The Politics of Trade

Studies in International
Institutional Dynamics

Editors

Richard Higgott, Centre for the Study of Globalization and
Regionalization, University of Warwick
Karl Kaiser, Kennedy School of Government,
Harvard University
S. Neil MacFarlane, Department of Politics and International
Relations, University of Oxford
John Odell, School of International Relations, University of
Southern California
Louis Pauly, Centre for International Studies, University
of Toronto

VOLUME 1

The Politics of Trade

The Role of Research in Trade Policy and Negotiation

Edited by
Diana Tussie, Latin American School of Social Sciences and
Latin American Trade Network, Argentina

This book is printed on acid-free paper.

Library of Congress Cataloging-in-Publication Data

The politics of trade : the role of research in trade policy and negotiation / edited by Diana Tussie.
       p. cm. — (Studies in international institutional dynamics ; v. 1)
   Includes bibliographical references.
   ISBN 978-90-04-17278-4 (hardback : alk. paper) 1. International trade—
Research. 2. Foreign trade regulation. I. Tussie, Diana.
   HF1379.P667 2009
   382’.3—dc22                                                                                                                                                          2008044929

ISSN: 1874-2025
ISBN: 978 90 04 17278 4

Copyright 2009 by Republic of Letters Publishing BV.

International Development Research Centre
PO Box 8500, Ottawa, ON K1G 3H9, Canada
www.idrc.ca/info@idrc.ca
ISBN (ebook) 978-1-55250-400-0

All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher.

Authorization to photocopy items for internal or personal use is granted by Republic of Letters Publishing BV provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers, MA 01923, USA.
Fees are subject to change.

CONTENTS

ACKNOWLEDGMENTS

As always in the case of editing a book one relies on the collegiality and generosity of many people and institutions. Our book does not stray from the norm. Many hands have helped in the conception of the initial project and the step by step preparation of the book. It is by a chain of coincidences that only my name has made it to the cover as sole editor.

Although I can only mention only a few of all the hands that helped I am nonetheless most grateful to all of them. In some cases the debt is such that I feel bound to record it here, and in this respect I should like to start by expressing my sincere thanks to the institution that conceived the initial idea and allowed the authors to come together, the International Development Research Centre (IDRC). Without exception our colleagues at the IDRC have given freely of their time and experience both in the initial steps and the subsequent steering, in particular, Fred Carden, Susan Joekes, Martha Melesse and Andres Rius. Not only have they read drafts but also helped to conceptualise how the methodology meant to be the underpinning of the book could be applied. In this regard, I must recognize a double debt to Fred Carden, who has helped us to understand the complex dynamics of policy influence, the limits of academics as speaking “truth to power” but at the same time, the power of research to improve policy ideas. John Young shared his extensive understanding with generosity and provided constructive critical comments when the original papers were first discussed at a meeting in Buenos Aires in 2006.

The book would not have been possible without the analytical and editorial incisions of Patrick van Zwanenberg, Jorgelina Loza and Pablo Trucco who time and again scrutinised drafts with diligence. Finally, it is high time to recognize the unlimited forbearance of all the authors who dealt with every round of comments in good spirits. I am very conscious of my good fortune in this regard.

Diana Tussie
Buenos Aires
November 2008

This page intentionally left blank

CHAPTER ONE
THE POLITICS OF TRADE: THE ROLE OF RESEARCH IN TRADE POLICY AND NEGOTIATIONS

Diana Tussie1

Policy makers and academics relate to each other in complex ways. Sometimes they do not relate at all. There have always been those in policy circles who are aloof to the products of research and who go about their business with only some evidence gathering along the way in a mostly do-it-yourself fashion. By the same token there have always been academics quite content in their ivory towers, working in priest-like fashion at their intellectual constructions regardless of the world beyond or the policy implications of their research. In the area of development policy such divorce was never paramount. The idea of development itself was born out of a sense that knowledge could make a difference. Its conceptual apparatus as well as the values, images, and emotions it attracted are bound to the idea of progress and the belief that knowledge would yield advancement. The domain of trade is an area that has lagged behind, but the once-pervasive segregation between policy and research is now fast retreating, as the ideological cleavages and paradigm wars of yesteryear began to subside and trade liberalisation has become enshrined as a development model in itself. Except for a small number of holdouts, virtually every country today is either already a member or seeking to accede to the World Trade Organization (WTO). Most countries are engaged in proliferating bilateral and regional agreements. The complexity of these issues virtually compels policy makers to seek out frames of reference and evidence for their policies. These frames of reference are cognitive maps that describe problems and map out realities; but they also have the power to create and shape realities. Since actors are not automata responding

1 Research assistance by Jorgelina Loza and Pablo Trucco is gratefully acknowledged. Both were attentive eyes who contributed all along to bring the many strands together.

to structurally determined incentives, their ideas and the process by which they acquire them are extremely significant.

This book deals with two topics that are intertwined throughout. One thread addresses the research and policy interface, itself part of a wider debate on the role of ideas. The other analyses the context of trade liberalisation and how research has mobilised and legitimised change. Policy change involves cognitive maps, the articulation of a vision and of its companion instruments, as well as an understanding of the ways to make them viable. Research creation and deployment are of growing importance in the drawn-out contest of trade negotiations where competing agendas are at stake. After all, trade policy and negotiations are about who gets what and how.

Little attention has been paid to the manner in which research is produced, deployed, and taken up by policy in countries or to the specificity of the realm of trade despite the fact that trade reform has been consecrated as central to development. Moreover, the trade reform debate has largely taken for granted the role of research production, dissemination, and uptake. Most students of trade liberalisation acknowledge that a significant change in the intellectual landscape played a role in the wave of trade reforms that took place in the aftermath of the debt crisis and the collapse of the Soviet Union. However, the difficulty in measuring intangibles in the development of knowledge and research has prevented scholars from testing their influence in the wave of trade reforms of the past 20 years. While hypotheses based on economic crisis, democratisation, and conditional lending by multilateral agencies have been tested, knowledge-based explanations have been marginalised. Thus, this volume offers an analytical framework for the study of the episodes, highlighting the various contextual factors that may play a key part both in defining a trade problem and in influencing the solution. In what ways has research influenced episodes of trade policy change? There may be a growing body of literature on the use of knowledge in a variety of policy fields, but studies on how research has been used in the area of trade policy and negotiations have lagged behind those in some other areas, despite the fact that trade policy making presents many instances where public policy decisions must be made at well-defined points in time and often with more than one country involved, which could allow for comparative assessments.

The choice of policy change is key to this work, as it emphasises the capacity of research to modify a status quo and to catalyse the knowledge-based policy discussion to another level. To understand how this uptake occurs is to understand not only how knowledge is generated but also the effects of internal political contexts and external influences on the policy process. Each of the case studies in this book looks at the various contextual factors that play a key part in defining a trade problem and in influencing the solution. In this new era of post-paradigm strife, the telescopic focus has zoomed in to the microscopic view in order to shed light on the actual implementation of policies and concurrent negotiations. Altogether this volume shows the growing relevance of commissioned research by governments and by interest groups that support a particular cause in increasingly contested settings—research not as independent truth, but as instrumental and supportive to policy decisions taken on other grounds, opening a window onto a new camp of post-academic research.

This introduction will not attempt to summarise and assess the wealth of material contained in this book but provides the underpinnings on which the case studies have been constructed (see Chapter 10 by Fred Carden). It proceeds by first reviewing how the trade policy reforms, and indeed the trade policy revolution of the last decade, have been explained, focussing on the missing role of the ideational dimension and how available knowledge and specific actors use windows of opportunity to frame issues and graft agendas. It then fleshes out the questions on the use of knowledge and the research and policy interface that the book addresses. Any discussion of these intertwined processes cannot ignore the ways in which change is related to the production and movement of knowledge. Changes in trade policy are essentially distributive. They produce ‘winners’ and ‘losers’, both within and between countries, as well as between the short and long term. In addition, trade negotiations are characterised by reciprocity: if a concession is provided, something must be granted in return. The interests of stakeholders are prominent in any trade negotiation and therefore they have a direct impact on both research production and uptake. Thus, in the context of trade policy and negotiations, research and researchers swim in partisan waters. In practice, trade remains an inherently and overtly political process.2

2 This particular feature of the trade field stands in contrast to findings on the role of research in the field of the Millennium Development Goals (MDGs), which could be understood as a global public good and therefore relatively less vulnerable to the sway of partisan fights (see Ayuk and Marouani 2007).

Part I: Paradigmatic Shifts

Trade Reform and Trade Negotiations

Neoclassical economics and liberal political theory have held that authoritarian governments would be reluctant to embrace trade liberalisation in the presence of a small but uncontested coalition of domestic interest groups that depend on protection for the maintenance of their rents. Yet there is substantive evidence that both democratic and authoritarian regimes have embraced protection to manage tensions that arise from the distributive consequences of international trade (Rodrik 1995). Protection has been common throughout history, and has been more pervasive than is warranted by liberal arguments. But there is little doubt that the massive transition from closed to open economies that swept one country after another into liberalisation in the 1990s gave liberal thought a new lease on life. The trade policy revolution inspired vast theoretical and empirical efforts to explain why so many trade reforms were implemented in such a short time. It was argued that democratisation and liberal trade policies in countries are correlated (Haggard et al. 1994; Milner and Kubota 2001; Przeworski 1991; Remmer 1990; Milner et al. 2000; Diamond and Plattner 1995; Smith et al. 1994).

A cluster of studies looked at the impact of economic crisis and the influence of international financial institutions as the International Monetary Fund (IMF) and the World Bank.3 The terms under which life-saving loans were granted were not only of financial nature. In many instances changes in trade policy were responses to conditionality, whether in the form of broad structural adjustment loans or the more focussed trade policy loans from the World Bank. These were all debt-led trade openings. Crises opened a window for reform (Drazen and Easterly 2001; Drazen and Grilli 1990; Keeler 1993; Nash and Takacs 1998; Bruno 1993). Simply put, the costs of existing privileges and rents drew the economy to a halt and downfall (Haggard et al. 1994). The status quo became unsustainable.

Windows of opportunity are just that: opportunities. They cannot explain why the crises in the 1980s led to trade reforms while previous crises did not. In addition, for the crisis argument to explain trade

3 The following chapters draw on Niño (2004).

reform by itself, it requires a latent policy alternative such as a first best policy. Unless such a policy exists, how can we anticipate which policy is adopted after the previous one fails? In the absence of a singular policy alternative or a first best option, the crisis hypothesis can only explain policy change, but fails to give any insight about the new policy adopted. The use of knowledge to select the subsequent policy choice raises further questions. The prevailing conventional wisdom recommends, in fact, avoiding the simultaneous implementation of trade reforms and stabilisation programmes aimed at reducing inflation or correcting short-term budget and current account deficits (Papageorgiou et al. 1990; Diaz-Alejandro 1975; Corbo and Fischer 1995). Whereas fiscal policies and monetary interventions are standard instruments of stabilisation programmes, trade policy affects resource allocation. If jointly implemented, trade liberalisation undermines price stabilisation by encouraging a policy of depreciation of the domestic currency. Alternatively, stabilisation undermines the sustainability of trade reforms by fostering a strong domestic currency that strengthens the bias against exporting and increases the current account deficit (Edwards 1989). In short, no research has supported the promotion of trade liberalisation reforms in the path to a crisis or in the aftermath of one. If the adoption of trade liberalisation together with stabilisation does not follow from research, then one must assume that the crisis has been an opportunity to push an idea that so far had been in background. Hence a good deal of the explanation lies in the power politics of knowledge rather than in the mere strength of the evidence.

When trade reform was not rolled back but continued unrelenting, regardless of the conditionality push, studies on the weight of policy-based lending then switched to the study of domestic preferences and institutions (see, for example Bates and Krueger 1993; Drazen and Easterly 2001; Edwards 1997; Haggard et al. 1994; Jenkins 1999; Krueger 1993; Milner and Kubota 2001; Przeworski 1991; Stallings 1992; Kahler 1992; Dollar and Svensson 1998; Sachs and Warner 1995). Research about how democratic institutions influence trade regimes has grown quite rapidly since then (Laird and Messerlin 1990; Rodrik 1995; Niño 2004; Jordana and Ramió 2002). In general, explanations based on institutions seem to fit situations where political actors hold different views. However, institutions may not provide enough structure to produce a unique equilibrium in certain situations. This is typically the case of uncertain environments, where lack of better knowledge about the effects of policies can lead to multiple policy decisions (Braun and Busch 1999; Goldstein and Keohane 1993). These accounts omit the significance of the power politics intrinsic in trade negotiations and the power politics of knowledge in influencing first the conceptual change and then the instrumental change to a scenario of permanent negotiations. In this context, research can serve as a focal point that allows members of a community to share analyses of the environment, the consequences of policies, and the legitimisation of change.

At the risk of belabouring the point, while policy can contradict prevailing conventional wisdom, the availability of research and ideas does not always produce policy change. There is plenty of evidence of research that only translates into action after being in the public domain for decades. Furthermore, situations where research findings do not translate into policy are just as common as situations where research shared and accepted by a minority becomes actual policies. Paradoxically, this lack of understanding discourages the study of how the construction of research itself influences policy and has relegated ideas-based explanations of trade policy to a subsidiary role. Trade negotiations on a reciprocal basis are driven intensely by knowledge. It is essential to avoid cleavage along simple moral or ideological lines in order to develop viable negotiating positions. Placing demands directly under the aegis of visibly ideological grounds tends to extinguish rather than create political synergy. Negotiations require a continuing series of moves on which some agreement can be developed even between partners of opposing camps. Research can matter, not simply because it can provide the substantive content of a country’s demands in a trade negotiation, but also because it can serve as an important legitimising device. There are thus two distinctive, and sometimes mutually exclusive, purposes for research: the first is to shape to a country’s negotiating agenda, whereas the second is to build consensus and legitimise the implementation of an agenda that has evolved as a result of several other, often political, forces (see the chapters by Rafael Gomez and Morley Gunderson, Clive George and Colin Kirkpatrick, Paul Mably, and Amrita Narlikar and Diana Tussie on the weight of legitimisation). The distinction between these two purposes of research assumes special relevance in the context of negotiations.

What Role for Ideas and Research?

To some scholars, ideas operate at a normative level by limiting the choices available to actors, while to others ideas operate at the cognitive level by providing new information in uncertain environments. Rational choice approaches to modelling ideas frequently use the former. These models treat ideas in much the same way as institutions that influence choice by constraining the options available to decision makers (Jacobsen 1995). Recent work on ideas as focal points incorporates elements of both approaches. Ideas constrain policy choices and induce unique equilibriums under uncertain environments (Braun and Busch 1999; Goldstein and Keohane 1993).

Peter Hall (1989) suggests that a new system of economic ideas will take hold in a society when there is a clear need for them, as well as a clear and congruent political dimension. He uses the concepts of ‘viabilities’ (economic, political, and administrative) to explain the reception of Keynesian ideas in the post-war decades. Peter Gourevitch (2005) provides a somewhat different schema. Synthesising the theoretical and empirical literature on the role and power of ideas and drawing on European and North American experience he selects three explanatory factors—which drive change. These are:

• first, the influence of epistemic communities, or key intellectual elites within a particular discipline, in this case economics;

• second, the extent of external pressures from the international community; and

• third, the role of internal political actors—especially those to whom decision makers listen.

In contrast to models of the diffusion of new economic ideas in indus-trialised countries, Gourevitch’s approach emphasises that in some circumstances external pressures need to be considered as an active force (not a mere constraint) and that training in economics needs to be taken into account as a crucial transmission mechanism. Gourevitch develops the second driver—external leverage—under four headings: the U.S. administration, the international financial institutions such as the IMF, multilateral treaties such as the WTO and the North American Free Trade Agreement (NAFTA), and global market actors. Their influence can be considered as part of that of the epistemic community of economists: the leverage arises from their ability to influence economic outcomes through access to research, finance, and markets.

The problem with ideational arguments arises from the fact that the availability of ideas does not alway produce policy change. While institutions may produce regular and predictable patterns of behaviour, there is a perception that ideas only influence political processes under certain circumstances. This situation has led many scholars to view ideas as ‘hooks’ selectively used by political actors to further their interests (Shepsle 1985; Jacobsen 1995). According to this argument, the problem with ideas-based accounts is not that they do not explain how ideas influence policy, but that they fail to predict when. Prediction is possible if we are able to identify ex ante the interests of those who use ideas as hooks. The production of research and the chains of transmission to enable hooking remain unquestioned, treated as the luck rather than the skill of deep-sea fishers.

In short, the third factor—domestic politics—holds the balance and can make a substantial difference. The case studies in this book are set at the level of domestic politics and in-country conditions and look at the interaction between in-country research and globally produced and circulated knowledge. In much mainstream literature, knowledge is conceived as a product travelling freely and that the transfer of knowledge occurs in a political vacuum. From discussions of international best practices to initiatives such as the Global Development Network, research is often packaged as a value-free technical entity that can be delivered untouched as a development solution.4

Strands of Research: Is There a Difference between Ideas and Research?

In the context of analysing policy change, Carol Weiss (1979) suggests grouping research into three main categories: research as ideas, research as data, and research as argumentation. Although these are ideal types, the breakdown is useful when examining when and how research contributed to an episode of policy change.

• Research as an idea exists in a diffuse form, and can be equated to the particular beliefs and principles held by a large number of people. As capacities these enable certain kinds of action or ‘ways of being in the world’. Ideas can be traced to epistemic communities. This category of research is usually brought to bear when a broad (or conceptual) policy direction is sought: in the realm of trade, the initial turn to trade liberalisation, or the acceptance of a major

4 For a discussion about the Global Development Network, see Stone (2000).

negotiation that will change the given structure of incentives. Here the research contribution is often over long periods of time.

• Research as data provides answers to the ‘real’ questions that preoccupy policy makers, such as ‘how far should I go in opening’—answers that cannot be deduced form the beliefs and principles. In the realm of trade, such research can play a role to guide the choice of instruments at a certain point in the decision-making process. The product of such research is often put forward in rational, technocratic terms and is aimed at addressing an existing policy problem.

• Research as argumentation emerges when it is employed in advocacy; it is brought to bear to advance a specific cause.

The chapters in this volume cover all three categories (see Table 1–1). For the purposes of this study, we adopt a broad definition of research to encompass any systematic exercise to increase the existing stock of knowledge. In the context of trade, this may include various forms of knowledge generation, such as academic research conducted at universities, policy briefs and papers from research think tanks, critiques by advocacy groups, and consultancy reports, as well as statistical analyses of trade flows conducted by national statistical institutes. Such research may therefore be conducted by a variety of individuals, including academics, policy consultants, researchers in major international financial institutions, advocacy groups and government statisticians.5 The initiation of a policy tends to be more idea and advocacy intensive. As the policy becomes embedded the need for data takes the lead, and research becomes more demand driven with a short-run dictating the need.

Policy Communities: Does Geography Matter in Trade Negotiations?

Prevailing ideas may be an important determinant of policy choice and persistence. Scholars have offered arguments with respect to the power of broad visions of reality, or epistemes, that provide the assumptions from which policies follow and shape the pattern of politics along time. Peter Haas’s work (1992) on the role of international epistemic communities illustrates how the transnational collaboration of ‘professionals’

5 There is a growing literature on the subject of research utilisation involving the International Development Center (IDRC) and the Overseas Development Institute (ODI) as well as the Economic and Social Science Research Council (ESRC) among others.

Table 1–1: Classification of the Episodes

Note: The types of influence in this table are drawn from Carden, Neilsen, Smutylo et al. (2002).

can shape policy preferences and are applied to problem solving. The term epistemic communities refers to a congregation sharing the same world view (or episteme). It is an international network of professionals with recognised expertise and competence in a particular domain and an authoritative claim to policy-relevant knowledge within that domain or issue area. The professionals in an epistemic community have a shared set of normative and principled beliefs: common casual beliefs, which are derived from the analysis of practices leading or contributing to a central set of problems in their domain and which then serve as the basis for elucidating the multiple linkages between possible policy actions and desired outcomes. They also share notions of validity and a mutual policy enterprise. The policy ideas of epistemic communities generally evolve independently, rather than under the direct influence of government sources of authority, but they are in close contact with policy events. The inclusion of some academics in state policy-making bureaucracies or in the decision-making process further entrenches the influence of the knowledge-based community (see Chapter 6 by Ahmed Farouk Ghoneim). It is the political infiltration of an epistemic community into governing institutions that lays the groundwork for a broader acceptance of the community’s beliefs and ideas. The result in turn may be the creation of the proper constructions of reality with respect to a particular issue area as well as mutual expectations and a mutual predictability of intention. Members of international epistemic communities can influence state interests either by directly identifying them for decision makers or by illuminating the salient dimensions of an issue from which the decision makers may then infer their interests. Within this framework, epistemic communities are international sources of policy innovations. Economic and political networking allows them to control the channels by which these innovations diffuse and to become the torchbearers of new ideas, setting standards for some policies and freezing out others as wrongheaded.

The reform of trade policy can be viewed as a process by which intellectual innovations were carried out by domestic and international organisations and were introduced into the policy process to become the basis of new or transformed domestic interests. Likewise, under specified conditions, international politics can be seen as a process by which innovations are diffused to become the basis of new or changed international practices. While the proliferating reforms of the 1990s can be explained by the influence of hegemonic epistemic communities, trade negotiations cannot be explained away under the same rubric. They require more interest-based problem solving and hands-on research. Agenda setting, assessment, and the construction of counter-proposals involve continuous evaluations and filtering to suggest alternative modes of actions. Research is more a servant of policy-in-the-negotiating-mode rather than its master.

Negotiations require the construction of a ‘maximum aspiration’ position as well as a reserve position, which will be the lowest acceptable outcome. A negotiating strategy includes a comparison of the potential advantages of a negotiated solution with alternatives available away from the negotiating table. The strategy of walking away should be based on sound analysis of the likelihood of securing a better or more acceptable outcome through negotiations. A negotiating party can develop the strength and availability of what is often called a BATNA (best alternative to a negotiated agreement) while conversely introducing evidence into the negotiating process that threatens the attractiveness of other negotiating parties’ BATNAs. Clear analyses of BATNAs are important factors in a successful negotiating strategy because they allow for wise decisions on whether to accept a negotiated agreement. As such, BATNAs provide a standard that will prevent a party from accepting terms that are too unfavourable and from rejecting convenient terms. Furthermore, having a good BATNA increases a party’s negotiating power and a well-prepared negotiating team will be able to gauge the desire of the other team for an agreement. This will allow for the most effective use of pressure and the most appropriate demands being placed upon the other negotiating team.

In the process of negotiation, analyses and integration of different proposals is required. Here a proposed ‘package’ is developed that involves each party making a concession in different topics to produce relative satisfaction to all parties. The gap between the interests is breached when each side gives something to the other side and vice versa. This is possible through issue linkages; each party makes concessions in different topics so that the balance produces relative satisfaction. Parties must work to develop potential options for such issue linkages and need to have something to offer each other. Negotiators can enlarge the space of agreement by identifying and discussing a range of alternatives, by improving the quality and quantity of information available to the other parties, and by trying to influence the perception of the other party. Much of trade negotiation involves such integrative bargaining because parties can enlarge the area where their interests overlap by identifying and discussing a range of alternative options and opinions (Saner 2001; Narlikar 2005; Odell 2006). The purpose of research cannot be understood narrowly as self-serving because the most important function is to justify and explain demands of one group to other groups. Tainted by special interests, it must reach out to others.

Facing the demands of complex and perennially moving agendas, negotiators seek research-based support that is usable for a specific place and space of time. Governments may therefore need the capacity not only to produce their own research but also to critically examine what is produced by authoritative centres, such as the World Bank and other multilateral organisations, which may have been shaped by perspectives that do not reflect national priorities. As demands for such context-specific research arise, networks of communities of specialists capable of producing and providing it emerge and proliferate. The episodes studied in this book show how prevalent these sources of research are in trade negotiations and how intense the chains of transmission from policy to the research community are (see the chapters by Rafael Gomez and Morley Gunderson, Mercedes Botto and Andrea Bianculli, and Kehinde Ajayi and Philip Osafo-Kwaakoy). They emphasise the social and constructive character of research and how it is continuously reproduced and negotiated, and hence always dynamic and provisional.

Research produced by insiders or outsiders that are plugged into the machinery as compared to research produced outside is based on quite different forms of problem conceptualisation. The ways in which research is used in the policy process also differs substantially. The chances of directly influencing the policy regime are greater, but the chances of mutual enlightenment drip by drip are also high. Thus the generation of research advances in a dialogic and evolutionary process that manifests itself in the interpersonal and inter-institutional exchanges of the policy community.

Several analysts argue that policy-making processes can usefully be investigated using notions such as policy community or advocacy coalition (see, for example, Kingdon 1984; Sabatier and Jenkins-Smith 1993). While these two notions differ, they broadly share the view that some specialists, such as academics, consultants, and other researchers, in a particular policy area, will help form a community that is bounded. However, without a focus on the political and institutional context within which research and policy interact, such dynamics may be lacking.

Although international influences are important, they also need the systematic and active engagement of actors within a country to be translated into policy. It is important to distinguish the initial acceptance of a new idea from the embedding of the research in policy (see the chapters by Abhijit Das and Ahmed Farouk Ghoneim on the moment of uptake). To be able to do so, an idea requires what Peter Hall (1989) calls viability. Differences between countries become more evident in this transition than in the generation of research, and the complex role of internal social and political structures and institutions is revealed. As an idea moves from acceptance to being embedded and as a country moves from reform to negotiations, political influences of particular sectional and regional interests come into play, influencing the political potential of research insofar as they imply support for a particular sector (such as export agriculture), social group (such as import competition), or geographical region (such as a regional grouping). It is this political dissonance between general principles and particular influences that often underlies the adoption of—as opposed to the acquiescence to—a policy proposal. In the process of adopting the proposal, considerable degrees of adaptation, translation, and integration take place, and local community of practice comes into play (see Chapter 4 by Mercedes Botto and Andrea Bianculli). Few if any of the authors in this volume consider external leverage to be the overriding determinant of uptake in trade negotiations. Rather, internal political structures respond to and modify the products of knowledge, so that the interaction between external leverage and internal agendas determines how research is played out through a complex and contested process of social decoding, feedback, and redefinition. The third driver identified by Weiss—the forces of internal politics and group interest—becomes more important as the discussion shifts from the issue of policy shifts to trade negotiations.

Trade negotiations occur at two levels (Evans et al. 1993). The first refers to the relation between the country authorities and the external partner. The second refers to the in-country negotiations with relevant actors, legislature, business, trade unions. These games occur simultaneously and interact with each other constantly along the process. At the second level, negotiations with domestic interests take place, in order to reflect those point of view at the first level and ensure that the results will be subsequently accepted and ratified. At the second level, all stakeholders that can influence the process or the final ratification are alert, and active, either on the offensive or the defensive. These may range from legislative members to various representatives of civil society. Negotiations require more interest-based, problem-solving, hands-on research, from inside the policy process. In practice trade remains an inherently and overtly political process and, consequently, research uptake is also political. Decision makers will not always defer to the opinion of consultants ‘out there’ or trust broad-based knowledge as impartial, usable, or applicable.

Research matters, but it is shaped by geography and it needs to respond to demand in order to be effective. Research is not produced nor does it exist in a vacuum. The interaction between the production of research and the policy process make it possible to understand when and why research influences trade negotiations. Research and policies evolve as the product of a cycle in which events lead to new thinking and new policies the consequences of which, in turn, often reveal new problems, thereby giving rise to further developments in thinking and policies. But both thinking and policies are heavily influenced by powerful interest groups, themselves shaped by the consequences of policy.

Scholars have made significant progress in explaining how ideas and research can influence policy decisions (Weiss 1991; Carden 2004; Court et al. 2005). However, it remains difficult to pinpoint when policy change is due to influential research and how the trade policy process incorporates and embeds research-based innovations. One way to examine this question is to start with the research and look out to the influence that intervention had on the policy canvas, pinpointing how a body of research is called in when a window of opportunity opens or when interests can be hooked on to it. The case studies in this book have employed a contrasting dynamic, tracking backward from policy to identify research-based influences (see Chapter 10 by Fred Carden). The episode study is a particular approach to a case study, where the episode of policy influence is the starting point for the case study. Thus, this method focusses on a clear policy change and tracks back to assess what impact research had among the variety of issues that led to such policy change.

Part II: Instrumental Change, Operational Research

What Is an Episode of Policy Change?

In order to define an episode of policy change we first need to be clear as to what we mean by policy. We need to know what it is that might be changing before we can decide whether any observed differences constitute an ‘episode of change’. Policy is commonly used to refer to many different things but policy can be grouped into two general types. One classical and relatively straightforward type of policy is primarily defined as a product or object; typically it is the result of a choice (or a series of interrelated choices) to undertake some course of action (or inaction). Expressions of general purpose, specific proposals, decisions, and formal rules all fit within this conception of policy (Minogue 1997). A second, more interaction-based type of policy refers more to the processes of negotiation and influence than to the products of that process. Examples of what constitutes policy in this conception include particular ways of defining problems within organisations, and the range of participants and the diversity of their agendas that are brought to bear on the activities of negotiation and decision making.

Any of these notions can play into defining an episode of policy change. However, some policies are far more readily identifiable as formal and discreet, for example a legislative decision; and changes to this kind of policy—or a lack of change—are relatively easy to recognise. With more interactive conceptions of policy, such as those concerned with negotiations and the inclusion or exclusion of stakeholders, it may be difficult for researchers to distinguish whether any aspects of policy have changed. As Carden explains in Chapter 10, this is partly because such changes are less evident, and also because those changes may be incremental and may well occur over long periods. For example, it is far less clear when gradual shifts in the way policy makers define problems constitute an episode of policy change, unlike when a new piece of legislation or declaration of intent is made. Nonetheless, those more subtle changes may be no less important.

Policy changes may be categorised in a variety of ways, but many commentators distinguish between instrumental change, which refers to relatively small, incremental changes in daily administrative policy issues, and conceptual change, which refers to more gradual shifts in terms of policy makers’ awareness and reorientation of their basic perspectives (e.g., Caplan 1979; Weiss 1991; Neilson 2001; Davies et al. 2005). This distinction is ideal because, in practice, changes to policies likely lie somewhere on a continuum between instrumental and conceptual. Nevertheless, the differentiation is useful, especially since, as far as the relationship between research and policy is concerned, policy makers use research not only in the more instrumental sense of applying data and information to policy decisions, but also, or even predominantly, as a source of ideas and a means of enlightening or broadening the existing knowledge base over time. This in turn can gradually shift conceptual thinking (and the policies supporting that conceptual thinking).

Compared to instrumental shifts, conceptual policy changes—whether in relation to changes in specific proposals, decisions, or rules, or in relation to the processes of policy definition, negotiation, and influence—are likely to be far less transparent, more subjective in nature. They usually occur over a longer time and are frequently affected by a wider range of factors. For those reasons, conceptual policy changes may not be difficult to recognise although it may be very difficult to establish the influence of any one factor, such as a piece of research. Thus, in examining instances of policy change, or lack of change, instrumental shifts may be easier to research. Conversely, when examining the effects of a piece of research it may be easier to consider only the impact of research on instrumental shifts in policy, perhaps missing the potential contribution to less visible—but perhaps just as significant—conceptual shifts in policy. What windows of opportunity were used and how? Tracking backward from policy to identify (research-based) influences represent a challenge in disaggregating the impacts of multiple influences and multiple research strands (Davies et al. 2005). The central purpose is heuristic; it can make influence intelligible but in a way that does not lose the connection to other factors at play.

What Is the Value of Researching the Research/Policy Interface?

The interface or relationship between research and policy change can be examined empirically in a number of different ways. These include, for example, general studies of research institutions and their strategies for influencing policy, studies of policy institutions and their relationships with research providers, or studies of the nature and activities of epistemic networks related to particular policy topics. The approach that has been adopted for this book—of choosing to focus on discreet cases of policy change and asking if and how research has contributed to those changes—has several potential benefits, but also poses a number of potential risks that must be considered in order to draw insights and conclusions (Carden 2004).

One important risk is that this approach may tend to focus on clearly observable, distinct, instances of policy change. As discussed above, the relatively more diffuse effects of research—in particular gradual shifts in conceptual thinking—are difficult to recognise. They may, however, constitute a far more important and significant impact of research, compared to more immediate direct impacts on policy. Even when they are recognisable, such shifts in conceptual thinking take place over a long period and thus may be difficult empirically to investigate. For example, Paul Sabatier and Hank Jenkins-Smith (1993), hold that the process of policy change and the role of policy learning requires a decade or more of observation. Yet how in practice might we explore the likely multiple causes, including research, of a ten-year shift in conceptual thinking on the part of policy makers? The temptation will be to focus on more ‘do-able’ examples, in the process perhaps missing some interesting aspects of the research-policy relationship. The latter might include, for example, the effects of research, among many other activities, in the inclusion of new issues in policy discussions, e.g., environment into trade policy discussions.

Furthermore, certain kinds of research tend to lend themselves more than other kinds to changes in conceptual thinking. An example here might be research illustrating how greater civil society participation in policy making brings a range of potential benefits to processes of governance (see Chapter 3 by Clive George and Colin Kirkpatrick). The value of these kinds of research, or their potential impact, may not be picked up by methods that focus solely on instrumental policy changes, unless analysis of policy changes is sensitive enough to capture the more diffuse ideas-based changes. Thus one consequence of focussing on episodes of more instrumental instances of policy change may be that ‘research as data’ is recognised as more influential than ‘research as argument’ or ‘research as advocacy’, although the second and third types may be just as influential in policy change, or more so, although less visible.

Another consequence of focussing on clearly observable, discreet cases of policy change is that such an approach may inadvertently provide support to the assumption that the use of research feeds into the policy-making process in a direct, or linear, manner. Linear conceptions of the research-policy relationship tend to be limited to instrumental, relatively short-term changes in policy decisions and to ‘research as data’ rather than broader more diffuse changes in policy conception. Several commentators have argued, however, that the relationship between research and policy should be seen as more dynamic and complex than in the linear model, with an emphasis on two-way processes between research and policy (e.g., Weiss 1991; Webber 1991; Garrett and Islam 1998; Neilson 2001; Court et al. 2005).6 Thus various contextual factors may play a key part both in defining the question that a research project tackles and in influencing the impact of that research on policy. In contrast to the lineal model, where underlying the question is ‘What can the researcher do to capture the attention of decision makers in order to utilise the results of their research in policy’, the two-way-processes perspective assumes a different key question: ‘Why are some of the ideas that circulate in the research-policy arenas picked up and acted on, while others are ignored and disappear?’ Is demand-driven research most likely to influence policy effectively? The episodes of trade policy change and negotiations included in this volume show the growing relevance of commissioned research both by governments and interest groups in increasingly contested settings designed from the beginning to support a particular cause—research not as independent evidence waiting to be ‘hooked’, but as instrumental and supportive to policy decisions taken on other grounds. Such a particular way of doing research differs significantly from the traditional academic approach, enjoying an aura of otherworldliness.

Most studies so far have argued that the role for research is stronger in support of a paradigm change than in operationalisation and reinforcement once the winds of change have settled. The studies of instrumental change in this book show that trade negotiations provide a new pull for analytical activities to search, research, enquire, produce evidence, and validate (see Table 1–1). There is a clear demand for research from policy makers (Carden 2007). The primary users of this type of research are those on the front line of policy development, the in-house machinery requiring thorough research for hard-headed negotiations. Building policy in the context of negotiations requires alertness to opportunity and the ability to be present with policy-driven papers. This post-academic fashion has five distinctive features:

• It is a mode of research production for policy endeavours that stands in contrast to two traditions, that of the public intellectual (the ‘sniper’

6 Thus the development of bridges to overcome supply- and demand-side obstacles to those links does not seem to apply comfortably to the specific case of trade policy and reform. Research and policy are significantly more inter-related (see Stone 2002; Stone and Denham 2004).

challenging and contesting perverse decision making) and that of the apolitical objectivity or rigour of ‘pure’ academic knowledge.

• It is produced and validated in the context of application as a result of the policy process.

• The research agenda is politically embedded and arises from the policy priorities that result from ongoing engagement with decision makers. It is path dependent, i.e., the problem is conceptualised taking into account the rules of the game and the range of politically feasible options at both international and domestic levels (in terms of international negotiations).

• There is greater accountability to relevant stakeholders than to established professional literature or academic review systems. Instead of relying on peer review, post-academic research relies on a wider set of criteria to judge quality, value, and usefulness to the conceptualisation and resolution of a problem. Such forms of quality control and validation mechanism do not give up the quest for technical excellence, but draw on technical evidence for a cause that weighs more than academic or professional validation.

• The product is problem-driven knowledge that is required and used because it is not only technically sound but also socially robust, i.e., it is perceived as legitimate and fair for a given purpose.

This pushes the analyst of the research-policy interface to focus more on the institutional and political context within which research and policy are interacting, rather than just the characteristics of the research itself or the relationships between researchers and policy makers.

Although there are potential risks associated with deciding to focus on episodes of policy change in order to investigate the research-policy relationship there are several potential benefits too. For example, a detailed focus on specific cases of policy change can begin to untangle some of the complexity of the political processes at work in contributing to that instance of change. In practice, multiple and often confounding variables will contribute to instances of policy change, and without careful empirical study it may be extremely difficult to address the question of when, under what circumstances, and how research is influential in the policy process. Alternative research approaches may simply lack the forensic view that such case studies can provide.

For example, close empirical scrutiny of an episode of policy change may allow us to clarify the causal relationship between research and policy change. Thus the different circumstances in which policy makers or interest groups draw on research to support or legitimate a policy decision that has already been or will be made or in which research contributes to causing that change in policy may not be visible except by using a careful case-study approach.

As argued above, a focus on episodes of policy change may restrict attention to the relationship between research as data and observable, discreet, instances of policy change, rather than research as ideas and gradual shifts in conceptual thinking over time. Yet, if analysts take care to include the latter, a case-study approach may be particularly valuable. This is because one of the characteristics of research as ideas, as opposed to research as data, is that, the actual findings of a study will have disappeared and become transformed into a simple ‘story’ (Weiss 1991). Perhaps the best way to show how such stories affect policy decisions and policy-making processes and to relate such stories to their origins in research is through careful case studies.

A second type of benefit is conceptual self-consciousness: a careful case-study—based approach may help guard against a tendency on the part of protagonists to exaggerate the actual influence of research on policy makers. Since researchers (and funders) everywhere are under considerable pressure to demonstrate the value of their work, for example in terms of policy relevance and influence, they may overstate the impact of their work unless such claims can be carefully examined using a case-study approach. Similarly, policy makers may sometimes find it easier to defend an account of how and why policies changed by reference to rational evidence-based factors rather than as a response to political circumstances and interests. General analyses of institutions, based for example on interviews with protagonists without tying them to specific cases may, by comparison, present an overly rosy picture of the relationship between research and policy.

The Riddle in Trade Episodes

The above discussion on the complex nature of the interaction of research and policy, and how trade policy has been explained so far, indicates several hypotheses that the empirical studies of the research— policy boundary in this volume can illustrate. These hypotheses include the following:

• Conceptual policy changes are opaque, subjective in nature, take place over a long period, and are caused by a wide and interacting range of factors. As a consequence, the empirical relationship between research and conceptual policy change is very difficult to investigate because it is not a linear relationship.

• The relationship between research and policy is more dynamic and complex than generally assumed by linear models. Instead there are two-way processes between research and policy. Thus various contextual factors may play a key part both in defining the question that a research project tackles and in influencing the impact of that research on policy.

