Normative Influences of "Special and Differential Treatment" on North-South RTAs

Recently, there has been a surge in bilateral and regional trade arrangements between developed and developing countries, which are known as North-South RTAs. Under the current legal system of the WTO, North-South RTAs are governed by Article XXIV of the GATT or Article V of the GATS, which means such RTAs must be reciprocal and must cover substantially all the trade. On the other hand, there is another category of rules on RTAs based on the so-called Enabling Clause, which, in exceptional circumstances, provides special and differential treatment (SDT) for RTAs among developing countries. This paper considers the applicability of the SDT concept to North-South RTAs by examining why rules on RTAs and the concept of SDT were incorporated into the GATT/WTO legal framework so as to permit the derogation of most-favored-nation (MFN) obligations.

Rethinking special and differential treatment in the WTO

Special and differential treatment (S&D) allows differentiated treatment for developing countries within the WTO system by justifying a deviation from the most-favoured-nation obligation. Since it was incorporated into the GATT (the predecessor of the WTO) in the 1960s, S&D has played a significant role in promoting the integration of developing countries into the multilateral trading system. However, S&D is undergoing complicated and entangled discussion at the current multilateral trade negotiations, the Doha Development Agenda. There are a number of reasons to make opposing arguments in developed and developing countries, among which this paper focuses on two elements: diversification of developing countries and instability of preferential schemes. In order to overcome these problems and in order to make S&D more effective and operational, this paper considers the following alternative approaches: differentiation among developing countries applying the common but differentiated responsibility (CBDR) principle by analogy and codification of a preferential scheme as a multilateral agreement in the manner of North-South RTAs with flexibility.

Regional Cooperation of Small & Medium Firms in Japanese Industrial Clusters

This study examines the effects of intra-regional cooperation among firms and institutions on the growth of firms, using the unique data set of questionnaire survey collected in the three major industrial clusters in Japan. In contrast to the existing studies on regional innovations or agglomeration economies, this study explicitly focuses on the detailed contents of cooperative activities with two specific viewpoints: 1) the contents of regional cooperation in each of the three production stages of R&D, commercialization, and marketing, and 2) the detailed types of alliance partners. Our results demonstrate three points: 1) positive correlations are observed between the intensity of regional cooperation and the firm growth rate and R&D expenditure, 2) horizontal cooperation such as alliances with universities and cross-industry exchange organizations has positive significant effects on the growth rate of firms, which is in contrast with the previous studies that stressed only the role of vertically integrated inter-firm linkages in Japan, and 3) contents and partners of regional cooperation are different among the three clusters based on different dominant industries.

Location choice in low-income countries : evidence from Japanese investments in East Asia

Unlike most existing studies, this paper examines the location choices of MNEs in developing countries. Specifically, we investigate the location choices of Japanese MNEs among East Asian developing countries by estimating a four-stage nested logit model at the province level. Noteworthy results of location elements are as follows. As is consistent with the mechanics of cheap labor-seeking FDI, Japanese MNEs are more likely to invest in locations with low income and low tariff rates on products from Japan. Also, accessibility to other locations and/or ports matters in attracting Japanese MNEs because it is crucial in importing materials and exporting their products. In addition, WTO membership and bilateral investment treaties are important because these contribute to the settlement of trade and investment disputes, which is more likely to be necessary in developing countries.

Competition between firms in developing and developed countries

We analyze competition in emerging markets between firms in developing and developed countries from the viewpoint of the boundaries of the firm. Although indigenous firms generally face a disadvantage in technology compared with foreign firms, they have an advantage in marketing as local firms. Moreover, they have opportunities to leave weaker fields to independent specialized firms and use lower wages. On the other hand, foreign firms also have their own advantages and disadvantages for growth. Therefore, entry conditions for indigenous firms can vary greatly depending on the situation. We classify these conditions into eight cases by developing a model and showing each boundary choice for indigenous firms.

Who Develops Innovations in Medicine for the Poor? Trends in Patent Applications Related to Medicines for HIV/AIDS, Tuberculosis, Malaria and Neglected Diseases

Who invents medicines for the poor of the world? This question becomes very important where the WTO allows low income countries to be unbound by the TRIPS agreement. This agreement concerns medicines for infectious diseases such as HIV/AIDS, tuberculosis and malaria. These diseases cause serious damage to low income countries. Under these circumstances, some scholars wonder if anyone will continue innovative activities related to treating these diseases. This paper sought to answer this question by collecting and analyzing patent data of medicines and vaccines for diseases using the database of the Japan Patent Office. Results indicate that private firms have led in innovation not only for global diseases such as HIV/AIDS but also diseases such as malaria that are spreading exclusively in low income countries. Innovation for the three infectious diseases is diverse among firms, and frequent patent applications by high-performing pharmaceutical firms appear prominent even after R&D expenditure, economies of scale, and economies of scope are taken into account.

