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Poverty and the WTO:
Impacts of the Doha Development Agenda
Thomas W. Hertel
and
L. Alan Winters
Purdue University and Development Research Group, The World Bank
Global Business Dialogue, July 2006
2
Method• Establish new “policy benchmark”:
– Post-UR, including ATC quota elimination– Post-WTO accession for China and others– Post-EU enlargement
• Define an ambitious DDA scenario• Assess implications for world markets• Communicate them to national models • Implications for poverty in individual countries: 12 case studies
in Latin America, Africa and Asia • Near term vs. long run impacts• Supplement with 2 global studies
3
Impact Of Trade Reforms On World Prices
(percentage change in average price)
-5
0
5
10
15
20
25
cotton oseeds cgrns dairy apparel autos
Full-Lib DDA
4
Incomplete price transmission yielded unequal gains from Mexican trade reforms in
1990’s
Source: Nicita, 2004.
5
Doha impacts on poorest rural households in Mexico also influenced by price transmission (Nicita, 2005)
0
0.5
1
1.5
2
2.5
Doha Doha+ Doha++
BorderNorthCenter South
Doha+ = Doha and Productivity enhancementDoha++ = Doha+ and enhanced price transmission
% c
hang
e re
al in
com
e
6
Complementary reforms can greatly enhance poverty gains
• Consider subsistence hhlds with same characteristics as cotton growers; consider gains from switching to cotton as opportunities improve
• Switch boosts income 20%• Higher cotton prices add 1%• Improved extension services
boost productivity by 8.4%• Total income gains to hhld
could be nearly 30%• Also improved LR nutritional
status of children0
5
10
15
20
25
30
cotton subsist
chg-crop+prices+extens
Real income gains to farm households in Zambia
7
Broad Impacts of Doha for Brazil
• Decline in manufacturing employment• Increased agr employment: 253,000 new jobs
filled by– 56,000 workers coming from contracting non-agr
sectors
– 197,000 workers coming from unemployment: 78% drawn from lowest 3 income classes
• Increased returns to farm land
8
Doha boosts employment in relatively poorer regions thereby reducing poverty
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
CurrentHeadct
delEmply delPvty
SaoPaolo
Rio
Brazil
Tocantins
Maranhao
National headcnt falls by 236,000
(Proportion of pop.)
(Percentage changeIn headcount)
9
Country Studies Summary: Near Term Poverty Impacts of Trade Reform are Mixed
-4
-3
-2
-1
0
1
2
BangladeshBrazilCam
eroonChinaIndonesiaM
exicoM
ozambique
PhilippinesRussia
DohaFull-Lib
Perc
enta
ge c
hang
e in
hea
dcou
nt
10
Long Term Poverty Impacts of Trade Reform are Uniformly Favorable:
(these studies add impact on investment)
-5-4.5
-4-3.5
-3-2.5
-2-1.5
-1-0.5
0
Bdsh Brazil China
DohaFull-Lib
Perc
enta
ge c
hang
e in
hea
dcou
nt
Note: LR results only available for 3 countries and world
11
Impacts of Doha and Full-Lib Compared
• Doha is less poverty friendly than Full-Lib• Operate on same instruments, but differing degrees• DDA eliminates export subsidies, but developing
country applied tariffs will be barely reduced• Poverty focus requires the opposite• Engagement by developing countries in liberalizing
their trade regimes would make Doha more poverty friendly
12
Conclusions • DDA must be ambitious• Short-run mixed but sum < 0; long-run <0. • Complementary policies • Deeper cuts in developing country bound
tariffs• Sustained long term poverty reduction depends
on economic growth:– Impact of the DDA on investment is critical– Trade reforms need to be far reaching -- reducing
barriers to services trade and investment, in addition to merchandise tariffs
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