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Ctts

Acknowledgements 7

Acronyms 9

Overview 11

1. Itrdcti ............................................ 35

2. Trd,GrtdPrtRdcti. . . . . . . . . . . . . . . . . . . . . . . 45

21 Globalisation and Growth

22 Growth and Poverty Reduction

23 Growth and Inequality

24 Globalisation and Poverty Reduction

25 Globalisation for the Poor

3. SlitCrctristicsfLst-DlpdCtris. . . . . . . . . . . 77

31 Criteria for Addition to and

Graduation from the List of LDCs

32 Implications of the Criteria33 Classical Theory of Comparative Advantage and

Small and Vulnerable States

4. CprtibtDlpddDlpig

CtristStrgttLiksbtTrd,

GrtdPrtRdcti . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

41 Temporal and Spatial Heterogeneity of the Links

and their Strength42 Growing Doubts on the Benefits of Globalisation in

Developed Countries

43 Historical Ambivalence of Developing Countries towards

Trade Openness and Multilateral Trade Agreements

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T R a D e , G R o w T h a n D P o v e R T y R e D u C T I o n T . n . S R I n I v a S a n

44 Developing Countries in the WTO

45 Accelerating and Sustaining Growth in LDCs

and Small Economies

46 The Voice of LDCs in International Organisations

and Negotiations

47 Programmes of Action for the LDCs

5. DRddtLst-DlpdCtris ............. 119

. MkigGlblPrtrsipfrDlpmt Mreffcti:SmRcmmdtis . . . . . . . . . . . . . . . . . . . 125

61 Is there a Global Partnership for Development?

62 Some Recommendations

References 139

Index 145

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Acknowledgements

The research for this book was funded by the Commonwealth Secretariat

and it was drafted during my visit to Stanford Center for International

Development, Stanford University, Stanford CA, during the summer of2008. I thank both institutions for their support.

Thanks are due to Edwin Laurent, Philip Levy, Bipul Chatterjee and

Pradeep Mehta, my discussants and participants in the conference on

Global Partnership for Development at New Delhi, August 12-13, 2008 at

which an earlier version was presented. I thank Jane Lanigan for carefully

editing the manuscript and Guy Bentham for proof-reading.

Thanks to Academic Foundation, New Delhi for publishing thebook.

T.N. Srinivasan

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Acronms

AFT Aid-for-Trade

CDP CommitteeforDeelopmentPolic

CHOGM CommonealthHeadsofGoernmentMeeting

ECOSOC EconomicandSocialCounciloftheUnited

Nations

EPAs EconomicPartnershipAgreements

FDI ForeignDirectInestment

FTA FreeTradeAgreement

IF IntegratedFrameorkforTrade-RelatedTechnical

AssistancetoLeast-DeelopedCountries

IFSC IntegratedFrameorkSteeringCommittee

IMF InternationalMonetarFund

GATT GeneralAgreementonTariffsandTrade

GATS GeneralAgreementonTradeinSerices

GSP GeneralisedSstemofPreferences

GDP GrossDomesticProduct

GNI GrossNationalIncome

LDCs Least-DeelopedCountries

LLDCs LandlockedDeelopingCountries

MFN Most-Faoured-Nation

MFA Multi-FibreArrangement

NBER NationalBureauofEconomicResearch

ODA OfficialDeelopmentAssistance

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10 TRADE , GROwTH AND POvERTy REDUCTION T .N . SR IN IvASAN

OECD OrganisationforEconomicCo-operationand

Deelopment

PRSP PoertReductionStrategPaper

PTAs PreferentialTradeArrangements

POA ProgrammeofAction(ofUNCTAD)

PPP PurchasingPoerParit

R&D ResearchandDeelopment

ROw Restoftheworld

SPS SanitarandPhtosanitar

SIDS SmallIslandDeelopingStates

SvE SmallvulnerableEconomies

SvS SmallvulnerableStates

SDT SpecialandDifferentialTreatmentSSM SpecialSafeguardMechanism

TA TechnicalAssistance

TOR TermsofReference

TFP TotalFactorProductiit

TNC TradeNegotiatingCommittee

TRIPS Trade-relatedAspectsofIntellectualPropertRights

UN-OHRLLS UnitedNationsOfficeoftheHigh

RepresentatieforLeast-deelopedCountries,

LandlockedDeelopingCountriesandSmall

IslandDeelopingCountries

UNCTAD UnitedNationsConferenceonTradeand

Deelopment

UNDP UnitedNationsDeelopmentProgramme

wTO worldTradeOrganization

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Ovrviw

Th global conomic sstmconsisting of intrnational trad in goods

and srvics, flows of caital, financ, idas, labour and tchnologis

bcoming incrasingl intgratd, with mor and mor nations articiatingin th sstm. Howvr, in th intgration rocss, dvloing countris

in gnral and grous of dvloing countris in articularsuch as last-

dvlod countris (LDCs), landlockd dvloing countris (LLDCs),

small island dvloing stats (SIDS) and small vulnrabl stats (SVS)

ar widl rsumd to fac scial challngs and roblms to varing

dgrs. Work rogramms and orational documnts of th World Bank,

WTO and othrs dscrib thir roosd actions in suort of LDCs. In

articular, th dclaration of th Ministrial Confrnc of th WTO inDoha, Qatar, in 2001, which launchd th Doha Round of multilatral trad

ngotiations (th Dvlomnt Round) xlicitl rfrs to dvlomnt

issus, and in articular to thos rlating to th intgration of LDCs

and small conomis into th global trading sstm. Othr dclarations

includ thos on th Millnnium Dvlomnt Goals, adotd at th

Millnnium Summit of th Unitd Nations Gnral Assmbl in 2000

and th Montrr Consnsus on Dvlomnt Assistanc, adotd at

th Intrnational Confrnc on Dvlomnt Assistanc at Montrr,

Mxico, in March 2002. At bst ths could b viwd as articulating

dsirabl goals and asirations and at worst as loft, but mt rhtoric,

sinc non of thm crdibl commit thir signatoris and hold thm

accountabl for taking concrt actions in suort of th rhtoric. Indd,

going bond th dsirs, goals and action rogramms, whthr th

various countris (b th dvlod or dvloing, including LDCs)

thmslvs hav mad concrt and crdibl fforts and commitmntsto achiv thm is an on qustion. Th book xlors this qustion,

along with th sco for strngthning th links btwn trad, growth

and ovrt rduction though cooration btwn th dvlod and

dvloing (including LDCs) nations, including cooration that gos

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12 T R A D e , G R O W T H A N D p O V e R T y R e D U C T I O N T. N . S R I N I V A S A N

bond multilatral trad talks and rgional trading agrmnts. It argus

that a cohrnt analtical framwork is ssntial for thinking both aboutth ossibl mchanisms of th intraction btwn trad, growth and

ovrt rduction, and, imortantl, about thir rsnc or absnc (and

thir strngth, if rsnt) in th scific contxt of ach countr so as to

assss th sco of ublic olic at national and intrnational lvls. B

subsuming th rocss of libralisation of forign trad and caital flows

undr th broadr rocss of globalisation, it suggsts a ossibl framwork

b distinguishing th influnc of globalisation on growth, growth on

ovrt rduction, and globalisation on ovrt rduction b drawing

on conomic thor and mirical vidnc across countris as wll as

individual countr xrincs.

plausibl links in th globalisation-growth-ovrt rduction chain

can b ostulatd in thor. yt th ralit is far mor comlicatd, and

man links could b absnt in som countris at som oints in tim and

ma var in thir strngth ovr tim, vn if rsnt. Not all links nd

b unidirctionalthus, it is ossibl that in som links, globalisationinfluncs growth ositivl, but th charactr of that growth incrass

ovrt. This bing th cas, it is imortant not to focus slctivl on

som ascts of globalisation, whil ignoring thos othr rocsss bsids

globalisation in xlaining th obsrvd outcoms; in this wa mislading

assrtions about th rol of globalisation can b avoidd. Globalisation

can rduc ovrt dirctl b accntuating th mchanisms that rais

th rturns to th rsourcs of th oor (and b attnuating thos that

lowr th rturns) or indirctl through influncing othr rocsss, such

as growth, that la an instrumntal rol in rducing ovrt.

Globalisation influncs growth b ositivl contributing to ach of

th thr sourcs of growth: growth in inuts of roduction; imrovmnts

in th fficinc of allocation of inuts across conomic activitis; and

innovation that crats nw roducts, nw uss for xisting roducts or

brings about mor fficint us of inuts. Domstic rsourcs ar allocatd

mor fficintl whn th conom can scialis in thos activitis inwhich it has comarativ advantag. B bing on to caital, labour and

othr rsourc flows, an conom is abl to augmnt rlativl-scarc

domstic rsourcs and us art of its abundant rsourcs lswhr, whr

th arn a highr rturn. Clarl, fficinc of rsourc us in ach nation

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13OV eR V IeW

and across th world is nhancd b th frdom of movmnt of rsourcs.

Finall, th fruits of innovation anwhr in th world bcom availablvrwhr in such an on world. Morovr, thor also suggsts that

globalisation and growth hav a slf-rinforcing rlationshi, in that highr

growth surs a largr volum of trad flows.

Th instrumntal rol of growth for ovrt rduction works through

th ffcts of growth both on dmand (domstic and global) for goods and

srvics in which th oor ar involvd, ithr as slf-mlod roducrs

thmslvs or workrs in thir roduction. Ths ffcts dnd on thcomtitivnss and fficinc of th markts for such goods and srvics,

as wll as on th accss of th oor to thos goods (.g., sds, frtilisr

and watr) and srvics (ducation, halth and insuranc). Globalisation,

b rducing th barrirs to trad, articularl in labour-intnsiv goods

and srvics, rducs ovrt b raising th rturns to labour. Also, b

acclrating th rocss of rmoval of domstic distortions that rtuat

ovrt, globalisation could rduc ovrt rmanntl. Sinc th

mchanisms through which globalisation influncs ovrt dirctland indirctl ncssaril orat in th contxt of domstic and global

institutions and olicis, dsfunctional domstic institutions (which ar

ubiquitous in dvloing countris) such as thos that limit flxibilit

of labour us, sgmnt markts and fail to rovid an adquat and solid

conomic, olitical and social infrastructur, could attnuat considrabl

or vn rvrs th bnficial ffcts of globalisation on ovrt.

potntiall man domstic olicis could rduc ovrt, includingrdistribution of incom and assts to th oor. Lssning markt

distortions has a dnamic ffct in that it not onl incrass th valu

of rsnt rsourcs, but also ncourags gratr invstmnt and futur

accumulation. Rdistribution olicis oftn fail bcaus th ar not wll

targtd and ar highjackd b th non-oor. evn if th do not fail,

thir succss is short-livd unlss rdistribution is continud indfinitl.

