WTO at the Margins: Small States and the Multilateral Trading System

Half-title......Page 3
Title......Page 5
Copyright......Page 6
Contents......Page 7
List of Figures and Appendices......Page 10
List of Tables......Page 15
List of Contributors......Page 21
Introduction......Page 25
PART I Theory and evidence......Page 33
1.1 Introduction: the theory of comparative advantage ad extremum......Page 35
1.2 Characteristics of efficient national economies in a global market......Page 37
1.3 The nature and consequence of rent-based development......Page 40
1.3.1 Market-based sources of quasi-rent......Page 41
1.3.1.1 Booming sectors......Page 42
1.3.1.2 Niche market activities......Page 44
1.3.2.1 Trade preferences......Page 46
1.3.2.2 Tax concessions......Page 48
1.3.2.3 Sovereignty: from de jure to nefarious rents......Page 49
1.3.3 The conundrum of copra and tourism......Page 50
1.4 Conclusion......Page 51
2.1 Introduction......Page 53
2.1.1.1 Geographic......Page 54
2.1.1.2 Economic......Page 55
2.2 Constraints to growth and development......Page 56
2.2.2 Export concentration......Page 57
2.2.3 Size and manufacturing......Page 58
2.2.4 Domestic production of non-tradables......Page 60
2.2.5 Size and matters of finance......Page 61
2.2.6 Volatility......Page 62
2.2.6.1 Volatility and growth......Page 64
2.2.6.2 Investment: is it the key?......Page 65
2.2.7 Isolation and geographic surroundings......Page 66
2.2.7.1 Isolation......Page 67
2.2.7.2 Geographic surroundings......Page 68
2.2.8 Vulnerability......Page 69
2.2.8.1 Measuring vulnerability index components......Page 70
2.2.8.2 Indices results......Page 72
2.3.1 Theoretical work......Page 73
2.3.2 Empirical work......Page 74
2.3.3 Growth and size regressions findings......Page 75
2.3.4.1 Openness......Page 76
2.3.4.2 Fundamentals......Page 78
2.3.4.3 Sectors......Page 79
2.3.5 Income level and size regression findings......Page 80
2.3.6 Behind the income results: preferential arrangements......Page 81
2.4.1 Sectoral focus......Page 82
2.4.2 Openness......Page 83
2.4.4 Integration......Page 84
Armstrong, De Kervenoael and Read (1998)......Page 86
Banerji (1978)......Page 87
Briguglio (1995)......Page 88
Easterly and Kraay (2001)......Page 89
Khalaf (1979)......Page 90
Kwan and Beladi (1993)......Page 91
Ramey and Ramey (1995)......Page 92
Srinivasan (1986)......Page 93
Bibliography......Page 94
3.1 Background......Page 98
3.2 The approach......Page 99
3.3 The business cost data......Page 105
3.4 The regressions results......Page 108
3.5 The disadvantages of smallness: cost inflation factors and income penalties......Page 120
3.6 Policy conclusion......Page 127
References......Page 130
4.1 Introduction......Page 132
4.2 Current benchmarking initiatives and their appropriateness for small states......Page 133
4.3 A small-states specific competitiveness index......Page 141
4.3.1 Country-level findings......Page 143
4.3.2 Findings by region, income group and country size......Page 145
4.4.1 T-test and variables......Page 152
4.4.2 The t-test results......Page 155
4.5 Conclusions......Page 159
Definition of small states and countries used......Page 161
Indexing the variables......Page 162
References......Page 165
5 The economics of isolation and distance......Page 169
5.1.1 Distance and economic interactions......Page 170
5.1.2 The magnitude of shipping costs......Page 172
5.1.4 Landlocked countries......Page 173
5.2 Remoteness and real income......Page 174
5.2.1 Quantifying the effects......Page 178
5.3 New technologies: the death of distance?......Page 179
5.3.1 Weightless inputs and outputs......Page 180
5.3.2 ICT and the costs of remote management......Page 181
5.3.3 The speeding up of production......Page 183
5.4 Conclusions......Page 184
6.1 Introduction......Page 188
6.2.1 Trade in merchandise goods......Page 189
