economic development prepared by chan bonnivoit

8/6/2019 Economic Development Prepared by Chan Bonnivoit

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MSc. Chan Bonnivoit

Royal University of Agriculture

Chamcar Doung

ECONOMICS

DEVELOPMENT


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1.

Consideration

on

the

factors

of

economic

development1. Terminologicalterm

Development,LevelofDevelopmentandProcessofDevelopment Developmentdefinesas:

Levelofdevelopment Processofdevelopment

Levelofdevelopment Beingdevelopmentatcertaintime

Processofdevelopment Beingatrendofthelevelofdevelopmentinaperiodoftime


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1.

Consideration

on

the

factors

of

economic

development Thusitshouldbedeterminedthemeaningofthelevelof

development.

Meaningofthelevelofdevelopment:

Levelofwelfareortheleveloftheprosperityofthepeople Levelofwelfareisassumedasalivingstandard

A livingstandardofthepeoplecanbemeasuredbythebasicneed.Ifthebasicneed is improved, itcanbesaidthatthelivingstandardofthepeopleisimproved.


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I.Considerationonthefactorsofeconomic

development

Meaningofthebasicneedformulatedbyscientist: Toprovide thepeople theexistingof livingconditions

oratleastofthehumanvaluewhichmeansthatshouldbeprovidedphysic,psychologyandsocialofthehumantothepeople.

MeaningofthebasicneeddefinedbyILO: Haveenoughfood,home,clothing,homesmaterials, Relating to social conditions, it should be provided

health, education, cleanwater, healthy and sanitationandpublictransportation. It can be included improving of works conditions,

holiday and dialogue, social security and humanity

freedomaswellsomenotimportantthingsrequested.


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development

Throughthemeaningoftheleveloflivingstandard,it

canbeprovidedtounderstandthetermofdevelopmentrelatingtothestaticanddynamicdevelopment.

Therefore,itcanbesaid,thatthelevelofdevelopmentisunderstoodasalevelofthelivingstandardatacertaintime,and

Theprocessofthedevelopmentisdeterminedwhatthecapacityorthelevelofthedevelopmentwouldbe

changedin

a

periodof

time.


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development

Buttofindoutthelevelofthelivingstandarditisverydifficult,because itdepends from theCountry to theCountry and fromtheregiontotheregionduetotheeconomic,geographicalandcultural differentiation, the behavior and the livings style ofthosepeople.

It means that it doesnt have the common value from theCountry to the Country and from the region to the regionregardingtothelevelofthelivingstandard.

Therefore, it isverydifficultly tohavecommonvalue taking todemonstrate in determining the Countries group in theworld,which are a group of LDC, Developing Country or DevelopedCountry.

HowcanbedeterminedsuchCountries?


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development

2. Indicatortomeasurethedevelopment

Definitionofdevelopmentsindicator

Developmentindicatorsshouldhavetwocriterion:

Theycanmeasurethelevelofdevelopment.

TheyshouldhavethethresholdvaluewhichtakestodeterminethelevelofdevelopmentoftheCountries

whichcanbeclassifiedintothegroupoftheLeast

Developed

Countries,

the

Developing

Countries

or

the

DevelopedCountries.

Suchdevelopmentindicatorscanmeasureorindicatethedevelopmentlevelofeconomic,socialandpolitical

issues.


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development

2. Indicatortomeasurethedevelopment(cont)

EconomicIndicators PerCapita

Nationalincome/Population

Distributionindicator

LorenzCurve

Gini Coefficient


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niymny plitplkgRsuksrub

plitplkgRsuksrub KW CatMlRTB nig esvacugeRkay Edl)anplitenAkgRbeTsmYy enAryeBlmYyEdl)ankMNt; CaTUeTAkgmYyqaM .

plitplkgRsuksrub KW CacMnYnsrubntMlbEnm

tMlbEnm KWCa CaplsgrvagtMlRTB nigesva CamYynwgtMlRTBGnrkarI vaCaRTBEdl)anTijykmkeRbIedIm,IbMElgeTACaRTBmYyepSgeTot Edl)aneRbIkg

dMNak;kalplitkm

. xageRkamenH KW Ca]TahrN_EdlbgajBIkarKNnatMlbEnm nig karKNnaplitplkgRsuksrub(GDP) .


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plitplkgRsuksrub KW CacMnYnsrubntMlbEnm

fRTB nig esva fRTBGnrkarI =plitplkgRsuksrub= tMlbEnm

370 - 220 = GDP = 150


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PerCapita=Nationalincome/Population

GNP

GDP

NNP to

NNP to


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PerCapita=Nationalincome/Population

GNP

GDP

NNP to

NNP to


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GDP 9,299.2

Plus:receiptsoffactorincomefrom therestoftheworld +305.9 Less:paymentsoffactorincometotherestoftheworld 316.9

Equals:GNP 9,288.2

Less:Depreciation 1,161.0

Equals:Net

National

Product

(NNP) 8,127.1

Less:indirecttaxesminussubsidiesplusother 675.5

Equals:NationalIncome 7,469.7

Less:corporateprofitsminusdividends 485.7

Less

:

social

insurance

payments

662.1 Plus:personalinterestincomereceivedfromthegovernmentand consumers +456.6

Plus:transferpaymentstopersons +1,011.0

Equals:PersonalIncome 7,789.6

Less:personaltaxes 1,152.0

Equals:DisposablePersonalIncome 6,637.7


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THECOMPONENTSOFGDP WhatIsNotCountedinGDP?

GDPexcludesmostitemsthatareproducedandconsumedathomeandthatneverenterthemarketplace.

Itexcludesitemsproducedandsoldillicitly,suchasillegaldrugs.


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THECOMPONENTSOFGDP GDP(Y)isthesumofthefollowing:

Consumption(C)

Investment(I)

Government

Purchases

(G) NetExports(NX)

GDP=Y=C+I+G+NX


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THECOMPONENTSOFGDP Consumption(C):

Thespendingbyhouseholdsongoodsandservices,withtheexceptionofpurchasesofnewhousing.

Investment(I): Thespendingoncapitalequipment,inventories,and

structures,includingnewhousing.


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Business fixed investment includes the equipment andstructures that businesses buy to use in production.

Residential investment includes the new housing thatpeople buy to live in and that landlords buy to rent out.

Inventory investment includes those goods that businesses

put aside in storage, including materials and supplies, workin progress, and finished goods.


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THECOMPONENTSOFGDP GovernmentPurchases(G):

Thespendingongoodsandservicesbylocal,provincial,andcentralgovernments.

Doesnot includetransferpayments(e.g.unemploymentinsurancepayments),becausetheydonotrepresentspendingongoodsandservicesorarenotmadeinexchangeforcurrentlyproducedgoodsor

services. NetExports(NX):

Exportsminusimports.

GDP d It C t


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GDPandItsComponents

Copyright2004 South-Western


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GDPandItsComponents

(2001)

Consumption69%

Government Purchases

18% Net Exports-3 %

Investment16%


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plitplkgRsuksrubmanEtnam nigplitplkgsrubRsukBit(Nominal GDP and Real GDP)

GDP manEtnam KWCa GDP Edlvas;enAfbcb,n (Current Price)

Nominal GDPt =

GDP Bit KWCa GDP Edlvas;enAfefr(Constant Price) b fenAqaMeKal .

