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Abstract:
This survey of the recent literature asks: how important is trade policy for poverty reduction? We consider the effects of openness on poverty in two components: the effect of openness on average income growth, and the effect on distribution for a given growth rate. Evidence from a variety of sources (cross-country and panel growth regressions, industry and firm-level research, and case studies) supports the view that trade openness contributes greatly to growth. Moreover, trade openness does not have systematic effects on the poor beyond its effect on overall growth. Trade policy is only one of many determinants of growth and poverty reduction. Trade openness has important positive spillovers on other aspects of reform, however, so that the correlation of trade with other pro-reform policies speaks to the advantages of making openness a primary part of the reform package.

Trade, growth, poverty, income distribution, trade protection, openness

Abstract:
Aggregate and more micro data on trade between the U.S., Canada, and Mexico are used to attempt to assess the early effects of Mexican entry into NAFTA. Although the fraction of Mexican trade with the U.S. and Canada has risen sharply, a number of factors have contributed to this result. Mexican reduction of tariffs and quantitative restrictions and the Mexican alteration of exchange rate policy at the end of l994 were both important. Based on early returns, the impact of NAFTA over its first three years does not appear to have been large relative to the effects of these other events.

Abstract:
Broad-based liberalization is in the interests of developing countries.
Developing countries became full-fledged participants in multilateral trade negotiations only with the Uruguay Round, during which they succeeded in bringing agriculture into the GATT/WTO, reaching agreement on phasing out the Multi-Fibre Arrangement within 10 years, and beginning work on services, among other things.

Their overriding interest in the new round is still to ensure the healthy expansion of an open multilateral trading system.

Developing countries should seek across-the-board liberalization rather than zero-for-zero reductions, which tend to favor the interests of industrial countries (which focus on sectors in which they have comparative advantage) and diminish the support for further cuts.

Liberalization of agricultural trade provides important opportunities. Developing countries have a considerable stake in reducing agricultural protection and subsidies and prohibiting agricultural taxes and export quotas.

Of particular interest are agreements covering services-including, for example, agreements on ways to permit the temporary immigration of construction workers. It is important that labor standards not be used to stifle competition from labor-abundant developing countries-that any agreement about labor standards not raise the costs of unskilled labor in countries whose comparative advantage lies in exported products that use unskilled labor extensively-and that excessively high product standards not be imposed.

Developing countries can increase their leverage substantially by forming coalitions based on common interests in a wide range of areas (as the Cairns group did in the Uruguay Round).

This paper - a product of Trade, Development Research Group - is part of a larger effort in the group to identify opportunities for developing countries in the WTO 2000 negotiations. The author may be contacted at akrueger@leland.stanford.edu.

Abstract:
Until NAFTA, analyses of preferential trading arrangements began by assuming a customs union with a common external tariff, and the differences between customs unions and free trade agreements (FTAs) have been little analyzed. This paper points to some of the differences between FTAs and customs unions, and shows that on welfare grounds a customs union is always Pareto-superior to an FTA. Moreover, the political economy of FTAs will lead to more opposition to further multilateral trade liberalization than will customs unions.

Abstract:
In this paper we analyze the evolution of the Mexican economy between 1995 and 1998. The remarkable quick recovery seen in aggregate activity has not been uniform across the economy. The tradable sector has grown strongly, while the non-tradable sector has recuperated only sluggishly. This asymmetric response is intimately linked with the severe credit crunch that Mexico has experienced since 1995. Although fresh domestic bank lending dried up, tradable firms obtained financing in the international capital market. This was not the case in the non-tradable sector. A phenomenon that has gone hand in hand with the credit crunch is the steady increase in the share of non-performing loans. We analyze the reasons for this increase, the rationale for the partial bailout policy adopted in 1995, and we investigate why this policy stance did not solve the banking problem. An important lesson is that non-performing loans are unlikely to disappear on their own, even under a high GDP growth scenario. Furthermore, the existence of non-performing loans presents an obstacle for the banking system to adequately perform its functions. This raises the question of whether an alternative strategy under which all non-performing loans were recognized at once and the fiscal costs were all paid up-front would have been preferable.

