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This chapter presents information on the utilization by the sub-Saharan African developing countries of EU, US, and Japanese trade preferences, and explores the reasons why rules of origin may constrain the take-up of the preferences. Unlike previous studies, which have concentrated on the overall level of utilization of available preferences, the variations in the rate of utilization of preferences across beneficiaries and across the three developed-country preferential schemes are highlighted.

This chapter looks at the ethical aspects of globalization during the 1990s. It argues that in the way that they have sought to shape globalization, the advanced industrial countries and some of the multilateral institutions that they control have violated some basic ethical norms. Three central issues in the context of global finance are analyzed: the design of debt contracts between developed and developing countries and other aspects of lending behavior; the consequences of excessive debt; and broader issues associated with the global reserve system. Three types of ethical problems are discussed: (1) where markets (or international institutions) take advantage of their “power” and the weaknesses of the developing country to pursue their own interests at the expense of or risk to those in the developing countries; (2) where international financial institutions provide advice that works to the disadvantage of the developing countries; and (3) where the markets, and especially the international financial institutions, have not done as much as they could for the well-being of the developed countries.

This chapter examines some of the other outstanding debates on capital market liberalization (CML). In particular, it focuses on when a country is sufficiently developed to risk capital market liberalization, whether all countries should make liberalization their long-term goal, and whether capital market liberalization is reversible; even if it was a mistake in the first place, should countries that have already liberalized now stick with it? For example, proponents of liberalization often argue that the issue is not whether countries should liberalize their capital markets, but rather that liberalization should occur within the ‘proper’ sequence of reforms. Critics, however, argue that CML should not necessarily be the long run goal of all countries and that there are better ways for developing countries to integrate into the global economy. The chapter also contains a section that examines the appropriateness of different techniques of capital market liberalization for countries in various stages of development.

This chapter deals with trade policy and the world trading system from a development perspective, and concludes with proposals for making the global trading system more development-oriented, beginning with a re-orientation of the WTO. As trade is a means to development, not an end in itself, the Organization's policies should be judged not on whether they are ‘trade-distorting’ but whether they are ‘development-distorting’. Second, the WTO must make structural changes to compensate for the handicaps of developing countries in the WTO system; reciprocity among members with different capacities leads to unequal outcomes. Thirdly, developing countries need policy space, and must be allowed to consider national treatment, subsidies, and tariffs when these are development-inducing. Finally, the WTO should stick to trade issues — not intellectual property and other non-trade issues. Other agencies exist to handle other issues. With these changes, the WTO could better play its role in the design and maintenance of fair rules for trade, and thus contribute towards a balanced, predictable international trading system which is designed to produce and promote development.

As countries develop, their labor force shifts from agriculture to industry and services, and in the process, the well-being of the people improves. This essay sheds some light on the economic logic that drives the process and on the important role that agricultural productivity plays in it. It argues that agricultural productivity growth is the key to poverty alleviation, and then discusses the policy implications for developing countries. The first section shows how the process of secular decline in poverty is inevitably associated with a movement of labor from agriculture to other sectors, and how agricultural productivity growth facilitates such a movement. The second section discusses the importance of international trade in this process. Both agricultural and trade policies tend to generate political battles because they redistribute incomes from one group to another. This political economy question is addressed in the third section, which also discusses the causes (and consequences) of the observed policy bias against agriculture. The fourth section discusses the two main determinants of agricultural growth-technology and crop diversification, and reflects on the policy options available to poor countries to induce agricultural growth without causing domestic upheavals.

This chapter discusses the central economic question of debt relief: does debt relief work to promote economic growth? This seemingly straightforward question — often taken for granted by debt campaigners — merits closer attention to ensure that relief bears constructive and sustainable outcomes. It is argued that debt relief is highly effective at promoting growth in countries suffering from a “debt overhang”, where reducing debt levels will stimulate investment and net resource transfers from abroad, but less effective in countries where infrastructure is weak and where net resource transfers are already positive.