Real GDPt =

]TahrN_ ]bmakgesdkicmanplitEtBIrRbePT ehIyf nigbrimaNrbs;va

enAqaM nimYy mandUckgtaragxageRkam ykqaM 2005 CaqaMeKal

tt

i QiP

ttQiPi

0

Real and Nominal GDP


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RealandNominalGDP




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RealandNominalGDP




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RealandNominalGDP



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development

ProblemoftheCalculationofPerCapita

Deficitoftechnicalinfrastructuretocalculatepercapita

Notexcludedtheadvancepaymentofthehousehold

Marketpriceisaffectedeitherbythepowerofsuppliersorconsumer

Problem

of

the

registration

of

population Problemofconvertingpercapitaintoforeign

currency(US$)

Theory

of

purchasing

power

parity

(PPP)(Pcam,rice=PUS,rice S(R/US$))

BP=(X.PR Eno.M.PUS$)+(CM CX)


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Purchasing

Power

ParityinaPerfectCapitalMarket Purchasingpowerparity(PPP) isbuiltonthe notion

ofarbitrageacrossgoodsmarketsandtheLawofOnePrice.

TheLawofOnePrice istheprinciplethatinaPCMsetting,homogeneousgoodswillsellforthesamepriceintwomarkets,takingintoaccounttheexchangerate.

/$wheatUK,wheatUS, SPP =

d


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I.Introduction

Imports(Debits)

CurrentAccount:(M)

Goodsandservices

Factor andassetsincome Assets transfer (= transfer

account)

Aids,giftsetc. (=unilateraltransfer)

CapitalAccount:(CM)

Directinvestments

Security

purchase Bank claims, liabilities,

obligations,etc.

Governmentassetsabroad

Exports(Credits)

CurrentAccount:(X)

Goodsandservices

Factor andassetsincome Assets transfer (= transfer

account)

Aids,giftsetc.(=unilateraltransfer)

CapitalAccount:(CX)

Directinvestments

Security

purchase Bank claims, liabilities,

obligations,etc.




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development

LorenzCurve

F

Q


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development

LorenzCurve(cont) Axislinepresentedthepercentageofpeoplegrouphaving

differentincome.

Ordinatelinepresentedthepercentageoftheirincomein

relationtoGDP. OUisadiagonalline.

IftheLorenzCurvehasatendencytoapproachthediagonal

line,itmeansthattheincomedistributionintheCountrytendstoequally.

IftheLorenzCurveisfarawayfromthediagonalline,itmeansthattheincomedistributionoftheCountrytendsto

unequally.


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development Gini Coefficient

ConcentratingonlyonecoefficienttopresenttheincomesdistributionoftheCountry

Gini coefficient=SurfaceofLerenz Curve/(1/2

Quadrant)= [(Fi1 +Fi)Qi] 1 Gini coefficienthasatendencyto0,itmeansthat

theincomedistributionintheCountrytendsto

equally. Gini coefficienthasatendencyto1,itmeansthatthe

incomedistributionintheCountrytendsto

unequally.


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C l ul ti f Gi i C ffi i t ( )


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Group ofPeople

(i)

Qi(Income %)

Fi(Number of

peopleinterviewed

Fi-1 Fi-1+Fi (Fi-1+Fi)Qi

Labor (1) 15% 20% (20) 0 20% 0.03Farm (2) 12% 40% (20) 20% 60% 0.072

Businessman(3) 35% 60% (20) 40% 100% 0.35

Official (4) 20% 80% (20) 60% 140% 0.28

Other (5) 18% 100% (20) 80% 180% 0.324

100% 100% 1.056

GC = [(Fi-1 + Fi) Qi] 1 = 1.056 1 = 0.056

Calculation of Gini Coefficient (as e.g.)


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development

AnalysisofGini

F

Q

Case 1

Case 2



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development

AnalysisofGini

F

Q


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development

2. Indicator

to

measure

the

development

(cont) SocialandpoliticalIndicators

IndicatorsdefinedbyEconomistsAdelman/Morris

Quantification

method

defined

by

both

Economists Notuseablemethod,becauseof

BaseonownviewofScientistsorEconomist

Notcollectableforrelativevaluebetweentheindicators


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development

3. GroupingtheCountryGroupintheReality

1. GroupingtheCountryGroupbyOECD

2. GroupingtheCountryGroupbyUN

IndustrialCountryGroup

TransitionEconomicGroup

DevelopingCountryGroup

LeastDevelopedCountry

MostSeriouslyAffectedCountry NewIndustrialCountry

LandLockedCountry


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- For the 2006 triennial review, the threshold for graduation was $900,about 20 per cent above the $745 threshold for inclusion.

- Gross national income per capita

- Human Asset Index

- Economic Vulnerability Index

- There are two indicators of health and nutrition:

- the percentage of population undernourished and,- the mortality rate for children aged five years or underAnd, two for education:- the gross secondary school enrolment ratio and,- the adult literacy rate.
http://www.un.org/esa/analysis/devplan/profile/criteria.html#gnihttp://www.un.org/esa/analysis/devplan/profile/criteria.html#haihttp://www.un.org/esa/analysis/devplan/profile/criteria.html#evihttp://www.un.org/esa/analysis/devplan/profile/criteria.html#evihttp://www.un.org/esa/analysis/devplan/profile/criteria.html#haihttp://www.un.org/esa/analysis/devplan/profile/criteria.html#gni


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Figure 1: Composition of the economic vulnerability index (EVI)


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II Theoretical Interpretation of Economic


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II.TheoreticalInterpretationofEconomic

Development

1. NaturalResourcesandEco.Development

Limitationofsubstitutionofinputfactors

NaturalResources

Rawmaterials

Land

Weather

Environment

Second characteristic of production


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function

L

K0

Iso-quant

X

J

IL1

K2K1

L2

MRS = L/K = MPK/MPL = R/W

MRS: Marginal rate of substitution

MPL: Marginal production of Labor

MPK: Marginal production of Capital

W: Wage

R: Rent

Iso-Cost



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Development


a. RawmaterialsandEco.Development SomeIndustrialCountrieslikeJapan,HongKong,

Singapore,Switzerlandetc.builttheirCountry

withoutrawmaterials, TheCountrieshavespecialization(AdamSmith

Theory).

AdamSmith:Capitalaccumulationisaprerequisitetoextendthenationalspecializationandtheallocationoftheresourceswhichareabasisto

improve

the

Per

Capita



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Development


a. RawmaterialsandEco.Development Countriesobtainingrawmaterialstendtouse

thoseexportrevenueonlyforimportingthe

consumptiongoods,nottoimportthegoodsforbuildingtheirindustrialinfrastructure.

Priceofrawmaterialsisalwayscheaper.Thereasonsarefollowing(seeslidesbelow):

Tariff peaks and high tariffs


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Tariffpeaksandhightariffs

GenerallyusedbyIOs:

Nationalpeaks: 3timesthenationalaverage

Internationalpeaks: >15%

BUT,THEREISNOAGREEDWTODEFINITION


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EC15:boundAVGperHSChap.


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0

2

4

6

8

10

12

14

16

18

20

03

27

34

41

48

55

62

69

76

84

91

Gr

HS Chapter (Non Ag tariff lines only)

Average(%)

Bound Duty AV

Intern. Peak > 15%

Nat. AVG = 4%

Nation. Peak > 12%

3X

Nat.

AVG

Brazil:boundAVGperHSChap.


