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How to make trade work for development

How to make trade work for development. Hakim Ben Hammouda Director Trade, Finance and Economic Development Division, UNECA. Outline. Introduction Acceleration of trade liberalisation. Trade liberalisation: from consensus to questions. What do the theories say?

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How to make trade work for development

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  1. How to make trade work for development Hakim Ben Hammouda Director Trade, Finance and Economic Development Division, UNECA

  2. Outline • Introduction • Acceleration of trade liberalisation. • Trade liberalisation: from consensus to questions. • What do the theories say? • Lessons from other experiences. • WTO gives some flexibilities. • Conclusion.

  3. 1. Introduction • Trade policy is back at the centre of the development debate. • The multilateral negotiations and the WTO have given this renewed interest on trade. • Many gatherings are today taking place to renew the thinking about trade policies. • What kind of trade policies do developing countries need? • Is it neo-liberal trade policies like those of the 80s or the interventionist type of the 1970s?

  4. 2. Acceleration of trade liberalisation • In the 1980s and 90s, an acceleration of trade liberalisation was witnessed. • This liberalisation was the result of four movements: • Unilateral liberalisation as a result of economic reforms accompanying SAPs. • Liberalisation as a result of multilateral negotiations in the WTO (especially the Uruguay Round). • Liberalisation as a result of regional integration process. • Liberalisation as a result of bilateral negotiations (e.g. Cotonou Agreement; the Barcelona process).

  5. 3. Trade liberalisation: from consensus to questions • The 1980s and 90s witnessed major consensus on trade liberalisation. • But since end of 90s, questions were raised about relevance of trade liberalisation because: • There were no improvements in African countries situation in the global economy. • There were strong fiscal consequences for developing countries. • There were legitimate risks of de-industrialisation. • Developed countries failed to honour their part of the bargain as they did not implement their commitments e.g. lowering of high tariffs; subsidies elimination; tariff peaks remain; tariff escalation abounds).

  6. 4. What do theories say? • Major debate since 2000 with two issues being debated: • The causal relationship between trade liberalisation growth and trade liberalisation and poverty reduction. • No consensus on trade liberalisation and growth. • Dollar and Kraay (2004) strongly advocate that trade liberalisation is good for growth. • Sachs and Warner (1995) and Summers and Heston (1991) had reached a similar conclusion. • Rodrik and Rodriguez (2000) challenged these results.

  7. 4. What do theories say? Contd... • The issue of impact of trade liberalisation on revenue and poverty also debated. • Dollar and Kraay (2004) posit that there is positive impact of trade liberalisation on revenues. • Hanson (2003) and Abarche, Dickenson and Green (2004) argue that there is a negative impact of trade liberalisation on poverty. • What can be concluded is that the impact of trade liberalisation has become a controversial issue in the theory.

  8. 5. Lessons from other experiences. • To be able to give a good response on the impact of trade liberalisation, there is need to go back to the best practices for lessons: • Asian emerging countries could give direction of responses to our question. • In their experiences, beyond trade, they had a strategic vision for development. • Trade policy and its instrument was integrated in this vision.

  9. 5. Lessons from other experiences. Contd… • Asian countries employed pragmatic compromises between openness and control. • It is not about a general trade policy then, but adequate instruments to respond to each sector priorities. • The key is differentiation between and within sectors. • Main conclusion: there is need to build a strategic vision and be more pragmatic in the policy design and implementation.

  10. 6. WTO gives some flexibilities • In deed, the WTO offers room for this pragmatism. For instance: • It recognizes the essence of special and differential treatment. • Implementation of commitments can be differentiated according to level of development. • It allows for special products designation such that trade liberalisation could be differentiated. • Countries therefore have room within the multilateral framework to employ a pragmatic trade policy.

  11. 7. Conclusion • To conclude, and reverting to our earlier question regarding what kind of trade policies that developing countries need? • Is it neo-liberal trade policies like those of the 80s or the interventionist type of the 1970s? • This presentation indicates that it is neither of these type of policies. • But pragmatic trade policies are the key to getting trade liberalisation achieve the desired results with respect to growth and poverty.

  12. Thank you for your attention.

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