economic implications of wto negotiations on non agricultural market access the economic implications of current wto negotiations are likely to be far reaching the world bank and unctad estimate annual global gains in agriculture and non agricultural products including fish of about 70 150 billion each under various scenarios and technical assumptions liberalising trade in services could be even more important especially if agreement were reached to facilitate the temporary movement of labour mode 4 under the general agreement on trade in services gats some qualifications however are in order first gains are likely to be spread unevenly across countries and across sectors and second short term adjustment costs might precede long term gains much depends on how ambitious liberalisation is and on policies to facilitate adjustment this paper examines the doha mandate in non agricultural market access nama and the current state of the wto negotiations in particular some key proposals being considered at the december 2005 ministerial meeting in hong kong we analyse various scenarios and their implications for trade welfare output employment revenues and preferences as well as the distributional effects across countries and sectors we note possible adjustment problems related to balance of payments and structural adjustment as well as revenue and preference losses these suggest the need for aid for trade to help developing countries realise gains possible from wto negotiations

market access liberalisation in the doha round scenarios and assessment the modalities of negotiation on market access for agricultural and non agricultural products are an important item of the doha development agenda the dispersion of tariffs remains very large translating into sizeable economic distortions in particular tariff peaks are numerous and highly protective this is why the choice of a formula of reduction in tariffs is a sensitive issue using the macmaps database we apply various formulas excluding or including peaks at the most detailed level of information on tariffs considering preferential schemes conceded so far the resulting changes in tariffs are introduced in a cge exercise using mirage we find that trade and welfare gains are halved when excluding peaks from the negotiations

lowest unique bid auctions with population uncertainty abstract we characterize the unique poisson nash equilibrium of the l owest u nique b id a uction luba when the number of bidders is uncertain and follows a poisson distribution

agricultural tariffs or subsidies which are more important for developing economies this article assesses the impact of the world price depressing effect of agricultural subsidies and border protection in organization for economic co operation and development oecd countries on developing economies exports imports and welfare developing economy exporters are likely to benefit from reductions in such subsidies and trade barriers whereas net importers may lose as world prices rise a simple partial equilibrium model of global trade in commodities that benefit from domestic support or export subsidies is developed to estimate the relevant elasticities simulation results suggest that a 50 percent reduction in border protection will have a much larger positive impact on developing economies exports and welfare than a 50 percent reduction in agricultural subsidies although there is significant heterogeneity across developing economies the results suggest that efforts in the doha round of world trade organization wto negotiations should be directed at substantially reducing border protection

commodity trade and international risk sharing how much do financial markets matter abstract this paper evaluates the social gains from international risk sharing in some simple general equilibrium models with output uncertainty a simulation model calibrated to selected moments of u s and japanese data estimates the incremental loss from a ban on international portfolio diversification to be on the order of 0 20 percent of output per year even the theoretical gains from asset trade may disappear under alternative sets of assumptions on preferences and technology the paper argues that the small magnitude of potential trade gains may help explain the apparently inconsistent findings of empirical studies on the degree of international capital mobility

free entry and efficient rent seeking this paper concerns rent seeking and the extent to which rents are dissipated under various circumstances gordon tullock s 1967 insight that expenditures made to capture an artificially created transfer represent a social waste suggested that the cost to the economy of monopoly and regulation is greater than the simple harberger 1954 deadweight loss indeed under tullock s original formulation and in the extensions of his work by krueger 1974 and posner 1975 rents are exactly dissipated at the social level 1 is spent to capture 1 so that the total welfare loss from such activities is equal to the harberger triangle plus the rectangle of monopoly profits

does antidumping use contribute to trade liberalization in developing countries some supporters of antidumping have argued that this procedure serves as a kind of safety valve for protectionist pressure in this paper we investigate whether there is empirical evidence that the use of antidumping actions has contributed to ongoing tariff reductions over the period 1988 to 2004 in a sample of 23 developing countries some of which have become aggressive users of antidumping in recent years the evidence is not supportive of the safety valve argument for these countries instead evidence suggests that past use of antidumping may have led to less rather than more trade liberalization