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p p

0

10

20

30

40

50

60

70

80

90

03

28

28

32

31

36

44

43

48

68

51

56

61

66

71

72

78

84

85

86

88

91

96

HS Chapter (Non AG tariff lines only)

Average(%)

Bound duty AV

Intern. Peak > 15%

Nat. AVG = 30%

3XNat.

AVG

Nation. Peak > 90%

Tariffescalation:textilesandclothing


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0

5

10

15

20

25

30

35

40

45

Raw material Semi-manufactured Finished product

Tariff

(%)

g

Tariff only but problems still exist


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Tariff Peaks:Japan

minimum tariff 0% maximum tariff 958%

Tariff Escalation:

cocoa imports into the EC

cocoa beans milk chocolate0% 18.7%

Forms:Specific duties and ad valorem duties

Seasonal dutiesMatrix tariffs

y p

II. Theoretical Interpretation of Economic


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Development


b. LandandEco.Development Notefficientusingofland,becauseof

ProblemofownershipofLand

Lackofcropmanagement Lackoflandmanagement

Lackofirrigationsystem

Lack

of

technology

and

know

how Lackofpublicandprivateinvestment

Lackofcredit

andsoon



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p

Development1. NaturalResourcesandEco.Development

b. Landand

Eco.

Development

(cont)

Inefficientofusinglandcanbeimprovedthrough:

Publicandprivateinvestmentinirrigationsystem,fertilizerandotherinfrastructure

Legalandinstitutionalreform,including

credit

reform

and

bureaucracy

reform Setuplocalfarmcommunityorassociation

inordertoprovidenewtechnologyknowhowandinformationrelatingtomarket,etc.



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c. Weather

and

Eco.

Development MostdevelopedCountrieslocatedinthezonewherehaveathemoderatedweather,namelyfourseasonsinayear.

DevelopingCountriesmostlylocateintheinadequatezone

of

the

world. Theinadequateweathercanbenegativelyeffectedonthe

humanhealthaswelltheproductivity,becauseitcancreateabestconditionsforthegrowthoforganism,virus,bacteriaetc.tospreadtheiractivitieswhichcanhastyhazardthehumanandanimalhealth.

ButCountrieslikeSingaporeandMalaysialocatealsointheinadequateweatherzone,buttheCountriescanbedevelopedtheireconomicsbecauseofimprovingthehealthsystem,sanitarymeasuresandworkconditionsfortheirpeople.



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p


d. EnvironmentandEconomicDevelopment Urbanization,gaspollution,waster,migrationintothe

City,woodcuttingetc.canrigorousdamagethe

environment.

Buttousetheenvironmentinreproductionablemannerfordevelopingtheeconomicsinthecountrycannotdevastatetheenvironment.

Currently,mostcountries,includingthedevelopingcountriesandleastdevelopedcountriesintheworldaretakingintoaccounttousetheenvironmentinthe

sustainablemanner.



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p


e. Conclusion HavingnaturalresourcesmeansthattheCountryhas

thecapacitytodeveloptheeconomicoftheCountry.

ButitdoesntmeansthatitcandeterminethelevelofeconomicdevelopmentoftheCountry.

TheeconomicdevelopmentoftheCountrydependsmuchmoreonthemanagementandtheknowledgetousethesenaturalresources.



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p

Development2. CapitalandDevelopment(cont)

Effectsof

the

Capital

on

the

Eco.

Development

CapitalistheMotor.

AdamSmith:CapitalaccumulationisaprerequisitetoextendthenationalspecializationandtheallocationoftheresourceswhichareabasistoimprovethePerCapita.

ProductionelasticityoftheDevelopedCountriesislarger2timeor3timethantheproductionelasticityoftheDevelopingCountries.



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Development

2. CapitalandDevelopment(cont)

RelationshipbetweenMaterialCapitalandHR Materialcapitalcanbeequipment,building,goodsin

store,inventory,etc.

HRcannotbeusedasamaterialcapital,althoughHRisdefinedasaskilledCapital.

BaseonEconomistDenisonHRinvolvedintheproductionprovidestheshareoftheoutputfrom50%to70%incomparingtothematerialcapitalprovidingonlyfrom30%to50%.



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Basic

theory

to

build

up

the

capital



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ReasonsoftheinsufficiencyofCapital Tobeinsufficientinsavings

To

be

insufficient

in

investments Tobeinsufficientinfinancialinstitutions(1)

Lackoncapitalequipmentsofsubpopulation

Capitalflowintoabroad


Development


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Development

Low Output

Low Per Capita

Low SavingLow Capital

Investment

Low Capital

Equipments

Low Productivities


Reasonsofdeficitofsaving

Itcanhaveadeficiencyofcapacitytosavelikeaviciouscirclebelow.



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Reasonsofdeficitofsaving(cont) Lackonwillingnesstosave,becauseof:

Fluctuatinginterestratethatcannotbepredicable

Consideringmetaeconomicwhichaffectsonthecomparisonbetweenthevalueofcurrentandfutureusingoftheircapital.



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Reasons

of

deficit

of

investments Deficitofcapacitytoinvest:Itcanbedeficiencyof

investmentclimateswhicharefollowing:

Economic

Economicpolicy(Fiscalandmonetarypolicy)

Economicconditions(Governmentbudgetdeficit/surplus,

balancepayment,interestrate,inflation,productivity,

economicgrowth,speculativesentiments) Politicalsituation

MarketPsychology orconsumerconfidence

Investment means every kind of asset owned or controlled by an investor


Development


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Investment meanseverykindofasset,ownedorcontrolled,byaninvestor,

includingbutnotlimitedtothefollowing:

(i) movableandimmovablepropertyandotherpropertyrightssuchasmortgages,liensorpledges;

(ii) shares,

stocks,

bonds

and

debentures

and

any

other

forms

of

participation

inajuridicalpersonandrightsorinterestderivedtherefrom;

(iii) intellectualpropertyrightswhichareconferredpursuanttothe lawsandregulationsofeachMemberState;

(iv) claimsto

money

or

to

any

contractual

performance

related

to

abusiness

andhavingfinancialvalue;

(v) rightsundercontracts,includingturnkey,construction,management,productionorrevenuesharingcontracts;and

(vi) businessconcessions

required

to

conduct

economic

activities

and having

financialvalueconferredbylaworunderacontract,includinganyconcessionstosearch,cultivate,extractorexploitnaturalresources.

Theterminvestment alsoincludesamountsyieldedbyinvestments,inparticular,profits,interest,capitalgains,dividend,royaltiesandfees.Anyalterationoftheforminwhichassetsareinvestedorreinvestedshallnotaffecttheirclassificationasinvestment;



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Development

Low Output

Low Per Capita

Low Domestic

Demand

Low Capital

Investment

Low Capital

Equipments

Low Productivities


Reasonsofdeficitofinvestments Itcanhaveadeficitofwillingnesstoinvest



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Reasonsofinsufficiencyoffinancialinstitutions insufficiencyofsomefinancialinstitutionslike:

FinancialMarket

StockMarketandBondsMarket

FinancialIntermediaries

CentralBank

CommercialBank

SpecializedBank

MutualFund OtherFinancialMarket

MicroFinancesInstitutions

LoanandCreditAssociations

InsurancesandPensionFunds



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Reasonsoflackonfinancialinstitutions(cont) Itcanbeadeficiencyofqualityoffinancialinstitutions:

Sufficiencyofliquidity

Currentratios AcidTest

SourceofCapital

Insufficiencyofprofitability



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Reasonsoflackonfinancialinstitutions(cont)

Net worth is a company's total assets minus total liabilities.



