Small Island States and the WTO
description
Transcript of Small Island States and the WTO
Commonwealth Secretariat
Small Island States and the WTO
10 Years of Experience
2
Commonwealth Secretariat Endowments
Do small islands states, given their natural endowments, have a special economic and trade problem?– Common argument: Given relatively high GDP/capita,
small states do not have a problem.– Prosperity of many has been directly as a result of
smallness combined with other characteristics. – Trade preferences which suited production capacity of
small states is being eroded.
The problem is not the past but the future
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Commonwealth Secretariat What are the problems
• Smallness is a problem but by no means overarching
• Isolation and geographic dispersion combined compound problem.
• Recent development results, while better that the LDCs, indicate a deteriorating situation
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Commonwealth Secretariat Marginalisation
Why marginalisation?
• Declining share of world trade ≠ Declining welfare
• It is possible to have a declining share and have incomes rising.
• Marginalisation measures:– Productive and adaptive efficiency of the economy – Distributive equity of the system of globalisation – Political significance.
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Commonwealth Secretariat
Trends in Marginalisation and Growth of Real GDP in Small States
Equatorial Guinea
Djibouti
Bahrain
MaldivesBotswana
Dominica
SaoTome&Principe
Comoros
Samoa
Gambia
Trinidad and Tobago
Suriname
GDP Growth Rate = 0.6579 Growth of Exports Share + 4.1811R2 = 0.6571
-2
0
2
4
6
8
10
12
14
-8 -6 -4 -2 0 2 4 6 8 10 12 14Trend growth rates in export share
GD
P g
row
th r
ate
Source: Razzaque and Grynberg (2004)
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Commonwealth Secretariat
Share of LDCs and Small States in Global Inflow of FDI
0
0.5
1
1.5
2
2.5
319
72
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
Per
cen
t of
glo
bal
FD
I in
flow LDCs Small States
Source: Authors’ estimates from UNCTAD (2002)
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Commonwealth Secretariat Small States & trade
• Cost disadvantages resulting from being small island states have meant that economic activity has often been based upon ‘quasi-rents’ - transitory returns above opportunity costs.
• These rents are either: – market based eg niche markets or booming sectors; or– de jure rents stemming from legal arrangements eg
trade preferences, sovereignty (finance centres) or tax concessions
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Commonwealth Secretariat Globalisation & Small States
• If small states survive on quasi rents, what is the problem?– De jure rents , especially trade
preferences, are eroding. The value of sovereignty is being decreased
– The international community sees no reason to intervene.
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Commonwealth Secretariat
GDP per capita and Foreign Market Access (FMA)
Isolation and Distance
Source: Redding and Venables (2001)
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Commonwealth Secretariat
YearTotal flows
(US millions)Total ODA
(US millions)
DevelopingCountries LDCs Small States
DevelopingCountries LDCs
Small States
1980 42591 9872 1693 32460 8724 1505
1985 41019 10257 1730 30180 9483 1353
1990 74122 17470 2872 56036 16747 2427
1995 70725 17064 1792 58706 17198 1811
1999 79165 11797 950 50543 11591 1076
ODA
ODA Levels – LDCs and Small States
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Commonwealth Secretariat
Composite Relative Commodity Prices and Aid Flows in Small States, 1980-2000
0
200
400
600
800
1000
1200
1400
1600
1800
1980 1985 1990 1995 2000
US$
Mill
ions
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Rea
ltiv
e C
omm
odit
y P
rice
Ind
ex
Small States Aid Flows Composite Price Index
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Commonwealth Secretariat
• The hypothesis that all countries need to be treated the same is an empirical one – what if some countries cannot adjust?
• Adjustment not possible where the cost of inherited disadvantages are so large that there is no above zero factor price that will induce investment
• Will the investors come?
The Genesis of the Cost Study
Costs of Doing Business
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Commonwealth Secretariat
The Sample
Size Group
Region Micro Very Small
Small Median Large
Pacific 11 2 1 - -
Caribbean 8 3 1 - -
Sub-Saharan Africa 1 5 2 10 1
Latin America - - 1 6 1
South Asia - - - 1 3
Rest Asia - - 2 2 5
OECD - - 7 11 8
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Commonwealth Secretariat
Exemplar Economies
Classification Country Population
Micro Anguilla 12,100
Very Small Vanuatu 197,000
Small Singapore 4,020,000
Median Hungary 10,020,000
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Commonwealth Secretariat
Summary of Cost Disadvantages(% deviation in costs relative to median economy)
Area of Cost MicroVery Small
Small
Airfreight Average 31.8 4.1 -1.7
Seafreight Average 219.6 70.5 9.1
Unskilled Wages Average 60.1 31.6 6.6
Semi-Skilled Wages Average 22.4 12.1 2.6
Skilled Wages Average 38.0 20.3 4.3
Telephone Average (marginal costs) 98.5 47.2 9.0
Electricity (marginal costs) 93.1 47.0 9.4
Water (marginal Costs) 0 0 0
Fuel Average 53.8 28.3 5.9
Personal Air Travel Average 115.7 56.8 11.0
Land Rent Average -3.5 -17.2 -8.9Source: Winters and Martins (2004)
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Commonwealth Secretariat
Industry MicroVery Small
Small
Electronic Assembly 36.4 14.3 2.7
Clothing 36.3 14.3 2.7
Hotels and Tourism 57.5 28.5 6.2
Cost Disadvantage for Exemplar Economies by Industry(% by which target country costs of supplying exports exceed
median country costs )
Source: Winters and Martins (2004)
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Commonwealth Secretariat Recognition in the WTO
• Paragraph 35, Doha Ministerial Declaration agrees a work programme to examine issues of the trade of small economies, the objective being:
“to frame responses to the trade-related issues identified for the fuller integration of small, vulnerable economies into the multilateral trading system, and not to create a sub-category of WTO Members”
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Commonwealth Secretariat
• Contradiction – framing responses to the trade concerns of SVEs without identifying who the SVEs are
• No universally accepted definition of SVEs
• However defined, Small Island States share of world trade is miniscule
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Commonwealth Secretariat
São
Tom
é an
d P
rinci
pe
Com
oros
Gui
nea-
Bis
sau
Sam
oa
Van
uatu
Dom
inic
a
Sol
omon
Isla
nds
St.
Kitt
s an
d N
evis
St.
Vin
cent
and
the
Gre
nadi
nes
Gre
nada
Cap
e V
erde
St.
Luci
a
Ant
igua
and
Bar
buda
Mal
dive
s
Sur
inam
e
Bel
ize
Sey
chel
les
Guy
ana
Fiji
Hai
ti
Bar
bado
s
Pap
ua N
ew G
uine
a
Mau
ritiu
s
Bah
amas
, The
Trin
idad
and
Tob
ago
Cub
a
Jam
aica
Dom
inic
an R
epub
lic
0.00%
0.02%
0.04%
0.06%
0.08%
0.10%
0.12%
0.14%
% w
orl
d im
po
rts
of
go
od
s an
d s
ervi
ces
(ave
rag
e 19
98 -
200
2)
0.01
%
0.04
%
0.02
%
0.03
%
0.05
%
0.10
%
0.49
%
0.20
%
collective % world imports of goods and services (not to scale)
Small Island States share of World Trade
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Commonwealth Secretariat Dispute Settlement
• Bananas• Sugar • Tuna• Gambling
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Commonwealth Secretariat Emerging Issues
• Fisheries Subsidies• Financial Services• Subsidies and Countervailing Measures
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Commonwealth Secretariat The Future
• Precondition is that the international community recognise the inherent disadvantages of small island states