The contribution of the paper is two-fold. We seek to place the EU-ACP relationship in a wider analysis of ‘sustainable development’, in line with the theme of this special issue, where sustainable development is located in a wider critical analysis of its relation to neo- liberalisation. Second, we offer a novel interpretation of EU-ACP tradeliberalisation which acknowledges the contributions of the major interpretations of the relationship from realist, constructivist, neo-Gramscian and Uneven and Combined Development (U&CD) perspectives. However, by contrast, our interpretation rests on the location of these contributions in a wider understanding of world market expansion, and the politics of generalised competitiveness that is associated with this. The originality of our approach is to suggest in relation to realists, neo- Gramscians and promoters of U&CD, that the EU-ACP trade relationship should not be read merely as the EU securing competitiveness relative to the ACP. Our contribution relative to constructivists is to acknowledge the role of ideas but to suggest that these are important only in as much as they arise from material processes and have material affects, in this case, principally world market expansion and generalised competitiveness. The significant implications of this are wide ranging and discussed briefly in the conclusion, but are of importance to those wanting to contest what they see as the damaging social, political and economic effects of tradeliberalisation in both ACP and EU societies. The discussion is therefore based on an interpretation of policy documents and a critique of the relevant secondary literature.
Linkages between trade, growth and poverty reduction are coming under increasing global scrutiny by a broad array of policy and civil society actors. The collapse of the WTO Doha Development Round—which had once been heralded as an opportunity to advance a more equitable approach to trade reforms—in June 2006 starkly illustrated the contentious nature of these debates. An emerging body of empirical evidence suggests that although in the medium to long-term trade reforms may result in improved growth, tradeliberalisation alone is insufficient to reduce poverty and inequality (e.g. Winters et al, 2004; Boussolo and Nicita, 2005). Instead complementary policies—not only policies on competitiveness, investment climate and infrastructure but also policies that consider the social dimensions of trade reforms such as social protection—are necessary (e.g. McCulloch et al., 2004). Attention to country contexts is particularly critical: case study research suggests that there is considerable scope to develop policies to mitigate the adverse impacts of tradeliberalisation and promote a more equitable distribution of the positive effects but a one-size-fits-all approach is neither technically nor politically feasible (Edwards, 2001; Polaski 2006). Rather the development of effective pro-poor trade policy approaches necessitates an understanding not only of the diverse impacts of trade reforms on different households— depending on, for example, whether households are net producers or net consumers, their rural/urban location, poverty status, labour market positioning 2 —but also on different household members. Gender analysts have for instance underscored the gendered impacts of tradeliberalisation, which are linked to the gendered composition of the labour market, (un)equal access to credit markets and legal rights regarding land title and ownership and cultural norms and practices related to the intra-household division of labour, assets and decision-making (Senapaty 2003; Kabeer, 2003). However, to date little attention has been paid to the potential impacts on child well-being.
The evolutionary approach to economic geography emphasises synergies with both the NEG and the IEG literature without loosing its distinct focus, which is to emphasize the evolution of the economic landscape over time (Boschma and Martin, 2010). According to Boschma and Frenken (2006) evolutionary economic geography (EEG) is unique in its core assumptions, units of analysis and type of explanations. From a methodological per- spective EEG values methodological pluralims applying formal modelling and statistical testing of theoretical propositions alongside case study approaches. Key assumptions a more closely shared with the IEG literature which assumes "economic action to be contex- tual rather than driven by maximisation calculus." (Boschma and Frenken, 2006, p. 292). EEG focuses mainly on organizational routines determining economic behaviour and rm or industry location. Organizational routines are shaped by path dependencies, or put dierently by organizational routines acquired in the past, innovation as well as relocation. Following Nelson and Winter (1982) the unit of analysis is organizational routines at the rm level. Firms are studied from a historical perspective in which entry, exit and spinos are attributed special attention. For instance, Klepper (2007, 2010) highlights the impor- tance of spinos for the forming of successful clusters like the automobile industry around Detroit and the semiconductor industry in Silicon Valley. As spinos are more likely to locate close to their parent rms in order to exploit location specic economic and social knowledge, spatial clusters emerge. Thus, clusters are persistent and self-reproducing, even if localization economies are absent (Boschma and Frenken, 2011), and the location of the cluster is determined by the location of the initial successful parent (Klepper, 1996). Apart
