WTO AT THE MARGINS: SMALL STATES AND THE MULTILATERAL TRADING SYSTEM; ED. ROMAN GRYNBERG

This Book Was First Published In 2006. At A Pivotal Point In The History Of The Wto, When Development Issues Are At The Heart Of Negotiations, How The Larger And More Powerful Members Address The Legitimate Concerns Of Its Poorest And Most Vulnerable Members Will Shape The Perception Of The Institution Throughout The Century. This Book Aims Not Only To Document Almost Ten Years Of Experience Of Small States With The Wto But Also To Explain This Experience. It Takes An Evidential Theory Approach To Explaining The Features Characteristic To The Trade And Economic Development Of Small Island States. It Then Highlights The Issues Of Concern To These States In Relation To Negotiations At The Wto. The Experience Of The African Caribbean And Pacific (acp) Countries With The Wto Dispute Settlement Mechanism Is Discussed, And The Book Ends With A Discussion Of Key Negotiating Issues For The Island States And Institutional Arrangements To Facilitate Reform. Half-title......Page 3 Title......Page 5 Copyright......Page 6 Contents......Page 7 List of Figures and Appendices......Page 10 List of Tables......Page 15 List of Contributors......Page 21 Introduction......Page 25 PART I Theory and evidence......Page 33 1.1 Introduction: the theory of comparative advantage ad extremum......Page 35 1.2 Characteristics of efficient national economies in a global market......Page 37 1.3 The nature and consequence of rent-based development......Page 40 1.3.1 Market-based sources of quasi-rent......Page 41 1.3.1.1 Booming sectors......Page 42 1.3.1.2 Niche market activities......Page 44 1.3.2.1 Trade preferences......Page 46 1.3.2.2 Tax concessions......Page 48 1.3.2.3 Sovereignty: from de jure to nefarious rents......Page 49 1.3.3 The conundrum of copra and tourism......Page 50 1.4 Conclusion......Page 51 2.1 Introduction......Page 53 2.1.1.1 Geographic......Page 54 2.1.1.2 Economic......Page 55 2.2 Constraints to growth and development......Page 56 2.2.2 Export concentration......Page 57 2.2.3 Size and manufacturing......Page 58 2.2.4 Domestic production of non-tradables......Page 60 2.2.5 Size and matters of finance......Page 61 2.2.6 Volatility......Page 62 2.2.6.1 Volatility and growth......Page 64 2.2.6.2 Investment: is it the key?......Page 65 2.2.7 Isolation and geographic surroundings......Page 66 2.2.7.1 Isolation......Page 67 2.2.7.2 Geographic surroundings......Page 68 2.2.8 Vulnerability......Page 69 2.2.8.1 Measuring vulnerability index components......Page 70 2.2.8.2 Indices results......Page 72 2.3.1 Theoretical work......Page 73 2.3.2 Empirical work......Page 74 2.3.3 Growth and size regressions findings......Page 75 2.3.4.1 Openness......Page 76 2.3.4.2 Fundamentals......Page 78 2.3.4.3 Sectors......Page 79 2.3.5 Income level and size regression findings......Page 80 2.3.6 Behind the income results: preferential arrangements......Page 81 2.4.1 Sectoral focus......Page 82 2.4.2 Openness......Page 83 2.4.4 Integration......Page 84 Armstrong, De Kervenoael and Read (1998)......Page 86 Banerji (1978)......Page 87 Briguglio (1995)......Page 88 Easterly and Kraay (2001)......Page 89 Khalaf (1979)......Page 90 Kwan and Beladi (1993)......Page 91 Ramey and Ramey (1995)......Page 92 Srinivasan (1986)......Page 93 Bibliography......Page 94 3.1 Background......Page 98 3.2 The approach......Page 99 3.3 The business cost data......Page 105 3.4 The regressions results......Page 108 3.5 The disadvantages of smallness: cost inflation factors and income penalties......Page 120 3.6 Policy conclusion......Page 127 References......Page 130 4.1 Introduction......Page 132 4.2 Current benchmarking initiatives and their appropriateness for small states......Page 133 4.3 A small-states specific competitiveness index......Page 141 4.3.1 Country-level findings......Page 143 4.3.2 Findings by region, income group and country size......Page 145 4.4.1 T-test and variables......Page 152 4.4.2 The t-test results......Page 155 4.5 Conclusions......Page 159 Definition of small states