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Development

DebitDebit CreditCredit

-- ConsumptionConsumption-- Investments :Investments :

-- Capacity BuildingCapacity Building

-- AssetsAssets

-- GNPGNP-- Income from AssetsIncome from Assets

-- Income from WorkingIncome from Working


Deficitofcapitalequipmentsofsubpopulation

Balancesheetofhouseholdincome



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Deficitof

capital

equipments

of

sub

population(cont)

Theeffectsoftheirhouseholdincomeare: Beinglowskilllabor,becauseofdeficitofcapitalto

investonthecapacitybuilding.

Havingsmallland

Usingonlytraditionalequipmentsfortheirproductions

Deficitofruralcreditsandinvestments



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Deficitofcapitalequipmentsofsubpopulation(cont)

Bythesideofthedevelopmentpolicytheredistributionincomepolicy whichoftenisusedbymost

Countriesaresuccessfullyinstrumenttodiminishthedeficitofcapitalequipmentsofsubpopulation.

PriceandIncomePolicy(directpolicy)

FiscalPolicy(indirectpolicy)

AdamSmith: Thenationalspecializationandthe

allocationof

the

resources

are

abasis

to

improve

the

per

capita.



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Thereasonofdeficitofcapitalisalsothecapitalflowintoabroad:

Repatriationofforeignincomeandprofit.

Repaymentofthecreditandpaymentofinterestrate.

Localpeople

save

their

money

in

abroad.

Highskilledlaborsmovetoworkinabroad.



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Development2. CapitalandDevelopment(cont) Cambodianinvestmentprotection:Theinvestmentlawand

subdecreecontainsanumberofimportantguaranteesfortheinvestors:

Equaltreatmentofallinvestors

Nonationalizationadverselyaffectingthepropertyofinvestors

Nopricecontrolsonproductsorservices

Norestrictiononforeignequityparticipation

Norestrictiononforeignconvertibility

Remittanceofforeigncurrenciesabroad.



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Development3.Socialandpoliticalconditionsandeco.

Development Problemofthereligion

Family

structure

(clan) Problemofethnic

Deficitofmobilizationorproblemofmarginalizationofthedifferentgroupofpeople



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Development

4.DevelopmentandinternationalEconomic

Internationaleconomicsmeansalleconomicaltransactionsbetween

households,privates

and

public

of

one

Countryandhousehold,privatesandpublicofanotherCountries

( b )

( d )


Development


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Imports(Debits) CurrentAccount:(M)

Goodsandservices

Factor

and

assets

income Assets transfer (= transfer

account)

Aids,giftsetc. (=unilateral

transfer) CapitalAccount:(CM)

Directinvestments

Securitypurchase

Bank claims, liabilities,obligations,etc.


Exports(Credits) CurrentAccount:(X)

Goodsandservices

Factor

and

assets

income Assets transfer (= transfer

account)

Aids,giftsetc.(=unilateral

transfer) CapitalAccount:(CX)

Directinvestments

Securitypurchase

Bank claims, liabilities,obligations,etc.


h l f ( illi f ll )

International Transactions: Data


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88

The

U.S.

Balance

of

Payments,

2005

(Millions

of

Dollars)


l


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Development4.DevelopmentandinternationalEconomic

Balancesheetofbalancepayment

X+CM=M+CX=>M X=CM CX

ifM>X

=>

CM>CX,

itmeans

trade

deficit.

In

this

case

the

Country

shouldtakethecreditfromtheabroadtocompensatethedeficitinordertomaintainthecurrentvalueofexchangerate.

ifMCM


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Q

P

Exchange rate $Credits Debits

Current Account

1 Exports $1,418.64

2 Imports ($1,809.18)

3 Unilateral Transfers $10.24 ($64.39)Balance on Current Account ($444.69)

Capital Account

4 Direct Investment $287.68 ($152.44)

5 Portfolio Investment $474.39 ($124.94)

6 Other Investments $262.64 ($303.27)Balance on Capital Account $444.26

7 Statistical DiscrepanciesOverall Balance $0.30

Official Reserve Account ($0.30)

0.73

S

D

A U S iti i t th l d ll t th FOREX k t

BalanceofPaymentsandtheExchange

Rate


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Q

P

As U.S. citizens import, they supply dollars to the FOREX market.

Credits Debits

Current Account

1 Exports $1,418.64

2 Imports ($1,809.18)


Capital Account



6 Other Investments $262.64 ($303.27)

Balance on Capital Account $444.26



0.73

Exchange rate $

S

D


Rate


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Q

P

As U.S. citizens export, others demand dollars in the FOREX market.

Credits Debits

Current Account

1 Exports $1,418.64

2 Imports ($1,809.18)


Capital Account







0.73

Exchange rate $

S

D

A h U S ll d ll h l f d ll i


Rate


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Q

P S

D

As the U.S. government sells dollars, the supply of dollars increases.

S1

Credits Debits

Current Account

1 Exports $1,418.64

2 Imports ($1,809.18)


Capital Account







0.73

Exchange rate $

WhatDoestheTradeBalance

R ll M ?


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Really Mean? Soinspiteofitsname,anditsdefinition,the

tradebalance Isnotreallyabouttrade,whichisjustthesymptom

It

is about

whether

we

are

living

within

our

means Whenisatradedeficitgood?

Whenthecountry(likeayoungperson)isinvesting

forthefuture(likeasuccessfuldevelopingcountry) Notwhenitisgoingintodebtjusttofinancecurrent

consumption(liketheUS)

What is the government debtand the annual budget deficit?

When a government spends more than it collects in taxes, it borrows

f th i t t t fi th b d t d fi it


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Annual Deficit (2002)Annual Deficit (2001)

Annual Deficit (2000)

Annual Deficit (1999)Annual Deficit (1998)

Annual Deficit (1997)

The government debtis an accumulation

of all past annual

deficits. In 2001, thedebt of the U.S. federal

government was $3.2

trillion.

from the private sector to finance the budget deficit.

4 Development and international Economic


Development


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4.DevelopmentandinternationalEconomicConditionofinternationalTrade

Absolutepriceadvantage P1CountryA


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It present only

return, not relating

to exchange rate

presented in the

ordinal axe

Factors that Shift RF and RD


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C diti f i t ti l t d ( t)


Development


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Conditionsofinternationaltrade(cont) Domesticdemandfortheproduct.

Locationof

export

Country

Productiondiversifyingindifferentareascanprovidethedifferencefactorallocationaswellsalary.

Profitandcostvariation It depends on variation of production condition like

production factor, technology, salary, state policy (taxandexpenditureforinfrastructure)andmoneysupply.

Tariffs

and

non

tariff

barriers Advalorem,specifictax,compoundtariff,MFNandGSP.

Quota, voluntary export restriction, dumping price,subsidies, SPS, TBT, safeguard and government

procurement.

The Mundell-Fleming ModelUnder Floating Exchange Rates


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e

Income, Output, Y

LM*

IS*

e

Income, Output, Y

LM*

IS*IS*'

LM*'

When income rises in a small open economy, due tothe fiscal expansion, the interest rate tries to rise but

capital inflows from abroad put downward pressure

on the interest rate.This inflow causes an increase in

the demand for the currency pushing up its value

and thus making domestic goods more expensive

to foreigners (causing a NX). The NX offsetsthe expansionary fiscal policy and the effect on Y.

