Trade liberalisation and technical efficiency: Evidence from Bangladesh manufacturing industries

The paper investigates the effects of trade liberalisation on the technical efficiency of the Bangladesh manufacturing sector by estimating a combined stochastic frontier-inefficiency model using panel data for the period 197894 for 25 three-digit level industries. The results show that the overall technical efficiency of the manufacturing sector as well as the technical efficiencies of the majority of the individual industries has increased over time. The findings also clearly suggest that trade liberalisation, proxied by export orientation and capital deepening, has had significant impact on the reduction of the overall technical inefficiency. Similarly, the scale of operation and the proportion of non-production labour in total employment appear as important determinants of technical inefficiency. The evidence also indicates that both export-promoting and import-substituting industries have experienced rises in technical efficiencies over time. Besides, the results are suggestive of neutral technical change, although (at the 5 per cent level of significance) the empirical results indicate that there was no technical change in the manufacturing industries. Finally, the joint test based on the likelihood ratio (LR) test rejects the Cobb-Douglas production technology as description of the database given the specification of the translog production technology.

Missed opportunities:the WTO trade policy review for the East African community

The East African Community (EAC), comprising Kenya, Tanzania and Uganda, came into force on 7 July 2000 with a Common External Tariff (CET) established in January 2005. This Trade Policy Review (TPR) of the EAC is timely as all three countries had implemented significant trade liberalisation since the late 1980s while the CET represented an asymmetric change – Kenya and Tanzania essentially reduced tariffs whereas Uganda increased tariffs. The TPR provides considerable information on the CET and on trade and related policies in each of the member countries. However, the EAC and the TPR missed a number of opportunities: the EAC included no coordinated export promotion or investment provisions, while the TPR says little on the potential for intra-regional trade, and nor does it address the position of the EAC in the economic partnership agreements (EPAs) being negotiated with the EU. This review concentrates on these omissions to explore the implications of the EAC for developments in trade policy in the region.

The impacts of trade policy reforms on the Sri Lankan economy

This dissertation presents an analysis of the impacts of trade policy reforms in Sri Lanka. A Computable General Equilibrium (CGE) model is constructed with detailed description of the domestic production structure and foreign trade. The model is then used to investigate the effects of trade policy reforms on resource allocation and welfare.^ Prior to 1977, Sri Lanka maintained stringent control over its imports through rigid quantitative restrictions. A new economic policy reform package was introduced in 1977, and it shifted Sri Lanka's development strategy toward an export oriented policy regime. The shift of policy focus from a restrictive trade regime toward a more open trade regime is expected to have a significant impact on the volume of external trade, domestic production structure, allocation of resources, and social welfare.^ Simulations are carried out to assess the effects of three major policy reforms: (1) a devaluation of the Sri Lanka rupee, (2) a partial or a complete elimination of export duties, and (3) a devaluation-cum-removal of export duties.^ Simulation results indicate that the macroeconomic impact of a devaluation-cum-removal of export duties can be substantial. They also suggest that the resource-pull effects of a devaluation and a devaluation-cum-export duty removal policy are significant. However, the model shows that a devaluation combined with an export duty reduction is likely to be a superior strategy. ^

Closing the productivity gap and trade *policy

The relationship between trade policy and productivity growth is regarded as ambiguous in the literature. This dissertation examines under what condition the relationship would be positive (or negative). Through the use of static and dynamic analysis, we find two conflicting effects (the pro-protection effect and the pro-competitive effect) that cause the relationship to be ambiguous. If there exists a productivity gap between the import-competing and foreign industries, and if the level of protection is low (high), the relationship is positive (negative). We also show that the import-competing firm responds to a change in the protection level by choosing a level of investment in innovation which yields a different rate of productivity growth. The policy implication, therefore, is that a trade-policy maker should set the trade protection at a level which induces the firm to choose the highest rate of productivity growth, and, as a result, leading the firm to close the initial productivity gap in the most efficient way. ^

