A few weeks before the Brexit date of 31 October 2019, the big questions remain unanswered: Will Britain withdraw from the European Union? And if so, with or without a deal? These decisions not only affect the European Union and the United Kingdom itself, they also have consequences for the 79 countries of the ACP group, which have many links with both partners. Above all, a 'hard brexit' would create uncertainty for ACP countries and jeopardise their development opportunities. In the event of a disorderly Brexit, however, these risks for the ACP countries arise not so much from international trade as from possible changes in development policy.
ABSTRACTThe prices of cash crops impact the livelihoods of millions of households in developing countries. While the influence of speculators on global commodity prices determined through derivatives exchanges is extensively discussed, the contribution of hedgers to short‐term changes in futures prices has largely been disregarded in the financialization of commodities discourse over the past two decades. This results in a failure to account for the interconnected activities of increasingly consolidated lead firms within physical global value chains (GVCs) and derivatives markets. This article examines the pricing and hedging strategies of lead firms in the coffee, cocoa and cotton GVCs in relation to their activities on commodity derivatives markets. Based on Open Interest data as an indicator of derivatives markets activity, a measure of buying and selling pressure by trader categories is applied in a Generalized ARCH (GARCH) model. The findings of this article show that hedgers' activities allow speculators to drive global benchmark prices so that they can benefit through combinations of financial hedging and physical trading strategies. As these practices of lead firms contribute to the transmission of futures prices along GVCs, smallholders and other actors in cash crops in producer countries are exposed to heightened price changes.
On the 1st of January 2021, African countries started the African Continental Free Trade Area (AfCFTA). It is a largely symbolic step toward the long-term goal of economic integration on the African continent. The integration process includes an extensive agenda that requires time and will affect the development in African countries in multiple ways. While studies typically report potential trade and welfare gains, the overall impact of the agreement depends on various factors. In this ÖFSE Briefing Paper, we (i) present the state of play in the AfCFTA negotiations and implementation, (ii) discuss the challenges for the AfCFTA based on the characteristics of African trade, and (iii) offer a critical assessment of economic impact studies. A positive contribution of the AfCFTA to the Agenda 2063 of the African Union requires appropriate policies to overcome the limitations and challenges of the integration process, in particular through coordinated industrial policies. These efforts should be supported by the European Union, including through adjustments to its current trade regime with African partners.
China is today the second-largest economy after the US and the world-leading export nation. The economic and political development of China in the past decades has had a big impact on other parts of the world. The Chinese demand for natural resources has dramatically changed trade volumes and structures in many resource-producing countries. Even though China has recently shifted its internal economic focus away from export manufacturing towards a more consumption and service-based economy, securing the supply of primary commodities remains one of China's main priorities. It is today the world's major consumer of iron ore, steel, coal, zinc, lead, tin, nickel, copper and aluminium. As part of this trend, the relationship between Latin America and the Caribbean (LAC) and China has also intensified over the last two decades. The value of total trade between China and all LAC countries has increased twentyfold since 2000. Taking out Mexico from the LAC dataset reveals that China has become the most important single export market for the remaining LAC countries. Chinese Foreign Direct Investment in LAC has grown significantly since 2000. It has been particularly dynamic from 2010 onwards and is directed primarily towards the raw materials sector. Chinese policy banks have become the largest lender in Latin America in the past two decades, providing more financing to the region than the World Bank and the Inter-American Development Bank (IDB) combined. This paper looks at the role of China in Latin America with a focus on natural resources, and, in particular, minerals. It first describes the evolving economic and diplomatic relations between China and LAC and depicts the main Chinese actors in this region, before giving an overview of developments in the areas of trade, finance and investments. It concludes that if the relationship with China is to contribute to inclusive development in LAC, the countries in the region have to coordinate their efforts in order to obtain greater benefits from the new economic relations.
AbstractThis paper calls for integrating price-setting power and related uneven exposure to price risks into the analysis of governance in global value chains (GVCs) as it adds to other power dimensions in producing unequal distributional outcomes. This is shown for the cocoa GVC, in which—unlike in today's mostly liberalised market structures—the world's top cocoa-producing countries, Côte d'Ivoire and Ghana, pursue price stabilisation measures. These measures address intra-seasonal producer price volatility, and recent collaboration has achieved a living-income differential on top of export prices, but such measures do not shield export and producer prices from inter-seasonal variations in world prices determined on commodity derivatives markets. Based on interviews with actors along the cocoa GVC, we argue that this is related to the price-setting power of 'grinder-traders' and the key role of financial hedging and trading on commodity derivatives markets in their business strategies. Financialisation processes have increased derivatives trading's complexity and short-termism, accelerating consolidation among grinder-traders and making price stabilisation more challenging. Through their price stabilisation systems, Côte d'Ivoire and Ghana have maintained some price-setting power in the cocoa GVC, but largely remain 'global price-takers', with prices determined on derivatives markets and transmitted along the cocoa GVC through grinder-traders.
ABSTRACTRestructuring of global and local markets has led to an increased influence of commodity derivatives markets on commodity price setting. This has critical implications for price risks experienced by actors along commodity chains. Commodity derivatives markets have undergone significant changes that have been referred to as the 'financialization of commodities', which we define as an increase in trading activity by financial investors and the reorientation of business strategies by commodity trading houses towards risk management and financial activities. This article assesses how these global financialization processes affect commodity producers in low‐income countries via the operational dynamics of global commodity chains and national market structures. It investigates how prices are set and transmitted and how risks are distributed and managed in the cotton sectors in Burkina Faso, Mozambique and Tanzania. It concludes that uneven exposure to price instability and access to price risk management have important distributional implications. Whilst international traders have the capacity to deal with price risks through hedging, in addition to expanding their profit possibilities through financial activities on derivatives markets, local actors in producing countries face the challenge of increased short‐termism — albeit to different extents depending on national market structures — with limited access to risk management.
