Trade Arrangements Research Articles

EU VAT Aspects of Longer Chains of Triangular Transactions

The EU VAT Directive does not contain rules specifically relating to cross-border trading arrangements involving parties in various Member States and a single intra-Community movement of goods. However, the VAT Directive does contain a simplified arrangement for specific triangular transactions involving three parties in three different Member States. In this article, the author explains that the simplification measure can extend to transactions involving more than three parties, but it is then often necessary for one or more of the parties to register for VAT in another Member State.

Designing the European Gas Market: More Liquid & Less Natural?

Designing a gas market is defining how the commodity, the transmission and ancillary services are traded. The European Union has built the commoditization of natural gas through the socialization of several costs of trade. This choice aims at obtaining more liquid markets through the creation of virtual hubs of trade. These virtual hubs ignore most of the network and of the physical gas flows by the creation of market zones. Thus the definition of such market zones has tied EU markets inside virtual trading zones (national or sub-national). We show the consequences and the challenges of this European choice, especially at the cross-zone level (often at country cross-border). Once entry/exit trade arrangements are preferred, the use of market-based mechanisms for cross-zone decisions like network investments becomes less natural.

Effective rates of protection revisited for Indonesia

This paper calculates nominal and effective rates of protection for Indonesian tradables sectors in early 2008, and compares these figures with previous calculations for 1987 and 1995. Such a review is overdue. Many non-tariff barriers to imports and exports have been abolished, though new import restraints on rice and sugar are notable exceptions to this trend. Import tariffs have been lowered, particularly through regional preferential trade arrangements. We account for such arrangements in two different ways. Export taxes persist in certain natural resources sectors, but most rates have been reduced. We find that more than half of the effective support provided to tradable products sectors now comes from subsidies on fuels, fertiliser, electricity and liquefied petroleum gas, rather than from trade policies per se. Duty drawbacks and exemptions for exporters boost the effective rate of protection for tradables sectors overall by a small fraction of 1%, and for no input–output sector by more than 3%.

Competition in the European electricity markets – outcomes of a Delphi study

Internal European electricity markets are a target set by the European Union (EU) and under development at present. This article presents the findings of a Delphi study focusing on the prospects of European electricity markets. The main aim is to report the obstacles that participants in the survey felt were the most critical ones affecting competition in the European electricity markets of the future. The respondents were European electricity market specialists, and the themes of the survey ranged from transmission networks and electricity trade to demand flexibility. One of the key findings was shared concern over the adequacy of transmission network capacity in Europe. It was considered that technical issues, such as existing transmission network bottlenecks, are most likely to form obstacles to creating common European electricity markets if new capacity is not built quickly enough. It was seen by the panellists that electricity trading arrangements, whilst important, are unlikely to form a barrier to the development of an internal electricity market. It was noted that electricity trading issues have recently been the subject of development work in the EU.

Markets, organizations, institutions and national identity

PurposeThrough a case study of Pan American World Airways (Pan Am), this paper sets out to explore the roots of twentieth century globalization and the postcolonial nature of the trading relations involved.Design/methodology/approachDrawing on Foucault's broad notion of “the archive” a critical hermeneutics approach is used to examine a series of company‐produced texts, including minutes, travelogues, company narratives, annual reports, film, diaries, and published histories.FindingsThe paper argues that Pan Am contributed to the “idea of Latin America” and, in the process contributed to practices of dependency that served the interests of the USA. Drawing on a case study of Pan Am, the paper further argues that multi‐national corporations help to establish the contours of international trade by influencing the very character and boundaries of the territories traded in, with troubling implications for the countries traded in.Research limitations/implicationsAs a detailed case study extension of the findings to other global trading arrangements needs to take into account to social‐political context and relational histories of the players involved.Practical implicationsThe paper generates insights into the role of rhetoric in developing trading relationships and its roots in embedded notions of postcolonial thinking and generalizations.Originality/valueThe paper contributes to an understanding of the role of language and the social construction of national identities involved in the development of international business.