and countries used......Page 161 Indexing the variables......Page 162 References......Page 165 5 The economics of isolation and distance......Page 169 5.1.1 Distance and economic interactions......Page 170 5.1.2 The magnitude of shipping costs......Page 172 5.1.4 Landlocked countries......Page 173 5.2 Remoteness and real income......Page 174 5.2.1 Quantifying the effects......Page 178 5.3 New technologies: the death of distance?......Page 179 5.3.1 Weightless inputs and outputs......Page 180 5.3.2 ICT and the costs of remote management......Page 181 5.3.3 The speeding up of production......Page 183 5.4 Conclusions......Page 184 6.1 Introduction......Page 188 6.2.1 Trade in merchandise goods......Page 189 6.2.2 Exports of commercial services......Page 194 6.2.3 Total export (merchandise plus commercial services) trade......Page 196 6.2.4 Total trade transactions......Page 197 6.3.1 Long-term trends......Page 198 6.3.2 Recent performance of individual countries......Page 209 6.4 Why is marginalisation of small states a cause for concern?......Page 217 6.5.1 Understanding marginalisation......Page 220 6.5.2 A simple model of marginalisation of small states......Page 224 6.5.3 Data......Page 225 6.5.4.1 Tests for unit roots and cointegration......Page 227 6.5.4.2 Testing the variables for unit roots......Page 228 6.5.4.3 Estimation strategy......Page 231 6.5.4.4 Test for existence of a long-run relationship......Page 234 6.5.4.6 Short-run dynamics......Page 236 6.6 Implications for long-term trade and development of small states and concluding remarks......Page 239 References......Page 248 7.1 Introduction......Page 251 7.2 The costs of being small......Page 252 7.3.1 Vulnerability to external economic shocks......Page 260 7.3.2 Vulnerability to natural disasters......Page 263 7.4 The costs of governance......Page 267 7.5 Characteristics in combination......Page 269 7.6 The limits of regionalism......Page 271 7.7 Being ill-equipped to benefit from globalisation......Page 273 7.8 Being vulnerable to harm from globalisation......Page 276 7.9 Small economies’ predicament as a trade concern......Page 285 7.10 The feasibility of favourable treatment for small economies......Page 287 7.11 Small states, negotiating weaknesses......Page 291 7.12 Conclusion......Page 292 References......Page 293 PART II WTO and small economies......Page 303 8.1 Introduction......Page 305 8.2 Small states, globalisation and the WTO......Page 307 8.3 WTO precedents on sub-categorisation of Members, including small economies......Page 309 8.4 A small matter of definition......Page 312 8.5 Small economy issues in the dedicated sessions of the WTO......Page 314 8.6 Conclusion......Page 317 9.1 Introduction......Page 333 9.2 Why SDT for small developing economies?......Page 334 9.3 Evolution and status of special and differential treatment......Page 336 9.4 Debate over the efficacy of SDT......Page 342 9.5.1 Acute vulnerability......Page 349 9.5.1.1 High degree of openness......Page 350 9.5.1.3 Export market concentration......Page 351 9.5.1.5 Acuteness......Page 352 9.5.3 Small size of firms......Page 353 9.6 Implications of small size......Page 354 9.6.1 Volatility......Page 355 9.6.2 Sub-optimal resource use, allocation and mobilisation......Page 357 9.6.3 Constrained international competitiveness......Page 359 9.6.4 Disarticulated adjustment capacity......Page 362 9.7.1 Guiding principles......Page 363 9.7.2.1 Differentiated obligations......Page 364 9.7.2.2 Asymmetrically phased implementation......Page 365 9.7.2.4 Flexibility in application and adherence of disciplines under prescribed circumstances......Page 366 9.7.2.6 Development promoting policy......Page 367 9.7.2.8 Enabling access to mediation......Page 369 9.7.2.9 Development funding for implementation and trade capacity-building......Page 370 9.8 How SDT addresses the characteristics and problems of SDEs......Page 371 9.9 Identification of small developing economies......Page 373 9.10 The way forward......Page 376 9.10.1 Differentiated treatment......Page 377 9.10.2 Implementation, adjustment and