When income rises in a small open economy, due to

the fiscal expansion, the interest rate tries to rise but

capital inflows from abroad put downward pressure

on the interest rate.This inflow causes an increase in

the demand for the currency pushing up its value

and thus making domestic goods more expensive

to foreigners (causing a NX). The NX offsetsthe expansionary fiscal policy and the effect on Y.

When the increase in the money supply puts downwardpressure on the domestic interest rate, capital flows out

as investors seek a higher return elsewhere. The capital

outflow prevents the interest rate from falling. The

outflow also causes the exchange rate to depreciate

making domestic goods less expensive relative to

foreign goods, and stimulates NX. Hence, monetary

policy influences the e rather than r.

When the increase in the money supply puts downward

pressure on the domestic interest rate, capital flows out

as investors seek a higher return elsewhere. The capital

outflow prevents the interest rate from falling. The

outflow also causes the exchange rate to depreciate

making domestic goods less expensive relative to

foreign goods, and stimulates NX. Hence, monetarypolicy influences the e rather than r.

+G, or T+e, no Y+G, or T+e, no Y +M-e, +Y+M-e, +Y


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TheTariff

Ad l t iff t d t i ll t i


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Ad valorem tariff: a trade tax is equally to a givenpercentageofsellingprice.

Ex:13%forimportedknitcottonheadwearinUS$.

Specifictariff:atradetaxisequallytoafixedamountofmoneyperunitsold.

Ex:14centsoneachpoundofimportedfertilizer.

Compound tariff: a trade tax that has both a specificandanadvalorem.

Ex: 19 cents per pound plus 18.5 percent ad valorem onimportedcashmeresweaters.


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T iff IA

Agricultural Products Section I

Part IMost Favored Nation Tariff

State A

Schedules of Concession on Goods


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Tariffs IA

Tariff Rate Quota IB

Non-Agricultural products Section II

Part II

Part III

Part IV

Preferential Tariffs

Non-tariff Concessions

Agricultural products:

Commitments l imiting subsidization

D

OHAS

CH

EDULE

4. Tariff(Schedules of concessions for WTO Members)


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Schedule VI SRI LANKA

This Schedule is authentic only in the English language


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This Schedule is authentic only in the English language

PART I MOST-FAVOURED NATION TARIFFSECTION II Other Products

Tariff itemnumber

Description of products Base rate of duty(U/B)

Bound rate of duty Initial negotiatingright

Other duties andcharges

1 2 6 4 5 6

0301 LIVE FISH030110 - ornamental fish 66% (U) 50%

030191 -- trout (salmo trutta, salmo gairdneri, salmoclarki, salmo agua bonita, salmo gilae)

66% (U) 50%

030192 -- eels (anguilla spp.) 66% (U) 50%

030193 -- carp 66% (U) 50%

030199 -- other: 66% (U) 50%

0302 FISH, FRESH OR CHILLED,EXCLUDING FISH FILLETS ANDOTHER FISH MEAT OF HEADING NO.0304

030211 -- trout (salmo trutta, salmo gairdneri, salmoclarki, salmo agua bonita, salmo gilae)

66% (U) 50%

030212 -- pacific salmon (oncorhynus spp.), atlanticsalmon (salmo salar) and danube salmon(hucho hucho)

66% (U) 50%



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Bound and Applied MFN Tariffs


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0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

180.0%

200.0%

2006 2006 2005 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006

Bangladesh Norway India Korea Indonesia Brazil Philippines Japan Malaysia China EC United

States

Australia

Bound Tariff Applied Tariff

Philippines Wood, pulp, paper andfurniture

Bound Rates and Applied Rates by SectorBound Rates and Applied Rates by Sector

China Wood, pulp, paper andfurniture


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Bound Duty

Applied Duty Source) World Trade Report 2004 13

0.0

10.0

20.0

30.0

40.0

furniture

Textiles and clothing

Leather, rubber,

footwearand travel goods

Metals

Chemicals and

photographic

supplies

Transport equipment

Non-electric machinery

Electric machinery

Mineral products

nd precious stones

and precious metals

Manufactured

articles not

elsewhere

specified

Fish and

fish products

Petroleum

Binding coverage : 61.8%Average of bound duties : 23.4% Average of applied duties : 4.3%

China

0.0

10.0

20.0

30.0

40.0

furniture


Leather, rubber,

footwear

and travel goods

Metals

Chemicals andphotographic

supplies

Transport equipment


Electric machinery

Mineral productsnd precious stones

and precious metals

Manufactured

articles not

elsewhere

specified

Fish and

fish products

Petroleum

Binding coverage :100.0% Average of bound duties : 9.1%Average of applied duties : 11.3%

USWood, pulp, paper and

furniture EUWood, pulp, paper and

furniture

Bound Rates and Applied Rates by SectorBound Rates and Applied Rates by Sector


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Bound Duty

Applied Duty Source) World Trade Report 2004 18

0.0

10.0

20.0

30.0

40.0


Leather, rubber,


Metals

Chemicals and

photographic

supplies

Transport equipment


Electric machinery

Mineral products

and precious stones

and precious metals

Manufactured

articles not

elsewhere

specified

Fish and

fish products

Petroleum

0.0

10.0

20.0

30.0

40.0


Leather, rubber,


Metals

Chemicals and

photographic

supplies

Transport equipment


Electric machinery

Mineral products

and precious stones

and precious metals

Manufactured

articles not

elsewhere

specified

Fish and

fish products

Petroleum

Binding coverage :100.0% Average of bound duties : 3.2% Average of applied duties : 3.7%

Binding coverage :100.0% Average of bound duties : 3.9%Average of applied duties : 4.0%

Nontariffbarriersandargumentfor

protection

Q t


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Quota:

Government imposed the limitation on the volume orvalueofinternationaltrade.

Quota

rent:

Profit

that

come

about,

because

a

quota

has

artificiallyraisedthepriceofimportedproducts.

Quotaoccurs thelossoftheconsumers

Tariff Quotas or Tariff Rate Quotas


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Imports (MT)Imports (MT)Quota volumeQuota volume

Applied duty %Applied duty %

Out-of-quotatariff

In-quotatariff

Tariff Quotas or Tariff Rate Quotas


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protection

Embargo:


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Embargo: Embargo is a complete ban on trade in product or

products.

Voluntaryexportrestraint (VER)

Agreement between imported and exported Countrieswhereby the export agree to limit the amount of theirexport.

Throughthisagreementthese foreign industriesareabletoraisetheirprices.

Inthecase,theimportedCountrylosstherevenueC=C+C2(seenfigurebelow).

Financial contributions and kinds of contribution bySubsidies


protection


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Financialcontributionsandkindsofcontributionby

GovernmentasExamples

Grants

Loans

Loanguarantees Taxcredits

Taxexemptions

Importdutyexemptionsoncapitalequipmentused

Provisionofgoodsorservicesotherthangeneralinfrastructure

Purchaseofgoods

Incomeorpricesupports

Govt entrustsordirectsprivatebodytocarryoutabovefunctions

Exportsubsidy: A pa ment b a go ernment to an industr that leads to

Other

Non

tariff

barriers

and

argument

forprotection


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Apaymentbyagovernmenttoan industrythat leadstoanexpansionofexportsbythatindustry.