Supply Management: Problems, Politics - and Possibilities

Despite a professed commitment to free trade, Canada has retained a staunchly protectionist supply management regime in several agricultural sectors, notably in the dairy industry. Canada’s dairy farms are governed by a byzantine system that prices milk based on intended usage, locks out most foreign products with exorbitantly high tariffs and even determines how much farmers can produce. Everyone suffers. Canadians are forced to pay almost three times as much for four litres of whole milk as Americans, while the farmers are barred from taking advantage of the opportunities and efficiencies a truly free market affords. At the same time, Canada’s insistence on protecting supply management makes it difficult for Canada to open up access to international markets. This means that all other Canadian enterprises that rely on trade (including the farmers in the non-supply-managed sectors who make up by far the majority of Canadian farmers) – all those who would benefit from Canadian participation in trade arrangements such as the Trans-Pacific Partnership – are being denied lucrative access to some of the world's largest and rapidly growing markets. The system needs to go. However, it is possible to dismantle it fairly. Australia managed it by offering dairy farmers transition payments over eight years, financed by a temporary retail levy on milk. Consumers now enjoy lower prices and Australia has one of the most dynamic and efficient dairy industries in the world. New Zealand did away with its own tariffs and subsidies even faster, and its dairy sector has become that country’s largest export earner. The potential gains for Canada are very real. At the same time, and, just as importantly, the threats to risk-averse politicians from the dairy lobby are, contrary to widely-held assumptions, negligible. Since 1971, the number of Canadian dairy farms has dropped by a staggering 91 percent. There are now few, if any, ridings where dairy votes could plausibly swing elections – particularly compared to the votes of all those in those same ridings who would benefit from dismantling supply management. This paper assesses Canada’s political, agricultural and economic landscape, highlights the present regime’s absurdities, challenges long-held political assumptions, and draws on lessons learned from the most successful reforms abroad to make the case for liberalizing the Canadian dairy industry. With lucrative free trade agreements being considered, and in particular the prospect of joining (or being refused access to) the Trans-Pacific Partnership, now is the time for the Harper government to reach out to the provinces and farmers, and get rid of supply management for the good of all Canadians.

The Ambiguous Role of the WTO in Times of Stalled Multilateral Negotiations and Proliferating FTAs in East Asia

Abstract The world trading system is characterized by a growing number of free trade agreements (FTAs). Limited progress in the negotiations at the multilateral level within the WTO has contributed to this development, inducing countries to seek faster, alternative ways to speed up liberalization, which make it possible to take advantage of preferential treatment with key trading partners. This article discusses what role the WTO should take with regard to FTAs in times of stalled multilateral negotiations and proliferating FTAs, and how FTAs can contribute to the multilateralization of regionalism. When results at the multilateral level are scarce, there may be a shift towards other alternatives in which the WTO is left out. This may force the WTO to function reactively, simply facing facts as an organization, rather than proactively, where it may play some role in shaping the FTA development. FTAs are not an entirely separate phenomenon from the WTO, since countries that negotiate FTAs play two roles. They are members of the WTO and as such are part of the work and negotiations of the organization. They are also part of trade arrangements that are limited to a smaller number of countries, and hence can negotiate against the interest of the entire multilateral organization. This article explores how these agreements can facilitate the work and negotiations of the WTO to regionalize bilateralism and multilateralize regionalism, here named the “sticky rice” approach. Various East Asian trade arrangements are used as empirical examples.

Bilateral trade, colonial heritage and common currency arrangements: An Oceanian perspective

We reassess the trade impact of common currency arrangements – the Rose effect – on the basis of new empirical evidence stemming from the Oceanian Island Countries. In particular, we investigate how the conjunction of a common colonial heritage and membership in a common currency arrangement can impact bilateral trade. To do this, we use different specifications of the gravity equation over an original panel dataset covering the period from 1980 to 2009. Our results first show that the trade impact of common currency arrangements is much more prominent and significant for country pairs that share a common colonial heritage than for country pairs with distinct former colonizers. Second, while a common colonial heritage does significantly and positively affect trade, whether the underlying country pair is in a common currency arrangement or not, the pro-trade effect of a common colonial heritage is nonetheless enhanced by the existence of such a common currency arrangement. These results suggest, more generally, that further steps towards monetary integration in the zone could not be contemplated without taking historical factors into account.