6.2.2 Exports of commercial services......Page 194
6.2.3 Total export (merchandise plus commercial services) trade......Page 196
6.2.4 Total trade transactions......Page 197
6.3.1 Long-term trends......Page 198
6.3.2 Recent performance of individual countries......Page 209
6.4 Why is marginalisation of small states a cause for concern?......Page 217
6.5.1 Understanding marginalisation......Page 220
6.5.2 A simple model of marginalisation of small states......Page 224
6.5.3 Data......Page 225
6.5.4.1 Tests for unit roots and cointegration......Page 227
6.5.4.2 Testing the variables for unit roots......Page 228
6.5.4.3 Estimation strategy......Page 231
6.5.4.4 Test for existence of a long-run relationship......Page 234
6.5.4.6 Short-run dynamics......Page 236
6.6 Implications for long-term trade and development of small states and concluding remarks......Page 239
References......Page 248
7.1 Introduction......Page 251
7.2 The costs of being small......Page 252
7.3.1 Vulnerability to external economic shocks......Page 260
7.3.2 Vulnerability to natural disasters......Page 263
7.4 The costs of governance......Page 267
7.5 Characteristics in combination......Page 269
7.6 The limits of regionalism......Page 271
7.7 Being ill-equipped to benefit from globalisation......Page 273
7.8 Being vulnerable to harm from globalisation......Page 276
7.9 Small economies’ predicament as a trade concern......Page 285
7.10 The feasibility of favourable treatment for small economies......Page 287
7.11 Small states, negotiating weaknesses......Page 291
7.12 Conclusion......Page 292
References......Page 293
PART II WTO and small economies......Page 303
8.1 Introduction......Page 305
8.2 Small states, globalisation and the WTO......Page 307
8.3 WTO precedents on sub-categorisation of Members, including small economies......Page 309
8.4 A small matter of definition......Page 312
8.5 Small economy issues in the dedicated sessions of the WTO......Page 314
8.6 Conclusion......Page 317
9.1 Introduction......Page 333
9.2 Why SDT for small developing economies?......Page 334
9.3 Evolution and status of special and differential treatment......Page 336
9.4 Debate over the efficacy of SDT......Page 342
9.5.1 Acute vulnerability......Page 349
9.5.1.1 High degree of openness......Page 350
9.5.1.3 Export market concentration......Page 351
9.5.1.5 Acuteness......Page 352
9.5.3 Small size of firms......Page 353
9.6 Implications of small size......Page 354
9.6.1 Volatility......Page 355
9.6.2 Sub-optimal resource use, allocation and mobilisation......Page 357
9.6.3 Constrained international competitiveness......Page 359
9.6.4 Disarticulated adjustment capacity......Page 362
9.7.1 Guiding principles......Page 363
9.7.2.1 Differentiated obligations......Page 364
9.7.2.2 Asymmetrically phased implementation......Page 365
9.7.2.4 Flexibility in application and adherence of disciplines under prescribed circumstances......Page 366
9.7.2.6 Development promoting policy......Page 367
9.7.2.8 Enabling access to mediation......Page 369
9.7.2.9 Development funding for implementation and trade capacity-building......Page 370
9.8 How SDT addresses the characteristics and problems of SDEs......Page 371
9.9 Identification of small developing economies......Page 373
9.10 The way forward......Page 376
9.10.1 Differentiated treatment......Page 377
9.10.2 Implementation, adjustment and graduation......Page 378
9.11 Conclusions......Page 379
10.1 Introduction......Page 380
10.2 Background......Page 381
10.3 The use of ‘objective’ variables......Page 385
10.4 Analysis by sector......Page 391
10.5 Line-by-line analysis......Page 396
10.6 Conclusions......Page 404
Appendix 10.1......Page 406
Appendix 10.2 Cluster and discriminant analysis......Page 407
Appendix 10.3 Results of line-by-line de minimis analysis......Page 420
Appendix 10.4 Notes on data sources......Page 442
