Tariﬀ Preferences Related terms

Download 433,47 Kb.

Pdf ko'rish

Sana	18.07.2021
Hajmi	433,47 Kb.
	#122858

Bog'liq
Tariff Preferences - an overview ScienceDirect Topics

Tariﬀ Preferences

Related terms:

Free Trade, World Trade Organization, Customs Union, Trade Eﬀect,

Terms of Trade, Foreign Economic Policy, Most Favoured Nation,

Tariﬀs, Foreign Investment

Legal Aspects of Commercial Policy Rules

A.O. Sykes, in Handbook of Commercial Policy, 2016

3.3.2 Special and Diﬀerential Treatment

From the outset of GATT, developing countries have sought and

received certain special allowances. It is well known that developing

countries have not been asked to make tariﬀ concessions to the same

degree as developed nations, an unsurprising fact given the smaller

size of developing country markets. Additional ﬂexibilities were

provided in GATT Article XVIII. It aﬀords somewhat relaxed rules for

tariﬀ renegotiations for the purpose of promoting a “particular

industry,” for balance of payments measures (already noted in

connection with the case against India), and for measures that violate

other GATT provisions after notiﬁcation and consultation with other

members. Part IV of GATT, which was added in response to

developments in the 1950s and early 1960s, contains mostly

hortatory language urging GATT members to take account of the

interests of developing countries in their commercial policies. Two

provisions in Article XXVII are arguably binding, however, concerning

an obligation on the part of developed members to refrain from

raising tariﬀs and nontariﬀ barriers on goods of export interest to

less-developed members, and to refrain from new ﬁscal measures

that would hamper the exports of primary products from less-

developed members. There has not been any enforcement litigation

under these provisions, however, despite numerous occasions on

which developed members have taken measures that aﬀect exports

from less-developed members.

In addition to these provisions of GATT, many other WTO treaties

aﬀord some form of special and diﬀerential treatment. Examples

include longer phase-in and transition periods for developing

country members under the Agriculture Agreement, the SPS and TBT

Agreements, the Subsidies Agreement, and TRIPs, as well as

exemptions from certain obligations for least-developed countries

under several agreements.

One the most signiﬁcant instances of special and diﬀerential

treatment in practice has been the development of the Generalized

System of Preferences (GSP), pursuant to which (mostly developed)

members aﬀord duty exemptions and other preferences to

developing country exports. GSP was authorized by a 10-year waiver

under GATT in 1971, and made permanent by the 1979 “Enabling

Clause,” which refers back to the 1971 waiver and its “generalized,

nonreciprocal, and nondiscriminatory preferences beneﬁcial to the

developing countries” (footnote 6). Developed countries are not

obligated to extend GSP beneﬁts, but are authorized to do so subject

to certain constraints. Major GSP schemes include those of the EU,

the United States, Japan, and Australia.

In practice, GSP schemes are quite selective in their coverage, often

excluding politically sensitive imports, excluding imports of particular

goods from countries that are deemed to be already competitive, and

“graduating” certain countries altogether from the scheme based on

their level of development. GSP beneﬁts may also be conditioned on

the willingness of beneﬁciary countries to aﬀord adequate intellectual

property protections, to aﬀord internationally recognized worker

rights, and to assist in eﬀorts to combat international terrorism,

among other things. Thus, GSP beneﬁts have been used to

encourage beneﬁciaries to cooperate in a variety of economic and

political initiatives.

It is questionable, therefore, whether existing GSP schemes meet the

standards of “generalized, nonreciprocal, and nondiscriminatory

preferences” set forth in the Enabling Clause. India brought a case

against the EU's GSP scheme on this basis, challenging in particular

some special preferences given to 12 nations, ostensibly granted

because of the special needs of those countries to combat drug

production and traﬃcking. These special preferences, which did not

apply to India, did apply to Pakistan. The Appellate Body ultimately

held that the EU scheme was discriminatory and inconsistent with

the Enabling Clause because the EU had not justiﬁed in any careful

way the selection of the 12 beneﬁciaries. Ultimately, the EU

rejiggered its criteria for granting special preferences in a manner

that excluded Pakistan, and the issue has been quiescent since then.

There is little doubt that other features of various national schemes

involving limitations on coverage, implicit reciprocity, and

discrimination among countries could be challenged under the

Enabling Clause, but such challenges have not been brought to date,

probably because the respondent might respond by abolishing its

GSP scheme altogether.

Read full chapter

URL: https://www.sciencedirect.com/science/article/pii/S221431221630014X

Special and Diﬀerential Treatment for

Developing Countries

E. Ornelas, in Handbook of Commercial Policy, 2016

2.1.1 The American Nonreciprocal Arrangements

The GSP of the United States took eﬀect on January 1976. It currently

oﬀers duty-free access on around 3500 tariﬀ lines to 122 countries.

Another 1500 tariﬀ lines are included for 43 LDCs. Its statute

speciﬁes various criteria under which a developing country may not

qualify—being “communist,” expropriating US citizens, not

recognizing worker rights, not recognizing intellectual property

rights, allowing child labor, etc. Countries in those categories may be

taken out, permanently or provisionally, fully or partially, from the

recipients’ list. The American GSP also excludes several sensitive

items. Some statutory exclusions are explicit (eg, “watches”) whereas

others allow for more discretion (import-sensitive electronic articles).

The program needs periodical renewal by Congress. Historically,

there have been several periods during which it was temporarily

suspended due to lack of authorization by Congress, although it has

always been renewed retroactively, with duties paid during expiration

periods been reimbursed to exporters after reauthorization.

Remarkably, such retroactive payments have always taken place

despite the lack of a statutory requirement imposing them.

In addition to GSP, the United States currently has two other major

non-GSP schemes of nonreciprocal preferences: the African Growth

and Opportunity Act (AGOA, in force since 2001) and the Caribbean

Basin Initiative (CBI, launched under a diﬀerent name in 1983 and

expanded in 2000). The beneﬁciaries of the non-GSP programs are

usually GSP beneﬁciaries. A key diﬀerence is that they receive broader

preferences than they would under standard GSP. AGOA also

provides more ﬂexibility (to some members) in terms of compliance

with rules of origin.

