Presentatie German Calfat 4x4


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Presentatie German Calfat 4x4

  1. 1. Help, ik word protectionist! 4X4 – Ontwikkelingssamenwerking anders bekeken. 25-2-2009 Germán Calfat
  2. 2. 2 Table of Contents • The History • The Theory • The Evidence
  3. 3. 3 1.How free have « free traders » been? Lessons from history(*). • It was not the free market but government protection and subsidies that transformed Britain into a leading manufacturing nation. • From a raw-wool based economy to a formidable wool manufacturing nation Import Substitution strategies with Henry VII Elizabeth I (1558-1603 ) (1485-1509) This section is based on the evidence provided in the following books of author Ha-Joon Chang (2002,2005,2007)
  4. 4. 4 A century of protectionist policies Robert Walpole (1721-1742): Radical Change in Industrial and Trade Policy. a) Tariffs on imported foreign manufactured were significantly raised, while those on raw materials were kept at low levels. b) Key exports from the colonies were banned (to keep emerging competitors away from British manufacturers).
  5. 5. 5 “kicking away the ladder » In 1860 Britain adopted free trade only when it had acquired a technological lead over its competitors, « Behind high and long– standing tariffs » (Friedrich List, 1885)
  6. 6. 6 Meanwhile in the US… • Under British rule America was given British « special » treatment: »The New England Colonies should .. not be permitted to manufacture so much as a horseshoe nail » William Pitt the Elder (1708-1778) Secretary of State
  7. 7. 7 The Report ( on the Subject of Manufactures) 1 vs. The Wealth 0 (of Nations). “The core of Hamilton’s idea was that a backward country like the US should protect its ‘industries in their infancy’ from foreign competition and look after them to the point where they could stand on their own feet”. Alexander Hamilton Adam Smith US Treasury Secretary 1776 1791
  8. 8. 8 The US followed Britain's protectionist route Protection continue in the early 20th century and was strengthened in 1930 with the Smoot- Hawley tariff which raised the average tariff on manufactures to 50 per cent. « No other country implemented a more protectionist policy to promote its industry than the United States. They started to liberalise its trade only after the Second World War, at the time they had already established industrial supremacy »..(Bairoch, 1993)
  9. 9. 9 And …for the record: • Five of the six fastest growing countries during the ‘golden age’ of growth 1950-1973 were the highest tariff countries (Japan, Italy, Austria, Finland and France). • According to empirical evidence [O’Rourke(2000), Clemens and Williamson (2001), Vamvadkis(2002) and Yanikkaya(2002)] there seems to be a positive relation between tariff rates and growth.
  10. 10. 10 Mid-1980s: Devoloping countries, a mixed strategy. • Viet Nam : Gradual approach to economic reform, following a two- track programme. It engages in state trading, maintains import monopolies, retains quantitative restrictions and high tariffs on agricultural and industrial imports. Result: successful in achieving sustained growth, sharply reduced poverty, expand trade and attract foreign investment. Despite High trade barriers, it is rapidly integrated with the global economy. • Haiti: Undertook comprehensive trade liberalisation in 1994-95, slashed import tariffs to a maximum of 15 per cent and removed all quantitative restrictions. Yet its economy has gone nowhere, and its social indicators are deteriorating. • Integration with the world economy is an outcome, not a prerequisite, of a successful growth strategy.
  11. 11. 11 Lesson 1 • It can be said , with some confidence, that tariffs never harmed economic progress in the countries now developed. • All we know is that as countries get richer they dismantle trade restrictions, not that they get richer because they liberalise trade. • And , for developing countries today, the issue is not whether to protect, but how to protect in order to ensure the dynamic efficiency of its nascent industrial activities.
  12. 12. 12 2. The classical foundations of Trade Liberalisation • Comparative advantage : in support of trade liberalisation Let us mention two implicit assumptions: • A) Static Nature an its indifference to the types of goods that countries specialise. • B) the idea of continuous full employment.
