Bernard Hoekman

The Political Economy of the World Trading System : from GATT to WTO

The World Trade Organization (WTO) is likely to be a major international organization for the foreseeable future. This volume surveys the WTO and GATT from the viewpoint of public choice and political economy, detailing the mechanics of the multilateral trading system that emerged from the Uruguay round of GATT. The authors, who were involved in the negotiations of the Uruguay talks, explain why WTO rules are phrased the way they are, the successes and failures of WTO and GATT, and how business, industrial associations and political lobbies influence the multilateral trading system.

Horizontal and vertical intra-industry trade between Eastern Europe and the European union

Horizontal and Vertical Intra-Industry Trade Between Eastern Europe and the European Union. — The share of intra-industry trade (IIT) in total trade between central and east European nations and the EU is broken down into various components. Vertical IIT is found to account for 80 to 90 percent of total IIT. Controlling for country-specific effects, it is positively associated with product differentiation, labor intensity of production, economies of scale, and foreign direct investment (FDI). Horizontal IIT is also positively correlated with FDI and product differentiation; however, a significant negative relationship is found for scale and labor intensity.ZusammenfassungHorizontaler und vertikaler intra-industrieller Handel zwischen Osteuropa und der Europäischen Union. — Die Verfasser teilen den Anteil des intra-industriellen Handels (IIH) am gesamten Auβenhandel zwischen den mittel- und osteuropäischen Ländern und der EU in verschiedene Komponenten auf. Es stellt sich heraus, daβ der vertikale IIH 80 bis 90 vH des gesamten IIH ausmacht. Unter Berücksichtigung länderspezifischer Effekte steht er in positiver Beziehung zu Produktdifferenzierung, Arbeitsintensität der Produktion; Skalenerträgen und ausländischen Direktinvestitionen. Horizontaler IIH ist ebenfalls positiv korreliert mit ausländischen Direktinvestitionen und Produktdifferenzierung, während hinsichtlich der Skalenerträge und der Arbeitsintensität eine signifikant negative Beziehung festgestellt wird.

Development, trade and the WTO : a handbook

Developing countries are increasingly confronted with the need to address trade policy related issues in international agreements, most prominently the World Trade Organization (WTO). New WTO negotiations on a broad range of subjects were launched in November 2001. Determining whether and how international trade agreements can support economic development is a major challenge. Stakeholders in developing countries must be informed on the issues and understand how their interests can be pursued through international cooperation. This handbook offers guidance on the design of trade policy reform, surveys key disciplines and the functioning of the World Trade Organization (WTO), and discusses numerous issues and options that confront developing countries in using international cooperation to improve domestic policy and obtain access to export markets. Many of the issues discussed are also relevant in the context of regional integration agreements. Separate sections of the handbook summarize what constitutes sound trade policy; the major aspects of the WTO from a development perspective; policy issues in the area of merchandise trade and the liberalization of international transactions in services; protection of intellectual property rights and economic development; new regulatory subjects that are emerging in the agenda of trade talks; and enhancing participation of developing countries in the global trading system.

Protection and Trade in Services: A Survey

This paper surveys the literature on trade in services, focusing on the policies that are used to restrict such trade, the gains from liberalization, and the institutional mechanisms that have been adopted in the pursuit of liberalization. The paper argues that technological progress and international trade negotiations are likely to keep liberalization of trade in services a high profile policy issue. It also suggests that the research agenda should focus on developing better estimates of the welfare costs of protectionism in the service sector.

Global integration and technology transfer

This volume presents a rich set of analyses exploring how trade and foreign direct investment (FDI) can help increase economic growth by allowing firms to tap into and benefit from the global pool of knowledge. The chapters demonstrate that both obtaining access to foreign markets and opening their own economies to trade and FDI are crucial to promoting economic growth in developing countries, because they stimulate international technology diffusion. The volume also identifies government policies that can facilitate technology transfer and its absorption in the developing world.

Agriculture and the WTO: next steps

The potential welfare gains from further liberalizing agricultural markets are shown in this paper to be huge, both absolutely and relative to gains from liberalizing textiles or other manufacturing, according to new simulation results of the Global Trade Analysis Project. The probability of the WTO delivering sizeable farm protection cuts in the next round of multilateral trade negotiations would be greater if industrial and service sector negotiations were undertaken simultaneously as part of a comprehensive new round. The immediate challenge for analysts and negotiators is to identify and assess feasible policy packages that facilitate genuine agricultural reform rather than encourage inefficient re-instrumentation of farm support measures. Such assessment will require significant improvements in both analytical tools and databases. Copyright 2001 by Blackwell Publishing Ltd.

