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Implications of WTO disciplines for special economic zones in developing countries

Author

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  • Creskoff, Stephen
  • Walkenhorst, Peter

Abstract

Many developing countries operate geographically delineated economic areas in the form of export processing zones, special industrial zones, or free trade zones. This paper provides an overview of the application of World Trade Organization disciplines to incentive programs typically employed by developing countries in connection with such special economic zone programs. The analysis finds that the disciplines under the Agreement on Subsidies and Countervailing Measures have the most immediate relevance for middle-income World Trade Organization members that are not exempt for certain"grandfathered"programs, but will also concern other developing countries in the future, as their exemption expires or their per-capita income passes a threshold of US$1,000. Incentives related to special economic zones can be broadly grouped into three categories: (i) measures that are consistent with the World Trade Organization, notably exemptions from duties and taxes on goods exported from special economic zones; (ii) measures that are prohibited or subject to challenge under World Trade Organization law, notably export subsidies and import substitution or domestic content subsidies; and (iii) and measures where World Trade Orgainzation consistency depends on the facts of the particular case. The paper provides a set of recommendations on how to eliminate questionable incentives. The single most important zone policy reform to achieve World Trade Organization compliance is to remove all requirements to export and permit importation of goods manufactured in special economic zones into the national customs territory without any restrictions other than the application of import duties and taxes.

Suggested Citation

  • Creskoff, Stephen & Walkenhorst, Peter, 2009. "Implications of WTO disciplines for special economic zones in developing countries," Policy Research Working Paper Series 4892, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4892
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    References listed on IDEAS

    as
    1. Michael Engman & Osamu Onodera & Enrico Pinali, 2007. "Export Processing Zones: Past and Future Role in Trade and Development," OECD Trade Policy Papers 53, OECD Publishing.
    2. Andrew Green & Michael Trebilcock, 2007. "Enforcing WTO Obligations: What Can We Learn from Export Subsidies?," Journal of International Economic Law, Oxford University Press, vol. 10(3), pages 653-683, September.
    3. Michael Daly, 2006. "WTO Rules on Direct Taxation," The World Economy, Wiley Blackwell, vol. 29(5), pages 527-557, May.
    4. Sam Laird, 1999. "Export policy and the WTO," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(1), pages 73-88.
    5. Edward M. Graham, 2004. "Do export processing zones attract FDI and its benefits," International Economics and Economic Policy, Springer, vol. 1(1), pages 87-103, March.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Jean-Marc Siroën & Ayçil Yücer, 2014. "Trade Performance of Free Trade Zones," Working Papers DT/2014/09, DIAL (Développement, Institutions et Mondialisation).
    2. Moberg, Lotta, 2015. "The political economy of special economic zones," Journal of Institutional Economics, Cambridge University Press, vol. 11(1), pages 167-190, March.
    3. Wojciech Lichota, 2016. "Efektywność finansowa specjalnych stref ekonomicznych w Polsce," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 99-130.
    4. Fabrice Defever & José‐Daniel Reyes & Alejandro Riaño & Miguel Eduardo Sánchez‐Martín, 2019. "Special Economic Zones and WTO Compliance: Evidence from the Dominican Republic," Economica, London School of Economics and Political Science, vol. 86(343), pages 532-568, July.
    5. Fabrice Defever & Alejandro Riaño, 2016. "Protectionism through Exporting: Subsidies with Export Share Requirements in China," CESifo Working Paper Series 5914, CESifo.
    6. Ayçıl Yücer & Jean-Marc Siroën, 2017. "Trade Performance of Export Processing Zones," The World Economy, Wiley Blackwell, vol. 40(5), pages 1012-1038, May.
    7. Shun-ichiro Bessho & Kimiko Terai, 2011. "Competition for private capital and central grants: the case of Japanese industrial parks," Economics of Governance, Springer, vol. 12(2), pages 135-154, June.
    8. Emiko Fukase & Will Martin, 2016. "Agro-processing and horticultural exports from Africa," WIDER Working Paper Series 174, World Institute for Development Economic Research (UNU-WIDER).
    9. Teresa Cheng, . "From special economic zones to greater special economic region – Hong Kong Special Administrative Region as a model for legal infrastructure design," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    10. Defever, F. & Reyes, J-D., 2016. "Does the Elimination of Export Requirements in Special Economic Zones A ect Export Performance? Evidence from the Dominican Republic," Working Papers 16/04, Department of Economics, City University London.
    11. Defever, Fabrice & Riaño, Alejandro, 2017. "Subsidies with export share requirements in China," Journal of Development Economics, Elsevier, vol. 126(C), pages 33-51.
    12. Muge Seda Ates & Gizem Ates & Demet Toktas & Esra Canpolat Gokce, 2023. "The Relationship Imports and Exports in Free Zones Have with Turkiye Foreign Trade and Employment: The Fourier Autoregressive Distributive Lag (ADL) Hidden Cointegration Test," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 73(73-1), pages 385-418, June.
    13. Andrés Rodríguez‐Pose & Federico Bartalucci & Susanne A. Frick & Amelia U. Santos‐Paulino & Richard Bolwijn, 2022. "The challenge of developing special economic zones in Africa: Evidence and lessons learnt," Regional Science Policy & Practice, Wiley Blackwell, vol. 14(2), pages 456-481, April.
    14. Emiko Fukase & Will Martin, 2016. "Agro-processing and horticultural exports from Africa," WIDER Working Paper Series wp-2016-174, World Institute for Development Economic Research (UNU-WIDER).
    15. Reeg, Caroline, 2017. "Spatial development initiatives – potentials, challenges and policy lessons: with a specific outlook for inclusive agrocorridors in Sub-Sahara Africa," IDOS Studies, German Institute of Development and Sustainability (IDOS), volume 97, number 97, July.

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    Keywords

    Economic Theory&Research; Trade Law; Trade Policy; Taxation&Subsidies; Emerging Markets;
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