a note on poisson contests we apply the environmental equivalence property of poisson games myerson in int j game theory 27 375 392 1998b to show that in contests in which the number of contestants is a poisson random variable with at least two expected contestants and a non increasing return to effort ex ante aggregate effort is less than in a corresponding contest wherein the number of participants is equal to the expected number of contestants under uncertainty uncertainty about the number of participants in a rent seeking contest seems natural with rent seeking contests attracting socially wasteful investments of effort or scarce resources uncertainty generates a social benefit

reciprocal tariff reductions under asymmetric bargaining power increasing heterogeneity of participants that form the basis of wto trade negotiations has raised concerns about unfair treatment of weak countries due to their lack of bargaining power the wto responds to these concerns by arguing that the institutional design with its specific rules such as the principle of reciprocity serves to reduce inequalities in bargaining power by giving smaller weaker countries more voice a recent study has challenged this result for a particular type of reciprocity namely the volume approach given the wide discretion of how reciprocal concessions are conducted i give a more complete picture of how different kinds of reciprocity affect the bargaining outcome of asymmetric countries it turns out that while the volume approach amplifies the negative effects of power asymmetries a tariff formula approach has the ability to reverse this effect for low symmetries the swiss formula does the best job whereas for larger power differences a linear formula is best suited to reduce the impact of power asymmetries

on the theory of piecemeal tariff reform the case of pure imported intermediate inputs what is the effect of a tariff reduction that applies only to a subset of commodities subject to tariffs this important question was addressed systematically for the first time by james meade 1955 ch 13 in his classic work trade and welfare after a careful analysis meade concluded t here is more likely to be a gain in economic welfare if the rate of duty is high on the primary imports which will come in in increased volume and is low on the secondary imports which will come in in reduced volume p 208 this result was proved formally by trent j bertrand and jaroslav vanek 1971 who demonstrated that in a small open economy if the highest tariff rate is reduced to the next highest one welfare will rise provided the import demand for the good with the highest tariff exhibits gross substitutability with respect to all other goods 2 subsequently following a different strand of the literature as exemplified in john green 1961 tatsuo hatta 1973 1977 and peter lloyd 1974 independently proved similar results in terms of hicksian substitutability 3 in deriving their results bertrand and vanek allowed for the use of final goods as intermediate inputs i e interindustry flows 4 however neither they nor the subsequent writers including hatta and lloyd allowed for the existence of pure imported intermediate inputs that are not produced domestically therefore a natural question is whether the piecemeal policy prescription derived by them remains valid in the presence of pure imported intermediates this question is particularly important for developing countries for two reasons first by far the bulk of the imports of developing countries are intermediate and capital goods according to the world bank during the period 1975 1985 50 percent of developing countries imports were accounted for by intermediate inputs and an additional 30 percent were capital goods a sizable proportion of both capital and intermediate goods are neither produced nor directly consumed in these countries second the meade bertrand vanekhatta lloyd result has been the cornerstone of trade policy reform in many developing countries especially during the last decade in most countries trade reform has been based on the so called concertina approach under which the highest tariffs are reduced to the next highest ones and then to the next highest ones and so on thus lopez professor department of agricultural and resource economics university of maryland college park md 20742 and consultant trade policy division world bank 1818 h street n w washington dc 20433 panagariya senior economist trade policy division world bank 1818 h street n w washington dc 20433 and professor department of economics university of maryland college park md 20742 the findings interpretations and conclusions in this paper are entirely those of the authors they do not necessarily represent the views of the world bank its executive directors or the countries they represent the authors are indebted to two referees and tatsuo hatta for valuable comments on an earlier draft iin this quotation primary imports refers to the goods on which tariffs are reduced while secondary imports refers to other importables subject to tariffs 2robert lipsey and kelvin lancaster 1956 had proved the basic result of bertrand and vanek in a one factor three good model with a cobb douglas utility function 3more recently takashi fukushima 1979 has proved the validity of the hatta lloyd result when the highest tariff is shared by several commodities while rodney falvey 1988 has done the same in the presence of quantitative restrictions on imports 4although hatta 1973 1977 did not allow explicitly for interindustry flows his results can also be shown to be valid in the presence of such flows

