The impact of petroleum exporting countries' membership of the World Trade Organisation on their economic development with an emphasis on the export dependency of these nations on crude oil

• Main Author: Habibi Baghi, Mohsen
• Published: Middlesex University 2008
• Subjects: 658
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.570795

In the mid-1990s, most nations, including some major oil exporting countries, joined the World Trade Organisation (WTO) to create a global trading system that was more integrated than ever before. The basic motive behind membership of this organisation was economic growth and industrialisation based on international trade. The theoretical underpinnings which support the idea can be found in the literature review, yet despite these considerable efforts, the trade-development or industrialisation relationship still remains quite ambiguous. In this research we study industrialisation in selected oil exporting nations after they became members of the WTO based on a two-phase analysis approach. In the first stage, we investigate the change in crude oil share in the total annual exports of these nations as the crude oil export ratio (CER) which has been very high, and in the second phase we study export portfolio diversification as an industrialisation index. In fact, the considerable share of crude petroleum in the export portfolio of these countries persuades us to ask whether or not they have successfully changed their comparative advantage from primary to manufactured goods after WTO membership to maximise their benefits from international trade. To examine the change in the industrialisation level in oil exporting countries in two different time periods before and after membership of the WTO, we utilise the crude oil export ratio (CER) for the first phase and a variant of the Balassa revealed comparative advantage (RCA) measure for the second. The CER, tells us to what extent these nations have reduced (or may have increased) their economic dependency on crude petroleum exports after their membership of the WTO. Indeed, a high rate of such a dependency would not only create a more risky export portfolio in international trade but also could be considered as an important characteristic of underdeveloped or even non-industrialised economies. In simple terms, a meaningful shift in the comparative advantage from primary to complex commodities’ production could be revealed in the shape of export diversification in these nations. This shift may enable these nations to be industrialised mostly when such activities are accompanied by a meaningful decrease in the CER as a consequence of WTO-led trade liberalisation. Although it is difficult to change the export specialisation pattern in a nation, it initially could be affected by technology absorption, especially when the level of education and institutions created for the purpose of absorbing internationally diffused knowledge are high in a nation. Therefore, the key contribution of this study is to measure the impact of WTO membership using a new – and a much more comprehensive – method for the very first time. This research consists of seven chapters. The first chapter provides a brief explanation of the goals and objectives of the present study. This chapter also includes the methods which will be utilised to investigate the research questions. The history of trade development and industrialisation studies is discussed in the second chapter – as the literature review – to provide the background for the present research. Chapter three focuses on the methodology and its basic foundations to clarify the way which we investigate the research questions. In the fourth chapter we discuss the essential data and also the related data sources which have been utilised to analyse the economic dependency of the countries in the research population on crude petroleum exports. Chapter Five provides the results of CER analyses which indicate what really happened to economic dependency on crude oil in petroleum exporting nations after their membership of the WTO. Initial and terminal revealed symmetric comparative advantage (RSCA) has been analysed systematically based on a Galtonian regression in the sixth chapter to compare the distribution of the RSCA for each nation at two points before and after WTO membership. Finally, with regard to the results of the analyses, the research presents some recommendations in the last chapter.