Gratr intgration with global financial markts would incras th

fficinc of financial intrmdiation, and thrb hav larg and long-trm bnfits for th oor b facilitating thir invstmnt in both hsical

and human caital. Intgrating domstic roduct and factor markts b

rducing transactions cost and incrasing invstmnt in transortation

and communication infrastructur, so that th oor ar not onl abl to

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comt in largr and mor comtitiv markts, but also hav u-to-dat

markt intllignc, is also imortant. Abov all, institutional rforms havto b undrtakn for corrcting massiv failurs of govrnanc, articularl

b sriousl addrssing ndmic corrution.

Intrnational olicis that influnc th trad-growth-ovrt linkags

includ th accss to th world markts for goods, srvics, tchnolog

and caital b oor countris. protctionist olicis in rich countris,

such as highr-than-avrag tariff rats on imorts of goods and srvics

xortd b th oor countris, domstic suort and xort subsidis ongoods in which th and th oor countris comt in world markts,

advrsl affct oor countris and sciall th oor in thos countris.

protction of agricultur (a sctor uon which much of th oor in

dvloing countris dnd for thir livlihoods) in th Unitd Stats and

euroan Union is an grgious xaml of such barrirs. In addition, tariff

scalation in rich countris, in th sns of lowr tariffs on unrocssd

goods xortd b oor countris in comarison to tariffs on rocssd

goods, advrsl affcts th otntial for manufacturing b discouragingrocssing in oor countris, thus limiting th movmnt of labour from

low-roductivit rimar activitis to highr-roductivit manufacturing.

Anothr imortant asct is whthr or not rich countris dtr bribing

of forign buraucrats and oliticians b thir multinational comanis.

policis that ncourag, rathr than stand in th wa of, mutuall bnficial

off-shoring of manufacturing and srvics b rich countr firms would

bnfit som, if not all, dvloing countris b incrasing th dmand

for thir skilld labour. Of cours, domstic olicis in oor countris hav

to b accommodating in th sns of ncouraging skill accumulation, and

making it mor attractiv for such labour to work at hom rathr than

migrat. encouraging forign dirct invstmnt (FDI) in oor countris

could facilitat roductivit gains and tchnolog transfrs. FDI in th

financial sctor, as wll as intgration of global financial markts b

rducing costs of financial intrmdiation, ncourag roductiv us of

crdit for invstmnt. On th othr hand, financial oning could incrasth risks of a financial crisis if a countrs domstic financial institutions

ar not adquatl dvlod. Balancing th bnfits from incrasd

xctd rturns and incrasd risk from financial intgration would

dnd on individual countr institutions and othr charactristics.

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15OV eR V IeW

Th analsis in this book of domstic and intrnational olicis

for strngthning th trad-growth-ovrt linkags lads to on vrimortant conclusion, naml, that th rimar constraints on such

strngthning ar largl domstic and basicall of olitical conom. This

is not to sa that xtrnal constraints ar absnt or unimortant, but onl

that th ar scondar to th domstic ons. Indd, xtrnal constraints

such as volatilit and instabilit of th global markts for goods, srvics

and caital could rod th bnfits of global intgration for th dvloing

world. Th ongoing crisis in intrnational financial markts is a dir

xaml of instabilit inducd b olic and institutional failurs as wll

as outright fraud. Th book survs rlvant mirical studis dating from

th lat 1960s to th rsnt. It finds that th mor carful among th

cross-countr studis that us aroriat conomtric tchniqus, do find

a strong association, not onl btwn trad and growth, but also btwn

growth and ovrt rduction. Th also find that this association is

tmrd b th rsnc of domstic olic distortions, thus mhasising

th conclusion that rmoving domstic constraints arising from olicdistortions brought about b olitical conom is a crucial st for

maximising th bnfits from trad libralisation.

Individual countr studis also suort th findings of cross-countr

studis. For xaml, studis of China and India, in which an ovrwhlming

majorit of th worlds oor liv, show that both xrincd fastr growth

and gratr ovrt rduction onl aftr both ond thir conomis

significantl to forign trad and invstmnt (in China 1978; and in India,

in th mid-1980s, in a limitd mannr, and thn mor sstmicall and

broadl aftr 1991). A vr rcnt stud of 13 countris (8 Asian and 5

African), finds unsurrisingl that countris that undrtook domstic

rforms along with trad rforms succdd most in ovrt rduction;

and whrvr domstic rforms of dsfunctional land and labour markt

olicis, as wll as rductions in suort to caital-intnsiv industris,

did not accoman trad libralisation sufficintl, th rsulting ovrt

rduction was limitd. Thus, th findings of cross-countr and individualcountr cas studis strongl suort th conclusion that if trad rform

is to b ffctiv in rducing ovrt, it has to b art of th broadr

ackag of rforms that rlax domstic constraints. This has th furthr

imlication that th focus of ovrt-allviation olicis and rogramms

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has to b broad and go bond hling dvloing countris in intgrating

thmslvs with world markts and building a global artnrshi for thislimitd uros, into th arna of domstic olitical conom and rform.

Th book also xamins whthr grouings of countris into LDCs,

LLDCs, SIDS and SVS has th rational that countris in ach grou shar

som common charactristics and fac som common roblms that ar

not onl distinct from thos facd b othr grous, but also rlvant for

formulating som common solutions for addrssing thm. Th critria that

hav bn usd in dfining ths grous (othr than thir bing landlockdand/or rmot from th cntr of gravit of world trad and financ) do

not aar to b foundd on such a rational. Instad, th ar basd on

obsrvd outcoms, such as low gross national incom, wak human assts

and high conomic vulnrabilit. Such outcoms ar th joint ffcts of

two sts of factors: thos that ar xognous bing bond th control

of olic-makrs (.g., ndowmnts such as land, minrals and climat)

and thos that ar ndognous and within thir control (.g., social and

conomic institutions, and rsourcs such as human and hsical caitalndowmnts and tchnolog choic). It is crucial for olic analsis,

not onl whthr a countr is ut in a articular grou largl bcaus

of xognous factors or bcaus of ndognous factors that ar undr its

control, but also whthr for countris in ach grou thr is a substantial

dgr of commonalit among such factors (xognous and ndognous).

Basd on obsrvd outcoms onl, it is hard to distinguish miricall

whthr xognous or ndognous factors wr largl dtrmining a

countr bing ut in a grou. Th rquird mthodolog is comlx and

th rsults ar not vr robust. For this rason, conclusions such as that a

countrs small siz or bing an island or landlockd per se ar inhibiting

factors in acclrating growth through global intgration, or that classical

thor of comarativ advantag bing a fundamntal dtrminant of trad

attrns is not valid for thm and so on hav to b r-xamind taking into

account th fact that such countr grouings classifid through outcoms-

basd critria ar analticall unsound.Th litratur on LDCs rviwd in this book, first sms to confound

th xognous and th ndognous factors that ar rlvant in dtrmining

a countrs LDC status. Scond, this confounding, comoundd b th

roblm of robustl distinguishing btwn such factors from availabl

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17OV eR V IeW

mthodolog and data, rsnts a srious dilmma for th rst of th world

in th formulation of olicis, articularl of rsourc transfrs, to hlLDCs. Should th rst of th world or should it not imos conditionalitis

so that th rciint countris do not ut th rsourcs transfrrd to uss

othr than for mutuall agrd uross? Third, in th litratur on small

and vulnrabl countris thr is a tnsion btwn thortical studis

that oint to th sub-otimalit of small siz for sustaind growth and

dvlomnt, bcaus thir structural disadvantags of small siz and

rmotnss outwigh thir advantags, and mirical studis that do not

find an strong vidnc for disadvantags of small siz. This suggsts that

countris ar abl to mor than offst an disadvantags of thir small siz

b suitabl dsigning and ffctivl imlmnting olicis that fostr

growth. Fourth, rminiscnt of th arl dvlomnt litratur that argud

that th institutions and roblms of dvloing countris ar so vastl

diffrnt from thos of th dvlod ons that th sam conomic thor

cannot b usd for analsing both, thr ar contmorar argumnts that

claim that trad attrns of SIDS cannot b xlaind b convntionaltrad thor basd on comarativ advantag. Ths argumnts aar to

b just as invalid as thos of arl dvlomnt litratur. Fifth and last,

th litratur indicats that th tndnc to focus on trad rfrncs

and trad rotction as th rfrrd mans for offstting rmannt

or tmorar cost disadvantags of SIDS in articular, or LDCs mor

gnrall, sms unwarrantd.

proosals for cooration btwn dvlod and dvloing countris

for strngthning th trad-growth-ovrt links hav to rcognis svral

facts. First, not all such links, dirct and indirct, nd to b unidirctional.

Scond, thr is normous htrognit across countris, and ovr tim, on

both th rsnc or absnc of scific links and thir strngth whr and

whn rsnt. Third, givn this htrognit, a on-siz-fits-all aroach

to strngthning th links is infasibl and would b inaroriat,

vn if fasibl. Fourth, an ssntial rrquisit for cooration is an

undrstanding b both grous of countris of th fficac of th links, andthir oration in a mannr that is bnficial to both. Howvr, thr ar

growing doubts in dvlod countris, articularl in th Unitd Stats

and in som mmbrs of th euroan Union, of th traditional blif

that intrnational trad is on of mutuall bnficial xchang, and about

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th fasibilit and fficac of addrssing distributional conflicts (from

trad libralisation) through domstic olic instrumnts. If unaddrssd,ths doubts will undrmin an fforts to fostr cooration btwn

dvlod and dvloing countris. Th ongoing global financial crisis has

incrasd such doubts.