Family Business in Mexico: Responses to Human Resource Limitations and Management Succession

Indigenous firms in Mexico, as in most developing countries, take the shape of family businesses. Regardless of size, the most predominant ones are those owned and managed by one or more families or descendent families of the founders. From the point of view of economics and business administration, family business is considered to have variety of limitations when it seeks to grow. One of the serious limitations is concerning human resource, which is revealed at the time of management succession. Big family businesses in Mexico deal with human resource limitations adopting measures such as the education and training of the successors, the establishment of management structure that makes control by the owner family possible and divisions of roles among the owner family members, and between the owner family members and the salaried managers. Institutionalization is a strategy that considerable number of family businesses have adopted in order to undergo the succession process without committing serious errors. Institutionalization is observed in such aspects as the establishment of the requisite condition to be met by the candidate of future successor and the screening by an institution which is independent of the owner family. At present these measures allow for the continuation of family businesses in an extremely competitive environment.

Do Foreign Currency Deposits Promote or Deter Financial Development in Low-Income Countries? An Empirical Analysis of Cross-Country Data

Foreign currency deposits (FCD) are prevalent in many low-income developing countries, but their impact on bank lending has rarely been examined. An examination of cross-country data indicates that a higher proportion of FCD in total deposits is associated with growth in private credit only in inflationary circumstances (over 24 percent of the annual inflation rate). FCD can lead to a decline in private credit below this threshold level of inflation. Given that FCD exhibit persistence, deregulating them in low-income countries may do more harm than good on financial development in the long term, notably after successful containment of inflation.

Securing Medical Personnel: Case Studies of Two Source Countries and Two Destination Countries

A shortage of medical personnel has become a critical problem for developing countries attempting to expand the provision of medical services for the poor. In order to highlight the driving forces determining the international allocation of medical personnel, the cases of four countries, namely the Philippines and South Africa as source countries and Saudi Arabia and the United Kingdom as destination countries, are examined. The paper concludes that changes in demand generated in major destination countries determine the international allocation of medical personnel at least in the short run. Major destination countries often alter their policies on how many medical staff they can accept, and from where, while source countries are required to make appropriate responses to the changes in demand.

Myanmar and Japan: How Close Friends Become Estranged

Independent Myanmar and Japan had long held the strongest ties among Asian countries, and they were often known as having "special relations" or a "historically friendly relationship." Such relations were guaranteed by the sentiments and experiences of the leaders of both countries. Among others, Ne Win, former strongman throughout the socialist period (1962-1988), was educated and trained by the Japanese army officers of the Minami Kikan, leading to the birth of the Burma Independence Army (BIA). Huge official development assistance provided by the Japanese government also cemented this special relationship. However, the birth of the present military government (SLORC/SPDC) in 1988 drastically changed this favorable relationship between the two countries. When the military seized power in a coup, Japan was believed to be the only country that possessed sufficient meaningful influence on Myanmar to encourage a move toward national reconciliation between the junta and the opposition party led by Aung San Suu Kyi. In reality, Japan failed to exert such an influence due to its sour relations with the military government and reduced influence in the new international and regional political landscape. What is worse, Japan seems to be losing its say on Myanmar issues in the international political arena, as it has been wavering in limbo between the sanctionist forces, such as the United States and the European Union, and engagement forces, such as China and ASEAN.

Value Chain Dynamics and Growth of Local Firms:The Case of Motorcycle Industry in Vietnam

Vietnam’s burgeoning market for motorcycles has attracted global industry eaders,players from developing countries, and local firms. This has led to a dynamic evolution of value chains. This paper presents an explanation of the varieties of the growth patterns xperienced by the local suppliers, focusing on the roles of customer and local supplier strategies. Case studies showed that while the role of customers may be important, strategies of suppliers to improve the ompetitive edge in the production of otorcycle components and to diversify into other products account for important ariations of growth trajectories among local suppliers. Findings presented in this paper suggest the need to direct more attention to strategy that local firms use to boost their competitive edge in business.

Asian Industrial Development from the Perspective of the Motorcycle Industry

This paper discusses the diversity of industrial development among Asian countries that emerges through an investigation of the motorcycle industry despite its uniform industrial attributes. The paper then explores factors that generate diversity, focusing attention on the differences in knowledge-based assets accumulated in each country. It finds that diversity is brought about through the differences in domestic industrial resources and the capabilities of local firms. The analysis underscores each country’s intrinsic logic in industrial development, contrary to the current trend of stressing assimilation through the global production networks of multinational corporations.

Who Uses FTAs?

It is noted that utilization of AFTA is low by international standards. In order to clarify the reasons for such low utilization, this paper investigates what kinds of Japanese affiliates in ASEAN are more likely to use FTAs in their exporting, by employing unique affiliate-level data. Our findings are as follow. First, the larger the affiliate is, or the more diversified its procurements’ origins are, the more likely it is to utilize an FTA scheme in its exporting. Second, affiliates exporting actively to developing countries are more likely to use FTAs than those exporting to developed countries. Third, there are clear differences in FTA utilization depending on affiliates’ locations and sectors. These results afford a clue to the reasons for the low FTA utilization in East Asia.