The European Union grants preferential market access for sugar to a group of African, Caribbean and Pacific (ACP) countries. Sugar exported under these quotas receives between two and three times the world price. These trade preferences are intended as a form of aid, but they tend to stifle productivity growth in the recipient countries. The European Union could better assist ACP countries by providing direct development assistance in place of sugar subsidies, for example by investing the aid transfers into infrastructure or other essential public services. This paper tests this proposition for the case of Fiji using a computable general‐equilibrium model. It is found that significant gains in economic performance can be achieved by employing such alternative strategies for aid. These gains are particularly strong over the medium to long term when the aid funds are diverted to infrastructure development. However, there are issues of equity to consider since, in the case of Fiji, the rural poor would be the losers if trade preferences were to be removed. Moreover, the degree of benefit in alternative strategies such as infrastructure development will be contingent on the economy's flexibility, which in turn depends upon the country's regulatory regime and education performance.
The environment, defined broadly to include both reproducible and natural resources, such as petroleum reserves and wildlife parks, supports all economic and other social activity. The notion of sustainable development arises from a concern that future well-being could be eroded by the pursuit of economic goals which degrade and deplete finite resources.While such concerns are not new, the focus of debate has shifted within the past twenty years. Following the first oil price shock in the early 1970s, questions about whether or not it is possible to maintain growth while energy stocks are declining were brought to the fore. In recent years, however, concerns about the possible negative impact of exploration activity and fossil fuel use on the natural environment — also considered a finite resource — have gained prominence.But achieving sustainable resource use involves making trade-offs. For example, open access to a highly prospective site to help meet the energy needs of current and future generations has to be weighed against the site being partially or fully closed to exploration in order to completely preserve the value of the natural environment inherent in the site.To answer questions about environmental tradeoffs requires judgments about the relative social values of alternative uses of the sites in question. Information based on commercial exploration assists in making such judgments. By upgrading knowledge about the economic and social value of a natural resource, the information gained from exploration can help with making judgments about sustaining or conserving the human environment for future generations. Indeed, because the outcome of the exploration process has both social and commercial implications, it is likely that the level of exploration activities chosen for purely commercial reasons may be lower than the level that would be considered optimal if full account were taken of the trade-offs inherent in maintaining or improving the quality of life of future generations.The purpose in this paper is to investigate the role that exploration can play in improving economic and social well-being generally. To do this, petroleum exploration activity is separated into two phases — first, 'low impact' exploration such as the collection of seismic data and, second, drilling. The key contribution of this paper is to highlight conditions under which levels of low impact exploration, as determined by commercial considerations alone, are likely to be less than the socially optimal level.
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