interamerican development bank integration and trade sector
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INTERAMERICAN DEVELOPMENT BANK Integration and Trade Sector. The trade and poverty nexus in Latin America. PAOLO GIORDANO. LATN Plenary Meeting Buenos Aires - November 17, 2008. In Latin America anxiety is eroding the consensus for trade integration. - PowerPoint PPT PresentationTRANSCRIPT
INTERAMERICAN DEVELOPMENT BANKINTERAMERICAN DEVELOPMENT BANK Integration and Trade SectorIntegration and Trade Sector
The trade and poverty nexus in Latin AmericaThe trade and poverty nexus in Latin America
LATN Plenary MeetingBuenos Aires - November 17, 2008
PAOLO GIORDANO
In Latin America anxiety is eroding the consensus for trade integration...
Source: Latinobarometro (different years)
60%
65%
70%
75%
80%
85%
90%
95%
100%
1996 1997 1998 2001 2002 2005
LAC: ATTITUDES TOWARD TRADE INTEGRATION (% Population in Favor)
... and in the developed economies there is a perception that free trade should be more pro-poor
Source: The German Marshall Fund (2006)
0% 20% 40% 60% 80% 100%
Believe that poor countries benefit from free trade
Agree to promote free trade with poor countries
Agree to provide assistance to poor countries
EuropeUSA
75%
72%
77%
75%
70%
56%
Outline
1. Trade and Poverty: an elusive question ?
2. Transmission Channels
3. Empirical Evidence in LAC
4. Toward a Policy Agenda
5. The LATN proposal
The trade and poverty debate:
a dialogue of the deaf when terms are not well defined
Trade: Free trade vs. globalization Technological change, FDI, capital flows, migrations, etc. Trade policy measures vs. trade outcomes
Poverty: Poverty vs. inequality Relative vs. absolute measures (national and global)
Monetary measures vs. basic needsMeasurement issues
Necessary to clearly define the variables under analysis
Outline
1. Trade and Poverty: an elusive question ?
2. Transmission Channels
3. Empirical Evidence in LAC
4. Toward a Policy Agenda
5. The LATN proposal
Prices
Employment
Government/ Fiscal Policy
Wages/ Salaries
Consumption
Consumption/ Income
Consumer or producer?Weight in consumption basketMarket structure (comp, olig, mono)Are markets integrated?
Labor mobility?Skills of householdsFull employment or unemployment?Levels of informalityPrivate sector competitiveness
Fiscal dependence on trade tariffs Is tax reform progressive or regressive?Are social safety nets in place?
Transmission channels of standard trade theory do not work as expected in LAC
Overall, standard theory does not tell the whole story
Initial conditions: Labor-intensive sectors enjoyed past protection> adjustment costs are significant
Skill biased technological change: Technological change (often embodied in FDI) favored high-skilled labor
> wage inequality increased
Shifting comparative advantages: LAC opened-up parallel to the global integration of labor-intensive economies (eg. India,China)
> LAC comp. advantage is no longer in labor-intensive goods
Outline
1. Trade and Poverty: an elusive question ?
2. Transmission Channels
3. Empirical Evidence in LAC
4. Toward a Policy Agenda
5. The LATN proposal
An IDB – DFID partnership for Trade and Poverty
The Trade and Poverty Trust Fund is financed by
Ex-post evidence
Trade, Growth & Poverty: positive but small link
> but protectionism is certainly anti-poor
Trade & Inequality: mixed results
> tech. change, FDI and capital acc.t opening may be regressive
Need of flanking measures:
> compensatory and complementary policies
Source: Giordano and Florez (2008)
-8.00 -7.00 -6.00 -5.00 -4.00 -3.00 -2.00 -1.00 0.00 1.00
COL
CHI
PAR
BOL
DOM
HON
PER
BRA
VEN
ARG
SAL
URU
CRI
MEX
ECU
Unilateral FTAA WTO
IMPACT ON POVERTY (%)
Ex-ante simulations
-0.6%-0.4%-0.2%0.0%0.2%0.4%0.6%
Colombia Peru Bolivia
GDP Poverty
Andean - US FTAs (%)
-0.8%
-0.4%
0.0%
0.4%
0.8%
1.2%
Costa Rica Honduras Nicaragua
CAFTA (%)
Source: Ganuza, Morley, Robinson and Vos (2004) Source: Giordano and Watanuki (2008)
Outline
1. Trade and Poverty: an elusive question ?
2. Transmission Channels
3. Empirical Evidence in LAC
4. Toward a Policy Agenda
5. The LATN proposal
Lessons learned for policymaking
The effects of Trade on Poverty are:
Long-termed
Indirect y specific
Contingent on internal conditions
Potential negative short-term effects
Sustain momentum
Research & dialogue
Complementarypolicies
Compensatorypolicies
Support to negotiations & implementation
Knowledge generationRegional policy dialogue
Aid for Trade
Outline
1. Trade and Poverty: an elusive question ?
2. Transmission Channels
3. Empirical Evidence in LAC
4. Toward a Policy Agenda
5. The LATN proposal
The LATN proposal: a prioritization
Micro-econometrics: marginal returns (Andean, C. America)
CGE: IDB-INT multi-region model w. micro-simulations (Andean, C. America)
Price transmission: a daunting task (country / product specific)
Value chains governance cases studies: generalization issues
Compensatory / complementary policies: effectiveness evaluation
>> identification of operational proposals / quick wins>> policy dialogue
Food for thoughts
Trade and poverty: is it the appropriate question ?
The debate is launched: how to maintain momentum ?
Aid for Trade: how to contribute to its implementation ?
LATN network: which is the comparative advantage ?
INTERAMERICAN DEVELOPMENT BANKINTERAMERICAN DEVELOPMENT BANK Integration and Trade SectorIntegration and Trade Sector
Thank youThank you
LATN Plenary MeetingBuenos Aires - November 17, 2008