quality of domestic firms due to a low technology base and limited skills and experience are the major constraints in construction services that contribute to its disadvantageous position. Moreover, there is a lack of supporting institutional mechanisms to facilitate easier access to key inputs including access to finance and equipment. Lack of regulatory framework, intense competition among well-funded and equipped foreign operators and lack of access to finance and equipment as well as inexperienced management are issues that should be addressed to reverse this situation. Analysts in this sector have been arguing that economic opening will lead to the introduction of new financing instruments that can increase the local firm’s access to critical assets and will expose the labour force to skills and management experience critical for the growth and consolidation of the domestic operators. In the banking sector in Bangladesh, competition has been enhanced due to the announcement of opening of markets to new entrants, and as a result, interest rates have been lowered and loan quality (i.e. the share of non-performing loans in banks’ balance sheets) has improved. It appears that the activities in the banking sector, dominated by inefficient nationalised commercial banks (NCB), are being replaced by relatively more efficient and competitive private commercial banks (PCB) and foreign commercial banks (FCB). However, absence of prudential regulation may result in economic crisis with serious social impact as the Asian financial crisis of 1997 indicates. Hence, stakeholders consider that Bangladesh should follow cautious and slow down the process of liberalisation in the banking sector. The regulatory agency of the insurance sector in Bangladesh is not equipped with adequate manpower and resources to supervise this growing industry, which limit the agency’s role in the development of the sector. Insurance analysts consider that while opening this sector, apart from introducing efficiency and better regulation, the insurance companies need to be innovative in expanding their business activities in order to reach the common people. In the travel and transport sector, major weaknesses in the regulatory framework include poor coordination between authorities, poor governance (corruption and poor enforcement). According to analysts, Bangladesh can liberalise this sector on Mode 4 only after setting up a proper regulatory body. Because of its unique geographical location, Bangladesh has the potential to become a ‘transport hub’ to serve the entire hinterland comprising Nepal, Bhutan and Northeast India.
To analyse the impact of this source of sector heterogeneity, I consider the implementation of a common trade policy in an environment in which sectors di¤er in the degree of product market competition. This exercise enables us to isolate the contribution of sectoral di¤erences in product market competition to the relationship between trade and innovation. In this exercise, I consider two alternative scenarios (restricted entry vs. free entry) and two alternative tradeliberalisation policies: a movement from autarky to free trade and a movement from positive to zero trade costs. In the second policy I consider either an initial situation in which trade costs are common across sectors or an alternative scenario in which the degree of trade openness is common across sectors, as explained below. In the six scenarios, tradeliberalisation a¤ects innovation through a joint e¤ect of an increase in market size and an increase in competition. However, the latter is di¤erent across sectors due to di¤erences in the initial degree of competition. More precisely, when the countries move from autarky to free trade, the initially less competitive sectors experience a larger increase in innovation and by extension, sector productivity growth. This is the consequence of the fact that the increase in competition coming from foreign markets is tougher in sectors which are initially less competitive. Once the countries are opened to trade, a reduction in trade costs in sectors which start with the same level of trade barriers increases innovation and sector productivity growth in those sectors that are initially more competitive. This is the consequence of the fact that, for the same trade barrier, a sector which is initially more competitive is relatively more closed to foreign trade and a reduction in trade barriers intensi…es competition more in those sectors. When I consider instead an alternative scenario in which all sectors start with the same degree of trade openness, I …nd that innovation increases more in the less
Second, when transport costs are large enough (¿ > 1:05 approximately in the …gure) and under free trade countries grow at a rate that falls in between the growth rates they would experience if they traded with a symmetric partner. The reason is as follows. When trade costs are high (like also when countries trade with similar partners and under free trade) each country produces a proportion of varieties of …rst and second-class goods equal (or close) to its demand. In these circumstances, if a country, say the foreign country, trades with a country that has a comparative advantage in the progressive sector, it will bene…t from larger knowledge spillovers than if it traded with a similar partner. Larger spillovers lead to higher growth; thus, its growth rate will be larger than in the case of trade with a similar country. Vice- versa, the country with the comparative advantage will bene…t from less spillovers than when it trades with a similar partner; thus, the growth rate will be lower that in the case of the domestic country trading with a similar country.
influence market forces. For example, it maintains an extensive network of grain reserves. From 2006-2008, state owned enterprises (SOE) were the dominant purchases of grains. In this period, global prices were falling so that this action supported domestic prices. The size of grain reserves is kept secret so it is not possible to assess demand and supply conditions. Inhibiting the free flow of information is anathema to the efficient functioning of competitive markets. The government’s immense purchase of grain is inconsistent with its privatization and development of free markets in the agricultural sector of the economy. The low productivity and income of the rural population is a legacy of the planned economy, which prohibited the free flow of labor and capital across regions. Currently, agriculture contributes only 11% of GDP while employing over 40% of the labor force. The government uses subsidies and pricing policies that marginally increase farm income in the short run. But, the long run effect is to keep farmers entrenched in low-income grain production (Doherty and Lu, 2013).. In the last several years, China’s supported grain prices have been above global prices. Consequently, grain exports have fallen. Intent on supporting China’s production of grains (wheat, corn, rice, cotton and soybeans), the government purchased large quantities for its reserves. China was tempted to raise grain tariffs but this would have been a violation of its WTO commitment to keep tariffs below 3%. China needs to introduce greater freedoms and flexibility in its grain policies to improve its international competitiveness (Doherty and Lu, 2013).