Increasing Sub-Saharan Africa's Share of Foreign Direct Investment: Public Policy Challenges, Strategies, and Implications

In this article, the author describes anecdotal predictors of foreign direct investment (FDI) inflows, which include key indicators of development, governance variables, information infrastructure, and business environment. He also presents the public policy challenges of increasing FDI to Sub-Saharan Africa. Using Porter's 1990 framework of competitive advantage of nations as a backdrop, specific strategies to increase FDI inflows with their implications are offered. Among the suggested strategies and implications are using the “principle of clustering” where demand conditions are favorable, looking outside the traditional inflows of FDI to Africa, establishing carefully monitored export processing zones, expanding regional trading arrangements, working together to change the negative perceptions of the region, and reducing corruption. The article ends with a conclusion and discussion.

A study on India s trade relationship with SAARC countries

India occupies 70% of the SAARC region, both geographically and economically, and the remaining six nations of the SAARC borders only with India and not with each other. As the biggest, and the most industrialised trading partner among the SAARC countries, India has to recognise that a special responsibility devolves on her and take a lead in making the Regional Economic Cooperation a reality in South Asia. The present study reveals that there are enormous opportunities for forging closer economic relations among SAARC countries. These opportunities could be fully utilised through the twin processes of trade liberalisation and industrial restructuring which are complementary to each other. The SAARC Preferential Trade Arrangement (SAPTA) is the first step in trade liberalisation. However, the scope of SAPTA has to be sufficiently widened in order to derive substantial benefits from preferential trading agreements. It is suggested that the SAARC countries adopt a combined approach for tariff elimination, tariff reduction and preferential or concessional tariffs. This process will help in moving quickly towards the creation of a Free Trade Area in the SAARC region. This paper studies the India’s trade with SAARC countries during the period 1999–2000 to 2009–2010 and examine whether SAPTA is successful in increasing India’s intra-regional trade.

New industrial policy: Navigating between market and government failure

After three decades of expulsion, the industrial policy (IP) is again a part of legitimate policy agenda in developed and emerging economies alike. The theoretical case for IP interventions remains valid in the presence of continued market failures enhanced by growing share of international trade and stronger connectedness in the global economy. But dangers of government failures are equally present, either through errors of commission (due to excessive and wrong government intervention)or omission (failure to act and correct the obvious market failures). At the practical policy level the issue is no longer 'why' IP is needed, or whether the government should engage in IP, but 'how' to design and implement IP measures that would avoid the known pitfalls of the past and help sustain development and obtain desirable economic restructuring. Recent debates (Lin-Chang, Rodrik-Lerner) and thorough literature surveys(Harrison)confirm the need for IP, but recommend a close alignment with comparative advantage (Lin), shift from hard (tariffs, subsidies) to soft IP interventions aimed at increasing productivity when ever possible (Harrison), and suggest avoiding risks of poorly designed IP measures through joint government-private sector 'self-discovery' of optimal IP policy parameters not known ex ante (Rodrik). Advanced WTO and bilateral trade arrangements may seriously limit the scope for legitimate new industrial policy.

A Critical Review on Regional Integration Processes in East Asia

The major economies of East Asia, namely Japan and the Four Asian Tigers, have always prioritized the WTO-led multilateral trade liberalization over other trade arrangements primarily due to their unique economic structure with a high dependency on the world’s major markets such as the US. Along the same line, even the huge blow from the Asian Financial Crisis in 1997 only managed to trigger a few initiatives to aide East Asian regional integration while being led by different centering bodies, APEC and ASEAN. These dispersed efforts naturally resulted in no realistically significant achievements in the light of ‘integration’ until the present day. Under these circumstances, East Asia now faces a second opportunity to achieve its economic independence from the extra-regional influences via regionalization: the 2009 Global Credit Crunch. This paper hereupon critically reviews the actual progress and the likely impacts of the current global recession on the East Asian region.

A Critical Review on Regional Integration Processes in East Asia

The major economies of East Asia, namely Japan and the Four Asian Tigers, have always prioritized the WTO-led multilateral trade liberalization over other trade arrangements primarily due to their unique economic structure with a high dependency on the world’s major markets such as the US. Along the same line, even the huge blow from the Asian Financial Crisis in 1997 only managed to trigger a few initiatives to aide East Asian regional integration while being led by different centering bodies, APEC and ASEAN. These dispersed efforts naturally resulted in no realistically significant achievements in the light of ‘integration’ until the present day. Under these circumstances, East Asia now faces a second opportunity to achieve its economic independence from the extra-regional influences via regionalization: the 2009 Global Credit Crunch. This paper hereupon critically reviews the actual progress and the likely impacts of the current global recession on the East Asian region.