The top portion of Table 4 details the breadth and depth of the main

American nonreciprocal programs. Over a third of the tariﬀ lines are

already zero on an MFN basis. Relative to the tariﬀ lines with strictly

positive MFN duties, regular GSP beneﬁciaries can export duty-free

in just over half of them. LDCs have duty-free access in an additional

21.5% of dutiable tariﬀ lines. AGOA and CBI beneﬁciaries have even

broader access, being able to export around 40% more products

duty-free to the American market than regular GSP beneﬁciaries

countries are allowed to. Table 4 also distinguishes between

agriculture (where several developing countries have comparative

advantage) and nonagricultural products. It is worth noting that only

in about 21% of agricultural products there is duty-free MFN access

to the American market. Moreover, regular GSP beneﬁciaries have

preferences in just about 40% of the dutiable agricultural goods.

Countries included in the broader programs, on the other hand, are

eligible to export duty-free a larger fraction of agricultural than of

nonagricultural dutiable products.

Table 4

. Tariﬀ lines covered by the American and the European

programs of nonreciprocal preferences, 2014

United

States

Tariﬀ

schedule

Total

number of

tariﬀ lines

10713

1897

Number of

MFN duty-

free tariﬀ

lines

3871

395

Number of

MFN

dutiable

tariﬀ lines

6842

1502

GSP

Number of

duty-free

lines

3507 51.3%

598

39.8%

GSP-LDCs

Number of

duty-free

lines

4980 72.8%

1230 81.9%

AGOA

Number of

duty-free

lines

5247 76.7%

1259 83.8%

CBI/CBERA Number of

duty-free

lines

5499 80.4%

1269 84.5%

CBI/CBTPA Number of

duty-free

lines

5756 84.1%

1269 84.5%

EU

Tariﬀ

schedule

Total

number of

tariﬀ lines

9379

2076

Number of

MFN duty-

free tariﬀ

lines

2356

400

All products

Agricultural

goods

a

N

# of

tariﬀ

lines

As % of

dutiable

tariﬀ

lines

# of

tariﬀ

lines

As % of

dutiable

tariﬀ

lines

lin

Obs.: For the United States, all preferential tariﬀs are duty-free.

WTO standard deﬁnition of agricultural and nonagricultural

goods.

WTO database on Preferential Trade Arrangements.

The breadth of the American GSP program has been relatively stable

over the last two decades, as Fig. 1 shows. After a drop in the late

1990s, the number of GSP-eligible tariﬀ lines has ﬂuctuated just

around 50–51% of the total nonzero MFN tariﬀ lines.

Number of

MFN

dutiable

tariﬀ lines

7023

1676

GSP

Number of

preferential

tariﬀ lines

6137 87.4%

867

51.7%

of which:

Number of

duty-free

lines

2994 42.6%

124

7.4%

GSP+

Number of

preferential

tariﬀ lines

6197 88.2%

917

54.7%

of which:

Number of

duty-free

lines

6004 85.5%

731

43.6%

EBA

Number of

preferential

tariﬀ lines

6932 98.7%

1603 95.6%

of which:

Number of

duty-free

lines

6932 98.7%

1603 95.6%

All products

Agricultural

goods

# of

tariﬀ

lines

As % of

dutiable

tariﬀ

lines

# of

tariﬀ

lines

As % of

dutiable

tariﬀ

lines

lin

Fig. 1. Proportion of GSP-eligible tariﬀ lines relative to dutiable MFN

tariﬀ lines, United States.

The top portion of Table 5 shows instead the importance, in terms of

trade value, of the imports entering the United States under its

nonreciprocal arrangements. It makes clear that, from the

perspective of the United States, the preferences do not have a major

impact: the imports that are eligible for preferences under all of its

nonreciprocal programs combined amount to less than 3% of the

value of the American imports (or about 5% of the American imports

of dutiable products). Observe also that these are the ﬁgures for

eligible imports; if one considers only the imports that actually claim

preferences, the proportion would be signiﬁcantly smaller, as I

discuss in Section 4.2.3. The corresponding values for agricultural

products are only slightly higher.

Table 5

. Imports into the United States and the EU from beneﬁciaries

of programs of nonreciprocal preferences, as a percent of their total

imports

United

States

(2014)

All partners

Imports

entering

MFN

duty-

free

47.6%

41.1%

48%

GSP

beneﬁciaries

Total

imports

11.9%

15.7%

11.7%

Imports from nonreciprocal

programs beneﬁciaries (% of

total imports)

All

products

Agricultural

goods

Nonagricult

goods

Imports

entering

MFN

duty-

free

5.5%

9.5%

5.2%

Imports

eligible

for GSP

beneﬁts

1.6%

1.5%

LDC GSP

Beneﬁciaries

Total

imports

0.8%

0.4%

0.8%

Imports

entering

MFN

duty-

free

0.1%

0.3%

0.1%

Imports

eligible

for GSP

beneﬁts

0.3%

0.1%

0.3%

AGOA

beneﬁciaries

Total

imports

1.1%

1.8%

1.1%

Imports

entering

MFN

duty-

free

0.4%

1.3%

0.3%

Imports

eligible

for

AGOA

beneﬁts

0.6%

0.3%

0.6%

CBI/CBERA

beneﬁciaries

Total

imports

0.3%

0.2%

0.4%

Imports

entering

MFN

duty-

free

0.2%

0.1%

0.2%

Imports

eligible

for

CBERA

beneﬁts

0.1%

Imports from nonreciprocal

programs beneﬁciaries (% of

total imports)

All

products

Agricultural

goods

a

Nonagricult

goods

CBI/CBTPA

beneﬁciaries

Total

imports

0.3%

0.02%

0.3%

Imports

entering

MFN

duty-

free

0.2%

0.1%

0.2%

Imports

eligible

for

CBTPA

beneﬁts

0.04%

–

0.05%

(2012)

All partners

Imports

entering

MFN

duty-

free

59.3%

42.9%

60.4%

GSP

beneﬁciaries

Total

imports

60.6%

65.3%

60.3%

Imports

entering

MFN

duty-

free

38.4%

31.7%

38.8%

Imports

eligible

for GSP

beneﬁts

21%

19.3%

21.1%

GSP+

beneﬁciaries

Total

imports

2.6%

8.9%

2.2%

Imports

entering

MFN

duty-

free

2.1%

3.6%

Imports

eligible

for

GSP+

beneﬁts

0.3%

2.9%

0.2%

EBA

beneﬁciaries

Total

imports

1.9%

2.6%

1.9%

Imports from nonreciprocal

programs beneﬁciaries (% of

total imports)

All

products

Agricultural

goods

a

Nonagricult

goods

WTO standard deﬁnition of agricultural and nonagricultural

goods.

