Global Economic Prospects 2004: Realizing the Development Promise of the Doha Agenda September 2003 Hans Timmer and Uri Dadush World Bank

Global Economic Prospects 2004:Global Economic Prospects 2004:

Realizing the Development Realizing the Development PromisePromise

of the Doha Agendaof the Doha Agenda

September 2003

Hans Timmer and Uri Dadush

World Bank

A global recovery is underway, but remains fragile as macro stimulus in the rich countries has largely run its course.

Developing countries continue to out-pace OECD countries as a result of increased openness and improved policies.

The Doha Agenda has the potential to speed growth, raise incomes, and reduce poverty, and all countries have an interest in its success.

But to realize this potential, governments have to tackle inequities in the world trading system – and to forge an agreement than benefits the poor.

Main messages…Main messages…

Indicators now favorable for recovery and stronger growth in 2004

- Financial headwinds on investment easing

The rich countries: Road to recoveryThe rich countries: Road to recovery

550

600

650

700

750

2000Q1 2001Q1 2002Q1 2003Q1

6,000

7,000

8,000

9,000

10,000

11,000

Japan [right scale]Japan [right scale]

USA [left]USA [left]

Corporate profits, USA and JapanCorporate profits, USA and Japan

Indicators now favorable for recovery and stronger growth in 2004

- Financial headwinds on investment easing

- Equity markets stronger

The rich countries: Road to recoveryThe rich countries: Road to recoveryDJI, DAX & TOPIX, index Mar-03=100.DJI, DAX & TOPIX, index Mar-03=100.

85

90

95

100

105

110

115

120

125

130

135

140

3/3/2003 4/2/2003 5/2/2003 6/1/2003 7/1/2003 7/31/2003

TOPIXDOW JONES

DAX

The rich countries: investment now rising....The rich countries: investment now rising....Real fixed investment, percent change at annual ratesReal fixed investment, percent change at annual rates

-16

-12

-8

-4

0

4

8

Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03

Euro AreaEuro Area

United StatesUnited States

JapanJapan

.... and production is turning the corner.... and production is turning the corner

-8

-6

-4

-2

0

2

4

6

8

Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03

High income countriesHigh income countries

Industrial production, percent change at annual ratesIndustrial production, percent change at annual rates ForecastForecast

0

1

2

3

4

5

1981 82 83 84 85 86 87 88 89

1990 91 92 93 94 95 96 97 98 99

2000 1 2 3 4

2005

Early 1990s recession

East Asia financial crisis

2001 downturn

The rich countries: a moderate recovery...The rich countries: a moderate recovery...Real GDP, percent changeReal GDP, percent change

Early 1980s recession


ForecastForecast

The international environment improves...The international environment improves...

Percentage change

Export market growth /1 -0.2 2.5 6.8 8.0

Non-oil commodity prices -9.1 5.1 6.9 1.1

U.S. LIBOR (%) 3.5 1.8 1.0 2.0

Source: World Bank. Note: /1 import demand in partner markets.

2001 2002 2003 2004

Emerging market spread (bp) 797 ...728 610


Percentage change



U.S. LIBOR (%) 3.5 1.8 1.0 2.0


2001 2002 2003 2004


Industrial Production and Metals Price Index (Jan-2001 = 100)

95

96

97

98

99

100

101

102

103

104

105

80

82

84

86

88

90

92

94

96

98

100

Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03

Metals and Metals and MineralsMinerals

World IPWorld IP

Metal prices firm... another indication of Metal prices firm... another indication of anticipated recoveryanticipated recovery


Percentage change



U.S. LIBOR (%) 3.5 1.8 1.0 2.0


2001 2002 2003 2004


ForecastForecast

Industrial Production, 3m/3m saar

-10

-5

0

5

10

15

Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03

High Income High Income CountriesCountries

Developing Developing CountriesCountries

WorldWorld

Strong growth of industrial production in Strong growth of industrial production in developing countriesdeveloping countries

Industrial Production Index (Jan-1999 = 100)

100

105

110

115

120

125

130

135

Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03

WorldWorld

Developing Developing CountriesCountries

High Income High Income CountriesCountries

Strong growth of industrial production in Strong growth of industrial production in developing countriesdeveloping countries ForecastForecast

0

1

2

3

4

5

Early 1980s debt crisis

1990s recession Transition countries

East Asia financial crisis

2001 Global downturn

The developing countries: a robust outlook The developing countries: a robust outlook Real GDP, percent changeReal GDP, percent change

Trend growth

ForecastForecast

Developing countriesDeveloping countries

0

1

2

3

4

5

The developing countries: ... and the OECD The developing countries: ... and the OECD Real GDP, percent changeReal GDP, percent change

ForecastForecastDeveloping countriesDeveloping countries


0

200

400

600

800

1000

1200

1400

1600

1965 1969 1973 1977 1981 1985 1989 1993 1997

Other manufacturing

Equipment

ICT

Autos and parts

Textile and clothing

Processed foods

AgricultureNatural resources

Developing country merchandise exports ($billion)