Services Trade and Growth

The competitiveness of firms in open economies is increasingly determined by access to low-cost and high-quality producer services - telecommunications, transport and distribution services, financial intermediation, etc. This paper discusses the role of services in economic growth, focusing in particular on channels through which openness to trade in services may increase productivity at the level of the economy as a whole, industries and the firm. The authors explore what recent empirical work suggests could be done to enhance comparative advantage in the production and export of services and how to design policy reforms to open services markets to greater foreign participation in a way that ensures not just greater efficiency but also greater equity in terms of access to services.

Determinants of Intra-Industry Trade between East and West Europe

The share of intra-industry trade (IIT) in total trade between Central and East European nations and the EU is among the highest of all the EU’s bilateral trade flows. IIT is broken down into horizontal and vertical components and the determinants of each is investigated. Vertical IIT (exchange of similar goods of different quality) is found to account for 80-90% of total IIT and is positively associated with product differentiation, labour intensity of production, economies of scale, and foreign direct investment (FDI). Controlling for country effects, a statistically significant positive association is found between horizontal IIT (the exchange of close substitutes of similar quality) and FDI, product differentiation, and industry concentration; a significant negative relationship is found for scale and labour intensity. These results do not hold if country effects are not controlled for, suggesting that country-specific factors are key determinants of horizontal IIT. The estimation results are more robust than those in previous studies, reflecting the specific characteristics of the endowments of, and ongoing restructuring process in, transition economies.

Trade and employment : stylized facts and research findings

The substantial literature investigating the links between trade, trade policy, and labor market outcomes-both returns to labor and employment-has generated a number of stylized facts, but many open questions remain. This paper surveys the subset of the literature focusing on trade policy and integration into the world economy. Although in the longer run trade opportunities can have a major impact in creating more productive and higher paying jobs, this literature tends to take employment as given. A common finding is that much of the shorter run impacts of trade and reforms involve reallocation of labor or wage impacts within sectors. This reflects a pattern of expansion of more productive firms-especially export-oriented or suppliers to exporters-and contraction and adjustment of less productive enterprises in sectors that become subject to greater import competition. Wage responses to trade and trade reforms are generally greater than employment impacts, but trade can only explain a small fraction of the general increase in wage inequality observed in both industrial and developing countries in recent decades. A feature of the literature survey is that the focus is almost exclusively on industries producing goods. Given the importance of service industries as a source of employment and determinants of competitiveness, the paper argues that one priority area for future research is to study the employment effects of services trade and investment reforms.

Reducing Agricultural Tariffs Versus Domestic Support: What's More Important for Developing Countries?

High levels of protection and domestic support for farmers in industrial countries significantly affect many developing countries, both directly and through the price-depressing effect of agricultural support policies. High tariffs--in both rich and poor countries--and domestic support may also lower the world price of agricultural products, benefiting net importers. The authors assess the impact of reducing tariffs and domestic support in a sample of 119 countries. Least developed countries (LDCs) are disproportionately affected by agricultural support policies. More than 18 percent of LDC exports are subject to domestic support in at least one World Trade Organization (WTO) member, as compared to only 9 percent of their imports. For other developing countries the figures are around 4 percent for both their exports and imports. So, the prevailing pattern of trade suggests the world price-reducing effect of agricultural domestic support policies may induce a welfare loss in LDCs. The authors develop a simple partial equilibrium model of global trade in commodities that benefit from domestic support in at least one WTO member. The simulation results suggest there will be large differences between LDCs and other developing economies in terms of the impact of a 50 percent cut in tariffs as compared to a 50 percent cut in domestic support. Developing countries as a group would suffer a welfare loss from a cut in support, while LDCs would experience a small gain. For both groups of countries, tariff reductions by WTO members--including own liberalization--will have a positive effect on welfare. The results show both the importance of focusing on tariffs as well as subsities, and the need for complementary actions to allow a domestic supply response to occur in developing countries if world prices rise