graduation......Page 378 9.11 Conclusions......Page 379 10.1 Introduction......Page 380 10.2 Background......Page 381 10.3 The use of ‘objective’ variables......Page 385 10.4 Analysis by sector......Page 391 10.5 Line-by-line analysis......Page 396 10.6 Conclusions......Page 404 Appendix 10.1......Page 406 Appendix 10.2 Cluster and discriminant analysis......Page 407 Appendix 10.3 Results of line-by-line de minimis analysis......Page 420 Appendix 10.4 Notes on data sources......Page 442 Bibliography......Page 444 PART III WTO dispute settlement......Page 447 11.1.1 What was the dispute?......Page 449 11.1.2 Why was there a problem?......Page 450 11.1.3 Prelude to battle......Page 452 11.1.3.1 The first phase of the banana wars......Page 454 11.1.3.2 The early challenges......Page 456 11.1.4 Resolution of the dispute and subsequent reforms......Page 457 11.1.5 The breakthrough......Page 458 11.1.7 Impact of the changes......Page 459 11.1.8 2004 – Enlargement......Page 463 11.1.9 How is the Caribbean adapting?......Page 464 11.2.1 2006 – Abolition of the quota system......Page 465 11.3.1 Implications of the banana challenge for other commodity protocols and preferences......Page 467 11.3.2 Strategy and tactics......Page 469 11.3.3 Other systemic lessons......Page 470 11.4 Conclusion......Page 473 12.1 Introduction......Page 475 12.2.1 Contribution to real GDP......Page 477 12.2.2 Contribution to employment......Page 478 12.2.3 Contribution to the current account of the BOP......Page 479 12.3 Social importance of banana exports in the Eastern Caribbean......Page 481 12.4 WTO proceedings against the EU banana regime......Page 482 12.5 Changes to the EU regime for banana imports prior to and since the WTO ruling......Page 485 12.6 Extent of decline of the Eastern Caribbean region’s banana industry......Page 487 12.7 Impact of industry decline on the Windward Islands export revenue......Page 490 12.8.1 Impact of industrial decline on economic growth......Page 493 12.8.2 Impact on the current account of the BOP......Page 497 12.8.3 Impact on (un)employment......Page 499 12.9 Economic and social outlook for the OECS economies (2004–2006)......Page 501 12.9.1 Economic outlook......Page 502 12.10 Conclusions......Page 504 References......Page 506 13.1 Background......Page 508 13.2 The GATT Banana Panels 1992–19946......Page 512 13.3 The banana dispute in the WTO......Page 514 13.4 Jamaica and other Caribbean countries seeking to protect their interests......Page 518 13.5 Testing the WTO dispute settlement mechanism......Page 519 13.6 The quest for a WTO-consistent banana regime......Page 526 13.7 The new banana regime (EC Regulation 896/2001)......Page 529 13.8 The banana dispute and the negotiations for a new Partnership Agreement between the ACP and the EU (the Cotonou Agreement)......Page 530 13.9 The request for a waiver in the WTO’s Council for Trade in Goods......Page 534 13.10 Breaking the waiver deadlock at the Doha Ministerial Conference......Page 536 13.11 The impact of the banana dispute on Jamaica’s banana industry......Page 537 Reference sources......Page 544 14.2.2 Quota scheme......Page 546 14.2.4 Export and production refunds......Page 547 14.2.6 Preferential import programme......Page 548 14.3.1 Export subsidies in excess of commitments......Page 549 14.3.1.2 Agriculture Agreement......Page 550 14.3.1.3 Conclusion......Page 552 14.4 Policy arguments in support of complaints......Page 553 14.6 Third party participation in WTO proceedings......Page 555 14.6.1 Joining consultations......Page 556 14.7 Conclusion......Page 557 15.2 The EU sugar regime......Page 559 15.2.1 Implications of the sugar regime......Page 562 15.3 Impact of current EU sugar regime on Sugar Protocol countries......Page 564 15.4.1 The impact of an import tariff......Page 568 15.4.2 The impact of a unit export refund......Page 569 15.4.3 Evaluation of policy reforms......Page 570 15.5 Impact of reduction of EU export subsidies on ACP countries......Page 572 15.5.2 Other wider reforms......Page 573 15.5.3 Alternative simulated reform effects on Sugar Protocol