• In practice, multiple and sometimes confounding variables contribute to instances of policy change. Without careful empirical study, the question of when, under what circumstances, and how research is influential in the policy process may be extremely difficult to address. An empirical scrutiny of an episode of policy change can clarify the complexity of the causal relationship between research and policy change and address the problem of attribution.

• If research is not the key driver on policy change, there must be other drivers against which research should be compared, which requires additional research. The additionality of research refers to the value added by research to the policy process.

The chapters in this volume provide valuable insights on these issues and hypotheses and assess the role played by research on specific episodes of trade policy change around the world. Thus chapters two and three focus on paradigmatic shifts, looking at the role of research in changing and adapting the mainstream approach to trade by providing evidence on how trade works as well as endowing legitimacy on a major policy change. Specifically, in Chapter 2 Rafael Gomez and Morley Gunderson look at the trade policy change implemented by Canada and examine how research initiatives can be used to win the support of domestic lobbies and how they can serve as legitimising instruments, whereas Clive George and Colin Kirkpatrick in Chapter 3 explore the influence of the sustainability impact assessment programme of the European Commission on EU trade policy and parallel policy measures.

The fourth and fifth chapters consider instrumental changes in countries that have adopted a common external tariff at the regional level and look at the conditions and timing for research uptake. In this regard, in Chapter 4 Mercedes Botto and Andrea Bianculli compare two instances in Argentina’s regional integration process and identify the type of knowledge produced, the articulation established with policy makers, and the factors that either promoted or hindered uptake, while in Chapter 5 Philip Osafo Kwaako and Kehinde Ajayi assess the political context of tariff reform for Nigeria’s adoption of the common external tariff of the Economic Community of West African States (ECOWAS), as well as the role of various stakeholders in the process. Chapters six and seven examine how interests are fleshed out through research production and draw a contrast between two institutional setups. Ahmed Farouk Ghoneim in Chapter 6 analyses how the process of formulating trade policy in Egypt takes up independent ideas in an informal setting, whereas Abhijit Das in Chapter 7 studies the case of trade facilitation in India and the role played by the United Nations Convention on Trade and Development (UNCTAD) where, in contrast, linkages between research, policy, and implementation are significantly more structured in a democratic set-up.

Finally, chapters eight and nine provide the last episodes analysed in this volume and look at how research can be influential in forming coalitions to negotiate in the WTO process. There are ever growing numbers of such coalitions active in the WTO; not only do they show more resilience than anticipated, but also their proposals are characterised by an unprecedented familiarity with technical detail, which suggests that they are backed by substantive research. In particular, these studies assess the cases of the G20—in Chapter 8 by Amrita Narlikar and Diana Tussie—and the G33—in Chapter 9 by Paul Mably—in the WTO, contrasting the centralised research production for the latter with the multiple research sources of the former. In Chapter 10 Fred Carden looks back at each of the contributions through the lens of the episode approach and teases out the consequences of the issues raised. The book closes with a reflection on the other side of the equation and turns to the influence of policy making on the research setting. It examines the conditions under which trade research is produced and the types of products that result in preparation for these battles.

These episode studies have worked with two types of policy change: instrumental change that leads to the opening of windows and the creation of tools that can expand the texture of negotiations to political exigencies, and conceptual change (or normative change) that involves a more radical overthrow of a policy framework.7 The purpose of

7 Lindquist (2001) contends that instances of policy changes may be viewed as being routine, incremental, fundamental, or emergent. Routine changes involve minor modifications to a programme and often involve limited debate. Incremental changes occur when particular issues are reviewed without a comprehensive overhaul of policy. Fundamental policy changes lead to rethinking of the policy framework. Emergent changes similarly involve a major paradigmatic shift.

research in each episode can be classified, according to the categories used by Weiss, into research as an idea, research as data, and research as argumentation. These typologies and categorisations provide a useful roadmap8 to present the episodes here and the type of influence in which research made a difference9 in a systematic and useful fashion, as showed in Table 1–1.10

Bibliography

Ayuk, Elias and Mohamed Ali Marouani, eds. 2007. The Policy Paradox in Africa: Strengthening Links Between Economic Research and Policymaking. Trenton NJ and Ottawa: Africa World Press and International Development Research Centre.

Bates, Robert H. and Anne O. Krueger, eds. 1993. Political and Economic Interactions in Economic Policy Reform: Evidence from Eight Countries. Oxford: Blackwell.

Braun, Dietmar and Andreas Busch, eds. 1999. Public Policy and Political Ideas. Cheltenham: Edward Elgar.

Bruno, Michael. 1993. Crisis, Stabilization, and Economic Reform: Therapy by Consensus. Oxford: Oxford University Press.

Caplan, Nathan. 1979. ‘The Two-Communities Theory and Knowledge Utilization’. American Behavioral Scientist, 22(3):459–470.

Carden, Fred, Stephanie Neilson, Terry Smutylo, et al. 2002. IDRC-Supported Research in the Public Policy Process: A Strategic Evaluation of the Influence of Research on Public Policy. Working paper. International Development Research Centre, Ottawa.

Carden, Fred. 2004. ‘Issues in Assessing the Policy Influence of Research’. International Social Science Journal, 56(1):135–151.

——. 2007. ‘Context Matters’. In E. Ayuk and M.A. Marouani, eds., The Policy Paradox in Africa: Strengthening Links Between Economic Research and Policymaking. Trenton NJ and Ottawa: Africa World Press and International Development Research Centre.

Corbo, Vittorio and Stanley Fischer. 1995. ‘Structural Adjustment, Stabilization, and Policy Reform: Domestic and International Finance’. In H. Chenery, ed., Handbook of Development Economics, 1 edition. Santiago: Pontificia Universidad Católica de Chile, Instituto de Economía.

Court, Julius, Ingie Hovland, and John Young. 2005. ‘Research and Policy in International Development: Introduction’. In J. Court, I. Hovland, and J. Young, eds., Bridging Research and Policy in Development: Evidence and the Change Process. London: Overseas Development Institute.

Davies, Huw, Sandra Nutley, and Isabel Walter (2005). ‘Assessing the Impact of Social Science Research: Conceptual, Methodological, and Practical Issues’. Background

8 The table in Chapter 10 by Carden fleshes out a framework to analyze these relationships between research and policy.

9 Types of influence as per (Carden et al. 2002).

10 Table 10–1 fleshes out a framework to analyse these relationships between research and policy.

discussion paper for the ESCR Symposium on Assessing the Non-Academic Impact of Research. University of St. Andrews.

Diamond, Larry Jay and Marc F. Plattner. 1995. Economic Reform and Democracy. Baltimore: Johns Hopkins University Press.

Diaz-Alejandro, Carlos. 1975. ‘Trade Policies and Economic Development’. In P.B. Kenen, ed., International Trade and Finance: Frontiers for Research. Cambridge: Cambridge University Press.

Dollar, David and Jakob Svensson. 1998. What Explains the Success or Failure of Stuctural Adjustment Programs? World Bank Policy Research Working Paper No. 1938. World Bank, Washington DC.

Drazen, Allen and Vittorio Grilli. 1990. The Benefits of Crises for Economic Reforms. NBER Working Paper No. W3527. National Bureau of Economic Research.

Drazen, Allen and William Easterly. 2001. ‘Do Crises Induce Reform? Simple Empirical Tests of Conventional Wisdom’. Economics and politics, 13(2):129–157.

Edwards, Sebastian. 1989. Openness, Outward Orientation, Trade Liberalization, and Economic Performance in Developing Countries. NBER Working Paper No. W2908. National Bureau of Economic Research, Washington DC.

——. 1997. ‘Trade, Liberalization Reforms, and the World Bank’. American Economic Review, 87(2):43–48.

Evans, Peter B., Harold Karan Jacobson, and Robert D. Putnam, eds. 1993. Double-Edged Diplomacy: International Bargaining and Domestic Politics. Berkeley: University of California Press.

Garrett, James L. and Yassir Islam. 1998. Policy Research and the Policy Process: Do the Twain Ever Meet? Gatekeeper Series no. 74. International Institute for Environment and Development, London. <www.iied.org/pubs/pdfs/6138IIED.pdf> [Accessed: March 2008].

Goldstein, Judith and Robert O. Keohane, eds. 1993. Ideas and Foreign Policy: Beliefs, Institutions, and Political Change. Ithaca: Cornell University Press.

Gourevitch, Peter. 2005. ‘Economic Ideas, International Influences, and Domestic Politics: A Comparative Perspective’. In V. Fitzgerald and R. Thorp, eds., Economic Doctrines in Latin America: Origins, Embedding, and Evolution. Basingstoke: Palgrave Macmillan.

Haas, Peter. 1992. ‘Introduction: Epistemic Communities and International Policy Coordination’. International Organization, 46(1):1–35.

Haggard, Stephan, Steven Benjamin Webb, and World Bank. 1994. Voting for Reform: Democracy, Political Liberalization, and Economic Adjustment. New York: Oxford University Press.

Hall, Peter A., ed. 1989. The Political Power of Economic Ideas: Keynesianism Across Nations. Princeton NJ: Princeton University Press.

Jacobsen, John. 1995. ‘Much Ado about Ideas: The Cognitive Factor in Economic Policy’. World Politics, 47(2):283–310.

Jenkins, Rob. 1999. Democratic Politics and Economic Reform in India. Cambridge: Cambridge University Press.

Jordana, Jacint and Carles Ramió. 2002. Diseños institucionales y gestión de la política comercial exterior en América Latina. Institution for the Integration of Latin America and the Caribbean, Buenos Aires.

Kahler, Miles. 1992. ‘External Influence, Conditionality, and the Politics of Adjustment’. In S. Haggard and R.R. Kaufman, eds., The Politics of Economic Adjustment: International Constraints, Distributive Conflicts, and the State. Princeton NJ: Princeton University Press.

Keeler, John T.S. 1993. ‘Opening the Window for Reform: Mandates, Crises, and Extraordinary Policy Making’. Comparative Political Studies, 25(4):433–486.

Kingdon, John W. 1984. Agendas, Alternatives, and Public Policies. Boston: Little, Brown.

Krueger, Anne O. 1993. Political Economy of Policy Reform in Developing Countries. Cambridge: Cambridge University Press.

Laird, Sam and Patrick Messerlin. 1990. ‘Institutional Reform for Trade Liberalization’. World Economy, 13(2):230–249.

Lindquist, Evert A. 2001. Discerning Policy Influence: Framework for a Strategic Evaluation of IDRC-Supported Research. Background paper. International Development Research Centre, Ottawa.

Milner, Helen, Edward Mansfield, and Peter Rosendorff. 2000. ‘Free to Trade? Democracies, Autocracies, and International Trade Negotiations’. American Political Science Review, 94(2):305–322.

Milner, Helen and Keiko Kubota. 2001. Why the Rush to Free Trade? Democracy and Trade Policy in the Developing Countries. Paper prepared for the annual meeting of the American Political Science Association. San Francisco.

Minogue, Martin. 1997. ‘Theory and Practice in Public Policy and Administration’. In M.J. Hill, ed., The Policy Process: A Reader, 2nd edition. New York: Harvester-Wheatsheaf.

Narlikar, Amrita. 2005. Bargaining over the Doha Development Agenda: Coalitions in the World Trade Organization. Working Paper No. 36. Latin American Trade Network.

Nash, John and Wendy Takacs. 1998. Trade Policy Reform: Lessons and Implications. World Bank, Washington DC.

Neilson, Stephanie. 2001. Knowledge Utilization and Public Policy Processes: A Literature Review. Evaluation Unit, International Development Research Centre, Ottawa.

Niño, Jaime. 2004. What Determines Trade Regimes and Reforms? The Role of Ideas and Democracy. Paper presented at the annual meeting of the American Political Science Association. Chicago.

Odell, John S., ed. 2006. Negotiating Trade: Developing Countries in the WTO and NAFTA. Cambridge: Cambridge University Press.

Papageorgiou, Demetris, Armeane M. Choksi, and Michael Michaely. 1990. Liberalizing Foreign Trade in Developing Countries: The Lessons of Experience. Washington DC: World Bank.

Przeworski, Adam. 1991. Democracy and the Market: Political and Economic Reforms in Eastern Europe and Latin America. Cambridge: Cambridge University Press.

Remmer, Karen. 1990. ‘Democracy and Economic Crisis: The Latin American Experience’. World Politics, 42(3):315–335.

Rius, Andrés. 2003. The Knowledge Systems Implications of Building Institutions for High-Quality Growth. Working paper. International Development Research Centre, Ottawa.

Rodrik, Dani. 1995. ‘Political Economy of Trade Policy’. In G.M. Grossman and K. Rogoff, eds., Handbook of International Economics. New York: Elsevier.

Sabatier, Paul A. and Hank C. Jenkins-Smith, eds. 1993. Policy Change and Learning: An Advocacy Coalition Approach. Boulder: Westview Press.

Sachs, Jeffrey and Andrew Warner. 1995. ‘Economic Reform and the Process of Global Integration’. Brookings Papers on Economic Activity, 26(1995-1):1–118.

Saner, Raymond. 2001. ‘WTO versus Regional Trade Agreements’. In R. Saner and I. Maidana, eds., Trade Negotiation Cases, Analyses, Strategies at Bilateral, Regional, and Multilateral Levels, Bolivia, 2000. Bolivia: Editorial “Los Amigos del Libro”.

Shepsle, Kenneth. 1985. ‘A Comment on Derthick and Quirk’. In R.G. Noll, ed., Regulatory Policy and the Social Sciences. Berkeley: University of California Press.

Smith, William, Carlos Acuña, and Eduardo Gamarra. 1994. Democracy, Markets, and Structural Reform in Contemporary Latin America: Argentina, Bolivia, Brazil, Chile, and Mexico. Transaction Publishers, New Brunswick NJ.

Stallings, Barbara. 1992. ‘International influence on Economic Policy: Debt, Stabilization, and Structural Reform’. In S. Haggard and R.R. Kaufman, eds., The Politics of Economic Adjustment: International Constraints, Distributive Conflicts, and the State. Princeton NJ: Princeton University Press.

Stone, Diane. 2000. ‘Knowledge, Power, and Policy’. In D. Stone, ed., Banking on Knowledge: The Genesis of the Global Development Network. London: Routledge.

——. 2002. ‘Using Knowledge: The Dilemmas of Bridging Research and Policy’. Compare, 32(3):285–296.

Stone, Diane and Andrew Denham, eds. 2004. Think Tank Traditions: Policy Research and the Politics of Ideas. Manchester: Manchester University Press.

Webber, David J. 1991. ‘The Distribution and Use of Policy Knowledge in the Policy Process’. Knowledge and Policy, 4(4):6–36.

Weiss, Carol. 1979. ‘The Many Meanings of Research Utilization’. Public Administration Review, 39(5):426–431.

——. 1991. ‘Policy Research as Advocacy: Pro and Con’. Knowledge and Policy, 4(1/2):37–56.

This page intentionally left blank

PART ONE
PARADIGMATIC SHIFTS

This page intentionally left blank

CHAPTER TWO
CREATION OF VALUES AND PRINCIPLES: CANADA’S EXPERIENCE WITH THE CUSFTA AND NAFTA

Rafael Gomez and Morley Gunderson1

The purpose of this chapter is to examine the role of research on trade policy based on Canada’s experience with the Canada-U.S. Free Trade Agreement of 1989 (FTA) and its subsequent expansion to include Mexico under the North American Free Trade Agreement (NAFTA) of 1992.

Examining the impact of research on trade agreements is particularly informative in light of the difficulty of conveying the economic arguments in favour of free trade to the general public and the political process. This has long been recognised. In his famous treatise in the late 1880s, Henry George (1886) argued that the greatest obstacle to free trade was in communicating to labour that the long-run benefits in the form of real wage growth and job destruction exceeded the short-term adjustment costs. In their classic article, Wolfgang Stopler and Paul Samuelson (1941, 58) state: ‘Second only in political appeal to the argument that tariffs increase employment is the popular notion that the standard of living of the American worker must be protected against the ruinous competition of cheap foreign labour.’

1 Rafael Gomez is an associate professor at Glendon College, York University, and a lecturer in management at the London School of Economics and Political Science. He is also a research associate of the Centre for Industrial Relations and the Centre for International Studies at the University of Toronto. Morley Gunderson holds the CIBC Chair in Youth Employment at the University of Toronto and is a professor at the Centre for Industrial Relations and the Department of Economics. He is also a research associate of the Institute for Policy Analysis, the Centre for International Studies, and the Institute for Life Course and Aging. Without implicating them for any of the conclusions, the authors are indebted to Michael Baker, Dwayne Benjamin, Jeremy Bulow, Olivier Deschenes, Don Dewees, Cliff Halliwell, Jennifer Hunt, Lisa Lynch, Alan Nymark, Daniel Parent, Craig Riddell, Dan Trefler, Diana Tussie, and Klaus Zimmerman for helpful discussions. We are grateful to all the participants of the FLACSO seminar August 2006 (Buenos Aires) who provided comments at our presentation of an earlier version of this chapter.

The Canadian free trade agreements are excellent examples for illustrating the issue of the role of research because, although the movement to freer trade was described as a ‘leap of faith’, it was certainly backed by considerable research. As discussed subsequently, that research ranged from policy-oriented discussion pieces to computable general equilibrium models. It included the spectrum of work related to theory, evidence and policy. There was often a strong advocacy component, but not always.

Issues that will be dealt with in this chapter include: Did the research have any impact on the policies of moving toward freer trade? If so, why did the pro free trade research seem to dominate over the research against freer trade? What are the types of research outputs that seem most important in affecting the policy initiatives? Are there key interactions that must occur between the research and various stakeholders? Are there key inputs into the research that facilitate it having an effect on policy? Are there contrasts between the FTA and NAFTA with respect to a differential impact and does this shed light on the issue?

At the outset it should be emphasised that establishing a causal link whereby research affects policy is extremely difficult for a number of reasons (Gunderson 2007). Reverse causality may be present since policy makers who want a policy initiative in place may well foster the research that will support the initiative. This could come in many forms: commissioning background studies from sources known to favour the initiative, designing the terms of reference in ways that will yield supportive results, ‘advertising’ favourable results while ‘burying’ unfavourable ones, or reviewing the research with suggestions tilted toward influencing the results or having them presented in a favourable fashion.

Establishing a correlation between academic research and policy outcomes does not imply causality. For causality to be at work, the research results would have to be so powerful as to have an independent impact on policy initiatives.

It is also the case that we may only observe the research results when they confirm the desired policy change. This can give the appearance that the research results positively influenced the policy change, especially as they are ‘trotted out’ to support the change. Otherwise, they may be buried or counter studies may be commissioned to offset their impact.

Background

The Canada-U.S. Free Trade Agreement was negotiated between 1985 and 1987 and implemented January 1, 1989. It emerged out of an earlier period of nationalistic views and extensive government intervention in the economy during the 1960s and ’70s. From the mid 1970s to the 1980s, the Canadian economy (and generally the U.S. and world economies) were in the worst shape since the Great Depression of the 1930s. As outlined by John Chant (2005) both inflation and unemployment were at double-digit levels and productivity and growth were lagging. Factors underlying this poor performance included the increase in oil prices by the Organization of the Oil Producing Countries (OPEC) and attempts to fund both the Vietnam war and the ‘Great Society’ at the same time in the United States via an expansionary monetary policy.

In Canada, the response generally involved continued extensive government intervention and a nationalistic orientation in a number of fronts. The Anti-Inflation Board was established to administer wage and price controls from 1975 to 1978, and the National Energy Policy was established in 1980 to fix energy prices. The 1980 government budget under Prime Minister Pierre Trudeau promised ‘new levels of government intervention to encourage “Canadianization” of the economy, the strategic use of the Foreign Investment Review Agency, tougher rules for assuring government procurement contracts that would favour Canadian firms, and a new State Trading Corporation to help sell the products of smaller Canadian companies to centrally planned economies’ (Chant 2005, 14). A high-tech industrial policy was also proposed.

These nationalistic and interventionist policies of the mid 1970s to the early 1980s were generally supported by earlier royal commissions, task forces, and government-commissioned reports that recommended such initiatives. This was the case with the Royal Commission on Dominion-Provincial Relations reporting in 1940 and chaired by N.W. Rowell and Joseph Sirois, the Royal Commission on Canada’s Economic Prospects reporting in 1958 and chaired by Walter Gordon, the report of the Task Force on Foreign Ownership and the Structure of Canadian Industry chaired by Mel Watkins in 1968 and Foreign Direct Investment in Canada, the 1972 report by Herb Gray.

In the early 1980s, however, a transformation in political thinking began to occur. The same prime minister who brought the previously mentioned nationalist and interventionist government initiatives, and who promised ‘even new levels of government intervention’ and who instituted wage and price controls, appeared to have an epiphany guided by Adam Smith’s invisible hand. In a memo to his cabinet in 1982, Trudeau stated: ‘Personally, I remain convinced that the primary engine of economic development must be a dynamic private sector and that the market place is in most circumstances the best allocator of scarce resources’ (Chant 2005, 17). Soon after in that same year, Trudeau appointed Donald Macdonald to chair the Royal Commission on the Economic Union and Development Prospects for Canada (the Macdonald Commission). The main recommendation of that commission was for a free trade agreement with Canada and the United States. In essence, the Canada-U.S. Free Trade Agreement of 1989 was spawned by the Macdonald Commission, which in turn arose out of a transformation of political views away from a nationalist-interventionist strategy and toward a more market-oriented one.

The Macdonald Commission and the Free Trade Recommendation2

As indicated, the Macdonald Commission was established in 1982—a time that marked the beginning of a transformation of political thinking within the Trudeau government away from a nationalistic-interventionist strategy and toward a more market-based one. Macdonald himself appears to have undergone a similar transformation. As minister of energy earlier, he was responsible for nationalistic-interventionist policies including the National Oil Policy, the establishment of a state-owned petroleum company, government investment in oil sands that at the time were not commercially viable, and price controls on uranium exports. Later, as minister of finance, he was responsible for the wage-price control programme. In answer to the question of what made him change his viewpoint, he indicates: ‘My experience in the private sector after my departure from government made it clear that state-controlled programs had failed to achieve the rates of growth to which we all aspire’ (Macdonald 2005, 9). While his practical private-sector experience appears to explain his transformation from supporting a nationalistic-interventionist strategy to a market-based one that would recommend

2 Much of this discussion is from Morley Gunderson (2007).

the FTA, that recommendation was buttressed by numerous research studies that also endorsed the FTA, as discussed subsequently.

As stated by Macdonald (2005, 7): ‘The use of the Royal Commission instrument to develop broad policy responses has now become a pattern in Canada. Rowell-Sirois, Walter Gordon and our Royal Commission, each in its generation provided a perspective on the political economy of Canada, of our place within a changing world, and of policy responses for Canadians to choose.’3 In that vein, the issue of the impact of research on public policy becomes closely linked to the extent to which research influences the recommendations of such royal commissions.

The Macdonald Commission’s Origins and Mandate

The initial impetus for the Macdonald Commission was to recommend the means to foster internal trade within Canada in the hope that this would further a stronger internal economic union. The mandate was soon broadened extensively to involve the appropriate national goals and policies for economic development, and the appropriate institutional and constitutional arrangements to promote the liberty and well-being of individual Canadians and the maintenance of a strong Canadian economy (Royal Commission on the Economic Union and Development Prospects for Canada 1985, 561). While the mandate was broad, its focus was that of adapting to change.

The mandate was broadened because the forum of a royal commission, with its public hearings and research programme, was regarded as desirable for obtaining information on a broader range of policy issues that were beyond the capabilities of the internal civil service to analyse. Furthermore, the arm’s-length nature of the relationship between governments and such commissions meant that the government could select the recommendations it wanted. As Macdonald (2005, 2) says, ‘if the recommendations were not acceptable to the government, it could disavow them’. This highlights that the link between research and public policy may be buffered through such institutional arrangements as royal commissions and task forces. They may foster research,

3 In an analysis of the role of research in royal commissions, Jane Jenson (1994) also indicates that earlier royal commissions based their recommendations on public hearings and legal expertise, while the latter ones turned increasingly to research, requiring the support of facts.

but they may also provide a mechanism for cherry-picking the results wanted by the political process—again highlighting the difficulty of establishing a direct causal line between research and public policy. Even in such circumstances, however, the research has an indirect impact if it supports what the political process deems appropriate—in effect, if it provides the cherries to pick.

The research conducted and synthesised by the Macdonald Commission was extensive, amounting to 280 studies done mainly by 300 different academics in 70 volumes in three areas: law and constitutional issues, politics and institutions of government, and economics. Trade was one of seven areas under the economics umbrella, the others being macroeconomics, federalism and the economic union, industrial structure, income distribution and income security, labour markets and labour relations, and economic ideas and social issues. While trade was only one of seven areas within the economics umbrella, and economics was only one of three major areas under analysis, trade was described as its ‘signature analysis’ and the most immediate impact of the commission was described as giving ‘greater legitimacy and momentum to the argument for free trade with the US’ (Banting 2004).4

In his foreword to each of the research volumes, Macdonald commented on the dearth of research at the time of previous royal commissions: ‘Very little was known about the evolution of the Canadian economy. What was known, moreover, had not been extensively analysed by the slender cadre of social scientists of the day.’ He further commented on the importance of research for his own commission: ‘We enjoyed a substantial advantage over our predecessors: we had a wealth of information. We inherited the work of scholars at universities across Canada and we had the benefit of the work of experts across private research institutes and publicly sponsored organisations.’ He also commented, however, on the importance of mechanisms such as royal commissions to link the research to public policy by filling the research gaps and consolidate the existing research: ‘Our problem was not a shortage of information; it was to interrelate and integrate—to synthesise—the results of much of the information we already had.’ Gregory Inwood (1998, 16) also states that ‘from the very start, the

4 Michael Hart (2005) states that ‘the Macdonald commission examined a wide range of issues related to Canada’s economic and social circumstances, but its signature analysis concerned Canada’s performance as a trading nation’.

Research Directors decided that the studies commissioned would not be intended to produce new, original or ground-breaking research, but rather work which summed up the state of the discipline in which scholars were writing’.

This underscores the importance of having both an existing stock of cumulative research upon which to draw and the capability of having mechanisms to absorb such research and link it to the policy area. Academic research on its own may stay buried in the ivory towers if it is not synthesised and translated into a language understood by policy makers. The incentive systems within the academic environment, however, generally do not reward such consolidation and translation, preferring instead the basic and applied research published in peer-reviewed refereed journals. As such, it requires mechanisms such as royal commissions and task forces or individuals within government departments who can bridge the gap between academic research and public policy.

The research volumes of the Macdonald Commission were of extremely high quality and done by top researchers in Canada.5 This is certainly the case with the work on trade, coordinated by John Whalley, an internationally recognised and prolific scholar in the area.6 As Craig Riddell (2005, 53) points out, the policy influence of the Macdonald Commission ‘may have flowed from its detailed diagnosis, as well as from the specifics of its recommendations’.

The Sources of Free Trade Support

Support for the FTA of 1992 came not only from the research of the Macdonald Commission reporting in 1985 but also from the economics research community in general—at least from what could be labelled as economists who followed the conventional paradigm.7 Of course,

5 The background research studies, for example, were subject to the normal academic peer review process done in refereed journals (Inwood 1998, 16).

6 As indicated by Hart (1994, 29): ‘He [Whalley] had written, edited, or encouraged the production of seven volumes [Vols. 9–14 and 68] of research related to [free trade]. More than any other person on the Commission staff, he ensured that the free trade option gained a full hearing.’

7 Positive effects on output, income, productivity, growth, employment, and wages were predicted from the computable general equilibrium models outlined in the background studies for the Macdonald Commission by Robert Hamilton and John Whalley (1985), Richard Harris (Harris 1985), and Richard Harris and David Cox (1984). The Harris-Cox modelling, developed earlier, was particularly influential, presented to the commissioners in seminars and summarised in the background studies (Inwood 1998, 29).

this reflects the basic principles of economics that outline the benefits of free trade by exploiting comparative advantage and the benefits of specialization.

Positive impacts of the FTA on output, income, employment, and wages were predicted for Canada based on various macroeconomic forecasting models, including the FOCUS-PRISM models discussed by Peter Dungan (1985), in the Informetrica model discussed in Informetrica (1985) and by Carl Sonnen and Mike McCracken (1985), the Economic Council of Canada CANDIDE model (Magun et al. 1988), and the model of Ernie Stokes (1989). While the predicted impacts were positive, they were generally small, in part because the tariff reductions were small and phased over a long period of time. As well, macro forecasting models are not suited to capture the important impacts that can emanate from enhanced economies of scale and productivity improvements that can arise from the associated restructuring.

Computable general equilibrium models can capture both the direct effects that emanate from reductions in tariffs and non-tariff barriers to trade, as well as the indirect effects that emanate from industrial restructuring, economies of scale, productivity improvements, reductions in imperfect competition and induced investments. The computable general equilibrium (CGE) models generally confirmed the results of the macro-forecasting models: positive effects on output, income, growth, productivity, employment and wages (Brown and Stern 1987, 1989; Canada. Department of Finance 1988; Cox and Harris 1985, 1986, 1992; Crandall 1987; Harris and Cox 1985).

The case for a bilateral free trade agreement with the U.S. was fostered by a number of other factors of particular importance to Canada (Winham 2005). Other regional trading blocs were forming internationally and Canada was at risk of not gaining access to a large market. As well, Canada’s traditional reliance on exporting primary products was tenuous given that the demand for such products was forecast to be in decline and a reallocation to more manufacturing was considered desirable. To obtain the economies of scale necessary to be globally competitive in that area, secure access to the large U.S. market was regarded as necessary. This was especially the case given the possibility of increased protectionism in the U.S., especially in the form of non-tariff barriers to trade—a dire possibility since more than 70% of Canada’s trade was with the United States. Also for this reason, a bilateral free trade agreement with the U.S. was preferred especially since further multilateral free trade through the General Agreement on Tariffs and Trade (GATT) was uncertain. While the benefits of free trade were the ostensible rationale for that recommendation, a more subtle rationale also pertained to the fact that freer trade may foster further market-oriented reforms in domestic policy. This is especially the case since Canada is a federal system where provinces have considerable independent decision making in many areas. Free trade may be an effective way for the federal government to induce market-oriented reforms in such a system.

Although formal macro-forecasting and CGE models were prominent in the research agenda of the Macdonald Commission, such models have been criticised in this area, generally on the grounds of unrealistic assumptions and inability to capture all of the subtleties of the adjustment process.8 But the criticisms have tended not to be of a research nature published in academic journals and providing alternative predictions based on alternative methodologies.9 This is also the case with many of the nationalist-interventionist arguments advanced in the 1960s and ’70s mainly by political scientists and sociologists—arguments that tended to be rejected by the Macdonald Commission and its associated researchers.10

Overall, the solid research done or synthesised by prominent economists associated with the commission as well as that done by the research community in general supported the recommendations for the FTA. While strongly suggestive of the impact of research on fostering free trade, this does not establish a causal connection since there is the possibility that cause and effect worked in the other direction. That is, such reputable and prominent economists may have been commissioned to

8 Examples of criticisms include the conference presentations by Ricardo Grinspun (1991) and James Cypher (1992).

9 In commenting on a symposium on free trade, an internal memo from the Macdonald Commission indicated that the critics of free trade ‘spoke forcefully against free trade but were criticized for not providing at least some definition and dimensioning of whatever the alternative was they were recommending’ (Inwood 1998, 30).

10 Inwood (1998, 5) indicates that their arguments ‘found public expression in such journals of contemporary opinion as Canadian Forum, Canadian Dimension, Our Generation and This Magazine’. These were magazines of contemporary opinion and not research journals.

do the forecasts or to consolidate the existing literature because it was known that they would likely find outcomes favoured by the Macdonald Commission. This does not imply that they may have been ‘hired guns’ who prostituted themselves and tailored their results to those who ‘pay the bills’. Rather, they were prominent economists or groups in the paradigm mould, and the conventional paradigm would predict favourable outcomes from free trade.

Economists Finally Have Their Day in the Sun

This possibility certainly has been suggested. Inwood (1998), for example, indicates that the nationalistic-interventionist emphasis of the 1960s and ’70s (dominated by sociologists and political scientists) engendered a backlash in the 1980s (dominated by economists) with their emphasis on free markets, free trade, and a diminished role for the state. As such, he concludes that ‘this combined with the traditionally hegemonic position of economics within state-sponsored research programs meant that, in some ways, the recommendations of the Macdonald Commission research were predictable, if not foregone’ (7). Inwood further argues that ‘the emergence of free trade as an issue within the Commission’ was also a foregone conclusion after ‘Macdonald’s public pronouncement in November of 1984 that he favoured a “leap of faith” into free trade with the United States, a decision that had neither been communicated internally to the researchers, nor been agreed to by the other Commissioners. . . Thus, the academics had to scramble to produce studies focusing on free trade after Macdonald went public’ (14). This criticism seems unfair, however, since the commission itself only reported in 1985 and by then the research studies were completed and certainly the results of the research would have been largely known prior to then. Inwood himself states: ‘As the Macdonald Commission research studies began pouring in throughout 1984 and 1985, the Commissioners started to formulate their conclusions’ (179; see also Inwood 2005). As discussed subsequently, the case for free trade was also made earlier to the commission by a number of academics involved with it.

The influence of mainstream economists in the policy recommendations of the commission, and especially its signature recommendation for free trade, is exhibited in various ways. Macdonald was reported to have said that he ‘found the economics research produced by the Commission useful in clarifying and supporting his convictions regarding free trade. And he credited Smith and his team of economists, particularly the Wonnacotts [Paul and Ron] and John Whalley for this’ (Inwood 1998, 21).11 The prominent political scientist Richard Simeon (1987) indicated that the rigour and the fairly homogenous view of economics made that discipline prominent as a source of policy advice to the commission. More generally, in their analysis of the relationship between social science and politics, Stephen Brooks and Alain Gagnon (1988, 109) conclude that ‘there can be little doubt that economists remain pre-eminent among social scientists in their integration with the policy process’. The virtual unanimity of the economists hired by the Macdonald Commission in favour of free trade, and the general support of the economics profession for such an endeavour certainly also helped make the link between research and policy. As indicated by Inwood (1998, 35), ‘only one academic could be found to make the anti-free trade case out of the approximately three hundred hired by the Commission’.

The importance of academic research to the commission in general is illustrated by the fact that of the 1014 references cited in the final report, 67% are from the academic literature, 17% from the background research studies of the commission, 10% from briefs formally presented to the commission, and 6% from references to transcripts of the public hearings. Overall, 84% of references relate to research and mainly academic research, since the background studies were generally synthesis of such research; only 16% of the references were to transcripts of the hearings or briefs presented to the commissioners.12 The academic research dominated not only in references but also in impact because the briefs and public hearings generally involved advocacy positions opposed to free trade. As Inwood (1998, 18) states: ‘The Commission chose largely to ignore the briefs and transcripts.’ In this case, at least, it appears that solid peer-reviewed academic research trumped advocacy positions not backed by research.

Importance of Champions in Translating and Delivering the Free Trade Message

For academic research to have an influence on public policy, however, it must have champions who can translate the research and advance

11 Their influential and long-standing support for free trade is illustrated, for example, in Wonnacott and Wonnacott (1967).

12 These calculations are based on numbers obtained from a content analysis of the final report (Inwood 2005, 181).

it to policy makers. In the case of free trade for the Macdonald Commission, this was done by three academics associated with the commission: John Whalley (economics); Gil Winham (political science), and Jack Quinn (law). Inwood (1998, 29) states that ‘together the three of them coordinated an effort over the summer and fall of 1984 to produce a free trade proposal for the Commissioners’. The credibility of their proposal was likely enhanced by the fact that they came from different disciplines.

In addition to those who influence key decision makers in government, it is also important to have champions who will bring the message directly to the public so as to get public support on side. Without such support, it is unlikely that the political process could simply follow the recommendations of the research, no matter how solid and unanimous in its conclusions. This was particularly important for the free trade recommendation, since advocacy groups were publicly condemning the commission report and its recommendation for free trade.13 Champions did emerge in the form of some high-profile business leaders, a former politician, Macdonald himself, and some academics, notably John Crispo, whom Macdonald (2005, 11) thanked for ‘his robust platform technique which ultimately frightened away the union leaders from contested meetings where initially it was they who had brandished the verbal brass knuckles’.

The ‘Mulroney’ Election Effect

The movement of the research recommendations and those of the Macdonald Commission into an actual free trade agreement was also fostered by the fact that immediately after the commission’s report was published in 1985, a new Conservative government headed by Brian Mulroney replaced the formal Liberal government that had started the commission. Perhaps ironically, the Conservative government had made a bilateral free trade agreement a cornerstone of its platform. Once elected, the government moved swiftly to start negotiations, which lasted from 1985 to 1987, culminating in the FTA that was implemented on January 1, 1989.

The research, especially that of the Macdonald Commission, generally agreed that free trade would positively affect output, income,

13 Daniel Drache and Duncan Cameron (1985) produced an early example of the opposition to the recommendation for free trade.

productivity, growth, employment, and wages in Canada. There would, of course, be adjustment costs, especially for workers displaced by imports produced by low-wage labour in foreign countries. In part to alleviate those adjustment consequences, the commission also recommended a universal income security programme (UISP). UISP was a form of guaranteed annual income with a clawback rate of 20% over the normal income tax rate and applied to all income. It was to replace other income support programmes.

Interestingly, that recommendation did not appear to be based on research, at least not based on research done by the Macdonald Commission. As stated by Jonathan Kesselman (2005, 74): ‘It was surprising that the Commission opted for a plan of this kind given that only one if its background studies considered this approach at all and recommended that it not be pursued.’ That study, however, did indicate that ‘the UISP program also would have entailed a large redistribution of incomes, raising questions of its political feasibility’ (74). In that vein, the research of the Macdonald Commission appears to have influenced policy in that the research backed free trade and opposed a more universal income support programme, even though only the free trade recommendation was pursued politically. This raises the question of why the commission’s recommendations seemed to follow the research in supporting free trade, but did not follow the research when the commission (but not the research) recommended a universal income security programme. Perhaps the commission realized that the UISP was not politically feasible given its costs, but its recommendations in that direction ‘took them off the hook’ with respect to dealing with the adjustment consequences of free trade.

As Kesselman (2005, 74) states: ‘Despite the fact that Canada has not pursued a guaranteed annual income along the lines of the UISP, the Commissions general approach has nevertheless had a significant impact on subsequent policy developments.’ He then cites a number of income support programmes that incorporated many of the general features of the UISP.

The Evolution to the North American Free Trade Agreement

Shortly after the implementation of the FTA, Canada found itself negotiating a trilateral agreement to also include Mexico under NAFTA, signed in 1992 and ratified by Canada in 1993. Daniel Trefler (2005, 111) states that ‘the year 1993 was a low water mark for the [previous] Canada-U.S. Free Trade Agreement’ since Canada was in the depths of a recession and was experiencing extensive job losses, especially in manufacturing. In that vein, it is somewhat surprising that NAFTA could be negotiated under such conditions. There are a number of contrasts between the FTA and NAFTA, however, that have implications for understanding why it was negotiated as well as the potential impact of research on trade policy.

Major Differences in the Period of Debate

While the research of the Macdonald Commission was likely influential in establishing the FTA, or at least facilitated the political process in establishing it, there was no equivalent commission or body of research to recommend NAFTA. The earlier research and recommendations of the Macdonald Commission, as well as the academic research, however, in general would carry forward to such an extended agreement. Thus the academic research was fairly solidly behind freer trade.