international risk sharing and european monetary unification abstract we explore income and consumption smoothing patterns among european community ec countries and among oecd countries during the period 1966 90 we find that for oecd as well as for ec countries about 40 percent of shocks to gdp are smoothed at the one year frequency with about half the smoothing achieved through national government budget deficits and half by corporate saving at the three year differencing frequency only 25 percent of shocks to gdp are smoothed mainly via government lending and borrowing in the absence of alternative income and consumption smoothing mechanisms the restrictions on budget deficits imposed by the maastricht treaty should be relaxed to allow governments to run large temporary deficits in response to output shocks

agricultural market access a moving target in the wto negotiations abstract this article analyzes the impact of multilateral market access liberalization of the doha round agricultural negotiations at the center are the effects of variations in the magnitudes of tariff cuts different tariff cutting formulas the tariff capping as well as different numbers and width of tariff bands the simulations are conducted with an extended version of the gtap model and the gtap database 6 0 including bound and applied rates and a module to cut tariffs at the 6 digit tariff line level the results reveal that the heights of the tariff cuts and the kind of tiered formula applied are most important for the outcome of the doha round while the width of tariff bands and the tariff capping only have a moderate influence on the countries trade pattern and welfare in contrast the number of tariff bands is not important for the results

trick or treat development opportunities and challenges in the wto negotiations on industrial tariffs negotiations on industrial tariffs in the current wto work programme have turned out to be surprisingly difficult on the one hand developing countries particularly in africa are concerned about the potential negative effect on their industrial development of developed country efforts to push them into deep cuts in applied tariffs after the disillusion of the uruguay round promises of welfare gains seem unconvincing on the other hand a number of the more complex formula proposals for tariff cutting make it difficult for participants to evaluate what they have to do compared with what they hope to receive the developing countries may achieve greater exports and welfare gains from the more ambitious proposals but computations show that these also imply greater imports lower tariff revenues some labour market adjustments and reduced output in some politically sensitive sectors some way of assisting the developing countries in coping with these adjustments is required to take advantage of the opportunities presented by the negotiations

why is it so difficult trade liberalization under the doha agenda many explanations have been offered for the current difficulties of the world trade organization wto in fact the system appears to have managed many of these challenges reasonably well including the increase in the number of members its mediaeval decision making procedures the changing geopolitical environment the rapid growth of preferential trade arrangements ptas the complexity of its agreements and concerns about erosion of unilateral preferences by contrast the near exhaustion of the traditional fuel of industrial country non agricultural tariffs the increasing importance of non trade concerns and incomplete adjustment to a new multi polar negotiating system appear to be important factors requiring further examination

asset pricing puzzles and incomplete markets the representative agent theory of asset pricing is modified to incorporate heterogeneous agents and incomplete markets the model features two types of agents who differ up to a nontradable idiosyncratic component in their endowment processes numerical solutions indicate that individuals are able to diversify a substantial portion of their idiosyncratic income risk through riskless borrowing and lending alone restrictions on the variability of intertemporal marginal rates of substitution hansen and jagannathan 1991 are used to argue that incomplete markets as modeled here cannot account for the properties of asset returns that are anomalous from the perspective of representative agent theory a large literature in financial economics has investigated the extent to which variants of the lucas 1978 general equilibrium theory of asset pricing can account for the joint behavior of aggregate u s consumption and asset returns by and large this literature has concluded that a theory based upon frictionless arrow debreu markets and or a representative agent makes strongly counterfactual predictions regarding even the simple unconditional properties of this relationship mehra and prescott 1985 for instance show that the theory drastically underpredicts the average excess rate of return on u s stocks the so called equity premium puzzle weil 1989 points out as did mehra and prescott that the magnitude of the average risk free rate is far below that predicted by the theory this has been dubbed the risk free rate puzzle numerous authors including grossman melino and shiller 1987 and backus gregory and zin 1989 show that the theory cannot account for term premia inherent in the yield curve hodrick 1987 surveys a large literature which documents the theory s shortcomings in accounting for excess expected returns in foreign exchange markets the notion that the representative agent model cannot account for excess returns across a wide array of asset markets can be made more precise by using tools developed by hansen and jagannathan 1991 and shiller 1982