Prospects and challenges in the formation of the COMESA-EAC and SADC Tripartite Free Trade Area

The stalemate of the multilateral trade system in addressing key trade and trade related issues over the years have mounted pressure on World Trade Organisation (WTO) member states to search for alternative solutions. This pressure has directed countries’ attention and efforts towards bilateral and regional trade arrangements as an immediate intervention to resolve some of the stagnated issues at the multilateral level. Despite the pressure and the hurry for regional trade liberalization, concluding a comprehensive agreement both at bilateral, regional and multilateral negotiations remains complex to achieve given the existence of varying economic divergences among countries. With regard to the proposed tripartite Free Trade Area (T-FTA) among COMESA-EAC and SADC member states, it is one among the many regional economic communities (RECs) that have emerged over the years. This paper tries to examine some of the complexities and inter-linkages in reaching a tripartite free trade agreement in services and goods, as well as infrastructure development...

Regional Trade Agreements and the Neo-Colonialism of the United States of America and the European Union: A Review of the Principle of Competitive Imperialism

The recent proliferation of Regional Trade Agreements (RTAs) in the last two decades raises questions about the paradigm shift from the multilateral trading system of the World Trade Organization (WTO) to bilateral and regional preferential trade arrangements. Even more questionable is the fact that the United States of America (USA) and the European Union (EU), among the other trading powers of the world, are leading the use of RTAs to the detriment and neglect of non-discriminatory trade liberalisation. It has been suggested that neo-colonialism may be the motivation for the use of RTAs by the USA and the EU as their international trade policy of choice within a broader competitive process for imperial domination of their preferential trading partners. This article reviews this suggestion in order to propose an alternative explanation for the RTA practice of the USA and the EU.

Liberalization of Legal Services under the CEPA Framework between Mainland China and Hong Kong

Legal services are an important type of trade in services, and opening up the legal services market requires careful consideration. The Closer Economic Partnership Agreement (CEPA) between Mainland China and Hong Kong has taken the lead in setting the platform for opening up the legal services market. This regional free trade arrangement aims to provide preferential treatment to (and only to) the legal service industry and providers in the region. Because of the ever-developing economic relationship between the two parties, it is necessary to study the possibility of opening the market even further. This article examines the existing framework for liberalization of legal services under the CEPA framework and offers some suggestions on further liberalization of legal services between Mainland China and Hong Kong.

DIVERSITY AND DYNAMICS OF MANAGEMENT OF GUM AND RESIN RESOURCES IN ETHIOPIA: A TRADE‐OFF BETWEEN DOMESTICATION AND DEGRADATION

ABSTRACTAlthough the human domestication of forest and tree resources is often considered to result in resource degradation, it may also lead to improved resource potentials. This paper assesses the nature and dynamics of gum and resin focused woodland exploitation and management systems in Ethiopia in the context of degradation and domestication processes. In three sites with commercial gum resin producing woodlands and production history, we studied variation in (i) woodland management and gum resin production systems and (ii) socio‐economic and biophysical factors that condition the management and production systems. On the basis of their organizational features, we formulated nine production models and related them to different phases of domestication and different degrees of ecosystem degradation. The production systems gradually evolved from the extraction of wild trees to production in an adapted forest system. However, domesticated woodlands with an adapted forest structure and composition and increased provisioning services are still little developed despite decades of production history. Many of these woodlands are undergoing serious degradation because of low quality management practices. This is mainly attributable to existing land use practices and the social arrangements for the production of and trade in the gums and resins. The findings illustrate that domestication involves not only a change in ecological and production systems but also the development of social arrangements for production and trade. We conclude that the status of domestication in a social sense determines whether forests and/or specific forest resources are degraded or aggraded in the sense of resource enrichment. Copyright © 2011 John Wiley & Sons, Ltd.

Delegated trading and the speed of adjustment in security prices

Institutional trading arrangements often involve the portfolio manager delegating the task of trade execution to a separate division within the firm. We model the agency conflict that arises in this setting and show that optimal performance benchmarks often create an incentive to execute orders contrary to concurrent information flow. We hypothesize that aggregate contrarian trading resulting from widespread application of such benchmarks leads to delays in the assimilation of information in security prices. Using institutional trading data, we document the hypothesized contrarian trading pattern and relate the pattern to price-adjustment delays in the response of individual stocks to index futures returns. The evidence supports the assertion that delegated institutional trading contributes to these delays.