Furthermore, the period of time between the FTA of 1989 and NAFTA of 1992 was far too short for the impact of the FTA to be determined, especially because it was to be phased in over 10 years. As well, there was simply too short a period for a systematic research agenda to be put together. Also, as mentioned, the early 1990s was a period of severe recession in Canada so that it would not be possible to disentangle the impact of the FTA from that of the recession that was largely induced by tight monetary and fiscal policy.

Research on the impact of the FTA did not emerge until after NAFTA was negotiated, so that it was not able to influence that policy process. The research generally found that the FTA led to short-run adjustment costs but long-run gains in productivity and output, as predicted by economic theory. Noel Gaston and Daniel Trefler (1994; 1997), for example, estimate that about 10% of the 400 000 jobs lost in Canada between 1989 and 1993 can be attributed to the tariff reductions of the FTA. The vast majority of the losses are attributed to other adjustment pressures such as the recession, high interest rates, a high exchange rate, and technological change. They further emphasise that the job losses would have been mitigated had there been more wage flexibility in Canada. Trefler (2004) further documents the adjustment costs and the long-run productivity benefits from the associated restructuring.

At the time NAFTA was negotiated there was also no research on the controversial social issue of whether it would foster a ‘race to the bottom’ in terms of social policy initiatives. As indicated subsequently, such research did not appear until the late 1990s. Furthermore, conflicting evidence is found, with the evidence from political scientists suggesting no downward converge and the evidence from economists suggesting some downward convergence, not all of which is regarded as undesirable.

The Lack of Research-Based Channels of Influence

Even if research on the economic and social impacts of the FTA had been available at the time of negotiating NAFTA, it is unlikely that it would have had much of an impact because NAFTA was more of a defensive move—Canada did not want to be left out of such an agreement that otherwise may reallocate U.S. trade from the north to the south. In contrast, the FTA involved a conscious effort by Canada to negotiate a bilateral free trade agreement with the U.S. so as to secure access to that large market and to foster domestic market-oriented reform. As Winham (2005, 104) puts it: ‘Unlike the North America Free Trade Agreement (NAFTA) which was a foreign policy in which Canada sought to maintain its interests against initiatives by foreign countries [Mexico], the FTA was at base a domestic policy in which Canada sought especially to regulate its economy.’ Such a conscious domestic policy effort would likely require more research support for its political acceptability than would a more defensive foreign policy move.

Another difference between NAFTA and the earlier FTA was that the FTA involved a trading arrangement with another high-wage country, the U.S., while NAFTA involved a trading arrangement to include a low-wage country, Mexico. This raised similar concerns as were occurring in the U.S.—that is, the possibility that low-wage imports from Mexico would displace low-wage labour in the U.S. and Canada, and this would exacerbate the growing wage inequality that was already occurring. Academic research tends to support the notion that freer trade with low-wage countries has contributed to the growing wage inequality in countries such as Canada and the U.S., although the impact of trade is likely smaller than that of skill-biased technological change.14 Such trade, however, was already occurring from other low-wage countries

14 Reviews of that earlier literature are contained in William Cline (1997), Susan Collins (1998), Robert Feenstra and Gordon Hanson (Feenstra and Hanson 1997), J. David Richardson (1995), Dani Rodrik (1997), and Adrian Wood (1995).

especially in Asia, so Mexico was only regarded as part of an already continuing trend.

The ‘Giant Sucking Sound’ Debate

A related concern with NAFTA was what a third-party presidential candidate at the time, Ross Perot, termed the ‘giant sucking sound’; namely, that the expansion of free trade to a low-wage country such as Mexico would put pressure on wages and for a harmonisation of labour and social policy, and the harmonisation would be downward toward the lowest common denominator—Mexico. That is, with such freer trade and more open capital flows, multinational corporations (MNCs) would be more likely to locate their production in countries with lower labour costs and labour standards, and export into the higher cost countries. Given this credible threat, governments would be under pressure to compete for business investment and the jobs associated with that investment. They would do so in part by being ‘open for business’ by reducing their laws and regulatory initiatives that otherwise impose costs on business. The polemics in this area were loud and strong, as evidenced by the phrases that were used to describe the phenomenon: race to the bottom, social dumping, harmonisation to the lowest common denominator, regulatory meltdown, ruinous competition, and the rule of the market replacing the rule of law.15 The polemics, however, were not backed by research. In fact, it was only in the post-NAFTA period that research was conducted on the topic.16

In the U.S., NAFTA was also associated with the issue of illegal immigration. The hope was that free trade would be a substitute for labour mobility—in this case, illegal immigration. That is, individuals can move to another country directly by migrating (legally or illegally)

15 For discussions in the Canadian context see Roy Adams and Lowell Turner (1994), Morley Gunderson (1993), Brian Langille (1996), Ian Robinson (1998), and Gilles Trudeau and Guylaine Vallée (1994).

16 Various studies published by Keith Banting, George Hoberg, and Richard Simeon (1997) indicate that Canadian policies have tended to converge toward those of the United States in a number of areas, including macroeconomic policy, industrial policy, and environmental policy, as well as individual political rights and judicial protection from the state. With respect to social policy, however, studies by political scientists tend to suggest little or no convergence (Boychuk and Banting 2003; Cameron and Stein 2000, S30; Garrett 1998, 823; McBride and Williams 2001, 302; Simeon et al. 1997, 393); studies by economists suggest considerable convergence (Gomez and Gunderson 2002, 2005; Gunderson 1998, 1999).

or they can ‘move’ indirectly by having their labour embodied in goods and services that are exported to that country.17 In essence, the receiving country can ‘import’ labour directly by immigration (legal or illegal), or it can import it indirectly by importing goods and services that embody the labour that otherwise would have moved. This possibility was emphasised by Mexican president Carlos Salinas when he said ‘you can take our goods or our people’ during the NAFTA negotiations.

In the other direction, trade and mobility can also be complementary. Immigration can foster trade and capital flows as the new immigrants bring ties with their former country in various dimensions, including customers, suppliers, investment opportunities, and sources of finance. Immigrants also encourage the interactions in the other dimensions of integration, through language and networks. Cities such as Toronto, for example, have a comparative advantage in the global marketplace in all of these dimensions given their high concentration of immigrants.

While free trade and freer labour and human capital mobility can be substitutes or complements in theory, the evidence based on research suggests that they are complements in practice.18 That is, free trade tends to promote labour mobility and migration rather than being a substitute for it. In general, the research suggests that integration in one area can foster deeper integration in other areas.

This complementarity does not have to be the case with each and every dimension of deeper integration. Earlier Canadian tariff barriers and capital restrictions encouraged foreign direct investment (FDI) and ownership in Canada as a way to ‘jump the tariff walls’. Free trade and FDI were substitutes, with FDI increasing when free trade was inhibited. Networking through the internet is a form of trade in services whereby ‘virtual mobility’ can be a substitute for actual mobility.

17 This is part of the factor price equalization theorem whereby factor prices (e.g., wages) can be equalised across countries through labour migrating from low-wage to high-wage regions. The supply reduction in the low-wage region and the supply influx into the high-wage region reduce wage differentials. But factor prices can also be equalised by trade in goods and services that embody the different types of labour. According to the Heckscher-Ohlin theorem, low-wage countries export labour-intensive goods that embody the low-wage labour inputs with which they are abundantly endowed. This is equivalent to them exporting their low-wage labour through migration (i.e., trade can be a substitute for migration from the low-wage country).

18 Evidence on the complementarities between immigration, trade, and foreign direct investment (FDI) is given in Steve Globerman (2000), Keith Head and John Ries (1998), and Saskia Sassen (1988).

Free trade may also be a substitute for the brain drain or the loss of human capital through international migration of highly educated personnel. This is of particular concern to Canada because it extensively subsidises higher education through higher taxes while the U.S. has lower taxes, more user charges for education and a more dispersed salary distribution. As such, individuals have an incentive to acquire their subsidised education but then move to the U.S. given the higher pay and lower taxes. The brain drain after the FTA and NAFTA, however, has not been as large as it was earlier in the century, and not as large as may be expected given the large differences in after-tax income and unemployment between Canada and the U.S. (Helliwell 2001).

Canada’s Experience with Free Trade Agreements: Did the Research Matter?

Establishing a formal causal link whereby research affects policy is difficult, if not impossible, for a number of reasons, including reverse causality whereby the political process influences the research to support its already predetermined policies. As well, research results may only be apparent when they confirm the desired policy change; otherwise they are ‘buried’ or there may be counter studies commissioned to offset their impact.

Subject to these caveats, Canada’s experience with the FTA and NAFTA suggests that research did have an influence, at least in facilitating the political process to carry out its more market-oriented agenda to include free trade. It is simply impossible to tell whether the research could have killed the political agenda if the research did not support free trade. Certainly, the opposition to free trade was not backed by research. It had a more polemic, nationalist-interventionist orientation. Such an orientation was more favourably regarded in the 1960s and ’70s but by the early 1980s was falling out of favour given the adverse economic conditions starting in the mid 1970s—conditions that many would regard as fostered by the interventionist practices.

While the precise impact of research on the FTA is impossible to establish, that agreement was backed by the extensive research of the Macdonald Commission as well as academic research in general. That research was of high quality and done by top academics, and it involved a synthesis of the cumulative academic research to that time. This highlights the importance of having both an existing stock of cumulative research upon which to draw and the capability of having mechanisms for synthesising such research and linking it to policy.

Other ingredients, however, helped in the link between research and policy. The research had champions within the research community itself who brought the free trade message to the commissioners and who often trumpeted it to the general public afterward. The commission made a point of promoting the message to the general public, in part to counteract the opposition that was coming from trade unions and other advocacy groups. As well, the whole free trade agenda was part of a larger movement away from interventionist-nationalist policies and toward a more market-oriented, deregulated economy. The stars were coming into alignment; research was part of that constellation, but just how important is impossible to establish.

The subsequent extension of the FTA to include Mexico under NAFTA did not have an extensive Canadian research component backing it in part because the period between the FTA and the signing of NAFTA was too short for the impact of the FTA to be determined or for a research programme to be mustered. However, research on the economic and social impacts of the FTA did appear after NAFTA was negotiated, and generally showed favourable results in terms of productivity and growth, but with short-run adjustment consequences that could have been mitigated by more wage flexibility. The evidence on the social impact suggested either no downward harmonisation in social policies or downward harmonisation that is not necessarily undesirable. Even if such research would have been available for the NAFTA policy deliberations, it would not likely have played a major role because NAFTA was more of a defensive foreign policy move to ensure that Canada would not be left out of a trade agreement with Mexico and the United States. Furthermore, the legacy of the research of the Macdonald Commission and the academic research in general certainly would carry through. Research did draw attention, however, to other issues and especially the possible impact of NAFTA on labour adjustment and wage polarisation that was also occurring in response to other forces such as skill-biased technological change.

Conclusion

This chapter has suggested that there is a stronger role for research when it is supporting a large paradigm change (e.g., from nationalist intervention to reliance on market forces as was the case in the FTA) than in paradigm reinforcement, like in the subsequent expansion of free trade in the case of NAFTA. Whether this general finding will apply to future bilateral or regional negotiations is an open question. Such future negotiations research is not likely to play as important a role, because there seems a reasonable agreement that additional free trade is likely to lead to short-run adjustment costs in terms of job losses (especially if there is not wage flexibility) but long-run gains in terms of productivity and growth. As such, politics will likely play an important role because political factors are probably to be crucial in determining the feasibility of absorbing short-run costs for long-run gains.

Overall, the Canadian experiences with the FTA and NAFTA suggest that high-quality research was likely an important ingredient in enabling (but not causing) the political process to adopt these free trade agreements. The process was facilitated, however, by other ingredients, including champions who can synthesise and translate the academic research for the political process and the public in general. Research is likely to be neither a necessary nor sufficient condition for policy change, but it can facilitate such change if the other stars are aligned.

References

Adams, Roy, and Lowell Turner. 1994. ‘The Social Dimension of Freer Trade.’ In Maria Cook, and Harry Katz, eds., Regional Integration and Industrial Relations in North America. Ithaca: ILR Press, 82–104.

Banting, Keith. 2004. ‘Economic Union and Development Prospects for Canada.’ Canadian Encyclopedia. <canadianencyclopedia.ca/index.cfm?PgNm=TCE&Params=A1ARTA0002515> [Accessed: December 2007].

Banting, Keith, George Hoberg, and Richard Simeon. 1997. ‘Introduction.’ In Keith Banting, George Hoberg, and Richard Simeon, eds., Degrees of Freedom: Canada and the United States in a Changing World. Montreal and Kingston: McGill-Queen’s University Press.

Boychuk, Gerard, and Keith Banting. 2003. ‘The Paradox of Convergence: National Versus Sub-National Patterns of Convergence in Canadian and U.S. Income Maintenance Policy.’ In Richard Harris, ed., North American Linkages: Opportunities and Challenges for Canada. Calgary: University of Calgary Press.

Brooks, Stephen, and Alain Gagnon. 1988. Social Scientists and Politics in Canada: Between Clerisy and Vanguard. Kingston: McGill-Queen’s University Press.

Brown, Drusilla, and Robert Stern. 1987. ‘A Modeling Perspective.’ In Robert Stern, Philip Trezise, and John Whalley, eds., Perspectives on a U.S.-Canadian Free Trade Agreement. Washington DC: Brookings Institution Press, 155–190.

——. 1989. ‘Computable General Equilibrium Estimates of the Gains from U.S.-Canadian Trade Liberalisation.’ In David Greenaway, Thomas Hyclak, and Robert Thornton, eds., Economic Aspects of Regional Trading Arrangements. London: Harvester Wheatsheaf.

Cameron, Duncan, and Janice Gross Stein. 2000. ‘Globalization, Culture, and Society: The State as a Place amidst Shifting Spaces.’ Canadian Public Policy 26(Supplement): S15–S34.

Canada. Department of Finance. 1988. Canada-United States Free Trade Agreement: An Economic Assessment. Ottawa: Canadian Government Publishing Centre.

Chant, John. 2005. ‘Macro Stability and Economic Growth: What the Macdonald Commission Said.’ In David Laidler, and William Robson, eds., Prospects for Canada: Progress and Challenges Twenty Years after the Macdonald Commission. Toronto: C.D. Howe Institute, 13–24.

Cline, William. 1997. Trade and Wage Inequality. Washington DC: Institute for International Economics.

Collins, Susan, ed. 1998. Imports, Exports, and the American Worker. Washington DC: Brookings Institution Press.

Cox, David, and Richard Harris. 1985. ‘Trade Liberalization and industrial Organization: Some Estimates for Canada.’ Journal of Political Economy 93(1):115–145.

——. 1986. ‘A Quantitative Assessment of the Economic Impact on Canada of Sectoral Free Trade with the United States.’ Canadian Journal of Economics 19(3):377–394.

——. 1992. ‘North American Free Trade and Its Implications for Canada: Results from a CGE Model of North American Trade.’ Economy-wide Modeling of the Economic Implications of a Free Trade Agreement with Mexico and a NAFTA with Canada and Mexico. Washington DC: United States international Trade Commission.

Crandall, Robert. 1987. ‘A Sectoral Perspective: Steel.’ In Robert Stern, Philip Trezise, and John Whalley, eds., Perspectives on a U.S.-Canadian Free Trade Agreement. Washington DC: Brookings Institution Press, 241–243.

Cypher, James. 1992. “Labor Market Implications of the Mexico-U.S. Free Trade Agreement.” Paper presented at the Allied Social Science Association meeting, New Orleans, January.

Drache, Daniel, and Duncan Cameron, eds. 1985. The Other Macdonald Report: The Consensus on Canada’s Future that the Macdonald Commission Left Out. Toronto: Lorimer.

Dungan, Peter. 1985. The Macroeconomic Impacts of Free Trade with the United States: Lessons from the FOCUS-PRISM Models. Working Paper DP85-6. Toronto: University of Toronto.

Feenstra, Robert, and Gordon Hanson. 1997. ‘Foreign Direct Investment and Relative Wages: Evidence from Mexico’s Maquiladoras.’ Journal of International Economics 42(3–4):371–383.

Garrett, Geoffrey. 1998. Partisan Politics in a Global Economy. Cambridge: Cambridge University Press.

Gaston, Noel, and Daniel Trefler. 1994. ‘The Role of International Trade and Trade Policy in the Labour Markets of Canada and the United States.’ World Economy 17(1):45–62.

——. 1997. ‘The Labour Market Consequences of the Canada-U.S. Free Trade Agreement.’ Canadian Journal of Economics 30(1):18–41.

George, Henry. 1886. Protection or Free Trade: An Examination of the Tariff Question with Especial Regard for the Interests of Labor. New York: Robert Schalkenbach Foundation, 1980.

Globerman, Steve. 2000. Trade Liberalisation and the Migration of Skilled Professionals and Managers: The North American Experience. London: Blackwell Publishing.

Gomez, Rafael, and Morley Gunderson. 2002. ‘The Integration of Labour Markets in North America.’ In George Hoberg, ed., Capacity for Choice: Canada in a New North America. Toronto: University of Toronto, 309–356.

——. 2005. ‘Does Economic Integration Lead to Social Policy Convergence? An Analysis of North American Linkages and Social Policy.’ In Richard Harris, and Thomas Lemieux, eds., Social and Labour Market Aspects of North American Linkages. Calgary: University of Calgary Press, 309–356.

Grinspun, Ricardo. 1991. “Are Economic Models Reliable Policy Tools? Forecasting Canadian Gains from Free Trade.” Paper presented at the conference on ‘Critical Perspectives on North American Integration’, York University, 6–8 December.

Gunderson, Morley. 1993. ‘Labour Adjustment Under NAFTA: Canadian Issues.’ North American Outlook 4(1–2):3–21.

——. 1998. ‘Harmonization of Labour Policies under Trade Liberalization.’ Relations industrielles/Industrial Relations 53(1):24–52.

——. 1999. ‘Labour Standards, Income Distribution, and Trade.’ Integration and Trade 3 (January–February):24–52.

——. 2007. ‘How Academic Research Shapes Labor and Social Policy.’ Journal of Labor Research 28(4):573–590.

Hamilton, Robert, and John Whalley. 1985. ‘Geographically Discriminatory Trade Arrangements.’ Review of Economics and Statistics 57(3):446–455.

Harris, Richard. 1985. ‘Jobs and Free Trade.’ In David Conklin, and Thomas Courchene, eds., Canadian Trade at a Crossroads: Options for New International Agreements. Toronto: Ontario Economic Council 188–203.

Harris, Richard, and David Cox. 1984. Trade, Industrial Policy, and Canadian Manufacturing. Toronto: Ontario Economic Council.

——. 1985. ‘Summary of a Project on the General Equilibrium Evaluation of Canadian Trade Policy.’ In John Whalley, ed., Canada-United States Free Trade. Toronto: University of Toronto Press.

Hart, Michael. 1994. Decision at Midnight: Inside the Canada-U.S. Free-Trade Negotiations. Vancouver: University of British Columbia Press.

——. 2005. ‘International Trade: Tinker or Transform to Re-energize the Canada-U.S. Economic Relationship.’ In David Laidler, and William Robson, eds., Prospects for Canada: Progress and Challenges Twenty Years after the Macdonald Commission. Toronto: C.D. Howe Institute, 121–133.

Head, Keith, and John Ries. 1998. ‘Immigration and Trade Creation: Econometric Evidence from Canada.’ Canadian Journal of Economics 31(1):47–62.

Helliwell, John. 2001. ‘Canada: Life Beyond the Looking Glass.’ Journal of Economic Perspectives 15(1):107–124.

Informetrica. 1985. Economic Impacts of Enhanced Trade: National and Provincial Results. Ottawa: Department of External Affairs.

Inwood, Gregory. 1998. “The Universe Is in Trouble: Please Advise—Social Science Research and Knowledge Utilization in the Research Program of the Macdonald Commission.” Paper presented at the annual general meeting of the Canadian Political Science Association, Ottawa, 31 May.

——. 2005. Continentalizing Canada: The Politics and Legacy of the Macdonald Commission. Toronto: University of Toronto Press.

Jenson, Jane. 1994. ‘Commissioning Ideas: Representation and Royal Commissions. In Susan Phillips, ed., How Ottawa Spends 1994–95. Ottawa: Carleton University Press.

Kesselman, Jonathan. 2005. ‘Labour Markets and Social Policy: Impacts of the Macdonald Commission Report.’ In David Laidler, and William Robson, eds., Prospects for Canada: Progress and Challenges Twenty Years after the Macdonald Commission. Toronto: C.D. Howe Institute, 67–82.

Langille, Brian. 1996. ‘General Reflections on the Relationship of Trade and Labor (Or Fair Trade Is free Trade’s Destiny).’ In Jagdish Bhagwati, and Robert Hudec, eds., Fair Trade and Harmonization, vol. 2, Legal Analysis. Cambridge MA: Harvard University Press, 231–266.

Macdonald, Donald. 2005. ‘The Commission’s Work and Report: A Personal Perspective.’ In David Laidler, and William Robson, eds., Prospects for Canada: Progress and Challenges Twenty Years after the Macdonald Commission. Toronto: C.D. Howe Institute, 5–12.

Magun, Sunder, Someshwar Rao, Bimal Lodh, Laval Lavallée, and Jonathan Pierce. 1988. Open Borders: An Assessment of the Canada-U.S. Free Trade Agreement. Discussion Paper No. 331. Ottawa: Economic Council of Canada.

McBride, Stephen, and Russell Williams. 2001. ‘Globalization, the Restructuring of Labour Markets, and Policy Convergence.’ Global Social Policy 1(3):281–309.

Richardson, J. David. 1995. ‘Income Inequality and Trade: How to Think, What to Conclude.’ Journal of Economic Perspectives 9(3):33–55.

Riddell, W. Craig. 2005. ‘Labour Markets and Social Policy: What the Macdonald Commission Said.’ In David Laidler, and William Robson, eds., Prospects for Canada: Progress and Challenges Twenty Years after the Macdonald Commission. Toronto: C.D. Howe Institute, 53–66.

Robinson, Ian. 1998. ‘NAFTA, Social Unionism, and Labour Movement Power in Canada and the United States.’ Relations industrielles/Industrial Relations 49(4):657–693.

Rodrik, Dani. 1997. Has Globalization Gone Too Far? Washington DC: Institute for International Economics.

Royal Commission on the Economic Union and Development Prospects for Canada. 1985. Report of the Royal Commission on the Economic Union and Development Prospects for Canada. Donald Macdonald, chair. Ottawa: Minister of Supply and Services Canada.

Sassen, Saskia. 1988. The Mobility of Labor and Capital: A Study in International Investment and Labor Flow. Cambridge: Cambridge University Press.

Simeon, Richard. 1987. ‘Inside the Macdonald Commission.’ Studies in Political Economy 22(Spring):167–179.

Simeon, Richard, George Hoberg, and Keith Banting. 1997. ‘Globalization, Fragmentation, and the Social Contract.’ In Keith Banting, George Hoberg, and Richard Simeon, eds., Degrees of Freedom: Canada and the United States in a Changing World. Montreal and Kingston: McGill-Queen’s University Press.

Sonnen, Carl, and Mike McCracken. 1985. ‘Free Trade: The Economic Case Is Positive.’ Monthly Economic Review 4(11).

Stokes, Ernie. 1989. ‘Macroeconomic Impact of the Canada-U.S. Free Trade Agreement.’ Journal of Policy Modeling 11(2):225–245.

Stolper, Wolfgang, and Paul Samuelson. 1941. ‘Protection and Real Wages.’ Review of Economic Studies 9(1):58–73.

Trefler, Daniel. 2004. ‘The Long and the Short of the Canada-U.S. Trade Agreement.’ American Economic Review 94(4):870–895.

——. 2005. ‘International Trade: 20 Years of Failed Economics and Successful Economies.’ In David Laidler, and William Robson, eds., Prospects for Canada: Progress and Challenges Twenty Years after the Macdonald Commission. Toronto: C.D. Howe Institute, 111–121.

Trudeau, Gilles, and Guylaine Vallée. 1994. ‘Economic Integration and Labour Law and Policy in Canada.’ In Maria Cook, and Harry Katz, eds., Regional Integration and Industrial Relations in North America. Ithaca: ILR Press, 66–81.

Winham, Gil. 2005. ‘International Trade: What the Macdonald Commission Said.’ In David Laidler, and William Robson, eds., Prospects for Canada: Progress and Challenges Twenty Years after the Macdonald Commission. Toronto: C.D. Howe Institute, 99–110.

Wonnacott, Ronald, and Paul Wonnacott. 1967. Free Trade between the United States and Canada: The Potential Economic Effects. Cambridge MA: Harvard University Press.

Wood, Adrian. 1995. ‘How Trade Hurt Unskilled Workers.’ Journal of Economic Perspectives 9(3):57–80.

This page intentionally left blank

CHAPTER THREE
CREATION OF PROCESSES: SUSTAINABILITY IMPACT ASSESSMENTS

Clive George and Colin Kirkpatrick1

During the 1990s civil society organisations expressed increasing concern over the potentially adverse effects of further trade liberalisation on the environment, on employment levels and wage rates in high income countries, and on the development process in developing countries. Concerns that had arisen on the eve of the 1994 North American Free Trade Agreement (NAFTA) became a major issue for the World Trade Organization (WTO) negotiations in Seattle in 1999. After the failure of the Seattle ministerial meeting, the subsequent agenda for the WTO negotiations at Doha in 2001 adjusted to focus on development, with sustainable development as a key goal. Similar goals have been established for many regional and bilateral negotiations.

In response to civil society concerns, the European Commission (EC) embarked on an ongoing programme of Sustainability Impact Assessments (SIAs) of all its trade negotiations. The programme aims to ensure that policy choices are informed by an assessment of their potential economic, social, and environmental impacts in both the European Union and its trading partners, and that they are consistent with the overarching objective of sustainable development.2 SIAs have

1 This chapter draws on work undertaken for the European Commission to develop and apply a methodology for assessing the impact on sustainable development of trade negotiations and agreements. It reviews the work of many other organisations involved in the commission’s Sustainability Impact Assessment programme, whose contributions are gratefully acknowledged. The authors are also grateful to the referees for their helpful comments on an earlier version of the text. The views and opinions expressed are, however, those of the authors alone.

2 The EC has produced revised guidelines on how to conduct the required analysis (see EC 2005a; 2006b). The guidelines quote from commission’s strategic objectives as follows: ‘We should make policy choices that ensure that our various objectives are mutually reinforcing. Actions that promote competitiveness, growth and jobs, as well as economic and social cohesion and a healthy environment reinforce each other. These are essential components of the overarching objective of sustainable development, on which we must deliver’ (EC 2005a, 1).

been carried out for both global and regional trade agreements, beginning in 1999 in the preparations for the Seattle WTO ministerial. The process includes extensive consultation and participation with stakeholders and other interested parties, alongside qualitative and quantitative research into the relationships between proposed trade measures and their potential effects.

This chapter examines two policy episodes associated with the EC’s SIA programme: the Hong King ministerial meeting of the WTO in December 2005 and the 10th anniversary ministerial summit of the Euro-Mediterranean Partnership held in November 2005. It examines the extent to which the SIA programme has influenced either EU trade policy or the formulation of parallel policy measures. Many difficulties have to be addressed in conducting meaningful assessments and integrating their results into trade policy making, and this chapter reviews the extent to which such difficulties have been overcome, as well as the factors that have been influential in contributing to policy change.

Greater understanding of the likely impacts of a trade agreement may influence policy either by way of a change in a country’s negotiating position, and hence in the negotiated agreement, or by influencing parallel policy measures designed to enhance the beneficial effects of the agreement or counter its adverse ones. Parallel policies may include domestic measures in any of the trading partners, or support for the introduction of such measures through development assistance.

The European Union’s SIA Programme

Following the Uruguay Round of multilateral trade liberalisation, it became apparent that although some developing countries had experienced significant economic benefits, others had not. Much of the evidence suggested that many of the least developed countries (LDCs), particularly in sub-Saharan Africa, had failed to gain from trade liberalisation and, in some cases, had suffered losses. As well as these disappointing outcomes for the LDCs, higher income developing countries became concerned about adverse effects on their development potential resulting from other aspects of the Uruguay agreements, such as the agreement on Trade-Related Intellectual Property Rights (TRIPS). Similar concerns were expressed by civil society organisations, along with further concerns about social impacts in high income countries and worldwide effects on the environment.

In response to these mounting concerns during the preparations for the Seattle ministerial, the EC initiated a preliminary assessment of the impacts on sustainable development in its trading partners and in Europe of the proposed negotiations. This involved extensive stakeholder consultation in parallel with technical analysis, in order to provide objective information for stakeholder dialogue as well as for the negotiation process. The methodology was developed in early 1999, building on earlier experience in assessing the environmental impacts of trade policy (Commission for Environmental Cooperation 1999; Kirkpatrick et al. 1999; see also NAFTA Environmental Review Committee 1992; Organisation for Economic Co-operation and Development 1994; United States Trade Representative 1993). An overview assessment of the Seattle agenda was undertaken prior to the WTO ministerial in November 1999 (Kirkpatrick and Lee 1999). This initial analysis indicated that while an overall economic benefit could be expected, many of the issues that had been raised were genuine cause for concern and would need fuller investigation.

After the failure at Seattle, negotiations were subsequently mandated by the Doha ministerial. The EC launched more detailed assessments of all aspects of the Doha agenda and those regional trade negotiations and agreements to which the EU is a party, following further development and refinement of the SIA methodology (Kirkpatrick and Lee 2002). Some 16 SIAs have been undertaken to date by a range of organisations, as listed in Appendix 3–1.3

From the outset the SIA programme has stimulated much debate and criticism associated with civil society concerns over the trade liberalisation agenda (SUSTRA 2003; WWF 2002). Many detailed lessons have been learned and have contributed to ongoing refinement of the SIA methodology and its application (George and Goldsmith 2006; Kirkpatrick and George 2006). Further civil society contributions have maintained the pressure to strengthen the process, to enhance its relevance to decision making and to embed it more fully in the formulation of trade policy (Aprodev et al. 2002; Campaign to Reform the World Bank et al. 2006; Royal Society for the Protection of Birds and International 2003; Solidar 2005). The EC has held two international

3 All SIA studies have been undertaken by external consultants, on a contracted basis. Assessment reports are listed in the references, and are also available on the Sustainability Impact Assessment Website at <www.sia-trade.org>.

conferences to review experience and further develop the process (EC 2003a; 2006a).

SIAs contribute to the public debate on trade liberalisation and, through that debate, provide objective information to decision makers to enable them to integrate sustainable development more successfully into trade policy. To achieve this, the SIA process has to include extensive consultation and participation with stakeholders and other interested parties alongside its technical analysis of causes and effects. The process gathers different views and evaluates them in the light of available information, to provide objective information that is intended to inform the negotiations and contribute to the design of national and international policy measures to enhance beneficial effects and mitigate potentially adverse ones.

A typical SIA examines all the trade measures under negotiation and their potential impacts on all economic sectors in the affected countries. A broad assessment may be undertaken in a preliminary overview SIA, which identifies those measures and sectors for which more detailed sectoral SIAs are needed. Consultation takes place at key stages of either type of assessment, as summarised in Figure 3–1.

The technical aspects of the assessment follow the vertical sequence in the central box of Figure 3–1, interacting with the horizontal inputs and outputs of the consultation process. The first need in the technical assessment is to evaluate the causal relationships for all aspects of the trade policy agenda. The principal measures currently or previously under discussion in the WTO agenda are the following:

• Agricultural tariffs

• Non-agricultural tariffs

• Trade in services

• Trade facilitation

• Government procurement

• Trade and investment

• Competition policy

• TRIPS

• Technical Barriers to Trade (TBT)

• Sanitary and Phytosanitary (SPS) measures

• Rules of origin

• Subsidies, anti-dumping and countervailing measures

• Trade and environment

• Dispute settlement mechanism

Figure 3–1: Overview of the Sustainability Impact Assessment Process

Figure 3–2: Assessment of Impacts

A regional trade agreement may include the equivalents of any or all of these measures.

All of the components of a potential trade agreement have an economic effect, differing between countries, which will in turn have social and environmental effects. Some may also have direct social or environmental effects. The analysis of causal relationships includes, where appropriate, those embedded in economic modelling studies, together with logical analysis of other relationships and empirical evidence from the literature. The process is summarised in Figure 3–2.

For each component of the policy agenda, the central part of the technical analysis begins by identifying the effect of the proposed change on economic incentives and opportunities, in comparison with a baseline of no change to existing agreements. This will cause changes in the production system, differently in different countries, with consequent economic, social, and environmental impacts that may interact with each other. Some impacts may be only temporary, occurring while the system adjusts to the change, while others will continue into the longer term.

Long-term impacts may also arise through the impact of the trade measure on underlying processes of economic development, social transformation, and environmental degradation (or improvement) that are taking place in response to various drivers of change. Any effect that the measure may have on accelerating, decelerating, or otherwise altering any of these processes may have significant long-term impacts on the economic, social, or environmental aspects of sustainable development.

For some components of the policy agenda such as tariff changes, the causal relationships are fairly well understood and may have been incorporated into economic and other models. For others the relationships are less well understood, and empirical evidence of past effects is limited. In such cases much of the analysis consists of evaluating the validity of the various claims made by negotiating parties for and against the proposed measure, alongside stakeholder concerns and further logical analysis of likely causes and effects. The EU’s approach to trade impact assessments is not intended to evaluate the impacts of any particular negotiating position or trade policy, but rather to provide information that may contribute to policy development in both the EU and its trading partners. In some of the early studies, attempts were made to evaluate a range of alternative scenarios for a potential trade agreement, but the large number of permutations combined with a relative lack of precision in assessment techniques made this impracticable. Subsequent studies have instead used a single scenario comprising an outer bound for each of the measures under negotiation, from which the likely impacts of any intermediate position can be inferred for each measure.

At the broadest level, sustainable development can be defined in terms of the eight Millennium Development Goals (MDGs) and their 18 targets. Some of the more recent SIAs have therefore assessed the impacts on each target of the MDGs. While this provides important

Table 3–1: First-Tier Indicators or Themes for Sustainability Impact Assessment Methodology

information, these targets are too general to give a clear indication of many significant impacts. At the regional level a greater degree of precision may be available in an established indicator set. For example, in the SIA of the Euro-Mediterranean Free Trade Area (EMFTA), impacts on each of the 34 priority indicators of the Mediterranean Strategy for Sustainable Development were assessed. Even here however, many of the indicators are designed to monitor the effects of actions other than trade liberalisation, while many of those that are relevant to trade are too broad to indicate important impacts. The SIA methodology therefore steers the assessments according to nine aggregate indicators or sustainable development themes, and two indicators of sustainable development processes (see Table 3–1).

More specific analysis is guided by an initial scoping exercise based on consultation, a review of causal effects, and the evaluation of stakeholder concerns. More detailed secondtier indicators are developed from the significant impacts identified during the assessment, primarily for the purpose of subsequent monitoring.

The Institutional and Political Context of the SIA Programme

The EC developed its SIA programme in response to public concerns. The idea for extensive public dialogue supported by objective analysis of the issues came from within the EC’s Directorate General (DG) for Trade and was supported strongly by trade commissioner Pascal Lamy (2005). Informal discussions in the early stages of the programme indicated that some negotiators welcomed the initiative while others felt that it would add little to negotiating positions and might hamper the negotiating process. Officials in the DGs responsible for environmental and social issues were generally supportive.

Whereas the SIAs for the WTO negotiations and most of the EC’s regional trade agreements have been commissioned by DG Trade, the SIA for the Euro-Mediterranean Free Trade Area was commissioned by EuropeAid in association with DG External Relations. The difference is associated with a history of EC programmes in the Mediterranean region contributing to the development of a strong network of environmental and civil society organisations, which were active in calling for an impact assessment of the proposed free trade area. Strong support from DG Environment and other DGs working with civil society in the region led to funds being made available for the SIA, with additional support from the DG Trade officials responsible for the other SIAs.

The initial interest to attend to public concerns presents particular challenges for integration into decision making. In assessing impacts in other countries as well as in the EU, the approach aims to be objective and impartial. However, the EU’s trade policy is by definition partial, favouring the EU’s interests and working toward an agreement with other countries through a process of give and take. If an SIA is indeed impartial, there will inevitably be conflicts between its findings and Europe’s negotiating position. This tension is reflected in a clear distinction between the impact assessments conducted under the programme (SIA) and those conducted in parallel under EU procedures for the impact assessment of policy proposals (EC 2005a). For all policy decisions made at the EU level, since 2003 the EC has been implementing an impact assessment process for all major initiatives that are presented in the annual policy strategy or in the work programme of the EC (2002). The majority of these impact assessments involve public consultation and provide full public access to assessment reports. This is not, however, the case for trade policy, where the EC’s impact assessments are conducted internally and access to the reports is restricted (EC 2007). If the development of a negotiating position were done publicly, it would reveal the hand of the negotiators and weaken their position. Therefore, although the publicly conducted SIA process is intended to inform negotiating positions, it does not define them.

The EC recognised early on in the post-Doha SIA programme that tensions could arise between the SIA and the established process of building negotiating positions and conducting negotiations. The EC did not expect its negotiating positions to be completely different from the results of an SIA, but accepted that there may be inconsistencies. It established a mechanism for resolving them, in which the EC may modify its position if it considers the result to be robust, but otherwise it may not. In view of the high levels of uncertainty in many of the SIA findings, there is considerable scope for rejecting them on these grounds. The EC may publish its response to the SIA findings and recommendations on its website, although its decisions may entail a degree of confidentiality, to avoid undermining the negotiating position.

Sustainable development is a complex concept covering a wide variety of economic, social, and environmental impacts resulting from many interacting activities. Decisions on appropriate balances and trade-offs can only be made by political processes that take account of the differing values and interests of all the stakeholders in each country. Trade negotiations are one of many such processes, undertaken by negotiators whose prime aim is to maximise particular benefits for their own country. Each country’s negotiators consult other government departments in order to develop a negotiating position consistent with that country’s interpretation of sustainable development. The subsequent negotiations are primarily a process of give and take on specific economic issues, influenced by each country’s arguments that its own interpretation of sustainable development is correct, and that where other countries’ interpretations differ from it they are incorrect. Instances where an SIA can demonstrate incontrovertibly that one or other interpretation is correct are extremely rare. More commonly the most an SIA can do is tilt the balance of the negotiations toward Europe’s position or against it. A change in the outcome may occur directly if EC negotiators consider the assessment to be sufficiently robust to change their negotiating position, or indirectly through any influence that the public dialogue on the SIA findings may have on the negotiations.

Trade negotiations take place in a wider institutional setting in which the WTO is responsible for maintaining the stability of the international trade regime and promoting further liberalisation of trade, while other international bodies are responsible for international agreements on social and environmental issues. WTO committees on trade and environment and trade and development aim to ensure consistency between WTO agreements and these other agreements, but the WTO’s own responsibility is limited to the management and promotion of international trade. The aim of multilateral or bilateral/regional trade negotiations is similarly restricted to promoting trade, while remaining consistent with international agreements on social and environmental issues. To the extent that current global development is socially inadequate and environmentally unsustainable, this may be taken as an indication of the relative weakness of international social and environmental institutions compared with those responsible for economic issues. This weakness may limit the extent to which SIAs can contribute to enhancing sustainability within existing international structures and decision-making frameworks. Alongside this, SIAs may offer the potential to contribute to WTO reform and the reform of other trade policy formulation processes, to steer them more strongly toward sustainable development. The remainder of this chapter examines the extent to which SIAs have influenced trade policy making in favour of sustainable development, and the potential for expanding this influence.

