GEI Working Paper Abstracts

Working papers produced by the research projects in the Global Economic Institutions Programme have begun to appear. They are available for £4/$8 each from: Subscriptions Officer, Centre for Economic Policy Research, 90-98 Goswell Road, London EC1V 7RR, UK.

Papers: [1-5] | [6-10] | [11-15] | [16-20] | [21-25] | [26-30] | [31 - 35] | [36-45]

[46-47]

Working Paper no. 31
How Substantial is EU Tariff Discrimination?
Christopher Stevens

The EU has a complex array of trade agreements, but do they actually provide their beneficiaries with better tariffs than their competitors? An answer to this question requires an analysis of the EU's tariff reductions under the Uruguay Round, the new GSP and the multiple higher-level agreements from which no fewer than 121 states benefit. Each of these is analysed in turn to establish 'the stakes of the game'; how discriminatory (at least in relation to tariffs) is EU trade policy and, hence, what is the absolute scale of its challenge to multilateralism.

The conclusion is that the discrimination is much less extensive than might be supposed. This is partly because the Uruguay Round has reduced MFN tariffs on many industrial items to low levels. But it is also because there is now such a large group of states that have higher-level agreements, the terms of which are often very similar in relation to tariffs.

This offers an avenue for improving the compatibility between the EU's policies and the WTO system that avoids the dangers of increased protectionism identified elsewhere [Stevens 1997a]. It is proposed that the EU rationalise its higher-level tariffs into a single system that is then extended to all GSP beneficiaries other than the most competitive. The discrimination that would then exist between the great majority of the EU's trade partners on the one hand and, on the other, the OECD states plus the most competitive GSP beneficiaries should be time bound.

Working Paper no. 32
The Bretton Woods Institutions
A View From the Boards
Huw Evans
July 1997

The paper compares and contrasts, from the vantage point of their executive boards and of a joint executive director, the International Monetary Fund and the World Bank. Both institutions are struggling to adapt to a world of large-scale private flows.

These public-sector institutions raise difficult issues of governance: the paper emphasizes the importance of effective leadership, chosen in a competitive way, and of shareholder support. Both institutions, particularly the more centrally managed and better-led IMF, have responded to crises such as Mexico, but both need to do more outside crises to adapt to a changing world environment. Both institutions face the paradox of success: the more successful are governments in promoting economic stability, growth, and poverty reduction, the less the need for these institutions.

Working Paper no. 33
Credibility and Fiscal Policy in the ERM
Andrew Hughes Hallett, Milena Ignjatovic, Ronald MacDonald
August 1997

Using a version of the capital asset pricing model, we examine the credibility of number of participating countries in the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS). The measure of credibility obtained from this model is time-varying and is related to fundamentals which are thought to influence credibility, particularly the stance of fiscal policy. The analysis is conducted for four countries, namely France, Belgium, Germany and Italy. We note, inter alia, that the macroeconomic policies pursued by France during the sample period generates a measure of credibility which converges on German levels and that this contrasts quite sharply with the Italian experience.

Hughes Hallett is Jean Monnet Professor, Ignjatovic is a Researcher and MacDonald is Professor of International Finance in the Department of Economics, University of Strathclyde. Hughes Hallett and MacDonald direct a GEI project 'Optimal International Regimes and Global Economic Institutions'. Contact: Department of Economics, University of Strathclyde, Curran Building, 100 Cathedral Street, Glasgow G4 0LN, UK, tel: (44 141) 552 4400, fax: (44 141) 552 5589, email: economics@strath.ac.uk.

Working Paper no. 34
A 'Bankruptcy' Procedure for Sovereign States
Marcus Miller Lei Zhang
August 1997

Do emerging economies need a bankruptcy procedure to handle potential debt defaults? Jeffrey Sachs and John Williamson, for instance, say yes: while others, including notably the two Working Groups who issued reports on Crisis Resolution (on behalf of G10 and the Institute of International Finance) say no - mainly on account of 'moral hazard' ascribed to debtors. But could the replacement of syndicated bank lending with widely held bond debt under the Brady plan have posed a problem of inter-creditor conflict sufficiently pressing to have tipped the balance in favour of having a more orderly procedure than currently exists?

To investigate this, we use the basic tools of finance, starting with the valuation of corporate debt and then going on to sovereign debt. What we find is that, without 'water-tight' sovereign immunity, creditors could face a serious Prisoners Dilemma in the absence of a code. Though it may be collectively inefficient, individual creditors may see it in their self-interest to grab what they can of the available collateral in a 'race of the vultures'.

Avoiding inter-creditor conflicts of this sort is the primary reason for having a bankruptcy code. Our simulations also suggest that the case for an orderly procedure (including in particular an automatic stay) is fairly robust in the face of 'moral hazard' problems affecting debtor countries.

Contact: Department of Economics, University of Warwick, Coventry CV4 7AL, UK, tel: (44 1203) 523049, fax: (44 1203) 523032, email: m.h.miller@warwick.ac.uk, ecrsm@csv.warwick.ac.uk

Working Paper no. 35
International Competition Policy: The Long March Towards a WTO Agenda
Peter Holmes, Alexander Lehmann, Francis McGowan
August 1997

In December 1996 the WTO Ministerial meeting agreed to set up a working group on Trade and Competition issues, following the inclusion of a limited number of references to competition issues in the Uruguay Round. This paper traces the evolution of the debate which led to this move from the late 1940s onwards. It shows that the long delays in making progress on this issue reflect deep philosophical differences of opinion. Some believe that existing domestic and regional rules are adequate to deal with cross border competition issues such as mergers and monopolistic and cartel abuses, and that sufficient trade liberalisation and deregulation will get rid of all dominant position that could be abused. Others argue that globalisation sunk costs and economies of scale in some sectors threaten problems that cannot be adequately dealt with due to inconsistencies and gaps in existing domestic and regional rules. The paper looks at the different interests lying behind the debates now beginning at the WTO and the possible options.