Essays on the political economy of trade policy and economic *development

This dissertation studies the political economy of trade policy in a developing country, namely Turkey, under different economic and political regimes. The research analyzes the effects of these different regimes on the import structure, the trade policy and the industrialization process in Turkey and derives implications for aggregate welfare. ^ In the second chapter, the effects of trade liberalization policies on import demand are examined. Using disaggregated industry-level data, import demand elasticities for various sectors have been computed, analyzed under different economic regimes, and compared with those of developed countries. The results are statistically significant and reliable, and conform to the predictions of economic theory. Estimation of these elasticities is also a necessary ingredient for the third chapter of the dissertation. ^ The third chapter examines the predictions of the state-of-the-art “Protection For Sale” model of Grossman and Helpman (1994). Employing advanced econometric methods and a unique data set, strong support is found for the fundamental predictions of the model in the context of Turkey. Specifically, the government is found to attach a much higher weight to social welfare than to political contributions. This weight is higher under the democratic regime than under the dictatorship, a result potentially of interest to all researchers in the area of political economy. ^ The fourth chapter looks at the effects of industry concentration and import price shocks on protection, promotion and the choice of policy instruments in Turkey. In this context, it examines and finds support for the predictions of some well-known models in the literature. ^

Globalization, Trade Policy, and the Permissive Consensus in Canada (Working Paper 27)

Do public protests dramatize the new political salience of trade policy? This article analyzes a survey of Canadian mass opinion taken just before the protests against the proposed Free Trade Area of the Americas in Quebec City in April 2001. The survey design allows a comparison of the difference between Canadians’ positive assessment of trade agreements but more ambivalent responses to “globalization.” We examine a series of underlying attitudes and values to probe latent opinion on trade and globalization. We conclude that the permissive consensus on trade agreements is robust – that is, Canadians are prepared to defer to governments on trade liberalization – but this consensus may be endangered by ongoing globalization and pressures for North American integration that go well beyond issues of tariffs and trade. On these latter issues, the nature of globalization and integration, not its existence, are subject to heated debate.

Using Quantitative Methods to Explore Political Leverage, Trade Policy, and Food Security: A Case Study of the Middle East

This dissertation explores why some states consistently secure food imports at prices higher than the world market price, thereby exacerbating food insecurity domestically. I challenge the idea that free market economics alone can explain these trade behaviors, and instead argue that states take into account political considerations when engaging in food trade that results in inefficient trade. In particular, states that are dependent on imports of staple food products, like cereals, are wary of the potential strategic value of these goods to exporters. I argue that this consideration, combined with the importing state’s ability to mitigate that risk through its own forms of political or economic leverage, will shape the behavior of the importing state and contribute to its potential for food security. In addition to cross-national analyses, I use case studies of the Gulf Cooperation Council states and Jordan to demonstrate how the political tools available to these importers affect their food security. The results of my analyses suggest that when import dependent states have access to forms of political leverage, they are more likely to trade efficiently, thereby increasing their potential for food security.

The impacts of US agricultural and trade policy on trade liberalization and integration via a US- Central America free trade agreement

Resumen Este estudio analiza importantes acciones legislativas del 2002 que afectarán sustancialmente las negociaciones comerciales con Estados Unidos; examina, asimismo, la protección de importaciones de ese país con respecto a productos agrícolas que serán críticos en las negociaciones con los países centroamericanos. Las acciones legislativas mencionadas fueron la aprobación del Proyecto de ley Agrícola del 2002 y la aprobación de la Autorización de Promoción Legal, que provee tratamiento del ‘trámite rápido’ de los acuerdos comerciales…

Book review: Hannah Murphy, The Making of International Trade Policy: NGOs, Agenda-setting and the WTO (Cheltenham, UK: Edward Elgar, 2010), 240 pp., £65.00, ISBN 978 18498 00181 (hbk).

The nexus between states,non-state actors and intergovernmental organisations is an increasingly important area in both the study and practice of global governance. Hannah Murphy makes a meaningful contribution to this area in examining the informal role of non-governmental organisations (NGOs) in relation to agenda-setting within the World Trade Organization (WTO). © Dean Coldicott, Deakin University 2012.