ExportsubsidiesPolicycoverage Article9.1(WTO)

(a)directsubsidiescontingent on

export

performance(b)saleordisposalforexportbygovt atpricebelowdomesticmarket

(c)paymentsonexportsfinancedbygovt action

(d)marketingsubsidies,includinghandling,upgrading,transport,

freight

(e)favourableinternaltransport

and

freight

charges

for

exports(f)subsidiesonagr.Productscontingentonincorporationinexportedproducts

Pillars of the Agreement on Agriculture

Market Domestic Export


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Market

Access

Domestic

Support

Export

CompetitionTarifficationBindings

Reductions

Market AccessTariff Rate Quotas

Special

Safeguard

Amber Box

AMS Reduction

Blue BoxProduction Limiting

Programmes

Green BoxNon Trade

Distorting

Volume

Reduction

Value Reduction

Roll-over

Amber boxCalculating the Current Total AMS

Annexes 3 and 4


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Product-specificsupport

Market price support

Compensatory payments

Product-specific

subsidies+

= Current Total AMS

Non-product specific

support

Fertilizers

Irrigation, drainage

Electricity

Subsidized credits

Countervailingduty:

Othernontariffbarriersandargument

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Cou e a g du y: A tax imposed by importing Country designed to offset

artificiallylow

prices

charged

by

exporters.

Thismeasures is to impose the tax inorder tooffset thesubsidizedexportgoods.

Governmentprocurementpolicies: Directpurchasingagentsofstateandlocalgovernmentto

purchase American product unless comparable foreigngoodaresubstantiallycheaper.

Dumping:


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Defined

a

selling

a

product

in

a

foreign

Country

at

a

price

that is lower than thepricechargedby thesame firm initshomemarketoratapricebelowcostofproduction.

Manyreasonsfordumping: Maybepredatorypricingpolicy Mayberesultofcustomproduction

May

be unintentional /

technical

dumping May be conscious economic decision relating to profits fromincreasedmarginalproduction.

Definition of Dumping base on WTO agreement


forprotection


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Definition of Dumping base on WTO agreement

Dumping=whenaproductissoldforexport toanothercountryatlessthanitsnormalvalue.

Normal

Value is

thepriceinthehomemarketwhenthegoodissoldatapriceabovethecostofproduction

thepricechargedforthegoodwhensoldatapriceabove

costinthirdcountrymarkets constructednormalvalue calculatedasthetotalcostsof

producingtheproductplusareasonableamountforselling,generalandadministrativeexpensesandprofit.

Antidumping law:


forprotection


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Dumping margin: The difference between the normalvalueofaproductanditsdumpedprice.

Injury test: Investigation to determine the cause of theforeigntradepracticeto harmadomesticproducer.

INJURYFACTORS(Article3.4)Include:

Actual and potential decline in:


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Actual and potential decline in:

Sales - Productivity

Profits - Return on investment

Output - Utilisation of capacity

Market share

Actual and potential negative effects on: Cash flow - Growth

Inventories - Ability to raise capital

Employment - Ability to raise investment Wages

Factors affecting domestic prices

The magnitude of the margin of dumping

Safeguard:


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A

measure

trade

law

that

allows

for

temporary

protection (5 years) against fairly trade foreignimport.

Reasonforusingthismeasureistradeadjustment inthedomesticproducers.

But forusing thismeasure itshouldbe investigatedthe injury of the domestic industry through theforeignproducts.


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seriousinjury

(threatof)


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( )=significantoverallimpairmentinthepositionof

adomesticindustry Relevantfactors:

Increasedimports(valueandvolume)

Market

penetration

of

imports Changesinsales

Production

Productivity

Capacityutilization

Profits/losses

Employment

Rule of Origin (ASEAN case):


forprotection


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RuleofOrigin(ASEANcase):

Agricultureproducts(chapter0124)andagriculturalproductscommittoWTO,suchascottonchapter52,silkchapter50.

Nonagriculturalproducts

Rule of Origin (ASEAN Case) (cont):


forprotection
http://../Chan%20Bonnivoit-Documents/Cambodia%20Trade%20Policy/KHM21A1.mdbhttp://../Chan%20Bonnivoit-Documents/Cambodia%20Trade%20Policy/KHM21A1.mdbhttp://../Chan%20Bonnivoit-Documents/Cambodia%20Trade%20Policy/KHM21A1.mdbhttp://../Chan%20Bonnivoit-Documents/Cambodia%20Trade%20Policy/KHM21A1.mdbhttp://../Chan%20Bonnivoit-Documents/Cambodia%20Trade%20Policy/KHM21A1.mdbhttp://../Chan%20Bonnivoit-Documents/Cambodia%20Trade%20Policy/KHM21A1.mdb


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RuleofOrigin(ASEANCase)(con t):

AgriculturalProducts

Applytheruleofwhollyproducedorobtainedapplicableforgoodswhicharemadewhollyfromdomesticrawmaterial.

ThevalueofrawmaterialsfromexportingcountryandASEANCountryisnotlessthan60%oftotalproductioncost.

Rule of Origin (ASEAN Case) (cont):


forprotection
http://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdfhttp://../Chan%20Bonnivoit%20for%20Ministry%20of%20Commerce/Russian%20Documents%20Scan/Signature%20with%20the%20Russia%20Federation%20for%20Russia%20Accession%20into%20WTO.pdf


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RuleofOrigin(ASEANCase)(con t):

Non

agricultural

Products Applytheruleofwhollyproducedorobtainedapplicableforgoodswhicharemadewhollyfromdomesticrawmaterial.

ThevalueofrawmaterialsfromexportingcountryandASEANCoutry isnotlessthan40%oftotalproductioncost.

ThelocalASEANcontentcanbecumulative,thatis the value of inputs from various ASEAN


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is,thevalueofinputsfromvariousASEAN

members

can

be

combined

to

meet

the

60%

or

40%

requirement.Thefollowingformulaisapplied:

(Rawmaterialcost+Directlaborcost+Directoverheadcost+Profit+Inlandtransportcost)x100/FOBvalue

TheformulaforcalculatingtheRCVshallbe:


forprotection


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A BuildUpMethod

RVC=(VOM/FOB)x100%

B BuildDownMethod

RVC

=

[(FOB

VNM)

/

FOB]

x

100%

RVC:RegionalValueContent VOM:Valueoforiginatingmaterialsusedbytheproducerin

theproductionofgood VNM:Valueofnonoriginatingmaterialsusedbythe

producerintheproductionofgood

Protectintellectualpropertyright:


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Patent allows inventors the opportunity to recover theirinvestment and the cost of creating and marketinginventions.

Copyright give authors control over the reproduction,disseminationandpublicperformanceoftheirwork.

Trademark assures consumers about the productcharacteristicssuchasquality.

P i ll l i h ( )


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Protectintellectualpropertyright(cont):

GeographicalIndication isanygeo. sign(wordorsymbol)used to indicate that a product originates in a givencountry/region/placeand its quality, reputation orothercharacteristic are essentially due to its geographical

origin.

Industrialdesignisaesthetic shape(ex.Modelofshirt)ofmassproducedproducts.

