This paper examines the effect of international trade on corporate market power in emerging market economies and developing countries, with a special focus on sub-Saharan Africa. The analysis is based on a large firm-level dataset, tariff data by sector and agreggate indicators of international trade for the period 2000-17. Greater trade liberalization and trade integration are associated with significant declines in market power, with the effect being more pronounced for firms in the manufacturing and ICT sectors, private sector firms, and firms with higher initial markups. Firms in sub-Saharan Africa tend to experience signficantly lower markups after allowing greater trade integration. The effects of trade liberalization on market power materializes over time, and there are significant complementarities between trade reforms and real sector reforms.
Ms. Sonali Jain-Chandra and Mr. Ananthakrishnan Prasad
We analyze the impact of the elimination of textile and clothing (T&C) quotas in 2005 on India. Our simulations suggest that while Indian exports of T&C will continue to expand in the presence of the safeguards on China, they will be affected adversely once these safeguards are lifted. We argue that India could emerge much stronger and expand its trade in T&C at a much faster pace, if some of the key domestic structural weaknesses are overcome.
In the Doha Round, negotiators are discussing the elimination or continuation of the special agricultural safeguards introduced by the Uruguay Round as well as the creation of special safeguard mechanism for use by developing countries. This paper argues that, in violation of the spirit of the WTO Agreement in Agriculture, the special agricultural safeguards have often been used as a prolonged protectionist device. It then draws lessons for the design of the special safeguard mechanism.
The share of emerging Asia in world trade has increased sharply over the past 25 years. A large part of this increase is the result of booming intraregional trade. This paper investigates the key factors behind the rapid increase in intraregional trade among economies in emerging Asia and its implications for the dependency of economies in the region on the business cycles in the EU, Japan, and the United States. The rise in intraregional trade is largely driven by rapidly growing intra-industry trade, which is a reflection of greater vertical specialization and the dispersion of production processes across borders. This has led to a sharp rise in trade in intermediate goods among economies in emerging Asia, but the EU, Japan, and the United States remain the main export markets for final goods.
Although the rest of the world had waited a long time for China to open up, feelings were mixed when it actually did and began to integrate rapidly with the world economy. With the country’s recent accession to the World Trade Organization (WTO), many of its trading partners are increasingly concerned that China’s competition in the world goods and capital markets may adversely affect their own growth prospects. This paper examines the implications of China’s WTO accession for other developing countries in the context of the country’s long-term process of growth and opening up. The paper argues that China’s integration into the world economy will inevitably impose adjustment costs on its trading partners in the short-to-medium term, but the benefits it generates are likely to dominate in the long run.
This paper argues that natural resource abundance creates opportunities for rent-seeking behavior and is an important factor in determining a country’s level of corruption. In a simple growth model, we illustrate the interrelationships between natural resources, corruption, and economic growth, and discuss potential anti-corruption policies. We show that the extent of corruption depends on natural resource abundance, government policies, and the concentration of bureaucratic power. Furthermore, the growth effects of natural resource discoveries and anticorruption policies crucially depend on the economy’s state of development. We empirically corroborate the model’s implications in a cross-country framework with both corruption and growth endogenized.