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Department World Economy, Hamburg Institute of International Economics, Germany
The WTO Doha Round of multinational trade negotiations is labelled the "development round" to highlight the fact that progress could be achieved through the enhanced integration of the poor countries into the world economy. Since the trade agenda focuses to a large extent on the levels of direct and indirect trade barriers as well as other aspects of trade and competition policy, an important aspect of the relative trade performance of developing countries has been neglected somewhat. This paper argues that, in addition to trade barriers, other trade costs, such as communications and transport costs, have to be taken into account. These other costs can be significantly higher in developing countries, which impedes their successful integration into world markets.
Keywords: developing countries, transport costs, WTO Doha Round
Introduction
The economic consequences of the increasing globalisation of the world economy, that is, a closer integration of production and markets, have been discussed intensively over the last decade (Krugman and Obstfeld, 2000). The growing interdependence of countries around the world has been the result of, among other things, lower trade barriers, the fall in communications and transport costs, and the revolution in information and communications technologies - in short, lower transaction costs. Transaction costs are roughly defined as the costs of collecting and evaluating information about alternative exchange options, of negotiating the conditions of exchange transactions and of enforcing exchange contracts (Williamson, 2001).[1]
Due to several successful General Agreement on Tariffs and Trade (GATT) rounds of multilateral trade negotiations after World War II, tariff barriers have fallen dramatically. More specifically, since the establishment of the General Agreement on Tariffs and Trade in 1947, average tariff rates were reduced from 40 percent to 4 percent in 1999 (Senti, 2000). Combined with worldwide deregulation in a number of financial and product markets, the internationalisation of capital and financial flows and enormous acceleration in the progress of key technological innovations such as containers and modern telecommunication, this has increased competition on world markets and has led to more trade and international investment. For example, whereas world production grew by an annual average of 1.5 percent in the period 1990 to 2000, trade rose by 6 percent and foreign direct investment...