How to make trade work for development

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How to make trade work for development

• Hakim Ben Hammouda
• Director
• Trade, Finance and Economic Development Division,
  UNECA

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Outline

1. Introduction
2. Acceleration of trade liberalisation.
3. Trade liberalisation from consensus to
   questions.
4. What do the theories say?
5. Lessons from other experiences.
6. WTO gives some flexibilities.
7. Conclusion.

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1. Introduction

• Trade policy is back at the centre of the
  development debate.
• The multilateral negotiations and the WTO have
  given this renewed interest on trade.
• Many gatherings are today taking place to renew
  the thinking about trade policies.
• What kind of trade policies do developing
  countries need?
• Is it neo-liberal trade policies like those of
  the 80s or the interventionist type of the 1970s?

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2. Acceleration of trade liberalisation

• In the 1980s and 90s, an acceleration of trade
  liberalisation was witnessed.
• This liberalisation was the result of four
  movements
• Unilateral liberalisation as a result of economic
  reforms accompanying SAPs.
• Liberalisation as a result of multilateral
  negotiations in the WTO (especially the Uruguay
  Round).
• Liberalisation as a result of regional
  integration process.
• Liberalisation as a result of bilateral
  negotiations (e.g. Cotonou Agreement the
  Barcelona process).

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3. Trade liberalisation from consensus to
questions

• The 1980s and 90s witnessed major consensus on
  trade liberalisation.
• But since end of 90s, questions were raised about
  relevance of trade liberalisation because
• There were no improvements in African countries
  situation in the global economy.
• There were strong fiscal consequences for
  developing countries.
• There were legitimate risks of de-industrialisatio
  n.
• Developed countries failed to honour their part
  of the bargain as they did not implement their
  commitments e.g. lowering of high tariffs
  subsidies elimination tariff peaks remain
  tariff escalation abounds).

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4. What do theories say?

• Major debate since 2000 with two issues being
  debated
• The causal relationship between trade
  liberalisation growth and trade liberalisation
  and poverty reduction.
• No consensus on trade liberalisation and growth.
• Dollar and Kraay (2004) strongly advocate that
  trade liberalisation is good for growth.
• Sachs and Warner (1995) and Summers and Heston
  (1991) had reached a similar conclusion.
• Rodrik and Rodriguez (2000) challenged these
  results.

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4. What do theories say? Contd...

• The issue of impact of trade liberalisation on
  revenue and poverty also debated.
• Dollar and Kraay (2004) posit that there is
  positive impact of trade liberalisation on
  revenues.
• Hanson (2003) and Abarche, Dickenson and Green
  (2004) argue that there is a negative impact of
  trade liberalisation on poverty.
• What can be concluded is that the impact of trade
  liberalisation has become a controversial issue
  in the theory.

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5. Lessons from other experiences.

• To be able to give a good response on the impact
  of trade liberalisation, there is need to go back
  to the best practices for lessons
• Asian emerging countries could give direction of
  responses to our question.
• In their experiences, beyond trade, they had a
  strategic vision for development.
• Trade policy and its instrument was integrated in
  this vision.

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5. Lessons from other experiences. Contd

• Asian countries employed pragmatic compromises
  between openness and control.
• It is not about a general trade policy then, but
  adequate instruments to respond to each sector
  priorities.
• The key is differentiation between and within
  sectors.
• Main conclusion there is need to build a
  strategic vision and be more pragmatic in the
  policy design and implementation.

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6. WTO gives some flexibilities

• In deed, the WTO offers room for this pragmatism.
  For instance
• It recognizes the essence of special and
  differential treatment.
• Implementation of commitments can be
  differentiated according to level of development.
• It allows for special products designation such
  that trade liberalisation could be
  differentiated.
• Countries therefore have room within the
  multilateral framework to employ a pragmatic
  trade policy.

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7. Conclusion

• To conclude, and reverting to our earlier
  question regarding what kind of trade policies
  that developing countries need?
• Is it neo-liberal trade policies like those of
  the 80s or the interventionist type of the 1970s?
• This presentation indicates that it is neither of
  these type of policies.
• But pragmatic trade policies are the key to
  getting trade liberalisation achieve the desired
  results with respect to growth and poverty.

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Thank you for your attention.