exporters......Page 574 15.5.4 Alternative perspectives: effects on non-protocol ACP sugar exporters and importers......Page 580 15.6 Conclusions......Page 583 Bibliography......Page 585 16.1 Introduction: background to the WTO decision......Page 586 16.2 The European market for tuna......Page 590 16.3.1 Development of the sector......Page 594 16.3.2 Key features of the canning industry......Page 595 16.3.4 Key constraints facing the industry......Page 598 16.4.1 Development of the sector......Page 600 16.4.2 Key features of the canning industry......Page 601 16.4.3 Role of tuna in the export sector......Page 603 16.4.4 Key constraints facing the industry......Page 604 16.5 Case study 3:Mauritius......Page 605 16.5.1 Development of the sector......Page 606 16.5.2 Structure of the canning sector......Page 607 16.5.3 Role of tuna in the export sector......Page 608 16.5.4 Key constraints facing the industry......Page 609 16.6.2 Structure of the canning sector......Page 610 16.6.3 Role of tuna in export sector......Page 612 16.6.4 Key constraints facing the industry......Page 613 16.8 Potential and actual impacts of opening the European market to Asian canned tuna......Page 614 16.8.1 Senegal......Page 616 16.8.2 Ghana......Page 618 16.8.3 Mauritius......Page 620 16.8.5 Europe......Page 621 16.9 Next steps......Page 624 16.10 Conclusions......Page 625 References......Page 628 PART IV Negotiating issues and institutional arrangements......Page 629 17.1 Introduction......Page 631 17.2 Existing economic theory and empirical evidence on subsidies......Page 632 17.3 Existing WTO rules on subsidies......Page 634 17.4.1 The negotiations......Page 637 17.4.2 The concerns of small vulnerable coastal states......Page 641 17.4.2.1 Revenue generation from access fees......Page 642 17.4.2.2 Domestic and foreign fishers operating for export in the EEZ and territorial sea to supply canneries, loining facilities and domestic processing facilities......Page 643 17.4.2.3 Artisanal fisheries for export and domestic markets......Page 644 17.5.1 Fisheries access arrangements with the USA......Page 645 17.5.2 EU fisheries partnership agreements......Page 647 17.5.3 Japan, Korea and Taiwan......Page 648 17.5.4 Revenue estimates from Pacific ACP access arrangements......Page 650 17.6 Implications of WTO disciplines on fisheries subsidies......Page 654 18.1 Introduction......Page 657 Part I 18.2 Overview of characteristics of the standard-setting bodies......Page 659 18.3.1.1 The OECD......Page 663 18.3.1.2 FATF......Page 664 18.3.1.3 The Basel Committee......Page 666 18.4 Effective implementation: obstacles and impacts......Page 668 18.4.1 The OECD......Page 670 18.4.2 FATF......Page 671 18.4.3 The Basel Committee......Page 673 18.5 Assessment, compliance and small developing states......Page 679 18.5.1 The OECD......Page 681 18.5.2 FATF......Page 685 18.5.3 The Basel Committee......Page 689 Part II 18.6 Financial services in the WTO......Page 691 18.6.1 Background to domestic regulation at the WTO......Page 694 18.6.2 Domestic regulation: GATS Article VI(4) and (5) and Article (2)(a) of the FSA......Page 695 18.6.3 International standardisation and harmonisation......Page 699 18.7 Conclusion......Page 701 Bibliography......Page 704 19.2 Agreement on Subsidies and Countervailing Measures......Page 708 19.2.2 Prohibited export subsidies......Page 709 19.2.4 Actionable subsidies......Page 711 19.2.6 Non-actionable subsidies......Page 712 19.2.8 Remedies......Page 713 19.2.9.1 Illegal prohibited export subsidies......Page 714 19.2.9.3 Introduced prohibited export subsidies......Page 715 19.2.9.7 New round of negotiations......Page 716 20.1 Introduction......Page 717 20.2 The Vanuatu economy......Page 718 20.3.1 Systemic and protocol issues: from WTO to ‘WTO plus’......Page 721 20.3.1.1 The trade regime......Page 722 20.3.1.2 The investment regime......Page 725 20.3.1.3 Other protocol issues......Page 727 20.3.2.1 The goods offer......Page 729 20.3.2.3 Bilateral negotiations......Page 733 20.4 Conclusion......Page 735 20.5 Epilogue......Page 737 INDEX......Page 739