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
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
2
Impact Of Trade Reforms On World
Prices
(percentage change in average price)
25
20
15
10
5
0
-5
cotton
oseeds
cgrns
dairy
Full-Lib
DDA
apparel
autos
3
Incomplete price transmission yielded unequal
gains from Mexican trade reforms in 1990’s
Source: Nicita, 2004.
4
% change real income
Doha impacts on poorest rural households in Mexico
also influenced by price transmission (Nicita, 2005)
2.5
2
Border
North
Center
South
1.5
1
0.5
0
Doha
Doha+
Doha++
Doha+ = Doha and Productivity enhancement
Doha++ = Doha+ and enhanced price transmission
5
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 children
30
25
20
chg-crop
+prices
+extens
15
10
5
0
cotton
subsist
Real income gains to farm
households in Zambia
6
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
7
Doha boosts employment in relatively poorer
regions thereby reducing poverty
2.5
2
1.5
SaoPaolo
Rio
Brazil
Tocantins
Maranhao
1
0.5
0
-0.5
-1
-1.5
Current
Headct
(Proportion
of pop.)
delEmply
delPvty
(Percentage change
In headcount)
National headcnt
falls by 236,000
8
Percentage change in headcount
Country Studies Summary: Near Term
Poverty Impacts of Trade Reform are Mixed
2
1
Doha
Full-Lib
0
-1
-2
-3
-4
sia s
e
us
R p in
e
p
ili q u
Ph bi
am
oz
M
ico
ex
M s ia
ne
do
In
a
in n
Ch oo
er
m
Ca
il
az sh
Br ade
l
ng
Ba
9
Percentage change in headcount
Long Term Poverty Impacts of Trade Reform
are Uniformly Favorable:
(these studies add impact on investment)
0
-0.5
-1
-1.5
-2
-2.5
-3
-3.5
-4
-4.5
-5
Doha
Full-Lib
Bdsh
Brazil
China
Note: LR results only available for 3 countries and world
10
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
11
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
12