Delivering on Doha’s Promise: The Role of Rich Country Policies

1. Delivering on Doha’s Promise: The Role of Rich Country Policies Nancy Birdsall Center for Global Development Cancun Trade and Development Symposium September 11, 2003 Cancun, Mexico

2. Why a CDI? • Rich country policies matter for development • Time to hold rich countries accountable • Need a tool to measure rich country commitments to development – ex: Millennium Development Goal 8

3. What is the CDI ? • Measure of policyeffort on policies that affect development prospects of poor countries • The index ranks 21 countries –members of the DAC (except Luxembourg)

4. Components • Aid • Trade • Investment • Environment • Migration • Peacekeeping

5. Overall Scores

6. Goals of the CDI • Educate and inspire to action the rich-world public and policy makers • Motivate a race to the top among OECD countries • Spark new research and data collection • Foster debate about the role of rich country policies in development

7. Trade Aggregate measure of protection in tariff equivalent terms: • Tariffs • Non-tariff barriers • Subsidies Revealed Openness

8. Total Tariff Equivalent of Agricultural Protection Against Developing Countries(percent tariff equivalent) Source: William Cline, “An Index of Industrial Country Trade Policy toward Developing Countries,” CGD Working Paper #14, October 2002.

10. Trade Results

11. Global Free Trade Can Reduce Poverty in Developing Countries by: 1. Opening Agriculture Markets 2. Raising Unskilled Labor Wages 3. Boosting Productivity 4. Inducing Investment 5. An early harvest: free market access for poor nations

12. Liberalization of agricultural markets Agricultural protection against developing countries: • 34 percent in the United States • 100 percent in the EU • 230 percent in Japan • 65 percent in Canada Free trade in agriculture would reduce global poverty by an estimated 200 million people, or about 7 percent. Source: William Cline, “Trading Up: Trade Policy and Global Poverty,” CGD Brief 7, September 2003.

13. The Impact of Global Agricultural Liberalization on Poverty in Selected Countries Source: William Cline, “Trading Up: Trade Policy and Global Poverty,” CGD Brief 7, September 2003.

14. Raising Unskilled Labor Wages • Global free trade would boost world income by about $230 billion annually • About $140 billion in gains for industrial countries and $90 billion for developing countries • In developing countries, real wages of unskilled labor would rise by an estimated 5 Source: William Cline, “Trading Up: Trade Policy and Global Poverty,” CGD Brief 7, September 2003.

15. Boosting Productivity • Increasing trade spurs productivity, which in turn supports long-term increases in per capita income. • Productivity gains in developing countries would lift an estimated additional 200 million people out of poverty in the long term. Source: William Cline, “Trading Up: Trade Policy and Global Poverty,” CGD Brief 7, September 2003.

16. Inducing Investment • Increased trade opportunities induce investment, which also generates long-term increases in per capita income. • Capital investment effects could conservatively reduce the number living in poverty by an additional 300 million people. Source: William Cline, “Trading Up: Trade Policy and Global Poverty,” CGD Brief 7, September 2003.

17. An early harvest: free market access for poor nations LDCs, SSA and HIPC countries account for 64 countries with a combined population of 1 billion, of whom 715 million live in poverty. Estimated growth effects from preferential trade agreements: • US Caribbean Basin Initiative 7-8% • EU Lome-Cotonou arrangement 7-8% • Andean Trade Preference Act 2 % Source: William Cline, “Trading Up: Trade Policy and Global Poverty,” CGD Brief 7, September 2003.

18. Poverty Intensity of US Imports from Developing Countries Source: William Cline, “Trading Up: Trade Policy and Global Poverty,” CGD Brief 7, September 2003.

19. Impact ofGlobal Free Trade on Global Poverty Reduction (in millions, cumulative) Source: William Cline, “Trading Up: Trade Policy and Global Poverty,” CGD Brief 7, September 2003.