Bibliography......Page 444
PART III WTO dispute settlement......Page 447
11.1.1 What was the dispute?......Page 449
11.1.2 Why was there a problem?......Page 450
11.1.3 Prelude to battle......Page 452
11.1.3.1 The first phase of the banana wars......Page 454
11.1.3.2 The early challenges......Page 456
11.1.4 Resolution of the dispute and subsequent reforms......Page 457
11.1.5 The breakthrough......Page 458
11.1.7 Impact of the changes......Page 459
11.1.8 2004 – Enlargement......Page 463
11.1.9 How is the Caribbean adapting?......Page 464
11.2.1 2006 – Abolition of the quota system......Page 465
11.3.1 Implications of the banana challenge for other commodity protocols and preferences......Page 467
11.3.2 Strategy and tactics......Page 469
11.3.3 Other systemic lessons......Page 470
11.4 Conclusion......Page 473
12.1 Introduction......Page 475
12.2.1 Contribution to real GDP......Page 477
12.2.2 Contribution to employment......Page 478
12.2.3 Contribution to the current account of the BOP......Page 479
12.3 Social importance of banana exports in the Eastern Caribbean......Page 481
12.4 WTO proceedings against the EU banana regime......Page 482
12.5 Changes to the EU regime for banana imports prior to and since the WTO ruling......Page 485
12.6 Extent of decline of the Eastern Caribbean region’s banana industry......Page 487
12.7 Impact of industry decline on the Windward Islands export revenue......Page 490
12.8.1 Impact of industrial decline on economic growth......Page 493
12.8.2 Impact on the current account of the BOP......Page 497
12.8.3 Impact on (un)employment......Page 499
12.9 Economic and social outlook for the OECS economies (2004–2006)......Page 501
12.9.1 Economic outlook......Page 502
12.10 Conclusions......Page 504
References......Page 506
13.1 Background......Page 508
13.2 The GATT Banana Panels 1992–19946......Page 512
13.3 The banana dispute in the WTO......Page 514
13.4 Jamaica and other Caribbean countries seeking to protect their interests......Page 518
13.5 Testing the WTO dispute settlement mechanism......Page 519
13.6 The quest for a WTO-consistent banana regime......Page 526
13.7 The new banana regime (EC Regulation 896/2001)......Page 529
13.8 The banana dispute and the negotiations for a new Partnership Agreement between the ACP and the EU (the Cotonou Agreement)......Page 530
13.9 The request for a waiver in the WTO’s Council for Trade in Goods......Page 534
13.10 Breaking the waiver deadlock at the Doha Ministerial Conference......Page 536
13.11 The impact of the banana dispute on Jamaica’s banana industry......Page 537
Reference sources......Page 544
14.2.2 Quota scheme......Page 546
14.2.4 Export and production refunds......Page 547
14.2.6 Preferential import programme......Page 548
14.3.1 Export subsidies in excess of commitments......Page 549
14.3.1.2 Agriculture Agreement......Page 550
14.3.1.3 Conclusion......Page 552
14.4 Policy arguments in support of complaints......Page 553
14.6 Third party participation in WTO proceedings......Page 555
14.6.1 Joining consultations......Page 556
14.7 Conclusion......Page 557
15.2 The EU sugar regime......Page 559
15.2.1 Implications of the sugar regime......Page 562
15.3 Impact of current EU sugar regime on Sugar Protocol countries......Page 564
15.4.1 The impact of an import tariff......Page 568
15.4.2 The impact of a unit export refund......Page 569
15.4.3 Evaluation of policy reforms......Page 570
15.5 Impact of reduction of EU export subsidies on ACP countries......Page 572
15.5.2 Other wider reforms......Page 573
15.5.3 Alternative simulated reform effects on Sugar Protocol exporters......Page 574
15.5.4 Alternative perspectives: effects on non-protocol ACP sugar exporters and importers......Page 580
15.6 Conclusions......Page 583
Bibliography......Page 585
16.1 Introduction: background to the WTO decision......Page 586
