S. BROCK BLOMBERG, Claremont McKenna College - Department of Economics
Email: bblomberg@mckenna.edu
ROZLYN C. ENGEL, United States Military Academy
Email: Rozlyn.Engel@usma.edu

Recent reports from Iraq paint a mixed picture of a country taking steps toward selfgovernance and economic recovery as well as one experiencing waves of violent internecine conflict. In this paper, we analyze weekly price data for 255 goods from the eighteen Iraqi governorates over the years 2005-2008 to assess the extent that markets are developing. The law of price one suggests that, after controlling for distance between major cities, prices should converge in the presence of relatively free trade among the governorates. Our model explores whether prices have converged across regions, over time and what might explain those dynamics. Our paper suggests four empirical regularities associated with market development in Post-War Iraq. First, the degree of price distortion (i.e. price dispersion) has been approximately two times higher than those reported using similar techniques and data in the United States and Japan. Second, the degree of price distortion drops significantly during the period commonly referred to as "the surge" and rises afterward, though at a more modest pace. Third, the degree of price distortion is significantly smaller in areas in which the United States military presence was greatest, i.e. Sunni and Kurdish regions as opposed to Shia regions. Finally, there is limited evidence to suggest that the sub-national economies (Kurdish, Shia, and Sunni) and not completely economically integrated, though the "border effects" are smaller than those reported across countries in the trade literature. Hence, we conclude there are "lines in the sand" rather than significant border impediments to trade. Taken together, these results suggest a significant role for violence and security in explaining market distortions and market integration and disintegration.

NIKOLAUS WOLF, London School of Economics - Centre for Economic Performance (CEP), The University of Warwick, Dept. of Economics and CSGR, Centre for Economic Policy Research (CEPR), CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Email: nikolaus.wolf@warwick.ac.uk

When did Germany become economically integrated? Within the framework of a gravity model, based on a new data set of about 40,000 observations on trade flows within and across the borders of Germany over the period 1885 - 1933, I explore the geography of trade costs across Central Europe. There are three key results. First, the German Empire before 1914 was a poorly integrated economy, both relative to integration across the borders of the German state and in absolute terms. Second, this internal fragmentation resulted from cultural heterogeneity, from administrative borders within Germany, and from geographical barriers that divided Germany along natural trade routes into eastern and western parts. Third, internal integration improved, while external integration worsened after World War I and again with the Great Depression, in part because of border changes along the lines of ethno-linguistic heterogeneity. By the end of the Weimar Republic in 1933, Germany was reasonably well integrated.

INGO BORCHERT, University of St. Gallen - Department of Economics
Email: IBorchert@worldbank.org

Through its diverse trade preference schemes, the European Union provides different groups of developing countries with different degrees of market access. This paper is the first to demonstrate empirically that such staggered market access induces sizable trade diversion to the detriment of relatively less preferred beneficiary countries. In particular, preferences granted to African, Caribbean and Pacific economies are shown to impair the export performance of seven developing countries whose products only qualify for basic preferences under the Generalized System of Preferences. Exports to the European Union decline by about 30 percent if the African, Caribbean and Pacific tariff fallsby 10 percentage points. In terms of forgone trade volume, losses for these relatively disadvantaged countries amount on average to 9 percent of their total trade with the European Union, depending on the country and its main exports. These intra-developing country distortions are driven by highly substitutable, often labor-intensive commodities.

LUIS ABUGATTAS, affiliation not provided to SSRN
Email: luis.abugattas@undp.org
SIMONETTA ZARRILLI, United Nations - Conference on Trade and Development (UNCTAD)
Email: simonetta.zarrilli@unctad.org

The implications of trade in services liberalization on poverty alleviation, on welfare and on the overall development prospects of developing countries remain at the hearth of the debate on the interlinkages between trade and development.

Assessing the actual and potential implications of services liberalization in developing countries is a complex exercise. Empirical studies remain anecdotic, with examples concerning a rather limited number of countries and services sectors. Quantitative assessment has produced inconclusive results. Moreover, a number of theoretical and methodological issues need to be addressed. Among those, there is the fundamental issue of whether the theoretical assumptions for justifying reform in the goods sector can be directly and fully transferred to the services sector and what could be the possible implications of such a transfer for welfare, equitable public policies and democratic sustainability. Answering this question is a precondition for formulating policy recommendations to developing countries, and for these countries to put in place sound domestic policies and accept international obligations that bind certain policy options. This paper holds the view that trade in services has some specificities, above all the movement of factors of production - that makes it rather different from trade in goods.

This paper reaches the overall conclusion that liberalizing trade in services, under appropriate regulatory and policy frameworks, may contribute to enhancing global welfare through increased efficiency, lower prices and greater choice of services, as well as increased competition at a country level. Liberalization is expected to be instrumental to expand access to basic services and contribute, therefore, to reducing poverty and achieving the MDGs. Developing countries, however, face a number of structural weaknesses that jeopardy the achievement of the above-mentioned results, namely poor or inexistent regulatory frameworks, difficulty in putting in place the right sequencing of policy reforms and liberalization initiatives, inability to compete with TNCs, numerous and fragile SMEs, poor access to capital and technology, pressure from investors and trade partners, huge fiscal deficits. Moreover, the ever-changing nature of markets and technologies, which is a key feature of several services sectors, can easily render the regulatory regime outdated, this characteristic demanding continuous and systematic fine-tuning of the regulatory and deregulatory framework.

