Transcript The General Agreement on Trade in Services (GATS)

Mozambique: Globalization and
Domestic Policy Choices
Frank Flatters
Queen’s University, Canada
May 4, 2006
Purpose
• Assumption: The real question is not whether
to integrate with the global economy, but how
to integrate most successfully
• Explore lessons from Mozambique and
elsewhere to discuss policy options for global
integration
– A few key do’s and don’ts
2
Outline
• Context
• Private and Public Sectors
• Trade Diplomacy and Unilateralism
• An Agenda for Mozambique
3
International context
• Growth, trade, jobs and poverty reduction
– Openness is necessary but not sufficient
• Globalization of production networks
– Export-led growth or import-led growth?
– Logistics and trade facilitation
• Many general lessons but no unique solutions
4
Domestic context
• Mozambique has come a long way in a short
time
• But it is still poor and has a long way to go
• Some hesitancy and confusion about the way
forward
5
Private and public sectors
• The private sector must drive growth, but in a
policy framework set by government
• The government must listen to the private
sector but must be independent, represent all
interests and avoid capture
• Global competitiveness as a guiding vision
6
Trade diplomacy
• Use trade negotiations to support and lock in
beneficial reforms, not to delay them
– Induced mercantilism and the fallacy of “concessions”
• Dangers of regional agreements and how to
avoid them
– Market size, trade diversion, complexity (tariffs, rules of
origin), policy diversion
– Grant all preferences on a multilateral basis
7
Do it yourself—Unilateralism
• What Mozambique needs it can do for itself;
but watch out for dangers
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Infant industries, declining industries, and adjustment
Tax incentives
Dumping and subsidies
Development finance
8
Agenda for Mozambique
• Focus on domestic reform
• Import policies
• Export policies
• Investment reform
9
Focus on domestic reform
• Mozambique’s comparative advantage is in
improving its own policies, not those in the
United States or EU
• The focus needs to be the entire regulatory
regime, at the border and behind the border
• Implementation is the most difficult part
10
Import policies
• Continue nonpreferential tariff reform
– High rates on final goods, surcharges, cascading
• Customs and trade facilitation
– Excessive focus on revenue and control
– No need to put imports in cold storage before release
11
Export policies
• The best export incentive is easy importing
(import-led growth)
– EPZ and other import facilities (VAT, duty drawbacks,
etc.) as immediate first steps
• Regulations, red tape, poor infrastructure, and
weak service sectors tax exports
• Export taxes and restrictions hurt the poorest
12
Investment environment
• Mozambique’s “high cost” economy is due
largely to well known domestic policy failures
– Laws and regulation: labor and land laws, financial
regulation, business licensing, legal system
– Infrastructure and services: roads, transport, telecoms,
education
– Taxes: low rates, broad base, and no incentives
• Improvements in all these areas are a
necessary complement to trade policy reform
13
Can Mozambique compete?
• Yes – but it requires an environment that
encourages and facilitates investment,
employment, imports, and exports
• The current regime raises costs, rewards rentseeking and discourages competition
14