The TDCA was negotiated in the late 1990s. On some of the issues EC policy and general thinking have further developed. Many of the proposed changes are minor or technical and would not normally require an amendment to the Agreement. But since amendments are needed in other sections, this is an opportunity to update some provisions. A more substantial change is proposed concerning sanitary and phyto- sanitary issues, which have turned out to be an important impediment to trade and therefore require enhanced cooperation.
The contribution of this paper is that it reconciles several key stylised facts within a single Economic Geography framework. The story runs as follows. The improvement of communication technology in the recent wave of glob alisation brings about a change in the specialisation of developed economies by allowing greater services agglomeration from their position of initial ad vantage in the first wave. Firstly, it results in a loss of workers from North’s manufacturing sector due to competition for skilled workers. Secondly, greater services tradeliberalisation results in the loss of forward linkages for North’s manufacturing firms by allowing South’s manufacturing sector to access ser vices inputs cheaply. If services trade is free enough (such as in 4>s — 0.8 in Figure 11), this can trigger a precipitous shift of manufacturing to the South or deindustrialisation (which implies greater offshoring). The loss of employ ment and forward linkages in North’s manufacturing sector then reduces the wage of semi-skilled workers in the North. The increase in skilled labour in the North further accentuates this process and results in even greater inequal ity. By explicitly modelling the agglomeration process with labour markets constraints, and treating the globalisation process as two distinct waves, this paper shows how the shifts in economic geography can explain many stylised facts.This paper therefore provides a stylised understanding of the history of North-South industrial development and the patterns of trade.
The public debate on the DDA has renewed interest in the effects of liberalisation of markets on developing countries. In the ongoing round of WTO negotiations, the ‘macro’ level of the debate seems to neglect important questions of the actual – rather than perceived – impact of tradeliberalisation on farmers in the developing world and the likely consequences on LDC farmers if further liberalisation of trade is agreed. In other words, harmful micro-level impacts on LDC farmers are usually simply assumed on the basis of high-level policy calculations carried out at the macro level of trade policy rhetoric (largely national and inter-governmental). One critical element in this assessment therefore is the extent to which changes in world agricultural policies, as a result of WTO reforms, will actually influence prices and other market signals (such as product quality) and what impact these might have on agriculture in developing countries and on farmers themselves. For example, little is known about which critical products are likely to cause price volatility and also to influence or encourage LDC exports – or indeed definitively in what direction the price changes will go.
With the ascendance of liberal approaches to economic develop- ment since the 1980s, developing countries have faced strong international pressure to reduce trade barriers with advanced, industrialised economies. A striking example is the fate of Botswana, Lesotho, Namibia and Swaziland (BLNS) following the 1999 trade and development agreement between the Euro- pean Union (EU) and South Africa. As members (with South Africa) of the Southern African Customs Union, the BLNS countries are now effectively locked into reciprocal trade liberali- sation with the EU. The BLNS governments’ acceptance of the agreement was accompanied by offers of various forms of financial assistance. This report aims to clarify links between tradeliberalisation and financial compensation, and their longer- term implications for BLNS countries’ economic relations with the EU. How well do compensation programmes conform with the liberal rationale of easing transitional economic adjustment costs in the move to freer trade? To what extent do they appear motivated more by the need to secure BLNS governments’ political acceptance of the EU-South Africa trade agreement? Analysing several programmes and drawing on personal inter- views with public officials, the report concludes that compensa- tion has provided political ‘side payments’ that deviate in important ways from liberal economic principles. The broader implications for understanding the political economy of tradeliberalisation and financial compensation in developing countries are also briefly discussed.
Before other considerations, we acknowledge that previous arguments that support local forest transitions can hardly be extended to a global perspective. However, we can provide some additional arguments supporting a possible global forest transition. To this end, the analytical models of the New Economic Geography can be useful as they consider explicitly the role played by transport costs. Specifically, Martin and Rogers (1995) provide a general equilibrium framework in which the trade-off between economies of scale and transport costs defines the location of economic activity. This is the most tractable of all economic geography models (see Chapter 3 in Baldwin et al., 2003), which is also known as the footloose capital model. In this paper, we extend this analysis to consider two areas (North and South) with different natural endowments in order to analyse the effects of tradeliberalisation not only on industrial location and on the concentration of economic activity between different countries, but also on the growth of their stocks of natural resources. Our model is able to reproduce the previously explained mechanisms. Thus, a reduction in transport costs has a negative effect on stock in the short-term, but in the long-term this initial effect is reversed as a consequence of the industrial reorganisation between countries because of the change in transport costs.
