Developing Country Priorities and Challenges in Trade

L Alan Winters

University of SussexAlso Centre for Economic Policy Research (London)

and Centre and Economic Performance (LSE)

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Fundamental Objectives:

• Poverty Reduction

• Growth

• Social and Political Development

• Equity

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Direct Determinants

1 efficiency

2 productivity growth

3 investment - especially in people

4 widespread productive employment

5 minimum income levels for the poorest

6 equitable and efficient world system

Trade policy contributes via these Trade policy contributes via these

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Mostly Domestic

• Items 1 to 5 are domestic

• They respond to a country’s own policy

• Most key trade policy issues are unilateral

• Most challenges in trade policy are also domestic – distribution– special interests

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The Trading System

• Does it help the domestic dimensions?

• Is it equitable?

• Is it efficient?

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Trade and Growth

• positive link– technology, inputs, competition, market signals,

ideas,

• the only doubt is methodological

• growth benefits the poor

• on average

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Trade Liberalisation and Poverty

• long-run - growth and productivity• medium term

– prices– employment and wages– government revenue and spending

• short term– risk and variability– adjustment costs

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Analysing Trade and Poverty

• Conceptual Framework– Implementation

– Policy implications

• Specific Liberalisations:– agriculture, TRIPS, services, manufactures,

subsidies, anti-dumping, competition policy, environmental standards, labour standards, TRIMS and investment

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Trade Liberalisation and Poverty: A Handbook

• Do It Yourself

• Every case is different

• Political will and analytical capacity

• Centre for Economic Policy Research, London, October 2001 (www.cepr.org)

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Key Sector: Agriculture

• Poverty is rural • Agriculture is their dominant source of

income

• Spill-overs to non-farm rural workers

• Food is main expenditure item of poor

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Developed Countries Must

• Open Markets – Non-discriminatorily, not preferentially

• Slash domestic support– Genuinely de-coupled support

• Eliminate export subsidies

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Developing Countries

• Eliminate anti-agriculture bias• Effective policies

competitive markets; extension infrastructure; land and credit access

• Food Security• Individual poverty effects depend on

net supply positions; asset distributionability to adapt; leaving agriculture

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Services - A Huge Opportunity

• Highly regulated/protected

• Competition is the key

• Improve quality and cost

• Public services - need not include

• Ensure the poor have access

• Net position of poor varies by sector

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Temporary Movement of Labour

• THIS IS NOT MIGRATION

• Unskilled labour as well as skilled

• $300 billion per year?

• Very Complex - especially security• separate GATS from regular visas

• recognition of qualifications

• do not tax for benefits not received

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Manufactures

• Liberalise trade in both directions

• Developing countries – have far higher tariffs– are rapidly growing as markets

• Developed countries– peaks and escalation– honestly abolish MFA

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Institutions and Growth

• corruption - worse in closed economies• conflict resolution• distribution• WTO can help

– examples, support for institutional reform – blueprints– technical assistance

• Avoid external imposition

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Regional Trading Arrangements

• attenuate competition (fewer partners)

• less efficient suppliers

• prone to exceptions

• little evidence of depth or breadth or speed

• focus inwards not outwards

• don’t encourage global process

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Proposals on Regionalism

• Apply GATT 24 and GATS 5 to developing countries

• Define ‘substantially all’ – 95% after 5 years; 98% after 8

• Enforce ‘other restrictive regulations’ ban• Use DSP to protect rights of excluded

countries– especially for rules of origin

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Scarcity of Skills

• the key problem of developing world• encourage education• capacity building

– but draws skills from other tasks– leakage to private sector is a success– allow developing countries to choose

where/what– in research and analysis as well as government

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Economise on Skills: Trade Policy

• simple and robust trade policies

• easy to implement and plan

• not negotiable with interests

• save private resources as well as public

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Economise on Skills: The WTO

• small and straight-forward agenda• simple agreements with few exceptions• test agreements with a ‘use of skills’ audit• let developing countries intervene late but effectively• provide analytical support without strings• co-operate on analysis and negotiation

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On these criteria Doha disappoints

• Investment and Competition Policy are to be negotiated – starting now in their Committees

• Environment is ‘in’ – even if only in a small way at first

• Trade facilitation is ‘in’