This book documnts th historical ambivalnc of dvloing

countris, which constitut an ovrwhlming majorit of WTO

mmbrshi, towards th Gnral Agrmnt on Tariffs and Trad (GATT)/

WTO and th rocss of trad libralisation. It contnds that mandvloing countris did not articiat in this rocss during most of th

GATT ra (1947-1995) and in acclrating th growth of thir trad, mainl

bcaus th wr drivn b th thn-dominant faith in inward-orintd,

imort-substituting industrialisation as th aroriat dvlomnt

stratg. Th rctd and maintaind rlativl high barrirs to forign

trad. Of th ight rounds of multilatral trad ngotiations undr th

ausics of GATT, u to th conclusion of th sixth (th Toko Round,

concludd in 1979), man dvloing countris rcivd that GATTromotd th intrsts of dvlod and industrialisd countris and that

it had frustratd svral thir attmts to hav thir concrns addrssd.

Concssions grantd to dvloing countris, such as th inclusion of

part IV on trad and dvlomnt and th Toko Rounds nabling claus

on scial and diffrntial tratmnt, wr mostl rhtorical, and othrs,

such as th Gnralisd Sstm of prfrncs (GSp), wr alwas havil

qualifid, and thir bnfits small. In sum, from th rsctiv of man

dvloing countris, th GATT was unfrindl, if not activl hostil, to

thir intrsts. It is dbatabl whthr or not th frustrating xrinc of

dvloing countris in sking gratr accss to th markts of dvlod

countris was a consqunc of thir rlntlss, but misguidd, ursuit of

th imort-substitution stratg of dvlomnt, and thir oting out of

th GATT. Had th articiatd full, vigorousl and on qual trms with

th dvlod countris in th GATT, and had th adotd an outward-

orintd dvlomnt stratg, th could hav achivd far fastr andbttr-distributd growth. Th xrinc of east Asian countris that

adotd outward-orintd stratgis of dvlomnt from th mid-1960s

onward, and also that of China and India sinc th mid-1980s, suorts

this assssmnt.

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Howvr, vn whn dvloing countris activl articiatd with

cohsion, as th did in th Toko Round (1973-1979), th outcomswr not in thir long-trm intrsts, rimaril bcaus thir dmands

continud to b drivn b th imort-substitution idolog. Thir scial,

diffrntial and mor favourabl tratmntincluding not bing rquird

to rcirocat tariff concssions b th dvlod countriswas tril

damaging: onc dirctl, through nabling thm to continu thir costl

imort-substitution stratgis; a scond tim b allowing th dvlod

countris to rtain thir own GATT-inconsistnt barrirs (in txtils)

against imorts from dvloing countris; and a third tim b allowing

th industrialisd countris to k highr-than-avrag most-favourd-

nation (MFN) tariffs on goods of xort intrst to dvloing countris.

Nonthlss, thr has bn a significant and wlcom shift on th

art of dvloing countris awa from ambivalnc, towards a mor

rctiv attitud towards trad onnss and a rul-basd trading sstm,

sinc th conclusion of th Urugua Round and th stablishmnt of th

WTO. This is in art du to th succss of China and India in acclratingthir growth and rducing thir ovrt aftr th bgan sriousl

intgrating thir conomis into th world conom. yt som vstigs of

th ast, such as th dmand for non-rcirocit and for rlaxation, if not

a comlt waivr, of ruls alicabl to all othr mmbrs of th WTO

rsist.

Rviwing th rcnt xrinc of LDCs, this book finds that thir

annual rcntag growth in r caita gross domstic roduct (GDp)narl trild from 1.3 during 1990-2000 to 4.0 in 2000-2006 and furthr

to 4.3 in 2007 (UNCTAD, 2008, Tabl 1 and Statistical Annx, Tabl 1).

Howvr, th xtnt of this imrovmnt that is sustainabl in th long

trm bcaus of imrovmnts undrling fundamntals, such as total

factor roductivit growth, and th xtnt of it that is not sustainabl

bcaus of rvrsibl short-trm favourabl factors such as, for xaml,

th imrovmnt in trms of trad of commodit xortrs, has t to b

xlord. UNCTAD (2008, Tabl 5) shows that LDCs mrchandis xortsmor than doubld to US$99 billion in 2006 from US$43 billion in 2003.

Howvr, xortrs of oil xorts accountd for US$52 billion of US$99

billion and minral and agricultural xorts of non-oil xorts accountd

for anothr US$77 billion. Thus, LDCs continu to dnd havil on oil

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and rimar commodit xorts. UNCTAD (2008: 11) oints out that

th incras sinc 2004 in LDC xorts was largl attributabl to risingintrnational commodit rics. Th ric indx of food ros b 49 r cnt,

agricultural raw matrials b 52 r cnt, and minral and ors b 178 r

cnt and crud trolum b 128 r cnt during 2000-2006 (UNCTAD,

2008, Tabl 7). Ths favourabl ric trnds ma b rvrsd in th nar

futur. Howvr, th gross domstic savings of LDCs incrasd from 12.8

r cnt GDp in 2000-2002 to 20.7 r cnt in 2006 and gross domstic

caital formation incrasd modstl from 19.8 r cnt of GDp to 22.2

r cnt during th sam riod (UNCTAD, 2008, Tabl 4). If sustaind,

ths trnds ar conduciv to futur incrass in growth. Thus, thr is

vidnc of short-trm favourabl, but rvrsibl, factors in imrovd

growth rformanc; howvr, thr is no vidnc of th roblm of long-

trm sustainabilit of growth of LDCs ithr disaaring altogthr or

vn dclining in its svrit.

Th LDCs, articularl small countris, ar dmd to hav littl

voic in th intrnational organisations of which th ar mmbrs andhav no influnc in thir dcision-making rocsss. Howvr, voic and

influnc dnd not onl on charactristics of mmbrs (such as th

siz of thir oulation and conom), but also on ruls of mmbrshi

and dcision-making in th organisations thmslvs. Intrnational

organisations var significantl in both rscts. Th goolitical and

conomic configuration of th glob has changd vastl sinc th aroval

of th UN chartr in 1945. yt nwl-mrging owrs such as Brazil,

India and also Jaan hav had littl succss in achiving thir asirations

for rmannt mmbrshi of th Scurit Council. This is dlorabl,

though undrstandabl: no stat would voluntaril agr to its rcivd

owr bing rducd. In th World Bank and th IMF, which also dat

back to th nd of th Scond World War, thr is wightd voting with

th wight (i.., quota in th arlanc of th two organisations) of ach

mmbr roughl corrsonding to its conomic siz at th dat of th last

rvision of quotas. Hr again, although th rlativ conomic sizs of itsmmbrs hav bn changing, th rocss of rvision of quotas has bn

a contntious issu, though som rvisions hav takn lac riodicall,

most rcntl in Aril 2008.

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Thus far, a convntion has bn followd that dcisions of consqunc

in th GATT/WTO hav to b mad b consnsus, so that in ffct vrmmbr has a vto in such dcisions. In rincil, LDC mmbrs of th

WTO thrfor, hav a strong voic in its dcisions if th choos to

xrcis it. Howvr, thr ar man ractical constraints in doing so.

Historicall, collctiv action b grous of dvloing countris in GATT/

WTO has not bn articularl ffctiv mainl bcaus thir shar in

world trad was small whn GATT was signd in 1948, and has not grown

nough sinc. Although th shars in world trad of som countris of east

Asia hav grown significantl sinc th ond thir conomis in th

mid-1960s, and Chinas shar has grown sctacularl sinc its oning in

1978, still such growth has not bn nough to offst th dclins in th

shars of Africa and South and Cntral Amrica.

Th dominant constraint in acquiring a voic is what is usuall trmd

inadquat caacit, a broad trm that covrs a rang of inadquacis:

small siz, magr rsourcs, lack of knowldg (and difficult in acquiring

such knowldg) about ngotiating issus, lack of skilld rsonnl and soon. Th ongoing Doha Round, lik all such ngotiations, involvs comlx

issus and th ngotiating ositions of mmbrs and also th rocss

of ngotiations is labrinthian. Th trad-offs involvd ar difficult to

valuat, vn for a vr wll-informd and skilld individual. A small

and oor dvloing mmbr countr is svrl handicad in such

ngotiations. Th nd for caacit building is rcognisd in th WTO,

and svral rich countris hav contributd rsourcs for this ffort. Much

mor can b don, and this is an ara in which dvlod countris, as wll

as bttr-lacd dvloing countris, can contribut.

Thr ar svral rogramms of action for hling th LDCs, of

which th thr rominnt ons ar: th Intgratd Framwork (IF) for

Trad-Rlatd Tchnical Assistanc to LDCs, th programm of Action

(pOA) of th UNCTAD and th Aid-for-Trad (AFT) of th WTO. This

book brifl rviws th xrinc of ach, although thos of th pOA

and AFT ar much too short to com to dfinitiv judgmnts about thirfficac. Th IF has bn valuatd twic, and th rort of th scond

valuation was ublishd in 2003 following six ars of its orations.

yt this valuation concludd that it could not achiv its uros of an

assssmnt of th rsults of th IF, rimaril bcaus it was still too arl

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to look for masurabl rsults. Instad it confind itslf to an anlsis of

altrnativ rocsss for th oration of IF and making rcommndationson thm. An IF manual was ublishd in 2005, aftr th valuation.

Th non-availabilit of an masurabl rsults did not dtr th

Dvlomnt Committ of th World Bank and th IF to dcid in

Stmbr 2005 that th Intgratd Framwork should b nhancd,

rovidd with additional rsourcs and that a task forc on nhancd IF

should b stablishd. Th task forc rortd in Jun 2006, concluding

that th IF had faild to mainstram trad into th povrt RductionStratgg pars (pRSps) rocss in larg art bcaus of its wak countr

ownrshi, and that th rsons of th donor communit had bn

inadquat. It cam u with rdictabl rcommndations: strngthn

countr ownrshi, assign rsonsibilit for imlmntation and incras

funding and mak it rdictabl. In 2007, an indndnt scholar rviwd

th trad and diagnostic studis carrid out in 11 LDCs through th donor-

fundd IF to assss th ffctivnss of IF in addrssing trad-rlatd nds,

with th objctiv of ovrt rduction as th cntr of th analsis. Hfound that although ths studis rsnt much of us to th countris in

romoting xort dvlomnt, th nglct k aras of significanc to

ovrt-rduction fforts.