However, these results may be affected by another composition effect; in fact, pooling together MICs and LICs does not allow us to capture the distinctive features of the relationship between trade openness, technology upgrading and inequality in the two groups of countries. MICs and LICs may in fact be affected in different ways by international trade. Indeed, the potential for technological upgrading should be greater in MICs, which are more likely to be characterized by higher ‘absorptive capacity’ (or “capabilities”), which are considered a fundamental pre-requisite for taking advantage of new technologies (see, for instance, Abramovitz, 1986; Lall, 2004). This may in turn influence the choice of the technologies to import 36 ; in other words, MICs have the necessary capabilities in order to use the technologies produced in more advanced countries and to follow a catching-up path. While this process may have a positive impact on growth, it is very likely that it also implies an (at least temporary) increase in the demand and wages for skilled labor (at least until the labor supply adjusts as a result). LICs, instead, are likely to be excluded from this mechanism, and therefore trade with more advanced countries may not have the same adverse consequences in terms of income distribution. In fact, trade with LICs is often confined to the importation of older (or second– hand) capital equipment that requires fewer skills to operate than state–of–the–art equipment (Barba Navaretti et al., 1998 37 ). Turning the attention to the export side, MICs are better endowed with the industrial infrastructure needed to serve the sophisticated and demanding markets of the developed countries, so the skill-enhancing impact of exports is likely to affect only this group of counties. In contrast, exports from LICs are mainly concentrated in the primary and extractive sectors and are generally characterised by a low-technology content.
Finally, the evidence shows that tradeliberalisation exacerbates wage inequality through shifts in industrial wage structures. However, the industry wage premium in Indonesia diverges greatly. The industry’s smallest premium is in sectors with high unskilled labour stocks. This shows that unskilled labours receive low wages not only due to the economic skill premium growth but also because a disproportionate number work in industry with low wage premiums. This is an inequality that has not been detected in prior researches. The inequality and enhancement of skill premiums can be dealt with through policies of the labour market, such as those suggested by Martins (2004) by shifting the minimum wages and building social safety programmes, besides increasing access to education.
Mujeri (2002) argued that while Bangladesh’s greater integration into the world economy was generally “pro-poor”, the gains were relatively small due to structural bottlenecks and other constraints. The World Bank (2002) showed that the benefits of economic growth during the 1990s had not been distributed evenly across the regions. The World Bank (2004) report showed that Bangladesh experienced a significant improvement of the rural non-farm sector in recent years. In another report, the World Bank (2006) argued that tradeliberalisation made available cheap imports of agricultural inputs such as pesticides, irrigation equipment, fertilisers and seeds. The report claimed that the application of these inputs affected the environment adversely in the form of loss of soil fertility, loss of bio-diversity and water pollution. Salim and Hossain (2006) found that there were wide variations in productive efficiency across farms as a result of agricultural reforms. Average efficiency increased modestly from pre-reform to the post-reform period. The efficiency differentials were largely explained by farm size, infrastructure, households’ off-farm income, and reduction of government anti-agricultural bias in relation to trade and domestic policies.
There have been some studies that provide the features and determinants of migra- tion in Vietnam. Anh, Goldstein and McNally (1997) employed the Vietnam Population Census data in 1989 to assess how population movements respond to market opportuni- ties as a baseline estimate. This study shows that national reunification resulted in popula- tion redistribution and a rural resettlement policy while market reforms and macro struc- tural changes affected labour markets and contributed indirectly to more spontaneous and voluntary spatial mobility. In addition, their findings from the multivariate analysis reveal that more developed provinces attracted more in-migrants; however, the govern- ment policy did not stimulate out-migration from sending provinces or cities. Later, Anh et al. (2003) basically focused on the statistical analysis to assess the determinants of internal migration by a making distinction between macro-socio-economic factors and the specific mechanisms (wage and unemployment differentials, etc) through which structural factors operate. They exploited the secondary data sources from the Vietnam Population Census in 1989 and the Population and Housing Census in 1999 covering all 61 provinces in Vietnam (GSO, 2001). They argued that economic factors, for instance, incomes and employment opportunities, have a larger influence than non-economic fac- tors in determining the current migration pattern in Vietnam; in particular, the migration decision reflects the income differences rather than demographic variables (for example, age, gender, marital status).