the long or short of it determinants of foreign currency exposure in external balance sheets abstract a major focus of the recent literature on the determination of optimal portfolios in open economy macroeconomic models has been on the role of currency movements in determining portfolio returns that may hedge various macroeconomic shocks however there is little empirical evidence on the foreign currency exposures that are embedded in international balance sheets using a new database we provide stylized facts concerning the cross country and time series variation in aggregate foreign currency exposure and its various subcomponents in panel estimation we find that richer more open economies take longer foreign currency positions in addition we find that an increase in the propensity for a currency to depreciate during bad times is associated with a longer position in foreign currencies providing a hedge against domestic output fluctuations we view these new stylized facts as informative in their own right and also potentially useful to the burgeoning theoretical literature on the macroeconomics of international portfolios

formula approaches for market access negotiations textabstractmost of the large tariff reductions achieved in multilateral trade negotiations have involved tariff cutting formulas such as the swiss formula however wide variations in initial tariff rates between active participants call for new approaches under the doha development agenda this paper surveys a range of formula options and examines both targeted and flexible applications of the swiss formula that target tariff escalation and peaks and would allow policy makers to directly target how far they will move towards free trade while providing some flexibility for trading off reductions in peak tariffs against reductions in lower tariff sectors

nominal revaluation of cross border assets terms of trade changes international portfolio diversification and international risk sharing 1 introduction all nominal assets are subject to nominal risks the real value of nominal debt decreases under inflation in open economies nominal cross border assets are subject to nominal risks such as inflation risks and exchange rate risks that is when the price level and exchange rates fluctuate unexpectedly the real value and real interest income of nominal cross border assets change and wealth is redistributed internationally this is called the nominal revaluation of cross border assets 1 this international wealth redistribution or international wealth transfer is enormous when substantial nominal cross border assets are held in major industrial countries foreign assets and liabilities have reached their gdp levels holdings of foreign assets by the united states were 73 of its gdp and its foreign liabilities were 95 in 2000 the ratios for the united kingdom were even larger 260 and 276 respectively in 1999 2 in these circumstances substantial wealth is transferred internationally through the nominal revaluation of cross border assets in the united kingdom the annual average of this wealth redistribution was more than 5 of its annual gdp during the period 1987 2000 3 this nominal revaluation of cross border assets can work as international risk sharing under some restrictive conditions when income and the price level move inversely the real value and real return on nominal assets are proportional to income thus by cross owning or trading nominal assets internationally countries can share some country specific risks in his simple twoperiod model where the only sources of uncertainty are endowment shocks svensson 1989 showed that even a perfect pooling equilibrium can result by trading only nominally risk free bonds under a monetary policy that generates negative correlation between endowment and the price level however he did not emphasize the role of the mechanism in overall international risk sharing and possibly for this reason the result is not well known in this paper i apply the idea to the aggregate level of international risk sharing by considering all types of nominal cross border assets as opposed to limiting the study to only nominal bonds themselves the mechanism can be thought of as a nominal analogy to cole and obstfeld 1991 in cole and obstfeld s 1991 model changes in the terms of trade can automatically transfer wealth to insure country specific risks in the nominal revaluation the relative nominal price nominal exchange rate changes between countries instead of relative real price terms of trade changes make international risk sharing possible 4 cole and obstfeld 1991 further suggested that the welfare gains from international portfolio diversification may be small and the home bias in international portfolio investments may be justified since changes in the terms of trade can insure some country specific risks 5 similarly if the nominal revaluation works as international risk sharing it may serve as another justification for home bias in equities since equities are only parts of total cross border nominal assets and the nominal revaluation of other cross border assets such as bonds direct investments currencies loans and so on can provide risk sharing 6 on the other hand the nominal revaluation has some interesting implications on the comparison between the flexible and the fixed exchange rate regimes if it works as or against international risk sharing it provides another merit or drawback of the flexible exchange rate regime since the changes in the nominal exchange rate can provide international risk sharing or increase the country specific risks this paper empirically examines three international risk sharing channels the nominal revaluation of cross border assets the terms of trade channel suggested by cole and obstfeld 1991 and cross border security ownership or international portfolio diversification that is thought of as a natural way of sharing country specific risks