All ths ngativ findings on th rformanc of th IF should

not b surrising for thr rasons. First, th rimar objctiv of IF is

vagu: th mainstraming of trad into dvlomnt lans has littl

orational contnt and vn lss of an idntifiabl and masurabllinks to dvlomnt goals. Although tchnical assistanc (TA) and its

coordinatd dlivr as goals could b mad orational, unlss th IF

itslf has clar and wll-dfind objctivs, TA in suort of it cannot b

mad orational. Scond, th conct of countr ownrshi is lusiv,

as notd in UNCTAD (2008, Box 4), and too difficult to b maningful

(Buitr, 2005). Morovr, it unncssaril confuss th convntional (but

incrasingl irrlvant) conct of sovrignt, maning that a sovrign

countr is on which has comlt control ovr its domstic affairs, witha countr having control ovr how xtrnall rovidd rsourcs ar to b

utilisd for dvlomnt and ovrt rduction. It is not so much countr

ownrshi of a rogramm of xtrnal aid that mattrs, but whthr or not

th rogramm is wll dfind to dlivr th objctivs that th countr

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itslf wishs to achiv with th rsourcs, rgardlss of who dsignd

th rogramm. Th aid and TA undr th IF ar fundd b donors: itmaks no sns to xclud thm from having a sa in th objctivs that

aid to a rciint is mant to achiv, and how th aid funds ar to b

usd for this uros. Howvr, it is rasonabl to insist that donors

and rciints jointl dcid on th intndd uss of aid and on was

to monitor th rocss of actual us. Calling this joint dcision-making

countr ownrshi is countrroductiv. Third, th most srious and

almost fatal dfct of th IF is a failur to undrstand that dvlomnt

and ovrt rduction ar comlx tasks. Gratr intgration of a countr

with th world conom, whil it crtainl will contribut significantl to

both, is not th onl dtrminant of ithr. Morovr, th constraints on

dvlomnt, ovrt rduction and th us of gratr intgration with th

world conom for hling with both, involvs considration of domstic

olitical conom. Unlss this is clarl undrstood, rdsigning th IF at

th margin is unlikl to hl this rogramm dlivr gratr intgration

or ovrt rduction to an significant xtnt.In 2006, UNCTAD comrhnsivl rviwd th stat of dvlomnt

of th LDCs and also th achivmnt of its programm of Action (pOA).

Mor rcnt data from UNCTAD (2008) confirm th disturbing findings

of UNCTAD (2006), although it maks onl a vr brif rfrnc to th

pOA):

Onl 8 out of th 50 LDCs1 mt or xcdd th pOA targt of

growth of 7 r cnt r annum btwn 2000 and 2004. In 2006,growth rats of 14 countris xcdd 7 r cnt. Tn out of 35

LDCs mt th invstmnt targt of 25 r cnt of GDp during 2001-

2004. In 2006, 14 mt th targt.

Nintn out of th 50 LDCs wr unabl to achiv r caita

growth rats of mor than 1.0 r cnt r annum during th

riod 2000-2004, which is far too low to hav a srious ffct on

th xtrm ovrt in which about half th oulation of LDCs

liv. Morovr, rogrss towards human dvlomnt goals is vr

mixd.

1. Th 50 includ Ca Vrd, which graduatd from bing an LDC in 2007.

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Although th rcnt imrovd growth rformanc in som

LDCs notd abov is crtainl ncouraging, a closr analsisshows that out of 40 LDCs, onl 7 hav xrincd stadil

sustaind growth. All th othr LDCs hav xrincd conomic

contractions of varing duration and svrit sinc achiving

olitical indndnc. Of th 33 LDCs which hav xrincd

conomic criss with major outut losss, thr ar onl 12 whos

ral GDp r caita is now highr than it was at its ak in th

1970s or arl 1980s.

Caital formation was still onl 22 r cnt of GDp in th LDCs as

a grou in 1999-2003. It was 22.2 r cnt in 2006, with domstic

rivat invstmnt articularl wak. Actual rats of human caital

formation in th LDCs in th 1990s wr slowr than in othr

dvloing countris. Th inadquat rats of caital formation

rflct waknsss both in domstic rsourc mobilisation and in

th wa in which xtrnal caital inflows ar suorting domstic

rocsss of caital accumulation. For th LDCs as a grou, thr has bn littl structural chang

sinc th arl 1980s, though thr ar significant diffrncs among

LDCs.

Th roductivit ga is widning. Labour roductivit in th

LDCs as a grou in 2000-2003 was just 12 r cnt highr than in

1980-1983, whilst it incrasd b 55 r cnt on avrag in othr

dvloing countris. Th goods and srvics which th LDCs can sul comtitivl

to world markts ar ultimatl limitd b th goods and srvics

which th can roduc and how fficint th ar in roducing

thm. Limits on roductiv caacit and fficinc, rathr than

xtrnal barrirs to thir xorts, ar th basic sourcs of th

marginalisation of th LDCs in world trad.

Th most imortant wa in which labour has found roductiv

work within LDCs ovr th last 25 ars has bn through

agricultural land xansion. Howvr, this is bcoming mor and

mor circumscribd.

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This assssmnt b UNCTAD (2006) is highl unlikl to b changd

in an significant rscts b th xrinc of LDCs aftr 2004. It lavs nodoubt that th task of dvlomnt of LDCs (and of dvloing countris

mor gnrall) is a daunting on. A narrow focus on on or a fw of

th man contributor factors to dvlomnt, b it trad, hsical and

human caital accumulation, or corrction of markt failurs, dsfunctional

govrnanc, insurgncis and thnic conflicts and rlatd olitical conom

issus, would b inaroriat. Of cours, not all roblms could b

ffctivl addrssd at th sam tim. A rioritisation among thm,

basd on an undrstanding of th dvlomnt rocss htrognit

among countris, is ssntial. In such an xrcis, th rmoval of domstic

constraints is most likl to mrg as th task of highst riorit.

Th brif histor of Aid-for-Trad (AFT) launchd at th Hong Kong

ministrial mting of th WTO in Dcmbr is not vr ncouraging.

AFT was mant in larg art to addrss two rlatd concrns. On is th

assistanc that som WTO mmbrs will nd to hl thm imlmnt

th rsults of currnt multilatral trad ngotiations, and to co withcrtain adjustmnt costs that ma b incurrd. Th scond, broadr st

of concrns, is th insufficinc of trad-rlatd caacit in man WTO

mmbrs to allow thm to bnfit from th oortunitis th multilatral

sstm crats. AFT was rviwd in 2007 and a road ma for it was

arovd b th WTO Committ on Trad Dvlomnt in arl 2008.

Howvr, th road ma was short on concrt and scific actions and

long on gnral actions.

Th basic rmis of AFT is that succssfull comlting th Doha

Dvlomnt agnda, though ncssar, is not sufficint for incrasing trad

oortunitis of dvloing countris and LDCs. put diffrntl, to avail

of th oortunitis that a succssful comltion ons u would rquir

rlaxing th constraints that ths countris fac in doing so. This in turn

would rquir not onl idntification in scific countr contxts what

ths constraints ar, but quall imortant what actions thos countris

and othr WTO mmbrs could tak in rlaxing thm. Th constraintsso idntifid (.g., gnral caacit constraints) would b critical, not

onl for availing of trad oortunitis, but also for dvlomnt (and

its ovrarching goal of ovrt rduction) in gnral. If this is th cas,

for AFT to b a comlmnt to official dvlomnt assistanc (ODA),

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it would hav to b targtd at rlaxing thos constraints that ar

inhibiting availing of trad oortunitis onl, and not an that constraindvlomnt as wll, sinc ths would b th targts of ODA. Howvr,

whthr doing so is a cost-ffctiv us of AFT rsourcs is a sarat issu.

Aftr all, availing of trad oortunitis has onl an instrumntal valu,

and not an intrinsic valu, as dvlomnt and ovrt rduction do. It

is ossibl, thrfor, that us of gnral uros aid such as ODA, rathr

than AFT linkd to trad, could achiv th rlaxation of constraints that

limit dvlomnt as wll as availing of trad oortunitis mor cost

ffctivl. In addition, crdibl commitmnt from concrnd officials is

ssntial to undrtak th actions ndd and to rovid incntivs for

th rivat sctor to tak comlmntar actions (and to avoid actions

that limit th fficac of ublic-sctor actions) for xanding trad-rlatd

invstmnt and roduction. It is ossibl that AFT has th otntial

to ralis its objctivs, but not onl is this otntial t to b st out

in ralistic and concrt trms, but fw scific actions to achiv th

otntial ar dscribd in th larg and accumulating litratur on AFT.Th ministrial dclaration of 14 Novmbr 2001 that launchd th

Doha Round of multilatral trad ngotiations rfrrd to small conomis

and LDCs and thir influncs in svral aragrahs. Th Doha Agnda

and Work programm of th WTO slld out th goals of th ngotiations

from th rsctivs of dvloing countris and LDCs, with rsct to

ach itm of th ngotiating agnda. Th itms of th agnda, othr than

rovisions for tchnical assistanc and caacit building, could b dividd

into two broad catgoris. Th first can b dscribd as xhortations and

good faith fforts urgd on dvlod countris. Almost all of ths itms

ar ssntiall voluntar. Without minimising th valu of xhortations,

moral rsuasion and ongoing voluntar fforts, it has to b rcognisd

that it is imossibl to st tim limits for thir fulfilmnt, lt alon st

unishmnts for not fulfilling thm.

Th scond catgor, which constituts a majorit of agnda itms,

consists of scial and diffrntial tratmnt of dvloing countris ingnral and in articular, LDCs, small conomis and othr grous. Ths

itms includd, for xaml, lowr rats of rquird rduction of bound

tariffs b dvloing countris, or xmting LDCs altogthr from an

rduction, or a longr tim schdul for mting commitmnts and so

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on. All ths itms rsond to th dmands of dvloing countris and

LDCs for concssions and non-rcirocal commitmnts. This book taksth viw that giving dvloing countris a rasonabl longr tim for

mting th sam commitmnts as dvlod countris is an ntirl

aroriat wa of taking into account thir bing at a lowr stag of

dvlomnt. Howvr, allowing thm to rtain highr barrirs to

trad until th subsqunt round of ngotiations, with no commitmnt

whatvr to rducing thm or rducing thm to a lssr xtnt than is

rquird of dvlod countris, is not in thir intrsts in an wa. It

sustains dvloing countris mistakn blif that trad rstrictions and

trad olicis ar ffctiv instrumnts for achiving non-trad rlatd and

broadr goals of dvlomnt. This is not to dn that oor countris,

articularl if th han to b oorr than othrs bcaus of factors

bond thir control, could bnfit from som unconditional rsourc

transfrs, mostl in th form of grants. Nonthlss, th WTO is not a

rsourc-transforming agnc. B agring to dmands of dvloing

countris for concssions in th commitmnts and obligations withwhich th ar to coml, dvlod countris ar abl to avoid making

an rsourc transfr commitmnts. This is countrroductiv.

