Trade, Equity and Development in the Doha Negotiations

Trade, Equity and Development in the Doha Negotiations spolaski@ceip.org December 5, 2005

Overview of Carnegie Study • Economic model commissioned by Carnegie • Utilizes newest global trade data and trade patterns (GTAP 6) • For developing countries, agricultural labor markets are modeled separately from urban unskilled labor markets • Unemployment in unskilled labor markets in developing countries is recognized in model 2

Overview of Results • Impact of likely Doha liberalization very different for different developing countries • Many low-income countries fare poorly; some developing countries face net losses in real income, export market share • Importance of sectors beyond agriculture for broad-based gains to developing countries • Minimal cost to developed countries of special treatment for defensive agricultural interests of developing countries 2

Final Report • Final report available late January 2006 at www.carnegieendowment.org/trade • Report will include full model description, extensive range of findings, policy implications and policy recommendations 2

(No exceptions for sensitive or special agricultural products) (Includes 2% sensitive and 4% special agricultural products) • Kym Anderson, William J. Martin and Dominique van der Mensbrugghe, “Market and Welfare Implications of Doha Reform Scenarios,” in Agricultural Trade Reform and the Doha Development Agenda, ed. Kym Anderson and William J. Martin (Washington, D.C.: World Bank, November 2005). • Carnegie Endowment for International Peace (forthcoming). • In the World Bank model, the scenario is based on tariff reductions from bound rates based on a tiered formula. Resulting average agricultural tariff reductions are 44% by developed countries and 21% by developing countries. The corresponding reductions for bound tariffs on manufactured goods are 50% and 33%. In the Carnegie model scenario, labeled in subsequent figures as “Carnegie Central Doha Scenario,” reductions are from trade-weighted ad valorem equivalent (AVE) applied border protection. Agricultural AVEs are reduced by 36% by developed countries and 24% by developing countries, whereas the corresponding reductions for manufactured goods are 50% and 33%. Least developed countries do not make AVE reductions in either model. 3

Source: Kym Anderson, William J. Martin and Dominique van der Mensbrugghe, “Market and Welfare Implications of Doha Reform Scenarios,” in Agricultural Trade Reform and the Doha Development Agenda, ed. Kym Anderson and William J. Martin (Washington, D.C.: World Bank, November 2005). Agriculture data from Table 12.14. Manufactures data calculated by author from data in Table 12.14. • World Bank Scenario 2 with 2% “sensitive” products and 4% “special” products. • World Bank NAMA scenario with cuts to tariff bindings of 50% by developed countries, 33% by developing countries and no change by least developed countries. 4

In the Carnegie Doha scenario for agriculture, reductions are from trade-weighted ad valorem equivalent (AVE) applied border protection. Agricultural AVEs are reduced by 36% by developed countries and 24% by developing countries. Least developed countries do not make AVE reductions. • In the Carnegie Doha scenario for manufactured goods, reductions are from trade-weighted ad valorem equivalent (AVE) applied border protection. AVEs for manufactured goods are reduced by 50% by developed countries and 33% by developing countries. Least developed countries do not make AVE reductions. 5

a Change in Percent of World Export Market a. Includes reductions in border protection and subsidies on both agriculture and manufactures. 9

Impact of Flexibility for “Special Products” on Developed Country Real Income Gains a. This scenario assumes full flexibility, that is, developing countries do not reduce border protection at all. 12

Trade, Equity and Development in the Doha Negotiations