16.2 The European market for tuna......Page 590
16.3.1 Development of the sector......Page 594
16.3.2 Key features of the canning industry......Page 595
16.3.4 Key constraints facing the industry......Page 598
16.4.1 Development of the sector......Page 600
16.4.2 Key features of the canning industry......Page 601
16.4.3 Role of tuna in the export sector......Page 603
16.4.4 Key constraints facing the industry......Page 604
16.5 Case study 3:Mauritius......Page 605
16.5.1 Development of the sector......Page 606
16.5.2 Structure of the canning sector......Page 607
16.5.3 Role of tuna in the export sector......Page 608
16.5.4 Key constraints facing the industry......Page 609
16.6.2 Structure of the canning sector......Page 610
16.6.3 Role of tuna in export sector......Page 612
16.6.4 Key constraints facing the industry......Page 613
16.8 Potential and actual impacts of opening the European market to Asian canned tuna......Page 614
16.8.1 Senegal......Page 616
16.8.2 Ghana......Page 618
16.8.3 Mauritius......Page 620
16.8.5 Europe......Page 621
16.9 Next steps......Page 624
16.10 Conclusions......Page 625
References......Page 628
PART IV Negotiating issues and institutional arrangements......Page 629
17.1 Introduction......Page 631
17.2 Existing economic theory and empirical evidence on subsidies......Page 632
17.3 Existing WTO rules on subsidies......Page 634
17.4.1 The negotiations......Page 637
17.4.2 The concerns of small vulnerable coastal states......Page 641
17.4.2.1 Revenue generation from access fees......Page 642
17.4.2.2 Domestic and foreign fishers operating for export in the EEZ and territorial sea to supply canneries, loining facilities and domestic processing facilities......Page 643
17.4.2.3 Artisanal fisheries for export and domestic markets......Page 644
17.5.1 Fisheries access arrangements with the USA......Page 645
17.5.2 EU fisheries partnership agreements......Page 647
17.5.3 Japan, Korea and Taiwan......Page 648
17.5.4 Revenue estimates from Pacific ACP access arrangements......Page 650
17.6 Implications of WTO disciplines on fisheries subsidies......Page 654
18.1 Introduction......Page 657
Part I 18.2 Overview of characteristics of the standard-setting bodies......Page 659
18.3.1.1 The OECD......Page 663
18.3.1.2 FATF......Page 664
18.3.1.3 The Basel Committee......Page 666
18.4 Effective implementation: obstacles and impacts......Page 668
18.4.1 The OECD......Page 670
18.4.2 FATF......Page 671
18.4.3 The Basel Committee......Page 673
18.5 Assessment, compliance and small developing states......Page 679
18.5.1 The OECD......Page 681
18.5.2 FATF......Page 685
18.5.3 The Basel Committee......Page 689
Part II 18.6 Financial services in the WTO......Page 691
18.6.1 Background to domestic regulation at the WTO......Page 694
18.6.2 Domestic regulation: GATS Article VI(4) and (5) and Article (2)(a) of the FSA......Page 695
18.6.3 International standardisation and harmonisation......Page 699
18.7 Conclusion......Page 701
Bibliography......Page 704
19.2 Agreement on Subsidies and Countervailing Measures......Page 708
19.2.2 Prohibited export subsidies......Page 709
19.2.4 Actionable subsidies......Page 711
19.2.6 Non-actionable subsidies......Page 712
19.2.8 Remedies......Page 713
19.2.9.1 Illegal prohibited export subsidies......Page 714
19.2.9.3 Introduced prohibited export subsidies......Page 715
19.2.9.7 New round of negotiations......Page 716
20.1 Introduction......Page 717
20.2 The Vanuatu economy......Page 718
20.3.1 Systemic and protocol issues: from WTO to ‘WTO plus’......Page 721
20.3.1.1 The trade regime......Page 722
20.3.1.2 The investment regime......Page 725
20.3.1.3 Other protocol issues......Page 727
20.3.2.1 The goods offer......Page 729
20.3.2.3 Bilateral negotiations......Page 733
20.4 Conclusion......Page 735
20.5 Epilogue......Page 737
INDEX......Page 739