Abstract:
Ideas with regard to trade policy and economic development have changed radically since the 1950s. Then and now, it was recognized that trade policy was central to the overall design of policies for economic development. But in the early days, there was a broad consensus that trade policy for development should be based on 'import-substitution.' By this was meant that domestic production of import-competing goods should be started and increased to satisfy the domestic market under incentives provided through whatever level of protection against imports, or even import prohibitions, was necessary to achieve it. It was thought that import substitution in manufactures would be synonymous with industrialization, which in turn was seen as the key to development. The contrast with views today is striking. It is now widely accepted that growth prospects for developing countries are greatly enhanced through an outer-oriented trade regime and fairly uniform incentives (primarily through the exchange rate) for production across exporting and import competing goods. This paper addresses the changes in thought and policy. What was the contribution of economic research to the sea change in thinking, policy prescriptions, and politicians' acceptance of the need for reform? What sorts of economic research best informed the policy process? In a nutshell, how did we learn? In this paper, I first sketch the initial approach to trade policy in early development research and thought. Next, consideration is given to the evolu- tion of thought, research, and experience with respect to trade and development over the next several decades, and to the 'conventional wisdom' of the 1990s. Finally, the role of research and the sorts of research that proved most fruitful in guiding policy and changing the consensus is considered.

Abstract:
On their fiftieth anniversary, the International Monetary Fund and the World Bank were" extensively reviewed, both to mark the occasion and to consider, often critically roles and performance. This paper reviews the functions of the two institutions in light of their" evolution over the past fifty years and of changes in the international economic system. It then" evaluates and assesses some of the criticisms and proposals for reform of the two institutions."

Abstract:
This paper outlines the salient characteristics of competing models of economic regulation and controls. It then examines the evolution of the American sugar program from 1934 to 1987 in the light of these models. While lobbying and other features of traditional models were clearly important, other elements also played a key role. In particular, a technocracy developed, and complexity of regulation served as an important factor perpetuating the sugar program. Similarly, lobbying and the role of vested interests was clearly important in the evolution of the program once it began but there was an element of ?accident? in the programs initiation. Once it existed, it became an instrument to be captured and used by politicians, technocrats, and economic interests alike.

Abstract:
This paper focuses on the effects of rules of origin in Free Trade Areas. We first point out that even rules of origin which are not restrictive, namely those which do not raise costs of production, have very pronounced effects on trade and investment flows. We then look at some different ways of specifying rules of origin (ROOs) under perfect competition. We compare price and cost based ROOs and show that even if they are equivalent in the 'long run', they are not equivalent in the short run where capacity constraints can exist. We also show that some kinds of ROOs can be ranked in terms of their implications for producer profits. We also show that welfare is likely to be non monotonic in the restrictiveness of the ROO, so that making a ROO more stringent could raise welfare. Finally, we show that in the presence of imperfect competition, ROOs may raise output and reduce prices as they become more stringent.

Abstract:
In the mid-1950's, Turkey was a much richer country than Korea. With about the same population, Turkish GNP was about three times that of Korea, Turkish exports were fifteen times those of Korea, and the Turkish savings rate was much higher than Korean.

By 1980, the situation was dramatically reversed, as Turkish income was 40 percent below Korea's, Turkish exports were less than one-fourth those of Korea and the Turkish savings rate was about two-thirds of Korea's.

This paper examines the variables that affected economic growth and shows the critical importance of the different policy choices in the two countries.

Abstract:
My topic is the question: what difference does the set of commercial policies chosen by a developing country make to its rate of economic growth? Three points are salient. First, in its present state, trade theory provides little guidance as to the role of trade policy and trade strategy in promoting growth. Second, the empirical evidence overwhelmingly indicates that there are important links between them. Third, a number of hypotheses as to the reasons for these links have been put forward, but there is not as yet sufficient evidence to enable us to estimate their relative importance.

Abstract:
Christopher Gilbert and David Vines (eds.), The World Bank: Structure and Policies

Martin Shubik, The Theory of Money and Financial Institutions, Vol. I

Ben Fine, Social Capital Theory versus Social Theory: Political Economy and Social Science at the Turn of the Millennium

Heinz D. Kurz, Critical Essays on Piero Sraffa¿s Legacy in Economics

Samanathan F. Ravich, Marketization and Democracy: East Asian Experiences

Subal C. Kumbhakar and C. A. Knox Lovell, Stochastic Frontier Analysis

Douglas Gale, Strategic Foundations of General Equilibrium: Dynamic Matching and Bargaining Games

Abstract:
Economic reform, on an ongoing basis, is vital if economies are to achieve, and maintain, rapid and sustained economic growth. Yet governments face challenges when introducing economic reforms. Policymakers must judge what reforms are needed; when to introduce them; and how rapidly to pursue their reform programme. Failed reforms can discredit the reform process as a whole, and so make it more difficult, and more costly, to retry in the future. The reform process in emerging market economies provides many lessons that are widely applicable. Perseverance is critical: reforms must be followed through if they are to be successful. Reforms also need to be wide-ranging, encompassing not just monetary, fiscal and trade policy but reform of the financial sector and of public institutions. Reforms in many countries need to include the protection of property and individual rights; improved tax administration and greater efficiency of public spending; and commercial codes. Reforms can be most easily implemented at times of global expansion. Fiscal consolidation, for example, is more easily accomplished in a more favourable environment partly because it helps deliver future growth and partly because it gives governments scope for counter-cyclical policy during future downturns.