Th Doha ngotiations hav draggd on for mor than six ars. A

st of rvisd ngotiating txts, with thir modalitis for agricultural and

non-agricultural roducts, wr circulatd on 19 Ma 2008. Ths wr

rjctd b India and othr dvloing countris as indaquat. An informal

mting of th Trad Ngotiating Committ (TNC) ond on 21 Jul

2008 to considr th latst (Jul 2008 ackag) ngotiating txts. As of

25 Jul 2008, on som of th k issus ositions ar t to convrg. Th

WTO Dirctor Gnral, pascal Lam, saw th situation as critical, dging

btwn succss and failur (WTO News). Th ngotiations collasd

on 29 Jul 2008. Although th roximat rason for th collas was th

irrconcilabl diffrnc in th ositions of China and India on th on

sid and th US on th othr on th scial safguard mchanism (SSM)

for dvloing countris on agricultural imorts, it was vidnt that thrwr significant gas among WTO mmbrs in othr aras that would

hav mad it difficult to arriv at final modalitis vn had thr bn

agrmnt on SSM. As is to b xctd, ngotiators blamd ach othr

for th collas whil claiming thir commitmnt to conclud th Doha

Round.

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Th roscts for a rsumtion of ngoatiations and concluding

th Round soon sm unlikl. Th rsidntal lctions in th US arto b hld on 4 Novmbr 2008. parliamntar lctions in India hav to

b hld bfor th nd of Ma 2009. A nw euroan Commission will

tak offic in Sring 2009. If th Rublican part administration in th

US is succdd b a Dmocratic part administration, which most olls

of votrs in mid-Octobr 2008 (two wks bfor th lctions) suggst

is likl, going b th rhtoric of Mr. Barack Obama, th Dmocratic

rsidntial candidat, it sms unlikl his administration would ush

for rsumtion of th Doha ngotiations. evn if h did, h would insist on

inclusion of labour and nvironmntal standards, which hav so far bn

kt out to WTO agrmnts, as art of th final Doha agrmnt. Th

coalition govrnmnt ld b prim Ministr Manmohan Singh of India, an

ardnt trad libralisr, could b rlacd b anothr that could b far lss

nthusiastic about furthr oning of Indias markts. Th nw euroan

Commission could b mor rsonsiv to rotctionist forcs, articularl

in agricultur in Franc and poland and som othr mmbr countris.B that as it ma, th Jul 2008 ackag sms to go a long wa

in dlivring much of what was romisd in th Doha Dclaration and

agnda b wa of scial and diffrntial tratmnt of dvloing countris

in gnral and of LDCs in articular. Whthr this and an furthr

imrovmnts in th txts will lad to thir nhancd and bnficial

articiation in world trad will dnd on what th basic constraints ar

in th first lac that rduc ffctiv articiation. Ths constraints ar

mostl in th domstic arna, rimaril of domstic olitical conom and

socit, and will not disaar vn if th Jul 2008 txts ar adotd.

evn with thir adotion, dramatic imrovmnts in trad

rformanc cannot b xctd. For xaml, WTO data show that vn

aftr th rmoval of sstmic biass against trad and th dismantling

of barrirs sinc th mid-80s, Indias shar in world mrchandis trad

incrasd b onl half of on r cnt ovr two dcads, from 0.5 r cnt

in 1983 to 1 r cnt in 2006. Morovr, in 1948, soon aftr th conclusionof GATT, Indias shar was much highr at 2.2 r cnt. Mor gnrall,

th total shar of world mrchandis trad for Mxico, South and Cntral

Amrica, th Middl east, Africa and Asia (xcluding Jaan, Australia and

Nw Zaland), which togthr broadl covr th dvloing world, was

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31.4 r cnt in 1948, 26.8 r cnt in 1983 and 35.4 r cnt in 2006.

Howvr, th trnd in ths shars of world mrchandis trad dos notrval th divrgnt trnds among sub-grous. For xaml, if w xclud

South east Asia, which has bn much mor on sinc th 1960s, and

China, which ond in 1978, th shar of th rmaindr of this grou

was 27.1 r cnt in 1948, 19.8 r cnt in 1983 and 19.6 r cnt in 2006.

World Bank data also broadl suggst a similar rcnt trnd: th shar of

low- and middl-incom countris in world mrchandis xorts incrasd

from 19 r cnt in 1995 to 30 r cnt in 2006. Howvr, xcluding east

Asia and th pacific, th shar of th rmaining countris incrasd b lss,

from 12 r cnt in 1995 to 18 r cnt in 2006. It is clar that although

th riod aftr 1980 is on of growing intgration of th dvloing world

with th world tradcrtainl it rsultd in halting th dclin in, and

has in fact raisd, th xort shar of th dvloing worldth gain in

xort shar has largl bn in China and South east Asia. Africa and

South and Cntral Amrica hav xrincd a stad dclin in thir

shar of world trad vr sinc 1948. This suggsts that othr constraintsrstrictd thm from gaining xort shars.

It is doubtful that a maningful global artnrshi for dvlomnt

xists at rsnt. Th fasibilit of vn utting on togthr is vr

difficult, for svral rasons, th rimar on bing that dvlomnt is

multidimnsional. Rasonabl ol could, and oftn do, disagr not

onl on its contnts, but mor imortantl, on th rlativ imortanc

of its man comonnts for ach of th man htrognous st of

dvloing countris. Indd on could go furthr and oint out that

th multidimnsional charactr of dvlomnt raiss roblms vn in

dfining a dvloing countr, sinc a countr could b dvlod in som

dimnsions and not in othrs. evn if thr was univrsal agrmnt on th

rlvanc and rlativ imortanc of a sub-st of dimnsions, such as thos

includd in th Millnnium Dvlomnt Goals, such agrmnt is vr

unlikl to xtnd to th actions that ach artnr should undrtak in

romoting thm. It would sm that it is futil to talk about a hothticalartnrshi for dvlomnt in all its ascts. It is bttr to start from th

ralit that man, b no mans all, dvlod and dvloing countris

(mor rcisl th govrnmnts in owr in thm) hav common intrsts

in som ascts of dvlomnt. So too hav a whol host of multilatral

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institutions, non-govrnmntal organisations (national and trans-national)

of various olitical hus. Whil it is aroriat to xloit th xistncof such common intrsts for furthring dvlomnt, it would b far-

ftchd to th oint of bing maninglss to call this a global artnrshi

for dvlomnt. Thr is no dning, howvr, that oftn a larg

numbr of such intrsts com togthr in romoting articular ascts

of dvlomnt. If this is a rasonabl aroximation of ground-lvl

ralit, on has to focus on a considrabl mor modst objctiv of how

to mak xisting grous intrstd in dvlomnt (som cohsiv nough

to b calld coalitions if not artnrshis, and othrs much loosr) mor

ffctiv. Sinc such grous ar likl to b issu-scific, it is imossibl to

mak concrt rcommndations for making thm mor ffctiv.

Th book concluds with svral rcommndations. Th World Bank

should b rconstitutd into a smallr institution that catrs onl to

th nds of thos among dvloing countris that do not hav accss

to world caital markts. Ths countris would crtainl includ LDCs

(othr than thos with trolum and natural rsourcs) and a fwothrs. A larg majorit of ths countris will b in Sub-Saharan Africa.

A similar rform of rgional dvlomnt banks, including th ossibilit

of closing ons that hav not bn ffctiv, if an, should b considrd.

Crtainl, th succsss of th IMF in its foras into structural adjustmnt

hav bn limitd. Its currnt intrusion into ovrt allviation through

rquiring pRSps as foundations for its involvmnt with a dvloing

countr is totall unwarrantd. Th rol of th IMF should b confind

to rsonsibilit for th stabilit of th global financial sstm and for

roviding advic on macroconomic, xchang rat and financial sctor

olicis to its mmbrs, through its mandatd consultation with thm

undr its Articl IV. Th wightd voting in th dcision-making of th

IMF and World Bank nds to b rformd bond what was accomlishd

rcntl in Aril 2008. Th outmodd convntion that th US nominats

th rsidnt of th World Bank and th eU nominats th managing

dirctor of th IMF should b abandond in favour of a choic mchanismthat rsults in th most qualifid candidats bing aointd.

Th rform issus rlating to th WTO ar lss comlicatd than

thos rlating to th World Bank and th IMF. As long as th convntion

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31OV eR V IeW

that its dcisions will b mad b consnsus continus, with vr

mmbr having an qual voic in rincil in its imortant dcisions, itsadvic otntiall has gratr crdibilit, rovidd that voic is xrcisd.

Howvr, xrcising such a voic rquirs caacit in svral dimnsions,

which LDCs in articular lack. Caacit constraints in LDCs rstrict not

onl thir ffctiv articiation in th WTO, but also thir intraction

with othr intrnational institutions and th rst of th world. Caacit

building is firml on th agnda of th WTO, with svral rich countris

alrad contributing rsourcs for th ffort. Caacit-building fforts hav

to b multidimnsional and th assistanc to such fforts has to b much

broadr-basd than in th WTO or World Bank onl. Again, such assistanc

has to b coordinatd, focusd and flxibl to rsond aroriatl to th

normous divrsit of th LDCs.

