Category: Trade

Economic Development in the 21st Century: A Review

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by Ramiro Eugenio 脕lvarez (University of Siena) and聽Santiago Jos茅 Gahn (Roma Tre University)

What drives economic development? What is the nature of the external constraints that developing economies face? What is the role of industrial policy and the central banks in the development process? These were the core questions that were posed in the recent webinar series on Development in the 21st Century, organized by the of the . These four meetings were particularly oriented towards examining notions such as distribution, patterns of specialization, industrial policies and balance of payment constraints. The discussion of such phenomena is especially important in a context of deep academic divides regarding the drivers of economic development.

Following the tradition of the Latin American structuralist school, the meetings placed special emphasis on the inherent challenges of conditions associated with being in the periphery when the problem of development is faced. During the meetings, processes of economic integration that perpetuate asymmetric economic relations of the center-periphery type were examined, as well as the role played by public institutions, e.g. central banks, in the development of industrial economies.Read More »

Do not take peace for granted: Adam Smith鈥檚 warning on the relation between commerce and war

mppaganelli5 Comments

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By聽Maria Pia Paganelli and聽Reinhard Schumacher

Is trade a promoter of peace? Adam Smith, one of the earliest defenders of trade, worries that commerce may instigate some perverse incentives, encouraging wars. The wealth that commerce generates decreases the relative cost of wars, increases the ability to finance wars through debts, which decreases their perceived cost, and increases the willingness of commercial interests to use wars to extend their markets, increasing the number and prolonging the length of wars. Smith, therefore, cannot assume that trade would yield a peaceful world. While defending and promoting trade, Smith warns us not to take peace for granted. We unpack Smith鈥檚 ideas and their relevance for contemporary times in in the Cambridge Journal of Economics.Read More »

Market Power = Trade Power? Why the Strong Don鈥檛 Always Win in Trade Negotiations

pegmurrayevansLeave a comment

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Do stronger countries always get what they want in trade negotiations? My new book – 鈥� suggests not. In it, I ask how African, Caribbean and Pacific (ACP) countries were able to extract a series of concessions from the European Union in negotiations for free trade agreements over the last two decades. In doing so, I explore the underlying reasons why power relationships in trade politics are more complex than they appear at first glance. Read More »

Increasing and Diminishing Returns 鈥� Africa鈥檚 Opportunity to Develop

Erik Reinert1 Comment

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鈥楾his tendency to Diminishing Returns was the cause of Abraham鈥檚 parting from Lot, and of most of the migrations of which history tells鈥� wrote the founder of neo-classical economics, Alfred Marshall, in the first edition of his textbook (1890). In a footnote he refers to the Bible鈥檚 Genesis xiii : 6: 鈥楢nd the land was not able to bear them that they might dwell together; for their substance was great so they could not dwell together鈥�. (Marshall 1890: 201)

Marshall鈥檚 observation also applies to today鈥檚 migration patterns: from countries where most activities are subject to constant or diminishing returns to countries whose key economic activities are subject to increasing returns to scale. Diminishing returns occur when one factor of production is limited by nature, which means that it occurs in agriculture, mining, and fisheries. Normally the best land, the best ore, and the richest fishing grounds are exploited first, and 鈥� after a point 鈥� the more a country specialises in these activities, the poorer it gets. OECD () shows how this occurs in Chilean copper mining: every ton of copper is produced with a higher cost than the previous ton.

In Alfred Marshall鈥檚 theory, the 鈥楲aw of Diminishing Returns鈥� is juxtaposed with 鈥楾he Law of Increasing Returns鈥�, also called economies of scale. Here we find the opposite phenomenon; the larger the volume of production, the cheaper the next unit of production becomes. Traditionally economies of scale were mainly found in manufacturing industry, and increasing returns combined with technological change has for centuries been the main driving force of economic growth. Increasing returns creates imperfect competition, market power and large barriers to entry for challengers 鈥� companies or nations 鈥� making it difficult for them to enter these industries. In contrast to the rents produced under conditions of increasing returns, raw materials 鈥� commodities 鈥� on the other hand, are subject to perfect markets, and productivity improvements spread as lowered prices. This is the essence of the theory which explains why former World Bank Chief Economist Justin Yifu Lin was correct hen he asserted that 鈥楨xcept for a few oil-exporting countries, no countries have ever gotten rich without industrialization first鈥� ( : 350).Read More »

Trade for Human Rights as a Minimum Core Obligation

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In on the Minimum Core Doctrine (MCD) John Tasioulas states:

鈥渢he essence of the concept will be taken to be the sub-set of obligations associated with socio-economic rights that must be immediately complied with in full (obligations of immediate effect)鈥� (p. 3).

He contrasts these against those obligations that require significant resources and are therefore subject to 鈥榩rogressive realization鈥�. Thus, the defining characteristic of MCD is that it differentiates obligations between those of immediate effect and those of progressive realization. And the focus is on the nature of the obligations (what the state must do when) rather than the nature of substantive rights (the condition of people鈥檚 lives).

However, the discussion about what constitutes minimum core obligations in substance focuses on the nature of rights enjoyment and a package of minimum goods and services that would be required rather than the nature of obligations. This starts with General Comment 3 that refers to 鈥榓 minimum core obligation to ensure the satisfaction of, at the very least, minimum essential levels of each of the rights鈥�, and to the provision of 鈥榚ssential primary health care鈥� (ICESCR quoted in Tasioulas p. 5). Further, human rights-based practice begins to specify specific types of diseases to be treated and goods and services that would be included in the minimum, as under the 鈥榮elective primary health care model鈥� adopted by UNICEF (Tasioulas p. 5).Read More »

Free Trade Free for All: Market Romanticism Versus Reality

jmoududLeave a comment

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The drama surrounding President Trump鈥檚 decision to impose import tariffs on steel and aluminum has roiled the Republican Party and wide swathes of the corporate elite. The tariff decision comes on the heels of . This accusation of 鈥渦nfairness鈥� when it comes to US trade deficits is well worn. In a previous era, Japan was the alleged culprit of 鈥渦nfair鈥� trade practices because of its persistent trade surpluses with the U.S.Read More »

The BRICS and a Changing World

Sanjay G ReddyLeave a comment

This July and August, I led an international group of experts in preparing an Economic Report on the role of the BRICS countries (Brazil, China, India, Russia and South Africa) in the world economy and international development. 聽The was commissioned as an input to the that took place in early September 2017 in Xiamen, China.

It surveys the BRICS countries鈥� sizable contribution to global growth, trade and investment, evaluates the prospects for this to continue in the future, and explores the possible role that these countries can play in bolstering the global economy, in reshaping international economic arrangements and in contributing to the and to international development generally. An important conclusion in the report is that continued BRICS growth as well as policy initiatives can substantially benefit other developing countries (the report uses the IMF category of Emerging Market and Developing Countries, or EMDCs) 鈥� and developed countries too. 聽I will 聽be pleased if the report will be circulated widely, and welcome all reactions.Read More »