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How Trade Policy Could Ease Tensions in Fragile Countries
for governments to discriminate against some groups, and thus limit the resentments and disputes that can result in civil conflict. In addition, if it is possible, for example through international arrangements, to reduce government access to resource revenues, then the incentive to rebel in order to control these revenues is reduced. This perspective is consistent with the analysis in chapter 2, which shows that increases in the prices of point-source commodity exports are associated with a larger increase in conflict where government accountability is low. Often windfall increases in oil or minerals prices are captured by the government, state-owned entities, or national-resource companies, which have total discretion on how to spend such resources. This appears to have been the case in the Republic of South Sudan, where the renewal of oil exports to Sudan in April 2013 was followed by increased political violence, which eventually triggered the current civil war. On the other hand, the development of a transparent and accountable oil revenue management system was associated with a peaceful post-independence political transition in oil dependent Timor-Leste (see box 1.3). Second, transferring part of the revenues from point-source commodities to the producing areas can reduce the risk of conflict. This can be deduced from the results of recent studies. First, federal systems, which are typically more inclined to reward natural resources–producing areas (Brosio and Singh 2014), are less subject to conflict risk from trade-related changes. Second, conflicts over extractive resources occur overwhelmingly in producing areas, as also confirmed by Dube and Vargas (2013), Berman et al. (2014), and Maystadt et al. (2014). Third, transferring resources to local militant groups helped reduce the intensity of the conflict in the oil-producing Niger Delta, at least in the short run. Producing areas can be rewarded by channeling resources through individuals, organizations, or subnational governments. Besides conflict prevention, this transfer is also justified from an economic standpoint as compensation for the environmental degradation and socioeconomic evils generated locally by natural resource extraction (Brosio and Singh 2014). These principles may not apply when nonstate actors (e.g. local rebel groups) rather than the state control the extraction and the sale of the natural resources. In those instances, the revenues are usually employed to fund the fighting. Thus, other strategies that are not completely dependent on the government may have to be implemented to break the link between increased revenues and conflict (see below). Using these principles in formulating policies to manage point-source commodity revenues requires adapting them to the local context. Examples of policy options in line with these principles include the following: a. Increase the transparency of the flow of revenues from extractive commodities. Domestic policies could help achieve that objective, for example by centralizing the collection of the revenues into a single account under the authority of a Ministry (typically the Ministry of Finance) as suggested by Haysome and Kane (2009). In addition, a number of international initiatives help governments to Trading Away from Conflict • http://dx.doi.org/10.1596/978-1-4648-0308-6