WTO database on Preferential Trade Arrangements.

Interestingly, although the number of GSP-eligible tariﬀ lines has

remained roughly constant since 2000 (Fig. 1), their relative

importance has changed more signiﬁcantly. This is especially true for

agricultural products, as Fig. 2 illustrates. Reaching over 12% of the

value of all dutiable agricultural imports in 1997, and remaining

above 10% until 2006, that ﬁgure has declined to just 5% in 2014.

Fig. 2. Proportion of GSP-eligible imports relative to total dutiable

imports, United States.

In addition to the requirements in nontrade areas mentioned above,

countries “graduate” if they reach a certain level of income, in which

case they lose the right to preferential access. Furthermore, a

product-country pair may be excluded as well if there is no longer a

“competitive need,” where the competitive need limit (CNL) is

deﬁned by a monetary threshold or as a percentage of American

Imports

entering

MFN

duty-

free

1.3%

Imports

eligible

for EBA

beneﬁts

0.9%

1.3%

0.9%

Imports from nonreciprocal

programs beneﬁciaries (% of

total imports)

All

products

Agricultural

goods

a

Nonagricult

goods

imports of that product in a year. By construction, exclusions under

this criterion target precisely the most successful exporters.

Read full chapter

URL: https://www.sciencedirect.com/science/article/pii/S2214312216300114

m

Preferential Trade Agreements

N. Limão, in Handbook of Commercial Policy, 2016

6.2.2.4 Bilateral Interdependence

What eﬀect do cooperative preferential tariﬀs between two countries

have on other policies between them not covered in the agreement?

Understanding this type of interdependence can help explain the

policy scope of agreements, eg, if tariﬀs and certain NTBs are highly

substitutable then an agreement that only includes the former would

be unraveled by the use of NTBs and thus have little value, which

may explain why almost all the agreements in Table 1 include both. It

would be interesting to explore that detailed database to determine

the extent of substitution between policies included and those

excluded from agreements. It would also be interesting to test if such

substitution increases the probability of subsequent cooperation in

those NTBs.

Read full chapter

URL: https://www.sciencedirect.com/science/article/pii/S2214312216300138

The Empirical Landscape of Trade Policy

C.P. Bown, M.A. Crowley, in Handbook of Commercial Policy, 2016

2.3.3 Tariﬀ Preferences Oﬀered by the United States

Here, we extend the analysis to provide a more detailed assessment

of the variation in the United States’ preferential tariﬀ oﬀerings

under its various PTAs. Fig. 9 breaks out bilaterally the United States’

share of these preference possible products for which it actually

granted a lower-than-MFN tariﬀ in 2014. As previously observed in

Table 3, the United States oﬀers some bilateral tariﬀ preferences to

countries via free trade agreements including NAFTA (with Canada

and Mexico), and bilateral FTAs with Australia, Colombia and Korea.

The United States oﬀered a lower-than-MFN tariﬀ in 2014 for close

to 100% of preference possible products to each of these countries.

In the few instances in which a product was not oﬀered a bilateral

tariﬀ preference, it is typically associated with the more recent

agreements (Colombia, Korea) that were not yet fully phased in.

Fig. 9. United States's bilateral tariﬀ preferences toward major

economies, 2014.

Constructed by the authors with bilateral tariﬀ data at the HS06 level from UN

International Trade Center. “Preference possible” products, deﬁned as HS06

products with nonzero applied MFN tariﬀs in 2014 (58.0% of US imported

products), not including products with tariﬀs applied as speciﬁc duties. For

country acronyms, see Table A.2.

US trading partners also receive lower-than-MFN applied tariﬀs

under unilateral preference oﬀerings. In 2014, the United States

oﬀered tariﬀ preferences to trading partners under a number of

diﬀerent unilateral programs; for the trading partners in our sample,

this includes the African Growth and Opportunity Act (AGOA) and

the Generalized System of Preferences (GSP). Fig. 9 indicates

diﬀerences in the comprehensiveness (product coverage) across the

diﬀerent US programs. For example, the US oﬀered tariﬀ preferences

for more than 80% of possible products for African countries such as

Kenya or Tanzania (which are eligible for AGOA) and only 65% of

possible products for Bangladesh or Pakistan (which are eligible for

GSP), despite these countries all having comparable levels of income

per capita. Furthermore, because the United States exercises

discretion by excluding certain products from certain countries (that

are both otherwise part of the program) from being GSP eligible, the

United States oﬀers Brazil, India, Indonesia, Thailand, Turkey, and

Ukraine slightly fewer tariﬀ preferences than other GSP-eligible

countries.

Importantly, there are also major trading partners to which the

United States oﬀered no special tariﬀs in 2014. These include three of

the top ﬁve sources for its imports—China, the EU, and Japan.

Collectively, these three economies alone accounted for over 43% of

total US goods imports; by itself, this explains why such a large share

of US trade continues to arrive under MFN tariﬀs. This may partially

explain why countries were seeking comprehensive new free trade

agreements with the United States in 2014 via the Trans-Paciﬁc

Partnership (TPP) negotiations (which includes Japan, as well as

Vietnam) and the Transatlantic Trade and Investment Partnership

(TTIP) negotiations with the European Union. Other major countries

to which the United States did not oﬀer preferences in 2014 include

Argentina, Russia and Saudi Arabia. Argentina and Russia had

previously been part of the US GSP program for a number of years;

both were recently removed from eligibility. Finally, the United States

not only did not oﬀer Burma and Iran any bilateral tariﬀ preferences

in 2014, they were not even granted the US's applied MFN tariﬀ rate

(despite Burma being a WTO member); the United States had an

import ban from both countries in eﬀect in 2014.

