradoxes that become apparent when looking at Thai trade policies in detail. For example, Thai trade policy was characterized by an anti-export bias, the causal effect of inward foreign direct investment (FDI) on exports could not clearly be demonstrated, and the effects of discriminatory tariff reductions were apparently very poor. Elements of an explanation are suggested.

Trade Policy Reforms and the Structure of Protection in Vietnam

This paper examines the current state of the trade policy regime in Vietnam against the backdrop of market-oriented policy reforms undertaken over the past one-and-a-half decades. The core of the paper is an in-depth analysis of the structure of protection, focusing on both incentives for import-competing production and the bias in the incentive structure against export production compared to import-competing production. It is found that, despite notable reform efforts, the structure of protection in Vietnam is still out of line with that of the major trading nations in the region, in terms of the level and the inter-industry dispersion of nominal and effective protection rates. There is a clear anti-export bias in the incentive structure, even though the degree of the bias has considerably declined over the years. There is no evidence to justify the existing protection structure on grounds of infant industry protection or employment generation.

HAS SOUTH AFRICA LIBERALISED ITS TRADE?

This paper uses new tariff data to re-evaluate the extent to which South Africa has liberalised its trade from the late 1980s. The paper finds that significant progress has been made in simplifying South Africa's tariff structure and reducing tariff protection, but further progress can be made in removing tariff peaks, reducing tariff dispersion, and lowering the anti-export bias arising from protection. Further, although protection has fallen, the decline has been no faster than in other lower-middle-income economies. The paper also finds that estimates of the level of nominal and effective protection, and their rate of change, are sensitive to the choice of tariff measure (collection duties or scheduled tariff rates) and Input-Output or Supply-Use table, but that the sectoral structure of protection is largely unaffected.

The extent of anti-export bias in the South African economy during the 1990s

An analysis of trade incentives in the South African economy during the 1990s reveals two major findings. Firstly, the extent of the anti-export bias in South Africa's trade policy during the 1990s is less than is claimed in the empirical literature. The sectors subjected to an anti-export bias accounted for around 7 per cent of total output in 1990 and 21 per cent in 1999. Secondly, sectoral output growth did not strongly correlate with the prevailing trade incentives of the 1990s. Export production continued despite the prevalence of import substituting incentives in many sectors. Although further research is needed, this suggests that attention should also be given to other factors related to domestic competitiveness (e.g. skills development, productivity enhancement, competition policy, etc.) and market access if South African export production is to be significantly increased.

Trade Liberalization in Bangladesh: The Process and Its Impact on Macro Variables Particularly Export Expansion

This paper examines the process of Bangladesh's trade liberalization and its impact on the growth and structure of exports, imports, GDP and other relevant macroeconomic variables with particular emphasis on exports. It also provides an updated account of the various structural adjustment programs undertaken in Bangladesh including trade, fiscal, industrial and financial reforms, and explains how these reforms supplemented one another to promote greater market and export orientation. Various Indicators of trade liberalization show a substantial shift of the Bangladesh external trade regime and the resultant reduction in anti-export bias. Spearheaded by textiles and readymade garments, both total- and manufacturing exports consistently grew over the post-liberalization period. Real GDP also registered a steady growth during the post-liberalization period, particularly during the 1990s. An empirical investigation based on a distributed lag modeling and cointegration suggests that both anti-export bias reduction and import-GDP ratio, the latter being a proxy for imported capital, have significantly impacted on exports in the long-term.

Trade Policy Issues in a Small African Economy: The Trade Policy Review of The Gambia 2004

The Gambia displays many of the classic characteristics of a small open economy, with the vulnerabilities that implies. The sum of its imports and exports are around 100 per cent of GDP, with a limited number of export commodities and a wide variety of imports, including some key staple foods. The Trade Policy Review of The Gambia 2004 provides a very helpful review and assessment of current trade patterns and policies. The latter rely predominantly on import and export taxes. While quite substantial trade reform measures have been implemented recently, these have led to only a very small reduction in the average tariff rate, and trade policy displays a substantial anti-export bias. Other important issues highlighted by the Trade Policy Review include serious capacity constraints relating to trade policy, and a failure to discuss connections between trade policy and growth and poverty reduction--again common characteristics of many small economies.

Policies to Improve Industrial Competitiveness in Brazil - 1995-2000

The paper analyses industrial competitiveness policies adopted in Brazil from 1995 to 2000 and compares them to previous economic measures and instruments related to the theme. A number of changes over previous policies were identified, such as: a) the agenda of competitiveness policies is presently more complex and diversified than in the first half of the 1990s; b) both fast productivity growth and exchange rate devaluation contributed to counterbalance the anti-export bias which characterized particular time periods in the 1990s. Although increased competitiveness can be partially attributed to trade liberalization and exchange rate valorization up to early 1999, new instruments to enhance industrial competitiveness were responsible for increasing competitiveness in the second half of the 1990s; c) local (state) initiatives to increase competitiveness remained nearly the same, as compared with the first half of the 1990s; the reliance on the concession of tax exemptions and tax credits so as to attract new enterprises to their territories continued to be the norm; d) although many measures and instruments have had as their focus the industrial segment of micro, small and medium firms, their effectiveness is questionable; e) trade defense and related measures continued at the same pace as before, as no new instruments or institutions were created in the last years of the decade; f) measures to reduce overall competitive inefficiencies (custo Brasil) continued to be adopted, albeit on a less focused level; g) the most conspicuous sector policy instrument - the Automotive Agreement - survived the wave of difficulties associated with the widening competitiveness gap between Brazil and Argentina after the Brazilian exchange rate devaluation of early 1999. But its future is uncertain; h) the National Development Bank (BNDES) began in the mid-1990s to implement restructuring measures aimed at strengthening domestic firms and groups so as to enhance their competitive position both at home and abroad.