The Effectiveness of SIAs in Inducing Policy Change

Any evaluation of the effectiveness of a programme should in principle begin by specifying its objectives. However, evaluation at the level of final objectives is confronted by the problems of attribution. The methodological problems of establishing a counterfactual baseline from which to assess impacts, and the difficulties of attributing changes to the initial policy intervention, have restricted effective evaluation at this level. A further difficulty often arises with a mismatch between the time over which the impacts have their full effect and the period within which the results of the evaluation can influence decision making. For practical reasons, it will often be necessary to conduct the evaluation at preceding stages in the cause–effect chain. Evaluation at the level of outcomes will assess the effect of the initial activity on the intermediate targets. Output evaluation will assess the outputs of the activity being evaluated. Activities-level evaluation focusses on the procedures followed.

Figure 3–3: Evaluation of Trade Sustainability Impact Assessment

The objectives of the trade SIA programme have been specified by the EC as:

Sustainability Impact Assessment is a process undertaken before and during a trade negotiation which seeks to identify economic, social and environmental impacts of a trade agreement. The purpose of an SIA is to integrate sustainability into trade policy by informing negotiators of the possible social, environmental and economic consequences of a trade agreement. The idea is to assess how best to define a full package of domestic policies and international initiatives to yield the best possible outcome, not just in terms of liberalisation and economic growth, but also of other components of sustainable development. An SIA should also provide guidelines for the design of possible accompanying policy measures. Such measures may go beyond the field of trade as such, and may have implications for internal policy, capacity building or international regulation. Accompanying measures are intended to maximise the positive impacts of the trade negotiations in question, and to reduce any negative impacts (EC 2005b).

The objective of SIA is therefore to ‘integrate sustainability into trade policy’, so that the implementation of the negotiated trade measures and accompanying policy measures will contribute to the ‘best possible outcome’ in terms of sustainable development.4

Figure 3–3 illustrates this evaluation chain in the context of the trade SIAs.

The integration of sustainable development into trade policies and accompanying measures was discussed at an international SIA seminar organised by the European Commission in 2003, where participants called for sustainable development to be more firmly established as an overarching aim of trade negotiations (European Commission 2003b). The seminar also sought clarification of the role of SIA in the negotiation process, with many participants worried that SIAs would lead

4 The core impact indicators used in the SIA methodology are specified in terms of the economic, social, and environmental pillars of sustainable development.

only to accompanying measures to mitigate negative effects of agreements, rather than to modifications in the EU’s negotiating position. In responding to these concerns DG Trade (2003, 1, 2) made the following statements:

• ‘Sustainable development has to become a central objective in all trade negotiations.’

• ‘SIA is an analytical and information tool that should play a key role in attaining this objective.’

• ‘DG Trade is committed to SIAs that improve the EU’s negotiating positions in the interests of sustainable development. SIAs are not intended to find ways of compensating for the shortcomings of negotiating positions by identifying the need for complementary measures.’

Some indirect evidence on the influence of the SIA studies on the EU’s negotiators can be drawn from the position papers published by the EC. For each SIA the EC aims to prepare a paper based on the SIA findings, which defines points of agreement, responds to disagreements, and considers what further action should be implemented. Prior to publication, the position paper is drafted and discussed with member states at the trade committee—the so-called ‘133 Committee’. This time-consuming process has been completed only for some of the earlier SIA studies. Typical responses fall into one of five main categories:

• specific new action is proposed;

• possible new action is under consideration;

• more detailed analysis is needed before decisions on action can be taken;

• sufficient action is already being taken;

• the EC disagrees with the SIA findings.

Where the responses fall in the first group, the proposed action has tended to be non-specific, such as raising awareness of EC delegations. This suggests that the SIA studies have had little direct influence on negotiating positions.

This conclusion is consistent with the outcome of the Hong Kong ministerial of the WTO in December 2005. No agreement was reached, other than to continue discussions, which themselves reached an impasse in July 2006. Efforts to revive the process have entailed reducing the extent of trade liberalisation under negotiation to be considerably less ambitious than originally proposed. This outcome is compatible with the findings of the SIA studies, which indicate that in the absence of effective mitigation and enhancement measures the original proposals offer only small gains with potentially large adverse effects. Negotiating positions on the WTO Doha agenda have moved toward less ambitious proposals, not as a direct response to the SIA findings, but because of limited progress in the negotiations.

In the case of the EMFTA there is evidence that the impact of the studies on EU policy making may have been somewhat greater, primarily through the attention received in Parliament. The Euro-Mediterranean Parliamentary Assembly Resolution on Economic and Financial Issues, Social Affairs, and Education (21 November 2005) was formulated ‘having regard to the Executive Summary of Phase 2 of the Sustainability Impact Assessment Study of the Euro-Mediterranean Free Trade Area’ (Euro-Mediterranean Parliamentary Assembly 2005, 2). In addition, a parliamentary question was tabled in the European Parliament, which required the EC to react to the findings of the SIA.

The SIA for the EMFTA is one of the more recent studies, timed to coincide with the preparations for the 10th anniversary ministerial summit of the Euro-Mediterranean Partnership. Many of the actions agreed at the summit address specific issues that were identified in the preliminary consultation draft of the SIA report, as detailed in the final report (SIA-EMFTA Consortium 2006). This suggests that the SIA might have had some indirect influence on the outcome of negotiations, arising primarily through the public dialogue on findings and its contribution to the influence of civil society groups and parliamentarians in both the EC and its trading partners.

In order to obtain wider evidence of the impact of the SIA studies, a pilot questionnaire survey was undertaken to solicit the views of internal and external stakeholders. The limited number of responses cautions against generalising the results, which are best interpreted as providing an indication of the range and variety of views that a larger and more representative sample might reveal. Responses were received from non-governmental organisations (NGOs), the private sector, and EC trade negotiators and officials, giving both ‘outsider’ perceptions and ‘insider’ judgements informed by experience. In the responses to specific questions no statistically significant difference was identified between the responses of insiders and outsiders. However, differences may be gleaned from the specific comments made. Respondents were asked to consider only those SIA studies with which they were familiar.

In relation to outcomes, the survey asked two questions covering the impact of the SIAs on decision making.

Question A. To what extent has SIA strengthened the integration of sustainable development into trade policy decisions?

Question B. What is your overall impression of the extent to which SIA has influenced decision making in each of the following areas: influence on trade agreement; influence on development aid programmes; influence on EU domestic policy; influence on domestic policy in non-EU countries?

For the first question, 59% of responses considered that the impact was low or very low, on a scale from one to five for very low to very high. Only one respondent gave a score of five, for very high impact. The responses for the second question were similar, indicating particularly low influence on trade agreements or on domestic policy in non-EU countries. They indicated somewhat greater influence on EU domestic policy and development aid programmes. For development aid, 31% of respondents reported a medium level of influence, and 6% a high level. For EU domestic policy 30% of responses ranged from medium to very high influence (10% each), but with 70% reporting low or very low influence. Over 80% of respondents thought that the influence on trade agreements or non-EU domestic policy was low or very low.

An indication of respondents’ reasons for these estimates was given by their responses to the questions related to activities and outputs. Nearly 70% of respondents thought that the SIA methodology had improved with the more recent studies, and only one thought that it had deteriorated. While 37% considered that the quality of analysis of the potential economic, social, and environmental impacts was poor, 16% thought that it was satisfactory, and 47% considered it to be good or very good. The responses to all the questions on the consultation process were positive overall, with 78% indicating satisfactory or better, and 50% good or very good. The discussion of mitigation and enhancement proposals and recommendations for policy makers was the weakest element. This was considered to be poor or very poor by 52% of respondents, and satisfactory or good by 48%. None thought that it was very good. A further indication of respondents’ views on the influence of the SIA programme is given by their detailed comments. These are given in Table 3–2.

Table 3–2: Stakeholder Comments on the Sustainability Impact Assessment Process

The stakeholder survey revealed that more still remains to be done to improve the technical and consultative aspects of impact assessments, but a fairly large majority of respondents considered them to be satisfactory or better in most respects. The principal shortcoming identified for the assessments themselves related to the relevance and specificity of the recommendations for mitigation and enhancement. As identified by one of the trade officials, many of the recommendations require non-trade interventions with separate financial and political implications. These are outside the remit of negotiators, and therefore cannot directly influence the negotiations. Others are fairly general and identify issues that negotiators should take into account, without specifying the details of any agreement they should reach. Since the issues are mainly social or environmental, while negotiators are concerned primarily with particular economic gains and losses, it is not clear how they can respond to this type of advice.

These shortcomings identified in the technical aspects of the SIA are consistent with the more general shortcomings identified by respondents, concerning a lack of integration of the studies into trade negotiations and linked policies. This is related to the institutional and political context in which negotiations are conducted and SIAs are undertaken. As noted above, there are significant tensions between an impact assessment process that evaluates impacts for all trading parties and a decision-making process based on negotiation between those parties. This difficulty is compounded by the introduction of social and environmental issues into negotiations that focus primarily on specific economic gains and losses.

Some of these tensions have been eased with the a new generation of studies. The EC has moved away from a philosophy in which the SIA is undertaken as in independent evaluation toward playing a stronger role itself in leading the assessment, and in defining specific issues for which better information is needed. To this end there is a steering committee for each SIA, whose members include trade negotiators for the relevant sectors and representatives of other departments with responsibilities for environment, social issues, and international development. The process has strengthened the role that SIA can play in helping to coordinate the different interests within the EC. Additionally, the interest generated within the European Parliament has enhanced its role in guiding the EC. As well as informing the negotiations, the SIA studies are intended to induce parallel policy measures in both the EU and its trading partners. Here again the stakeholder survey indicates that the SIA studies have had little influence to date. In general the studies have not revealed major adverse impacts in the EU, and so most of the recommendations for parallel measures relate to domestic policy in developing countries and the support that can be provided through development assistance programmes.

As identified in the survey, it is not expected that the studies will have a major influence on domestic decision making in non-EU countries. No evidence of significant influence has been identified. Stakeholders do not expect major influence partly because of a lack of specificity in the recommendations for mitigation and enhancement, and partly because the studies are neither commissioned by partner country governments nor steered toward the specific interests of their negotiators. In general the prime aims of partner country negotiators are to secure greater access for their exports and to minimise the concessions they have to make. In doing so they aim to obtain a net economic benefit, which the studies generally show will be small. Adverse social or environmental impacts as identified in the studies are the responsibility of other government departments, which have limited influence on the negotiations.

The greatest influence on parallel policy measures is expected to occur through EU technical assistance. For example, the study for the forestry sector in the WTO added greater weight to international action already being taken to strengthen forest governance, although there is no clear evidence that the policy was significantly changed by the SIA findings. Most of the SIA recommendations for technical assistance are uncontroversial, and assist primarily in identifying priorities. The greatest influence is expected for regional trade agreements. The number of countries involved is smaller than for WTO negotiations, allowing a greater degree of specificity in the SIA findings and recommendations. Also, regional trade liberalisation may be conducted within a wider framework of regional cooperation, allowing trade issues to be considered alongside non-trade issues. The stakeholder survey did not reveal any clear evidence of policy change at this stage. However, a new generation of SIAs have made more detailed recommendations for development assistance.

Barriers to Policy Influence and Possible Future Developments

The broad programme is an ambitious effort to strengthen the evidence base of trade policies and steer them toward sustainable development. Success to date has been limited. While there are signs that the programme has led to a heightened awareness of the potential impact of trade negotiations and has influenced decision-making processes within the EU, this has yet to feed through to significant changes in trade policy.

Many of the studies have shown that appropriately designed trade reforms have the potential to make a significant contribution to development, and, with appropriate parallel measures, can do so in an environmentally sustainable manner. It has, however, proved extremely difficult to realise these goals through the existing trade negotiating process. The Doha agenda did not change the multilateral process, only its stated goals. Multilateral trade negotiations are not designed to deliver sustainable development. Their purpose has always been to maximise gains and through a process of give and take, and move toward freer trade. To give real life to the development component, it may be necessary to reform the negotiating process itself.

Typically, the SIA studies show that global impacts on climate change and biodiversity loss are adverse, with many local adverse environmental impacts that are not cancelled out by the beneficial ones, and significant social impacts that include losers as well as gainers in many countries. The losers are often the most vulnerable groups. Trade negotiators, individually and collectively, are not responsible for these issues. They are given little specific information on how they should handle them, if at all, even when relevant information is made available. Their prime aim is to achieve market access gains, within the constraints placed by the government’s overall policy. They are not responsible for delivering the MDGs, nor do they have the competence to do so. They operate instead on the broad assumption that trade liberalisation, in any form, will help to deliver these goals, and that adverse impacts will be countered through the expected economic gains. This assumption is not borne out by the SIA studies. The current impasse in multilateral trade negotiations, and corresponding difficulties at the regional and bilateral level, may be taken as both an opportunity and an incentive for governments to re-evaluate the role of trade in contributing to wider goals and to adapt the policy-making process accordingly.

The SIA techniques may be able to contribute in two ways. First, although the findings of the multi-country studies have tended to be insufficiently specific to influence policy in developing countries, they have highlighted areas of concern that may be studied in more depth using similar methods by each country individually. The United Nations Environment Programme (UNEP) is undertaking a programme to build capacity in developing countries to undertake integrated impact assessments of this nature, with the support of the EC. An expansion of such assistance may be particularly beneficial for countries that do not have the capacity to support their negotiators with detailed assessments of the impacts of other countries’ proposals, or of their own proposals. However, while this would assist developing country negotiators in some respects, it would not remove the problem that the negotiations revolve primarily around the interests of key economic actors in each country, with little attention paid to social and environmental issues, even when information is available.

To help address this fundamental disconnect in the trade negotiation process, transparent multi-country SIA studies as undertaken for the EC might make a larger contribution if undertaken on behalf of the wider international community, rather than being commissioned by one of the main negotiating parties. Such studies might for example be commissioned jointly by a group of international bodies (such as UNEP, the United Nations Development Programme [UNDP], the International Labour Organization [ILO], the World Health Organization [WHO], the United Nations Industrial Development Organization [UNIDO], and the United Nations Conference on Trade and Development [UNCTAD]), with a joint steering committee similar to those introduced by the EC, and with the WTO and other international bodies such as the World Bank and the International Monetary Fund (IMF) invited to participate as observers. The findings of such studies would have no mandate to influence the WTO negotiations directly. However, they may carry sufficient weight and credibility in the public arena to influence negotiations indirectly. Similar initiatives may also be taken at the regional level. In the Mediterranean region, for example, the EU and its partner countries have adopted the overarching Barcelona process for regional cooperation and development. This pursues a wide range of development objectives, among which the creation of a free trade area is just one component. In parallel they have developed a Mediterranean Strategy for Sustainable Development. Further refinement of the sustainable development strategy, and its adoption as the defining strategy of the Barcelona process, would allow trade policy to be made subordinate to sustainable development, and steered more strongly toward sustainable development goals. A similar approach might be taken for other regional agreements.

Conclusions

The EU’s programme of ISAs of global and regional trade agreements has presented many challenges. These relate to consultation at the regional or global level, the technical aspects of assessing impacts whose origins lie in complex economic effects, and potential conflicts with local, regional, and global decision-making processes. In all these areas approaches have been developed that move some way toward addressing the issues, but many challenges remain. Many of the studies have shown that the benefits that have traditionally been expected from the static efficiency gains of trade liberalisation are small, and that many of the significant impacts occur through long-term dynamic processes. The analysis of these longer term effects and their interactions with other policy areas is expected to be a key area for future developments in trade impact assessment.

In respect of the two specific policy episodes examined, the influence of the SIA programme has been limited. At the regional level of the EMFTA there are indications that the SIA findings may have had some influence on the negotiations, via representations from civil society organisations and from parliamentarians in the EU and partner countries, rather than through any observable change in Europe’s negotiating position. At the multilateral level of the WTO Doha agenda negotiating positions have moved toward less ambitious proposals, because of limited progress in the negotiations rather than in response to the SIA findings.

This limited influence is associated with potential conflicts that have been identified between the impact assessment process and the decision-making process. While some of these have been satisfactorily resolved, attention needs to be paid to the decision-making process itself in order to better address the most significant regional and global issues that have been identified in the assessments. Most trade agreements have adopted sustainable development as a goal, but the bodies that negotiate them are not responsible for sustainable development, do not have the competence to define what sustainable development means, and are not subject to the requirements of any other authority except as provided through international environmental law and other mechanisms of regional and global governance. This chapter has identified steps that might be taken to address these limitations at both global and regional levels, which might help to make trade policy more readily steerable toward sustainable development goals.

Finally, the trade impact assessment techniques that have been developed for use by high income countries may prove to be highly appropriate for helping to strengthen trade policy in developing ones. For single country studies the decision-making processes are more straightforward, impacts can be studied in more detail, and recommendations can be made more specific. The integrated assessment of economic, social, and environmental effects, by each country for its own purposes, may be particularly influential in helping developing countries to formulate their trade policy more effectively, and to play a stronger role in international trade negotiations.

References

Aprodev, Begegnungszentrum für Aktive Gewaltlosigkeit, Berne Declaration, Campagna per la Riforma della Banka Mondiale, Centre for International Environmental Law, Center for Environmental Public Advocacy, Eurostep, Fern, Friends of the Earth Europe, Green Alternative, ICDA, International Confederation of Free Trade Unions, KULU Women and Development, Solidar, Solidaridad International, WeltladenDachverband, Women in Development Europe, Weltladen-Dachverband, Werkgroep Globalisering, World Development Movement, and WWF European Policy Office. 2002. Joint NGO statement on Sustainability Impact Assessments of EU Trade Policy. July. Brussels. <trade.ec.europa.eu/doclib/html/122192.htm> [Accessed: January 2008].

Campaign to Reform the World Bank, Friends of the Earth Europe, Greenpeace International, and Women in Development Europe. 2006. Learning Lessons from Sustainability Impact Assessments: The Responsibility of the European Union to Exclude Natural Resources—Forestry, Fisheries, and Minerals—from the WTO NAMA Negotiations. 21–22 March. Brussels. <www.foeeurope.org/publications/2006/NGO_Statement_natural_resources_SIAs_March06.pdf> [Accessed: January 2008].

Commission for Environmental Cooperation. 1999. Analytic Framework for Assessing the Environmental Effects of the North American Free Trade Agreement. Montreal: Commission for Environmental Cooperation. <www.cec.org/programs_projects/trade_environ_econ/pdfs/frmwrk-e.pdf> [Accessed: January 2008].

Euro-Mediterranean Parliamentary Assembly. 2005. Resolution of the Euro-Mediterranean Parliamentary Assembly on Economic and Financial Issues, Social Affairs, and Education. 21 November. Rabat. <libr.sejm.gov.pl/oide/empa/2_rabat_en.pdf> [Accessed: January 2008].

European Commission. 2002. Communication from the Commission on Impact Assessment. COM(2002) 276 final, 5 June. Brussels. <eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52002DC0276:EN:NOT> [Accessed: January 2008].

——. 2003a. ‘SIA of Trade Agreements: Making Trade Sustainable?’ Brussels. <ec.europa.eu/comm/trade/issues/global/sia/seminar.htm> [Accessed: January 2008].

——. 2003b. SIA of Trade Agreements: Making Trade Sustainable? Proceedings of the DG Trade Seminar, 6–7 February. Brussels. <trade.ec.europa.eu/doclib/docs/2006/september/tradoc_130035.11.pdf> [Accessed: January 2008].

——. 2005a. Impact Assessment Guidelines. SEC(2005) 791. Brussels. <ec.europa.eu/governance/impact/docs/SEC2005_791_IA%20guidelines_annexes.pdf> [Accessed: January 2008].

——. 2005b. ‘Sustainability Impact Assessment: FAQs.’ Brussels. <ec.europa.eu/trade/issues/global/sia/faqs.htm> [Accessed: January 2008].

——. 2006a. ‘EU Trade SIA Stocktaking Conference: Agenda and Speeches.’ Brussels. <ec.europa.eu/trade/issues/global/sia/sem0306_prog.htm> [Accessed: January 2008].

——. 2006b. Handbook for Trade Sustainability Impact Assessment. Brussels. <trade.ec.europa.eu/doclib/html/127974.htm> [Accessed: January 2008].

——. 2007. ‘List of Impact Assessments Planned and Carried Out.’ Brussels. <ec.europa.eu/governance/impact/practice_en.htm> [Accessed: January 2008].

——. Directorate General Trade. 2003. Challenges Identified at the Seminar and Replies from the Commission. Following the DG Trade Seminar, 6–7 February. Brussels. <trade.ec.europa.eu/doclib/html/130036.htm> [Accessed: January 2008].

George, Clive, and Bernice Goldsmith. 2006. ‘Impact Assessment of Trade-Related Policies and Agreements: Experience and Challenges.’ Impact Assessment and Project Appraisal 24(4):254–258.

Kirkpatrick, Colin, and Clive George. 2006. ‘Methodological Issues in the Impact Assessment of Trade Policy: Experience from the European Commission’s Sustainability Impact Assessment (SIA) Programme.’ Impact Assessment and Project Appraisal 24(4):325–334.

Kirkpatrick, Colin, and Norman Lee. 1999. WTO New Round: Sustainability Impact Assessment Study, Phase Two Report. Institute for Development Policy and Management and Environmental Impact Assessment Centre, University of Manchester. <www.sia-trade.org/wto/Phase2/frontpage2.htm> [Accessed: January 2008].

——. 2002. Further Development of the Methodology for a Sustainability Impact Assessment of Proposed WTO Negotiations. Institute for Development Policy and Management and Environmental Impact Assessment Centre, University of Manchester. <www.sia-gcc.org/gcc/download/new_method_april_2002_civil.pdf [Accessed: January 2008].

Kirkpatrick, Colin, Norman Lee, and Oliver Morrissey. 1999. WTO New Round: Sustainability Impact Assessment Study, Phase One Report. Institute for Development Policy and Management and Environmental Impact Assessment Centre, University of Manchester, and Centre for Research on Economic Development and International Trade, University of Nottingham. <www.sia-trade.org/wto/Phase1/frontpage1.htm> [Accessed: January 2008].

Lamy, Pascal. 2005. Trade Can Be a Friend, and Not a Foe, of Conservation. Speech at the WTO Symposium on Trade and Sustainable Development, 10–11 October. Geneva: World Trade Organization. <www.wto.org/english/news_e/sppl_e/sppl07_e.htm>[Accessed: January 2008].

NAFTA Environmental Review Committee (Canada). 1992. North American Free Trade Agreement: Canadian Environmental Review. October. Ottawa: Government of Canada.

Organisation for Economic Co-operation and Development. 1994. Methodologies for Environmental and Trade Reviews. OCDE/GD(94)103. Paris: Organisation for Economic Co-operation and Development. <www.olis.oecd.org/olis/1994doc.nsf/linkto/ocdegd(94)103> [Accessed: January 2008].

Royal Society for the Protection of Birds, and Birdlife International. 2003. Trade and Environment: Sustainable Development (and Sustainability Impact Assessments). Sandy, Bedfordshire, and Cambridge. <www.birdlife.org/action/change/trade/sdsia.pdf> [Accessed: January 2008].

SIA-EMFTA Consortium. 2006. Sustainability Impacts of the Euro-Mediterranean Free Trade Agreement: Final Report on Phase 2 of the SIA-EMFTA Project. Impact Assessment Research Centre, University of Manchester. <www.sia-trade.org/emfta/en/Reports/Phase2FinalreportMar06.pdf> [Accessed: January 2008].

Solidar. 2005. Trade for Decent Work, Decent Life: Assessment before Agreement. Statement for the 6th World Trade Organization ministerial, Hong Kong.

SUSTRA. 2003. Sustainability Impact Assessment: Policy Brief Paper. Based on the SUSTRA seminar on “Sustainability Impact Assessment, 26–27 April 2003, Center for Philosophy of Law (CPDR), Université catholique de Louvain, Louvain-la-Neuve. Montellier. <www.agro-montpellier.fr/sustra/publications/policy_briefs/policy-brief-sia-eng.pdf> [Accessed: January 2008].

United States Trade Representative. 1993. The NAFTA: Report on Environmental Issues. Washington DC: Office of the United States Trade Representative.

WWF. 2002. Changing the Balance of Trade: A Seminar on Sustainability Assessments of EU Trade Policy. 9-10 July. Brussels. <www.panda.org/downloads/policy/july2002 balancedtradeproceedings_mt0n.doc> [Accessed: January 2008].

Appendix 3–1: European Union Sustainability Impact Assessments

Sustainability Impact Assessments before 1999

Initial development of SIA methodology (Kirkpatrick et al. 1999)

• Overview SIA (IARC)

World Trade Organization’s Doha Development Agenda

Further development of SIA methodology (Kirkpatrick and Lee 2002)

• Preliminary Overview SIA (IARC consortium)

• Sector studies

– Agriculture: Major food crops (Stockholm Environment Institute)

– Non-agricultural market access: Textiles and clothing, non-ferrous metals, pharmaceuticals (Overseas Development Institute/IARC)

– Competition policy (British Institute of International and Comparative Law/World Trade Institute/IARC)

– Environmental services (Cordah/Westlake/IARC)

– Distribution services (International Trade and Services Policy/IARC)

– Forests (Savcor Indufor/IARC)

– Agriculture: General (Overseas Development Institute/IARC)

– Fisheries (Natural Resources Institute/IARC)

• Final Overview SIA (IARC)

Regional Sustainable Impact Assessments

• European Union–Gulf Cooperation Council (PriceWaterhouseCoopers)

• European Union–African, Caribbean, and Pacific countries (PriceWaterhouse Coopers)

– overview SIA

– sector/sub-region SIAs

• European Union–Chile (Planistat)

• European Union–Mercosur

– overview SIA (Planistat)

– sector/sub-region SIAs (Impact Assessment Research Centre consortium, in progress)

• Euro-Mediterranean Free Trade Area (SIA-EMFTA consortium/IARC)

– overview SIA

Sector/Sub-regional Sustainable Impact Assessments

• In progress

Note: IARC = Impact Assessment Research Council, University of Manchester; EMFTA = Euro-Mediterranean Free Trade Area; SIA = Sustainability Impact Assessment.

This page intentionally left blank

PART TWO
INSTRUMENTAL CHANGE, OPERATIONAL RESEARCH

This page intentionally left blank

CHAPTER FOUR
THE CASE OF ARGENTINE RESEARCH IN BUILDING REGIONAL INTEGRATION

Mercedes Botto and Andrea Carla Bianculli

By the mid 1980s, the Argentine government had launched a process of trade liberalisation that would not be reversed in the future. This decision was framed within the political guidelines—conditionalities— demanded by the World Bank in order to release the loans the country needed to manage its foreign debt difficulties. However, within these broad guidelines, Argentina, as was the case with borrowing countries in general, still had ample freedom of action in terms of both strategic and contingency decisions, as when deciding to opt for either a unilateral liberalisation process or a negotiated one, when privileging a project involving deep integration or mere trade initiatives, or when choosing to establish bilateral agreements with border or with northern countries. In sum, options were not limited.

The novelty and complexity of each of these definitions opened a window of opportunity for the influence of knowledge and academic research. Through their participation in the decisional process, academics could bridge the gap in terms of the uncertainty posed by these new challenges and make a contribution to prevent or avoid the unwanted costs of the reforms, such as those brought about by trade liberalisation.

Political and academic literature has strongly debated the impact of ideas on the decisional process since the early days after the Second World War. Two paradigms have emerged. While the first approach argues that social researchers play a crucial role in the rationalisation of the decision-making process, the second one, which assumes a rather sceptical vision of this relationship, portrays the decisional process as chaotic and decisions as being the result of mutual adjustments among the different actors and arenas. Using this second paradigm, this chapter claims that researchers are only one of the agents involved in the decision-making process, endowed with a specific type of knowledge— namely, scientific knowledge—and their influence depends on their rivalry or connection with the knowledge of other local actors.

The chapter thus evaluates to what extent social research has influenced the trade policy-making process since the re-establishment of democracy in Argentina in 1983, highlighting the factors that promoted the impact of such studies on trade policy. Hence, this research emphasises those least-known or least-publicised aspects of the trade policy by focussing on the processes, actors, and capabilities that have had an impact on decision making.

Building on the current debate about the nexus between knowledge and politics, this chapter analyses two processes of influence. The first, which can be characterised as a successful case, refers to the establishment of the capital goods protocol (CGP) signed with Brazil during the initial period of tariff preferences negotiation (1985 to 1988) and part of the Programme of Economic Cooperation and Integration (Programa de Integración Comercial y Económica [PICE]). The second episode, by contrast, is portrayed as a failed case: the negotiation of the common external tariff (CET) between 1991 and 1994, where, in spite of the technical complexity of the issue at stake, research and knowledge did not have a prominent role in the decision-making process.

Apart from focussing on these two policy episodes and inquiring about how research has contributed to their actual implementation, this analysis is intended to identify the type of knowledge produced, the articulation established with policy makers, and the factors that either promoted or hindered its use in the policy process. The information and data presented are based on secondary sources and the analysis of 18 interviews conducted with policy makers and researchers in the field of foreign trade, representing both private and public research centres, and who were directly involved in the process under the administration of either Raúl Alfonsín (1983–89) or Carlos Menem (1989–99), or both.

This chapter is structured in four parts. The first identifies the contributions to the literature in terms of the conceptual and methodological definitions. The second and third sections delve into the analysis of both episodes of policy change and focus on the research-policy relationship. The fourth section offers a comparative assessment of the field research and an initial impact evaluation. Finally, the conclusion presents the main lessons derived from both cases.

Literature Review and Concept Definition

Interest in the role of ideas and academics in the decision-making process is not new, and the impact of ideas on the decision-making process has been strongly debated in the political and academic literature since the post-war period. Two main paradigms can be identified regarding the role of social researchers—taken as knowledge producers—in the public decision-making processes (Brunner and Sunkel 1993).

The first of these paradigms, the engineering model of information use, which is part of the policy-making theory developed during the 1950s in the United States, promotes a favourable attitude toward social and political engineering. Its main argument is that researchers play a fundamental role because they provide the necessary knowledge and instruments for the rationalisation of the decision-making and coordination processes. In other words, they provide the empirical evidence that clarifies doubts and reduces the uncertainty brought about by policy reform. Four phases are identified, on the assumption that the decisional process is linear and incremental. In each of these phases, one main actor is responsible and stamps its own activity specificities and particular characteristics on the process.

While this first approach argues that social researchers play a key role in the rationalisation of the decision-making process, the second paradigm assumes a rather sceptical vision and characterises the decisional process as mainly chaotic. From this perspective, decisions are the result of mutual adjustments among different players and the diverse arenas where they interact. Within this ‘building blocks’ game, researchers are just another player, endowed with a very specific type of knowledge—namely, scientific knowledge—and their influence depends on their interaction with the knowledge of other local actors.

The engineering model of information use, which argues that the produced information fits into the decision to be made, has thus been superseded by an approach based on the idea that there are multiple decision-making arenas and that various actors are involved in this game, endowed with only partial information and local knowledge. These actors include social researchers and academics, whose knowledge—based on scientific rules—is only one of the many competing sources of information. However, arguments are put forward in the sense that only in exceptional cases does empirical research produce a direct, instrumental, and clearly identifiable impact on the decision-making process. On the contrary, in most cases, the decisional process is diffuse and lacks a concrete order of stages; in fact, routine governs. Hence, if research and information do have an impact, it is only indirect. This is what has been called ‘the enlightenment function of research’ (Weiss 1977), which illustrates the idea that knowledge gained by means of research provides a diffuse enlightenment function and broadens the existing knowledge base of policy makers. As long as it offers an understanding and interpretation of the data and the situation that are critical to the policy decision, research may lead to a gradual shift in concepts and paradigms. In other words, Carol Weiss’s (1979) enlightenment model highlights the role of research as clarifying, accelerating, and legitimising changes in conceptual thinking and, therefore, in policies.

When social research influences the decisional process, this is because it is just another knowledge or area of expertise. Moreover, this influence takes place in decision-making arenas already informed by other kinds of previous local knowledge—i.e., partial information, anecdotes, and accumulated experiences and practices, among others—used by the wide range of players involved in the process as soon as they implement their own strategies. Within this context, social scientific knowledge can have some limited influence on the decision-making process only by establishing competition with previously provided local knowledge and information. In most cases, the influence of research may lead to the construction of a framework consisting of empirical generalisations and ideas that can then be absorbed by policy makers in a rather unconscious manner.

The second research paradigm appears to be more realistic than the first. Based on the idea that knowledge and academia diversify rapidly, it argues that it is difficult to identify ‘social researchers’ as a clear and homogeneous social and professional group. Their specificity is not given by their belonging to a particular institution such as university. Instead, it is their experience and technical knowledge on certain issues that determine their specific character (Restier-Melleray 1990, 546).

In terms of the scope of this research, three concepts require a more precise definition: academia, policy change, and research influence.

Certainly, academia may be an elusive concept. The analysis in this chapter, with its focus on the influence of local academia on trade policy decisions, will revolve around the production—knowledge—of local academia, rather than on the ideas and findings produced by epistemic communities as defined by Peter Haas (1992). Academia operates as an actor, whose peculiarity is the production of knowledge according to rules, evidence, and positive—empirical—and scientific criteria, based on measuring and contrasting.

The general working definition here is based on a broad characterisation of academia, rather than on the idea that academia belongs or is confined to a specific ambit or production place, such as university. Clearly, this type of knowledge is currently quite dispersed across diverse circles, and academics are increasingly being appointed as service providers by other actors and institutions. Thus, in order to apprehend the concept of academia, the main changes in terms of its area of action and activities must be made explicit. As far as the area of action is concerned, and in the context of trade policies, academics can now be found within think tanks and as consultants and experts in the broader social and political community: ministries of the economy and foreign affairs and different public agencies, parliament, business sectors, domestic and international non-governmental organisations (NGOs), as well as international organisations, among others. In terms of their activities, the traditional characterisation of social research seems inadequate in the face of the new challenges imposed by policy making today. In this sense, Robert Reich’s (1991) concept of ‘symbolic-analytical services’ turns out to be of great utility, given that it includes a whole set of activities regarding the identification, solution, and arbitration of material problems and disputes by means of the manipulation of knowledge.

In sum, a vast amount of academia revolves around the notion of ‘actorness’, both in the private field and in the public field. However, within the realm of academic and scientific research, the information and knowledge that are produced to influence on public policies is of concern here.1 The focus is on policy-oriented intellectual and academic production. This leads to a second key concept in the analysis.

Policy change refers to the particular ambit or context where the impact of academic research is actually measured. Here the analysis will rely mainly on the categorisation put forward by different authors who distinguish between instrumental and conceptual changes in policy (Caplan 1979; Chudnovsky and Erber 1999; Davies et al. 2005; Neilson 2001; Weiss 1991). Building on this literature, the impact of academic research may be either instrumental or conceptual.2 Instrumental changes are brought about by small and incremental transformations in policy issues and practices. Clearly associated with micro-level decisions, these changes are limited to the day-to-day policy issues and are

1 See the concept of post-academic research in the introduction of this volume.

2 To learn more on the difference between instrumental and conceptual policy changes, please see the introduction of this volume.

mainly concerned with ‘bureaucratic management and efficiency rather than substantive policy issues’ (Caplan 1979, 462). On the contrary, conceptual changes lead to more gradual shifts in terms of policy makers’ knowledge and understanding of certain issues, and are related to macro-level decisions involving key policy matters.

Nevertheless, this distinction must be understood as an ideal type because reality is often far more complex and changes to policies may fall somewhere on this spectrum (Tussie 2006). Moreover, in most cases, the impact of research and information on the policy process is indirect. Here, the diffuse enlightenment function of research turns out to be of interest in order to overcome the idea that policy makers only resort to research and academia in an instrumental manner—to apply data, statistics, and facts to their policy decisions—and to highlight that knowledge or research utilisation is built on a gradual shift in conceptual thinking over time. Nevertheless, this broad double categorisation offers an appealing departure for the examination of both episodes of policy change.

Assuming that research is only one of the many competing sources of information policy makers can make use of, and one of the various factors that affect the final policy decision (Garrett and Islam 1998; Tussie 2006), this chapter argues that the availability of research and ideas does not translate directly into policy change. In other words, the research-policy link is not direct, and ideas only influence policy decisions under certain circumstances. In order to capture those circumstances, it is important to understand how the production of research and the policy process interact in a particular context. Specifically, policy influence is defined here as the result of a process where three conditions must be present: the availability of research or the ‘production of knowledge’, its articulation with the stakeholders and mainly with decision makers, and, finally, the political will of decision makers to make use of it.

Building on the current debate regarding the nexus between research and policy making, and the factors that contribute to this relationship, this chapter analyses two episodes of policy change within the Mercado Común del Sur (Mercosur) and the integration process initially launched by Argentina and Brazil: the CGP, signed within the PICE in 1987, and the CET established in 1994. The selection of these cases is based on the importance of both decisions within the broader process of trade liberalisation initiated by Argentina in the mid 1980s. While the CGP stands out as the first step toward liberalised trade between Argentina and Brazil—although that liberalisation remains a negotiated and highly controlled opening intended to constitute an agreement of economic complementarity—the negotiation of the CET implies a crucial move toward the establishment of the customs union within Mercosur. In addition, the CET constitutes a fundamental decision. On the one hand, it worked as a lock-in device, limiting the governments’ autonomy in terms of their domestic trade policies. On the other hand, it complemented internal trade liberalisation while, at the same time, moved toward reducing Mercosur external barriers. Furthermore, both decisions were taken by two different governments: whereas the first democratic government led by Alfonsín signed the PICE, the CET was established by the following administration, headed by Menem.

The next two sections explore the research-policy relationship regarding the design and implementation of the CGP and the CET, taking into account three conditions: the existence of research, its articulation with policy makers, and the political will or at least the possibility of putting this research into practice or the possibility of its utilisation. Based on the assumption that the research-policy relationship is neither linear nor automatic, and that it entails a highly complex and dynamic two-way process (Tussie 2006), these case studies focus on two particular instances of policy change to deepen the understanding of the dynamics of the political process and assess the importance of the different factors that have contributed to these instances of policy change.

A First Move toward Trade Liberalisation:
Alfonsín and the Capital Goods Protocol (1987–89)

In the mid 1980s, and after having implemented an inward-oriented development model for more than 50 years, Argentina began slowly but steadily to open its economy to international trade through the promotion of multiple strategies that combined unilateral opening and trade negotiations both at the regional and multilateral levels.

During the initial phase of the first democratic government led by Alfonsín, strict austerity and market-liberalising measures were resisted. In time, this resistance would be superseded by a different vision. In 1985, the newly designated Ministry of Economy, led by Juan Sourrouille, launched the Plan Austral, an economic programme that called for restructuring public companies and liberalising trade. Nevertheless, the decisive and final implementation of trade liberalisation as a unilateral policy started only in 1988. Two factors explain this. The first refers to the so-called Canitrot Reform, and the second to the relationship between Argentina and the International Monetary Fund (IMF) and the World Bank, which would play a more definitive role in shaping the reform policy in Argentina, particularly in terms of trade policy, public sector reform, and privatisation. Moreover, the discussions with the World Bank gave the economic team and policy makers a solid argument to convince the private sector of the need to move toward trade liberalisation and to overcome their opposition.

It is in this context that the PICE was established in 1986. Together with the Integration, Cooperation, and Development Treaty of 1988— both signed by the presidents of Argentina and Brazil, Raúl Alfonsín and José Sarney—these two agreements can be seen as the bedrock of the future Mercosur agreement. Based on gradual mechanisms that would be implemented in successive stages, allowing thus for adjustments, the PICE was intended to promote intra-industry trade between Argentina and Brazil and the overall expansion of bilateral trade, without inducing inter-industry specialisation. Sectoralism was a key principle of this initiative. The PICE entailed the negotiation of sectoral agreements to stimulate bilateral trade on the grounds of complementarity and political symmetry, to foster changes in the efficiency of production in key economic sectors through the expansion of bilateral investment flows, and to promote cooperation in areas of critical importance for joint economic development.

