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.For a brief descriptionof the zones, see GATT (1994, Vol.II, pp.40 41).15In the absence of tariff equivalents, we typically model NTBs in terms of the per-centage of trade subject to NTBs, using available or specially constructed NTBinventory data.These NTB measures are calculated by first making an inventory ofexisting NTBs classified by disaggregated import groupings, then determining thevalue of imports that are subject to any NTBs, and thereafter aggregating up to thesectors used in the model.Thus, a sector with a zero percent NTB trade coverage istaken to be completely exempt from NTBs, while, say, an NTB coverage of 25% istaken to mean that 25% of the imports in that sector are subject to one or moreNTBs.The NTB coverage ratios are then used in the model to dampen the effects oftariff reductions undertaken when the NTBs are assumed to remain in place.It isb723_Chapter-11.qxd 7/15/2009 10:00 AM Page 356356 D.K.Brown, A.V.Deardorff & R.M.SternThe EU maintains some quantitative restrictions on importsfrom Tunisia.These apply to such agricultural products as olive oil,oranges, potatoes, wine, apricot pulp, and sardines.In the absenceof measures of the tariff equivalents of these restrictions, wedecided to use a figure of 8% for the EU barriers on Sector 1 agri-cultural imports from Tunisia, based on the estimate in Harrison,Rutherford, and Wooton (1989).The EU also maintains certainseasonal restrictions on agricultural imports from Tunisia, whichwe assume to be included in the 8% tariff equivalent.With respectto manufactured goods, the EU has annual quotas limiting importsof cotton cloth and trousers from Tunisia.Since our textile andclothing sectoral aggregates cover a large variety of productsand we do not have any information on the tariff equivalentsinvolved, we have assumed that the EU quota restrictions here arenot binding.17important to emphasize that these measures of NTB trade coverage are not the sameas the tariff equivalents of the NTBs.For further discussion, see Deardorff and Stern(1990, pp.23 25).The most comprehensive available estimates of the NTB tradecoverage by sectors for Tunisia are given in GATT (1994, esp.pp.64, 66 68, and167 172).These sectoral estimates are weighted apparently by total imports and can-not in themselves be used to calculate bilateral coverage ratios which we wouldordinarily need for modeling purposes.In any case, as indicated below, we assumethat the estimated tariff equivalents that we have already reflect the most significantexisting NTBs, and that these NTBs will be eliminated in establishing the Tunisia-EUFTA.So long as this is the case, there is no need to use the NTB coverage ratios todampen the effects of Tunisian tariff reductions.16Tunisia s domestic tax system includes a value-added tax and a consumption tax.We chose not to represent these taxes in our modeling framework on the assumptionthat they would remain unchanged in the context of the Tunisia-EU FTA.For a briefoverview of Tunisia s tax system, see Nsouli et al.(1993, esp.pp.5 9 and 70 72).17According to GATT (1994, pp.89 96), the Tunisian Government has a variety ofmeasures designed to restrain or promote exports in certain specified circumstances.Since information is not available that would permit assessment of the quantitativeimportance of these export-related measures and how they might be changed withimplementation of the FTA, we have not taken them into account in our variousmodeling scenarios that will be noted below.b723_Chapter-11.qxd 7/15/2009 10:00 AM Page 357Some Economic Effects of the FTA between Tunisia and the EU 357III.The Determinants of Foreign Direct InvestmentAn important reason why many developing countries are anxious toenter into FTAs with advanced industrialized industries is the beliefthat the FTA will stimulate inward foreign direct investment (FDI).Tunisia is no exception.In order to shed some light on this question,we reviewed some selected studies in an effort to identify what appearto be the main factors influencing FDI inflows into developing coun-tries especially.These studies included UNCTAD (1993), UNCTC(1992), Bajo-Rubio and Sosvilla-Rivero (1994), Lucas (1993), andHaddad and Harrison (1993).Our reading of this literature sug-gested that macroeconomic factors appear to play a dominant role ininfluencing aggregate FDI inflows.It was especially striking in thestudies we examined that FDI has not been shown to be responsiveto the main microeconomic factor that one might have expected toinfluence capital flows: the return to capital.This may be becausereturns to capital do not in fact influence FDI, but there are alterna-tive explanations as well.For example, FDI may respond so elasticallyto small variations in returns that the observed variations become toosmall to be picked up econometrically.Or, FDI may respond to vari-ations in returns to capital separately by sector, so that measures oftotal FDI and average returns to capital hide the relationship.Finally,there was some evidence in the studies noted, although it was notoverwhelming, that openness and trade barriers also affect aggregateFDI inflows.As a general matter, the literature further suggested that incen-tives designed to encourage FDI inflows do not appear to matter verymuch, although once it is decided to engage in FDI, the presenceof incentives may affect the magnitude and geographic location ofthe FDI.18 As indicated earlier, Tunisia introduced a number of18Effects may appear to be greater when FDI incentives are linked directly to exports,as in maquiladora-type export processing zones.These have been used extensively byEast European countries in their arrangements with the EU, but is not clear thatTunisia is moving very far in that direction.By the same token, there is reason tobelieve that such arrangements have little spillover to the domestic economy.b723_Chapter-11.qxd 7/15/2009 10:00 AM Page 358358 D.K.Brown, A.V.Deardorff & R.M.Sterninvestment incentives in 1994, hoping that this would result in anincrease in inward FDI.While it is not possible to determine whateffects these incentives will have, it may be interesting nevertheless toexamine their potential impact within our CGE modeling framework,which we shall do below.But let us first consider some of the mainfeatures of Tunisia s Investment Code.IV.Tunisia s 1994 Investment Code19A new Investment Code was introduced in January 1994.It is globalin character and covers all sectors except domestic trade and invest-ments in mining, energy, and finance.Foreign investors are permitted100% ownership, with some exceptions in industries that are notwholly exporting, and in agriculture where long-term leasing ispermitted.Off-shore status can be granted to wholly exporting com-panies in the form of bonded factories or within a free trade zone.Common incentives are offered in all sectors, and there are additionalincentives designed to promote exports, regional development, agri-cultural development, environmental protection, technology transferand promotion, and development support activities and services (e.g.,education, etc.).The incentives can be either fiscal in the form of taxreductions or waivers, or financial in the form of grants or subsidies [ Pobierz całość w formacie PDF ]