Contents FOREWORD, Claude E. Barfield v ACKNOWLEDGMENTS xi 1INTRODUCTION 1 2BACKGROUND 3 3WHY INTERNATIONAL TRADE IN SERVICES IS (AND IS NOT) DIFFERENT FROM TRADE IN GOODS 5 4ACCOUNTING SERVICES IN INTERNATIONAL TRADE 11 5THE IMPEDIMENTS TO TRADE IN ACCOUNTING SERVICES 18 6DIFFERING ACCOUNTING STANDARDS: HOW IMPORTANT IS HARMONIZATION?22 7THE CURRENT FRAMEWORK FOR NEGOTIATIONS 28 8THE ROAD AHEAD 34 9CONCLUSION 37 NOTES 39 REFERENCES 43 GLOSSARY OF TRADE TERMS 47 ABOUT THE AUTHOR 55 vii Foreword he service sector accounts for more than 70 percent of the gross domestic product (GDP) of advanced industrial economies. Though trade in services is difficult to calculate and many transactions still go uncounted, current estimates place the worth of such trade as at least $2.5 trillion, or about a third of total world trade. For the United States, the world's most advanced industrial economy, the service sector looms even larger. Services account for almost 80 percent of U.S. production

The 1997 Kyoto Protocol is generally viewed as having set carbon emission reduction goals for the developed world for the purpose of avoiding global warming, a tragedy of the commons. 1 But instead of avoiding the plaguing free-rider problem that works in favor of tragedy, the protocol allows uncontrolled growth in carbon emissions from the developing world, which will more than offset reductions elsewhere. Strictly speaking, the Kyoto Protocol is not about avoiding a tragedy of the commons. It involves much more than that. Apart from expectations that meeting the terms of the protocol will not reduce future emissions, the scientific basis for Kyoto’s massive and costly undertaking is far from settled (Singer 1999). Competing models that seek to link human behavior to climate change yield mixed results, which is to say that temperature changes may be caused by solar activity, clouds, or ocean temperature changes. There is also contradictory evidence on temperature change itself. It is not a foregone conclusion that temperatures, though increasing in the last few years, are rising systematically. Nor is it clear that human activity contributes to the current temperature increases. Putting the scientific questions to one side and viewing the protocol on its own terms, there is serious question whether it is primarily about carbon emission reductions and global warming or about something else. An analysis of the agreement and of the post-Kyoto strategizing suggests that control of global warming is largely symbolic, which does not gainsay its vital importance to environmental groups. The real effects of the protocol relate to cartelization and efforts by interest groups and Bruce Yandle is Alumni Professor of Economics at Clemson University and a senior associate of PERC.

This paper examines the effect of legislative revisions of U.S. sugar quotas on the security pricing structure of suppliers to the U.S. sugar market, with focus on Cuba, as the major foreign beneficiary of this quota-based trade protection regime. The revisions of the sugar law in 1951 and 1956 did not produce substantial immediate increases in the quotas of rent-seeking domestic interests. Instead, they reassigned claims to the expected growth in the U.S. sugar market to mainland producers at Cuba’s expense. The redistribution of future claims increased Cuban producers ’ reliance on the more volatile non-U.S. world market. We hypothesize that the consequence was an upward reassessment of the relative risk premium on Cuban sugar companies. To test the hypothesis, we employ an endogenous event-study method to identify key information-generating events that cumulatively produced a significant structural break in the relative risk premia in Cuban sugar company stock prices. Our results provide strong evidence of a radical change in the expected future performance of the Cuban sugar industry after 1955 reflected in higher perceived risk, and they point to a possible revision of the conventional story of events leading to the Cuban Revolution.

The second draft ♦ What are the effects of institutional subversion on small business development, fiscal policies, economic growth, and firm performance? This paper provides an empirical investigation of institutional subversion in Russia’s regions. We develop a complete account of preferential treatments to the largest regional firms in texts of regional legislation during 1992-2000. The concentration of preferential treatments is used as a proxy for legislative subversion. Based on cross-section and panel data analysis, we find that regional institutional subversion has an adverse effect on small business growth, tax collection, social public spending, and federal tax arrears. Robustness of these results is verified by looking at a proxy for potential subversion based on size concentration in regional economies. The alternative approach produces similar results. Regional political influence generates substantial gains to firms both in the long and the short run. These firms exhibit faster growth in sales, market share, profitability, employment, and capital compared to their counterparts who are not politically connected. Yet, firms that exercise political influence have lower labor productivity.