Before concluding our discussion of preferential tariﬀs, we make two

additional points regarding US tariﬀ preferences that we are not able

to capture in the data utilized here.

First, our description of US tariﬀ preferences has focused exclusively

on the supply (oﬀerings) side. Even our data on bilateral tariﬀ

oﬀerings are incomplete as they exclude reference to the fact that the

United States also imposes upper limits (quantitative restrictions) on

how much can be imported under some of these unilateral

preferences. The focus on bilateral tariﬀ oﬀerings also does not

assess the equilibrium take-up of preferences, as it does not consider

demand-side factors. For example, preference utilization rates

describe the equilibrium outcome whereby exporters actually claim

the preferential tariﬀ rate on the customs declaration form, in lieu of

simply continuing to pay the (potentially higher) applied MFN tariﬀ.

Finally, like other areas of trade policy, there is additional variation to

US tariﬀ preference oﬀerings over time as well as across trading

partners and products, especially associated with the preferences that

arise under the discretionary unilateral programs. The list of products

for which the US oﬀers preferences can change from year to year;

furthermore, as we have seen from Fig. 9, certain GSP-eligible

exporting countries may have their particular export products

excluded from GSP in a given year that are otherwise GSP eligible.

Trading partners can also “graduate” from a given GSP scheme over

time, especially after exceeding certain income-per-capita thresholds.

For example, the US graduated Bulgaria and Romania from its GSP

program in 2007 (upon their accession to the European Union) and

Russia in 2014. Finally, countries can also be kicked out of GSP for

political reasons. For example, the United States removed Argentina

from its GSP program beginning in 2012 due to Argentina's failure to

pay roughly $300 million in damages since 2005–06 that it owed US

investors arising under a foreign direct investment dispute (USTR,

2012). Overall, there should appear to be much more trade policy

uncertainty associated with a US tariﬀ preference arising under GSP

than a US tariﬀ preference arising under one of its free trade

agreements.

Read full chapter

URL: https://www.sciencedirect.com/science/article/pii/S2214312216300151

Dumping and Antidumping Duties

B.A. Blonigen, T.J. Prusa, in Handbook of Commercial Policy, 2016

5.4.1 Do PTAs Aﬀect the Patterns of AD Use?

It is well known that preferential tariﬀs discriminate against

nonmembers it is not clear whether other PTA policies accentuate or

attenuate this discrimination. Prusa and Teh (2010) focus on the

extent to which PTAs alter the pattern of AD. AD is a particularly apt

policy to study because there is considerable variation in AD rules

across PTAs. Some PTAs contain no AD provisions, some prohibit it,

and others contain special rules for its use. They ﬁnd PTAs have had

large eﬀect on the pattern of AD use: decreasing the incidence

against PTA members and increasing the number of AD actions

against non-PTA members. The results are particularly strong for

PTAs that have additional AD rules. Taking the two eﬀects together,

they ﬁnd net eﬀect of PTA rules on total AD ﬁlings is small. Bown

(2014b) ﬁnds a similar eﬀect looking just at PTAs involving Turkey.

Read full chapter

URL: https://www.sciencedirect.com/science/article/pii/S2214312216300084

The Escape Clause in Trade Agreements

M. Beshkar, E.W. Bond, in Handbook of Commercial Policy, 2016

2.3 Other Escape Clauses

Escape clauses have also been included in some preferential trade

agreements as well as in other agreements that are part of the WTO.

A safeguard clause within a preferential trade agreement (PTA) is

intended to provide an avenue for temporary escape from injury due

to preferential tariﬀ reductions with a PTA partner. These safeguard

actions diﬀer from the “global” safeguards of the WTO agreement in

that they only apply to the preferential cuts made to PTA partners.

The degree to which safeguard protection is provided varies across

PTAs. The European Union, which has the deepest degree of

integration among partners, does not allow safeguard or

antidumping actions against member countries. The Treaty of

Asunciòn that established MERCOSUR, which aspired to a deep

integration among members, allowed safeguard measures against

member countries during the transitional period but not thereafter.

In practice, however, antidumping measures have continued to be

pursued against member countries.

In contrast, Article 801 of the North American Free Trade Agreement

(NAFTA) identiﬁes conditions under which a safeguard action may be

applied that are virtually identical to those in Article XIX of the GATT,

and allows safeguard measures to be applied against member

countries if the imports from the members contribute to the injury to

the domestic industry. The lack of use of escape mechanisms in the

EU may indicate that when there is a very high level of integration

among countries, so that other mechanisms for compensating

domestic industries for injury are available.

The existence of PTAs also raises a question of whether a country

imposing a global safeguard is allowed to exclude PTA members

from the application of the safeguard. In the Argentina Footwear

case, the WTO Appellate Body ruled that if a country includes the

trade from PTA members in calculating the increased imports of a

product, then it must also include those countries in its safeguard

measure. This parallelism principle has been supported in

subsequent rulings on safeguards.

Discriminatory safeguard clauses have also been allowed during

transitions as part of WTO agreements on speciﬁc topics. For

example, the WTO Agreement on Textiles and Clothing allowed

countries to impose temporary restrictions on speciﬁc countries

during the phase out of quotas that had been in place under the

Multi-Fibre Arrangement. Similarly, the Chinese Accession protocol

included a transitional safeguard measure that was in eﬀect for 12

years after China's entry into the WTO. Bown (2010) points out that

there has been a substantial weakening of the WTO safeguard

principles in the case of China safeguards. In addition to their

discriminatory nature, the injury test has been weakened and

countries are allowed to impose safeguards merely with the threat of

deﬂection of imports from other countries.