Driven by increased openness in Driven by increased openness in manufacturingmanufacturing

Real GDP Real GDP per capitaper capita growth, 1990s and 2006-2015 growth, 1990s and 2006-2015

Improved per-capita growth longer term Improved per-capita growth longer term

6.4

3.3

1.71.2

-0.2

5.4

4.1

3.3

2.5 2.5

1.6

-1.8-2.5

-1.0

0.5

2.0

3.5

5.0

6.5

East Asia South Asia East. Eur. &Central Asia

LatinAmerica

Middle East& NorthAfrica

Sub-SaharanAfrica

1990s 2006-2015

-1

0

1

2

3

4

5

6

7

High-incomecountries

East Asiaand Pacific

Europe andCentral Asia

LatinAmerica and

theCaribbean

Middle Eastand North

Africa

South Asia Sub-SaharanAfrica

Per

cent

Labor Capital Productivity

Decomposition of GDP growth 2005-2015Decomposition of GDP growth 2005-2015(Average per cent per annum)

As productivity growth is expected to As productivity growth is expected to accelerate…accelerate…

-4

-2

0

2

4

6

8

High-incomecountries



LatinAmerica and

theCaribbean


Africa


Per

cent

Labor Capital Productivity

Decomposition of GDP growth 1990-2000Decomposition of GDP growth 1990-2000(Average per cent per annum)

... compared to the 1990s... compared to the 1990s

Key Cancun Messages

Think “Development” Agriculture first South-South Trade is critical Preferences help, but don’t define success Development Community has a big role

All countries have an interest in a successful All countries have an interest in a successful Doha Agenda … $270 - $520 billion Doha Agenda … $270 - $520 billion

0

50

100

150

200

250

300

350

400

High-income countries Developing countries

$199

7 bi

llio

n Static gains

Dynamic gains

US $billions change in real income in 2015 relative to baseline

Potential of Doha Agenda Potential of Doha Agenda

More people would be lifted above the More people would be lifted above the poverty line…140 million…many in Africapoverty line…140 million…many in Africa

0

10

20

30

40

50

60

70



LatinAmerica and

theCaribbean


Africa


Mil

lio

ns

Source: World Bank staff simulations.

change in the number of poor in 2015 relative to the baseline

$1 per day$1 per day

$2 per day$2 per day

Potential of Doha Agenda Potential of Doha Agenda

$424 b from reforms in developingcountries

116 b. in income gains from reforms in high-income countries

Incomes in developing countries will be Incomes in developing countries will be $540 billion higher – with 13% fewer $540 billion higher – with 13% fewer poor -- if Doha were to succeed fully….poor -- if Doha were to succeed fully….

Most gains come from trade reforms in the South…

…and this does not include services…

World trading system…

Key Cancun Messages


Developing countries have failed to penetrate agricultural markets of rich countries

0

5

10

15

20

25

30

1980 1990 2000

Exports to poor countriesExports to poor countries

Exports to rich countriesExports to rich countries

0

5

10

15

20

25

30

1980 1990 2000

Developing countries’ share of total world exportsDeveloping countries’ share of total world exports

ManufacturingManufacturing AgricultureAgriculture

Exports to rich countriesExports to rich countries

Exports to poor countriesExports to poor countries

Realizing the Promise of the Doha Agenda Realizing the Promise of the Doha Agenda

Protection of sugar and wheat in rich countries Protection of sugar and wheat in rich countries has increased domestic production and driven has increased domestic production and driven net imports to zero net imports to zero

-5

0

5

10

15

20

25

30

35

1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001

MN

., t

on

s

Net imports

Production

Production and net imports of sugar in EU, Japan, and US, 1965–2002 (millions of tons)

-40

-20

0

20

40

60

80

100

120

1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001

Mn

., t

on

s

Net imports

Production

Production and net imports of wheat in EU, 1965–2002 (millions of tons)

Source: FAO

Protection in rich countries is high and unchanged since Protection in rich countries is high and unchanged since the Uruguay round…the Uruguay round…

Industrial countries: Producer SupportIndustrial countries: Producer Support

Direct subsidies

* As a percent of output at world pricesSource: OECD

perc

ent*

Border protection

0

50

100

150

200

250

300

86-88 99-01 86-88 99-01 86-88 99-01Other

industrialEU US Japan

86-88 99-01


Protection in rich countries is high and unchanged since Protection in rich countries is high and unchanged since the Uruguay round…though developing countries have the Uruguay round…though developing countries have reduced barriersreduced barriers

Developing countries: average tariffs for Developing countries: average tariffs for agricultureagriculture

Industrial countries: Producer Support EstimateIndustrial countries: Producer Support Estimate

