Trade Policy Reforms Research Articles

Trade liberalization effects on the development of small and medium-sized enterprises in Indonesia: A case study

The impact of international trade policy reform on the Indonesian economy, particularly in the areas of economic growth and development of the domestic manufacturing industry, has been studied extensively. However, the implications of such reform on the growth of small and medium-sized enterprises (SMEs) in Indonesia remain under-researched. This paper thus contributes to filling the gap by examining the impact of international trade policy reform, particularly following the 1997 crisis, on the growth of SMEs in Indonesia. Two main questions are posited: (a) how does international trade policy reform affect local SMEs?; and (b) has the growth of SME exports accelerated since the reform? The study does not find evidence that the reform has affected SMEs negatively. On the contrary, with the exception of a slight decline in 1998 due to the economic crisis, the number of SMEs has been growing. The paper suggests that such enterprises have not only managed to survive, but they have also been able to increase their output. Their exports also increased annually.

Why Isn't the Doha Development Agenda more Poverty Friendly?

AbstractCritics of the Doha Development Agenda rightly point to the lack of aggressive reform in wealthy countries for its role in dampening developing country gains. The authors find that the absence of tariff cuts on staple food products in developing countries also critically limits poverty reduction in those countries. Based on their analysis of the impacts of multilateral trade policy reforms in a sample of 15 developing countries, they find there is some evidence of poverty increases amongst the poor who work in agriculture when they lose protection for their earnings. However, these effects are minimized when agricultural tariffs are cut in all developing countries, and when the impact of lower food prices on low income consumers is taken into account in their 15 country sample.

Potential impacts of trade policy reform arising from the economic partnership agreement (EPA) on wage and employment in Nigerian manufacturing subsectors

potential impacts of trade policy reform arising from the economic partnership agreement (EPA) on wage and employment in Nigerian manufacturing subsectors

Trade and investment policy reforms in Cameroon: Impact assessment and perspectives

The paper analyzes the links between liberalization of trade and investment policy reforms and economic growth in Cameroon within 1980-2004. After identifying trade and investment policy reforms and market access conditions, which appears to gear towards liberalization, it appears that their expected results are still awaited. However, facts from the costs/benefits analysis tend to confirm the literature assertion that their long term benefit effects are superior to their short term adjustment costs. Despite the improvement in market access conditions thanks to trade preferences, the country did not take full advantage of that opportunity as well as those offered by trade and investment policy reforms because of the remaining trade, investment, institutional and economic bottlenecks including poor governance and external and mostly internal supply constraints. The growth elasticity determinant forecast model results show that additional reforms in view to lift those constraints are necessary and indispensable to boost growth in Cameroon. TRADE AND INVESTMENT POLICY REFORMS IN CAMEROON: IMPACT ASSESSMENT AND PERSPECTIVES

Trade policy reforms and private investment response in Nigerian

Trade policy reforms and private investment response in Nigerian

An evaluation of the impact of Nigeria's trade and investment policy reforms

An evaluation of the impact of Nigeria's trade and investment policy reforms

Border price and export demand shocks for developing countries from rest-of-world trade liberalization using the linkage model.

The volume on agricultural price distortions, inequality and poverty begins with a global study that uses the World Bank's linkage model to examine the economic impacts in various countries, regions and the world as a whole of agricultural and trade policies as of 2004. It does so by shocking that model with the removal of all agricultural price-distorting domestic and border policies with, and without, the removal of trade policies affecting all other goods. That pair of shocks is also employed in another global study in that volume to examine the inequality and poverty implications of those price-distorting policies for more than 100 countries. Then for ten national studies reported in that volume, the Linkage model again is used, but only to provide an exogenous set of shocks to the national economy wide model employed by the authors of each developing country case study. The effects of that shock on a national economy are then compared with the effects of own-country liberalization using the same national model and the same agricultural protection rates for that country as in the global Linkage model. In this appendix the authors describe the main assumptions adopted to generate the border price and export demand shocks from agricultural and trade policy reforms by the rest of the world, and how that is communicated to the national models.

Agricultural protection and poverty in Indonesia: a general equilibrium analysis.

A general equilibrium modeling approach is used to estimate the effects within Indonesia of unilateral and global trade liberalization, including effects on poverty incidence. It is concluded that global reform of trade policy in all commodities is a significant potential source of poverty reduction for Indonesia. The poor rural and urban have a strong interest in global trade policy reform. If Indonesia were to liberalize unilaterally, poverty incidence also will decline but the effect is small. If liberalization is confined to agricultural products, the effects are similar but the declines in poverty incidence within Indonesia are much smaller.