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Abstract:
This paper was originally prepared as part of the first stage of the research project, Alternative Trade Strategies and Employment. The project as a whole is focused upon identifying the relationships between alternative trade strategies -- export promotion and import substitution -- and growth in the demand for labor. The project has altogether three stages: (1) the preparatory stage, in which the theory underlying the relationship between trade strategy and employment was developed and a methodology for undertaking empirical research was formulated; (2) the second stage, in which project participants undertook the empirical research for individual countries and also for particular topics of special interest for the project as a whole, based upon the papers prepared in the first stage; and (3) a summing up, in which the results of the individual studies are analyzed in order to ascertain what insights into the trade-employment relation seem generally applicable. At the present time, the second stage of the project is nearing completion. This paper constituted one part of the first stage of the project: it spells out much of the basic methodology that underlies the individual country studies.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

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No abstract is available for this paper.

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No abstract available.

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This paper analyzes a nominal anchor exchange rate policy as a domestic distortion, in the tradition of international trade theory. It is shown that, in addition to the problems of sustainability and exit pinpointed in the exchange rate literature, a nominal anchor exchange rate policy, while in force, drives a wedge between the domestic and the international intertemporal marginal rates of substitution. The welfare cost of the Mexican use of the nominal anchor exchange rate policy prior to December 1994 is then estimated.

Abstract:
This paper assesses the theoretical and empirical basis for American labor union leaders' contention that imports have been a big source of job loss in the United States. It is shown, first, that identification of job losses "due to imports" is exceptionally difficult because economic growth affects adversely the industries believed affected by imports. Then, an accounting framework is employed to assess possible empirical orders of magnitude. The results are fairly conclusive in indicating that factors other than import competition have been primary in leading to structural shifts in employment.

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No abstract is available for this paper.

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This paper analyzes the equilibrium degree of protection as the outcome of the interaction of demands for protection and the demand for a liberal international trading order. It then assesses the current balance. On one hand, the nature of technical progress, the institution of the Uruguay Round, the mounting costs of agricultural protections and the increasingly high costs of protection as the world economy integrates all conduce toward a more liberal trading order. Demands for protection will intensify to the extent that growth decelerates, that trade negotiators fail to find mechanism to deal with nontariff barriers and that the United States fails to assume this leadership role that was earlier taken.

Abstract:
This paper assesses the empirical relevance of "dynamic" factors in industrialization in developing countries. Using data from a sample of 91 firms, rates of growth of output per unit of input are calculated. It is shown that there is little basis, at least with regard to Turkish experience, to the notion that non-traditional industries are in some sense more "dynamic" than traditional industries.

Abstract:
India's economic policies have undergone major reforms since the early 1990s. Before that, government regulation and control of economic activity was pervasive, and the trade sector did very poorly. One consequence was that imports were highly restricted and their scarcity was itself a major constraint on growth. After the crisis of the early 1990s, trade policy was substantially liberalized. In this paper, the pre-1990s regime is first briefly described. Thereafter, the economic policy reforms that impinged most directly on the trade sector are set forth, and the response of exports and imports to those changes is outlined. Exports have grown rapidly, from about 5% of the gross domestic product to around 15%, and they continue to grow at an average annual rate of 20%. Improved performance of the trade sector has been a major contributing factor to India's dramatically accelerated growth performance. A final section of this paper assesses the current situation, and sets forth the major policy challenges that will need to be met if that performance is to be sustained, if not improved upon.

economic policy reform, Indian economic policy, Indian exports and imports, India's trade, trade liberalization

Abstract:
That the global economy has been hugely successful over the past 50 years is unquestionable. A major underpinning of that success has been the open multilateral system, which has enabled the emergence of a truly international financial system, reciprocal reduction of trade barriers, and the emergence of many previously poor countries into the status of emerging markets or even developed . The open multilateral system, however, is increasingly under-appreciated and taken for granted. Preferential trading arrangements have proliferated, and with them the possibility of discriminatory arrangements for capital flows. The absence of an international regime for capital flows permits this development and poses a threat to the system, as do all of the issues on which countries' governments assert their interests, and ignore their interests in the overall health of the system. It is to be hoped that the benefits of multilateralism are more greatly appreciated, and that the current trend toward increasing regionalism and departures from the post-war system is reversed.

multilateralism, global economy, trade liberalization, global financial stability, F02, F33