RESOURCES

AID FOR TRADE AND DEVELOPMENT. Edited by Dominique Njinkeu and Hugo Cameron. Cambridge University Press, December 2008. Following in the wake of the World Trade Organization's engagement with Aid for Trade, this book brings together a range of perspectives around this emerging issue. The collection of articles in this volume presents many of the ideas elaborated through research conducted by International Lawyers and Economists Against Poverty (ILEAP) since 2005 and is intended to provide a basis for further study. Since many of the contributions on aid for trade to date have come from the North, the book looks to deepen the debate by forwarding voices and experiences from the South. The book traces the evolution of Aid for Trade from its beginnings and examines the global architecture, modalities, and costs associated with its implementation. Drawing on lessons from national and regional experiences, this book further explores ways in which Aid for Trade can both move forward and become a real tool for poverty reduction in beneficiary countries. For more information, please refer to http://www.cambridge.org/us/catalogue/catalogue.asp?isbn=9780521889513.

CURRENCY UNDERVALUATION AND SOVEREIGN WEALTH FUNDS: A NEW ROLE FOR THE WORLD TRADE ORGANISATION. By Aaditya Mattoo and Arvind Subramanian. Peterson Institute, 2008. Two aspects of global imbalances-undervalued exchange rates and sovereign wealth funds (SWFs)-require a multilateral response. For reasons of inadequate leverage and eroding legitimacy, the International Monetary Fund (IMF) has not been effective in dealing with undervalued exchange rates. Mattoo and Subramanian propose new rules in the World Trade Organization (WTO) to discipline cases of significant undervaluation that are clearly attributable to government action. The rationale for WTO involvement is that there are large trade consequences of undervalued exchange rates, which act as both import tariffs and export subsidies, and that the WTO's enforcement mechanism is credible and effective. The WTO would not be involved in exchange rate management, and the authors' proposals do not entail the WTO displacing the IMF. Rather, they would harness the comparative advantage of the two institutions, with the IMF providing the essential technical expertise in WTO enforcement. On SWFs, there is a bargain to be struck between countries with SWFs, which want secure and liberal access for their capital, and capital-importing countries that have concerns about the objectives and operations of SWFs. The WTO is the natural place to strike this bargain. Its services agreement, the General Agreement on Trade in Services, already covers investments by SWFs, and other agreements offer a precedent for designing disciplines for SWFs. Placing the two issues on the trade negotiating agenda may help reenergize the Doha Round of trade negotiations by rekindling serious private-sector interest in the WTO system, the absence of which has immobilized and ultimately derailed the round. The paper is available online at http://petersoninstitute.org/publications/interstitial.cfm?ResearchID=871

INVENTORIES, LUMPY TRADE, AND LARGE DEVALUATIONS. By George Alessandria, Joseph Kaboski, and Virgilio Midrigan. National Bureau of Economic Research, February 2008. Fixed transaction costs and delivery lags are important costs of international trade. These costs lead firms to import infrequently and hold substantially larger inventories of imported goods than domestic goods. Using multiple sources of data, the paper documents these facts and shows that a parsimoniously parameterized model economy with importers facing an (S, s)-type inventory management problem successfully accounts for these features of the data. Moreover, the model can account for import and import price dynamics in the aftermath of large devaluations. In particular, desired inventory adjustment in response to a sudden, large increase in the relative price of imported goods creates a short-term trade implosion, an immediate, temporary drop in the value and number of distinct varieties imported, as well as a slow increase in the retail price of imported goods. This study of six current account reversals following large devaluation episodes in the last decade provides strong support for the model's predictions. For more information, please refer to http://www.nber.org/papers/w13790.

EXTERNAL TARIFF LIBERALISATION IN CARICOM: A COMMODITY-LEVEL ANALYSIS: By Azim M. Sadikov. IMF, 2008. This paper estimates the impact of the tariff liberalization in the four largest CARICOM countries (Barbados, Guyana, Jamaica, and Trinidad and Tobago) on their trade flows. It traces changes in the product-line imports from CARICOM and non-CARICOM countries against time and commodity-level variation in external tariffs. The author finds that in each country the reduction of the external tariff, which eroded preferences enjoyed by member imports, increased the ratio of imports from non-member countries to imports from member countries. In Trinidad and Tobago, the higher ratio was largely the result of non-member imports crowding out member imports. In the three other countries, the ratio increased mainly because of higher non-member imports; there is little evidence that tariff reductions had an impact on member imports. Findings suggest that in Trinidad and Tobago liberalization of the external tariff reversed some of the trade diversion effects of CARICOM. The paper is available online at http://www.imf.org/external/pubs/cat/longres.cfm?sk=21616.0.