2003–2004 IGCC Dissertation Fellows
Progress Reports

Policy implications: During the last academic year I finished my doctoral dissertation “Essays on the Role of Natural Resources in International Trade and Development.” With it, I hoped to shed light on the ongoing Trade–Environment debate, where the two extreme positions frequently lack the rigorous scientific input necessary to justify their claims.

The issue about which free trade detractors and defenders clash more often is probably the impact of international trade on the environment of developing countries. Previous research has shown that trade liberalization may exacerbate the overexploitation problem characteristic of resources that are subject to open access, and lead to welfare losses. The argument is that when property rights in the resource sector are ill-defined, natural resources will be overexploited. Trade liberalization, through an increase in the relative price of natural resources, tends to exacerbate their overexploitation. The focus on developing countries is not accidental. In developing countries we can observe both: ill-defined property rights and trade liberalization translating into an increase in the relative price of natural resources. The obvious solution to the problem, the correct definition of property rights or the implementation of optimal policies in the resource sector prior to trade liberalization, is often impracticable. What then? Restrict trade?

My research shows that it is not desirable to restrict trade, but that there is a simple way to reap the benefits of trade liberalization without incurring the potential welfare losses derived from the overexploitation of natural resources. A simple policy instrument, a quota to regulate natural resource extraction, can ensure that the “South” reaps the trade benefits without exacerbating overexploitation. In contrast, in the presence of a suboptimal tax (including a zero tax in the special case of open access) on the use of natural resources, trade liberalization is not necessarily welfare improving. The implications for international policy analysis and intervention in the context of “North–South” trade are especially relevant because the analysis does not require the quota to be optimal. Distributional aspects aside, when faced with the choice of an instrument to regulate resource extraction, governments in the “South” could avoid welfare losses by choosing the quantity instrument.

A key underlying assumption is, however, that the quantitative restriction on natural resource use is perfectly enforced, and this is obviously a concern in developing countries. I show that there is a wide range of circumstances in which there exists a licensing scheme which, though potentially suboptimal from a welfare perspective, would be incentive compatible and self-enforcing in the sense that agents respect a government set quantitative restriction before and after trade liberalization.

In order to test empirically the predictions of the theoretical models, I have started the collection of remotely sensed satellite data to obtain alternative estimates of forest cover to those of the much used and criticized UN FAO deforestation data set.

The generous support of IGCC allowed me to travel to Vigo, Spain and Budapest, Hungary to get involved in two international research networks on Environmental and Natural Resource Economics: the European Association of Environmental and Natural Resource Economists, and the Hispano-Portuguese Association of Environmental and Natural Resource Economists. In addition, I was able to participate in the Zentrum für Europäische Wirtschaftsforschung (Center for Economic Research) Summer Workshop in Mannheim, Germany. This has given me the chance to learn about the current developments in my field of research and to receive feedback on my dissertation work and benefit from the mentorship of established academics such as Scott Barrett, Erwin Bulte or David Zilberman.

Susana Ferreira
Economics
UC San Diego

Three Essays on Development and Deforestation

Policy implications: My project explores the roles that global actors, such as international non-governmental organizations (NGOs), have played in the development of the Chinese NGO community in Yunnan, the People’s Republic of China (PRC). It describes the political relations between global actors, the state, local governments, and Chinese environmental NGOs. I will argue that Yunnan’s vibrant NGO community of today is an unintended result of the central government’s attempt to make Yunnan a model case for economic development in the Southwestern area of the PRC with the aid of global actors.

Although global actors in the PRC are invited guests who aid local actors, they cannot operate with a free hand. My project identifies the formal and informal constraints that the authoritarian regime has placed on global actors as well as on emerging local Chinese NGOs. It also describes the kinds of resources, influences, and conflicts that global actors bring to the local arena; analyzes how global actors have aided the growth of the local Chinese NGO community; and assesses the strategies that Chinese environmental NGOs take to advocate their causes in local environmental politics.