Perspectives on the Competitiveness of EU Dairy Farming Perspektiven für die Wettbewerbsfähigkeit der europäischen Milchwirtschaft Perspectives sur la compétitivité de la production laitière de l’UE

SummaryPerspectives on the Competitiveness of EU Dairy FarmingThis article considers the challenges that may lie ahead for dairy producers over the next ten years, such as trade policy reform, other market developments and changes in input costs. It examines the present competitive position of the dairy sector in a number of EU Member States. Milk price and input cost projections are developed using the FAPRI‐Ireland, FAPRI EU GOLD model and FADN data on farm level costs. In turn these allow the projection of how cost to output price ratios might evolve over the next ten years in the absence of structural change, thereby indicating the extent of structural change required. The results suggest that the phasing out of export subsidies, a reduction in import tariffs for dairy products and rising input costs would have serious ramifications for the viability of dairy farming across the EU. Furthermore, the results suggest that significant structural change will need to occur in dairy farming sectors across the EU. It is concluded that the future ability of many EU Member States to sustain current milk production levels will be largely dependent on the efficient transfer of resources between exiting farmers and those wishing to expand production.

How Much of South Korea's Growth Miracle Can Be Explained by Trade Policy?

South Korea's growth miracle has been well documented. A large set of institutional and policy reforms in the early 1960s is thought to have contributed to the country's extraordinary performance. In this paper, the authors assess the importance of one key set of policies, the trade policy reforms in Korea, as well as the concurrent GATT tariff reductions. They develop a model of neoclassical growth and trade that highlights two forces by which lower trade barriers can lead to increased per worker GDP: comparative advantage and specialization, and capital accumulation. The authors calibrate the model and simulate the effects of three sets of tariff reductions that occurred between the early 1962 and 1995. Their main finding is that the model can explain up to 32 percent of South Korea's catch-up to the G7 countries in output per worker in the manufacturing sector. The authors find that the effects of the tariff reductions taken together are about twice as large as the sum of each reduction applied individually.

Brazilian trade policies: some observed and estimated effects of the 1990s liberalization

This paper seeks to examine economic effects of Brazil's trade policy liberalization in the early-1990s. The effects in Brazil, along with those of many other countries pursuing similar reforms, have been contentious. The period in question was one of macroeconomic turmoil followed by successful stabilization, and various policies were pursued sometimes simultaneously, rendering it analytically difficult to separate out various policy effects. The paper examines the existing evidence on the country's productivity growth and employs a computable general equilibrium (CGE) model to simulate the effects of trade policy changes. The analysis suggests that the trade policy reforms resulted in significant welfare gains for Brazil.

Agriculture, poverty and growth in Africa: linkages and policy challenges.

Abstract Agriculture in Africa has been neglected by African governments and donor institutions for the last two decades. In the last few years there has been a resurgence in official commitment to the agricultural sector. For the vast majority of countries in Africa, agriculture will continue to be the main engine driving overall economic growth and poverty reduction, as many country case studies demonstrate. However, one should not equate increases in agricultural production with improvements in indicators of well-being, such as poverty rates and nutritional status. Complementary interventions are needed to ensure that overall economic gains translate into improvements in the lives of the poor. Macroeconomic and trade policy reforms of the late 1980s and 1990s in Africa did not unleash a great boom in agricultural production, economic growth and poverty reduction. Even with a favourable policy environment, the efficiency of agricultural markets is constrained by a host of institutional and infrastructure factors. There is significant disagreement in the literature about the proper role of African governments in supporting agricultural markets. A substantial increase in resources devoted to agricultural research will help the sector realize its anticipated potential for productivity gains. The empirical analysis of individual country experiences with growth and poverty linkages in Africa is relatively new; future directions for research are identified.

Trade Policy and Poverty in Benin: A General Equilibrium Analysis

Economic and financial crisis in Benin since 1980s led the government to embark on a process of economic reforms in 1991. These reforms sought to remedy the fiscal and trade imbalances in order to accelerate economic growth. Trade policy reform was given priority. Import bans and quotas were eliminated, import duties abolished and a compensatory tax on commodities sold in the domestic market instituted. This study analyzes the effects of the trade policy reforms using a computable general equilibrium (CGE) model and household survey data. Results show that these reforms are more beneficial to households in urban areas, but contribute to worsening poverty conditions of the most poor in rural areas. If liberalization policies target better strategies aimed at fighting poverty, or at least not deteriorating the situation, they need to be designed in a way that they do not worsen the poverty conditions of the most destitute in society.

Comment on “Rapid Economic Growth: Contributing Factors and Challenges Ahead”1

India's economic growth performance can be better understood relative to other economies, such as those in East Asia. Over the 1970–2005 period, the purchasing power parity-adjusted gross domestic product (GDP) data from the Penn-World Tables 6.2 show that the average per capita GDP growth rate for nine emerging East Asian economies2 was 4.6%, and that per capita real income increased fivefold. China's performance was most remarkable, with per capita GDP increasing 7.0% per annum and per capita real income rising nearly 12-fold. In contrast, the average per capita GDP growth rate for India was 3.1% over the same period, and its per capita real income only rising by a factor of three. However, India has shown remarkable growth acceleration in the last decade. The average per capita GDP growth rate for India was 4.9% over the 1995–2005 period, close to the long-term average growth rate for the nine East Asian economies. The successful performance of the Indian economy over the past 10 years is attributed to the same favorable growth factors that contributed to East Asia's success. The standard growth model – such as an extended version of the neoclassical growth model – predicts “conditional convergence” of income, implying that an economy with a lower initial income relative to its own long-run (or steady-state) potential level of income grows faster than a higher-income economy over time. The convergence model implies that economies with more favorable factors influencing the long-run level of per capita income would grow faster than those with less favorable factors, when controlling for the level of initial income. The literature identifies a number of important growth factors: (i) investment, (ii) fertility, (iii) human capital (schooling and health), (iv) institutions and policy variables (quality of institutions and price stability), (v) openness (trade and direct investment), and (vi) the external environment (terms-of-trade shocks). A comparison of these growth factors between India and the average of nine East Asian economies or China indicates that, by and large, India had less favorable conditions for rapid growth in 1970s – based on relatively lower levels of investment, human capital, quality of institutions, and openness. For instance, the average schooling for the Indian adult population was only 1.9 years compared to 4.0 years for East Asia (Barro & Lee, 2001). But the Indian economy, nonetheless, has significantly advanced its human capital, quality of institutions, and trade and foreign direct investment (FDI) openness over the past decades, which in turn contributed to the remarkable growth acceleration. While India's growth acceleration is broadly explained by the improvement in the growth factors, there must be additional factors that are more specific to India. Ahluwalia (2008) addresses several important factors, such as reform of trade and FDI policies, government support for information technology development, and the role of services. Nevertheless, the author needs further elaboration in defining unique features of India's development strategy, perhaps by providing more detailed empirical evidence or international comparisons. For instance, further discussion of how India differed from other economies in policy reform, the globalization process, and service sector development would be helpful. While Ahluwalia emphasizes the role played by changes in policies and institutions in accelerating India's economic growth, it is not clear how deep or broad India's market reform and trade liberalization were in the 1980s and 1990s, and how much they have contributed to improving the growth in productivity. The role of services can be further elaborated by using growth accounting-type analysis of the source of growth in the Indian service sector, compared with that in East Asian economies. In terms of challenges ahead, the author rightly points out four major challenges: (i) the lack of infrastructure, (ii) a scarcity of skilled labor, (iii) a lagging agricultural sector, and (iv) the difficulties of macroeconomic management. The lack of infrastructure investment is often emphasized as a major impediment to sustaining India's high growth rate. Discussions of the economic, political, and institutional factors that have hindered long-term infrastructure investment in the Indian economy would be of interest. One can assume that there are other important challenges. The current levels of institutional quality and openness for India are still lower than those in East Asian economies. In order to sustain high growth, India must accelerate its efforts at reform and trade and investment liberalization. In addition, India needs to stimulate investment for upgrading technology and human capital. According to data from the United Nations Educational, Scientific and Cultural Organization, the number of patents granted per millions over the 2000–2005 period was only 1 for India, compared with 16 for China, and 1113 for South Korea. The secondary school enrollment ratio in 2005 was 54% for India, far below the 75% in China and Vietnam.

Introduction: ‘New directions in international trade theory’

This special issue contains nine papers which were invited to a conference themed “NewDirections in International TradeTheory” at theLeverhulmeCentre forResearch on Globalization and Economic Policy at the University of Nottingham, UK. Bernhofen (2009) “Predicting the pattern of international trade in the neoclassical trade model: a synthesis” suggests a unifying framework for pattern of trade predictability in the neoclassical trade theory. His framework is based on the Popperian key characteristic of a scientific theory: the imposition of a restriction on possible outcomes. There are two parts to a theoretical prediction: the identification of a set of conceivable outcomes and a restriction criterion. Applying this apparatus to the neoclassical trademodel reveals a remarkable coherence between the various formulations of the model and allows for an intuitive interpretation of the predictions. In addition, it highlights the intellectual continuity between Ricardo’s (1817) original formulation of comparative advantage and the modern general equilibrium formulations. Traditionally, the trade policy reform literature has assumed that policymakers care mainly about socialwelfare.Motivatedby theobservation that recent tradenegotiations have also been about guaranteeing ‘foreign market access’, the literature has recently started to investigate the effects of policy reforms on both welfare and market access. Falvey and Kreickemeier (2009) “Tariff reforms with rigid wages” extend the trade policy reform literature by incorporating unemployment. They analyze the effects of tariff reforms on welfare and market access in a competitive small open economy

