In addition to these publications, the programme has organized a number of meetings over the last two years. The European Research Workshop in International Trade (ERWIT) continues to serve as the IT programme's annual symposium. The 1999 meeting took place in Bergen and was hosted by the Norwegian School of Economics and Business Administration, while the 2000 meeting took place in Copenhagen, organized jointly with the Economic Policy Research Unit at Copenhagen University. 1999-2000 also saw seven workshops and three conferences, as well as a number of lunchtime meetings and press briefings.

Economic Geography

Since the early 1990s the IT Programme has pursued a programme of research on the new economic geography. In 1998 CEPR was awarded two contracts from the Directorate General for Economic and Financial Affairs of the European Commission to carry out studies on the impact of market integration in Europe. The first study, entitled 'EMU and the Integration of European Product Markets', focused on price dispersion and the likely effects of increased price transparency due to EMU. It found evidence of reduced price dispersion between EU core countries but increased dispersion between the core and the periphery. The second study, entitled 'Factors Affecting the Location of Activities within the EU', provided an analysis of the changing location of EU industries and patterns of specialization of EU countries. The report established that EU countries are becoming more specialized. Significant innovations were also made in developing and applying an econometric framework which nests both comparative advantage and economic geography determinants of specialization and shows that both matter. Both projects were completed in early 2000.

June 1999 saw a workshop in Paris on 'Economic Geography and Public Policies', which raised issues such as capital taxation, unemployment, transportation and land use models, regional disparities, regional public investment and firm start-ups. April 2000 saw the publication of the tenth report in the Monitoring European Integration series. Entitled 'Integration and the Regions of Europe: How the Right Policies Can Prevent Polarization', the report questions whether European integration, which will increase the incentives for regional specialization, will lead to a polarized Europe. It argues that there are essentially three possible outcomes: dispersion, concentration or regional stagnation. Which of these occurs depends on the forces unleashed by economic integration and the ease with which people and firms respond to them. Evidence presented in the report suggests that government policy has an important role to play in preventing polarization. The authors argue that the most effective policies are ones that build up a region's skills rather than merely allowing it to bid for business more cheaply.

The largest new development in the programme's research portfolio is a 'Research Training Network' (RTN) network award entitled 'The Economic Geography of Europe: Measurement, Testing and Policy Simulations'. This project will allow eight participating institutions to recruit researchers, hold workshops and conferences, and publish Discussion Papers. Many members of the IT Programme are involved in the new network, which aims to carry out research to develop the microfoundations of agglomeration theory in order to provide more precise guidance for testing, measurement and computer simulation of the location effects of European integration. The project also aims to test econometrically the theory's predictions using European data and to use these results to analyse policies designed to influence the location of activity. The project held its first workshop in Villars, Switzerland, in January 2001.

Foreign Direct Investment

Foreign Direct Investment (FDI) has become an increasingly important factor in the global economy, but much less research has been undertaken on the causes, consequences and policy implications of FDI than on international trade. The Centre has tackled this problem via two specific projects. The first of these is a 'Training and Mobility of Researchers' (TMR) network funded by the European Commission and entitled 'Foreign Direct Investment and the Multinational Corporation'. Established in April 1998 for a period of five years, the network's research agenda focusses on the determinants of multinational activity at the level of the firm and the relationship between foreign trade and multinational activity.

Exploring the implications of FDI for both the home and the host economy, this research follows three main methodological approaches: theoretical modelling, empirical work based on econometric analysis, and empirical work based on case studies. The network held its first workshop in London in November 1998, with subsequent workshops taking place in Vouliagmeni in September 1999 and in Turin in May 2000. Publications to date include 29 CEPR Discussion Papers, production of a background paper on data sources and the development of a website (www.cepr.org/research/Networks/FDIMC/default.htm). It is intended that the final output of this project should be a multi-authored book, written by network members, which will aim to be the definitive advanced text in the area. It will review both theory and empirical work, drawing on the output of the project and literature in general.

The second of our current FDI projects is a ‘Socio-Economic Research’ (SER) project involving six European institutions, which began work in spring 2000. Entitled 'Labour Market Effects of European FDI', the research focuses on five European countries: Ireland, Italy, Spain, Sweden and the UK. The network will attempt to develop an analytical framework, accounting for all the various links between FDI and the labour market, and analyse empirically the sectoral and geographical distribution of European FDI and derive implicit labour demands. Subsequently, the impact of inward and outward FDIs on host and home economies will be analysed using cross-country firm-level panel-data. A considerable effort will be made in constructing comparable harmonized firm-level panel-data for the sample countries. The network’s first workshop took place in Madrid in October 2000.

Globalization and the World Trading System

It is now generally recognized that the liberalization of trade flows that has occurred in the last two decades, although perhaps necessary, has not proved sufficient in increasing growth for developing countries. In response to this the Centre is about to launch a project on globalization and development, which will illustrate the conditions under which countries succeed in participating effectively in the world economy and are able to gain from attracting new economic activities. This research will seek to establish the effects of trade liberalization and the wider forces of globalization on the pattern of international trade flows, on foreign direct investment flows and on the location of production. It will also examine issues arising at the country level, such as how important geography, regional clustering and the propensity for disease are in affecting economic performance. The project will be launched at a conference funded by DfID at the end of March 2001.

Our second major undertaking in this area is a project funded by the World Bank and led by Research Fellow Bernard Hoekman. Entitled 'WTO 2000', it aimed to address issues likely to arise in the new WTO round; following the collapse of the talks in Seattle in December 1999, its main focus has been on issues of WTO governance. Initial results were presented at the June 1999 'International Seminar on International Trade' (ISIT) conference in Cambridge, Massachusetts. A selection of the papers from this conference were reprinted in the Canadian Journal of Economics. In July 2000 we organized a conference in Brussels on 'The World Trading System Post Seattle: Institutional Design, Governance and Ownership', a report of which is on page 44.

In addition to these meetings, the 'WTO 2000' project is responsible for a number of publications. In March 2000 CEPR published the fourth in our series of Policy Papers, entitled 'Putting Humpty Together Again: Including Developing Countries in a Consensus for the WTO' and written by Zhen Kun Wang and Alan Winters. The paper argues that the failure of the 1999 Ministerial meeting reflected the different parties' widely disparate positions, the lukewarm attitude of governments towards further trade liberalization, and a failure of the WTO as an institution. In response to this the authors develop an eight-point plan that attempts to bind the developing countries into the world’s trading system.

In the summer of 2001 we will publish two more reports under the auspices of the 'WTO 2000' project. The first will be our sixth Policy Paper, entitled 'The World Trading System Post Seattle: Institutional Design, Governance and Ownership' and written by Bernard Hoekman, André Sapir and Alan Winters. The second will be a report produced in conjunction with the World Bank called 'World Trade Liberalization for the New Millennium: An Empirical Study'. This will examine the changing landscape of world production and trade, focusing on the major trends in global markets as they affect the distribution of gains from further trade reform. The report will estimate the costs of trade distortions that remain after the Uruguay Round is implemented, and the potential economic effects of reducing those distortions. Using the Global Trade Analysis Project (GTAP) model, the patterns of change since the 1960s are used as a basis for projecting the world economy through to 2005. The authors conclude that even after the full implementation of the Uruguay Round commitments, huge welfare gains remain to be realized.