Academic Research

The initiative to sign a programme of strategic cooperation and commercial integration was basically of a political nature.

When newly elected president Alfonsín asked both Dante Caputo, the minister of foreign affairs, and Oscar Romero, the undersecretary of international economic relations, to develop an integration project with Brazil, his aim was to put an end to the traditional hypothesis of conflict cultivated between both countries over time. Certainly, regional integration initiatives were not new, but this bilateral initiative was intended to go beyond previous experiences. Apart from the idea of overcoming this old conflict hypothesis, three elements appear to have converged in the mid 1980s to produce a major change in the political and economic environment. In the first place, the processes of political transition and return to democratic rule, with institutional reorganisation in Argentina (1983) and Brazil (1985), created new incentives to redress the bilateral relations. Second, the macroeconomic and regulatory crisis of Argentina and Brazil clearly showed that the development model based on high protection and state intervention was already exhausted. Third, in an international context marked by the expansion of the forces of globalisation and the deepening of the multilateral system, regionalism initiatives appeared to be useful instruments for avoiding marginalisation and, at the same time, enhancing their voice in the international arena. In sum, this initial plan sought mutual economic cooperation as a means to improve bilateral relationships, foster economic growth in the region, and promote a new positioning of the two countries in the international arena. In terms of the type of decision at stake, it is clear that the agreement between Alfonsín and Sarney implied a paradigm change.3

During this first commercial integration initiative, the debt crisis of 1982 played a key role: it promoted closeness between the governments of Argentina and Brazil. Even if the debt crisis and the international financial institutions—the IMF and the World Bank—clearly demanded the initiation of a process of trade liberalisation and the reform of the highly distorted tariff systems, the government opted for a process of deep integration, which, in terms of trade liberalisation, entailed a minimum and negotiated opening with Brazil. The aim was to privilege the development of a productive project.

According to the main actors involved in the process, this option was inspired by the European experience, which appeared as a successful case of regional integration, and by the lessons derived from the failure of previous integration experiences, such as the Latin America Integration Association (LAIA). This is clearly expressed by Carlos Bruno, undersecretary of economic integration, who argued that ‘if we try to develop a model of multilateral integration—such as that of LAIA—we will just develop the minimum common denominator of what we can build together. . . if—on the contrary—we choose those countries we consider to be the most dynamic ones—Argentina and Brazil—and we attempt to design a model of integration based on certain sectors of their economies, we will develop a model with a great degree of

3 Interview with former undersecretary of integration and Mercosur, Ministry of Foreign Affairs.

internal dynamism, and this is the key difference in terms of the traditional model’ (cited in Campbell 1999, 74).

Both the origin and evolution of this first approach to an integration project with Brazil were surrounded by worries mainly over the damages brought by the association in Argentina given the existing structural asymmetries between the new partners, derived from Brazil’s long process of sustained industrialisation during the 1960s and ‘70s. In order to face these fears, the process would be guided by the idea of gradual integration, through selective and joint projects, advancing at different speeds. Thus it was expected to promote industrial and trade complementarity within each of the sectors, minimising the negative effects on both economies and inducing specialisation in certain lines of production (Lavagna 2001). In terms of the negotiation procedures, the consensus was to adopt a selective scheme, by means of ‘positive lists’ that specified where commitments were made, rather than making broad commitments and listing exceptions. In addition, an integration process based on gradual schedules and flexible negotiation mechanisms was initiated.

Within this model of deep integration, the capital goods sector was chosen as the ‘star’ of the PICE.4 Given the economic situation of the mid 1980s and the existing structural asymmetries between the economies of both Argentina and Brazil, this sector presented some comparative advantages, just as the European Coal and Steel Community—where those sectors producing basic inputs—represented the first major step toward integration in Europe. In the first place, the capital goods sector was the most dynamic sector of global industry and trade. Second, it could have a multiplying effect throughout the productive

4 The basic components of the PICE included 24 sectoral protocols, signed between 1985 and 1990, which specified the customs categories to which the agreement was to be progressively applied. Initially, there were only 12 protocols. Ten covered economic sectors, such as capital goods, food, wheat, and the iron, steel, and auto industries. The other two had to do with the nuclear industry and aeronautics cooperation. While seven protocols sought to boost bilateral trade in specific sectors—capital goods, wheat, iron and steel, automotive industry, food industry—two more general protocols were intended to promote trade expansion and the complementarity of the food supply. In 1988, there would be 22 protocols in all, and in 1989, there would finally be 24, including issues regarding trade and trade-facilitating measures, scientific and technological development, and infrastructure development, among others. Annexes to each protocol established the list of specific items subject to tariff reduction. All 24 protocols were targeted to expand trade, encourage bilateral investment flows, foster cooperation in areas such as nuclear energy and biotechnology, and facilitate transportation.

structure. Third, it employed a highly qualified labour force. In addition, both countries had a high deficit in this sector, especially Brazil, which at the time was compelled to import from third countries. For Argentina, this represented a unique opportunity because these sectoral agreements would entail the initiation of a process of rapid industrialisation, after the deindustrialisation led by the economic plan headed by former minister of economy José Martínez de Hoz (1976–81). In sum, within these national and regional contexts, the capital goods sector was considered strategic because, in the long term, imports of capital goods would prompt an increase on the productivity of the economy, expanding exports, and fostering growth.

From an intellectual point of view and in terms of the debate that led to the liberalisation process of capital goods and the elimination of non-tariff barriers, the Economic Commission for Latin America and the Caribbean (ECLAC) provided a key report, which was the basis for the PICE.5 Two main reasons account for this.6 In the first place, and given that most of the members of the economic team had been trained at ECLAC, they shared many of the assumptions and paradigmatic guidelines promoted by this regional organisation. In the second place, and especially regarding the country office in Buenos Aires, ECLAC’s experts had undertaken industrial policy as an important area of research.

The private sector was also involved in the design of the macro proposal, but it did not present any concrete written document on the final text of the CGP. Business participation was induced by the government as a way of preventing conflicts and technical difficulties within both administrations. The summoning was immediate after Argentina and Brazil gave the first step toward regional integration, by the end of 1985.

Indeed, at the presidential meeting that took place in Foz de Iguazú in November 1985, Argentina and Brazil agreed to establish a high-level bilateral commission. Composed of government and private sector

5 ECLAC was established in 1948 as one of the five regional commissions of the United Nations. Aimed at contributing to the economic development of the region, reinforcing economic relationships among the countries, and promoting social development as well, it had a leading role during the 1960s and ’70s, when the region experienced a profound and diverse move toward regionalism. This trend was mainly influenced by ECLAC’s philosophy and the ideas of its first secretary general, the economist Raúl Prebisch.

6 Interview with Chief of the Office in Buenos Aires, ECLAC.

representatives, this commission was intended to discuss and launch the bilateral integration process. Oscar Romero recalls that this decision was based on the fact that ‘the integration process design and the design of the concrete solidarity scheme between both countries, should not be developed at the grey desk of a bureaucrat or political official; instead this should result from the participation of real actors or economic agents. Both presidents decided to include the most representative private agents, businessmen and business groups from both countries, so that they would not protect the apples, the rice or the meat, but instead would be the individuals capable of helping in the design of the bilateral relationship that we so much needed’ (Campbell 1999, 65).

Once the CGP had been signed, governments embarked in the difficult task of compiling the positive lists of the products and items to be liberalised. This implementation phase involved the direct participation of an external expert, especially appointed by the Argentine government, given the lack of technical knowledge and expertise in this particular area. Only a reduced number of companies, from some highly concentrated sectors and oligopolies (namely, the iron and steel industry and the petrochemical industry), counted with this extremely specialised information and expertise since they had also been part of the negotiations carried out for both the Latin America Free Trade Association (LAFTA) and LAIA. However, these sectors were not included in the agreement.7

Daniel Chudnovsky, an academic with no previous experience in public administration, was then appointed for the implementation of the CGP. Chudnovsky’s designation was intended to fulfil two crucial goals, apart from drawing up numbers and comparative statistics regarding the situation of the capital goods sector in Argentina and its potential complementarity with Brazil: to advise policy makers during the negotiations and to persuade producers in the machine tools industries about the feasibility of a productive complementarity agreement with Brazil.8

Persuading business groups was not an easy assignment since the positive lists prompted serious fears among Argentine manufacturers, who were concerned by the larger size and greater competitiveness of Brazilian producers (Chudnovsky and Erber 1999). In fact, it demanded an active

7 Interview with researcher, Centre for International Economics (Centro de Economía Internacional [CEI]) at the Ministry of Foreign Affairs.

8 Interview with former director, Centre for Research on Transformation (Centro de Investigaciones para la Transformación [CENIT]).

role and effort to put across these groups the differences between this new integration scheme and the unilateral liberalisation implemented during the 1970s, which had had a terrible and devastating impact on these industries.

With funding provided by the World Bank, the project developed by Chudnovsky entailed the elaboration of positive lists of those items and products that Argentina would offer Brazil during the final round of negotiations. These products would be marketed with a zero tariff and would be free of any non-tariff barriers by January 1987, after the entry into force of the CGP. The final composition of these positive or common lists was determined by the participation of different domestic manufacturers and the acceptance or refusal of each partner’s proposal.

Research-Policy Articulation

As already mentioned, both the idea of promoting a closer relationship with Brazil and the actual first negotiations were articulated inside the Ministry of Foreign Affairs. During this initial stage, negotiations and discussions were mainly political in nature, and handled by the Ministry of Foreign Affairs. Capitalising on the presidential political discourse and mandate, which urged close ties with Brazil and the removal of the old conflict hypothesis from the bilateral relation, policy makers within this ministry—namely, Oscar Romero and Carlos Bruno, undersecretary of international economic relations and undersecretary of economic integration, respectively—decided to promote a trade agreement between both countries. When asked about the initiation of this process, one of the academic respondents commented that public officials ‘got together as if they were spies organising a command attack, away from the noise; the idea was so awkward that they could not get together in a meeting room as it happens today . . . the whole process remained as highly informal. During this first stage, the Ministry of Economy knew nothing about this project; it was mainly focussed on the debt and inflation problems.’

However, in 1985, during the definition of the final design and concrete implementation of the initiative, the Ministry of Economy was assigned the whole responsibility for it. Two reasons explain this decision: the articulation with the private sector and the technical issues at stake. Indeed, Chudnovsky, the secretary of industry, and his political counterpart, Jorge Campbell, the undersecretary of foreign trade, launched a round of meetings with different sectoral chambers, especially with the Association of Metal Industrialists of the Argentine Republic (Asociación de Industriales Metalúrgicos de la República Argentina [ADIMRA]), and different individual industries.

Subsequently, the Ministry of Economy would increasingly take the lead in the initiative. Nevertheless, this new situation did not create mistrust in the Ministry of Foreign Affairs, and did not give way to a duplication of efforts. In fact, Juan Sourrouille and Dante Caputo, the heads of both ministries respectively, were deeply involved in the process. They worked on the project on a team basis, and shared the same vision and idea regarding the integration process with Brazil.9 This personal connection would also be strengthened by the interministerial coordination achieved after the parliamentary elections of 1985, which reinforced President Alfonsín’s leadership in Argentina. In turn, this would lead to the incorporation of an important number of officials and technical experts in the Secretary of Industry and Foreign Trade (Secretaría de Industria y Comercio Exterior [SICE]), who were deeply committed to the integration process with Brazil. This project was regarded as a possible main motor of the trade liberalisation scheme, or even as a means of positive adjustment. In sum, by the end of 1985, an interministerial taskforce was already in place. It relied on direct access to the highest political officials and policy makers, and its main objective was to promote the technical issues on the negotiating agenda. This taskforce was assisted and complemented by the private sector, which was acting in the shadows and was led by the so-called ‘captains of industry’.10 Nevertheless, this idyllic relationship would not last long, coming to an end in 1987 when Roberto Lavagna and his team left the SICE and were replaced by Beatriz Nofal, after the defeat of the Radical Party in the 1987 legislative elections.

9 Interview with former undersecretary of international relations and president, CENIT.

10 At the same time, although showing greater confidentiality, an informal working and advice group was created with these so-called captains of industry in order to gather their political endorsement to the initiatives. Later on, this same group would form part of the mixed commission. The ‘captains of industry’ was the name given to the economic groups that grew as state suppliers, and which, as detailed by Jorge Campbell (1999, 110), included the following business representatives: Jorge Haieck (SOCMA), Eduardo Braun (ASTARSA), Ricardo Zinn (SEVEL), Guillermo Livio Kühl (SAAB—Scania), Jaime Núñez (BAGLEY), Vittorio Orsi (SADE), Miguel Roig (Bunge y Born), Carlos Bulgheroni (BRIDAS), Carlos Tramutola (Propulsora), Alberto Hojman (BGH), and Sebastian Bagó (Laboratorios Bagó).

Based on the suggestions and proposals presented by the different chambers and industrial sectors, Chudnovsky elaborated the final positive lists on national capital goods. In those cases where consensus could not be achieved among two or more chambers producing the same product or item, the government would directly eliminate it from the final common lists, given that there were no adequate instruments to perform a technical evaluation of the competitive situation of the different products, thus revealing the government’s lack of capability to avoid conflictive situations (Chudnovsky et al. 1987). This would result in a quite different dynamic from the one originally proclaimed in the PICE: the promotion of intra-industry restructuring and specialisation. On the contrary, the common lists that had been agreed upon at the national level would only allow for the promotion of trade in terms of the lines of production in which each country had already specialised, and did not include or affect those sub-sectors or activities that showed greater reticence about this market opening.

Utilisation in Decisions

The list elaborated by the SICE was part of the negotiation with Brazil. The agreement—the Protocol on Goods—entered into force at the beginning of 1987. The original list of 224 items was subsequently enlarged as the years passed by means of successive rounds of negotiations and following the same initial dynamic. The sectors included in the voluntary tariff reduction referred to most electric and non-electric equipment and machinery and their components and pieces, together with automobile components. Electrical equipments and parts and transport vehicles were excluded from the common lists and were subject to a separate sectoral negotiation (Porta and Fontanals 1989).

Negotiations on wheat and food supply—Protocols Two and Three— were as successful as the previous one. Given that Protocol Two was intended to promote a balanced exchange for Argentina and to make up for existing asymmetries, it established annual commitments for the purchase of this product by Brazil and other technical issues—such as the price calculation, ports, and schedules for loading. Protocol Three was different because it was not intended to promote trade liberalisation or the elaboration of lists; instead, it defined a common list of fruits, vegetables, and dairy products to be mutually provided in case of undersupply.

The remaining protocols—the steel and iron industry, the automotive and food sectors—faced numerous difficulties in their implementation and had a relatively small commercial impact during this first phase of the integration process. In this sense, for example, the steel and iron agreement had only a limited scope, leaving aside the main products. The automotive protocol, on the contrary, was successively postponed since there was no agreement regarding the small print. Actually, according to those who were directly involved in the negotiations, a vital element was missing: the support of the private actors involved in the process: ‘Opening the final sectors without ensuring the previous liberalisation of the intermediate sectors and/or the elimination of the subsidies granted to sheet entailed higher costs for the Argentine manufacturer, who was thus obliged to buy sheet at a higher price than the one paid by his competitor, the Brazilian manufacturer, and consequently his production was not competitive.’11 A similar evaluation was provided for the automotive sector: ‘The automotive sector offered several advantages to be liberalised first: in the first place, consensus building within the sector was easy to achieve since only five companies comprised 90 percent of the total market; and, secondly, the sector allowed for a specialisation criterion. We proposed this scheme to Brazil, but companies would only accept it in 1991, when Mercosur ensured universal, automatic, and linear reductions.’12

Out of the six protocols dealing with production integration, the CGP was the only one to promote liberalisation, generating in turn quite important results in terms of the broader integration project. The implementation of this agreement led to a large increase in trade: between 1986 and 1990, regional trade in those products included in Protocol One grew from U$S16.7 to U$S 95.5 million, which accounted for a notable 472 percent growth. These benefits were even greater for Argentina than for Brazil. While trade in capital goods represented just 50 percent of Brazil’s total exports, in the case of Argentina this stood at 80 percent. In qualitative terms, this increase also benefited Argentina through the diversification of the export supply.

Nevertheless, this was a short-term process of limited scope. Different analyses emphasise that even if the CGP led to increased productivity

11 Interview with an academic, Universidad Nacional de Quilmes.

12 Interview with former undersecretary of international relations and president, CENIT.

and a better use of installed capacity in both countries, there were neither significant investments nor important transformations in the structure of the national supply. Difficulties in the availability and conditions of credit for acquiring capital goods and the lack of credibility of the regional approach hindered the decision making of Argentine producers in the medium term. In addition, the increase in bilateral trade—by 40 percent between 1985 and 1988—was circumscribed to specific sectors, particularly capital goods and wheat, products of relative high importance in macroeconomic terms. Most of the relevant productive sectors had only a marginal or symbolic participation in the impact of the integration initiative. Moreover, they did not seem to be interested in assuming a more active role in the near future. These sectors included the steel and iron industry, different branches of the food industry, and the automotive complex.

Acceleration of the Liberalisation Programme: Menem and the Common
External Tariff (1991–95)

Born in a context of industrial promotion and protection, where states led in economic functioning, the PICE constituted a cautious approach to regional trade liberalisation and integration. This first phase of integration (1986–89) was marked by sectoral negotiations on trade instruments. However, after an initial period of intra-regional liberalisation and rapid trade growth, the exchange of concessions slowed down and trade flows reached a plateau. This sector-by-sector integration was then replaced by a universal approach to regional trade liberalisation after the signing of the Acta de Buenos Aires (1990), which accelerated the integration process and anticipated that the common market would come into effect in December 1994.

The Acta de Buenos Aires was signed by the newly elected presidents Fernando Collor de Melo (Brazil) and Carlos Menem (Argentina). The latter continued the trade liberalisation process initiated by the previous administration, and even if there was a rapid move toward market reform, trade liberalisation was kept in a secondary and discreet place. The economic team established a policy aimed at reducing tariffs, progressively applied, although mainly stemming from the requirements and demands of both the IMF and the World Bank. Subsequently, this was accelerated and deepened with the implementation of a new economic plan headed by Domingo Cavallo.13 The government later adopted a series of measures intended to promote exports and reduce the manufacturing costs through the reduction and elimination of different taxes and the establishment of credit facilities and measures aimed at stimulating exports.

In this line and in terms of the regional integration process already established with Brazil, the Acta de Buenos Aires implied a key transformation by adopting an approach to trade liberalisation based on an automatic, linear, and universal mechanism of tariff elimination within the zone (Lavagna 2001). Shortly afterward, negotiations began giving way to the Treaty of Asunción in 1991 and extending these commitments to Paraguay and Uruguay. Mercosur was finally born.

Four mechanisms were included in the founding treaty to move toward a common market. In first place was the trade liberalisation programme that would lead to the establishment of a zero-tariff area by 31 December 1994. Second, as of 1 January 1995, a CET and a common commercial policy with a third country or groupings of countries would be established. A third mechanism referred to the coordination of macroeconomic and sector policies: foreign trade, agriculture, industry, fiscal, monetary, foreign exchange, capitals, services, customs, transport, and communications, among others. Finally, sector agreements were established to deepen and speed up the liberalisation of intra-regional trade flows (Bouzos et al. 2002).

The trade liberalisation programme started in 1991 and, in spite of some delay in the original plan, the bloc finally achieved free trade among the member countries by 1999, when the CET finally started to rule. The adoption of the CET entailed the commitment to a long-term political project with Brazil, which in turn allowed for better integration into the multilateral trade arena. Both the Argentine and Brazilian ministries of foreign affairs strictly opposed any formal weakening of the CET since this was an effective policy tool for opening up the economy to the rest of the world, and it was crucial for the countries to negotiate as a bloc the incorporation of Mercosur into free trade agreements both within the Americas and with the European Union.

13 After being at the Fundación Mediterránea think tank, Domingo Cavallo served as minister of foreign affairs (1989–91) and was instrumental in the realignment of Argentina with the United States.

During those years, regionalism and regional integration appeared to be effective in facilitating an entrance into a much more developed multilateral trading system. However, once again, two options were then on the agenda: the creation of either a free trade zone or a customs union. The first option was clearly promoted by the Ministry of Economy on the basis that a free trade zone would allow for more manoeuvres in the negotiation of the foreign trade policy—a vision shared as well by certain business think tanks such as Fundación Mediterránea and Centro de Estudios Macroeconómicos de Argentina (CEMA). The other option was the establishment of a customs union, an idea promoted mainly by public universities and the ECLAC.

Academic Research

In operative terms, the definition of the CET would compel the member states to subordinate their trade policies toward third countries to a common policy settled within the bloc. This was an extremely complex assignment given the structural asymmetries among the partners, which were reflected in their divergent tariff systems. Those countries with less diversified productive structures—such as Paraguay and Uruguay—objected the idea of granting tariff preferences to the larger partners, while Argentina and Brazil showed differences in terms of the most competitive sectors, an element that added more complexity to the process as well as to the possibility of building consensus (Giorgi 2003).

Mercosur governments appointed the design of the CET to the Common Market Group (Grupo Mercado Común [GMC]). Within this, the Sub-Group 10 (Subgrupos de Trabajo [SGT])—which dealt with issues related to macroeconomic policy coordination—would be in charge of examining and analysing the CET. During the first two years, national delegations focussed on the exchange of their own harmonised national systems of nomenclature and the elaboration of consensual rules and basic criteria for the creation of the CET. Given the existing diversity among the national tariff systems, consensus was easily achieved for the establishment of an escalated external tariff system, including at least three positions. However, difficulties emerged in terms of the tariff level attributed to each sector. In order to overcome these important differences, it was agreed to carry out the negotiation on the basis of the different proposals taken to the negotiating table. These were to be presented by May 1992.

Faced with this schedule, national governments required several studies and analyses that obligated a critical participation of academics. The elaboration of these proposals entailed big challenges for the governments in terms of the complexity of the issue: each country had diverse nomenclatures and tariff systems, and there were no comparative statistical analyses. In addition to this basic survey, the evaluation of the different possible scenarios and their expected impact on each domestic productive sector was another necessary task.

At the regional level, similar surveys were carried out. In 1993, the GMC appointed Honorio Kume, an expert from the Instituto de Pesquisa Econômica Aplicada (IPEA), a research centre associated with the Brazilian government. With funding provided by the EU and the Inter-American Development Bank (IADB), Kume was designated to perform a survey and to assist national governments in the meetings of the GMC, where he turned out to be an active participant.

In Argentina, the need to come up with a proposal gave way to a proliferation and overlapping of studies and the appointment of different working groups. In all, three special studies were particularly important, as described below.

The first group was composed of technical experts from the Ministry of Economy, who were to fulfil certain tasks regarding Mercosur, and academics from the Department of Economics at the Universidad de Buenos Aires (UBA). The tasks were divided between the two groups: the academics focussed on the development of the parameters—since there was a perceived need for this information during the negotiations—and the coordination of the different activities within this joint group, and the technical experts worked on a comparative study and elaborated diverse statistical measures given that these data were of great utility for the negotiations.14 The experts group was coordinated and financed with the ministry’s budget and its main objective was to collect all the existing information about the tariff positions in the four member countries in order to build a comparative matrix. This survey was guided by the demands and specific requirements of the officials of this public agency, who were also part of different working groups within Mercosur. In addition, these technical experts produced several proposals and reports that were submitted to the negotiators.

14 Interview with Argentine GMC negotiator.

The second survey was appointed by the Ministry of Economy. With funding provided by loans from the United Nations Development Programme (UNDP), a group of academics were selected on a personal basis. The remuneration of these appointed experts tripled those of the ministry officials who were responsible for the negotiation process, a situation that was thus regarded with suspicion. This consultancy group relied heavily on the information that they already had as well as on a matrix based on outdated data. Moreover, the directives and parameters of the research were settled by the Ministry of Economy and did not necessarily respond to the needs of the actual negotiators.

Finally, the Ministry of Foreign Affairs developed some documents and reports on its own. Julio Berlinski, an economist from Universidad Torcuato Di Tella (UTDT), was appointed for this survey. He was an external advisor and a specialist in tariffs who had already had some experience working for previous administrations on various tariff issues. He was asked to define the criteria for the CET. Unlike public experts from the Ministry of Foreign Affairs, Berlinski had a global vision of the whole situation that enabled him to develop a more comprehensive analysis, different from that of a public expert who had taken the Argentina tariff system and made consultations with the private sector on the basis of the demands put forward by Brazil.15

Most of the private sector did not provide inputs into the CET negotiating process because they perceived the customs union would not be actually implemented. In fact, ‘most of the chambers and sectors in general did not participate; neither did they come to know about it. What is commonly being said, that business actors came to know about this project through the newspaper, is quite true. We [the negotiators] did not receive any proposals from the business sectors. Therefore, as we had no proposals, we had no instructions either; we worked in a very theoretical manner—our job was mainly based upon calculations done at the desk. We analysed how far we could go in terms of the productive chain and its maximization, and we struggled for this as much as we could.’16

Only two research reports were produced by the private sector. The Chamber of the Chemical and Petrochemical Industries (Cámara de la Industria Química y Petroquímica [CIQyP]) produced a paper of an

15 Interview with a CEI researcher.

16 Interview with Argentine GMC negotiator.

operative nature intended to contribute to the survey and harmonisation process of the regional tariffs. This agreement was presented both to national governments and Mercosur institutions. As soon as the initiative was launched, chamber members reacted immediately: they decided to anticipate to the governments and presented a sectoral proposal. This was expressed by one CIQyP leader, who recalled that only the petrochemical sector would elaborate a proposal regarding a future nomenclator: ‘We held meetings during four months; every 15 days, 20 people per country got together. Moreover, this nomenclator is still valid today since it has barely undergone any changes. Governments signed it. . . We were the only sector that carried out such a task, but in fact we were the only ones that would need to do so since the steel and iron sector includes 14 chapters of the nomenclator while the chemical sector includes 2.849 tariff lines, and stands for 30 percent of the total number of lines. . . We finished this report. . . and then said that that would be the tariff system to be applied; because it had been said that it would be proportional to the added value. So we determined what the added value should be and proposed our own tariff scale. We ended up presenting a proposal, which was also a joint proposal—only with Brazil, for the time being—from 2 to 16. The government accepted it and made a slight modification: from 2 to 14, but they did respect the escalated scheme.’

The second case refers to the study published by Fundación de Investigaciones Económicas Latinoamericanas ([FIEL] 1993), whose pro-market philosophy had become well known with the publication of El comercio administrado de los ’90: Argentina y sus socios. This book argued that the best possible negotiating scenario for Argentina would be a free trade agreement with the United States, rather than a deep integration process with Brazil. Written between 1992 and 1993, it was based on a research project financed by an American foundation.17

Research-Policy Articulation

Most of the documents and studies detailed above were the result of either an appointment or a special request made by the governments to those academics involved in the in-house think tanks. The articulation between policy makers and researchers seemed therefore guaranteed.

17 Interview with a senior economist, FIEL.

However, things turned out to be more complicated. In the first place, only one of these different reports got to the Argentine negotiators in due time and proper form. This was the report elaborated by the experts and academics of the Ministry of Economy and the UBA. Unlike the others, this study was the result of teamwork, and certainly fulfilled the demands and requirements of the negotiators. Moreover, negotiators were also actively involved in its creation. In turn, these meant that the working group could have access not only to information but also to the instructions of the negotiating group.

Another group of studies, including the reports by Kume and Berlinksi, was also produced in proper form and in response to the demands and urgencies specified by the negotiators. These studies were intended to fulfil the same demand: the identification of the criteria to harmonise the nomenclatures of the countries in order to attain a common denominator. In the case of Kume, the report arrived too late for the Argentine negotiators: ‘By the time Kume had finished this study. . . the decision-making process was already over. The delay was terrible. . . We did have a close relationship with him; in fact, he attended the meetings held between the four governments, and was a keen supporter of Mercosur; he provided negotiators with regular reports. Nevertheless, the final document could not be taken as input for the final policy decision since it arrived once this had already been agreed on. I then took it to the library, and I think the report turned out to be useful to me, but only later on.’18 In addition, the usefulness of Kume’s report was only relative, at least regarding the elaboration of the positions of the national negotiators, since it focussed mainly on the distributive struggle in which each country would try its best to assure the survival of the most sensitive sectors: ‘These surveys and reports were helpful not for making decisions, but rather in terms of the advice they provided governments, for instance, during the CET negotiations, which entailed settling a common tariff for over 9,000 positions for the more than 90 chapters of the nomenclator. . . Some reports were elaborated, and then we analysed which products could be raised or lowered. . . In addition, when we had to negotiate within the SGT on trade issues, we really needed to know what they were asking for, but at the same time we had to move toward the dismantling of the tariff barriers, so we needed to be informed of what we should ask for, what we should

18 Interview with Argentine GMC negotiator.

not demand, where we could push further, where we could yield our positions, and what problems could then come up.’19

In the case of Berlinski’s report, its utility was limited to providing arguments to the negotiators of the Ministry of Foreign Affairs given that the technical issue was still centralised at the Ministry of Economy. Berlinksi did not have the chance to work directly with the negotiators, who had the latest and most accurate information. Instead, his study was only a laboratory experiment. Another challenge was the lack of continuity in time, which limited its utility to an exclusive issue of political legitimacy, as indicated by one interviewee: ‘I think negotiations are a process, along which papers are irrelevant. Papers and documents can provide ideas and advice, but the consultant should somehow participate along this whole negotiating process. However, this is never the case, or at least this was not my experience. I may be partly guilty for this since I find politicians boring. I believe that they are not interested in showing all what they know to us [the academics]. Assuring continuity is what really matters. But in real terms, nobody is interested in establishing a certain amount of tariffs because this is a quite complicated task, so a particular case is just taken, and in the end, it turns out to be useless.’20

The other studies and reports, together with the consultancy jobs that were appointed by the government between 1991 and 1994, were not intended to contribute to the definition of the CET, but to promote the public debate in favour of a process of deep integration with Brazil. The initiative came from the Ministry of Foreign Affairs, and mainly from Alieto Guadagni, who relied on international research centres, think tanks, and financing provided by the UNDP and the IADB either to appoint or to put ministerial positions out to tender.21 Different research centres, representing a wide variety of ideological assumptions, were chosen, according to their expertise in the different negotiating issues: CEMA, FIEL, UTDT, and Facultad Latinoamericana de Ciencias Sociales (FLACSO-Argentina). There was thus a clear division of labour: ‘[Osvaldo] Schenone, from Fundación Mediterránea, was appointed to work on the establishment of a regional market of capital goods;

19 Interview with researcher, Centro de Estudios para el Cambio Estructural (CECE).

20 Interview with academic, UTDT.

21 Guadagni was undersecretary of international relations, Ministry of Foreign Affairs (1991–96), and secretary of industry, Ministry of Economy (1996–98).

academics from FIEL were asked to analyse labour asymmetries and the tariff system of public services, while ECLAC specialists would have to focus on issues of macroeconomic coordination.’22

Guadagni intended to summon political will to promote Mercosur and constitute a solid critique in terms of the confrontation he had with the Ministry of Economy, now headed by Cavallo. This was expressed by one of the public officials involved in the process, as follows: ‘There was certain inertia—especially in terms of the proposed opening within Mercosur—in some sectors of the Ministry of Foreign Affairs, who were suspicious of Brazil and clearly preferred an agreement with the U.S. What we did was to take the agreement signed by Alfonsín and Sarney and extend it. There were conflicts, and quite important ones (within the Cabinet itself), that were never made public. I would now like to tell you an anecdote. Before the ratification of the Treaty of Ouro Preto, [Fernando Henrique] Cardoso—who had just been elected president of Brazil—made his first official visit to Argentina. During this visit, a meeting was organized in Olivos [presidential residence]. The minister of economy, who was also late for this bilateral meeting, proposed an integration arrangement different from that of Mercosur. Those present made no comments on this proposal until the following meeting, where Cardoso was told that such a scheme was not valid at all.’23

Cavallo was not interested in deepening Mercosur. Instead he leaned toward the establishment of a free trade zone with Brazil. The underlying reason for this was that the entrance of Argentina into a customs union would diminish autonomy in the handling of the trade policy given that the final aim was to establish a common tariff. In turn, this limitation would also affect the external trade policy, which, in the context of the economic plan known as the Convertibility Plan launched in 1991, was the only economic field where policy could be implemented. On the other hand, Cavallo’s increasing power over national politics, which was based on the initial success of the Convertibility Plan, turned out to be a positive signal for private sectors, revealing that the Treaty of Ouro Preto was not mature enough and would most likely not be signed.

22 Interview with former national director of industry, Ministry of Economy.

23 Interview with former undersecretary of international relations, Ministry of Foreign Affairs.

Utilisation in Decisions

With regard to the analysis of the various research studies and the different channels opened to promote the knowledge–policy makers articulation, it is clear that in terms of technical applicability, the studies that offered the greatest utility were the ones performed by the experts and academics from the Ministry of Economy and the UBA. This team, unlike the others, relied on an interesting virtue: its capacity to respond to the demands and requirements of the national negotiators in the regional arena in due time and proper form.

However, these reports were based on the technical conception of the experts and economists who did not have access to the medium- and long-term priorities established by those politically responsible for the negotiation process. Consequently they were dismissed when the need to make a political decision was finally imposed at the domestic level, mainly as a result of increasing Brazilian pressures.

Indeed, Argentina and Brazil had different and opposing positions in terms of the agricultural, capital goods, and computer and telecommunications sectors, which were certainly difficult to solve.24 Moreover, negotiations came to a halt when Cavallo decided to promote a closer relationship with the United States and revealed his intention of boosting a free trade agreement with it. Thus the position of the Argentine negotiators and experts within the GMC became blurred. By the mid 1993, it was evident that the schedule settled by the Treaty of Asunción regarding the establishment of the CET—by 1 January 1995—could not be fulfilled. Even if the process of harmonisation had already reached 95 percent of the whole tariff universe, there were still crucial debates to be solved. It was in this context that Brazil decided to assume the leadership in the debate both in political and operative terms.

24 In terms of the agriculture sector, Brazil intended to establish low nominal rates, an idea that Argentina refused since it feared that the establishment of lower tariffs for products such as powder milk, wheat, meat, or rice would hinder the entrance of Argentine products to the Brazilian market when competing with the subsidised prices of third countries. In the case of capital goods, Argentina wanted to place this sector in one of the lowest levels of protection since this would allow upgrading equipment and processing and product technologies through the acquisition of less expensive equipment and technology in the international market. However, Brazil rejected the proposal. Furthermore, and as far as computer and telecommunications goods were concerned, Brazil was determined to establish high tariffs, remaining thus as the exclusive supplier in the region (Giorgi 2003).

In political terms, Brazil held meetings with the highest ranked officials of the Argentine government and explicitly rejected the latter’s proposal to call off the establishment of a customs union and limit integration to a free trade area. Moreover, Brazil posed a serious threat: the removal of Argentina’s preferential access to the Brazilian market, especially for wheat and cars, the only sectors where exports were then growing. With this in mind, and given that the United States no longer seemed interested in the idea of signing a free trade agreement, Argentine president Carlos Menem declared his firm decision to fulfil the commitments previously assumed in Asunción and create a customs union within Mercosur.

At the operative level, Brazil managed to impose its own tariff scheme because there was no major resistance from Paraguay and Uruguay. The CET was ‘escalated’—meaning that tariffs increased with the added value of the products, with higher rates for finished goods—and the average tariff was settled at between 0 and 20 percent, protecting those industrial sectors in which Brazil was the only regional provider. Nevertheless, this tariff structure included some flexibility as shown by the four lists of exceptions included in the Ouro Preto Protocol. In exchange for the signature of this protocol, Argentina obtained what was called the Régimen de Adecuación Final a la Unión Aduanera (Final Adjustment Regime to the Customs Union [RAFUA]), which established an extra time period—a unique and maximum closing date of four years—granted to specific sectors for conducting a reform that would allow them to become competitive and survive in the new context: they could keep the national tariffs within the intra-zone trade, but these would have to disappear gradually and automatically by 1999.25

The domestic distribution of these exceptions did not rely on the knowledge and research works already performed, but on the traditional lobby practices deployed by the private sector. Fearing that the launch of the CET would lead to the disappearance of some business sectors or the loss of the acquired preferences during the previous intra-Mercosur liberalisation phase, private lobbies now demanded protection from the national government. The only business sectors to become

25 Thus, while first list of exceptions included those products already under the RAFUA, the second one comprised the national lists of specific exceptions to the customs union. Both the third and fourth lists were sectoral lists including capital goods and computer and telecommunications goods, where Brazil, under the request of Argentina, committed itself to the reduction of rates before 2006.

involved in this process were those that knew this dynamic because of previous negotiations or those that represented the most powerful economic sectors, given either their veto power—as in the case of the iron and steel and automotive sectors—or lobby power—as in the case of the textiles, sugar, and paper sectors.26

Impact Evaluation: An Initial Comparative Analysis

The following section compares both episodes of policy change. With regard to the agenda-setting process, they share a similar paradigm, which is clearly based on the idea promoted by international financial institutions—especially the World Bank—that portray trade liberalisation policies undertaken as a change of paradigm as being the unique possible solution to financial and economic crisis, and to growth problems as well. Promoted by the global epistemic community, this vision found support at the domestic level: the economic and political elites were deeply convinced of the need of reform. However, the strategies designed and implemented by the first two democratic governments— the Radical administration led by Alfonsín and the other, led by Menem from the Peronist Party—would show important differences.

The administration headed by Raúl Alfonsín followed the reform path proposed by the World Bank, but only partially. This government’s innovation was evident in the promotion of a trade liberalisation process based on bilateral negotiations and tariff preferences, precisely when at the global level unilateral liberalisation was actively promoted in order to deepen multilateralism. Thus the negotiations initiated with Brazil would be structured around a set of sectoral agreements, which followed a clear logic of productive complementarity. On the contrary, the following administration strictly followed the structural adjustment programme more explicitly involved with deregulation, privatisation, and trade liberalisation, including tariff reduction and the elimination of subsidies. These actions formed the Washington consensus, proclaimed by the international financial institutions—namely, the World Bank

26 Argentina included 221 products under this regime, basically those regarding the steel and iron sectors, footwear, and paper, all of which still continue to be exempted. The textile sector constitutes a paradoxical case: apart from including this sector in the RAFUA and creating a special committee aimed at elaborating a proposal for an intra-zone regulatory policy, the member states agreed on exempting it from the customs union as well.

and the IMF. Nevertheless, in following these policy recommendations regarding an unrestricted opening of the economy at all levels—unilateral, regional, and multilateral—there was still room to manoeuvre and, in the case of Argentina, this opening was carried out with a foreign exchange rate that evolved increasingly eroding competitiveness. At the regional level, the logic of the integration process with Brazil changed dramatically. Negotiations with Brazil, and with Paraguay and Uruguay in order to create Mercosur, were aimed only at attaining a free trade zone and a zero tariff within five years. The proposal of creating a customs union would be brought about by the larger partners of Argentina and Brazil, which clearly needed to establish a lock-in mechanism for the trade liberalisation already achieved and to resist the pressures of protectionist sectors interested in reversing the process.

The question that arises is whether this similarity led to a similar paradigm in terms of the nexus between research and policy making, as shown by the three conditions already mentioned: research, articulation, and utilisation.