Th bod that maks th ruls of th WTO is th ministrial

confrnc. Changs in xisting ruls mrg out of th agrmnts

concluding ach round of multilatral trad ngotiations. Not onl ar

th rounds initiatd aftr long intrvals of tim, but onc initiatd,ach round can tak a long tim to conclud. With no quivalnt of a

arliamnt or lgislatur that maks laws, amnds thm and rals thm

whr aroriat, WTO ruls could rmain on th books for a long tim

aftr th hav bcom irrlvant or ar in urgnt nd of amndmnt. A

wa out of this, such as making th WTO Council (in which all mmbrs

ar rrsntd) a lgislativ bod and rhas rstricting th consnsus

convntion onl to such dcisions that th Council dms aroriat

should b considrd. Th ultra lgalistic disut sttlmnt mchanism

of th WTO was a drastic shift from th olitical on of GATT. Th WTO

lgalistic sstm in ffct naliss th oorr mmbrs of th WTO, which

hav limitd caabilit to idntif violation of commitmnts b othrs and

argu thir cas bfor th anls and allat bodis. Going back to th

GATT sstm, although it has its own roblms, ma b bttr from th

rsctiv of LDCs and othr oor mmbrs of th WTO. This is worth

considring.Th attmts to us multilatral trad agrmnts as dvics to

intrud into non-trad-rlatd domstic rgulator arnas bgan at th

WTO Singaor Ministrial Confrnc of 1996. Ths domstic rgulator

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issus, sinc thn known as Singaor Issus, includ invstmnt,

comtition olic and transarnc in govrnmnt rocurmnt andtrad facilitation. Ths issus should rmain outsid th WTO.

Rgional and othr rfrntial trad arrangmnts (pTAs) hav bn

suggstd as a wa for LDCs, articularl SIDS and SVS, to ovrcom

constraints on thir intgration with world trad. It is claimd that

contmorar pTAs go bond trad libralisation and involv dr

intgration of mmbrs in othr aras, including in articular invstmnt

and tchnolog transfr. Th mirical vidnc on th bnfits from pTAsis contradictorth conclusions dnd on th mirical mthodolog,

databas usd and th countris and tim riods includd in th analsis.

Th ambiguous mirical vidnc and th strong thortical rsumtion

in favour of multilatral, rathr than rfrntial, trad libralisation,

togthr strongl suggst that LDCs should avoid gtting into pTAs and

conomic artnrshi agrmnts (epAs). Rich countris of an global

artnrshi for dvlomnt should not offr such disabling pTAs and epAs

with non-trad rovisions to th dvloing countris of th artnrshiand to rsuad thm not to ntr into ons offrd b othrs. Th

artnrshi should focus its fforts xclusivl on multilatral agrmnts

and work towards concluding th Doha Round satisfactoril and soon.

Th WTO should rmain an organisation whos mmbrs consist onl

of nation stats (or grous of thm) and indndnt customs aras within

stats (.g., Hong Kong). Th somwhat hatd dbat on th so-calld

dmocratic dficit in WTO is fundamntall dvoid of contnt. As longas univrsalit of mmbrshi of th WTO is th goal, as in th Unitd

Nations, an stat willing to undrtak th obligations of mmbrshi in

th WTO should b fr to al for mmbrshi. Ths obligations ar

mostl in th arna of trad, and aris from various agrmnts to which

th mmbrs ar artis. extnding th obligations to th olitical arna of

dmocratic articiation in ach mmbr stat is inaroriat.

A concrn has bn xrssd about rfrnc rosion arising

from th fact that rfrntial accss b wa of lowr tariffs alicabl

to xorts from dvloing countris has bcom lss valuabl as tariff

barrirs in thir xort markts fall. Th valu of th rfrncs, such as

th Gnralisd Sstm of prfrncs (GSp), is vastl xaggratd. Givn

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33OV eR V IeW

th dismal xrinc with GSp, rtaining it and linking th lvls of

rfrntial accss to tariff lvls in xort markts is countrroductiv.It would blunt th incntivs of dvloing countris to rduc th highr

domstic costs that limit thir xorts. Ths high costs wr th rational

for tariff rfrncs in th first lac. An global artnrshi should focus

on rducing ths costs rmanntl through ffctiv suort for caacit-

building fforts in th LDCs, rathr than rtuat th countrroductiv,

rfrntial accss through GSp.

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Introduction

It is widel presumed and perhaps accepted that countries in overlapping

groups of least-developed countries (LDCs), landlocked developing countries

(LLDCs), small island developing states (SIDS) and small vulnerable states(SVS) face special problems and challenges in a world econom that is

increasingl integrated in trade of goods and services, technolog, finance

and movement of people and ideas. The United Nations Office of the

High Representative for the LDCs, LLDCs and SIDS (UN-OHRLLS) was

established b the UN General Assembl in 2001. It lists 49 countries as

LDCs and provides data on them1 (www.un.org/special-rep/ohrlls/ldc/list.

htm, accessed 28 Jul 2008). Table 1.1, below, gives the composition of

LDCs, LLDCs and SIDS along with their overlap. Although the UN-OHRLLS does not list SVS, their composition can be put together from

the communiqu of the ministerial meeting in 2005 of small vulnerable

economies (SVEs) that are members of the WTO (WT/MIN105/22). There

are 24; surprisingl, none of them are in the list of LDCs compiled b the

UN-OHRLLS.

Around 2005, the countries in each of these groups varied enormousl

in terms of the size of their populations, levels of their gross nationalincome (GNI) per capita in nominal and purchasing power parit (PPP)

exchange rates, growth rates of GNI per capita, and their integration

with the world econom (Tables 1.2, 1.3, 1.4 and 1.5). For example, other

than (objectivel speaking) all of them being landlocked (or islands), the

LLDCs (or SIDS) are so heterogeneous in other characteristics, some of

which are subjective, that one might legitimatel raise the issue whether

the constitute meaningful groups for analtical purposes and for polic

formulation. The criteria for admission to or graduation from the group ofLDCs also raise analtical issues, which are discussed in Sections 3.1 and

3.2.

1. Prior to April 15, 2008 there were 50 LDCs. In 2007, Cape Verde graduated from being an LDC.The graduation of Samoa was due to be decided in 2008.

1

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36 T R A D E , G R O W T H A N D P O V E R T y R E D U C T I O N T. N . S R I N I V A S A N

Table 1.1

Composition of LDCs, LLDCs and SIDS

Geographical Region LDCs LLDCs UN Membership SIDS

I. Africa 33 15 I. UN members 37

of which LLDCs 12 12 of which LDCs 11

SIDS 3 - Small vulnerable states 16

II. Asia 15 10 II. Non-UN members 14


SIDS 7 - Small vulnerable states 0

III. Latin America & The Caribbean 1 2 TOTAL 51


SIDS 1 - SIDS -

TOTAL 49 27 Small vulnerable states 16

of which LLDCs 15 15

SIDS 11 -

SVS 0 0

Sources: (i) LDCs www.unohrlls.org/en/ldc/related/62 [accessed 28 Jul 2008]

(ii) SIDS www.unohrlls.org/en/sids/44/ [accessed 30 Jul 2008]

(iii) LLDCs www.unohrlls.org/en/lldc/39/ [accessed 30 Jul 2008]

The notable feature of the data in Tables 1.2-1.5 is the obvious

diversit among LDCs around 2005: their populations var from 100,000

in Kiribati to 156 million in Bangladesh, and their gross national income

per capita at PPP exchange rates var from $260 in Liberia to $8,5102 in

Equatorial Guinea. Their integration into world trade is ver modest (on

average) and except for natural resource-based economies, integration in

world investment flows is modest as well. These features are important

for analsing the feasibilit of these countries further integration with the

world econom, and the potential contribution the rest of the world could

make for ameliorating their special problems, meeting their particular

challenges and reducing their vulnerabilit.

Table 1.1 shows that 33 out of 49 LDCs and 15 out of 27 LLDCs

(though onl 5 out of 37 SIDS who are members of the UN) happen to be

in Africa, including islands off its coast. This fact raises the causal questionof whether the particular problems of LDCs and LLDCs are largel due to

their African location or is it the other wa around, so that some, if not

most, of the development problems of African countries arise from man

2. Data from: www.unohrlls.org/EN/SIDS/WW/

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37I N T R O D U C T I O N

of them being LDCs and/or LLDCs. Unfortunatel most of the empirical

analses based on cross-countr regressions reported in the literature aredescribed at best as analses of association or correlation, rather than

of causation, and therefore, do not establish or reject one or both these

causal mechanisms. In his well-received best seller Paul Collier (2007: 99)

argues that a group of countries with nearl a billion people have been

caught in one or other of four traps: conflict trap, the natural resource

trap, trap of being landlocked with bad neighbours and the trap of bad

goveranceFrom time-to-time the have broken free of the traps, but the

global econom is now making it harder for them to follow the path taken

b the more successful majorit. As a result, even when free of traps the

sit in limbo, growing so slowl that the risk falling back into the traps

before the reach a level of income that ensures safet. Collier does tr to

use econometric techniques for addressing the issue of two-wa causation.

Without delving deep into his analsis, it could be argued that of some of

the traps, such as the natural resource trap, are not inevitable as a trap,

but depend on the polic response to resource availabilit. Since some ofthe characteristics of LLDCs or SIDS are often claimed to be in the nature

of traps, the relevance of Colliers analsis for them is evident.