In recent years, a number of studies have been put forth to assess the potential economic effects of the EU-US trade agreement - the Transatlantic Trade and Investment Partnership (TTIP). Most studies report gains for the TTIP-member states. However, the commonly applied CGE models contain questionable assumptions such as full employment. In this report, we present a structuralist CGE-model for the assessment of TTIP with fundamentally different key assumptions with regard to the determination of output, income and employment. These distinct closures are applied within the standard trade liberalization setting including the reduction of tariffs and non-tariff barriers. Importantly, the model delivers results with regard to (i) macroeconomic effects including employment and wages, (ii) sectoral (20 Sectors) and (iii) regional (11 countries/regions) effects. Even though small but positive income effects are reported, the diverging results among TTIP-members, negative effects for real wages for low skill labor and the rest of the world, in particular developing countries, should be highlighted. An extensive sensitivity analysis confirms potential risks associated with TTIP. ; Seit März 2013 verhandeln EU und USA das Transatlantische Handels- & Investitionspartnerschaftsabkommen (TTIP). Aufgrund ihrer wirtschaftlichen Bedeutung und der weitreichenden Verhandlungsagenda stellt dies die bedeutendste handelspolitische Initiative seit dem Start der WTO Doha Runde im November 2001 dar. Die entscheidende Frage für politische Entscheidungsträger lautet dabei: Cui bono? Genauer: Was sind die zu erwartenden Auswirkungen des Abkommens auf Wirtschaftswachstum, Beschäftigung und Einkommensverteilung? In den letzten Jahrzehnten sind sog. CGE Modelle zum Standardinstrument geworden, um die Effekte der Handelsliberalisierung abzuschätzen. Diese Modelle wurden dafür kritisiert, dass sie erstens meist eine konstante Beschäftigung, ein konstantes Defizit der öffentlichen Haushalte und der Leistungsbilanz annehmen, und dass sie zweitens wichtige strukturelle Eigenheiten von Ländern nicht berücksichtigen. Damit bleiben zentrale Fragen außerhalb des analytischen Blicks. Das gegenständliche Papier präsentiert ein strukturalistisches CGE Modell, das (a) die Auswirkungen von Handelsliberalisierung auf die Beschäftigung, die Faktoreinkommen, die öffentlichen Haushalte und die Leistungsbilanz untersucht, (b) die strukturellen Eigenheiten von Volkswirtschaften berücksichtigt, und (c) flexibel auf verschiedene Szenarien und Handelsabkommen angewendet werden kann. Das Modell wird sodann für die Abschätzung der makroökonomischen Auswirkungen der laufenden EU-USA Verhandlungen (TTIP) verwendet. Damit soll ein Beitrag zur wissenschaftlichen und wirtschaftspolitischen Diskussion zu den Auswirkungen von Handelsliberalisierung auf Wachstum und Verteilung geleistet werden. Das hier vorgestellte Modell ist ein Multi-Sektor, Multi-Regionen Modell mit 20 Wirtschaftssektoren und 11 Regionen bzw. Ländern, und zwei Typen von Arbeitskräften (hochqualifiziert/ niedrig-qualifiziert). Die empirische Datengrundlage wird durch eine Social Accounting Matrix (SAM) auf Basis von Daten des Global Trade Analysis Projekts (GTAP) bereitgestellt. Mit dem Modell können die Auswirkungen von Veränderungen tarifärer wie nicht-tarifärer Handelshemmnisse (NTB) auf die abgebildeten Volkswirtschaften untersucht werden. Einschränkend muss darauf hingewiesen werden, dass die Effekte der Veränderung von NTB nur unvollständig dargestellt werden können. Insbesondere ist eine Bewertung des sozialen Nutzens bzw. der sozialen Kosten von NTB wie z.B. Gesundheitsoder Verbraucherschutzbestimmungen nicht möglich. Stattdessen werden nur die Kostenersparnisse aus dem Wegfall bzw. der Angleichung von NTM für die Privatwirtschaft berücksichtigt. Ebenso wenig können wie bei den meisten anderen Studien die Effekte vieler anderer Elemente der neuen Generation von Freihandelsabkommen abgebildet werden. Dazu gehören unter anderem die Effekte von Investitionsliberalisierung, den Schutz geistiger Eigentumsrechte, oder andere Effekte, wie zum Beispiel Umwelteffekte oder Auswirkungen auf die Menschenrechte. Daher berücksichtigt unser Modell nur einen Teil der Effekte von Handelsabkommen und enthält eine Tendenz zur Überschätzung der positiven wirtschaftlichen Effekte von Handelsliberalisierung. [.]
This policy note presents policy recommendations for a sustainable development strategy targeting the Ivorian and Ghanaian cocoa processing sectors. Against the backdrop of a comparatively small share of processed cocoa exports and limited opportunities in the cocoa global value chain, industrial policies should primarily seek to leverage the increasing opportunities in the local and regional as well as in niche global export markets to further promote local value added and linkages through the processing of cocoa beans. This is particularly important in the context of the Economic Partnership Agreements (EPAs) that both countries have negotiated with the EU.
This policy note presents policy recommendations for a sustainable development strategy for the Tunisian olive oil sector in the context of the ongoing negotiations on the Deep and Comprehensive Free Trade Agreement (DCFTA) between Tunisia and the EU. Against the backdrop of increasing local value added and ecological constraints, a sector development strategy should primarily focus on exploiting functional and product upgrading potentials in the EU and other end markets instead of increasing low value bulk exports.