My project focuses on two global actors active in Yunnan. The first, the Ford Foundation, a U.S. philanthropic organization, was the first foreign foundation to open an office in the PRC. My project describes the history of the foundation’s China program, the foundation’s political relationship with the PRC’s central government, and its early involvement in Yunnan, beginning in the late 1980s. My project then demonstrates how the Ford Foundation–funded Yunnan Upland Management (YUM) project contributed to the development of a vibrant NGO community.

The second global actor, the Nature Conservancy (TNC), is a U.S.–based environmental organization. TNC opened its first office in Kunming, China, in 1998. TNC has been working since 2001 on its first big project in Yunnan. My project discusses TNC’s relationship with the provincial and local governments and with the environmental community in relation to a dam construction controversy in one of TNC ’s project sites.

As part of my ongoing research, I have been conducting interviews with representatives, project managers and staff members of the relevant organizations and have completed 40 in-depth interviews so far. I have visited a few NGO project sites, and have attended relevant conferences, meetings, and workshops in Yunnan. I have conducted archival research at the Ford Foundation’s headquarters in New York. In addition, I have interviewed staff members from UNESCO’s Beijing Office, from other international environmental NGOs, and from the Department for International Development (DFID), a British bilateral aid agency in Beijing, all of which have interests in Yunnan.

Policy implications: In our globally networked society, infectious disease is not confined by national boundaries. Protecting against the spread of disease, producing and distributing effective treatments, and conducting the necessary basic research require international cooperation—especially when the disease-causing agent is strange and unpredictable. This is the case with Transmissible Spongiform Encephalopathy (TSE), a family of human and animal neurodegenerative disorders that are uniformly fatal. Forms of TSE such as "mad cow disease," new variant Creutzfeldt Jacob Disease (nvCJD), and Chronic Wasting Disease (CWD) have had devastating effects on trade, local economies, and people's lives.
TSEs provide a fruitful case for studying international cooperation, conflict, and resolution. Because they are poorly understood, educated guesses must be made as to what measures will prove effective in halting or slowing the spread of the disease. These measures are often costly and difficult to justify, especially as the results of such measures will not be visible for years to come due to the prolonged incubation period of the disease. In this context, decision making depends on the results of basic scientific investigation, mathematical modeling, and epidemiological projection.

My study was both a comparison between the United States and United Kingdom and an analysis of the exchange of information related to disease management both within and between these two nations. I traveled to various laboratories and clinics where TSEs are studied, international scientific and policy forums where TSEs are discussed, and advisory committee meetings where policies and their effects are debated. I interviewed multiple researchers and policymakers. I followed the networks of communication regarding significant research findings and examined how they finally became incorporated into policy decisions.

I found that information exchange occurred through many forums, both formal and informal. Scientific conferences on TSEs provided opportunities for exchange of scientific results amongst scientists. Some of the scientists who attend such meetings also serve on advisory boards for governmental agencies regulating TSEs, where they transmit this information to regulators. In addition, scientists who produce results which are considered to be of high impact to policy-related topics are often called in to discuss their results at advisory committee meetings. This provides an opportunity for international exchange, as U.K. scientists are often invited to speak at U.S. advisory committee meetings, and vice versa.

Access to the same scientific information, however, does not always lead to the same regulation in both countries. Sometimes this difference is a result of national contingencies, other times it is the result of differing predominant interpretations of the scientific data. Often, however, regulators in both the United States and United Kingdom learn first of relevant research findings that could impact public health not through official channels, but through unofficial communication with friends and colleagues. While this is an effective means of obtaining information, it often skews the type of information that is received. This, in turn, may lead to an unbalanced perspective on the problem at hand. Sometimes regulators who operate within certain social networks recursively share information with each other, creating a self-referential feed-back loop. When such self-referential cohorts develop, communication with those outside the network may falter, leading to ineffective management of the disease.