special and differential treatment of developing countries in the wto moving forward after cancun the issue of special and differential treatment sdt for developing countries in the wto has become a source of tension in north south trade relations the absence of an effective sdt regime clearly contributed to the failure of the cancun ministerial meeting of the wto this paper argues for a new approach that puts the emphasis on efforts to improve the development relevance of wto rules and create mechanisms which allow greater differentiation across wto members in determining the applicability of wto disciplines complemented by non discriminatory liberalisation of trade in goods and services in which developing countries have an export interest the former is key in allowing the wto to expand its reach to new behind the border policies and the latter is important to establishing a development dimension in multilateral trade negotiations

contests with an unknown number of contestants this paper studies rent seeking contests where the contestants do not know the number of actively competing contestants two models are compared in the first all players are risk neutral in the second all have constant absolute risk aversion if the expected fraction of active contestants is low an increase in the number of potential contestants increases individual rent seeking efforts this effect is in contrast to the complete information case where individual rent seeking efforts decrease in the number of contestants the effect is more likely under risk neutrality but also possible under risk aversion equilibrium rent seeking efforts are lower under risk aversion if and only if the expected fraction of active contestants is low

agricultural tariffs or subsidies this article assesses the impact of the world price depressing effect of agricultural subsidies and border protection in oecd countries on developing economies exports imports and welfare developing economy exporters are likely to benefit from reductions in such subsidies and trade barriers whereas net importers may lose as world prices rise a simple partial equilibrium model of global trade in commodities that benefit from domestic support or export subsidies is developed to estimate the relevant elasticities simulation results suggest that a 50 percent reduction in border protection will have a much larger positive impact on developing economies exports and welfare than a 50 percent reduction in agricultural subsidies although there is significant heterogeneity across developing economies the results suggest that efforts in the doha round of negotiations should be directed at substantially reducing border protection

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite

complete rent dissipation when the number of rent seekers is uncertain the focal question in the theory of rent seeking is the extent of rent dissipation as the indicator of social loss in general rent seeking models assume that the number of contenders in a rent seeking contest is known with certainty but given the hidden nature of rent seeking participants in rent seeking more usually can be expected to face an uncertain number of rivals we show that in a tullock contest with a stochastic number of participants complete ex ante rent dissipation is consistent with a pure strategy nash equilibrium this contrasts with but complements previous results of under dissipation when the number of rent seekers is uncertain our complete dissipation result expands the range of circumstances consistent with association of an observed rent with social loss

efficient rents 2 free entry and efficient rent seeking in the competition for a monopoly right in which the number of bidders is fixed tullock and others have found the value of the resources spent in the aggregate to capture the transfer to be sometimes less than and sometimes greater than the value of the monopoly we think this approach to be incomplete since it leaves unanswered the question of what determines the number of individuals who will vie for the right to be the monopolist it is unsatisfactory to imagine for example that the franchisor sets the number of contestants one could then foresee that rent seeking would arise to influence the permissible number of bidders and this merely moves the rent seeking dissipation question one step back