One case of particular interest is the Special Safeguard Mechanism in

the WTO Agreement on Agriculture. The agreement on agriculture

was intended to reduce trade barriers and support in agriculture,

while also converting quantitative restrictions to tariﬀs. A special

safeguard mechanism was put in the agreement that applied to

products that had been “tariﬃed” under the WTO agreement. The

agreement sets rules on the tariﬀs that can be imposed if imports

exceed a trigger level or price falls below a trigger price (based on

1986–88 prices). These safeguards diﬀer from those in Article XIX

because they can be triggered automatically without an investigation,

and as a result there is no injury criterion to be met in order for the

safeguard to be put in place. This agreement was limited in that it

applied only to the subset of agricultural goods that had been

tariﬃed and it required notiﬁcation to the WTO of what lines would

be eligible for this mechanism.

Read full chapter

URL: https://www.sciencedirect.com/science/article/pii/S2214312216300072

Business Networks in Thailand

N. Wailerdsak, S. Siengthai, in Business Networks in East Asian

Capitalisms, 2017

10.3.3.1.1 New Normal

The economic growth of Thailand (GDP) was on average, 9% in 1990

and lowered to 5% per year in 2000. Followed by the political

turbulence in the country during 2010–14, the economic growth

became 3% per year. The export growth rate was also negative

consecutively from 2012. Under the new normal of the economic

conditions and growth, it is expected that the growth rate will be

about 3% per year and the export growth rate will not be higher than

4% per year. This is due to the fact that many environmental factors

are changing. Many of the main staple products such as rice, rubber,

and palm oil have experienced a continuous decline in price. In

addition, the EU has stopped the Generalized System of Preferences

(GSP) privileges for Thailand as it has reached the expiration within

the set time frame. In addition, Thai manufacturers or exporters have

not ventured to other countries to make use of the GSP privileges

that those countries could have oﬀered. So, the problems must be

solved by other means and mechanisms available in the country

(Thailand Future Foundation Institute of Education, 2015; World

Bank, 2015).

Thailand is currently faced with some signiﬁcant problems, which

contribute to the slow economic growth. The main problem is that

the world trade has slowed down and its export growth rate is

negative. From the expansion rate around 10% per year during

1998–2008, the growth rate of the export sector has gone down to

0.9% per year during 2011–13. Needless to say, part of this outcome

was due to the world economic recession. But more importantly,

Thailand’s manufacturing sector, which is the foundation of the

export sector and the source of wealth for the country, has been

trapped and could not make a breakthrough from such a trap. It lacks

technological advancement to compete in the international upper

markets. At the same time, it could not come down to compete with

China and Vietnam in the lower markets which utilizing cheap

labour. This trap reﬂects the law of diminishing returns which is

experienced when the economic opportunities and gains based on

the utilization of local labour resources and foreign technology start

to diminish (Siengthai et al., 2009). This necessitates the country

increase its technological capacity with respect to production and

labour productivity to build its production capacity and hence,

competitiveness (Jestin, 2009; Suehiro, 2009). The second problem is

the ﬁerce competitive environment within the region itself. For

example, the value of electronics products from Vietnam is much

higher than that of Thailand (ie, about 40%). In spite of the fact that

not many years ago (ie, in 2010), the value of electronics product

export from Vietnam was only one in four times Thailand’s export

(IMD, 2014). In mid-2015, Samsung shut down its TV production

base in Thailand and moved to set up a new manufacturing plant in

Vietnam with about 90,000 mil. baht registered capital. The third

problem issue for Thailand is that it is evident that Thailand is

becoming an ageing society and the wage rates are increasing. The

Thai population is rapidly ageing, while the active labour force is

hardly increasing. The wage rates are increasing rapidly after the

minimum wage policy was implemented in around 2010 which was

above the labour productivity rate. This has decreased Thailand’s

competitiveness signiﬁcantly when compared to its competitors in

the global markets (IMD, 2014; Suehiro, 2009; World Economic

Forum, 2014). In 2011, there was a great ﬂood in Thailand, which led

to the retrenched export sector, as many manufacturing plants had to

close down and companies needed signiﬁcant budgets to recover

and renovate.

Under the 11th National Economic and Social Development Plan, the

Thai economy, which earlier had depended on the manufacturing

sector, is experiencing the saturation point. The export sector is

declining. More and more emerging economies have entered into

the manufacturing of basic needs products in competition directly

with Thailand. Meanwhile, the upgrading to the production of high-

technology products also demands time in development. The

existing competitors are ﬁrmly controlling their market share. Thus,

Thailand has come to a critical junction in its transition from a

middle-level income to a high-level income and developed economy.

The National Economic and Social Development Board (NESDB) has

therefore established a strategy for the country that Thailand now is

entering into the era in which the country growth will be based on

innovation and creativity. Thailand has to transform from low-cost

advantage manufacturing to the service sector which emphasizes

‘Thainess’. In the 11th Plan, there is a clear indication about the

development of industries which are knowledge-based. In the new

BOI Investment Promotion Policy issued in January 2015, it is clearly

stated that the government wants to create a competitive advantage

in a Thai way by emphasizing the ‘Thainess’ as its strengths.

Read full chapter

URL: https://www.sciencedirect.com/science/article/pii/B9780081006399000104

Handbook of International Economics

Giovanni Maggi, in Handbook of International Economics, 2014

4.2 Impacts of RTAs

In this section I will focus on two related themes: the impact of RTAs

on member countries’ trade barriers against outsiders (“external”

trade barriers) and the impact of RTAs on multilateral trade

liberalization.

The impact of RTA formation on external trade barriers has been the

subject of a sizable theoretical literature. One point that emerges

clearly from this literature is that the qualitative impact of RTAs on

external tariﬀs depends crucially on whether the agreement takes the

form of an FTA or of a CU. I will focus ﬁrst on FTAs.