Neigbouring right is Performers, Phonogram ProducersandBroadcastingOrganizations

Nontariffbarriers


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Nontariffbarriers


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DEFINITION

Patents


137/282

Disclosure

Patentable subject matter

Industrial applicability

Novelty

Inventive Step

Main Characteristics of Industrial

Design


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NO if dictated purely by the function

NO if contrary to public order and morality

Industrial

New (Worldwide)

risks arising from additives,human or animal

To protect : from :

DefinitionofanSPSMeasure


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risks arising from additives,

contaminants, toxins or disease-causingorganisms

damage caused by the entry,

establishment or spread of pestsa country

human life diseases carried by animals or plants

human or animal

life

pests, diseases or disease-causing

organisms

animal or plant

life

All types of measures with SPS objectives,

including :

Whattypeofmeasures?


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productcriteria

quarantine

treatments productionmethods

certificationandapproval

inspection

sampling

procedures packagingandlabelling

directlyrelatedtofoodsafety

including :

The

TBT

Agreement.


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Tostart:somedefinitionsTechnicalRegulation

"Documentwhichlaysdownproductcharacteristicsortheirrelatedprocessesandproductionmethods...withwhichcompliance is mandatory


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complianceismandatory.

Standard

Document,approvedbyarecognizedbody thatprovides,forcommonandrepeateduse,rules,guidelinesorcharacteristicsforproductsorrelatedprocessesandproductionmethods,withwhichcomplianceisnotmandatory

Conformityassessmentprocedure

Anyprocedureused,directlyorindirectly,todeterminethatrelevantrequirementsintechnicalregulationsorstandardsarefulfilled


Development


Effects of the unequally power share in


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Effectsoftheunequallypowersharein

internationaltradePerroux theorysaidthatthelargeCountrieshas:

Dominanttoimplementthetradepolicy

Havingpowertoinfluencetheimportingpriceandexportingprice

Usingtherevenuefromtheexportfordomesticgoods

Dominanttoimplementthemonetarypolicy,inparticulartheinterestratepolicyforcreditsintotheforeignmarket

ThewelfarelostofthetariffsimposedbysmallCountry

P S


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P

PW

X

a

0

S

PW+T

D

Tariff (T)

Q3 Q4 Q2

b c d

Thewelfare lostofatariff imposedbyasmallCountrybaseontheabovefigure.


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Changeinconsumersurplus: a$ b$ c$ d$ Changeinproducersurplus: +a$ Changeingovernmentrevenue: +c$

Netwelfarechange: b$ d$

ThewelfarelostofthetariffsimposedbylargeCountryP S


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PW

X0

S

P= PW+T

D

Tariff (T)

Q3 Q4 Q2

P

ThewelfarelostofthetariffsbythelargeCountry

SB + Tariff


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PA PW PB

XW

XA

XB

Country A: Market largeCountry

Country B: Market smallCountry

World Market

DA

SB

DA DB

SA

SB

PW

P

P

S + Tariff

Tariff

L0L1

a c

e

b d

PW PW

P

Thewelfare lostofa tariff imposedbya largeCountrybaseontheabovefigure.


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Changeinconsumersurplus: a$ b$ c$ d$ Changeinproducersurplus: +a$ Changeingovernmentrevenue: +c$+e$

Netwelfarechange: b$ d$+e$

Tariffescalation

Tariffsescalatewhentheyincreasewiththelevelofprocessing


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p g

Attheaggregatelevel,thepictureisdiverse thetariffstructuresofCanada,Australia,NewZealand,

TurkeyandNorwayexhibitescalation

thetariffstructuresofseveralcountriesexhibitpartialescalation

Attheproductlevel,tariffescalationispresentevenin

countrieswhereoverallstructureexhibitslittleornoescalation

Tariff

distribution:

tariff

peaks Tariffsthatexceedaselectedreferencelevel


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Nationalpeaks

are

more

frequent

where

average

tariffislow

Developedcountries: NewZealand,Australiaand

Icelandhavemanypeaks,EUhasfew LatinAmerica: oftenalltariffsabove15%

Otherdevelopingcountries: alsohighshareoftariffs

above15%

Tariffpeaksandhightariffs

GenerallyusedbyIOs:

N ti l k ti th ti l


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Nationalpeaks: 3timesthenational

average

Internationalpeaks: >15%

BUT,THEREISNOAGREEDWTODEFINITION

EC15:boundAVGperHSChap.

16

1820 Bound Duty AV

Intern. Peak > 15%


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0

2

4

68

10

1214

03

27

34

41

48

55

62

69

76

84

91

Gr

HS Chapter (Non Ag tariff lines only)

Av

erage(%)

Nat. AVG = 4%

Nation. Peak > 12%

3X

Nat.

AVG

Brazil:boundAVGperHSChap.

80

90

Bound duty AV3X

Nation. Peak > 90%


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0

10

20

30

40

50

60

70

03

28

28

32

31

36

44

43

48

68

51

56

61

66

71

72

78

84

85

86

88

91

96

HS Chapter (Non AG tariff lines only)

Aver

age(%)

Intern. Peak > 15%

Nat. AVG = 30%

3X

Nat.AVG

40

45

Tariff

(%)

Tariffescalation:textilesandclothing


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0

5

10

15

20

25

30

35

40

Raw material Semi-manufactured Finished product

Tariff Peaks:Japan

minimum tariff 0% maximum tariff 958%

Tariff only but problems still exist


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m m m ff ma mum tar ff 95

Tariff Escalation:

cocoa imports into the EC

cocoa beans milk chocolate0% 18.7%

Forms:Specific duties and ad valorem dutiesSeasonal duties

Matrix tariffs


Development


Backwash effects of Myrdall


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BackwasheffectsofMyrdallMyrdall theoryarguedthattheinternationaltrade

has

thebackwash

effects:

FlowofHumanResourcesintothelargeCountry.

ContinualflowofCapitalintothelargeCountry,becauseofitseconomicboom.

LargeCountryhastradingpricesadvantageand

exportsadvantage.


Development


Underdevelopedastheeffectsofdeclining


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termoftrade(ToT)? ItisthetheoryofPrebish andSinger DefinitionofToT =PX/PM

PX isexportingpriceindex PM isimportingpriceindex

ToT meanshowmanyunitsofimportinggoodswillbeexchangedwithoneunitofexportinggoodsoftheCountry.


Development


Underdevelopedastheeffectsofdeclining


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termoftrade(TOT)?(cont) Priceindexformula:

Laspeyres priceindex= Pit .Qit0/ P

it0 .Q

it0

Paashe priceindex(GDPDeflator)= Pit .Qit / P

it0 .

Qit

P=Price

Q=Quantity

t=time

i=kindoftheproducts


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II.

Theoretical

Interpretation

of

Economic

DevelopmentProductionPossibilityFrontier(PPF)andTOT


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Development

4.DevelopmentandinternationalEconomic Underdevelopedastheeffectsofdecliningtermof


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trade(TOT)?(cont) TOTdeclinesthatmeanseco.development

wouldbegonedown,becausetheimporting

pricewould

be

increased

or/and

the

exporting

pricewouldbereduced.

TOTincreasesthatmeanseco.development

would

be

grown

up,

because

the

importing

price

wouldbereducedor/andtheexportingpricewouldbeincreased.


Development



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trade

(TOT)?

(cont) TOTofsomeDevelopingCountriesandleastdeveloped

Countriesisgenerallyterrible.