Carbon motivated regional trade arrangements: Analytics and simulations

This paper presents both analytics and numerical simulation results relevant to proposals for carbon motivated regional trade agreements summarized in Dong and Whalley (2010). Unlike traditional regional trade agreements, by lowing tariffs on participant's low carbon emission goods and setting penalties on outsiders to force them to join such agreements, carbon motivated regional trade agreements reflect an effective merging of trade and climate change regimes, and are rising in profile as part of the post 2012 Copenhagen UNFCC negotiation. By adding country energy extraction cost functions, we develop a multi-region general equilibrium structure with endogenously determined energy supply. We calibrate our model to business as usual scenarios for the period 2006–2036. Our results show that carbon motivated regional agreements can reduce global emissions, but the effect is very small and even with penalty mechanisms used, the effects are still small. This supports the basic idea in our previous policy paper that trade policy is likely to be a relatively minor consideration in climate change containment.

Agriculture in the Canada-EU Economic and Trade Agreement

According to article 24 of the General Agreement on Tariffs and Trade (GATT), preferential arrangements (custom unions) and free areas are allowed by the World Trade Organization (WTO). The GATT requires that these agreements cover all and that existing external tariffs should not be raised by the countries concluding free agreements. Article 24 of GATT stipulates that:A free-trade area shall be understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce.. .are eliminated on all the between the constituent territories in products originating in such territories.1Unfortunately, the prescriptions of article 24 requiring all to be covered by a free area have never been enforced, and in fact, what substantially all trade means has never been defined.2 As a result, many free agreements have often excluded sensitive sectors like agriculture but those agreements have still been accepted by the GATT With an eye to article 24, Canada's chief negotiator for the Canada-EU agreement, Steve Verheul, has stated that we have agreed from the start everything is on the table.3 Thus, one major objective of this article is to assess the major challenges that the Canada-EU negotiators will face in tackling the entrenched agricultural barriers that exist on both sides of the Atlantic.In October 2008, Prime Minister Stephen Harper of Canada and President Nicolas Sarkozy of France confirmed during the Canada-EU summit that Canada and the EU would explore the possibility ofa free agreement. A few months later, in May 2009, the launch of the negotiations for a comprehensive economic and agreement (CETA) was announced. The negotiations are expected to take two and a half years to complete. The first round of talks was held in October 2009, followed by further discussions in January, April, July, and October 2010, and January, April, and July 2011. After seven rounds of negotiations, Foreign Affairs and International Trade Canada indicated that significant progress had been achieved in several sectors, such as goods, services, investment, and government procurement, and that the electronic commerce chapter had been dosed.4 Less progress had been made on other areas, including agriculture.In October 2008, Canada and the EU released a joint study, Assessing the costs and benefits ofa closer EU-Canada economic partnership, which outlines the economic benefits that could arise from closer economic integration, namely that GDP in Europe would increase by 0.08 percent and in Canada by 0.77 percent.5 This study is the source of the estimated $12 billion benefit to Canada that is often mentioned in news reports. Canada and the EU have agreed that the major areas for negotiation are in goods and services, investment, government procurement, regulatory cooperation, intellectual property, temporary entry of business persons, competition policy, labour, and the environment.6 The results of these types of economic-impact studies should be interpreted with caution as the assessments are completed in isolation from all other factors and subject to important assumptions. For example, one of the basic assumptions of this study is that Doha round of WTO negotiations would be completed and successful. Also, the study was completed before the global financial and economic crises. Thus it provides only an indication of possible impacts on the participating countries, subject to different assumptions and no change in the external factors.The attempt to create closer economic cooperation between Canada and the EU has been given a boost by three factors. First is the glacial pace of the Doha development agenda at the WTO. The long and inconclusive multilateral negotiations have resulted in an increased interest in regional agreements. Clearly, if the Doha round had been concluded successfully, the CETA negotiations on agriculture would have been easier: export subsidies in agriculture would have been eliminated; sensitive food products largely exempt from liberalization would have been clearly identified; and initial tariff levels would have been lower. …