Various papers have pointed out a strong tendency of FTAs to lead to

lower external trade barriers. This is generally known as the “tariﬀ

complementarity” eﬀect, but it is important to point out that such

eﬀect can arise from two distinct mechanisms. The ﬁrst one,

highlighted by Richardson (1993), occurs when the FTA leads

member countries to compete for tariﬀ revenue, thus inducing them

to reduce external tariﬀs. Interestingly, this mechanism can occur

even for small countries that use tariﬀs only for political-economy

reasons and have no TOT power. A second mechanism was pointed

out by Bagwell and Staiger (1999b): an FTA leads member countries

to import less from non-member countries, and if member countries

have TOT power this reduces their incentives to manipulate TOT vis-

à-vis non-members, in turn leading to lower external tariﬀs.

The tariﬀ complementarity eﬀect however is not the only possible

eﬀect at play in determining the impact of FTAs on external tariﬀs,

and other eﬀects may arise that mitigate or overturn it. Limão (2007)

for example shows that an FTA can lead to higher external tariﬀs if

the FTA serves also non-trade objectives (such as enhancing

cooperation on labor standards or security issues). Several real-world

FTAs appear to have this feature, with one country (typically the US or

the EU) granting tariﬀ preferences, and the other (typically a less

developed country) making non-trade concessions. In this type of

situation, the country that grants tariﬀ preferences may be better oﬀ

increasing its external tariﬀs, because this enhances the value of the

preferences and hence allows it to extract larger non-trade

concessions.

In the case of CUs, tariﬀ-complementarity eﬀects may still be

present, but two new forces arise that push in the opposite direction.

The ﬁrst one is known as the “market power” eﬀect: if two member

countries import the same good from outsiders, once the CU is

formed they jointly have more power over TOT, and thus have a

stronger incentive to raise tariﬀs against outsiders. The second eﬀect

is known as the “coordination” eﬀect: if country A increases the tariﬀ

on imports of a certain good from country B, this has a positive

externality on all other countries (both importers and exporters of

that good), and a CU allows member countries to internalize this

externality, thus leading to higher external tariﬀs. The ﬁrst paper in

the literature to highight these two eﬀects was Kennan and Riezman

(1990). Note that the coordination eﬀect can arise even in the

absence of the market power eﬀect: this is crystal-clear in a setting of

“competing exporters,” where each country is the sole importer of a

given good. Once all the eﬀects are taken into account, a CU can still

lead to lower external tariﬀs, but this is less likely than in the case of

an FTA (as shown by Bagwell and Staiger, 1999b).

In a series of papers, Emanuel Ornelas has established a link between

the literature on the impacts of RTAs and that on the determinants of

RTAs, by showing that taking into account the impact of RTAs on

external tariﬀs has important implications for the likelihood of RTA

formation in the ﬁrst place.

Ornelas (2005a) considers a model similar to Grossman and

Helpman (1995b), but in which external tariﬀs are determined

endogenously. Ornelas identiﬁes a “rent destruction” eﬀect of the

FTA, which arises from the fact that the rents from external tariﬀ

protection spill over to partner countries under the FTA. The rent-

destruction eﬀect lowers the incentives of special interest groups to

lobby for protection, and this creates a tendency of FTAs to induce

reductions in external tariﬀs. Interestingly, when political-economy

motivations are stronger, the drop in external tariﬀs is larger, thus

FTAs are more conducive to multilateral trade liberalization.

The second point made by Ornelas (2005a) is that, since an FTA

lowers the total amount of rents that trade protection can generate,

this has important implications for the political viability of the FTA.

Ornelas starts by considering a situation where there is no ex-ante

lobbying (that is, no lobbying to inﬂuence directly the decision to join

the FTA), and shows that in this case only FTAs that are suﬃciently

welfare-enhancing can be politically viable: intuitively, a welfare-

reducing FTA cannot be attractive to the government, because it

reduces both the level of welfare and the available amount of rents.

Ornelas then allows for ex-ante lobbying, and ﬁnds that in this case a

welfare-reducing FTA may in some cases be politically viable, but this

is made less likely by the rent-destruction eﬀect of the FTA: in

particular, a welfare-reducing FTA can be viable only if the

governments’ valuation of welfare relative to contributions is neither

too small nor too large. The bottom line of this paper then is that the

rent-destruction eﬀect reduces the political viability of welfare-

reducing FTAs.

The impact of RTAs on external trade barriers has also been the

subject of recent empirical work. Estevadeordal et al. (2008) focus on

the eﬀect of preferential trade liberalization on external tariﬀs in Latin

America from 1990 to 2001. An appealing feature of this dataset is

the wide variation in trade preferences across sectors and over time.

Employing a rich set of ﬁxed eﬀects, these authors ﬁnd that

preferential tariﬀ reduction induces faster decline in external tariﬀs.

Furthermore, they ﬁnd that this eﬀect is present only for FTAs, not

for CUs, and is stronger in sectors where the potential for trade

diversion is larger.

Interestingly, Limão (2006) and Karacaovali and Limão (2008) ﬁnd

results that seemingly diverge from those of Estevadeordal et al.

(2008). These two papers examine the impact of preferential trade

liberalization by the US and the EU on multilateral trade

liberalization, and ﬁnd that the US and the EU liberalized less during

the Uruguay Round in sectors where they had granted tariﬀ

preferences, suggesting that preferential liberalization might hinder

the cause of global free trade. What can explain the diﬀerence in

ﬁndings between these papers and Estevadeordal et al. (2008)?

Theory can help us answer this question. A key diﬀerence between

the two approaches is that Limão (2006) and Karacaovali and Limão

(2008) focus on the US and the EU, whereas Estevadeordal et al.

(2008) focus on developing countries. Tariﬀs are considerably higher

in developing countries, so the potential for trade diversion is larger

for these countries, and as theory suggests, this implies a stronger

tariﬀ complementarity eﬀect. Furthermore, Limão’s (2007) theoretical

analysis suggests that preferential liberalization may hinder global

free trade if RTAs are formed also for non-trade reasons, and this is

more often the case for North–South RTAs than for South–South

RTAs.

Thus far I have focused on how the formation of an RTA aﬀects its

member countries’ unilateral choices of external tariﬀs. Next I focus

on the impact of RTAs on the political viability of multilateral trade

agreements.