Evidence shows that market liberalization may bring about different results, according to the specific services sector and the specific country/region at stake. In some cases evidence also demonstrates that the results are more the consequence of flanking domestic policies than of services liberalization. Given the increasing concentration of many services industries worldwide, there is a risk that the liberalization of services sectors in developing countries can fall short of producing the expected beneficial outcomes, due to industries structures and behaviors. Because of the technological changes, some services sectors are becoming increasingly difficult to define - as it is the case for audiovisual and telecom services - with the related complexity of establishing appropriate policies.

Lacking a coherent and broad picture of the overall impact of services liberalization on the sustainable development prospects of developing countries, a cautious approach to liberalization seems in order, keeping in mind that the final goal of the GATS is not the expansion of international trade in services per se, but rather the economic growth of all trading partners and the development of developing countries.

The "knowledge gap" regarding the effects of liberalizing trade in services on developing countries was among the factors that hampered progress in the negotiations on services carried out in the framework of the Doha Work Programme. Lacking such a crucial element, developing countries felt reluctant to embark in broad liberalization commitments. The overall negotiations were suspended on 24 July 2006 because of the difficulties in building consensus among major trade partners on the core issues of the Work Programme. Diplomatic efforts are, however, ongoing to try to revive the negotiations.

Work in the area of assessment of services liberalization in developing countries must continue, including in UNCTAD, with increasing emphasis on the possible policy options available to developing countries to strengthen their domestic services sector, their export capacity and to link the liberalization of trade in services with sustainable development and poverty alleviation goals, including the achievement of the MDGs. Hopefully, such a work will contribute to move the analysis from an anecdotic picture to a full-fletched picture.

GBADEBO O. ODULARU, Department of Economics and Development Studies, CBS, Covenant University
Email: gbcovenant@yahoo.com

In as much as trade fosters economic development, it also exacerbates poverty, especially in the sub Saharan African (SSA) countries. Against this backdrop, this study will increase our understanding of the estimation of non-oil commodity trade flows between Nigeria and the U.S. More specifically, the study aims to analysing the impact of African Growth Opportunity Act (AGOA) on the U.S. imports of non-oil products from Nigeria. The research objectives are woven around the following questions:

- What is the nature of Nigeria's and U.S.'s foreign trade policies with particular reference to non-oil trade?
- What are the patterns, magnitude, composition and trends in Nigeria-US non-oil trade?
- Which economic sectors possess greatest potential for fostering trade in the non-oil sector between Nigeria and the U.S.?
- What is the impact of AGOA on the diversification and growth of non-oil exports in Nigeria?

This study adopts the difference-in-differences (DiD) as the research methodology. Within the Nigerian context, DiD intuitively compares the trends in imports of AGOA non-oil products before and after AGOA with the pattern of imports of non-AGOA non-oil products before and after AGOA, controlling for the timing of AGOA, import capacity and economic performance of both U.S. and Nigeria.

Using the World Trade Organisation (WTO) Integrated Data Base (IDB), the empirical analysis reveals that AGOA non-oil products increased by as much as 182 per cent with the implementation of AGOA, while the non-AGOA non-oil products fell by 76 per cent. Conclusively, AGOA has had a considerably positive impact on the Nigerian non-oil sector at the general level.

The policy implication of the empirical analysis is the need for the U.S. to expand the product coverage and opportunities of AGOA non-oil products in order for AGOA to achieve its objectives of using trade as a potent tool for promoting economic growth in SSA.

CHAO ZHOU, affiliation not provided to SSRN
Email: katezc@gmail.com

On 10 April, 2007, the United States requested consultations with China through DSB of WTO concerning certain measures pertaining to the protection and enforcement of intellectual property rights in China. The focus of this thesis is on the first argument of USTR about the thresholds for Criminal procedures and penalties. USTR argues that China lacks effective criminal deterrence and certain provisions of Chinese law allegedly create a "safe harbor" for wholesalers and retailers to avoid criminal liability. This paper tries to make an interpretation of certain TRIPS Agreement provisions' terms from law and economic perspectives, discuss whether IP enforcement needs criminal law, whether threshold is needed and what the optimal IP enforcement is.

TIMOTHY J. KEHOE, University of Minnesota - Twin Cities - Department of Economics, National Bureau of Economic Research (NBER)
Email: TKEHOE@ATLAS.SOCSCI.UMN.EDU
KIM RUHL, University of Minnesota - Twin Cities - Department of Economics
Email: ruhl@econ.umn.edu

A sudden stop of capital flows into a developing country tends to be followed by a rapid switch from trade deficits to surpluses, a depreciation of the real exchange rate, and decreases in output and total factor productivity. Substantial reallocation takes place from the nontraded sector to the traded sector. We construct a multisector growth model, calibrate it to the Mexican economy, and use it to analyze Mexico's 1994-95 crisis. When subjected to a sudden stop, the model accounts for the trade balance reversal and the real exchange rate depreciation, but it cannot account for the decreases in GDP and TFP. Extending the model to include labor frictions and variable capital utilization, we still find that it cannot quantitatively account for the dynamics of output and productivity without losing the ability to account for the movements of other variables.