“On the whole, the horizontal and vertical division of power is a guarantee against arbitrary rule and the usurping of power... In other words, a “bad” elected leader is better than a “good ” leader appointed from above because the system of appointing leaders is defective in principle”. “The point of a federal organization of Government lies in the rational balancing of real, objective contradictions between central and local interests”.

University ofPadua We propose a general formal structure for symmetric information delegation games that encompasses many existing economic applications in the elds of oligopoly theory, the theory of the rm, strategic trade policy and international political economy. Weprove that all individually rational allocations are implementable in delegation games with non separable utility. Secondly,we show that contract renegotiation and non observable contracts have similar e ects only in particular cases. We prove that all the equilibria obtained when renegotiation is excluded are implementable as renegotiation proof equilibria, provided that the side transfer technology implies a dead-weight loss increasing in the size of the transfer.

The merit of international convergence of bank capital requirements in the presence of divergent closure policies of di¡erent central banks is examined. The lack of a complementary variation between minimum bank capital requirements and regulatory forbearance leads to a spillover from more forbearing to less forbearing economies and reduces the competitive advantage of banks in less forbearing economies. Linking the central bank’s forbearance to its alignment with domestic bank owners, it is shown that in equilibrium, a regression toward the worst closure policy may result: The central banks of initially less forbearing economies also adopt greater forbearance. I ANALYZE THE JOINT DESIGN of two bank regulatory mechanisms: minimum capital requirements, which are an ex ante mechanism to prevent bank failures, and closure policy, which is an ex post mechanism to manage the cost of bank failures. At the heart of the paper is a simple but fundamental point: Ex post policies affect ex ante incentives, and, hence, the design of an ex ante mechanism must take into account any feedback from the ex post policies.The optimal design of capital requirements is thus tied to the extent of forbearance exercised by the central bank’s closure policy. This warrants a closer scrutiny of the merits of creating a ‘‘level playing ¢eld’ ’ in capital requirements across countries, as proposed and n Viral V. Acharya is with the London Business School. This paper is the second essay in my

Although economists and political scientists approach the politics of regulatory agency policymaking in different ways, nearly all agree that elected officials control regulatory agency policymaking for political ends. Elected officials negotiate the balance between citizen and interest group demand, translating this balance into pressure on the agency. Scholars presume that agencies respond to political pressure,

Accounting has been a lead sector in the General Agreement on Trade in Services (GATS) negotiations to reduce barriers to trade in professional services. This is no accident. Accounting already has a substantial international component; the largest accounting firms have major international presences and have been eager to operate in less restrictive environments. Accounting is coming to be understood as a vital infrastructural element of financial services, and as finance becomes more global, accounting too should become more global. Similarly, as large businesses enterprises generally have become more international, their need for more international accounting services has grown. But, despite the considerable international presences of the major accounting firms, virtually all countries maintain various types of restrictions that impede the flow of accounting services across borders. The consequences have been higher costs, poorer service to clients, and reduced efficiency, as well as lower quality accounting/auditing standards in many countries. Substantial progress can and should be made to reduce the current barriers to freer trade in accounting services. REDUCING THE BARRIERS TO INTERNATIONAL TRADE IN

We study three corporate non-market strategies designed to in‡uence the lobbying behavior of other special interest groups concerning environmental and/or health and safety issues: 1) “astroturf, ” in which the …rm covertly subsidizes a group with similar views to lobby when it normally would not, 2) the “bearhug,” in which the …rm overtly subsidizes the lobbying activities of another interest group, and 3) self-regulation, in which the …rm voluntarily limits the potential social harm from its activities. All three strategies can be used to reduce the informativeness of lobbying, and all reduce the welfare of the public decision maker. Astroturf lobbying on environmental policy issues is growing in popularity in the United States and some law makers have attempted to pass disclosure laws which would weaken the e¤ectiveness of the strategy. We show that the decision maker would bene…t by requiring the public disclosure of funds spent on astroturf lobbying, but the availability of alternative in‡uence strategies limits the impact of such a policy.