Levy (1997) considers a model where gains from trade can arise from

diﬀerences in relative factor endowments and/or from increased

product variety, and takes a median-voter approach to the choice of

trade policies. He shows that, if the FTA provides a country’s median

voter with disproportionately large gains, it may raise his or her

reservation utility above the level oﬀered by a multilateral agreement,

thus undermining political support for the latter. This undermining

is more likely to occur in FTAs that involve countries with similar

relative factor endowments. For example, suppose Germany joins the

EU. Assuming that EU countries have similar relative factor

endowments, this will beneﬁt the median voter in Germany mostly

through variety gains. In the next stage, Germany considers signing

a multilateral agreement. If Germany is relatively rich in capital and

its median voter is an unskilled worker, the multilateral agreement is

likely to damage the median voter through Stolper-Samuelson

eﬀects, without providing much additional variety gains, so he/she

will block the multilateral agreement. On the other hand, if the same

median voter were asked if he/she supports a multilateral agreement

before joining the EU, then the answer may be yes, because in this

case the variety gains may outweigh the adverse Stolper-Samuelson

eﬀects.

The model by Krishna (1998), already mentioned in Section 4.1, leads

to a similar result, in spite of the very diﬀerent structure. Recall that

Krishna focuses on a Grossman-Helpman type model with

oligopolistic competition. After establishing that politically viable

FTAs are more likely to be trade-diverting, Krishna examines how an

FTA aﬀects the political viability of a multilateral agreement. The key

ﬁnding is that the formation of an FTA may increase producers’

opposition to a subsequent multilateral agreement, because the

latter may reduce or eliminate the rents created by the FTA, and it

can even reverse the preferences of producers, from supporting a

multilateral agreement to opposing it. Thus, taken together, the

papers by Levy (1997) and Krishna (1998) deliver a pessimistic

message about the impact of RTAs on the political viability of

multilateral agreements.

Finally, Bagwell and Staiger’s (1999a) model (already discussed in

Sections 2.1 and 3.1.4) also delivers pessimistic implications for the

impact of RTAs on multilateral trade agreements, but for a very

diﬀerent reason than the models discussed above. A simple corollary

of Bagwell and Staiger’s analysis is that the presence of RTAs, by

breaking the ability of the MFN rule to channel all international

policy externalities into a single world-price externality, undermines

the eﬀectiveness of the MFN and reciprocity rules in guiding

countries toward an eﬃcient policy outcome.

Read full chapter

URL: https://www.sciencedirect.com/science/article/pii/B9780444543141000069

An analysis of the role of vertical specialization

in the development of China’s trade surplus:

evidence from 2000–2007

Wang Wei, in Vertical Specialization and Trade Surplus in China,

2013

Introduction

Globalization has altered world production and consumption

networks. As a result, the traditional ﬂow of goods from primary

production through to manufacturing and consumption has

expanded across international borders. VS in processing and

manufacturing in China has driven export growth. In particular,

intra-industry and intra-product trade between China, the US and

East Asia has increased China’s trade surplus over the long term.

Its trade surplus has continued to be a major component of China’s

rapid economic growth and increase in employment and income.

China’s outstanding performance in trade can be traced back to 1978,

with the adoption of reform and openness policies and increased

integration into VS and preferential tariﬀ treatment for the

processing trade. Following concerns raised by developed countries

over China’s huge trade surplus and growing external debt, China

appreciated the RMB by 8 percent in the ﬁrst half of 2008 in an

attempt to curb further growth.

Since China implemented the “Promoting Trade through Science

and Technology” strategy in 1999, China’s manufacturing goods

exports have grown rapidly and have become an important driver of

China’s trade surplus. However, there are still some problems with

the export competitiveness of China’s high-tech products: less

independent innovation and high VS, for example. While creating

more labor-intensive jobs for China, the growth of the Sino-US

bilateral VS trade and the transfer of production and export platforms

of transnational corporations to China have also brought China into

“the trap of comparative advantage.” As a result of the high VS, the

import of intermediate products better promotes the export of ﬁnal

products and has a large impact on the export of low-to-medium

technology-intensive ﬁnal products; the increasing liberalization of

intermediate products promotes the export of ﬁnal product exports

while decreasing the trade beneﬁt; and improved methods in the

processing trade, diﬀerent manufacturing goods trade structures and

types of specialized division of labor inﬂuence the welfare eﬀect of

bilateral trade liberalization.

Despite the promise of long-term economic prosperity for China,

globalization has also led to trade conﬂicts within China due to an

increased reliance on external demand and industrial safety issues.

Furthermore, the transfer of manufacturing, processing and

assembly works to China has led to a “hollowing out” of the

manufacturing industry in countries such as the US and Japan.

The concept of VS has been used by many economists to study the

case of China (Ping, 2005; Dean et al., 2007; Koopman et al., 2008;

CCER Research Team, 2006; Wendongwei et al., 2009). As mentioned

in the Appendix, Hummel et al. (2001) deﬁne VS as the sequential

production of a good, divided between a number of countries. In this

process, a country may outsource one or more parts of the

manufacturing process to other countries which are more specialized

in that particular area.

Specialization has changed from intra-industry and interindustry to

intra-product, which has accelerated globalization and brought more

countries into the global production system. The processing trade is

China’s main pattern for participating in the international division of

labor. This type of processing trade carried out by FIEs has accounted

for a large part of China’s trade growth. Though China takes part in

the global production network based on its comparative labor

advantage, has a comparatively low status and gains less than its

trading partners in the developed countries, it has been able to

increase its trade surplus due to its experience of 30 years’ reform

and “opening-up.”

The international trade in intermediate inputs and the outsourcing of

production processes has required a change in the way exports are

measured. The “standard” measure of exports is determined by the

market value of goods sold internationally. However, the market

value of goods can be very high when compared to the domestic

value added (not including the value of imported components). This

has led to an overestimation of the value of exports, an inﬂated value

added and inaccurate representation of net trade.

Alternatively, exports can be measured by “value-added trade” which

determines exports net of VS trade and reallocates value-added

during production to each country which participated in the

manufacturing process. This measure avoids the overestimation of

exports and moderates the value of net trade. This chapter utilizes

the value-added trade measure to determine the level of VS in the

Chinese manufacturing industry and provide an estimation of the

trade surplus which is net of intermediate inputs.

