Author Archives: jdingel

PTA negotiations disadvantage developing countries

Bilateral agreements are intrinsically more difficult to evaluate than either multilateral or unilateral liberalisations because of their second best nature ie the balance of costs and benefits is not a given… This problem of measurement is further complicated because increasingly RTA go beyond the simple dismantling of border barriers to trade in goods…

For administrations in developing countries where human capital is often the binding constraint the resource demands of negotiating one or more RTA alongside multilateral and unilateral trade policy-making are potentially much greater. This is a recipe for misunderstandings about implications of specific policy changes demanded by an agreement and in particular for economic and social development. All of this is further complicated by the possibility that each RTA negotiated by any given country could differ markedly from other RTAs under negotiation or in operation by or in that country.

Jim Rollo – The Challenge of Negotiating RTAs for Developing Countries: What could the WTO do to help? (pdf)

Relative rates of protection

Relative rate of assistance to agriculture, excluding decoupled payments, 1956 to 2004 (percent)

“The Relative Rate of Assistance is calculated as RRA = 100[(100+NRAag)/(100+NRAnonag) – 1], where NRAagt and NRAnonagt are the average percentage Nominal Rates of Assistance for the tradable parts of the agricultural and non-agricultural sectors, respectively.”

From: Kym Anderson and Tim Josling.

Australia and New Zealand have low relative rates of agricultural to non-agricultural protection because both had protection in manufacturing exceeding that in agriculture before they “unilaterally moved to virtually free markets in farm and non-farm goods.” European, Japanese and Korean protection is heavily concentrated in the agricultural sector. And America? It appears to protect its agricultural and non-agricultural sectors evenhandedly.

The shortcoming of the graph is that it depicts only relative protection. Visualizing both absolute and relative protection in the same figure would be very informative, though a bit difficult to construct.

“Cultural assimilation, cultural diffusion and the origin of the wealth of nations”

Quamrul Ashraf & Oded Galor propose a cultural explanation for economic growth, but it’s not the usual story:

A thousand years ago, Asia was ahead. Why is Europe richer now? Asia was geographically less vulnerable to cultural diffusion and thus benefited from enhanced assimilation, lower cultural diversity and greater accumulation of society-specific human capital; this was an edge in the agricultural stage. Greater cultural rigidity, however, diminished the ability to adapt to a new technological paradigm, delaying their industrialisation.

Full Vox column.

"Cultural assimilation, cultural diffusion and the origin of the wealth of nations"

Quamrul Ashraf & Oded Galor propose a cultural explanation for economic growth, but it’s not the usual story:

A thousand years ago, Asia was ahead. Why is Europe richer now? Asia was geographically less vulnerable to cultural diffusion and thus benefited from enhanced assimilation, lower cultural diversity and greater accumulation of society-specific human capital; this was an edge in the agricultural stage. Greater cultural rigidity, however, diminished the ability to adapt to a new technological paradigm, delaying their industrialisation.

Full Vox column.

Today’s trade blogosphere highlights

Alex Singleton: Peter Mandelson says EPA opponents are spreading misinformation and propaganda.

AFP: A movie (not a documentary) about the Battle in Seattle premiered in Toronto last weekend.

Iana Dreyer: The French president’s call for CAP reform is “typical Sarko style – more markets + more national preference or protection. What the final result will be is to be seen.”

Dani Rodrik: UBC’s Nathan Nunn finds that African countries that exported more slaves between 1400 and 1900 are worse off economically today. Slave procurement resulted in state collapse and ethnic fractionalization.

Today's trade blogosphere highlights

Alex Singleton: Peter Mandelson says EPA opponents are spreading misinformation and propaganda.

AFP: A movie (not a documentary) about the Battle in Seattle premiered in Toronto last weekend.

Iana Dreyer: The French president’s call for CAP reform is “typical Sarko style – more markets + more national preference or protection. What the final result will be is to be seen.”

Dani Rodrik: UBC’s Nathan Nunn finds that African countries that exported more slaves between 1400 and 1900 are worse off economically today. Slave procurement resulted in state collapse and ethnic fractionalization.

Today's trade blogosphere highlights

Alex Singleton: Peter Mandelson says EPA opponents are spreading misinformation and propaganda.

AFP: A movie (not a documentary) about the Battle in Seattle premiered in Toronto last weekend.

Iana Dreyer: The French president’s call for CAP reform is “typical Sarko style – more markets + more national preference or protection. What the final result will be is to be seen.”

Dani Rodrik: UBC’s Nathan Nunn finds that African countries that exported more slaves between 1400 and 1900 are worse off economically today. Slave procurement resulted in state collapse and ethnic fractionalization.

The trade paradox

Moisés Naím says there’s a free trade paradox: trade is booming while negotiations bust.

In many countries, free trade agreements are now politically radioactive, with imports routinely blamed for job losses, lower salaries, heightened inequality, and more recently, even poisoned toothpaste and deadly medicines. The domestic politics of trade reforms are inherently skewed against trade deals…

In 2006, the volume of global merchandise exports grew 15 percent, while the world economy grew roughly 4 percent. In 2007, the growth in world trade is again expected to outstrip the growth rate of the global economy… An unprecedented number of countries, rich and poor alike, are seeing their overall economic performance boosted by strong export growth…

So, what explains the paradox of gridlocked trade agreements and surging trade flows? The short answer is technology and politics. In the past quarter century, technological innovations—from the Internet to cargo containers—lowered the costs of trading. And, in the same period, an international political environment more tolerant of openness created opportunities to lower barriers to imports and exports. China, India, the former Soviet Union, and many other countries launched major reforms that deepened their integration into the world’s economy. In developing countries alone, import tariffs dropped from an average of around 30 percent in the 1980s to less than 10 percent today. Indeed, one of the surprises of the past 20 or so years is how much governments have lowered obstacles to trade—unilaterally. Between 1983 and 2003, 66 percent of tariff reductions in the world took place because governments decided it was in their own interests to lower their import duties, 25 percent as a result of agreements reached in multilateral trade negotiations, and 10 percent through regional trade agreements with neighboring countries…

As the volume of trade continues to grow, the need for clearer and more effective rules becomes more critical. In this century, the quality of what is traded will be as important as the need to lower tariffs was in the last… Moreover, a rules-based system accepted by a majority of nations can protect smaller countries and companies from the abusive practices of bigger nations or large conglomerates. The rule of law is always better than the law of the jungle, even in resolving trade conflicts.

[Hat tip: WaPo]