  13. 13. 13 The neoclassical development of the doctrine of comparative advantage. Heckscher and Ohlin : differences in relative factor Endowments. Ex: poor countries, with an abundance of labour and scarce capital should find it relatively cheaper to produce and export labour intensive goods. Stolper and Samuelson : is central in the Globalisation debate. Formalised the linkages between trade and wages trough changes in product prices. In poor countries the prices of labour-intensive products will rise, shifting resources to those sectors and raising the demand, and therefore, wages, for unskilled. The theory is appealing and sounds plausible: the practice is a bit more complex.
  14. 14. 14 Trade Liberalisation and Poverty • The impact of trade liberalisation on poverty has always been a matter of controversy and heated debate. • Economic Theory does not predict that trade liberalisation is poverty alleviating. • All that the theory predicts is static efficiency gains. • It says nothing definite about long-run growth, or about the distribution of the gains from trade in and between countries. • Trade Liberalisation necessarily implies distributional changes; it may well reduce the well-being of some people (at least in the short term) and some of these people may be poor.
  15. 15. 15 The analytical scheme Trade Policy Alan Winters Enterprise Distribution Government Individuals and Households Source: McCulloch,Winters and Cirera: Trade Liberalization and Poverty,( p. 66)
  16. 16. 16 Lesson 2 • Trade Liberalisation has made no obvious dent on world poverty. • Contrary to the prescription of orthodox trade theory, the wages of unskilled labour in poor countries seems to have fallen compared to skilled wages. ( But one should not blame the theory for this). • Trade policies do not automatically translate in benefits for the poor. There is a wide range of (complementary) policies which are necessary if price signals are to be transmitted effectively from international to sub- national markets.
  17. 17. 17 3. Trade Liberalisation and Poverty : A vision from Chiapas, an indigenous gender perspective . Impact of NAFTA on small scale agricultural producers (maize). • The promises: • Increase in the standard of living • More employment • Greater Democracy
  18. 18. 18
  19. 19. 19 Chiapas
  20. 20. 20 Profile of Chiapas • Largest section of the population is Indigenous • Regarded as an internal colony for the rest of Mexico produces 21 % of crude oil, 47% of national gas production, 54% of hydroelectric power). • But.. 32% of indigenous home has no running water, 35 % no electricity, and 85% continue to cook with charcoal. • Highest illiteracy ratio • Highest rate of malnutrition • More than one million with no access to health care facilities.
  21. 21. 21 Basic items identified from women perspective (To understand the loss in their autonomy, self determination and ability to survive) • Loss of self sustenance as a result of threats to their subsistence from maize • Extreme hardships to meet the growing need for supplementary cash • Painful consequences of increasing migration on their lives (and its disruption in their communities) • Loss of faith in their governments
  22. 22. 22 Central element in the analysis • Because Chiapas’ indigenous people are deeply connected with maize for their survival, the focus is on the effects on small farmers’ livelihoods due to the liberalisation of the market for their most important crop: maize.
  23. 23. 23 Welcome Mr NAFTA (1994): • Before NAFTA creation the Mexican government introduces measures to increase privatisation of resources and services. • Elimination of price supports in agricultural sector and credit facilities to rural farmers, deterioration of official support to extension services. • Government Salinas (1992) : End of ejidos. They were established during the Mexican Revolution (1910-1917) as central in the land reform (communal landholders). • Fundamental switch from small maize producers (who depended on artificially maintained prices, communal land and government support), to a capital-intensive corporate farming framework. • All barriers to trade and investment were eliminated
  24. 24. 24 Moreover • The agreed gradual reduction of barriers on imports of maize from the USA (15 year) was truncated to roughly 30 months when Mexico declined to enforce the planned tariff reduction allowing drastic increase of more 300% in maize exports (compared to pre- periods) with domestic price falls in Mexico of 50%.