One of the most sensitive issues regarding FDI and MNCs is their impact on relatively less developed countries (LDCs). This chapter makes no effort to “prove” net harm or benefits to LDCs. Instead, the thesis developed here is that it is impossible to determine scientifically that all MNCs are collectively harmful or beneficial to all LDCs on a permanent basis. To demonstrate the critical importance of heterogeneity, complexity, perceptions, and the fallacy of generalization, the nature of the conceptual obstacles to a definitive black-or-white judgment is examined. An examination of the many plausible arguments that incoming FDI is harmful on balance to the economic development of LDCs is followed by an examination of the many plausible arguments on behalf of the opposite conclusion, namely that on balance FDI has had a positive impact. A fourth section focuses on the difficulty in determining whether pre-existing economic conditions in a developing country determine the effects of incoming FDI, or whether FDI itself determines economic progress. The final section makes the case that the preferred answer to the question of the impact of MNCs and FDI on economic development is that it is indeterminate.

This chapter identifies two alternative forms of prudential regulation. The first set is formed by regulations that directly control financial aggregates, such as liquidity expansion and credit growth. The second set, which can be identified as the ‘pricing-risk-right’ approach, works by providing incentives to financial institutions thereby avoiding excessive risk-taking activities. Regulations in this category include ex-ante risk-based provisioning rules and capital requirements that take into account the risk features particular to developing countries. The main finding of the chapter is that contrary to policy intentions, the first set of regulations — the most commonly used in developing economies — can exacerbate rather than decrease financial sector fragility, especially in episodes of sudden reversal of capital flows. In contrast, the second set of prudential regulation can go a long way in helping developing countries achieving their goals. The chapter advances suggestions for the sequencing of implementation of these regulations for different groups of countries.

This introductory chapter focuses on the impact of the globalization of economic activities on global growth, resources, and environment. It cites the increased demand for natural resources, especially by developing countries. It also considers the effects of environmental pollution. An overview of the three parts of the book is presented.

Air pollution control in developing countries has received less attention than other environmental issues such as deforestation and water pollution. However, in the midst of a worsening air-pollution situation, the policy response has been slow, and tends to be based on command-and-control rather than economic incentives. Among point sources: coal-burning for industrial processes and domestic uses is the chief source of SO₂ and particulates; the use of biofuels also adds to particulate emissions. Among mobile sources, diesel trucks and buses generate significant amounts of particulates; the rapid increase in the number of vehicles, especially those using two-stroke engines, also contribute significantly to CO, SO₂, and NO₂ levels. Various arguments against the use of economic incentives for the control of point source pollution are discussed, and these suggest that most of these challenges are not insurmountable. The range of options for control of mobile sources of pollution is also briefly discussed. Transportation controls and changing the incentives to make public transport more attractive and improve vehicle maintenance are considered.

This chapter focuses on the interests of developing countries in the GATT/WTO system. In view of all the evidence, it should be clear that trade is important to developing countries and that their continued engagement in the global trading system is essential as a matter of development strategy.

A brief review is presented of the history of developing country involvement in GATT (General Agreement on Tariffs and Trade) and the experience of the first five years of the WTO (World Trade Organization), including efforts to negotiate the accession of China and Russia. The sections of the chapter are as follows: Special and differential treatment; Changing attitudes towards the trading system; Developing country participation in the WTO; Implementation of multilateral agreements; Expanding membership; and Conclusion.

This introductory chapter presents the arguments of the book and provides a framework for the issues related to capital market liberalization (CML). The first section addresses an important set of market failures that are likely to be significant in developing countries, and shows how they provide a rationale for state intervention in capital markets. The second section analyses the effects of capital market liberalization on developing countries, showing how the pro-cyclical nature of short-term capital flows can lead to financial and macroeconomic volatility and undermine growth. The third section introduces alternative policy options for interventions in capital markets, including direct and indirect capital controls and international regulations. The last section concludes by arguing that CML has high economic and social costs in developing countries, whereas its assumed benefits in terms of both economic stability and growth are unlikely to materialize.

An important problem in the management of global public goods lies with the imbalance of bargaining power as between developed and developing countries in the multilateral negotiations involved. Looks at characteristics of the negotiation process; the composition and strength of developing country negotiation teams; and tactics and methods for improving their bargaining position. Current constraints on negotiating capacity often reflect a lack of national policy analysis, design, and management capacity. One of this chapter's main recommendations is to increase national policy‐making capacity.

This essay explores why corruption is so widespread in developing countries. It is organized into three sections. The first section argues that a theory of corruption is needed in order to answer this question. The second section presents a theory linking corruption and development. The third section empirically documents the correlation between development and corruption.