When analysing the academic research that influenced the design of these strategies, both experiences exhibit large similarities. In both cases, governments were faced with new challenges, and they also lacked the basic expertise and information required to implement the required transformations effectively. Governments resorted to academic knowledge in order to gather further information and data regarding the policy change and its instrumentation. Thus regional and global epistemic communities had a key role in defining the main content of the final decisions involved in both instances, although there were essential differences in terms of ideas: those of the ECLAC vis-à-vis those of the World Bank.

As far as the CGP is concerned, the academia played a leading role in two different stages of the process. During the definition phase, when the strategy aimed at promoting sectoral integration was defined and designed, previous knowledge provided by decision makers outside the political parties, in both the ministries of economy and foreign affairs, was fundamental. Later on, the government appointed an academic as an ad hoc working group for the implementation of the strategy, basically to collect essential statistical data on the sectors under negotiation and to produce the final lists the Argentine government would present to its partner.

On the contrary, during the negotiation of the CET, academic research was restricted to designing the instrument. Even when the Treaty of Asunción made no reference to the CET or the sectoral policies that should be coordinated between the partners, the governments’ decision left little margin to manoeuvre. In fact, the trade liberalisation process had already been established and this was already out of the agenda under discussion. Thus the only window of opportunity for the participation of academia was given by the design and definition of the final instrument to be implemented: the CET. Nevertheless, in this case, academic research was more vast in terms of the studies, reports, and documents produced. Academics appointed either by the government or by private actors, devoted themselves to two different kinds of research. A first included technical reports, produced by public officials and in-house technicians, or by specialists appointed by the government, who were to collect the basic statistical data needed to construct the tariff nomenclature and to define the tariff levels. In addition, some business sectors, such as the CIQyP, advanced with the production of their own reports. The second kind of documents and studies, focussed mainly on the argumentation and legitimisation of the national positions before the public opinion, proposed different and more convenient negotiating scenarios for Argentina. These documents and studies were required by the government and carried out by private think tanks using international funding.

Differences emerge in terms of the articulation between researchers and policy makers. The CGP was the result of the joint work of researchers and policy makers, who shared and intertwined different types of knowledge and made political decisions. The final list including the capital goods industries and sectors to be liberalised could thus easily be implemented regarding both the technical aspects and the political support at stake. In addition, this group managed to present its final report before the deadline established by Argentina and Brazil. In the case of the CET, research results were finally communicated once the negotiations were over, and in a language that was not only inaccessible to negotiators but also of slight utility. Most of these documents and studies had been commissioned from academics who had no liaison with the negotiators and therefore ignored their day-to-day requirements. Only one of the reports was an exception to the rule: the document prepared by the negotiators within the different SGTs, relying on the technical and professional assistance provided by the UBA academics. This turned out to be extremely technical research, where the negotiators defined their needs and requirements while academics concentrated on collecting statistical data. Nevertheless, unlike the negotiation of the PICE, those in charge of this report did not receive the necessary social and political support in order to use the data and information that had been collected.

Finally, the last of the conditions that can determine the influence of academic knowledge on the decision-making process is the political will of the decision makers and their determination to make use of it. There are very sharp contrasts in this respect between both episodes. In terms of the CGP, the final list compiled by the appointed researcher was the unique element that the Argentine government took to the negotiating table with Brazil. Sectoral accords would thus advance only in those industries or sectors where there was reliable information regarding the benefits of integration, while those sectors where there was no empirical evidence and where consensus building among the stakeholders did not work were removed from the final list. During the final negotiation of the CET, the policy recommendations were put forward through the empirical analyses that had been previously developed but were not taken to the discussions with Brazil. Certainly, this turned out to be a rather atypical negotiation, whose results were determined by the timing and pressure exercised by the main commercial partner—Brazil—given the lack of both definition and interagency coordination on the part of Argentina. Out of the three proposals that were specifically commissioned at the national level, the only one that finally exercised some influence in the bilateral negotiations was the joint document prepared by the chambers of the chemical and petro-chemical industries of Argentina and Brazil; it was then presented to both national governments and to the regional authorities as well. Mercosur authorities accepted the inclusion of such document in the final agreement, with only some slight modifications.

Having compared both episodes in terms of the production of academic knowledge, its articulation within the decision-making process, and its use, this analysis now delves into the factors that promoted the production of knowledge in both cases and its articulation and use in the case of the CGP and of the CET proposal by the chemical and petrochemical sector.

The academic research was strongly boosted by the lack of experience of decision makers in the new problematic issues and questions, along with scarcity of the information needed to respond to them. This was precisely the case in terms of the paradigmatic change within the development model experienced in Argentina since the mid 1980s. This issue was new not only for public officials but also for the private sector involved in decision making. It should be noted that these were the first steps promoted by a democratic government after years of military dictatorship. Even in the case of previous trade liberalisation processes—for example, the negotiation of tariff preferences within LAIA during the 1970s—the military coup would then disarticulate these networks by breaking the constitutional order and replacing public officials and cabinets. The only sectors that were involved in this learning process were those related to the most concentrated sectors of the economy and that also experienced a large economic growth during the military regime—such as the steel and iron industry, or the automotive and petrochemical sectors. However, these were not involved in the formulation or implementation of the CGP, which was confined to smaller sectors and industries. In fact, an element that accounts for the influence of academics vis-à-vis other actors involved in the decisional process refers to the relative poor capacity or ability of the latter to respond or produce alternative strategies; this compares the influence of academics within the decision-making process, which was greater than those of other sectors also involved in the process. Indeed, the capital goods industry is not a concentrated sector in Argentina. Unlike other sectors showing great political leverage—such as the aforementioned industries—it is highly disarticulated and does not have a strong and clear labour organisation. This allowed the executive branch to design and implement the sectoral opening without consulting with the actors involved.

Later on, the CET negotiations would make this knowledge demand even more pressing given the lack of interministerial coordination and the different approaches to integration promoted by the ministries of economy and foreign affairs. While the latter promoted a deep integration scheme with Brazil, the former pushed for the establishment of a free trade area with the United States and other developed countries. In order to legitimate their own positions, each ministry and its public officials in charge would appoint the elaboration of research works and surveys in an ad hoc manner. In turn, this knowledge demand would be extended to business actors, such as the chemical and petrochemical sector, which assessed the need for elaborating its own sectoral proposal. From 1991 to 1993, the struggle between both ministries facilitated the proliferation of different studies and reports, although it did not promote the joint and effective work of academics and negotiators in the implementation phase. Unlike previous experiences in trade policy formulation in Argentina, most of the private sector was not involved in the elaboration of the CET, which in turn allowed for this to be the result of technical studies based on empirical evidence, at least in terms of the Argentine negotiating team. However, the absence of a clear leadership and coordination among ministries and public agencies also accounted for the lack of utilisation of the research results by policy makers during the implementation phase.

In the analysis of the second dimension, that of articulation, these three successful cases—the CGP and the CET proposal presented by the public officials within the Ministry of Economy, and the document elaborated by the private sector as represented by the CIQyP—clearly demonstrate that the ex ante articulation between decision makers and academics constitutes a key factor to guarantee that the information produced will be presented in due time and form.

Finally, both the CGP experience and the CIQyP proposal show that the use of knowledge depends on two conditions: interagency coordination and a common and unified vision, as well as the inclusion of non-governmental sectors, basically private actors. The policy-research articulation was possible in both cases because the proposed solutions left uncovered, for different reasons, deep distributive struggles between the sectors involved: in the first case, because the CGP was based on positive lists and, in the second experience, because losers and winners had been previously decided upon within the sector itself.

The comparative analysis on the nature of the policy-research relationship in both episodes of policy change brings to the forefront three initial conclusions. First, in temporal terms, the relative weight and incidence of the academia diminished as the novelty of the issue wore off and negotiating experience accumulated both in the public and private sectors. In effect, although academic knowledge was the only source in the elaboration of the CGP, 10 years later other types of knowledge and information were added to the negotiations of the CET, which were provided not only by the Ministry of Economy but also by think tanks and different productive sectors. Second, in both cases, academic contributions to the decisional processes played a legitimising role. The final aim of the research-policy relationship established was to justify the government’s negotiation position and discourse. Finally, and regarding the issues at stake, the incidence of academic knowledge had more possibilities of achieving success—use—in those areas where the distributional impact of the policies were almost inexistent—voice—or where those sectors whose interests would be seriously damaged by the implementation of a specific policy did not have veto power—exit.27 In the opposite case, the voice of academia and the role played by studies based on empirical evidence were neutralised by sectoral lobbies, which relied either on their traditional veto power or on technical expertise to defend their sectoral interests. This contrast became evident during the negotiation of the CET. While the project of establishing a customs union remained an ideal rather than a concrete policy, experts and academics worked in isolation. However, when the political will to promote a customs union was clearly defined, the strength and influence of private lobbies would obscure all empirical evidence. Table 4–1 offers a synthesis of these main findings.

Final Considerations

The empirical evidence presented along this chapter refers to two episodes of policy change in the process of trade liberalisation launched by Argentina in which there was an important production of local knowledge. The first episode (1986–89) was a process of gradual change, when trade liberalisation would be promoted through a strategy of selective sectoral and productive integration with Brazil. The second episode (1991–95) refers to the liberalisation and integration process initiated among the Southern Cone countries—Argentina, Brazil, Paraguay, and Uruguay—that led to the establishment of a common market: Mercosur.

Both processes also differ in terms of the type of policy change. While the CGP can be categorised as a failed case of conceptual change— intended to promote gradual shifts in policy makers’ knowledge and understanding of liberalisation through regional integration—the CET negotiations, on the contrary, can be defined as a process of incremental change, where transformations were brought about by means of micro-level decisions. In contrast, the negotiation of the PICE and the CGP involved a macro-level decision, where policy makers rejected the World Bank’s proposal, which suggested unilateral and universal deregulation and used local knowledge to design an alternative—regional and partial—way for trade liberalisation.

27 The concepts of voice and exit are being used in terms of A.O. Hirschman (1970; 1976).

Table 4–1: A Comparative Glance at the Common Goods Protocol and the Common External Tariff

Even if both episodes are consecutive and took place within the framework of the structural reforms promoted by the World Bank in Argentina since 1987, each case opens up different windows of opportunity for the academic research. In both cases, the utility of that research in the policy process showed important variations not only in terms of concrete use but also in terms of the exact moment when the research was applied and thus in terms of its impact on policy.

In the first case, research provided ideas, exposed previous experience, and offered the data needed to define the scope of the sectoral integration process, the definition of the strategy, and the final mechanisms and instruments for its implementation. However, local knowledge was not the result of research programmes developed as needed; in fact, it was the ‘personal capital’ of the academics who joined the working team of public officials and decision makers who would then be in charge of putting that research into practice. The ideas provided by foreign epistemic communities were also part of this process; in this case, these ideas were drawn from the personal experience of these academics who had been part of the ECLAC during the 1960s and ’70s, which contrasted sharply with the hegemonic ideas of the World Bank.

On the contrary, in the second episode, academic research offered important inputs for implementing the liberalisation process. In this case, research was abundant and provided by different actors, and it was also intended to fulfil various objectives. The technicians and experts from the Ministry of Economy would collect and systematise the necessary data for the final definition of the CET within the ongoing regional negotiations, but a second group of studies was commissioned by the ministries of economy and foreign affairs. Several external consultants, coming from different universities and think tanks, were then appointed to support the opposing ideological positions held by each of these ministries on whether to deepen the integration process with Brazil. Several regional organisations, such as the IADB, were also part of this ideological debate. In addition, business chambers with regional presence, such as the CIQyP, also provided important knowledge of the conditions and requirements of their sector in the new regional scenario. However, in these different cases, with the only exception of the technicians, research was intended to provide justification for the ideological positions held or to give way to certain lobbies.

Both episodes contrast sharply in terms of the impact local knowledge on the decision-making process. Also, both the PICE and the CGP can be characterised as a successful articulation process, promoted mainly by the government, which intended to build an alternative strategy to the one proposed by the World Bank. This allowed the government finally to be able to articulate a sectoral integration scheme. However, in both cases results would be weak given the strong opposition coming from the most concentrated private groups. In other words, even if there was a strong liaison during the academic research phase, this could not be utilised as sectoral interests would prevail over research evidence.

In the case of the CET, on the contrary, academic research, even if larger in number, had no impact on the decision-making process because the final decision regarding the CET was determined by the external pressures coming from Brazil, the hegemon within MERCOSUR. Brazil’s strength relied not only on its economic pre-eminence but also on the internal divisions and rivalries within Menem’s administration in Argentina. The only exception was then given by the private sector, which lobbied at the regional and national levels and finally achieved the required protection mechanism to assure its competitiveness in foreign markets.

By providing a comparative analysis of two different episodes of policy change, this chapter has highlighted the idea of influence as a complex process where the impact of knowledge on decisions can assume various forms and scope. Moreover, it is clear that the mere existence of knowledge regarding a certain issue does not constitute a necessary condition for its efficacy. In fact, the articulation between the different stakeholders and the political will to make use of it by the decision makers constitutes a key element. In this sense, expectations of academic incidence on trade policy should be cautious. Unlike other issues, trade policy is still strongly determined by two types of actors: external and private domestic actors.

References

Bouzos, Roberto, Pedro da Motta Veiga, and Ramón Torrent. 2002. In-Depth Analysis of MERCOSUR Integration, Its Prospects, and the Effects. Report presented to the Commission of the European Communities, Observatory of Globalization, November. Barcelona.

Brunner, Jose Joaquin, and Guillermo Sunkel. 1993. Conocimiento, sociedad y politica. Santiago de Chile: FLACSO-Chile.

Campbell, Jorge, ed. 1999. Mercosur. Entre la realidad y la utopía. Buenos Aires: CEI-Editorial Nuevo Hacer, Grupo Editor Latinoamericano.

Caplan, Nathan. 1979. ‘The Two-Communities Theory and Knowledge Utilization.’ American Behavioral Scientist 22(3):459–470.

Chudnovsky, Daniel, and Fabio Erber. 1999. ‘MERCOSUR’s Impact on the Development of the Machine Tools Sector.’ Integration and Trade 7/8. <www.iadb.org/intal/aplicaciones/uploads/publicaciones/i_INTAL_IYT_7-8_1999_Chudnovsky-Erber.Pdf> [Accessed: March 2008].

Chudnovsky, Daniel, Masafumi Nagao, and Staffan Jacobsson. 1987. Bienes de Capital y Tecnología en el Tercer Mundo. Buenos Aires: Centro Editor de América Latina.

Davies, Huw, Sandra Nutley, and Isabel Walter. 2005. “Assessing the Impact of Social Science Research: Conceptual, Methodological, and Practical Issues.” Background discussion paper for the ESCR Symposium on Assessing the Non-Academic Impact of Research, University of St. Andrews, 12–13 May.

Fundación de Investigaciones Económicas Latinoamericanos. 1993. El comercio administrado de los ’90: Argentina y sus socios. Buenos Aires: Editorial Manantial.

Garrett, James L., and Yassir Islam. 1998. Policy Research and the Policy Process: Do the Twain Ever Meet? Gatekeeper Series no. 74. London: International Institute for Environment and Development. <www.iied.org/pubs/pdfs/6138IIED.pdf> [Accessed: March 2008].

Giorgi, Débora. 2003. Mercosur. El Arancel externo común. Propuestas para su reforma. Paper commissioned by the Ministry of Foreign Affairs, Argentina.

Haas, Peter. 1992. ‘Introduction: Epistemic Communities and International Policy Coordination.’ International Organization 46(1):1–35.

Hirschman, Albert O. 1970. Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States. Cambridge MA: Harvard University Press.

——. 1976. ‘Some Uses of the Exit-Voice Approach: Discussion.’ American Economic Review 66(2):386–389.

Lavagna, Roberto. 2001. ‘Los desafíos del Mercosur.’ In Daniel Chudnovsky, and J.M. Fanelli, eds., El disafío de integrarse para crecer: balance y perspectivas del Mercosur en su primera década. Buenos Aires: Signo XXI de Argentina Editores.

Neilson, Stephanie. 2001. Knowledge Utilization and Public Policy Processes: A Literature Review. Ottawa: Evaluation Unit, International Development Research Centre.

Porta, Fernando, and Jorge Fontanals. 1989. ‘La integratión intraindustrial: el caso del Acuerdo Argentino Brasileño en el sector de bienes de capital.’ Integracíon Latino-americana 152:14–15.

Reich, Robert. 1991. The Work of Nations: Preparing Ourselves for Twenty-First Century Capitalism. London: Simon and Schuster.

Restier-Melleray, Christiane. 1990. ‘Experts et expertise scientifique: le cas de la France.’ Revue française de sciences politiques 40(4):546–585.

Tussie, Diana. 2006. Understanding the Use of Research in Trade Policy. Document prepared after “The Use of Research in Trade Policy: Workshop to Understand the Contributions from Episodic Studies. Buenos Aires.

Weiss, Carol. 1977. ‘Research for Policy’s Sake: The Enlightenment Function of Social Research.’ Policy Analysis 3(4):531–545.

——. 1979. ‘The Many Meanings of Research Utilization.’ Public Administration Review 39(5):426–431.

——. 1991. ‘Policy Research as Advocacy: Pro and Con.’ Knowledge and Policy 4(1/2):37–56.

CHAPTER FIVE
THE ADOPTION OF THE COMMON EXTERNAL TARIFF IN NIGERIA

Kehinde Ajayi1 and Philip Osafo-Kwaako

The links between research and policy have been the subject of recent investigations in the literature on development policy. Although the research-policy linkage was previously viewed as a linear process (with research being directly translated into policy), there is now widespread evidence that various other social and institutional factors may intervene in the policy-making process. In most developing countries, policy formulation occurs in a contested field, where political agents, private sector lobbies, civil society institutions, donor agencies, and researchers all seek to influence outcomes. This chapter analyses a particular instance of trade policy reform in Nigeria and assesses the role played by research outputs in the policy-making process.

In October 2005, Nigeria joined other members of the Economic Community of West African States (ECOWAS) in adopting a common external tariff (CET). ECOWAS comprises 15 member states, eight of which belong to a separate regional grouping—the West African Economic and Monetary Union (WAEMU)—composed primarily of states in francophone West Africa. For ECOWAS members not part of the WAEMU, the adoption of the CET was necessary to support the goal of deep economic integration throughout the West Africa. The CET is intended to serve as the most-favoured nation (MFN) tariff that ECOWAS member states can apply to third countries and also to non-preferential products traded within the ECOWAS region. It proposes a four-band tariff structured as follows: 0 percent (for products with social significance, such as medicines), 5 percent (for necessities and raw materials), 10 percent (for intermediate goods), and 20 percent (for finished consumer goods). This chapter examines Nigeria’s adoption

1 With grateful acknowledgement of support from a Fulbright Fellowship and the Department of Economics at the University of Ibadan.

of the CET and assesses the role played by research outputs in this instance of trade policy reform.

Although ECOWAS countries initially agreed to liberalise intra-regional trade by 2000, progress was slow. Nigeria’s participation in tariff harmonisation was, however, important in advancing any regional integration efforts: Nigeria accounts for about half of total gross domestic product (GDP) of the ECOWAS region, with an economy that ranks second (in GDP terms) only to South Africa in sub-Saharan Africa (World Bank 2006). Consequently, Nigeria’s 2005 adoption of the CET marked an important milestone in the process of deepening economic integration in the region and provided an interesting episode of policy change for investigation.

The primary area of investigation for this chapter was to understand the production of knowledge on trade policy issues and the channels through which such knowledge was disseminated to influence the policy-making community during the process of CET adoption. It was important to assess the nature of research input (theoretical versus applied), the authors of the research exercise (academics or consultants; local versus foreign), and how the research was finally utilised in recipient government departments or agencies. The methodology employed direct interviews with academics as well as policy makers in Nigeria, which provided a broad understanding of the nature of research utilisation in trade policy formulation. The investigation also assessed the political context of tariff reform as well as the role of various other stakeholders in the process. In this regard, it adopted a ‘tracer study’ approach, in which an episode of policy change was reviewed and the web of interacting factors (including research) that caused the policy reform subsequently examined (Court et al. 2005).

The broad conclusion of this chapter is that research played a rather limited role in influencing the CET adoption process. Some CET studies were used directly by an elite policy-making group, and also indirectly influenced the activities of other government bureaucrats. However, there was weak research utilisation during this particular instance of policy reform, and the chapter concludes with a number of suggestions for strengthening the research-policy linkages in Nigeria. The remainder of this chapter is structured as follows: the second section outlines the context of trade policy formulation in Nigeria, focussing on the role played by major domestic stakeholders; the third section surveys the evidence available to policy makers from various sources throughout the process of reform; the fourth section briefly evaluates the policy networks and links between the research and policy communities that provided channels for knowledge uptake; the fifth section synthesises the information presented in preceding sections to construct an account of Nigeria’s adoption of the CET and the role played by research in this process; and the sixth section summarises the investigation’s main findings.

The Context of Trade Policy Formulation

In order to investigate the role of research in trade policy formulation, it is important to review the existing context in which trade policies are developed in Nigeria and the web of factors that shape the trade policy environment. Various actors and institutional structures interact in the process of trade policy formulation. A history of weak institutional capacity in Nigeria’s public administration has significantly weakened the scope for effective trade policy making, resulting in the adoption of ad hoc trade policy measures, often supported by vested interest groups with close links to the ruling state elite. Adoption of the CET therefore provided an opportunity for Nigeria’s Tariff Technical Committee to streamline the country’s external tariffs and to ensure that the tariff regime was simplified, transparent, and predictable.

The 1999 Nigerian Constitution provides for a presidential system of government composed of an executive, a legislature, and a judiciary, with three tiers of government (at the federal, state, and local government levels). The president, vice-president, and appointed ministers constitute the Federal Executive Council, which is chaired by the president. In general, the council is responsible for the formulation and implementation of policies and programmes for the federation. The legislative arm of the federal government is composed of the bicameral National Assembly, with an upper house (the Senate) and a lower house (the House of Representatives). New policies and bills are designed and proposed by the executive branch of government with the assistance of the formal civil service bureaucracy. Ratification of policies, including international treaties, is, however, conducted by the National Assembly.

Regarding trade policy, the actual negotiation and formulation of policy are conducted by the Federal Ministry of Commerce, with support from the Federal Ministry of Finance, the Federal Ministry of Cooperation and Integration in Africa, and the National Planning Commission (NPC). The ministry of finance oversees the setting and administration of taxes and duties, whereas the NPC ensures compatibility of new trade treaties with existing national development plans. In addition, the Nigerian government utilises a broad range of trade policy measures and instruments, including a duty drawback scheme, export credits, and export processing zone policies. Effective coordination of the various trade-related agencies rests with the Trade Policy Advisory Council, which is convened by the ministry of commerce.2

To facilitate dialogue with other stakeholders, the ministry of commerce also convenes the National Focal Point on Multilateral Trading Matters, which provides a forum for consultation and dialogue on trade issues with other non-state actors. Private sector business coalitions remain the dominant non-state stakeholders in Nigeria’s trade policy environment, with an increasing participation from civil society and a somewhat limited presence of the academic and research communities. The minister of finance also chairs the Tariff Technical Committee, which oversees issues related to tariff revisions. The Tariff Technical Committee is composed of various stakeholders drawn from government as well as other private sector institutions. Figure 1 summarises the formal process of trade policy formulation that is to be expected.

In practice, the formulation of trade policy occurs differently. Following decades of poor economic management under military rule, Nigeria’s public administration capacity had been significantly weakened. The capacity of the civil service to generate and implement evidence-based policies deteriorated, resulting in the adoption of ad hoc measures as instituted by a ruling political elite and other vested interest groups with strong political ties. For trade policy, the result was the development of a policy environment and tariff regime that was largely unpredictable, complex, and opaque.

The organised private sector (OPS) serves as the major coalition in influencing the national trade policies. The OPS includes various private sector institutions such as the Manufacturers Association of

2 Among members of the Trade Policy Advisory Council are institutions such as the Nigerian Customs Service, the Nigeria Port Authority, the Nigerian Export Promotion Council, the Nigerian Export and Import Bank, the Nigeria Export Processing Zones Authority, the Nigerian Investment Promotion Council, the Nigeria Tourism Development Council, the Nigeria Bureau for Public Enterprises, the Nigerian National Petroleum Council, the National Food and Drug Administration and Control, and the Standards Organization of Nigeria.

Source: Tim Ruffer, Val Imber, and Jibrin Ibrahim (2004).

Figure 1: The Formal Trade Policy-Making Process in Nigeria

Nigeria (MAN), the National Association of the Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), the National Association of Small Scale Industrialists (NASSI), the Association of Nigerian Exporters, and banking institutions and other professional associations. The views of the OPS are often articulated in various fora, particularly through public workshops as well as in the local news media. Other civil society institutions such as non-governmental organisations (NGOs), faith-based institutions, and consumer advocacy groups as well as the Nigerian Labour Congress (NLC) are only recently emerging as contributors to the trade policy dialogue in Nigeria.

Although defending different constituencies, both the OPS and civil society tend to coalesce around common positions opposed to trade liberalisation. Recently, various domestic civil society organisations including the OPS have formed a coalition, termed the Nigerian Trade Network (NTN), to engage the government in dialogue on trade policy issues. The OPS remains the more vocal stakeholder and is often interested in defending commercial interests of its constituents by extensive lobbying of various government offices and the presidency. For the private sector, there remains an entrenched interest in ensuring extended periods of high tariffs to protect their private manufacturing and commercial interests. Civil society institutions, in contrast, aim at serving as advocates for ordinary Nigerians, particularly the majority of the poor in both urban and rural areas. Civil society institutions tend to support similar restrictive trade regimes, owing to a deep-rooted mistrust of neo-liberal policies, which are often viewed as being imposed on Nigeria by international financial institutions.

In a sense, the utilisation of political authority to support clientelist networks reflects Nicolas van de Walle’s (2001) theoretical description of the African state as often being ‘neo-patrimonial’. Although a neo-patrimonial state may have features of a Weberian rational-legal system (for example, with a modern bureaucracy, a formal legal system, and a distinction between the private and public spheres), this formal structure is often weak in practice. In many instances state institutions are undermined by patrimonial practices where officeholders utilise public resources for private ends and political authority frequently supports clientelist networks. Where there is a large state intervention in the economy, or where there is weak resistance from non-state actors, such patron-client networks serve as important avenues through which patronage and favours are provided, using instruments such as import licences and the granting of quotas. In such a restrictive trade environment, clientelist networks create avenues for rent-seeking behaviour.3 To the extent that the state elite utilises political authority to provide patronage, there is a tendency for policy formulation to become centralised and driven by vested interest groups, with only limited consultation from other stakeholders.

But this is not to argue that non-state actors, such as civil society, the OPS, or researchers have no influence in the policy process. Such non-state actors do influence the policy environment, albeit in a limited capacity. As argued by Robert H. Bates (1998), among others, policy formulation may also be viewed as the outcome of bargaining processes involving various interest groups. From this pluralist viewpoint, policy formulation is assumed to maximise the welfare of various competing interest groups. Occasionally, such stakeholder groups may lobby the government to obtain special trade concessions or duty exemptions.

In assessing the role played by research in the process of trade policy formulation, it is important to bear both theoretical approaches in mind—the neo-patrimonial view as well as one predicated on interest group behaviour. The scope of research impact differs in each of the models above. Research may be disregarded in a neo-patrimonial framework, but it may also have an impact in an environment where policy is formulated by competing interest groups. In this regard, evidence may be required to support some proposed policy programs. This is particularly important in the evolving trade policy environment in Nigeria, with the state adopting a liberalised and more open trading regime. In a more open trading framework, the autonomy of the state to impose ad hoc trade measures is limited. This creates a complex policy environment for trade formulation, which is influenced by interest group politics but also retains elements of a clientelist political system.

Evidence

Various forms of research evidence, ranging from the specific to the general, were available during the CET adoption process in Nigeria. In the review of the available reports conducted for this chapter, it was observed that most policy makers were often unaware of the majority of these studies. This section reviews three major components of such

3 See, for example, Jeffrey Herbst (1993).

evidence: first, a pool of impact assessment studies generated by various stakeholders to assess the welfare implications of Nigeria’s adoption of the CET; second, reviews of Nigeria’s trade policies by both local and foreign analysts; and third, the broad international country case studies analysing the costs and benefits of trade liberalisation. The first category of CET impact assessment studies tended to be demand-driven and highly specific. In contrast, trade policy reviews focussed on Nigeria’s broader experience in the global trading system and were conducted periodically by institutions such as the World Bank and the World Trade Organization (WTO). The third category of general evidence on trade liberalisation and growth was based largely on experiences from a variety of countries.

Table 1 summarises some of the major studies conducted and their major findings. It also identifies the authors of specific reports, institutions financing the report preparation, and the report’s intended audience or beneficiaries. The actual extent of research uptake was, however, determined by the existence of links between the research and policy communities, as well as the degree of legitimacy that various studies possessed. This subject of links and legitimacy is discussed in the next section.

Links: Influence and Legitimacy

Research utilisation theories and empirical evidence point to a lack of interaction between researchers and policy makers as a major reason for poor knowledge uptake. Nathan Caplan (1979) notes that research utilisation is not solely about improving the quantity, but rather improving the quality of links, particularly in cases of ‘meta-level’ decisions that require the synthesis of various information sources. Strong links create opportunities for researchers to disseminate their research effectively and such connections may similarly improve the quality of research itself.4

To understand the nature of trade policy making in Nigeria, it is important to examine who are seen as experts in this field, and how these

4 For example, researchers working on a decentralised livestock services project in Indonesia found that ‘when people had faith that the research they produced would be well received, and somebody would respond to it, they would gather good quality information and articulate it well’ (Crewe and Young 2002, 17).

Table 1: Summary of Available Research Evidence

Notes: CET = common external tariff, DFID = United Kingdom Department for International Development, ECOWAS = Economic Community of West African States, EPA = economic partnership agreement, GDP = gross domestic product, NLC = Nigerian Labour Congress, NTN = Nigerian Trade Network, UNCTAD = United Nations Conference on Trade and Development, UNDP = United Nations Development Programme, WAEMU = West African Economic and Monetary Union, WTO = World Trade Organization.

experts establish legitimising relationships. Such experts may exist as individuals, or as part of a broader community (an ‘advocacy coalition’) in which members share a set of common beliefs. Individuals with such influence operate as ‘policy entrepreneurs’, and may assume various forms such as connectors, who serve as ‘networkers’ to transfer knowledge to key policy makers, mavens, who are ‘information specialists’ and who gather information and then educate others, and salespeople, who use their charisma and persuasive power to gain exclusive audiences and acquire positions of trust (Crewe and Young 2002, 14).

In order to achieve influence, however, research must be seen as legitimate. Knowledge producers in Nigeria use various strategies to establish their legitimacy in trade policy debates. Information and research from international institutions often carry an inherent sense of legitimacy—partly for historical reasons, and partly because such institutions are viewed as having access to extensive technical and financial resources in conducting their research. Government sources similarly bear legitimacy in the provision of data. In contrast, local non-state actors (including local researchers) must cultivate links and establish the legitimacy of their work over a period of time. The following section examines the influence and legitimacy of government information sources, the local research community, lobbyists, international organisations, and domestic policy entrepreneurs.

Government Information Sources

In response to the question of on whom they rely for research input, Nigerian government officials frequently cited public institutions (such as the Central Bank of Nigeria, the Federal Office of Statistics, and the National Planning Commission) as a primary source of their information. Experiential knowledge from senior civil servants was also identified as a common source of information for trade policy formulation. In these cases, knowledge was used to guide minor or incremental policy changes. Public information sources became less legitimate in cases that required conceptual or macro-level utilisation of research. For more complex studies, government officials often outsourced projects to external research consultants. Nigeria’s institutional policy-making framework has a central organ for economic analysis within the National Planning Commission, namely the Nigerian Institute of Social and Economic Research (NISER). However, the institute’s research influence has recently waned and the institute made no substantial contribution to the deliberations about Nigeria’s adoption of the CET. Moreover, although most federal ministries also have in-house research departments, the weak capacity and poor resources of these departments suggest that they make only nominal contributions to actual policy research.

Local Research Community

At the individual level, most members of Nigeria’s local research community appear to have only minor levels of influence. However, there are selected groupings or epistemic communities that have significantly engaged in trade policy debates.5 The African Institute for Applied Economics (AIAE) and the Trade Policy Research and Training Programme (TPRTP) are two such institutions, both located in Nigeria, that have become associated with a specific ideology over time and now play a prominent role in that country’s trade policy. The TPRTP is a network of trade economists based in the Department of Economics at the University of Ibadan, and tends to hold a neo-liberal view on trade policy. One interview respondent described members as ‘espousing generic dictums on trade’. In contrast, the AIAE is viewed as adopting a rather structuralist approach to development and trade policy issues, employing more applied research methodologies compared to the mainstream neoclassical techniques of TPRTP researchers.

Both the AIAE and the TPRTP have participated in Nigeria’s trade policy-making process. The AIAE contributed to the Comprehensive Review of Nigeria’s Tariff Regime, which the ministry of finance (2003) commissioned prior to adoption of the CET, and the AIAE has been involved in formulating major national policies including the 2002 trade policy and the National Economic Empowerment and Development Strategy (NEEDS). The TPRTP has similarly participated in various national conferences and contributed to the preparation of national negotiation positions in multilateral fora, such as during the 2005 WTO Hong Kong

5 Theories on knowledge utilization note that researchers can garner significant influence when they constitute a technical elite or ‘epistemic community’ with access to privileged information and close links to policy-makers. (Sutton, 1999; and Crewe and Young, 2002). Epistemic communities often develop when objective research institutions evolve into politicized ‘discourse coalitions’ that eventually shape the direction of policy, as was the case with organizations such as the Brookings Institution and Heritage Foundation in the United States (Sutton, 1999).

meeting and the ongoing economic partnership agreements between the European Union and the Africa, Caribbean, and Pacific (ACP) countries. In addition, the TPRTP publishes the African Journal of Economic Policy, an academic periodical that often contains articles relating to trade policy.6 Although the TPRTP and the AIAE have actively participated in Nigeria’s trade policy formulation, their geographical distance from federal government officials in Abuja somewhat limits their ability to influence policy making continuously.

Lobbyists

As noted earlier, Nigeria’s policy arena is characterised by a signifi-cant presence of lobbyists who support various vested interests. Major business associations in Nigeria have merged into the OPS, and each association has some degree of in-house research capacity with a research division that usually consists of two or three employees. Internal research is primarily based on data gathered at quarterly meetings at which member firms and field offices present report updates. Occasional surveys of member firms supplement these basic statistics. Associations contract out more intensive studies to local consultants, usually with project-based funding from NGOs or donor agencies.

NGOs and business associations in Nigeria sometimes work jointly as advocacy coalitions. Two such examples are the National Association of Nigerian Traders (NANTS) and the NTN, with both institutions sharing a common anti-liberalisation viewpoint. The NANTS is an alliance of more than 5,300 corporate and individual members and is rapidly gaining influence in domestic trade policy discussions. For example, it is recognised by the European Commission as the representative non-state actor for negotiationg economic partnership agreements (EPAs). The NTN was also recently conceived as advocacy platform for civil society organisations and the OPS on trade and investment issues, and its main membership comprises the MAN, the NACCIMA, the NASSI, the NLC, and the NANTS. This advocacy coalition offers a united front on trade issues to promote pro-poor policies. It benefits from the

6 Academic journals and professional networks serve as another means for researchers to establish credibility, by disseminating scholarship through a legitimising avenue. Another leading periodical that covers trade policy issues is the Nigeria Journal of Economic and Social Studies, published by Nigerian Economic Society.

legitimacy of having the impact of a united voice, access to external funding, and close proximity to the policy community.7

Unlike the numerous OPS groups, the NLC represents the main voice of the national labour movement. The NLC’s research resources have somewhat more of an academic basis compared with other OPS groups.8 Members of both the NLC and the OPS have past relationships with the Nigerian government having served on various government advisory committees. However, the NLC sees itself as lacking economic weight of OPS groups: one NLC respondent characterised interactions with the government as being frequently ‘antagonistic’ compared to the ‘symbiotic relationship’ between politicians and industrialists.

Finally, the Nigeria Economic Summit Group (NESG), which organises an annual meeting to discuss Nigeria’s economic problems, represents a coalition for economic development led by the private sector. The group’s membership is by invitation only and includes representatives from academia, multinational corporations, and the local industrial elite, which has strengthened the NESG’s legitimacy over time. In many ways, it has already achieved its objective of ensuring dialogue on economic issues between the public and the private sectors. For example, the NESG’s views were incorporated in drafting stages of Nigeria’s 2002 trade policy. Moreover, the annual Nigeria Economic Summit serves as a regular means for reinforcing the group’s relationship with policy makers and preserving its prominent role in the policy debate. In contrast to other OPS groups, the NESG was not opposed to Nigeria’s adoption of a CET. Indeed, industrialists at the 2002 summit called for the harmonisation of tariffs on capital goods and raw materials to the CET adopted by the WAEMU members (Agu et al. 2003).

7 Both the NTN and the NANTS are based in Abuja, which gives them close proximity to policy makers. Although the NLC is also headquartered in Abuja, the MAN, the NASSI, and the NACCIMA are based in Lagos, maintaining a limited presence in Abuja through liaison offices. The media also has limited involvement in trade policy. In terms of funding, the NANTS and the NTN receive most of their funding from member dues and international NGOs, namely Oxfam, the Heinrich Boell Foundation, and the Friedrich Ebert Stiftung.

8 The NLC’s Labour Centre for Social and Economic Research is headed by a trade economist and currently hosts a visiting scholar.

International Organisations

Generally, many development institutions recognised that Nigeria’s trade policy in particular is politically sensitive and adopted an indirect approach to influence it by focussing on general reforms and broader economic policy rather than specific trade issues. The literature on research utilisation in development policy emphasises the need for international or external actors to create appropriate relationships with local communities. On the one hand it can be relatively easy for external actors to forge legitimising links with government actors if they establish themselves to be ‘internationally reputable consultants’ with impartial views (Crewe and Young 2002, 15). However, the donor-recipient relationship presents some challenges, such as scepticism from recipients about whether the ultimate goal of such research supports the donor’s self-interest. In response to these concerns, international researchers must be conscious of their approach. Indeed, one expatriate survey respondent described his objective as being a ‘trusted policy advisor’ by offering informed suggestions but being cautious not to interfere.

The international community’s focus on indirect approaches to influence Nigeria’s trade policy targets capacity building, funding, and technical support for both government and civil society agents. International NGOs have established significant links with local advocacy groups such as the NTN and the NANTS to support research initiatives. Agencies such as Oxfam have aimed to strengthen research uptake and the quality of policy debate by supporting these advocacy coalitions. Similarly, the Friedrich Ebert Stiftung funded a collection of essays on Nigeria and the neo-liberal world system as part of a capacity-building workshop for members of the National Assembly. The essays were published as an edited volume in November 2005. In some cases, bilateral donors have tended to work with national institutions. The EC has funded some ECOWAS studies, whereas the United States Agency for International Development (USAID) developed a project to assist ECOWAS countries in adopting a CET. Similarly, the United Kingdom’s Department for International Development (DFID) commissioned several trade-related studies and has provided funding for various technical advisors supporting government policy making (including trade policy issues). Although externally funded research is often conducted by international consultants, international teams occasionally collaborate with local researchers or subcontract projects.