  25. 25. 25 The economic logic of the impact fails to account for: • The deep cultural and ecological significance that maize has in the Mexican society. • For small subsistence farmers, growing milpa –small family plots where maize, beans and squash are planted- is a way to ensure food security. • Massive imports of maize posses a threat to the biodiversity of maize in Mexico.
  26. 26. 26 In addition the reduction in government welfare programmes and privatization of the health and education programmes has put the bonus on small farmers to find cash for such services: How do small farmers cope with this development?: Off-farm employment Shift to export oriented crops (coffee) Migration
  27. 27. 27 A gender perspective : • The shift towards an increasingly market oriented agriculture has meant a greater work burden and resulted in a negative impact in reproductive activities. • The reallocation of time and resources from maize to coffee has increased their existential insecurity. • Much exposed to price volatility of international markets • Increased dependency on outside food sources (Maseca maize) • Migration is a central concern. Lack of income options for women staying behind. Impossibility of planting milpa themselves. • Increasingly dependence on outside food sources (a) most the time dedicated to outside work and b) women are unable to maintain a milpa on their own. Corollary: junk food substitutes traditional products---- malnutrition. • Feeling of being betrayed by the Government.
  28. 28. 28 Lesson 3 • A preferential liberalisation (NAFTA) without proper complementary measures results in more harms than benefits: • indigenous people have been increasingly put at the whims of the market. • Forced to give up the life they have known for thousands of years to produce what the market wants • Increased dependence on outside food sources with volatile prices • Increased dependence on insecure cash sources ( wage labour and cash crops). • Families had to migrate to distant lands in search for money
  29. 29. References 29 • Bairoch, P. (1993), Economics and World History – Myths and Paradoxes (Brighton: Harvester Wheatsheaf). • Buffie, E. (2001), Trade Policy in Developing Countries (Cambridge: Cambridge University Press). • Chang, Ha-Joon (2002), Kicking Away the Ladder: Development Strategy in Historical Perspective (London: Anthem Press). • Chang, Ha-Joon (2005), Why Developing Countries Need Tariffs? (Geneva: South Centre). • Chang, Ha-Joon (2007), Bad Samaritans: Rich Nations, Poor Policies and the Threat to the Developing World (Random House Business Books). • Clemens, M. and Williamson, J. (2001), A Tariff Growth Paradox? – Protection’s impact the World Around 1875-1997, NBER Working Paper No. 8459, (Cambridge MA: National Bureau of Economic Research). • Krugman, P. (1984), ‘Import Protection as Export Promotion: International Competition in the Presence of Oligopoly and Economies of Scale’, in H. Kierkowski (ed), Monopolistic Competition in International Trade (Oxford: Clarendon Press). • Lederman, D, Maloney W. and Servén L. (2005), Lessons from NAFTA. For Latin Ameica and the Caribbean. The World Bank, Standford University Press. • List, F. (1841), The National System of Political Economy (translated by S.S.Lloyd) (Fairfield , NJ: Augustus M. Kelley 1991). • O’Rourke, K. (2000), Tariffs and Growth in the Late 19th Century, Economic Journal, April. • Rivera J.M.,Whiteford, S. and Chávez M. eds. (2009). NAFTA and the Campesinos: The Impact of NAFTA on Small-Scale Agricultural Producers in Mexico and the Prospects of Change.University of Scranton Press, Chicago. • Rodrik, D. (2001), The Global Governance of Trade: As if Development Really Mattered (New York: UNDP) • Stiglitz, J. (2006), Making Globalisation Work (New York: W.W. Norton and Co). • Vamvakidis, A; (2002), How Robust is the Growth-Openness Connection: Historical Evidence, Journal of Economic Growth, March. • Winters, A., McCullock, N. and McKay, A. (2004), Trade Liberalisation and Poverty: The Evidence so Far, Journal of Economic Literature, March • Yanikkaya, H. (2003), Trade Openness and Economic Growth: A Cross-Country Empirical Investigation, Journal of Development Economics, October.
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