ThereasonsoffailingTOTofsuchCountriesare: Priceoftheirimportinggoodsdependsonincome

elasticity.

Priceoftheirexportinggoodsdependsonpriceelasticity.

MonopolizingofimportinggoodsfromindustrialCountries.

ExportinggoodsandthosepriceofDevelopingCountriesfacedsomeconstraintsregardingtopotentialimplementingofcommercialpolicybythelargeCountries.


Development



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trade(TOT)?(cont) InthecasethattheTOTdeclinesorisworse,theeffectson

eco.developmentoftheDevelopingCountriesare

following: Reducingtheimportinggoodswhichareaffectedonthe

developmentoftheCountries.

Exportingsectorcannotbeimprovedintermoftechnology

andproductivity. Employmentofexportingsectorcanbedeclined.


Development



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trade(TOT)?(cont) CriticonthetheoryofPrebish andSinger:

FormulaofpriceindextooktocalculatetheTOTisnotso

correct,ifthetimetooktocalculatethepriceindexissofarfromthebasictimeintheformula.

Thereasonisthattheproductscanbealreadychangedthephysicalattitudeorquality,althoughthosenameisnot

changing.


Development



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trade(TOT)?(cont) CriticonthetheoryofPrebish andSinger(cont):

DreadfulTOTdependsnotonlyexternalissueslike

mentioned

above. Itcandependsontheinternalissueslikeincreasingincome

andtechnologyintheDevelopingCountrywhicharecausingtoincreasetheimportingpriceandtoreducethe

exportingprice.


Development



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trade

(TOT)?

(cont) CriticonthetheoryofPrebish andSinger(cont):

Thus,dreadfulTOTcanbeconsideredasfinefordevelopmentofthedevelopingCountryiftheinternaleffectscomparestoexternaleffectspositive.

Thus,shockingTOTcanbeconsideredasterriblefordevelopmentofthedevelopingCountryiftheexternal

effectsisstronglythantheinternaleffects.


Development


Effectsofinstabilityofexportrevenue


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Instabilityofexportrevenuedependsonthefluctuationofexportingprice.

ItcanseriouslyaffectontheCountrywhichhas:

smallGDP,

largeshareofexportinGDP,

exportingonlysingleproductorsectorand

their

domestic

development

depending

mostly

on

importinggoods.

Itcanexplaintheseeffectsbelow.


Development

4.DevelopmentandinternationalEconomic Effectsofinstabilityofexportrevenue(cont)


168/282

Incaseexportingpricegoingdowntheexportrevenuewillbereduced.

Thus,theGDPwillbereducediftheCountrydoesnthaveotherexportrevenueofanotherproductsinordertocompensate.

Finally,thedevelopmentoftheCountrywillbestagnateorgonedown.

Itcanseeinthemathematicalformulationbelow.


Development



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Y=C+I+G+X Mor Y=CD +CM +ID +IM +X Mor

Y=CD +ID +GD +X+(CM +IM+GM M)

Y=GDP C=Consumption

I=GrossInvestments

X=Export

M=Import

D=Domestic


Development



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Baseonaboveformulaitcanwritefollowing

CM +IM +GD M=0

=>Y=CD +ID +GD +X

IfXreducedand,CD,ID andGD arestable,itwillbeseenthatYorGDPwillbereducedaccordingly.

Also,GDP=Y=CD +ID +GD +Xisgonedown.


Development


Effectsofinstabilityofexportrevenue(cont)

h

f

h

h

d d

hl k


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Otherwise ifthe export revenue has reduced, it can happen likebelowrelatingtoimportingoftheCountry:

BaseonaboveformulaithasX=M,and

CM +IM M=0whichcanbewrittenasCM +IM =M

IfXreduced,itwillbeseenthatMwillalsoreduceaccordingly,

ReducingMmeansCM aswellIM canbereduced,butCM as

daily

consumption

can

not

decrease

for

all

cases. Therefore,onlyIM willbedecreasedandthosereducings effect

canbringtodiminishtheeco.developmentoftheCountry.


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Development

4.DevelopmentandinternationalEconomic Underdevelopmentastheeffectsofinternational

i l i ?


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capitalstransaction?

CategorizingtheforeigndirectInvestments(FDI)infollowing:

FDIs investtoexploitthenaturalresources

FDIs investtosupplyinthedomesticmarket

FDIs invest

to

supply

in

their

Countries

and

other

thirdCountries.


Development

4.DevelopmentandinternationalEconomic Underdevelopmentastheeffectsofinternationalcapitals

transaction?(cont)

Ad t d di d t f FDI i ti t l it th


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AdvantagesanddisadvantagesofFDIinvestingtoexploitthenaturalresources Itcanbemonocultureproductionwhichcanbringtofoods

insecurity

Loss

of

potential

development

of

the

Country

if

they

(FDIs)

think

thattheCountrydoesntinvestsomemoneytoobtainitsrawmaterial

Relativelysmallcapitalinvestmentsinthissector

TheCountrycangainlowtechnologybythisinvestment

Lowsalaryforthelaborinwhichthosesalarycannotpushtobuildupthedomesticindustries,becauseitcanbuyonlythetraditionalproducts.


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Development


Underdevelopmentastheeffectsofinternational

it l t ti ? ( t)


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capitalstransaction?(cont) AdvantagesanddisadvantagesofFDIinvestingtosupplyin

thedomesticmarket

Disadvantage

FlowouttheincomeandprofitintotheCountryofFDI

Domesticproducerscandisappearfromthedomesticmarket,becauseofweakcompetition.

Increasing

unemployment

as

disappearing

of

domestic

companies


Development4.DevelopmentandinternationalEconomic

Underdevelopmentastheeffectsofinternationalcapitalstransaction?(cont)

Advantages

of

FDI

investing

to

supply

in

their

Country

or

the

third

Countries


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Advantages ofFDI investing to supplyin their Countryor the thirdCountries IncreasingthevolumeofGDP.

FlowthecapitalintotheCountrywhichcaneffectoncapitalaccumulationfortheCountry.

Reducingorcuttingupimportinggoodswhichwillbeproducedby suchFDI.

Savingcapital,whichuseforimportingsuchgoods,inordertoinvestforothersectorsoftheCountry.

Increasingcapitalreserve

Improvingdomestictechnology Creatingjobsfordomesticlabor

Buildingupcapacityofhumanresourceandtraininginstitutions

RepatriateoftheirprofitcanbenotcarriedoutifthetaxpolicyoftheirCountryisinconvenient.


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Development

5.PopulationGrowthandtheEco.Development Effectspopulationgrowthonthelaborfactor

X/P

=

f

(

L/P

C/P

R/P)


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X/P = f( L/P, C/P, R/P) Populationgrowthwilloccurincreasingthepotentialof

labor

Butincreasingoflabordependsonthemortalityrate

TheEffectsonGDPbythepopulationgrowthdependontheproductivityofthosepeople

Ifthoseproductivityis0,itmeansthatGDPwillbestableandthepercapitawillbereduced.

Ifthoseproductivityisnot0,itmeansthatGDPwillincreaseandthusthepercapitawillalsoincrease.


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Development

5.PopulationGrowthandtheEco.Development Effectspopulationgrowthonnaturalresources

X/P = f ( L/P C/P R/P)


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X/P=f(L/P,C/P,R/P) PopulationgrowthinDevelopingCountrydidnotmean

thatintherealitythenaturalresource