M' Shafaeddin

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M. Shafaeddin

• Is NAMA a Tool of Development ,
• Or Another Manifestation of Asymmetries in WTO
  Rules?

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The developing world is not hearing what we are
saying and wre not hearing what developing world
is saying. Were passing like ships in the night
(C. Barshefsky, Ex-US trade rep.)
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Why Are We Passing Like Ships at Night?

• Concern
• Developed counts.
• World economy
• interchangeable value (trade)
• A. Smith
• Opening LDcs market
• Allocative efficiency

• Concern
• Developing counts.
• National economy
• Productive power (Dev.)
• F. List
• Expansion of supply/upgrading
• Creative efficiency (growth)

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Outline Is NAMAconsistent with
industrialization Dev.?

• Contradictions with Dev.
• In the design and implementation of GATT/ WTO
  rules
• Between Doha text and Proposals made by developed
  countries
• Detrimental effects on Industrialization

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1. Do GAT/WTO rules suffer from contradictions?

• Preamble to GATT
• Contradictions in design
• Contradictions in implementation

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Contradiction in design

• General
• Power of Government/not companies
• Competition policy
• Goods and capital not labour
• Specific exceptions
• Manufacture/not agriculture
• Labour intensive products
• Infant industry support for X/TRIPs

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The Role of TNCs

• Example
• The Share of top firms in production and trade
• Activity no.
• Total global output 200 28
• World trade 500 70
• Industrial output 1000 80
• _______________________
• Compare GM sale with GDP of Thailand

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• An. Av. cross-border mergers
• and acquisition with value of more than
  1b.1987-2006
• Periods No. of deals value b
• 1987-1996 23 49
• 1997-2001 110 445
• 2002-2004 71 186
• 2005 141 454
• 2006 172 584
• --------------------------------------------------
  -----

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Role of large firms

• Their Competitive advantage
• Technology
• Globalization
• Active strategy
• Creative destructions
• Implication for new comers
• Barriers to entry
• competitiveness

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Agricultural subsidies

• OECD 400b.
• As a percentage of exports of
• Africa 370
• Least Developed 1400
• All developing 25
• -----------------------------------
• Example Cotton Scandal

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Double Standards in Implementations

• Textiles and clothing
• Preferential treatment
• Anti-dumping
• Targeting

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2. NAMA Doha Round Objectives

• Attention to
• Special need of Dev. Countries
• Less than full reciprocity
• Flexibility
• SDT
• Reduction or elimination on X products of dev.
  Countries of
• High tariffs
• Tariff peaks and tariff escalation
• Non-tariff barriers

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Developed countries proposals on NAMA biased?

• Pushed for liberalization
• Across-the-board cut in tariffs to a low level
• Reducing tariff dispersion
• Binding of individual tariffs at low levels
• Near universal liberalization
• The use of Swiss formula for tariff cuts

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Harmful characteristics of the Swiss Formula

• T(a.t)/(at)
• R t/(at)
• told tariff rate
• Tnew tariff rate
• acoefficient
• Rrate of reduction
• The higher t, the higher R
• The lower a, the higher R
• a determines maximum new tariff (T) possible
• e.g. developed country proposal a15

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Implications for Developing Countries

• Cuts in tariffs greater for developing count.
• E.g. developed countries a 10 , t 5
• T3.33
• R 33 per cent, or 1.67 percentage points
• Developing a15, t50
• T11.5
• R 38.5 or 76 percentage points
• Beneficial effects for developed (Knowledge
  intensive industries) TRIPs
• Detrimental effects on industrialization of LDCs
• Slight market access for produced goods
• But damage on policy space for dynamic comp.
  advantage, diversification upgrading

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Experience of successful casesearly and late
industrializers

• Long period of selective infant-industry
  protection (Except Hong-Kong)
• Also intervention in other areas than trade
• Near maturity selective and gradual
  liberalization
• Then pushed for opening markets of others!
• 19th century 5 rules or war
• Recent through IFIs and WTO denial of credit
• And tariffs were used for bargaining in
  negotiations
• Pre-mature lib. by USA (1847-61) was reversed
• All learned from previous industrializers

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Experience during colonial era

• Forced liberal trade
• Results
• Sluggish growth
• De-industrialization
• Example of India

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Annual average growth rates in per capita GNP of
the Third world
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Experience of LDCs 1980-2000 sample of 46
countries

• Objectives
• Export expansion
• MVA expansion
• Diversification in fav. of Man.
• Stimulation of Invest.
• Upgrading
• Mexico, Brazil, Ghana

• Performance
• 20 countries rapid
• A few mostly East Asia
• 50 de-industrialization
• Resource-based,
• assemley gained
• I/GDP fell below early 80s Man. Sector suffered
  worst
• Little Exceptions cars, IS dynamic, near
  maturity
• Examples of disasters

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Mexico (a) champion of lib.how about
industrialization?

• Unilateral, multilateral, bilateral lib.rapid
  and extensive
• Relation between
• GDP non-oil exports graph
• MVA and exports of manufactures
• Lack of response of investment to LIB.

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Good News!!Lib. Helps Industries Near Maturity

• Experience of Republic of Korea
• Aerospace industry Brazil
• 1995 2004/5
• X value 182 m. 3.3 b.

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Concluding Remarks implications for WTO Rules

• Premature, Uniform, across-the-board, rapid, and
  universal lib.
• de-industrilization
• Locked in primary production, resource-based..
• Lib. Could help as a part of a dynamic trade
  policy
• Need for trade and industrial policy bottom-up
  approach in international trade rules and
• Change in the philosophy behind WTO rules
• Acceptance of dynamic com. advantage
• Allowing for different levels of dev. and
  capacity.
• Flexible rules dynamic policies
• Binding average tariffs
• Allow export performance requirements and
  domestic clauses
• TRIPs to allow better diffusion of technology

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• The failed WTO meeting in Cancun should serve
  as a warning something is fundamentally wrong
  with how the global trading system is managed-and
  with the global financial system
• J.Stiglitz
• The Guardian October 2, 2003

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Thank you

• For listening