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International Trade, Capital Flows Notes

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INTERNATIONAL TRADE, CAPITAL FLOWS 'Developing countries at Doha' Panagariya 2002

The DOHA documents: o 'Declaration on the TRIPS Agreement and Public Health
 'Agreement allows member governments to authorise third parties to produce a patented product through the so called 'compulsory licences' to satisfy local needs.'
 'weakens the conditions under which member governments can issue compulsory licenses.' o Decision on implementation - related issues and concerns.
 'In most cases, the measures take the form of 'taking note' or 'best endeavour' clauses' e.g. Antidumping, technical barriers to trade, rules of origin
 Doha decision ''urges' members to exercise restraint in challenging measures notified under the green box by LDCs to promote rural development and adequately address food security concerns.'

'clearly a 'best endeavour' provision that may bring additional moral pressure on MDCs at the margin but has no legal standing.'
 Agreement on Textiles and Clothing (ATC)

MDCs should aim to eliminate quota restrictions

'should exercise particular consideration before initiating AD investigations of textile exports from LDCs'

Notify any changes in their rule of origin.
 'Moral forces is all LDCs have to enforce compliance.' o Ministerial declaration
 Agenda with a clear negotiating mandate




Non-agricultural products
- 'promises to 'take fully into account the special needs and interests of LDCs, including through < full reciprocity in reduction commitments.'

Trade and environment
- First time it is brought into the negotiations agenda
- 'Fortunately, the negotiating mandate in the Declaration is quite limited and unlikely to damage the interests of LDCs significantly.'

'the Declaration calls for technical assistance to aid capacity building in LDCs through a variety of mechanisms, agencies and forums.'

'enhance the capacity of the multilateral trading system to contribute to a durable solution to the problem of external indebtedness of LDCs' Working group set up to....aid to ↑flows of technology

'Few LDCs reject the +ve role that trade facilitations to LDC's transparency in government procurement and investment and competition policies can play in the process of development.'

Why do LDC's object to multilateral agreements on investment?
o Political constraints - hierarchy of sectors:


'trade is easier to liberate than investment, which is easier to liberalise than labour.'
- Goods trade is easier to liberalise than services trade
- FDI is easier to liberalise than portfolio investment.
- Opening to immigration of skilled labour is easier than unskilled labour
- 'politics demands discretion in how investment liberalisation proceeds.'
- LDCs have been much more reluctant to make binding commitments in services than in goods. o Before they commit, they should be reasonably sure that benefits of a future agreement outweigh the risks of trade sanctions.
- 'Unlike goods, which they export as well as import, on the investment front, they are only importers.'

So 'under an investment agreement they will be making binding commitments without receiving anything in return.'

E.g rate of return on I in China is 10% and in EU is 5%

If EU capital → China, it appropriates the excess return. 'While China also benefits from the inflow in many ways, should it nevertheless give up its right to tax away a part of the extra 5%
o 'many LDCs lack the capacity to negotiate effectively on a wide ranging agenda.'
- 'often too many competing objectives chase a tiny pool of such resources,' o 'some LDCs fear that they will fail to implement the negotiated agreements in a timely fashion and be left exposed to the risk of trade sanctions.' 'Some truth in the complaint though the imbalance has perhaps been overstated and benefits from trade liberalisation to LDC's somewhat understated.' Uruguay Rounds - LDCs short changed?
o Expected 'to deliver significant ↑ market access for farm products of its member countries' → expectation was not realised. o 'views as unbalanced' - 'in the area of market access in industrial producers, LDCs committed to cutting their tariffs more deeply than MDC's.' o 'in new areas such as intellectual property, LDCs are required to adopt standards already prevalent in MDCs'
- 'Since much of the innovating activity is concentrated in MDCs, LDCs stand to pay potentially large sums of royalties to them.'
- Due to lack of public resources 'the patents can effectively deny them access to life saving medicines altogether.' o 'Some may even assert that on net the UK Agreement actually hurt the interests of LDC.'
- 'But such a conclusion is unwarranted.'
- 'While the balance of benefits was in favour of MDCs reflecting their greater bargaining power, LDCs made significant gains as well.'

↓ domestic inefficiencies and stimulates growth

'in so far as MDCs import much more in absolute terms, the absolute market access given by them by a 1% tariff cut is > a 1% cut in tariffs by LDCs.'
- 'If the eventual goal of the negotiations is to achieve worldwide free trade, which amounts to average reciprocity, LDCs must necessarily liberalise more at the margin.'
- 'In addition, to the administrative costs of meeting new obligatory outcomes in these areas are not necessarily mutually beneficial.'

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