Policy Entrepreneurs

Institutional links in Nigeria’s policy environment are reinforced by the movement of individuals between various groups, such as private sector actors engaging in advocacy, civil servants taking up employment in civil society organisations and development agencies, and academics moving into business activities. Additionally, membership of some organisations tends to be cross-cutting. As mentioned earlier, for example, the NESG includes academics as well as local business operators and foreign company representatives. Furthermore, individuals may belong to several groups concurrently. For example, some academics have established civil society organisations, and some national assembly representatives are former academics with businesses ties.9

In the midst of these complex interconnections, three individuals may be identified as policy entrepreneurs, to use the terms adopted by Crewe and Young (2002, 14), with keen insights to critical aspects of Nigeria’s trade policy scene. Ademola Oyejide of the TPRTP is a maven who passes on relevant information through conferences and research publication, and is a major contributor to Nigeria’s trade policy documents. Ken Ukaoha, the president of the NANTS, is an information specialist who has made great efforts to acquire contemporary knowledge on trade issues and educate others through a weekly column in a local newspaper, advocacy programmes, and via the NTN. Finally, Charles Soludo, founder of AIAE, is a salesman of policy research prior to his recent appointment as governor of the Central Bank of Nigeria.

Adoption of the ECOWAS Common External Tariff

Thus far, this assessment has provided a broad outline of the policy environment and available evidence prior to Nigeria’s adoption of the ECOWAS CET. In this section, the foregoing discussion is synthesised to identify the various factors that resulted in Nigeria’s commitment to reform its tariff policies and adopt the CET. Identifying the major drivers of influence for the policy change is a valuable exercise, as it enables an assessment of the role played by research along each of

9 For example, Ademola Ariyo, a professor in the Department of Economics at University of Ibadan, established the Centre for Public-Private Cooperation, an NGO that advocates for civil society participation in policy making.

the channels identified. A convergence of three major factors catalysed Nigeria’s eventual adoption of the CET: the commitment to reform by the economic management team of President Olusegun Obasanjo, the activities of bureaucrats in the Nigerian civil service, and the political commitment of the Obasanjo government to deepening regional integration in West Africa. These three factors coalesced at an opportune moment, mutually reinforcing each other, and ultimately resulting in the adoption of the CET. Each of these factors is discussed further below, and, subsequently, the influence of research, operating along each of these channels, is examined.

Reform Objectives of the Obasanjo Economic Management Team

At the inauguration of his second term in office in 2003, Obasanjo made a commitment to economic reform aimed at improving the country’s economic growth, reducing dependence on the oil sector, generating employment, and increasing investments in the economy. This commitment was operationalised by the appointment of an economic team, chaired by the minister of finance—a former senior official from the World Bank. The economic team was essentially a team of technocrats: a few ministers from key economic sectors and heads of other relevant government agencies (such as the offices for debt management and privatisation). Most of the team members had considerable international experience.

An ambitious reform programme was outlined by the reform team, aimed at ensuring macroeconomic stability, improving efficiency of public expenditure management, tackling corruption, and improving the domestic investment climate.10 With regard to reform of the tariff regime, the economic team argued that tariff liberalisation was needed to address the anti-export bias of the previous tariff schedule, to reduce incentives for smuggling (due to Nigeria’s uncompetitive duty rates), and, finally, to reduce duty rates for capital goods and raw materials in order to encourage the integration of Nigeria’s private sector into global value chains (International Monetary Fund [IMF] 2005). Adoption of the ECOWAS CET provided an appropriate means of addressing these

10 See International Monetary Fund ([IMF] 2005) for further discussion on Nigeria’s economic reforms under the IMF Policy Support Instrument (2005–2007).

concerns, reducing the country’s average unweighted tariff rates from about 30 percent to below 20 percent (IMF 2005) (BOF, 2006).

Activities of Government Bureaucrats

In addition, government bureaucrats, conducting routine administrative functions within the civil service, supported and facilitated the objective of trade policy reform. There was concerted progress made on reform by the economic team and the government stated its policies on trade reform (NPC, 2004). However, a review of the trade policy would not have been achieved without the broader support of government bureaucrats. This is an important concern as previous attempts at reform programmes had sometimes stalled owing to weak implementation capacity or lack of support from the civil service.11 Indeed, delays in Nigeria’s adoption of external agreements (such as WTO legislation) and inadequate participation in regional trade negotiations may be partly attributed to the weak and under-resourced capacity of trade-related departments. However, in the implementation of the ECOWAS CET, relevant government offices showed great commitment in achieving a timely revision of the tariff schedule. There were probably two main reasons for this broad support for tariff revision.

The first reason, largely procedural, emerged from the Nigerian Customs Service (NCS). Senior officials at the NCS noted that the legal basis of the previous Customs, Excise Tariff Decree No 4 (March 1995) had expired—and since 2001, ad hoc revisions had been made annually. In addition, the customs service noted that it was important for Nigeria to reconcile its tariff classifications with the current coding nomenclature set out by the World Customs Organization (WCO), which was operational for 2002–06. It was envisaged that Nigeria’s timely adoption of the CET (in mid 2005) would permit some experience with use of the existing WCO nomenclature prior to the adoption of the revised schedule in 2007.

The second reason for support resulted from a perceived benefit from tariff liberalisation and regional economic integration, as well as the need to show Nigeria’s commitment to regional economic

11 See, for example, Business Day newspaper of 18 May 2006 where delays in port and customs reforms have been reported and attributed partly to inertia from civil service workers.

programmes. In this regard, research played a role in shaping discussions of government bureaucrats, both during informal exchanges as well as at organised committee meetings.12 Some impact assessment studies had been reviewed by members of the tariff technical committee, and officials at the ministry of commerce and the NPC also indirectly utilised results from such studies during various national seminars and conferences. Although no specific research reports were cited, there was a perceived benefit of tariff liberalisation as public officials frequently compared Nigeria’s weak non-oil export performance with other emerging economies such as Malaysia, Brazil, and China. It was often argued that Nigeria’s non-oil exports performance could be improved by reducing duties on capital goods, raw materials, and intermediate products. Moreover, Nigeria could also improve its integration into the world economy by participating in global production value chains, for example, by importing machine parts or completely knocked-down components from China and exporting finished products to regional and international markets.13

The Politics of Regional Integration

A final factor driving adoption of the CET in Nigeria was the broad political backing for the ECOWAS regional integration project offered by Obasanjo. Throughout his tenure in office, Obasanjo was identified as an elder statesman, not only in Nigeria, but also in most of Africa (Economic Intelligence Unit 2006). The president’s statesmanship was strengthened by his support for conflict resolution and democratic processes in other African states. Furthermore, Obasanjo showed a genuine commitment to deeper pan-African integration, serving as a firm supporter of the New Partnership for Africa’s Development (NEPAD) (Economic Intelligence Unit 2006). Shortly after assuming office in 1999, the Obasanjo administration established a new government department, the Federal Ministry of Cooperation and Integration in Africa, to address these concerns. Nigeria’s adoption of the CET was therefore significantly driven by a political motive of presenting the country’s support of the pan-African goals presented in initiatives such as NEPAD. In past instances, Nigeria’s participation in ECOWAS

12 See, for example, Nigeria’s Ministry of Commerce (2006).

13 Again, see Ministry of Commerce (2006).

negotiations had been limited (Olympio 2006). For Nigerian trade negotiators, adoption of the ECOWAS CET provided an opportunity to provide concrete support to the regional economic programme.14 Given Nigeria’s limited trade with ECOWAS countries, it is likely that steady political support for the reform programme ensured its successful implementation. Clearly, without such political support, the work of technocrats and bureaucrats as discussed above may not have been implemented.

Discerning the Influence of Research

To understand the influence of research, it is important to outline the model of the policy process identified here. An interactive model of the policy process, complemented by international policy transfer, typifies the CET adoption process in Nigeria (Dolowitz and Marsh 1996; Grindle and Thomas 1991). The interactive model focusses on the role of policy elites tasked with the actual implementation of policy changes (Grindle and Thomas 1990). The model presents the policy process in a political economy framework, where various actors, likely to benefit or lose from a policy change, seek to influence the final outcomes of implementation. Although maintaining a rationalist framework, the interactive model acknowledges the policy process and the broader political context needed for policy reform. In addition, the policy transfer model contends that policy ideas developed in a given geographical location may be transferred, and applied, in other geographical locations with the assistance of agents such as international organisations or researchers (Dolowitz and Marsh 1996).

In line with the interactive model, a central role was played by a policy elite—the economic team—in implementing Nigeria’s tariff reform, with political support from the presidency. In addition, the role of international policy transfer of ideas and practices on tariff liberalisation was important in influencing key decision makers in the economic team. Given an interactive and international policy transfer model of the policy process, research can be seen to have influenced the

14 As ECOWAS member states were also in the process of negotiating EPAs with the EU, Nigeria’s adoption of the CET (which involved unilateral tariff liberalisation) indicated the country’s commitment to deepen trade in the sub-region and its pursuit of tariff liberalisation. Nigeria’s specific position on EPAs is currently unknown.

adoption process in two main ways: first, via a direct, but limited process, in which research inputs were used for direct problem solving by policy elites on the economic team and also by government bureaucrats, and, second, via a more diffuse process of enlightenment, in which research ideas gradually influenced the concepts that shape policy discussions. Each of these factors is discussed further below.

Problem-Solving Approaches. Some direct evidence—in the form of CET impact assessment studies—was utilised by members of the reform team as well as government bureaucrats to assess the potential impact of a tariff reform. Technocrats in the economic team embraced tariff reform, not only because it was viewed as important in supporting growth, but also as a means to simplify the tariff structure and reduce instances of rent-seeking practices.15 Research played an important role in influencing the trade policy decisions of the economic reform team. Their knowledge of cross-country research, acquired from prior professional experiences, influenced the team members and reinforced their commitment to simplifying and liberalising Nigeria’s tariff regime. Research was largely based on case studies and other country experiences often including commonly used comparator countries such as Indonesia and Malaysia. The limited research buttressed the decision, providing some analytical credibility and support for the decision.16 As an example, the use of simple average and weighted average tariff rates became an important index for the level of liberalisation and was cited frequently in government reports and memos.17

Yet the instrumental utilisation of research was limited as many other government bureaucrats and officials had very little knowledge of the relevant research on the CET (as reviewed in the third section of this chapter). In many conversations with members of the Tariff Technical Committee, it was observed that they were unaware of many of the previous studies that had been conducted. For example, one senior official of the NCS and member of the Tariff Technical Committee, who had played an active role in revising the existing tariff book, was largely unaware of the research evidence (as presented in Table 1).

15 Interview with Ngozi Okonjo-Iweala (former minister of finance, Nigeria), 25 May 2006.

16 Interview with Bright Okogu (advisor, Federal Ministry of Finance, Nigeria), 26 May 2006.

17 The tariff rates used were calculated in reports produced by a consortium of local consulting firms, including Skoup & Company, Enterprise Consulting Group, Kuji Intercontinental Agencies, and Adegbite & Company. See Table 1.

Government bureaucrats often relied on methods other than systematic policy research to clarify trade policy issues—namely, verification exercises or consultations with stakeholders. For example, in the debate on the ideal tariff to be placed on tyres to be used for buses and trucks domestic manufacturers (subsidiaries of Dunlop and Michelin) sought protection against foreign imports while importers of rubber tyres argued for tariff reduction.18 A previous import tariff of 50 percent had been reduced to 20 percent, but importers requested this be lowered further to 10 percent. To address this difficulty, a verification exercise was conducted on the manufacturers’ sites. Domestic production was estimated at about 0.5 million tyres per annum, compared with an estimated 10 million automobiles in use in the country. Using this information as the basis of evidence, it was argued that a 20 percent tariff rate was the appropriate middle ground to balance the interest of domestic manufacturers and importers. From the records of meetings, it is clear that such policy decisions were seldom rigorously analysed and often adopted based on the persuasiveness of arguments presented by particularly constituencies. For the CET reform programme, those members of the tariff technical committee interviewed often cited such past investigation as the basis of their background research for tariff amendments and classification rather than any systematic assessment of the evidence as presented in the third section of this chapter.

Enlightenment Approaches. A global discourse on trade liberalisation also percolated into the policy environment in Nigeria, influencing government bureaucrats, decision makers, and other stakeholders. This percolation process was diffuse as it often related to a broad idea of trade policy reform, rather than a specific tariff liberalisation measure (such as the adoption of the CET). This is striking given that popular opinion in Nigeria in the 1980s had opposed adoption of structural adjustment programmes, resulting in only limited neo-liberal reforms such as tariff liberalisation. Similarly, in the 1990s, Nigeria’s tariff regime was characterised as being protectionist and complex (WTO, 1998). However, by 2003, Nigeria had embarked on a process of unilateral tariff liberalisation, which was well articulated and defended by government bureaucrats.19 There was a gradual knowledge creep on

18 See Ministry of Commerce (2006).

19 Interview with Felicia Onyeabo, secretary of the Tariff Technical Committee, 25 April 2006.

the welfare benefits of tariff liberalisation, which had influenced local policy officials and stakeholders. Nigerian officials appeared more open to the opportunities and challenges posed by globalisation, and the need for some measure of tariff liberalisation in order to benefit from ‘cheaper access to raw materials and also to expose domestic firms to some degree of foreign competition’.20

What channels then may have facilitated this process of research percolation? It is probable that the transfer of research ideas to local policy makers occurred via channels such as international trade meetings, as well as workshops and seminars convened locally by government departments, donor agencies, and international institutions. Nigeria’s participation in international trade negotiations (e.g., at the WTO, ECOWAS, and within the EU-ACP) often reinforced the importance of trade and the need for further tariff liberalisation. In addition, various workshops and seminars on trade-related issues addressed the topic of tariff reform, particularly when discussing reports such as the WTO Trade Policy Review for Nigeria or the World Bank’s Investment Climate Assessment, or in the preparation of national policy documents such as NEEDS.

Conclusions

This chapter has presented an overview of the CET adoption process in Nigeria, identifying the specific role played by research in the process. Considering the broad context of CET adoption reveals a limited utilisation of research in the reform process. This limited use of research occurred in instances where policy elites relied on research reports to provide some analytical support for the tariff reform programme. A gradual percolation of research ideas on tariff liberalisation and trade openness also influenced government bureaucrats and policy elites in Nigeria’s economic reform team—as evidenced by a general appreciation of the importance of tariff reform. However, to a large extent, most government bureaucrats who were responsible for the technical tasks of amending and reclassifying tariffs were often unaware of existing research on Nigeria’s adoption of the CET.

20 Interview with Esther Oyero, chair of the Tariff Technical Committee, 26 April 2006.

The lack of adequate utilisation of research in this particular instance of policy change, in a sense, reflects the complexity and politicisation of the policy process in developing countries such as Nigeria. Trade policy is inherently a contentious issue, and this so not only in developing countries.21 The process may be more politicised in developing countries owing to the nature of the domestic political economy as well as a history of neo-patrimonial clientelism in government departments that limits the use of evidence-based policies. As an example, it is important to note that despite having officially adopted the CET, Nigeria is conducting a review of its CET tariff schedule to examine the few cases where tariff revision may be needed. This revision process has been driven largely by influential stakeholders who presented cases for consideration either via the presidency or directly to government bureaucrats.22 Research was considered to be of secondary concern in this process and, if needed, to be conducted ex post.

The foregoing assessment leads to two recommendations. First, in order to influence policy formulation, domestic researchers in Nigeria must aim at producing credible research and must also adopt effective communication strategies to disseminate their findings. In particular, it may be important for researchers to move beyond their existing academic spheres to engage in debates with other policy advocates such as from civil society or the OPS, and also to build stronger networks with government. Second, domestic government agencies, who should be the primary consumers of policy research, should improve their internal coordination and information sharing in order to increase the utilization of research in formulating evidence-based policies.

References

Achike, Ifeyinwa, Chukwuma Agu, and Moses Oduh. 2005. Impact of Common External Tariff and Economic Partnership Agreements on Agriculture in Nigeria. Enugu: African Institute for Applied Economics.

Adegbite, Oyeyemi. 2005. Impact of Proposed New Tariff Regime on the Revenue of the Federal Government of Nigeria: Summary of Findings. Report prepared for the Federal Ministry of Finance, Nigeria.

21 Slow progress of the current WTO Doha round of trade talks, amidst resistance from agricultural lobbies in the EU and the U.S., demonstrates this.

22 See, for example, Ministry of Commerce (2006).

Adjovi, Epiphane, Basile Awassi, Aboubakrine Beye, and Murray Smith. 2002. Final Report: Study of the Implications of the Common External Tariff in ECOWAS. Report prepared for the ECOWAS Secretariat and the European Commission.

Agu, Chukwuma, Okey G. Oji, and Charles C. Soludo. 2003. Potential Impacts of Extension of UEMOA Tariffs to All ECOWAS Member States: A Case Study of Impacts on Revenue and Trade Balance in Nigeria. Enugu: African Institute for Applied Economics.

Ajakaiye, Olu, and Adedoyin Soyibo. 1999. “Trade Liberalization in Nigeria, 1970–93: Episodes, Credibility, and Impact.” In Ademola Oyejide, Benno Ndulu, and Jan Willem Gunning, eds., Regional Integration and Trade Liberalization in Sub-Saharan Africa, vol. 2. London: Macmillan, 147–177.

Akinlo, Enisan. 1995. “Improving the Performance of the Nigerian Manufacturing Sub-sector after Adjustment: Selected Issues and Proposals.” Nigerian Journal of Economic and Social Sciences 38(2):91–110.

Aninat del Solar, Augusto. 1982. A Study of Basic Aspects of a Common External Tariff for ECOWAS. Geneva: United Nations Conference on Trade and Development.

Aremu, Issa. 2005. End of (Textile) Industry? A Critical Study of the Collapse of Textile Industry in Nigeria and the Implications for Employment and Poverty Eradication. Lagos: Friedrich Ebert Stiftung.

Bankole, Abiodun, Olawale Ogunkola, and Ademola Oyejide. 2005. “Import Prohibition as a Trade Policy Instrument: The Nigerian Experience.” In Peter Gallagher, Patrick Low, and Andrew Stoler, eds., Managing the Challenges of WTO Participation. Geneva: World Trade Organization.

Bates, Robert H. 1998. “The Political Framework of Agricultural Policy Decisions.” In Carl Eicher, and John Staats, eds., International Agricultural Development. Baltimore: Johns Hopkins University Press, 234–239.

Caplan, Nathan. 1979. “The Two-Communities Theory and Knowledge Utilization.” American Behavioral Scientist 22(3):459–470.

Court, Julius, Ingie Hovland, and John Young, eds. 2005. Bridging Research and Policy in Development: Evidence and the Change Process. London: Overseas Development Institute.

Crewe, Emma, and John Young. 2002. Bridging Research and Policy: Context, Evidence, and Links. Working Paper 173. London: Overseas Development Institute. <www.odi.org.uk/Publications/working_papers/wp173.pdf> [Accessed: 14 November 2007].

Dollar, David, and Aart Kraay. 2001. “Trade, Growth, and Poverty.” World Bank. <papers.ssrn.com/sol3/papers.cfm?abstract_id=632684> [Accessed: 13 November, 2007].

Dolowitz, David, and David Marsh. 1996. “Who Learns What from Whom: A Review of the Policy Transfer Literature.” Political Studies 44(2):343–357.

Economic Intelligence Unit. 2006. Nigeria: Country Forecast. London: Economist.

Grindle, Merilee, and John W. Thomas. 1990. “After the Decision: Implementing Policy Reforms in Developing Countries.” World Development 18(8):1163–1181.

——. 1991. Public Choices and Policy Change: The Political Economy of Reform in Developing Countries. Baltimore: Johns Hopkins University Press. [Accessed:

Herbst, Jeffrey. 1993. The Politics of Reform in Ghana, 1982–1991. Berkeley: University of Califorinia Press. [Accessed:

International Monetary Fund. 2005. Nigeria: Request for a Two-Year Policy Support Instrument. IMF Country Report No. 05/432. Washington DC: International Monetary Fund. <www.imf.org/external/pubs/ft/scr/2005/cr05432.pdf> [Accessed: 13 November 2007].

Lall, Sanjaya. 2000. Selective Industrial and Trade Policies in Developing Countries: Theoretical and Empirical Issues. Working Paper No. QEHWPS48. Oxford: Queen Elizabeth House, University of Oxford. <ideas.repec.org/p/qeh/qehwps/qehwps48.html> [Accessed: 13 November 2007].

Marchat, Jean Michel, and Taoufik Rajhi. 2004. Estimates of the Impact of a Common External Tariff on the Nigerian Manufacturing Sector: Some Simulation Results Based on Firm-Level Data. Working paper. Washington DC: World Bank.

Nigeria. Federal Ministry of Commerce. 2006. Minutes of Tariff Technical Meeting. BD.12237/S.403T, 17 October. Abuja: Federal Ministry of Commerce.

Nigeria. Federal Ministry of Finance. 2003. Comprehensive Review of Nigeria’s Customs and Excise Tariffs: Framework Paper and Summary of Reports. Abuja: Federal Ministry of Finance.

Olympio, John. 2006. Needs Assessment of the Trade Department of ECOWAS for EPA Negotiations. Report prepared for the ECOWAS Secretariat.

Rodriguez, Francisco, and Dani Rodrik. 1999. Trade Policy and Economic Growth: A Skeptic’s Guide to Cross-National Evidence. WBER Working Paper No. 7081. Cambridge MA: National Bureau of Economic Research.

Ruffer, Tim. 2004. An Assessment of Nigeria’s Import Prohibitions Policy. Study prepared for the United Kingdom Department for International Development. Oxford: Oxford Policy Management.

Ruffer, Tim, Val Imber, and Jibrin Ibrahim. 2004. The Political Economy of Trade Policy in Nigeria. Prepared for the Department for International Development (Nigeria), mimeo.

Sachs, Jeffrey, and Andrew Warner. 1995. “Economic Reform and the Process of Global Integration.” In George L. Perry, and William C. Brainard, eds., Brookings Papers on Economic Activity 1995. Washington DC: Brookings Institution Press, 1–118.

United States Agency for International Development. 2005. ECOWAS Common External Tariff (ECOTrade) Recommendations Regarding Changes in Tariff Rates.

van de Walle, Nicolas. 2001. African Economies and the Politics of Permanent Crisis, 1979–1999. Cambridge: Cambridge University Press. [Accessed:

World Bank. 2006. Nigeria: Country Economic Memorandum. Draft. Washington DC: World Bank.

World Trade Organization. 1998. Trade Policy Review: Nigeria. Geneva: World Trade Organization.

——. 2005. Trade Policy Review: Nigeria. Geneva: World Trade Organization.

This page intentionally left blank

PART THREE
UNDERSTANDING INTERESTS THROUGH RESEARCH

This page intentionally left blank

CHAPTER SIX
RESEARCH UPTAKE IN AN INFORMAL SETTING:
THE CASE OF EGYPT

Ahmed Farouk Ghoneim1

Trade policy in Egypt has experienced several changes in the last five years both in terms of institutional aspects as well as in policy dimensions. At the institutional level, the position of the responsibility for foreign trade has changed, in some cases being assigned to an affiliate or part of a ministry, and in other cases standing as a ministry of its own.2 Moreover, several laws and regulations have been enacted to deal with export promotion, organising the process of exporting and importing, and so on.

Regarding the policy dimension, Egypt has undertaken several liberalisation steps on all fronts: unilateral, regional, and multilateral. Certainly such changes were not just a matter of political decisions, as they had some sort of economic rationale behind them. This economic reasoning stemmed at least partially from the reservoir of research (domestic and international) whose policy implications have found their way to policy makers. The decade between 1990 and 2000 did not experience the same interest in trade issues as the five years between 2000 and 2005, whether on policy or at institutional levels. Certainly there are many aspects that have affected such change regarding trade policy and its governing institutional setup, among which are the implementation of Uruguay Round commitments, establishment of World Trade Organization (WTO), the proliferation of regional trade agreements (RTAs), which Egypt joined, and certainly the role of research and policy advocacy.

1 Associate Professor of Economics, Faculty of Economics and Political Science, Cairo University. Email address: aghoneim@gmx.de. The author would like to thank Susan Joekes, Dianna Tussie, Dina Mandour, and an anonymous referee for providing comments on earlier versions of this text.

2 For the purposes of this chapter, the government agency responsible for foreign trade is referred to as the ‘ministry’, led by a ‘minister’, regardless of whether it is a department in a larger ministry or a stand-alone ministry.

The focus of this chapter is on the role of research in formulating the Egyptian trade policy. It focuses on two episodes, namely the tariff formulation process and the partnership agreement between Egypt and the European Union. These two case studies represent the two policy changes mentioned by Diana Tussie in Chapter 1, where the first episode represents a form of instrumental policy change (in which there have been several incremental changes over the two periods mentioned above) and the second episode represents a form of conceptual policy change (in which a gradual change has occurred in the trade policy of Egypt). Although such a distinction is not so precise—the first episode sometimes includes elements of conceptual change and the second episode contains signals of instrumental change—the distinction is appropriate in order to be able to identify the different roles played by research in affecting the two types of policy changes; the entanglement of policy changes is indicated when necessary.

Moreover, in addition to the two distinct episodes, this chapter adopts a time dimension, differentiating between two periods, 1990 to 2000 and 2000 to 2005. The main reason for this distinction stems from the importance of trade matters due to the implementation of WTO obligations, which peaked in 2000. During the first period, there were several changes where the issue of foreign trade was managed by several ministries.

This chapter addresses several sets of questions.

• How is trade policy in Egypt designed and formulated: Who are the different stakeholders? Which has the upper hand, the executive or the legislative body? What is the role of different lobbies? What is the role of the different international donors? What is the weight of social and political aspects in designing such policy?

• What is the effect of research on the design and implementation of trade policy in Egypt: Through what kind of channels do research outcomes reach policy makers? What type of research depends on whether the research originated in the domestic context or internationally? Is the type of analysis used in the research empirical or descriptive?

• How does the interaction between researchers and policy makers, as well as other stakeholders take place: is it through advisors to ministers, or through stakeholder pressure backed up by research that serves their interests, or are there other means?

• Is research in the trade policy area driven by supply or demand: in other words, is it that the government or business community demands certain aspects to be studied or is that the research community comes up with policy-oriented research that serves their intellectual interests and then submits to the concerned parties (whether the government, legislative body, or the business community)?

• Does research have a role in changing trade policy? What are the reasons behind the changes, if any, that are revealed in a comparison of the two episodes and two periods under discussion in this chapter? For example, is the importance of the influence of research due to the institutional setup governing foreign trade, or is it the result of political economy effects? Moreover, what are the impacts of the technological advances brought by the wide use of internet in effects of the role of research in formulating trade policy?

Section One describes the two episodes of tariff formulation and the Egypt-EU partnership agreement and explains the methodology adopted and the limitations of the study. Section Two explains what is meant by research in the context of this study. Section Three focusses on the institutional setup that governs trade policy formulation in Egypt by identifying the main stakeholders and their role together with their effectiveness in affecting trade policy. Section Four traces trade policy developments in Egypt over the periods 1990 to 2000 and 2000 to 2005, while focussing on the two episodes. Sections five and six represent the main core of the study where they discuss the role of research in formulating trade policy in Egypt and the channels through which research affects trade policy. The different kinds of research are distinguished and the extent to which each type is credible for policy makers is explained. The chapter then assesses the role of research in formulating trade policy while controlling for other factors that might influence trade policy formulation, including information technology, and identifies different types of research. The chapter concludes by providing some policy prescriptions on how to enhance the role of research in trade policy formulation.

Section One: Definition of the Episodes, the Methodology Adopted, and Limitations

Definition of the Episodes

The two episodes examined in this chapter represent two major distinguished changes in Egypt’s trade policy. The first episode deals with tariff formulation (reform and reduction), a relatively incremental process that experienced several changes starting in the 1990s when Egypt began to implement its structural reform program jointly with the World Bank and International Monetary Fund (IMF). The process of tariff reform and reduction has continued since then. This chapter confines its focus to the most favoured nation (MFN) tariff reductions and does not deal with reductions undertaken in the context of RTAs. The MFN tariff reductions might be a result of international commitments with the World Bank or the WTO, or might be due to unilateral actions undertaken by the government of Egypt. This is investigated here through a review of the available research on the topic as well as interviews with prominent trade economists who have written on tariff changes and whether those changes were responding to any type of research or to domestic or external pressures.

The second episode deals with a major policy change, namely Egypt’s joining the EU in a partnership agreement. The event is important as negotiations between Egypt and the EU lasted five years, from 1995 to 2000, allowing ample time for interaction between research and policy. The Egypt-EU Partnership Agreement is considered the most important regional initiative that Egypt has undertaken in its history of regional integration. The EU is the major trading partner for Egypt and represents more than 40 percent of Egyptian exports and imports. Moreover, the relatively long period of negotiations allowed research to proliferate; and this case study is rich with examples of interaction between research and policy decisions and of possible evidence of the impact of research on trade policy. This episode is considered to be a conceptual change as it is akin to Egypt’s decision to open up to the whole world, implying a dramatic change in trade policy, although this change has been implemented gradually.

The Methodology Applied

A distinction is made between the so-called incident-based measures and outcome-based measures. Following Robert Baldwin (1989), incident-based measures refer mainly to policies adopted and rules and regulations enacted (e.g., initiating a tariff reform), whereas outcome-based measures refer to the result of the policies adopted and rules and regulations enacted in terms of quantitative indicators (e.g., percentage of exports to gross domestic product [GDP], trade openness indicators, etc.). This chapter focusses on the role of research in influencing incident-based measures as it is impossible to assess the role of research in affecting outcome-based measures. However, Baldwin’s narrow definition may be extended in order to investigate the impact of research on broadening the policy debate and enriching the discussions on trade policy. Although any spillover effects of the influence of research on policy might not be the main mechanism by which research affects policy, they may indirectly create a policy environment that is affected by research (see chapter 2). In analysing the impact of research on trade policy formulation, this chapter draws on the framework developed by Maja de Vibe, Ingeborg Hovland, and John Young (2002), as well as a number of interviews and personal communications with senior government officials and prominent Egyptian researchers.

The research here adopts a descriptive institutional type of analysis that includes aspects of political economy. My own privileged first-hand experience with the process of trade policy formulation (having served as advisor to two ministers and consultant to donors, as well as being an academic by profession) allows me draw some lessons from anecdotal evidence and case studies of how research affects trade policy in Egypt. With regard to the two episodes, a comparative approach between the two periods (1990 to 2000 and 2000 to 2005), and sub-periods when relevant, is adopted with a focus on the main factors that have affected the role of research in formulating trade policy in Egypt. The research depends on the existing body of literature in this field, which is relatively scarce and is complemented by personal communications with government officials and research community.

Moreover, the study here analyses different types of research including that undertaken by domestic research institutions, international donors, and governmental entities when available.

Research Analyzed

This chapter adopts a broad definition for the term ‘research’ to include all academic research in addition to reports (as long as they are not confidential), policy viewpoints, etc. It includes research undertaken by research institutes, think tanks, in-house research by ministries, and aid donors’ reports. Hence any document that contains information and knowledge, whether it takes any of the aforementioned shapes, is considered research (for a similar approach see Chapter 9).

Limitations

As mentioned, this chapter focusses on incident-based measures and how research is likely to influence them. It is impossible to measure the impact of research on outcome-based measures. Nevertheless, this chapter identifies the effects of research on existing outcome-based measures on the reformulation of incident-based measures. In other words, it considers the role of research in broadening policy debates and enriching policy discussions.

Another limitation is the inability to explain what prevents the full adoption of the research results in the formulation of policies. Research output reaches policy makers, and they take action based upon it; that action is in the form of either decisions or policies adopted. But it is always the case that the full prescription of research policy recommendations is not adopted by policy makers. Any attempt to explain this phenomenon of filtering or modifying of policy recommendations by policy makers must be based on subjective opinion, since it is almost impossible to trace its effect using objective criteria.

Section Two: What Is Meant by Research

Different types of research affect trade policy. There is the research produced by the ministry itself, and there is the research undertaken outside the ministry, whether by academics or multilateral and bilateral donors or other stakeholders. Below is an overview of the existing types of research available in Egypt. The quantity and quality have always been developing in a positive manner over time.

One type of research is undertaken by the ministry and can be classified into three categories. The first is what the ministry publishes in the form of monthly bulletins or other publications that produce statistical figures without in-depth analysis or any recommendations. This research monitors the developments in trade statistics and is mainly undertaken by the research department affiliated with the ministry. The research department is divided into three sectors, one dealing with marketing and commodity studies, one dealing with balance of payment studies, and one dealing with the information sector. The second category of research refers to publications undertaken by different ministry departments that publish their achievements, which again does not reflect in-depth research. The third category is research undertaken at the minister’s request and can be asked for in response to a certain problem or action that requires the minister to answer quickly. This research can be undertaken by the head of an agency affiliated to the ministry or by the staff of the technical office of the minister, or it can be a joint effort between the agencies assigned and the technical office staff. In many cases, this research produces a short, policy-oriented analysis that is not very in-depth and summarises the main policy implications of previous studies. Time and financial constraints often play an impeding role in undertaking rigorous economic analysis that helps trade policy formulation in a strategic sense. Research undertaken by the ministry often takes the shape of an ad hoc, politically pledged study that must be finished in few days to answer a specific question asked for by the minister. However, it should be noted that the proliferation of the so-called technical offices has improved the quality of research. This is mainly the result of several reasons: the quality of the staff of the technical offices, who are non-government officials employed according to the preference of the minister or his or her advisors and who have an academic background and are highly paid; the resources provided to the staff of technical offices in terms of access to computers, internet, and other research facilities, often not available in the same quantity and quality as in other ministry departments; and the policy research mix of the staff, which again is not different from other ministry departments (Ghoneim 2006). The reliance of the ministers of trade on technical offices has increased in the latter time period (2000 to 2005) compared to the former period (1990 to 2000).

Another type of research is that undertaken by research institutes, bilateral and multilateral donors, and other stakeholders such as business associations. It is in most cases policy-oriented research that either reflects the interests of the researchers based on what they perceive to be important issues to be addressed or the interests of donors who have an interest in further investigating a specific topic. Some cases, the number of which has increased dramatically in recent years, are part of the aid projects of both the United States and the EU; the research is undertaken by donors that subcontract it to consultants, both international and domestic, on topics chosen according to the common interest of the ministry and the donors. Hence, as an example, the Americans might be interested in knowing more about problems at Egyptian ports and how to overcome them, which is a concern for the Egyptian government, too; hence a specific research project might be deigned to tackle this issue, financed by the United States Agency for International Development (USAID) and conducted by American and Egyptian consultants. Moreover, think tanks and research institutes may carry out a research project if they receive a demand from the government in general or from the minister specifically to tackle a specific problem. This has happened with the two well-reputed research institutes in Egypt on a number of occasions, namely the Egyptian Center for Economic Studies (ECES) and the Economic Research Forum for Arab Countries, Iran, and Turkey (now called Economic Research Forum, ERF).3 Appendix 3–1 shows the number of working papers, including the number of trade policy-oriented papers, produced by those two think tanks since their establishment. As the two tables, show the proportion of trade policy-oriented papers has always been significant in the number of publications produced by the two institutes (in some years reaching 50 percent and 30 percent of the total produced), although there has been a decreasing trend in the number of trade policy-oriented paper in recent years, whether as percentage of total publications or in absolute terms.

3 ECES, established in 1992, is a non-profit, non-governmental think tank. Its mission is to promote economic development in Egypt by conducting and disseminating applied policy research. The aim of this research is to develop viable policy options for Egypt in light of international experience. ECES activities are carried out in the spirit of public interest, and its board members are well-reputed figures from the business community (see <www.eces.org.eg>). Also in 1992, representatives of a number of multilateral organisations and foundations approached a group of regional economists and scholars for the purpose of creating an independent self-sustaining institution that would help improve the quality and increase the quantity of applied policy-oriented economic research on the Arab region, Turkey, and Iran. This initial outreach resulted in the Economic Research Forum for the Arab Countries, Iran, and Turkey (ERF) in June 1993, with assistance from the Arab Fund for Economic and Social Development, the European Commission, the Ford Foundation, the United Nations Development Programme (UNDP), and the World Bank, subsequently followed by the International Development Research Centre (IDRC). ERF is an independent, non-governmental, non-profit organisation that provides a platform for a wide range of views. Its mission is to initiate and fund policy-relevant economic research, to publish and disseminate the results of research activity to scholars, policy makers, and the business community, and to function as a resource base for researchers through its databank and documentation library. ERF does not conduct research itself but, rather, acts as a research network, clearinghouse, and facilitator (see <www.erf.org.eg>).

Section Three: Institutional Setup Governing Trade Policy Formulation in Egypt

During the 1990s and until 2001 trade policy formulation was the responsibility of the Ministerial Economic Committee, which is chaired by the prime minister and includes a number of ministers involved in trade issues such as the minister of planning (now the minister of economic development), the minister of the economy (now the minister of investment), the minister of industry (now merged with the minister of trade), the minister of agriculture, etc. Trade policy was implemented by the ministry in charge (until the late 1990s, the Ministry of Trade and Supply); however, consultations with all ministries that might be affected by a certain trade policy was always taken into consideration.

In 2002, a special law to promote exports (Law 155 for 2002 for export promotion) was enacted, which aimed mainly at consolidating the decisions related to foreign trade in the Ministry of Foreign Trade and Industry (established in 2001, before which foreign trade was handled by different ministries). Hence, the institutional setup shifted from the diversified role of the Ministerial Economic Committee and the lessened ministerial role in charge to a reduced role for the committee and more active role for the minister of foreign trade. Other features of the law include providing an institutional framework governing exports, establishing a fund for promoting exports, and streamlining different institutional jurisdictions governing exports under the umbrella of one ministry (Ministry of Foreign Trade 2003).

As stated by the WTO (1999), informal advice and consultations on trade policy have always been sought from academia and interest groups, including the General Federation of Chambers of Commerce and the Federation of Egyptian Industries, the Egyptian Businessmen’s Associations, and other trade associations. There has never been an independent body that reviews the government’s trade policy.

Moreover, there are the commodity councils (now called export councils), which are quasi-governmental forums whose members are exporters of a certain set of products and who meet regularly with the minister to discuss policy-related problems affecting their exports. In 2005, there were 17 commodity councils (e.g., textiles, leather products, chemicals, engineering industries). The members of these councils might come from the private or public sector and the minister issues a decree to appoint members. Each council has a secretariat based in the ministry. The role of some export councils has recently included not only tackling the problems that affect their sectors but also formulating strategies that enhance exports of their specific sector. In the process of formulating the export strategy of a certain sector, a huge amount of research is needed and hence politics, reality, and research are blended in a document that reflects the needs of this specific sector.

The Federation of Egyptian Industries is a quasi-governmental body that protects the interests of different industries. Fifteen industrial chambers are affiliated to the federation. Of all the non-governmental organisations (NGOs) in Egypt, it has the most influence on trade policy formulation. The head of the federation and a percentage of the board members of each chamber is appointed by the Minister of Trade and Industry, with the rest elected by the members of each chamber. The federation is always represented in official meetings that deal with trade and its arguments are often well respected and taken into consideration. The federation has a special committee on foreign trade policies, which includes among its members independent experts, business community representatives, and representatives of different chambers. The committee’s role is to express the opinion of the federation on whatever trade policy is conducted or proposed by the government.

The process of trade policy formulation, by its nature, is relatively complex and thus almost all ministries have a say in whatever policy is undertaken, depending on whether such policy affects a particular ministry’s interests. For example, the Ministry of Health is extensively consulted in setting health measures regarding different products, and the Ministry of Agriculture is heavily involved in the process of importing cotton. The Ministry of Foreign Affairs has always been represented whenever RTA negotiations with another country or negotiations within the context of the WTO are taking place. Indeed, there is always friction between the Ministry of Foreign Affairs and the Ministry of Trade over which should lead such negotiations, although the extent of cooperation or friction has varied depending on the ministers in charge.