JOSHUA AIZENMAN, University of California, Santa Cruz - Department of Economics, National Bureau of Economic Research (NBER)
Email: jaizen@ucsc.edu

This paper studies the links between current accounts and relative price levels, finding that current account changes are associated with sizable future relative price level effects. This is done in panel regressions of the Penn effect, adding a lagged current account/GDP and other explanatory variables. A higher GDP/capita and greater export share of manufacturing tend to mitigate the real exchange rate impact of lagged current accounts. Active management of current accounts may provide a powerful adjustment channel, mitigating the real exchange rate effects of volatile terms of trade, and may explain the growing proliferation of Sovereign Wealth Funds.

PIERANGELO DE PACE, Johns Hopkins University - Department of Economics
Email: pierangelo.depace@jhu.edu

Since the 1970s the characteristics of international business cycles have changed and deeper economic integration has modified the features of cross-country comovement. We formally test for correlation shifts in measures of real economic activity and economic/financial integration. Especially for some specific subgroups of countries, we find evidence of higher correlations in Europe following the creation of the EMU in 1999. We detect more pronounced correlations at least between Mexico and the US in North America after the enforcement of the NAFTA in 1994. We We do not, however, find rising synchronization between Hong Kong and the US pursuant to the introduction of a linked exchange rate system - still in effect today - at the end of 1983. Results are derived from an econometric framework based on nonparametric iterated stationary bootstrap methods, whose statistical reliability and performance we carefully assess.

JOËLLE DE SÉPIBUS, University of Fribourg
Email: joelle.desepibus@unifr.ch

The so-called 'Linking'-Directive adopted in 2004 does not impose any limit on the import of JI and CDM credits under the European Union Emissions Trading Scheme (EU ETS), but requires from the Member States to set, in accordance with their 'supplementarity' obligations under the Marrakesh Accords, the maximal amount of Kyoto 'units' each covered installation is entitled to use for compliance under the scheme. Fearing a second price collapse of the European Union Allowance, the Commission decided, however, in 2006 to impose strict limits on the use of JI and CDM credits during the second trading period. This paper examines the legal basis of the Commission's decision and explores further the international and European legal framework within which the current debate on the use of JI and CDM credits and post-2012 international offsets takes place. It analyses in particular the recent proposal of the Commission on the third trading period of the EU ETS and the related report of rapporteur Doyle of the European Parliament and discusses the necessity to introduce quantitative and qualitative restrictions on the use of international offsets within the EU ETS against the backdrop of the international negotiations on a new global deal on climate change.

CHIARA FRANCO, University of Bologna
Email: chiara.franco2@unibo.it
FRANCESCO RENTOCCHINI, University of Trento - Department of Economics
Email: francesco.rentocchini@economia.unitn.it
GIUSEPPE VITTUCCI MARZETTI, University of Trento - Department of Economics
Email: gvittucci@yahoo.it

Although FDI have been at the forefront of economic debate since a long time, economists have not yet developed a unified framework for their investigation. In this paper, we put forward the idea that an essential point to analyze FDI concerns their underpinning motives. Motives are at the core of FDI and FDI are only but one of different alternative means for firms to grasp an opportunity in a foreign country. We discuss the factors that shape the set of available alternatives and analyze those affecting the decision to engage in FDI (internalization determinants), along with those influencing their localization (localization determinants). Starting from Dunning (1993) we put forward a revised taxonomy of FDI motives consistent with this framework - resource seeking, market seeking and non-marketable asset seeking. In order to show its practical implications, we survey common empirical issues on FDI showing how our analysis can shed light on seemingly contradictory empirical results.

TRADE ANALYSIS BRANCH DITC, UNCTAD, United Nations - Conference on Trade and Development
Email: tab@unctad.org

In this Trade and Development Index (TDI), UNCTAD presents some of its research on the link between trade and development in a new, integrated fashion. The TDI is an outcome of the secretariat's analysis to identify the complex interdependence of current economic conditions in both developing and developed nations.

The index offers a comprehensive review of the global trade and development performace of different countries, and idenfities the strengths and weaknesses of their institutional and policy environment. It showcases not only the tremendous progress that many developing countries have achived in recent years, but also raises several pertinent issues which will require further attention in formulating trade and development policies.

The TDI also aims to provide policymakers and researchers with a new tool for policy analysis and formulation, by presenting an analytical framework to understand how to enhance the enabling environment for trade and development . We believe that this framework will contribute to understanding why certain countries have made progress towards achieving the United Nations Millennium Development Goals (MDGs), while others have not. The analytical framework will also allow the UNCTAD Secretariat to enhance the overall coherence of its work, ranging from technical assistance to promoting Aid for Trade.