Table 1.2

Least-Developed Countries

Country Value

Population Min. Kiribati 0.1(2006, in millions) Max. Bangladesh 156

GNI per capita Min. Burundi 100(2006) Max. Equatorial Guinea 8,510

PPP GNI per capita Min. Liberia 260(2006) Max. Equatorial Guinea 16,620

Growth GDP per cap. Min. Equatorial Guinea -7.8(2005-06) Max. Maldives 21.5

Trade: merchandise Min. Central Afr Rep 24.1(2006, as % of GDP) Max. Lesotho 144.5

Trade: services Min. Bangladesh 5.9

(2006, as % of GDP) Max. Gambia 36.4FDI: net inflow Min. Liberia -13(2006, as % of GDP) Max. Equatorial Guinea 19.3

FDI: net outflow Min. Guinea-Bissau -2.8(2006, as % of GDP) Max. Angola 0.4

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Table 1.3

Small Vulnerable Economies

Country Value

Population Min. St Kitts and Nevis 0.048(2006, in millions) Max. Guatemala 13

GNI per capita Min. Solomon Islands 690(2006) Max. Trinidad & Tobago 12,500

PPP GNI per capita Min. Papua New Guinea 1,630(2006) Max. Trinidad & Tobago 16,800

Growth GDP per cap. Min. Grenada -0.8

(2005-2006) Max. Trinidad & Tobago 11.6

Trade: merchandise Min. Guatemala 50.8(2006, as % of GDP) Max. Guana 166

Trade: services Min. Guatemala 8.7(2006, as % of GDP) Max. Mauritius 47.2

FDI: net inflow Min. Papua New Guinea 0.6(2006, as % of GDP) Max. St Kitts and Nevis 42.3

FDI: net outflow Min. Trinidad & Tobago -2.3(2006, as % of GDP) Max. Jamaica 0.9

Table 1.4

Landlocked Developing Countries

Country Value

Population Min. Montenegro 0.601(2006, in millions) Max. Ethiopia 77

GNI per capita Min. Burundi 100(2006) Max. Botswana 5,570

PPP GNI per capita Min. Zimbabwe 170

(2006) Max. Botswana 11,730Growth GDP per cap. Min. Zimbabwe -6(2005-2006) Max. Azerbaijan 33

Trade: merchandise Min. Central Afr. Rep 24.1(2006, as % of GDP) Max. Swaziland 160.9

Trade: services Min. Zambia 8.3(2006, as % of GDP) Max. Mongolia 32.2

FDI: net inflow Min. Azerbaijan -2.9(2006, as % of GDP) Max. Serbia 16

FDI: net outflow Min. Rwanda -0.6

(2006, as % of GDP) Max. Azerbaijan 3.6

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Table 1.5

Small Island Developing States

Country Value

Population Min. Palau 0.02(2006, in millions) Max. Cuba 11

GNI per capita Min. Guinea-Bissau 190(2006) Max. Singapore 28,730

PPP GNI per capita Min. Guinea-Bissau 460(2006) Max. Singapore 43,300

Growth GDP per cap. Min. Timor-Leste -6.7

(2005-2006) Max. Maldives 21.5

Trade: merchandise Min. Haiti 44.5(2006, as % of GDP) Max. Singapore 386.2

Trade: services Min. Trinidad & Tobago 9.5(2006, as % of GDP) Max. Singapore 91.6

FDI: net inflow Min. Tonga -0.91(2006, as % of GDP) Max. St Kitts and Nevis 42.3

FDI: net outflow Min. Guinea-Bissau -2.8(2006, as % of GDP) Max. Singapore 6.5

Several international meetings have been held and declarations made

at their conclusion on LDCs, SVS and SIDS, and international agencies

publish reports on these countries periodicall. For example, the United

Nations Conference on Trade and Development (UNCTAD) publishes

reports on LDCs, the most recent one being in 2008. The Commonwealth

Heads of Government Meeting (CHOGM) held in Malta during 25-

27 November 2005 made a statement on SVS, which inter alia stated

Small states have well-recognised vulnerabilities, and the are nowconfronted b new challenges. These include faster-than-anticipated

erosion of preferential trade access arrangements; rapidl growing debt

burdens; additional responsibilities and compliance costs associated

with global efforts to combat terrorism; increased environmental risks

associated with more frequent and severe natural disasters; the spread of

HIV/AIDS and its impacts; and rising levels of outh emploment (see:

http://www.thecommonweath.org/Template/Internal.asp?nodiID=1, accessed 28

Jul 2008). The statement acknowledges earlier declarations and reports,such as Mauritius International Meeting of Januar 2006 and its Mauritius

Strateg for SIDS and the Commonwealth Secretariat/World Bank Task

Force Report of 2000.

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A ministerial conference of landlocked and transit developing

countries and donor countries and international financial and developmentinstitutions on Transit Transport Cooperation was held in Almat,

Kazakhstan, from 25-29 August 2003. It adopted the Almat Declaration

and the Almat Programme of Action. Predictabl, the action programme

emphasised polic improvements relating to customs bureaucrac, fees

and delas at borders of the landlocked countries, improvement in

transportation infrastructure, more trade preferences, and technical and

financial assistance for landlocked countries.

The Mauritius Declaration of 2005 on SIDS noted that the

implementation of the programme of action for sustainable development

of SIDS, adopted at Barbados 10 ears earlier, was disappointing at best,

having run into several problems due to inadequate internal cooperation,

external resources and technolog. Although the SIDS had done their part,

their activities were hampered b the same problems, as well as their own

capacit limitations to undertake what was needed to be done. The absence

of sufficient international awareness of the specific social, economic andvulnerabilities of SIDS was a serious matter of concern. Noting that major

challenges identified at Barbados still remained, while new challenges such

as AIDS have emerged, it concluded that the agenda for SIDS has become

even more urgent and daunting, but also that good progress was possible

with crucial partnerships with regional organisations and civil societ, and

essential involvement of the private sector.

In 2001, the Third United Nations Conference on LDCs in Brusselsadopted a programme of action for the least-developed countries for the

decade 2001-2010. Its progress was reviewed in 2006 b UN-OHRLLS. A

statistical profile on measuring progress in the LDCs was published in the

same ear jointl b UN-OHRLLS and the World Bank (World Bank, 2006).

The author has drawn on the data and other information in this and the

reports cited earlier.

The Doha Ministerial Declaration (WT/MIN(01)/DEC/1) of 14

November 2001 that launched the Doha Round (or the Doha Development

Round) in paragraph 35 on small economies agreed to a work programme

to examine issues relating to small economies with an objective to frame

responses to the trade-related issues identified for the full integration of

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small vulnerable economies into the multilateral trading sstem and not to

create a subcategory of WTO members (emphasis added).

Paragraphs 42-44 of the Doha Declaration dealt with LDCs and

acknowledged the seriousness of the concerns expressed b the least-

developed countries (LDCs) in the Zanzibar Declaration adopted b their

ministers in Jul of 2001; recognised that the integration of LDCs into

the multilateral trading sstem requires meaningful market access, support

for the diversification of their production and export base and trade-related

technical assistance; endorsed the Integrated Framework for Trade-RelatedTechnical Assistance to Least-Developed Countries (IF) as a viable model

for LDCs trade development; reaffirmed that provisions for special and

differential treatment are an integral part of the WTO; and agreed that

all special and differential treatment provisions shall be reviewed with a

view to strengthening them and making them more precise, effective and

operational. Apart from these specific paragraphs relating to LDCs and

SVS, other paragraphs relating to development are also relevant for these

countries. Section 5 returns to the questions of how far the protracted andet-to-be-concluded negotiations over six ears of the Doha Round have

met the goals set in the declaration of 14 November 2001 at Doha.

Several volumes (as well as numerous individual papers) on the special

problems of LDCs and island economies, and the vulnerabilit (and indexes

of measuring it) of small economies, have been published in a literature

that extends back several decades. A comprehensive bibliograph is not

provided in this book. However, a few recent publications that were foundmost useful in writing this book and which also include references to and

analses of the findings in the literature are UNCTAD (2006); Briguglio

et al. (eds., 2006); Briguglio and Kisanga (eds., 2004); Grnberg (2006);

Kisanga and Danchie (2007); Winters and Martins (2004); and Commission

on Growth and Development (2008).

The terms of reference (TOR) to this book were:

1) To assess the impact of the failure of the Doha Round negotiationson LDCs and small vulnerable states and the prospects for achieving

their enhanced and beneficial participation in world trade.

2) To discuss the scope of cooperation between developed and

developing (including least-developed) countries, apart from

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multilateral trade talks and regional trading arrangements, in order

to strengthen the link between trade, growth and povert reductionin the developing world.

3) To identif the scope for and measures that ma be adopted b

developed and the more advanced developing countries for plaing a

fuller and more effective role to advance growth and development in

the rest of the world (particularl in the poorer world), i.e., beond

their national borders and regional economic groupings.

4) Based on the above, to formulate recommendations for making theglobal partnership for development more effective.

These TOR are wide ranging in their scope, both in terms of countr

groups (SVS, LDCs and developing countries in general) and in terms

of topics (world trade, growth, povert reduction and development in

general). Different sections of the book address different TOR. The first

TOR is more of a factual assessment of the current state of the Doha

Round negotiations, since the negotiations have not been formall declared

to have failed as et. For meeting the other three, one has to have some

coherent framework for considering, first, the possible mechanisms of

the interaction of trade, growth and povert reduction in the developing

world on the one hand, and their presence or absence as well as their

strength in the specific context of the LDCs on the other; and second,

the scope for public polic at national and international levels. Since the

observed development, growth, povert and trade outcomes are the result

of domestic and international policies (economic, political and social) andnatural as well as other resource endowments, without a coherent framwork

it is impossible to sort out the issues involved, particularl the issue of

identifing causation from association. In what follows, Section 2 explores

issues relating to a possible framework. This section reviews liberalisation

of foreign trade as one component of a broader process of integration into

the world econom of developing countries in terms of their trade in goods

and services, in investment, in finance, in technolog flows and in terms

of migrations. This process usuall, though not precisel, is summarisedb the word globalisation. Section 3 is devoted to the institutional and

other relevant contextual features of LDCs. In particular, it will attempt

to distinguish between those features that might be reasonabl viewed

as exogenous and upon which the policies have no influence, and those

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that are endogenous and amenable to influence b policies. Also, where

appropriate, distinction will be drawn between national (and also pureldomestic policies of the national government) and international policies

(and those that are not domestic, e.g., trade, exchange rate and foreign

capital flow policies of the national government). In Section 4, the author

addresses the second and third terms of reference. Section 5 is devoted to

an assessment of the current state of the Doha Round (the first TOR).

Section 6 concludes the book b responding to the fourth and last TOR.

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Tra, Grwth aPrt Rti

Glbalisati is w th wil-s wr t srib th prss r

tim f th itgrati f iiial mis with th wrl m,thrgh itratial tra i gs a sris, itratial flws f

apital, fia a kwlg (ilig thlg). It is wil, thgh

t irsall agr, that thr wr tw was f glbalisati, th

first with Wrl War I a th s start at th f Wrl

War II, whil th ars i btw wr s f ati-glbal baklash

(Williams, 2002).

Th ahimt f th first wa, bfr it with th tbrakf th First Wrl War i Agst 94, was lqtl srib b Jh

Maar Ks (albit frm th prspti f a ppr-lass Lr).2

Ks was rfrrig t l t frm t tra i gs, bt als t

gag i frig istmt i qitis a bs, a frm f tral

(bth fr plasr a wrk, tmpraril a prmatl, althgh

h i t xpliitl mti this aspt). Ks mphasis that ths

frms wr m rmal, rtai a prmat, a xpt

. This haptr raws hail Sriiasa a Wallak (2004).