China's exchange rate reform and exports.

The paper argues that exchange rate reform is a vital supply-side factor in China's export growth. It contributes to China's export expansion by affording a realistic exchange rate and allowing freer access to foreign exchange, thereby leading to the reduction of anti-export bias and strong supply response. In an imperfect substitutes model, China's long-run export supply and demand functions are estimated in a system context. Evidence is found that the exchange rate reform is one of the most influential factors in China's long-run export expansion, inducing significant response of exports supply. In the short-run, the exchange rate reform and the export volume are also cross-linked through the error-correction process. China's exchange rate policy adjusts speedily to ensure the long-run equilibrium of the supply-side relationship and is likely to have played a dominant role in the adjustment. The study confirms, thanks to the exchange rate reform, China's exchange rate policy has benefited China's remarkable growth of exports before 1994.

Policy and Non-Policy Barriers to Trade and Implicit Taxation of Exports in Uganda

Uganda has made significant progress in reducing policy-induced anti-export bias in its trade policy in the 1990s. Taxes on exports have been abolished, and import protection has been reduced considerably. Such trade barriers are only a component of thee transaction costs associated with trade. Poor infrastructure, notably by increasing transport costs, and institutional inefficiencies can significantly increase trade costs. The effective protection of imports, and implicit tax on exports, due to transport costs is calculated and compared to effective protection due to trade policy barriers for Uganda. The results reveal that transport costs are often very high, in many cases representing a greater cost (tax) to exporters than trade policy.

Endogenous Export Subsidies as a Revenue-Seeking Activity: Some Implications for the Evolution of Protection

Explaining the anti-export bias of trade policy requires a model in which there is some asymmetry between protection of the import competing and export sectors. One asymmetry is that export subsidies require government expenditure, while import tariffs raise revenue for the government. A model is developed where lobbying for export subsidies is treated as a revenue-seeking activity. In contrast with the import-competing sector, it is found that there is no presumption that 'vicious circles' exist in the export sector, where a 'vicious circle' refers to the tendency for exogenous political shocks to be amplified by an endogenous lobbying response.

An Analysis of the Tariff Structure of the South African Clothing Industry

This article addresses the negative and positive implications of the protective tariff structure of the South African clothing industry on local manufacturers.The research suggests that the tariff protection has had negative effects on manufacturers and the total economy. The rebate on imported textiles used by companies that export clothing erodes the protection of the textile industry, as well as constituting an unfair advantage to companies that can afford the initial expenses to start an export programme. The tariffs on both textiles and clothing dramatically increase the end price to the consumer. They also tend to create an anti-export bias in the industry. The policy measures in terms of tariffs have tended to favour production for the domestic market, thus creating an “inward” looking industry. A more export-oriented approach must be adopted in order to give the consumer a better deal as well as to build on those areas where the industry can compete effectively. The opportunity for growth of exports in the upper and middle income clothing niche will likely outstrip the opportunities provided by the growth in the domestic market, which is already covered predominantly by domestic manufacturers. South Africa’s clothing industry has proven itself a worthy competitor in these areas as opposed to low income clothing which can be provided more efficiently and effectively by international low-cost producers.

The Impact of Southern Regional Trading Arrangements on Trade Regime Bias: Some Evidence for CARICOM

Trade regime bias, in particular anti-export bias, is likely to be a feature of 'southern' regional trading blocs of small, relatively inefficient countries, with relatively high external tariffs. This paper explores the reasons for this, and provides evidence of the pattern of trade regime bias prevailing in two CARI COM countries, Barbados and Trinidad. The paper also investigates the extent to which trade regime bias can be lowered through country-specific policy reforms, such as the lowering of non-tariff barriers, and the extent therefore to which regional commitments may constrain trade policy reform in developing countries.

“Large” and “small” regional trading blocs and trade regime bias: A comparison of the EC and CARICOM

‘Large’ and ‘Small’ Regional Trading Blocs and Trade Regime Bias: A Comparison of the EC and CARICOM. — Liberalizing trade on a regional basis may, but does not necessarily, reduce trade (anti-export) bias; the outcome depends upon the characteristics of the regional grouping and the height of external tariffs. There are a priori grounds for expecting trading arrangements for ‘small’ blocs to induce greater trade regime bias than ‘large’ ones. This paper explores the reasons for this, and provides evidence of potential trade regime bias from CARICOM (Barbados) and the EC (UK). The paper also considers to what extent regional commitments may constrain the scope for lowering trade regime bias, and investigates some of the national and regional policy options for lowering the bias associated with ‘small’ regional trade arrangements.