Liberalising Trends in Israel's Trade Policy: Trade Policy Review of Israel

Israeli authorities have been generally efficient in implementing gradual, mostly unilateral, liberalisation of their country's trade policy regime, with agriculture and related activities being the only major exceptions to the rule. This trend reflects a broad consensus among major political parties in Israel in pursuing liberal trade policy reforms. An alternative interpretation of the liberalising trend is that protectionist pressures from organised sectoral lobbies were either weak or inefficient.

How Much of South Korea's Growth Miracle Can Be Explained by Trade Policy?

South Korea's growth miracle has been well documented. A large set of institutional and policy reforms in the early 1960s is thought to have contributed to the country's extraordinary performance. In this paper, we assess the importance of one key set of policies, the trade policy reforms in Korea, as well as the concurrent GATT tariff reductions. We develop a model of neoclassical growth and trade that highlights two forces by which lower trade barriers can lead to increased per worker GDP: comparative advantage and specialization, and capital accumulation. We calibrate the model and simulate the effects of three sets of tariff reductions that occurred between the early 1962 and 1995. Our main finding is that the model can explain up to 32 percent of South Korea's catch-up to the G7 countries in output per worker in the manufacturing sector. We find that the effects of the tariff reductions taken together are about twice as large as the sum of each reduction applied individually.

How Much of South Korea’s Growth Miracle Can Be Explained by Trade Policy?

This paper assesses the importance of trade policy reforms in South Korea, as well as the General Agreement on Tariffs and Trade (GATT) tariff reductions, in explaining Korea's growth miracle. We develop a model of neoclassical growth and trade in which lower tariffs lead to increased gross domestic product (GDP) per worker via comparative advantage and specialization, and capital accumulation. We calibrate the model and simulate the tariff reductions that occurred between early 1962 and 1989. The model can explain 17 percent of South Korea's catch-up to the G7 countries in value-added per worker in the manufacturing sector. These gains, as well as most of the welfare gains, are driven by two key transmission channels: multistage production and imported investment goods. (JEL F13, F43, L60, O47)

Caveat Emptor: The Computable General Equilibrium Approach to Assessing the Poverty Impact of Trade Liberalisation

Millennium Development Goals, increasing attention is being given to the poverty impacts of trade liberalisation. The high level of public interest has stimulated renewed research activity aimed at expanding the evidence-base available to trade negotiators and policymakers. Within this context, computable general equilibrium economic modelling tools have been widely employed. This paper provides a critical assessment of the CGE economic modelling approach to assessing the impact of multilateral trade policy reform on poverty. It first summarises the results of recent modelling studies that have been widely quoted during the WTO’s Doha Development Agenda negotiations. The paper goes on to argue that although traditional representative agent CGE models tend to be by design ill-suited for poverty analysis, single-country CGE models linked to household micro-simulation modules may provide more relevant insights. Nevertheless, the latter need to be further coupled to other modelling approaches on both the macro and the micro side for a meaningful economic assessment of the trade-poverty nexus. Furthermore, CGE modelling results need to be integrated into a broader cross disciplinary approach, drawing on both quantitative and qualitative methods and evidence.

Japan's New Agricultural Trade Policy and Electoral Reform: ‘Agricultural Policy in an Offensive Posture [ seme no nosei

The Japanese government maintained protectionist agricultural policies for several decades after the end of World War II. However, it recently introduced a new policy that aims at promoting the export of agricultural products to overseas markets. Agricultural export promotion policy is fundamentally different from traditional agricultural trade policies, as it focuses primarily on the promotion of competitiveness of Japanese agriculture rather than protection of inefficient farmers. This paper tries to explain this intriguing development in Japanese agricultural trade policy by focusing on the impacts of the changes in legislators' incentives since the electoral reform of 1994. It argues that the post-reform electoral environment induced the introduction of the agricultural export promotion policy. It is because the reform made certain particularistic policies, such as the protection of the agricultural sector, less attractive to politicians that politicians must now appeal to a broader consituency.