Policy Innovations to Tackle Commodity Trade Mispricing: Simplified Methods for Developing Countries

Low-income countries need targeted and simple ways to counter commodity trade mispricing and restore diverted profits. In her latest report, Dr. Irene Musselli reviews various regulatory approaches to stemming commodity trade mispricing in low-income countries. Her analysis enquires into the cost-effectiveness of ‘mainstream’ solutions that rely on arm’s length transaction rules, heightened tax and trade transparency, and technology-driven innovations in customs law enforcement. Building on a three-tier test of proportionality, the article questions whether these options are the best means available to counter mispricing in low-income countries, and argues that more proportionate means are at hand to achieve this end in contexts of limited technical and administrative capacity. Specifically, her analysis calls for the regulatory use of reference prices and legislatively fixed margins for tax assessment purpose, so as to directly offset the revenue effects of trade mispricing practices. By eclectically drawing and combining insights from market intervention and market-based approaches, the analysis steers a middle course in between liberal and interventionist approaches, calling for a hybrid form of market-based price regulation within the framework of public-private models of supply chain governance. The analysis concludes by assessing the legal latitude that low-income countries enjoy under international economic law to implement this simplified and alternative approach.

Download working paper version here: Musselli, I. (2019). Curbing Commodity Trade Mispricing: Simplified Methods in Host Countries. R4D-IFF Working Paper Series, R4D-IFF-WP08-2019.

Photo by Pixabay on Pexels

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