Direct subsidies

* As a percent of output at world pricesSource: OECD

perc

ent*

perc

ent

Border protection

0

50

100

150

200

250

300

86-88 99-01 86-88 99-01 86-88 99-01Other

industrialEU US Japan

86-88 99-01

Source: TRAINS

0

50

100

150

200

250

300

1990 1995 2000


Source: WTO IDB (MFN Applied Duties)

Percentage of Tariff Lines Non Ad-ValoremPercentage of Tariff Lines Non Ad-Valorem

0

5

10

15

20

25

30

35

QUAD Large MiddleIncome

Other MiddleIncome

Lower Income

Per

cent

age

of ta

riff l

ines

Agriculture

Manufacturing

Specific duties mask high protectionSpecific duties mask high protection

Key Cancun Messages


Rich countries levy higher tariffs on imports Rich countries levy higher tariffs on imports from developing countriesfrom developing countries

0123456789

Industrial LatinAmerica

andCaribbean

Sub-SaharanAfrica

East Asia Europeand

CentralAsia

MiddleEast

SouthAsia

Av tariffs of industrial countries charged to exporters Av tariffs of industrial countries charged to exporters from various regions, 1997 (percent)from various regions, 1997 (percent)


……and so do other developing countriesand so do other developing countries

0

5

10

15

20

25

East Asia Europeand

CentralAsia

LatinAmerica

MiddleEast

SouthAsia

Sub-SaharanAfrica

Industrial

Protection rates faced by LAC exporters of manufactures, 1997

percent


Developing countries pay more of their foreign Developing countries pay more of their foreign tariffs to rich countries and to neighborstariffs to rich countries and to neighbors

0102030405060708090

100

Industrial East Asia Europe andCentral

Asia

LatinAmerica

andCaribbean


Africa


Share of tariff burden, percent

Rest of worldRest of world Intra-regionIntra-region

IndustrialIndustrial


Improving trade logistics can be as Improving trade logistics can be as important as cutting tariffs…ports, customs, important as cutting tariffs…ports, customs, transporttransport

0 2 4 6 8 10 12

South Asia

Africa

Latin Americaand Caribbean

East Asia andPacific

Developed

Average number of days to clear customs for sea cargo

Source: International Exhibition Logistics Associates, based on a sample of countries in each region

Development assistance is key to improving ports, customsDevelopment assistance is key to improving ports, customs

and trade infrastructureand trade infrastructure

Key Cancun Messages

Think “Development” Agriculture first South-South Trade is critical Preferences help, but don’t define

success Development Community has a big role

Share of LDCs in EU and US imports, 1966–2002 (percent)

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

0.9%

1.0%

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

US

EU

Source: WITS.

Trade preferences have had only marginal Trade preferences have had only marginal successsuccess

Share of LDCs in EU and US imports, 1966–2002 (percent)

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

0.9%

1.0%

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

US

EU

Source: WITS.

Trade preferences have had only marginal Trade preferences have had only marginal successsuccess

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

1996 1997 1998 1999 2000 2001 2002

CBI

AGOA

Andean

Share of preferential programs in US imports, 1966–2002 (percent)

30.0

35.0

40.0

45.0

50.0

55.0

60.0

1994 1995 1996 1997 1998 1999 2000 2001

Figure 6 Fewer exporters to the Quad countries are taking advantage of import preferences

Share of potential imports under GSP that entered with preferential access, 1994-2001 (percent)

Source: Inama (2003).

Preferences reduce pressures to engage in Preferences reduce pressures to engage in reciprocal tariff reductions…leaving the poorest reciprocal tariff reductions…leaving the poorest countries with highest protectioncountries with highest protection

0%

10%

20%

30%

40%

50%

60%

Duties/Imports Avg Nominal Tariff Imports/GDP

Dropped from GSP

In GSP

Source: Ozden and Reinhardt (2002).

Av. tariffs of countries in US GSP and those dropped from GSPAv. tariffs of countries in US GSP and those dropped from GSP (percent)(percent)

Key Cancun Messages

Think “Development” Agriculture first South-South Trade is critical Preferences help, but don’t define success Development Community has a big

role

Role of the Development Community

Analyze and advocate trade proposals that promote development

Dialogue with key constituencies• Developing country policymakers • Other stakeholders—donors, NGOs, private sector• General public opinion

Provide technical assistance and build trade capacity in clients

Support integration of trade in country strategies

For the development promise of the Doha For the development promise of the Doha agenda to be realized, all countries have to agenda to be realized, all countries have to take responsibilitytake responsibility

Rich countries have to lead in agriculture, labor- intensive manufactures, and development assistance as well as in services (mode 4)

Middle income countries have to be willing to provide new access in services and lower high external tariffs—benefiting themselves and their neighbors

Low-income countries, while seeking donor assistance and derogation on resource-intensive rules, have to be willing to reform their own border protection.

Documents

Global Economic Prospects 2004: Realizing the Development Promise of the Doha Agenda September 2003 Hans Timmer and Uri Dadush World Bank