2. What a xtrariar pis i th mi prgrss f ma that ag was whih amt a i Agst 94! Th ihabitat f L l rr b tlph, sippig hismrig ta i b, th aris prts f th whl arth, i sh qatit as h might sfit, a rasabl xpt thir arl lir p his rstp; h l at th sam mmta b th sam mas atr his walth i th atral rsrs a w trpriss fa qartr f th wrl, a shar, witht xrti r trbl, i thir prspti fritsa aatags; r h l i t pl th srit f his frts with th g faithf th twsppl f a sbstatial miipalit i a tit that fa r ifrmatimight rmm. H l sr frthwith, if h wish it, hap a mfrtabl masf trasit t a tr r limat witht passprt r thr frmalit, l ispath his

srat t th ighbrig ffi f a bak fr sh sppl f th pris mtals as mightsm it, a l th pr abra t frig qartrs, witht kwlg fthir rligi, lagag r stms, barig i walth p his prs, a wl sirhimslf gratl aggri a mh srpris at th last itrfr. Bt, mst imprtat fall, h rgar this stat f affairs as rmal, rtai a prmat, xpt i th irtif frthr imprmt, a a iati frm it as abrrat, saals a aiabl(Ks, 99).

2

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46 T R A d e , G R o W T H A n d P o v e R T y R e d u c T I o n T. n . S R I n I v A S A n

t impr, rsrs th fat that th abrpt t ths frms

rig th itr-war pri was t at all atiipat. Th attmpts aftrth S Wrl War t rstr thm s l partiall, with

migrati, fr xampl, t t fr a likl t b fr i th ar

ftr. Hwr, it is als imprtat t t that, fr xampl, tw f

th wrls largst lpig tris (i trms f pplati a th

mbr f pr), chia a Iia, ha s i raisig millis

f ppl ab thir mst prt lis only since bth bga takig

aatag f aailabl pprtitis b itgratig thmsls with wrl

markts. Thir xpri a that f thr tristhat glbalisati

has b assiat with alrati i thir grwth a with prt

rtis t ssaril impl that thr is a asal lik btw

glbalisati, grwth a prt rti. It is srpris, thrfr,

that istigish mists (.g., Jagish Bhagwati a Jsph Stiglitz)

as wll as pli-makrs l b f assrtig r qstiig th lik.

distigishig mr assiati frm pr asati rqirs a

apprpriat thrtial a mpirial framwrk r ml fr sralrass. Sral plasibl liks i th glbalisati-grwth-prt

rti hai a b pstlat i thr, t th ralit is far mr

mpliat a ma liks l b abst i sm tris at sm

pits i tim. Agr (2003), fr xampl, fis that glbalisati ma

ha a u-shap fft prt: whil xtsi itgrati rs

prt, small amts f glbalisati ma hrt th pr.3 e i thr,

t all liks b iirtialths, it is pssibl that i sm

liks, glbalisati ifls grwth psitil, bt th haratr f that

grwth irass prt. This big th as, it is as gh t blam

th prss f glbalisati fr a bsr r imagi trirati

i th iti f th pr, rathr tha lk fr th missig liks r fr

thr fatrs that l ha mt r twigh th bfiial ffts

f glbalisati. It is qall as t arg that bsr tms iat

frm glbalisatis prit tribtis t prt rti l

bas glbalisati has t g far gh. B fsig sltil sm aspts f glbalisati, whil igrig that thr prsss bsis

3. Th papr prsts a arit f thrtial rass fr this fiig. Th mpsit ix fglbalisatia wight arag f tra a fiaial pssis iffilt t itrprt,hwr, i th txt f his rss-tr st.

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47T R A d e , G R o W T H A n d P o v e R T y R e d u c T I o n

glbalisati l xplai th bsr tms, it is pssibl t assrt

r th rl f glbalisati.4

I thr, gratr itratial itgrati shl pla a imprtat

part i rig prt ar th wrl. I prati, it has ha mix

ffts t msti pli shrtmigs, ti istrial tr

prttiism a limit labr-markt itgrati arss tris.

Ma f th was i whih glbalisati is pri as harmfl t th

pr ar t itrisi aspts f glbal itgrati. Th rflt, rathr,

msti pli failrs sh as sgmt a istrt itral markts,as wll as istrial tr prttiism a limit labr-markt

itgrati arss tris.

T srt t th isss i a sstmati fashi, th fllwig isssi

is ii it fr sbstis: (i) glbalisati a grwth; (ii) grwth

a prt rti; (iii) glbalisati a prt rti; a (i)

glbalisati fr th pr. Th first sbsti smmariss th rlig

thr a mpirial i fr th glbalisati-grwth likag, whil

th s issss mpirial i fr th ti btw grwth

a th prt rti sq. Whil thr ar ma mhaisms i

thr fr xptig gratr itgrati t iras grwth a r

prt, th thr is t witht aats a th mpirial i is

t lsi. Th fft f glbalisati iqalit, i partilar, is

ambigs. Th thir sbsti pris a ptal aalsis f hw

glbalisati l b xpt t r prt b rig markt

istrtis that isprprtiatl afft th pr. It is arg i thlast sti that rmaiig istrial tr prttiism, partilarl

i agriltr, as wll as ti rstritis itratial labr

mbilit ar k aras fr rfrm.

This iisi simplifis th isssi f th ffts prit b

mi thr a th pli hags t ahi ths ffts.

Thr ar larl aitial liks amg th thr phma, a all thr

ar gs tms f th arig mi a sial prsss i

th tris aals.

4. darrff (2003) gs s far as t sggst that glbalisatis ritis ar mtiat b a iffrtrstaig f hw th wrl wrks as mpar t th rstaig glbalisatisspprtrs ha.

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48 T R A d e , G R o W T H A n d P o v e R T y R e d u c T I o n T. n . S R I n I v A S A n

Fr mst f this bk, th athr fis th pr as ths whs

im r staar f liig is blw what th sit i whih th lims a miimm that all its mmbrs ght t ha. Ths staars

ar wil arss atis a th prst i a rih tr ma b wll-

ff frm th prspti f a arag prs i lwr-im tris.

Th athr fss ths whs rsrs ar blw tr-spifi

prt lis, rathr tha ths blw a glbal prt li (sh as $ a

a), bas th lattr prt li sffrs frm sris ptal a

masrmt prblms.

Th athr als istigishs hr btw abslt prt a

rlati priati, r iqalit. Iqalit a ris, as th mbrs

i abslt prt li. urstaig glbalisatis ffts

rlati priati is imprtat fr rstaig sm f th bstals

t frthr itgrati, bt th fs hr is hw glbalisati affts

atial prt.6

2.1 Globalisationand Growth

Th trms glbalisati a grwth lmp tgthr sral iffrt

phma. Glbalisati i its mprhsi ss ils apital

markt itgrati, gs a sris markt itgrati, migrati

agrmts a ltral itrhag, r sm mbiati f all f ths.

This bk rfrs t ths sparatl. It similarl istigishs btw

frms f grwth i th isssi f thr, thgh th mpirial sti

s t istigish btw sta stat (lg-r) grwth, a grwthrig trasitis t a sta stat.

. opratiall, this sial miimm is ft itifi with th al f a spifi bl fgs a sris that a b btai thrgh hm prti, markt prhass apbli prisis. dfiig a prt bl fr iiials is iffilt gh, bt xtigth fiiti t hshls with ma mmbrs a iffrig ag-sx mpsitis is fraghtwith aitial iffiltis. valati is als iffilt: dat (200), fr xampl, shws thatsig a pri ix bas pris atall pai b hshls rathr tha a ffiial smrpri ix, rs th mbr f th pr (as masr b th prprti f th pplatismig lss tha th prt li) i rba Iia i 999-2000 frm ar 24 milli t8 milli.

6. Mr grall, hwr, th ffts f prt hma wll-big il ppls fligsf priati rlati t ths ar thm. S (98, chaptr 2) issss ths a thrpts f prt. Tibrg (97) lg ag sggst that th itsit f ppls fligsabt what thrs ar thm ar smig as mpar t thir w smpti lafft thir wlfar.

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49T R A d e , G R o W T H A n d P o v e R T y R e d u c T I o n

2.1.1 Theory

Thr ar sstiall thr srs f mi grwth: grwth i ipts

f prti; imprmts i th ffii f allati f ipts

arss mi atiitis; a iati that rats w prts,

w ss fr xistig prts r brigs abt mr ffiit s f

ipts. Th mbiati f hags i ths thr imsis that brigs

abt highr lg-r grwth (as pps t shrt-r trasiti ffts)

ps th ms haratristis. Whthr r t a hag i

rat f amlati f a fatr f prti r th ffii f fatrallati, fr xampl, has lg-r r l trasitial ffts grwth

ps i part th thlg f prti. A xgs hag

i th rat f istmt r pig th m t frig tra has

l a trasitial fft grwth i a tw-fatr (apital a labr)

stat-rtrs-t-sal grwth ml if th margial prt f apital

lis t zr as apital irass ifiitl rlati t labr. o th

thr ha, if th thlg is sh that th margial prt f apital

is b awa frm zr, trasitial as wll as sta-stat grwthffts l aris frm a xgs hag i istmt r frig

tra pli (Sriiasa, 99).

Big p t tra a istmt tribts t ah f th thr

srs f grwth. dmsti rsrs ar allat mr ffiitl wh

th m a spialis i ths atiitis i whih it has mparati

aatag. B big p t apital, labr a thr rsr flws, a

m is abl t agmt rlatil sar msti rsrs a spart f its abat rsrs lswhr, whr th ar a highr rtr.

clarl, ffii f rsr s i ah ati a arss th wrl is

ha b th frm f mmt f rsrs. Fiall, th frits f

iati awhr i th wrl bm aailabl rwhr i sh

a p wrl. empirial stis (.g., cet al., 998) sggst ttal fatr

prtiit (TFP) i pr tris, whih t ha msti R&d

apaitis, is highr wh thir tra with istrialis tris (wh

at fr th blk f R&d i th wrl) is gratr.

Thr als sggsts t

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