Using traditional economic measures, trade surpluses can be

overestimated due to VS and the inclusion of foreign inputs in

China’s exports. What, then, can account for the Chinese trade

surplus? We believe that the answer lies in VS. Let us look at China’s

trade surplus from a VS trade perspective. This chapter aims to

measure the level of VS in the Chinese manufacturing industry to

provide a more accurate representation of China’s trade surplus.

Read full chapter

URL: https://www.sciencedirect.com/science/article/pii/B9780857094469500034

East Asia

Kui-Wai Li, in Redeﬁning Capitalism in Global Economic

Development, 2017

I Introduction

The success of all East Asian economies can best be explained by

neoclassical economic analysis, the application of market economy

and capitalism. Having been considered as the “newly industrializing

economies” since the early 1970s, the growth of the East Asian

economies, typically South Korea, Taiwan, Singapore, and Hong

Kong, have gone through a process of industrialization, though the

type of export-oriented industries diﬀered among these economies.

Beginning from light manufacturing and labor-intensive industries,

South Korea and Taiwan have ventured into heavy industries, such as

shipping. The strong exports of the four East Asian economies have

earned them a new status since 1979, namely graduation from the

Generalized System of Preference (GSP) which speciﬁed that exports

from developing countries were allowed to enter the United States

and European markets without import tariﬀs (Kwok and Li, 1992).

Eﬀectively, this graduation changed the status of the four East Asian

economies to “developed economies,” and their exports would no

longer be tariﬀ-free.

The development experience of East Asia has shown distinct

transition stages. The early stage of industrialization was ﬁnanced

mainly from foreign direct investment dominated by labor-intensive

manufacturing. Industrial ﬂexibility is another advantage. Other than

the light manufacturing in the early stages of industrialization in the

1960s, industries that have ﬂourished since late 1970s were

electronics. Electronics should not be regarded as a land-intensive

industry, and its development would best be in small and eﬀective

economies. However, their concentration on electronics became a

constraint when new competitors emerged.

Due to their small market size, much of the industrial output from

East Asia was exported, supplementing the supply bottleneck in

consumer goods in the western economies. As income grew and

economies became more mature in the 1980s, these economies were

transformed to become suppliers of capital to neighboring

economies by investing in industrial plants in other Southeast Asian

countries, typically, Indonesia, Malaysia, Thailand, and the

Philippines, and later Vietnam and southern China. Singapore soon

served as the regional headquarters among the countries in the

Association of Southeast Asian Nations (ASEAN), while Hong Kong

served as headquarters to foreign investors to China. Singapore

tends to have a slight advantage over Hong Kong in Southeast Asia,

since Singapore is a leading member in ASEAN, while Hong Kong

has a slight advantage over Singapore in the economic relationship

with China, due to geographical proximity. Nonetheless, their

economic compositions are close to each other.

There has been a lack of regional protection among Asian economies.

The establishment of the ASEAN in 1967 with the ﬁve initial

members (Singapore, Malaysia, Thailand, Indonesia, and the

Philippines) was more a political cooperation against the spread of

communism from Vietnam than an economic cooperation body.

Unlike the European Union, all Asian economies compete among

themselves, especially given the similarities in their economic

background. Hence, maintaining competitiveness meant economies

would do their best to remain stable. Indeed, if any Asian economy

falls, the economic beneﬁts, such as outﬂow of capital and loss of

foreign investment, would go immediately to neighboring

economies. For example, when there was trouble in Indonesia or the

Philippines, Singapore and Hong Kong would become the natural

“shelter” of capital. Asian economies do not enjoy the kind of rescue

from neighboring economies as in the European Union where

stronger members could come to the rescue. This cannot be true

among Asian countries. Hence, the “look after oneself ” mentality in

the “intraregional” competition became a force of growth in itself.

However, by the 1990s, rising domestic costs in the four East Asian

countries have eroded their competitive advantage considerably. The

emergence of China has diverted much foreign investments away

from all East Asian economies, and at the same time, East Asian

economies also increased their investment in China. In the “push

and pull” analysis, the Chinese economy since the 1990s produced a

combination of both complement and substitution eﬀects on the

East Asia economies. The low cost of production in China worked as

a complement, as China “pulled” investment from East Asia.

However, foreign investments that could have come to East Asia

would have diverted to China, and such a loss of foreign investment,

and exports subsequently, produced the substitution eﬀect that

constrained growth among East Asia economies.

Another major event was the Asian ﬁnancial crisis in 1997−98,

though it was short-lived, the crisis reﬂected the economic and

industrial narrowness among key East Asian economies. Political

realities in some East Asian economies have somewhat derailed their

growth path, as political uncertainties generated risk and

disincentives, thereby hastening their fall in economic

competitiveness. While industrial diversity and economic

restructuring takes time, there is a need to explore new “comparative

advantage” for future development.

The human behavior of “give and take” is elaborated in the next

section to enlighten the economic performance of successful East

Asian economies, especially when compared to those “fragile states”

with extremely low levels of development, or countries that have

always remained in an unstable situation, with no potential to grow

and survival based on a daily basis. East Asian economies have

“taken” a lot from the international community over the years, but

their development has been complemented by domestic

improvements that enabled these economies to also “give” and

develop neighboring economies. This chapter summarizes, renews,

and extends the neoclassical debate on the causes of growth among

East Asian economies. Discussions will be made in relation to their

development in the period after the Asian ﬁnancial crisis, as each of

the East Asian economies are faced with new challenges and

situations and their next stage of growth can provide useful lessons

for other emerging countries.

Read full chapter

URL: https://www.sciencedirect.com/science/article/pii/B9780128041819000124

Recommended publications:

Journal of Policy Modeling

Journal

Energy Policy

Journal

Journal of International Economics

Journal

Journal of Asian Economics

Journal

Browse Journals & Books

ScienceDirect ® is a registered trademark of Elsevier B.V.

Download 433,47 Kb.

Do'stlaringiz bilan baham: