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In West Africa, recorded intra-regional trade is small but informal cross-border trade (ICBT) is pervasive, despite regional integration schemes intended to promote official trade. We argue that ICBT must be understood in light of two features of West African national boundaries: divergent economic policies between neighboring countries and the ease with which informal operators can ship goods across borders. We focus on two ICBT clusters: Senegal–The Gambia and Nigeria–Benin–Togo. Nigeria and Senegal have protected their domestic industries with high import barriers, whereas Benin, Togo and The Gambia have maintained lower import taxation. These differential trade policies, together with high mobility of goods and people across borders, lead to widespread smuggling, with goods imported legally in low-tax countries and re-exported unofficially to countries with higher import duties.

How do global supply chain linkages modify countries' incentives to impose import protection? Are these linkages empirically important determinants of trade policy? To address these questions, this paper introduces supply chain linkages into a workhorse terms-of-trade model of trade policy with political economy. Theory predicts that discretionary final goods tariffs will be decreasing in the domestic content of foreign-produced final goods. Provided foreign political interests are not too strong, final goods tariffs will also be decreasing in the foreign content of domestically-produced final goods. The paper tests these predictions using newly assembled data on bilateral applied tariffs, temporary trade barriers, and value-added contents for 14 major economies over the 1995-2009 period. There is strong support for the empirical predictions of the model. The results imply that global supply chains matter for trade policy, both in principle and in practice.

This article analyzes the relationship between export competitiveness and investment in machinery, allowing for imperfect substitution between domestically produced and imported machinery. A trans log export price function is estimated for developed, export oriented developing, and import substituting developing economies in a panel data setting. Between 1967 and 1990 imported machinery helped lower export prices for export oriented developing economies. Moreover, throughout the period imported machinery was not a substitute for domestic machinery. Import substituting developing economies was unable to harness imported machinery to reduce costs early in the period, but from about the early 1980s, with the opening of their trade regimes, they were able to benefit from the cost reducing effect. The results imply that innovative effort based on imported technologies can be a precursor to the development of domestic innovation capabilities.

This set of reports on manufacturing plans implementation in India includes the following: (1) A new agenda. Improving the competitiveness of the textiles and apparel value chain in India report is structured as follows: section one sets out the context, describing trends in global markets and in the textiles and apparel supply chain in India; section two analyzes in detail the choke points that are hindering the growth of the latter; section three sets out a reform agenda to address them; and section four concludes. (2) Fast tracking Indias electronics manufacturing industry. Business environment and industrial policy examines the prospects for India to meet its potential. Drawing on extensive survey questionnaires and interviews with key industry players (both domestic and foreign) and relevant government agencies, this study identifies major challenges India-based companies face in engaging in electronics manufacturing. The analysis culminates in detailed policy suggestions for regulatory reform and support policies needed to unblock barriers to investment in this industry and to fast-track it’s upgrading through innovation. (3) Supply chain delays and uncertainty in India. The hidden constraint on manufacturing growth report provides the context of the freight and logistics industry in India; describes the headline impacts of its performance on manufacturing firms; explores variations in this impact and causes thereof; and concludes with a more detailed look at the reform agenda this motivates.

World commodity markets-and particularly the markets for agricultural commodities-remain highly distorted despite the wave of liberalization that has swept world trade since the 1980s. Some markets for commodities are characterized by imperfect competition. Where monopolies or oligopolies in trade arise either because of government regulation or through other barriers to entry, distortions may arise that call for the application of antitrust law and other forms of pro- competitive policy action. Commodity markets are distorted on both the export and the import sides, with serious implications for world prices and their volatility. Governments also have a long history of intervening in markets for other natural resources, both renewable and non-renewables. Protection rates for imports of non-agricultural natural resources are generally low because of pressure from user industries. However, importing countries confronting exporters of resources with market power and thus the ability to affect world prices may seek to use import tariffs or excise taxes to lower demand and shift rents away from supplying nations. In sum, a wide mix of policy instruments is used by countries to influence the level and volatility of domestic prices for commodities. Countries also pursue policies that may affect international prices, either indirectly or directly, if they are large suppliers or importers.

For decades, agricultural price and trade policies in Sub-Saharan Africa have hampered farmers’ contributions to economic growth and poverty reduction. Although there has been much policy reform over the past two decades, the injections of agricultural development funding, together with ongoing regional and global trade negotiations, have brought distortionary policies under the spotlight once again. A key question asked of those policies is: How much are they still reducing national economic welfare and trade? Economy-wide models are able to address that question, but they are not available for many poor countries. Even where they are, typically they apply to just one particular previous year and so are unable to provide trends in effects over time. This paper provides a partial-equilibrium alternative to economy-wide modeling, by drawing on a modification of so-called trade restrictiveness indexes to provide theoretically precise indicators of the trade and welfare effects of agricultural policy distortions to producer and consumer prices over the past half-century. The authors generate time series of country level indexes, as well as Africa-wide aggregates. They also provide annual commodity market indexes for the region, and a sense of the relative importance of the key policy instruments used.

Reforms in recent decades have sharply reduced the distortions affecting agriculture in developing countries, particularly by cuts to agricultural export taxes and by some reductions in government assistance to agriculture in high-income countries, but international trade in farm products continues to be far more distorted than trade in nonfarm goods. This paper summarizes a series of empirical studies that focus on the effects of the remaining distortions to world merchandise trade for poverty and inequality, especially in developing countries. To obtain different insights into the various impacts, two global studies are undertaken using the World Bank's Linkage model, one multi-country study uses the Global Trade Analysis Project (GTAP) model, and ten country case studies are also included, each using a national economy-wide model. The Linkage model results suggest that liberalization will reduce international inequality, largely by boosting farm incomes and raising real wages for unskilled workers in developing countries, and will reduce the number of poor people worldwide by 3 percent. The analysis based on the GTAP model for a sample of 15 countries, and the ten stand-alone national case studies, all point to larger reductions in poverty, especially if only the non-poor are subjected to increased income taxation to compensate for the loss of trade tax revenue.

This paper assesses the potential impacts of the removal of agricultural and other trade distortions using a newly developed dataset and methodological approach for evaluating the global poverty and inequality effects of policy reforms. It finds that liberalization of agriculture will increase global extreme poverty (US$1 a day) slightly and by almost 1 percent if other goods trade is also liberalized; but the number of people living on less than $2 a day will fall by almost 1 percent. Beneath these small aggregate changes, most countries witness a substantial reduction in poverty while South Asia where half of the world's poor reside will experience an increase in extreme (but not moderate) poverty incidence due to high rates of protection afforded to its unskilled labor-intensive agricultural sectors. The distributional changes also are projected to be mild, but again exhibit a strong regional pattern: inequality falls in Latin America, which is characterized by high initial inequality, and rises in South Asia, has relatively low income inequality.

This paper analyzes the economic effects of agricultural price and merchandise trade policies around the world as of 2004 on global markets, net farm incomes, and national and regional economic welfare and poverty, using the global economy wide Linkage model, new estimates of agricultural price distortions for developing countries, and poverty elasticity's approach. It addresses two questions: to what extent are policies as of 2004 still reducing rewards from farming in developing countries and thereby adding to inequality across countries in farm household incomes? Are they depressing value added more in primary agriculture than in the rest of the economy of developing countries, and earnings of unskilled workers more than of owners of other factors of production, thereby potentially contributing to inequality and poverty within developing countries (given that farm incomes are well below non-farm incomes in most developing countries and that agriculture there is intensive in the use of unskilled labor)? Results are presented for the key countries and regions of the world and for the world as a whole. They reveal that, by moving to free markets, income inequality between countries will be reduced at least slightly, all but one-sixth of the gains to developing countries will come from agricultural policy reform, unskilled workers in developing countries the majority of whom work on farms will benefit most from reform, net farm incomes in developing countries will rise by 6 percent compared with 2 percent for non-agricultural value added, and the number of people surviving on less than US$1 a day will drop 3 percent globally.

During the 1960s and 1970s most developing countries imposed anti-agricultural policies, while many high-income countries restricted agricultural imports and subsidized their farmers. Both sets of policies inhibited economic growth and poverty alleviation in developing countries, while doing little to assist small farmers in high-income countries. Since the 1980s, however, many developing countries began to reduce the anti-agricultural bias of sectoral policies, and from the early 1990s the European Union began to move away from price supports to more-direct forms of farm income payments. This paper summarizes a forthcoming book that seeks to explain this evolving pattern of distortions to incentives conceptually and econometrically by making use of new political economy theory and a new globally comprehensive and consistent set of estimates of the changing extent of annual distortions over the past half-century. The distortion estimates involve more than 70 products that cover around 70 percent of the value of agricultural output in each of 75 countries that together account for over 90 percent of the global economy, and they expose the contribution of the various policy instruments (both farm and non-farm) to the net distortion to farmer incentives. Such a widespread coverage of countries, products, years and policy instruments has allowed this collection of studies to test a wide range of hypotheses suggested by the new political economy literature, including the importance of institutions. As a set it sheds much new light on the underlying forces that have affected incentives facing farmers in the course of national and global economic and political development, and hence on how those distortions might change in the future - or be changed by concerted actions to offset political pressures from traditionally powerful vested interests.

This chapter begins with a brief summary of the long history of national distortions to agricultural markets. It then outlines the methodology used to generate annual indicators of the extent of government interventions in markets, details of which are provided in Anderson and appendix A. A description of the economies under study and their economic growth and structural changes over recent decades is then briefly presented as a preface to the main section of the chapter, in which the nominal rates of assistance and consumer tax equivalents (NRA and CTE) estimates are summarized across regions and over the decades since the 1950s. These estimates are discussed in far more detail in the regional chapters that follow. A summary is also provided of an additional set of indicators of agricultural price distortions presented in chapter eleven that are based on the trade restrictiveness index first developed by Anderson and Neary (2005). In chapter twelve the focus shifts from countries to commodities, and all the various distortion indicators are used to provide a sense of how distorted are each of the key farm commodity markets globally. Then chapter thirteen uses the study's NRA and CTE estimates to provide a new set of results from a global economy-wide model that attempts to quantify the impacts on global markets, net farm incomes and welfare of the reforms since the early 1980s and of the policies still in place as of 2004. The chapter concludes by drawing on the lessons learned to speculate on the prospects for further reducing the disarray in world agricultural markets.

How hospitable will the global environment be for economic growth in the developing world as we come out of the present financial crisis? The answer depends on how well the author manage the following tension. On the one hand, global macro stability requires that we prevent external imbalances from getting too large. On the other hand, growth in poor nations requires that the world economy be able to absorb a rapid increase in the supply of tradable produced in the developing world. It is possible to render these two requirements compatible, but doing so requires greater use of explicit industrial policies in developing countries, which have the potential of encouraging of modern tradable activities without spilling over into trade surpluses. The 'price' to be paid for greater discipline on real exchange rates and external imbalances is greater use (and permissiveness) towards industrial polices.

In 1990, Australia and New Zealand were ranked around 25th and 37th in terms of Gross National Product (GNP) per capita, having been the highest-income countries in the world one hundred years earlier. Those countries relatively poor economic growth performance over that long period contrasts markedly with that of the past 15 years, when these two economies out-performed most other high-income countries. This difference in growth performance is due to major economic policy reforms during the past two to three decades, both at and behind the border. The report provide new evidence on the extent of governmental distortions to agricultural incentives in particular in the Australian and New Zealand economies since the late 1940s, both directly due to agricultural policies per se and indirectly (and negatively) through protection to manufacturing.

The story of agricultural policy in Northeast Asia over the past 50 years illustrates the dramatic changes that can occur in distortions to agricultural incentives faced by producers and consumers at different stages of economic development. In this study of Japan, the Republic of Korea (the southern part of the peninsula, hereafter referred to as Korea) and the island of Taiwan, China (hereafter referred to as Taiwan), the authors estimate the degree of distortions for key agricultural products as well as for the agricultural sector as a whole over a period when these economies transitioned from low- or middle- to high-income status the beginning of the so-called East Asian economic miracle of dramatic industrial development. The three economies in terms of the nature of their economies, including their resource endowments that determined the course of their modern economic growth and development. The evolution of agricultural policies in the three economies is then reviewed before discussing how to measure distortions to agricultural incentives using the methodology from Anderson et al. (2008), the focus of which is on nominal and relative rates of assistance. Implications of empirical findings for policy reforms in the three economies are discussed in the final section, where the authors also identify lessons for later-developing economies experiencing similar structural transformations in the course of their economic growth. Statistical observations are found to be consistent with the hypothesis that the success of rapid industrialization that advanced these economies to the middle-income stage resulted in declines in agriculture's comparative advantage associated with the growing income disparity between farmers and employees in non-agricultural sectors.

Earnings from farming in many developing countries have been depressed by a pro-urban bias in own-country policies as well as by governments of richer countries favoring their farmers with import barriers and subsidies. Both sets of policies, which reduce national and global economic welfare and contribute to global inequality and poverty, have been undergoing reform since the 1980s. Using the linkage model of the global economy and modifications to the pre-release of version 7 of the Global Trade Analysis Project (GTAP) protection database for 2004, this paper seeks to compare the effect of those reforms to date with those that would come from removing remaining agricultural and trade policies. Two sets of results are thus presented: one showing the effects of policy reforms between 1980-84 and 2004, the other showing what the removal of remaining distortions as of 2004 could be. Both sets of results indicate improvements in the real value of agricultural output and exports, the real returns to farm land and unskilled labor, and real net farm incomes in most developing country regions despite the adverse effect on the international terms of trade for some developing countries that are net food importers or are enjoying preferential access to agricultural markets of high-income countries. Landowners in those high-income countries still offering their farmers price supports could readily afford to compensate them from the benefits of removing remaining agricultural protectionism.

The purpose of this paper is to provide an overview of the literature on the political economy of policy instrument choice and relate it to the experiences in agriculture. The paper is therefore organized as follows. The second section provides a ranking of policies as to their transfer efficiency and determines the standard of evaluation, given that no policy is perfect in achieving its goals. The third section explores why political competition does not ensure that an efficient policy instrument is chosen. The following two sections explain the two key theories: enforcement and commitment problems in section four, and information and agency problems in section five. Section six presents the important Grossman-Helpman model of inefficient policy choice that falls outside these two general theories. Section seven describes how policy instrument choice in agriculture is often a discrete outcome in response to a crisis and therefore becomes path dependent, resulting in a status quo bias. Section eight describes how trade agreements can affect policy instrument choice. The final section gives some guidance as to the outstanding issues.

This paper outlines the methodological issues associated with the task of measuring that actual delivered direct protection or taxation to individual agricultural industries, as well as the direct protection or anti-protection to non-agricultural sectors. It begins with a guide to what elements in principle could be measured. There are two key purposes of the distortion estimates being generated by this project are: 1) to provide a long annual time series of indicators showing the extent to which price incentives faced by farmers and food consumers have been distorted directly and indirectly by own-government policies in all major developing, transition and high-income countries, and hence for the world as a whole; and 2) to attribute the price distortion estimates for each farm product to specific border or domestic policy measures, so they can serve as inputs into various types of partial and general equilibrium economic models for estimating the effects of those various policies on such things as national and international agricultural markets, farm value added, income inequality, poverty, and national, regional and global welfare.

This article analyzes the relationship between trade facilitation and trade flows in the Asia Pacific region. Country specific data for port efficiency, customs environment, regulatory environment, and e-business usage are used to construct indicators for measuring trade facilitation. The relationship between these indicators and trade flows is estimated using a gravity model that includes tariffs and other standard variables. Enhanced port efficiency has a large and positive effect on trade flows. Regulatory barriers deter trade. Improvements in customs and greater e-business use significantly expand trade but to a lesser degree than improvements in ports or regulations. The benefits of specific trade facilitation efforts are estimated by quantifying differential improvements in these four areas among members of the Asia Pacific Economic Cooperation (APEC). A scenario in which APEC members with below-average indicators improve capacity halfway to the average forall members shows that intra-APEC trade could increase by Dollar 254 billion, or 21 percent of intra-APEC trade flows.

This study examines the effects of the 1988 GATT-11 Agreement on U.S. exports to Japan. The agreement was reached by the General Agreement on Tariffs and Trade (GATT) after bilateral negotiations between Japan and the United States broke down. The commodities covered under the agreement include a diverse group of semiprocessed, high-value agricultural products (HVPs). During the 6- year period 1988-93, Japanese imports of these commodities increased substantially, and imports from the United States increased around $100 million. The agreement, therefore, has been beneficial to the United States as well as other suppliers. In Japan, the growing difficulty of relying on domestic suppliers is encouraging retailers to look abroad for many types of high-value products. During the next decade, the list of products needed by Japan is expected to expand far beyond the original GATT-11 commodities.