Business associations, at least the big ones, have always been consulted whenever a change in trade policy is initiated by the government. However, there is minor evidence of the influential role they play in formulating the trade policy. On the contrary, business associations have always claimed that their opinions are not being considered (a situation that started to change in 2005). The Chamber of Commerce has never played a significant role in the formulation of Egypt’s foreign trade policy, although it is deeply engaged in the formulation of domestic trade policy.

The institutional setup that governs trade policy in Egypt is complex; however, the major leader has always been the Ministry of Foreign Trade. The extent of consultations with other stakeholders has varied over time, as has its effectiveness. Despite the fact that there exist several institutional channels (committees, meetings, etc.) that ensure the representation of different stakeholders, it has been never clear how the actual process of formulating trade policy takes place. The role of big businesses and business leaders with strong political influence has always been evident in the formulation of trade policy, but the process was never transparent.

Finally, the role of the Parliament in formulating and monitoring Egypt’s foreign trade policy has been insignificant where it has been confined merely to the ratification of whatever foreign trade agreement the government concludes. The renegotiation of a certain agreement is not allowed by the constitution, and blocking the ratification has never happened. Parliament’s role in monitoring the implementation of trade policy has almost been non-existent.

A comparison of the two periods (1990 to 2000) and (2000 to 2005) reveals that trade policy formulation was more of a consultation process between different ministries before 2001, whereas since then the role of the minister of foreign trade has controlled the process. Moreover, the consultations with other stakeholders as NGOs and business associations have been relatively more involved in the second period, although the effectiveness of such consultations has always been questioned. The process of trade policy formulation has experienced a better institutional structure in the second period compared to the first; nevertheless, the effectiveness of such a structured institutional setup in the form of committees and meetings with different stakeholders is different for each type of trade policy adopted. For example, consultations in some cases were highly effective whereas in other cases a non-transparent mechanism has been adopted that undermined the institutional setup of the consultations.

It might be the case that the institutional setup played a role in how research affects policy. When the responsibility of trade decisions is shared among a number of ministers, the need for supportive research to back up a certain decision might be less urgent than would be the case when the responsibility falls on one minister. In this case, the minister in charge might need research to support his decisions. The benefit of research in political terms is likely to be less if the decision is shared by a number of ministers. Moreover, when the portfolio of the minister handling foreign trade diversifies to include other issues such as industry or domestic trade, there is reduced need and time spent asking for research than if the portfolio is restricted to foreign trade. Thus, the political weight of research declines as the portfolio expands. The combination of a culture more welcome to research in the second period with the regular interaction among policy makers and academics, together with the nature of the institutional setup governing trade policy, has created a more conducive environment for the interaction between research and policy, especially in the 2001–2005 period where the foreign trade ministry was established on its own.

With regard to the institutional setup of these two episodes, in the first one—related to tariff formulation—at the top there is a committee for tariffs that consists of a number of ministers and is chaired by the minister of finance. Below this committee is one of senior government officials from different ministries including the Ministry of Finance, the Ministry of Foreign Trade, and others. Any proposal (submitted by business) related to tariff change is submitted to the Ministry of Finance, specifically to the committee chaired by the Minister of Finance, which eventually passes it to the committee of officials. Moreover, any political decision to reform tariffs has to be passed to those two committees to initiate such reform. For the negotiations of the Egypt-EU Partnership Agreement, in 1995 headed a team of negotiators was formed by an ambassador from the Ministry of Foreign Affairs. The team held 491 hearings with different domestic stakeholders and 278 individuals who participated in the negotiations in different periods and meetings. The structure of the negotiating team was not rigid but was flexible depending on the needs of the negotiations, although the head of the negotiating team remained the same throughout the whole period of negotiations.

Section Four: Overview of Trade Policy Developments in Egypt between 1990
and 2005 with Special Focus on the Two Episodes

General Overview of Egypt’s Foreign Trade Policy Status

Egypt has never been a major player in the world economy in terms of trade, with the exception of long staple cotton where it has a large market share. Its share of total world exports as well as imports remains around 0.1% (WTO 2007). Its services trade performance has always been better than its merchandise trade performance. For example, Egypt is listed among the world’s 40 largest exporters of commercial services, but it has never appeared on the list of merchandise goods. The reason behind such a relatively advanced position for services compared to merchandise is the revenue from the Suez Canal, which is listed as transport exports and tourism. Hence Egypt enjoys a current account surplus and a chronic deficit in its merchandise balance of trade.

First Episode: Tariff Formulation

Egyptian trade policy experienced magnificent changes between 1990 and 2005 (Ghoneim and El-Mikawy 2003). The changes were all in the direction of liberalisation, with few exceptions where some backtracking on such liberal moves was evident. For example, the non-weighted average tariff rate declined from 42 percent in 1991 to 27 percent in 1999 (from 31 percent to 21 percent if tariff peaks on alcoholic beverages are excluded) and further to 20% in 2004 (WTO 2005). The first wave of tariff cuts between 1991 and 1999 was largely a result of the Economic Reform and Structural Adjustment Programme (ERSAP) that Egypt adopted jointly with the World Bank and the IMF starting in 1991 (WTO 1999; see also Table 3–1). The tariff cuts implemented in 2004 were a unilateral initiative of the government of Egypt. That the first episode under discussion represents an instrumental change is evident here where tariff reductions and reforms have been spread over a long time. A large array of non-tariff barriers was removed between 1991 and 1999 as part of the trade policy reform package adopted within the ERSAP. Moreover, as a result of the Uruguay Round, Egypt bound more than 98 percent of its tariffs, compared to an average of 73 percent for developing countries. With regard to the backtracking on trade liberalisation, in 1998 some 12 percent of the tariff lines had applied rates that exceeded their bound levels (WTO 1999).

A number of reforms have been undertaken, including the reduction of tariff bands from 27 to 6 bands in 2004 (Helmy 2005). Other institutional and policy reforms related to customs reform have been taking place, although at a slower pace of implementation, mainly for political and social reasons.

In general it can be argued that in the first period (1990 to 2000) most of the tariff changes were a result of international pressures coming from Egypt’s commitments to the World Bank or the WTO. In the second period (2000 to 2005) the tariff changes came as a result of completing international commitments and national initiatives as part of larger economic reform package and especially of an expansionary fiscal policy to lift the Egyptian economy out of its recession. The role of research in this episode is investigated in the next two sections.

Table 3–1: Developments in Tariff Rates in Egypt (1986–2005)

Source: WTO (1999; 2005).

Second Episode: The Egypt-European Union Partnership Agreement

Egypt’s trade relations with the EU date back to the 1970s, when the two countries signed the General Cooperation Agreement that guaranteed duty-free access of Egyptian industrial exports (with few exceptions) to the EU, without granting any kind of reciprocal treatment for EU exports to Egypt. The framework governing trade relations between Egypt and the EU started to change dramatically after the announcement of the Euro-Mediterranean Partnership (the Barcelona process) in 1995. A new regime began to govern the EU regional trade policies toward South Mediterranean countries, including Egypt. This new relationship was based on mutual duty-free access for industrial products and encompassed additional political, cultural, and social dimensions. Moreover, the Egypt-EU Partnership Agreement, which is the byproduct of the Barcelona process, includes a new scheme for abolishing tariffs on the Egyptian side over a relatively long time span of 12 years (with the exception of automobiles, whose liberalisation extends beyond 12 years). The agreement to enter into a partnership agreement, and especially into a free trade area with the EU, represents a drastic move for Egypt as the EU is its largest trading partner in both exports and imports (representing a conceptual change). Hence, since the announcement of the Barcelona declaration in 1995, Egypt has experienced a huge debate over the partnership agreement. The debate was not about whether to join the EU in a partnership agreement or not, but about the terms and conditions of tariff abolishment, agricultural quotas, etc.

The partnership agreement represents a distinguished episode (in the context of conceptual policy change) that is rich in interactions among the different stakeholders in the trade policy arena and is considered a specific case study, with a clear beginning and end. In the episode of the reduction and reform of tariffs (instrumental policy change), the case is rather loose, with much vagueness regarding the stakeholders behind it, the interactions among different stakeholders, and between the stakeholders and the policy makers. The next two sections investigate whether research has played a role in shaping trade policy.

Section Five: Role of Research in Formulating Trade Policy

As explained in Section Two, there are different types of research that affect trade policy. There is the research produced by the ministry itself and there is the research undertaken outside the ministry, whether by academics or by multilateral and bilateral donors or other stakeholders.

The effect of research on policy making in Egypt is not confined to ministers or their advisors reading studies and adopting some of the recommendations therein. There exist other mechanisms by which research influences trade policy formulation, whether through ministers attending conferences or by ministries hiring academics as advisors, a case that shows how research can be diffused throughout the process of trade policy formulation, although indirectly. The minister of foreign trade who served from 2001 to 2004 came from an academic background and had two advisors with academic backgrounds, and his successor has a deputy who also comes from academic background. This link is often overlooked when assessing how research affects trade policy formulation.

Did Research Influence Trade Policy Formulation?

Researching the first episode included interviewing a number of authors who have written on tariff reform at different times. These interviews showed that research did not affect directly trade policy (see Kheir El-Dinn and El-Dersh 1992; Refaat 1999, 2003). According to Hanaa Kheir El-Din and Amal Refaat, their research was undertaken to assess an existing situation, and when they provided critiques or policy evaluations, there was a time lag in implementing the resulting policy change and several issues they had referred to were ignored.4 For example, the continuing existence of high tariffs on specific items (tariff peaks) and the persistence of high effective rates of protection in several sectors were never explained by policy makers and have been dealt with very slowly in different tariff reform programmes. However, the existence of tariff lines exceeding the bound WTO rates that appeared in WTO’s trade policy reviews of Egypt (WTO 1999; 2005) have been dealt with partially by policy makers with no clear indication that such changes happened as a result of research published by WTO. In this episode, research deals with incident-based measures that provide some kind of criticism on the prevailing tariff structure and the loopholes of the system in place. The research usually suggests some sort of policy reforms to reduce tariff escalation or the effective rate of protection or tariff peaks, besides the reform of customs-related measures. In most cases, the issues of tariffs and customs reform, both in Egypt and other countries, are highly politically sensitive, and hence it is difficult to predict that research would likely influence such reforms in a direct, linear manner. The research in this a situation is more likely to provide policy makers, among other consumers of the research, with public awareness of the negative implications of the skewed system of tariffs in general.

Other studies undertaken by international organisations and bilateral donors, together with those written by domestic academics, might be used as evidence of the distorted and high tariff rates that used to be applied by the government. However, it is almost impossible to identify whether the published studies were used to exert pressure on policy makers. It can be safely argued that tariff reductions and reforms have adopted some of the suggestions and recommendations of such studies

4 Interviews with Hanaa Kheir El-Din and Amal Refaat.

although in an incomplete form. The research produced by the ministry itself is by nature biased and hence not likely to influence policy making. As argued above, the ministry’s research unit has been used to produce trends in exports, imports, etc., whereas the role of the technical staff has been geared to responding to the minister’s requests and summarising what has been produced by other studies. Hence, it is unlikely that the in-house research has positively affected the policy-making process. The change of the institutional setup to allow more input from different stakeholders and especially the business community in the second period (2000 to 2005) could have played a role in transmitting research findings to policy makers. This is an important issue especially because the second period coincided with the rise of a new segment of the business community that is export oriented and has always been pressing the government for tariff reduction on its inputs. The research findings helped to enrich the dialogue between the business community and policy makers. Moreover, the issue of consumers’ interests started to gain more importance in the second period, when high tariffs sometimes worked against such interests and thus policy makers used research findings to protect consumer interests whenever it was necessary to unblock the position of some lobbies.

To analyse the second episode, the head of the negotiating team that negotiated the partnership agreement was interviewed.5 He revealed interesting insights on the role of research in formulating trade policy. He reported that research undertaken in relation to the partnership agreement was, in many cases, heavily politicised, signalling the loss of credibility. He pointed out that researchers even in some international organisations changed the models they apply or the data they use to reach certain results that can help policy makers by backing up their arguments. As a result he learned it was most important to differentiate between ‘good’ and ‘bad’ research. His ability to draw this distinction improved over time and benefited from consultation with different stakeholders. Furthermore, he declared that he learned a lot from the research and that his negotiating positions were affected by the research produced by both local think tanks and international organisations. The role of research in affecting trade policy in this episode profited

5 Interview with Ambassador Gamal Bayoumi, the head of the Egypt-EU Partnership Agreement negotiating team. The international organisations and the research undertaken are not identified for confidentiality reasons.

from an environment conducive to the interaction between research and policy referred to earlier. In fact, policy makers needed research in order to start the public debate on this issue. In other words, it can be argued that research was driven by supply as well as by demand in this area, compared to the first episode in which research was mainly oriented toward supply. The only demand-driven aspect of the first episode was the investigation of the impact of tariff cuts on the government revenue.

Hence, the influence of research on trade policy formulation differs according to time and issue investigated. In the second period (2000 to 2005) and the second half of the first period (1995 to 2000), research seems to have been relatively more influential in affecting trade policy formulation than in the first half of the first period. This might be due to the creation of a more conducive environment for research, the proliferation of research by outside the ministry, better interaction among policy makers and researchers, and advancements in information technology that facilitated the dissemination of research. If the influence of research is distinguished by episodes, research can be seen to have had relatively more influence in the second episode (Egypt-EU Partnership Agreement) than in the first episode (tariff reductions). The reasons behind the different impacts of research on trade policy formulation are tackled in Section Six.

Section Six: Assessment of the Role of Research in the Formulation of Trade Policy

Assessing the role of research in formulating trade policy is a daunting task. Many variables affect the formulation of trade policy, research being just one of them; hence to be able to disentangle the effects of research in the formulation of trade policy from the effects of other variables is most difficult (see Chapter 8 for a similar argument). In addition, the technological advances (in terms of internet), changes in institutional setup, and administrative developments (in terms of the proliferation of technical offices) might affect the assessment in comparing the two periods and the two episodes under discussion here. This assessment begins with an analysis of the episodes based on empirical evidence when available, interviews with researchers, government officials, and members of the business community, and my own impression. It then moves from this micro-level analysis to a more general assessment of how research affects policy.

The Two Episodes

The two episodes showed that research has affected policy, although in different forms. The effect of research in the second episode (the Egypt-EU Partnership Agreement) was direct and clear, whereas its impact in the first episode (tariff formulation) was non-linear and suffered from time lags. The differences in the influence of research on trade policy formulation arise from a number of several factors, including the nature of problem investigated, the significance of the policy change, and the institutional setup. In the first episode, policy change was an ongoing process and political lobbies coordinated with policy makers in a relatively non-transparent manner. In the second episode, policy change was a once-for-all change, so there had to be enough time for debate, which thus allowed more time for research to influence policy, and the role of lobbies was evident in a relatively more transparent manner than in the first episode. The nature of the second episode (being limited in time and having a starting and ending point in terms of implementation), combined with the favourable developments on the institutional front, marked a clearer role played by research in affecting policy that fed back in the terms of negotiations adopted by the Egyptian team with the EU. Representing some form of conceptual policy change where policy, business, and research circles are hungry for research and information, research seemed to play an important role in affecting policy. The first episode, representing some form of instrumental policy change where the process has no clear time dimension, is subject to multiple political pressures, and has several social implications, showed that research is handicapped in capturing all such variables in one equation. Nevertheless, the published local research and international reports recommendations seem to have been adopted in a partial manner over the years when tariff reforms (as shown in Table 3–1) seem to have responded to the concerns flagged in different studies, although with a time lag. The effect of whether research is driven by supply or demand seems to affect the speed of adopting some of the research recommendations. The research in the second episode was driven by both demand and supply and hence its outcome was highly circulated and debated, whereas in the first episode it was merely supply driven and hence did not experience high circulation rates.

General Assessment of How Research Influences Trade Policy in the Egyptian Context

Using the framework developed by the Oversees Development Institute Julius Court and John Young (2004) concluded that in the Middle East–North Africa region there is a weak link between research and policy where policy makers often neglect the research findings, and there is a missing link between academics and policy makers. In fact, this finding contradicts with the severe need of research findings expressed by policy makers in the developing countries as stated by Lyn Squire (2002). However, the case of Egypt is slightly different: the link between policy makers and academics has been evident and was significantly strengthened in the second period, compared to the first period (for example, as explained above, by ministers attending academic conferences, acting as discussants for relevant papers, or even participating in workshops). However, the research findings often take time to be implemented by policy makers and in some cases are completely ignored, which is normal as research findings often do not take into consideration the sociopolitical context. Personal contacts between researchers and trade ministers in Egypt have proved to be effective (see Eremenko and Lisenkova 2004 for a similar argument in Ukraine). Most of the research undertaken has focussed on incident-based measures that need to be considered to improve the process of trade policy formulation. In most cases, despite focussing on incident-based measures, research has depended largely on empirical evidence or outcome-based measures, whether comparing trade data for Egypt over a time span or undertaking cross-country analysis.

With regard to research undertaken by the ministry, its impact throughout the two periods (1990 to 2000 and 2000 to 2005) has remained modest to a large extent. Despite access to internet, which increased the flow of information available to the researchers, they did not use it effectively. This is a result of several reasons, including a lack of incentives (since they are government officials who are paid regardless of how well they fulfil their job), a low level of English proficiency, neglect from the ministers, and the gradual substitution of government researchers by technical office staff. Hence the role of the research department did not change much in the two periods in terms of producing statistical data without in-depth analysis. However, the two episodes of tariff formulation and the Egypt-EU Partnership Agreement did not depend on this type of research. Moreover, in 2000 and 2002 the Ministry of Foreign Trade published four booklets on the partnership agreement in Arabic to disseminate information; these were free of charge and circulated in all academic and policy-oriented circles.

Research carried out by different ministry departments was also limited in terms of its effectiveness, as rather than undertake real research those departments simply published their achievements and their roles. With regard to research carried out at the request of the minister, one example relates to Egypt’s export promotion strategy, which dates back to 1995, when the Ministry of Supply and Trade provided a 20-year strategy up until 2017 through its export promotion centre (established in 1979). Neither the rates of export growth or sectors targeted in this strategy had any scientific basis for the rates of growth of exports, which ranged between 10 percent annual growth rate for the first five years and reached 16 percent annual increase in the last five years) (see WTO 1999). In 2000, the minister instructed his staff at the technical office to disregard the old export promotion strategy and collaborate with the Foreign Trade Sector affiliated to the ministry to develop a new one. Again, neither the rates of growth nor the sectors targeted had any scientific basis. In 2004 when the newly appointed minister completely ignored both export promotion strategies and asked for yet another new one; the project was assigned to one of the bilateral donors and subcontracted to domestic and international consultants. Neither of the two episodes under discussion in this chapter depended on this type of research.

The amount of research undertaken by the ministry’s technical staff in conjunction with affiliated organisations increased dramatically, and its role has been comparatively effective in relation to the other two types of in-house research. This is thanks to the proliferation of technical offices with capable staff proficient in English and with good exposure to the business community and academia. However, as mentioned earlier, the type of research is often constrained by lack of time and is undertaken according to the urgent needs of the minister. There is no research agenda developed at the beginning of each year or any kind of strategic research conducted systematically. Most of the research is done on the minister’s demand, as needed, on short notice, and is a collection of existing studies on a particular topic. Such research might have affected the process of policy making; however, because the research is unpublished, its effectiveness cannot be confirmed. Moreover, in many cases this type of research was simply a summary of work conducted elsewhere and hence cannot be considered actual research.

The amount of research produced by international donors increased in both quantity and quality from the first period to the second. This was partly thanks to the comparatively increased importance of trade policy in the second period, as a result of the establishment of the WTO in 1995 and the need to implement its agreements, and partly the result of increased attention to Egypt entering into a partnership agreement with the EU in 2004 as well as to the negotiations with the U.S. to start a free trade area. However, one of the problems of such research is that it remains confidential, as required either by the sponsor or the ministry, so that it is difficult to determine how it affects trade policy formulation. This has negative impact on the dissemination of ideas and on the need to build consensus to support or refute such research outcomes. The interviews conducted for this study showed that this type of research was very evident during the second episode, whereas its impact on trade policy has not been clear. The effect of this type of research was more evident in the second episode than in the first.

The research capacity of other stakeholders, such as the Federation of Egyptian Industries and the business associations, did not improve much over the two time periods. However, in the second a number of businesspeople started to establish their own research units, and hired academics to research particular topics. This was evident in the case of at least two businessmen, who are members of Parliament and need data to support their suggestions in the business community and Parliament.

Finally, think tanks and research institutes have diversified the agendas of both their research and their partners. An effective union of research institutes, donors, business community, and policy makers formed during the second period. In many cases the policy implications in the research studies have been implemented by policy makers, including, for example, the upgrading of international standards, the harmonisation of tariff levels, the cutting of red tape, and other issues related to trade policy that were mentioned in several studies during the second half of the 1990s and were implemented between 2000 and 2005. Domestic think tanks and research institutes have been effective in affecting trade policy, as has been evident in the second episode.

In general, one of the main obstacles that adversely affects the impact of research on the formulation of trade policy is the fact that research often ignores political aspects, the power of lobby groups, public opinion, and the media (for a similar argument, although in a general context, see Ajakaiye 2005 and references therein). Another main obstacle that affects the good marriage between research and trade policy formulation is that research might provide a good analysis of the problem at hand, but often fails to provide a realistic, pragmatic solution to solve such a problem (for a similar argument but in a general context, see Edwards 2004). In many cases, researchers fail to get a sense of the reality, either because they are armchair economists or because they cannot have access to the political economy dimensions of the problem they are researching due to confidentiality or the reluctance of government officials to provide them with the necessary information. Moreover, there has always been this type of love-hate relationship between academics and government officials, which is rooted in the Egyptian culture: they often claim to respect each other but in reality academics claim that government officials are narrow minded and government officials claim that academics live in their own world, which has nothing to do with reality (for a similar argument applied to the Latin American context, see Aninat del Solar and Botto 2006). Furthermore, it is often the case, although this has relatively improved significantly, that research findings are not conducted in a manner digestible to policy makers or the public.

In trying to explain the impact of research on trade policy formulation, at least in shaping incident-based measures, this chapter uses the framework developed by de Vibe, Hovland, and Young (2002) because the Egyptian case fits their argument. De Vibe and her colleagues argue that the following assumptions are invalid: the link between research and policy is a linear one where research influences policy in a one-way process, there is a clear divide between researchers and policy makers, and knowledge is confined to a set of specific findings. The Egyptian case study fits the alternative framework, which they suggest argues that the link between research and policy is complex and dynamic. This framework recognises several stylised facts that appear in the Egyptian context, including the fact that the link between policy and research is shaped by multiple relations and a reservoir of knowledge (as is the case of hiring academics as advisors). It also recognises that ‘although research may not have direct influence on specific policies, the production of research may still exert a powerful indirect influence through introducing new terms and shaping the policy discourse’ (8): the research that was produced affected the incident-based measures, although not immediately. Certainly the alternative framework fits the second episode more than the first, where the whole Egyptian social, cultural, institutional, and political structure allowed for. According to de Vibe and her colleagues (8), Carol Weiss (1977) ‘describes this as a process of “percolation”, in which research findings and concepts circulate and are gradually filtered through various policy networks’. Such filtration might take place through the role of advisors with academic backgrounds, the impact of the media in policy advocacy, or the participation of ministers in academic conferences and workshops. The increasing influence of research on trade policy in the second period, compared to the first, was confirmed by a number of interviews with senior government officials and staff members of aid donors’.6

Conclusion and Policy Implications

In Egypt, research is not well appreciated in all the forms discussed here. For example, the World Development Report 2005 identified that only 0.2% of gross domestic product (GDP) in Egypt is devoted to research and development (World Bank 2005). However, trade policy has been one of the areas that has benefited significantly from research abundance if compared to other fields. The problem in Egypt might have been a lack of research in the early 1990s, when data were not available, and the international and domestic contexts were not hungry for research, a situation that has changed dramatically since 1995. For Egypt, the main problem in this regard lies in the absence of consistent, sustainable type of institutional setup that bridges research and policy. Many of the conventional problems related to the absence of a strong link between research and policy in developing countries have been explored by Julius Court and John Young (2003) and by Diana Stone, Simon Maxwell, and Michael Keating (2001), who have tackled issues related to the political culture, external influences, the role of lobby groups, and a lack of understanding other political context by researchers—all of which apply to Egypt to a large extent when dealing with role of research in trade policy formulation.

That said, the link between research and policy has improved significantly. However, the strength of the link varies according to the preferences of the individual minister in charge, and it remains evident that

6 Six interviews were conducted with senior government officials, staff members of donor organisations, and former advisors to ministers of trade.

the selection of evidence provided by this research is based on political and social reasons (for example, in many studies the negative impact of engagement in a specific RTA has been identified, yet the minister proceeded with the negotiations for that agreement). The second episode of the Egypt-EU Partnership Agreement showed that research can be heavily politicised and thus should be dealt with prudently. The first episode of tariff formulation showed that the impact of research on policy might take several years to be considered, and it is not clear what type of channels are used to link research and policy. However, in the end, it seems from research findings and policies implemented that there are several similarities. The differences between the two episodes, whether in terms of being instrumental or conceptual change, time dimension, or change of institutional setup, explain that the role of research in affecting policy cannot be understood without accounting for such aspects. Besides the lack of a sustainable institutional setup that governs the relationship between research and trade policy formulation, lack of transparency explains the limited understanding of why some research findings are well taken as supporting evidence for policy actions while others are not. The distinction between the two episodes emphasised that the role of the demand and supply of research seem to play an influential role on the speed and circulation of the research in policy circles. Whenever the research is driven by demand, the findings—especially if in line with policy makers’ intentions—seem to have a high circulation rate and expectedly more influence.

Moreover, the Egyptian experience identified that research affects trade policy in different manners through choosing ministers, deputy ministers, and advisors from the academic community, which has a positive spillover effect on the marriage between research and trade policy formulation, even if undertaken indirectly. Moreover, the tradition of ministers attending the opening sessions and acting as discussants in academic conferences and workshops has indirectly increased the impact of research on trade policy formulation.

To sum up, the influence of research on trade policy formulation has been evident and has gained strength over time, where a number of incident-based measures that have taken place since 2000 were based on research findings. The detection of the exact causality between such research findings and policy implications remains an impossible task (as seen in the first episode of tariff formulation); however, the experience of Egypt shows that research has had a stronger influence on trade policy, even though the channels might be indirect or there might be a time lag. The extent of the influence of research on trade policy formulation differs by time, institutional setup, and the episode investigated. What remains missing in linking research and trade policy formulation is the identification of a sustainable institutional setup that can ensure that such link is not created in an ad hoc manner and that there is a systematic way of undertaking research that is needed by policy makers while ensuring the credibility of research.

References

Ajakaiye, Olu. 2005. “Utilization of Economic Research Findings in Policy Making in Sub-Saharan Africa: Challenges and Opportunities.” Paper prepared for ‘African Economic Research Institutions and Policy Development: Opportunities and Challenges’, Dakar, 28–29 January. <www.idrc.ca/uploads/user-S/11085715181Utilization_ Economic_Research_Finding.pdf> [Accessed: January 2008].

Aninat del Solar, Augusto, and Mercedes Botto. 2006. Trade Negotiations and Policy Design in Latin America: Is There Any Scope for Research Impact? Bridging Brief Series. Moscow: Global Development Network. <www.eerc.ru/details/download.aspx?file_id=10016> [Accessed: January 2008].

Baldwin, Robert E. 1989. Measuring Nontariff Trade Policies. NBER Working Paper No. 2978. National Bureau of Economic Research. <ideas.repec.org/p/nbr/nberwo/2978.html> [Accessed: January 2008].

Court, Julius, and John Young. 2003. Bridging Research and Policy in Development: Insights from 50 Case Studies. Workign Paper 213. London: Overseas Development Institute. <www.odi.org.uk/publications/working_papers/wp213.pdf> [Accessed: January 2008].

——. 2004. ‘Bridging Research and Policy.’ Forum: Newsletter of the Economic Research Forum 11(1).

de Vibe, Maja, Ingeborg Hovland, and John Young. 2002. Bridging Research and Policy: An Annotated Bibliography. Working Paper 174. London: Overseas Development Institute. <www.odi.org.uk/publications/working_papers/wp174.pdf> [Accessed: January 2008].

Edwards, Meredith. 2004. Social Science Research and Public Policy: Narrowing the Divide. Policy Paper No. 2. Canberra: Academy of the Social Sciences in Australia. <www.assa.edu.au/Publications/OP/op22004a.pdf> [Accessed: January 2008].

Egypt. Ministry of Foreign Trade. 2003. Export Promotion Strategy. Second year. Cairo.

Eremenko, Igor, and Katerina Lisenkova. 2004. Financial Sector Reforms in Ukraine: Role of Local Research and Foreign Advisors. Bridging Brief Series. Moscow: Global Development Network. <www.eerc.ru/details/download.aspx?file_id=10009> [Accessed: January 2008].

Ghoneim, Ahmed Farouk. 2006. ‘Law Making for Trade Liberalization and Investment Promotion in Egypt.’ In Noha El-Mikawy, ed., The Imperative of Good Governance: Economic Reform, Political Will, Incentives, and Capacities for Meaningful Participation. Cairo: Economic Research Forum for the Arab Countries, Iran, and Turkey.

Ghoneim, Ahmed Farouk, and Noha El-Mikawy. 2003. ‘Political Economy Aspects of Trade Reform in Egypt.’ In Heba Nassar, and Ahmad Ghunaym, eds., Institutional and Policy Challenges Facing the Egyptian Economy. Cairo: Center for Economic and Financial Research and Studies.

Helmy, Omneia. 2005. The Impact of Trade Liberalization on Government Revenues in Egypt. ECES Working Paper No. 101. Available in Arabic. Cairo: Egyptian Center for research uptake in an informal setting 179 Economic Studies. <www.eces.org.eg/Publications/Index3.asp?l1=4&l2=1&l3=115> [Accessed: April 2007].

Kheir El-Dinn, Hanaa, and Ahmed El-Dersh. 1992. ‘Foreign Trade Policy in Egypt: 1986–1991.’ In Said El-Naggar, ed., Foreign and Intra-Regional Trade Policies of Arab Countries. Kuwait: Arab Monetary Fund.

Refaat, Amal. 1999. New Trends in Egypt’s Trade Policy and Future Challenges. ECES Working Paper No. 36. Cairo: Egyptian Center for Economic Studies. <www.eces.org.eg/Publications/Index3.asp?l1=4&l2=1&l3=36> [Accessed: April 2007].

——. 2003. Trade-Induced Protection for Egypt’s Manufacturing Sector. ECES Working Paper No. 85. Cairo: Egyptian Center for Economic Studies. <www.eces.org.eg/Publications/Index3.asp?l1=4&l2=1&l3=98> [Accessed: April 2007].

Squire, Lyn. 2002. “Bridging Research and Policy: An Overview.” Paper prepared for ABCDE, Oslo, June. <wbln0018.worldbank.org/eurvp/web.nsf/Pages/Paper+by+Lyn+Squire/$File/SQUIRE.PDF> [Accessed: January 2008].

Stone, Diane, Simon Maxwell, and Michael Keating. 2001. “Bridging Research and Policy.” Paper prepared for an international workshop funded by the United Kingdom Department for International Development, Warwick University, 16–17 July. <www.gdnet.org/pdf/Bridging.pdf> [Accessed: January 2008].

Weiss, Carol. 1977. ‘Research for Policy’s Sake: The Enlightenment Function of Social Research.’ Policy Analysis 3(4):531–545.

World Bank. 2005. World Development Report 2005: A Better Investment Climate for Everyone. Washington DC: World Bank and Oxford University Press. <siteresources.worldbank. org/INTWDR2005/Resources/complete_report.pdf> [Accessed: January 2008].

World Trade Organization. 1999. Trade Policy Review: Report by the Secretariat. WT/TPR/S/55. Geneva: World Trade Organization. <docsonline.wto.org:80/DDFDocuments/t/WT/TPR/S55-2.DOC> [Accessed: January 2008].

——. 2005. Trade Policy Review: Report by Egypt. WT/TPR/G/150/Rev.1. Geneva: World Trade Organization. <docsonline.wto.org:80/DDFDocuments/t/WT/TPR/S150R1-0.doc> [Accessed: January 2008].

——. 2007. Statistics Database. Trade Profile for Egypt, October. <stat.wto.org> [Accessed: January 2008].

Appendix

Working Papers Produced by the Economic Research Forum (1994–2003)

Source: Compiled by author.

Working Papers Produced by the Egyptian Center for Economic Studies (1996–2005)

Source: Compiled by author.

CHAPTER SEVEN
RESEARCH UPTAKE IN AN INSTITUTIONALIZED
SETTING: THE CASE OF TRADE FACILITATION IN INDIA

Abhijit Das

A key challenge for trade negotiators and trade policy makers in formulating a country’s negotiating strategy in multilateral and bilateral trade negotiations lies in identifying and reconciling diverse range of interests of stakeholders. To illustrate, lowering the customs duty on raw materials is likely to be supported by industries downstream that would benefit from using cheaper raw materials. However, domestic producers of raw materials would oppose reducing the tariff on these products to avoid losing market share or experiencing price suppression or depression on account of cheaper imports. Thus, the same measure— lowering the customs tariff in this case—would affect different segments of stakeholders differently. This is likely to result in different groups of stakeholders seeking to influence trade policy in different directions, often conflicting with each other.

While the above example of a divergent impact of a reduction in customs tariff on stakeholders can be viewed as being simplistic, there is hardly any subject in international trade negotiations that does not involve a clash of interests in the domestic economy. Before a particular trade policy option can be decided, this issue requires a comprehensive examination so that the various interests involved are properly weighed and a balanced position can be worked out in the best interest of the country as a whole. There may also be a need to weight the short-and long-term interests of the domestic economy. Such a detailed examination of trade issues must be based on economic and social considerations, with a view to the various interests and linkages among different aspects of the economy as well as to overall macroeconomic factors. it calls for serious research and wide consultations with different government bodies, interest groups, and economic operators.

While the crucial role of research in influencing trade policy is universally recognised, few specific instances, particularly in developing countries, can be cited in which research led to changes in trade policy. Existing literature on the role of research on trade policy changes in the developing world focuses on two aspects: why there exists a need for research by developing countries when a significant amount of such research is being done by the developed world, and whether there have been occasions when research by developing countries has influenced trade policies.

Regarding the first issue, a paper by Arvind Panagariya (1999) highlights the need for research by developing countries in the context of World Trade Organization (WTO) negotiations. The author argues that given the far-reaching implications of the decisions made under the auspices of the WTO, the need for continually conducting research and developing long-term strategies is extremely important. Developed country members of the WTO such as the United States and the European Union take such research very seriously and, by the time they are ready to place a subject on the WTO agenda, have conducted numerous studies on it. Furthermore, according to Panagariya, developed countries also promote research in multilateral organisations on the impact that negotiations would have on developing countries.

Panagariya (1999) points out that developing countries heavily depend on the World Bank for research on WTO-related issues that concern them.1 He argues that this dependence might be risky because at crucial moments during the negotiations, these institutions promote the notion that the interests of developed and developing countries are in harmony. While this may be true to some extent in matters such as trade liberalisation, when it comes to issues such as the Agreement on Trade-Related Intellectual Property Rights (TRIPS) and the social and environmental clauses in the WTO, the interests of the two sets of countries are in direct conflict. He concludes that it is absolutely essential for developing countries to be able to critically examine the research disseminated by such institutions and also supplement it by research they have themselves conducted.

In a similar vein Mbekeani Kennedy, Taimoon Stewart, and Nguyen Thang (2003) argue that what developing countries lack is not skilled and tenacious negotiators but the capacity to analyse and understand their own interests in trade negotiations. According to them, poor

1 For example, a US$5 million trust fund was created at the World Bank by the United Kingdom with the principal objective to do research on the implications of the round for developing countries and to help them prepare for the negotiations.

countries suffer a knowledge deficit. Unlike developed countries, they have not developed the aggregations of scholars, interest groups, nongovernmental organisations (NGOs), and professional public servants that work to generate the hard facts and policy prescriptions informing policy making. Hence the authors point out that the best and urgent course for developing countries is to correct their knowledge deficit with timely, policy-relevant research. They cite three examples of where research might influence or might have influenced policy.

The first example is that of research by CARICOM, the Caribbean Community and Common Market, into the benefits of cartels in some situations in small economies. According to Mbekeani, Stewart, and Thang (2003), this research might be useful for CARICOM negotiators when they address competition questions at the WTO. They also cite the example of the research being carried out by members of the Southern Africa Development Community (SADC) on the links between trade development and poverty reduction. They point out that armed with the right research, the SADC governments can align their trade policies and negotiating positions with their own development programmes. The final example is of Vietnam, which is in the process of negotiating its accession to the WTO. According to the authors, research by the country has helped this process. On the basis of these three examples, Mbekeani, Stewart, and Thang conclude that if trade liberalisation is to serve the real interests of the poor people in developing countries, the hard facts of those interests will have to be understood more thoroughly and shared more widely, and this is possible only through proper research by the countries concerned.

Debapriya Bhattacharya (2005) also argues that in order to negotiate successfully in the current multilateral trading system it is essential for less developed countries to have, along with good negotiation skills, thoughtful planning and preparation based on good research and analysis. He cites the example of Bangladesh’s ability to identify through research the necessity of preference on the movement of service suppliers under mode four of the General Agreement on Trade in Services (GATS). As a result Bangladesh emphasised this issue during the WTO ministerial in Cancun and succeeded in achieving its recognition in the final draft of the ministerial declaration.

On the aspect regarding whether research has actually had an impact on trade policy changes, a paper by Shantayanan Devarajan and Sherman Robinson (2002) discusses how research supported by computable general equilibrium (CGE) modelling affected the way the North American Free Trade Agreement (NAFTA) evolved. From the start of NAFTA negotiations CGE models were used both in the negotiating process and in the political debate over the approval of the final debate. Many single-country, multi-country models and industrial and sectoral studies were developed to analyse the potential effects of NAFTA. The authors highlight how the CGE models played a significant role in raising the concerns of Mexico regarding agricultural liberalisation and increased sensitivity on both the U.S. and Mexican sides, which led to the final NAFTA agreement providing 15 years for implementation of the provisions for agriculture.

An excellent example of how research can influence trade policy is that of the Latin American Trade Network (LATN). Research by the LATN on export promotion policies identified ‘margins for manoeuvre’ within the agreements signed as part of the Uruguay round of trade negotiations, which have subsequently helped the Latin American countries. An LATN research paper also helped Argentina to resolve the dispute regarding competitive imports from Brazil in the footwear sector.

Yet another paper on how research might have an influence on Argentina’s trade policies is an analysis by Valeria Iglesias (2004). The study surveys policy makers in the two main ministries associated with the country’s foreign trade decision making and also distinguished senior and semi-senior researchers in the field of foreign trade. The study found that the introduction of the Global Trade Analysis Project (GTAP) approach was an advancement. Iglesias maintained that the influence of research on policy was highest for those policies where the scope for major changes was limited, whereas major trade decisions were fundamentally political decisions taken at the highest level of the executive branch. The study basically found that in Argentina local research has not had much influence on the trade liberalisation process. It puts forth a few factors on how research might be able to influence policy, namely the relevance of the subject in the political agenda, the inclusion of policy proposals, and the use of appropriate methodological approaches as well as objectivity of research.

The Global Development Network (G