Global Economic Prospects 2004: Realizing the Development Promise of the Doha Agenda

Transcription

1 Global Economic Prospects 2004: Realizing the Development Promise of the Doha Agenda Uri Dadush World Bank October 21, 2003

2 Main messages 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. Cancun a setback, but not the end of the road.

3 The Doha Agenda has the potential to accelerate growth A good agreement could boost incomes $ b. 400 US $billions change in real income in 2015 relative to baseline $1997 billion Static gains Dynamic gains 0 High-income countries Developing countries

4 More people would be lifted above the poverty line 140 million many many in Africa change in the number of poor in 2015 relative to the baseline $2 per day 70 $1 per day Millions East Asia and Pacific Source: World Bank staff simulations. Europe and Central Asia Latin America and the Caribbean Middle East and North Africa South Asia Sub-Saharan Africa

5 But to realize development promise, an agreement has to reduce barriers to the products the poor produce Agriculture is a priority, particularly reducing border protection and subsidies in rich countries Reducing protection on manufactures, particularly in the South Helping low-income countries reduce reliance on trade preferences and increase competitiveness exports and a new S&DT approach

6 Developing countries have failed to penetrate agricultural markets of rich countries 30 Developing countries share of total world exports Manufacturing 30 Agriculture Exports to rich countries Exports to rich countries Exports to poor countries 5 Exports to poor countries

7 Protection of sugar and wheat in rich countries has increased domestic production and driven net imports to zero 35 Production and net imports of sugar in EU, Japan, and US, (millions of tons) MN., tons Net imports Production Production and net imports of wheat in EU, (millions of tons) Production Source: FAO Mn., tons Net imports

8 Protection in rich countries is high and unchanged since the Uruguay round Industrial countries: Producer Support percent* Direct subsidies 150 Border protection EU US Japan Other industrial * As a percent of output at world prices Source: OECD

9 Protection in rich countries is high and unchanged since the Uruguay round though developing countries have reduced barriers percent* Industrial countries: Producer Support Estimate Border protection Direct subsidies percent Developing countries: average tariffs for agriculture EU US Japan Other industrial * As a percent of output at world prices Source: OECD Source: TRAINS

10 Specific duties mask high protection Percentage of tariff lines Percentage of Tariff Lines Non Ad-Valorem Agriculture Manufacturing 0 QUAD Source: WTO IDB (MFN Applied Duties) Large Middle Income Other Middle Income Lower Income

11 Specific duties mask high protection Average Ad Valorem Duties vs. Ad Valorem Equivalents in Agriculture Duty Rate (%) Australia US EU Jordan Average Ad Valorem Tariff Average Ad Valorem Tariff Equivalent Source: WTO IDB (MFN Applied Duties)

12 Quotas cover many products Share Of Agricultural Output Under Tariff Rate Quotas (percent) TRQ (%) OECD Average European Community United States 26.2 Japan 13.1 Eastern Europe Eastern Europe = Czech, Hungary, Poland and Slovakia; Other Industrial = Norway, Switzerland and Iceland; Other developing = Korea, Turkey and Mexico Source: OECD, Agriculture Market Access Database (AMAD) 50.1 Australia, New Zeland 0.0 Other Industrial Other Developing

13 Realzing the Promise of the Doha Agenda Development impediments take various forms: specific duties, mixed duties, and escalation Tariff lines containing specific, compound or mixed duties, by stage s of processing (percentage of all lines) Norway EU US Canada Russia Turkey Final Intermediate Raw Source: WTO IDB (MFN Applied Duties)

14 Rich countries levy higher tariffs on imports from developing countries Av tariffs of industrial countries charged to exporters from various regions, 1997 (percent) Industrial Latin America and Caribbean Sub- Saharan Africa East Asia Europe and Central Asia Middle East South Asia

15 and so do other developing countries Protection rates faced by Latin American exporters of manufactures, percent East Asia Europe and Central Asia Latin America Middle East South Asia Sub- Saharan Africa Industrial

16 Developing countries pay more of their foreign tariffs to rich countries and to neighbors Share of tariff burden, percent Rest of world Intra-region region Industrial Industrial East Asia Europe and Central Asia Latin America and Caribbean Middle East and North Africa South Asia Developing countries have an interest in reducing protection in the South as well as the North Sub- Saharan Africa

17 Pro-poor policies: The way forward Increase transparency by phasing out specific duties, mixed duties, and seasonal tariffs. More drastic cuts of tariffs, tariff peaks and border protection Reduce and decouple subsidies, and end export subsidies in agriculture. Rich country leadership is essential

18 Temporary movement of labor could increase incomes of developing countries but is an underused mode of trade in services Value of trade in services by mode Mode 4 (movement of natural persons) 1% Mode 1 (cross-border supplyair transport) Mode 3 (commercial presence- e.g., foreign investment) 28% 57% 14% Mode 2 (consumption abroad- e.g., tourism) Source: IMF Balance of Payments Yearbook

19 Putting liberalization of services on the table for greater mode 4 access may be key Services liberalization index South Asia East Asia Middle East & Africa Europe & Central Asia Latin America High Income Financial services Middle East & Africa Europe & Central Asia South Asia East Asia Latin America High-income Telecoms Greater competitiveness

20 S&DT: The issues Old style S&DT Trade preferences have often been seen as substitutes for MFN market access Opting out from reductions in border protections Uniform transition periods Consequences Reduced pressure for reciprocity in bargaining Under performance in trade

21 The benefits of U.S. trade preferences are distributed unequally Top 10 beneficiaries of U.S. generalized system of preferences, 2001 (percentage of total GSP benefits) All Other: 26% Chile 4% India 11% Indonesia 13% Russia 4% Venezuela 6% Turkey 4% Thailand 20% Philippines 7% South Africa 5%

22 Low income countries have relied too much on trade preferences..with only marginal success Share of LDCs in EU and US imports, (percent) 1.0% 0.9% 0.8% US 0.7% 0.6% 0.5% 0.4% EU 0.3% 0.2% 0.1% 0.0% Source: WITS.

23 Low income countries have relied too much on trade preferences..with only marginal success Share of LDCs in EU and US imports, (percent) 1.0% 0.9% 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0.0% US EU Source: WITS. 2.0% 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Share of preferential programs in US imports, (percent) CBI AGOA Andean

24 Low income countries have relied too much on trade preferences Share of potential imports under GSP that entered with preferential access, (percent) Source: Inama (2003).

25 Preferences reduce pressures to engage in reciprocal tariff reductions leaving the poorest countries with highest protection Av. tariffs of countries in US GSP and those dropped from GSP (percent) 60% 50% In GSP 40% 30% Dropped from GSP 20% 10% 0% Duties/Imports Avg Nominal Tariff Imports/GDP Source: Ozden and Reinhardt (2002).

26 Improving trade logistics can be as important as cutting tariffs ports, customs, transport Average number of days to clear customs for sea cargo Developed East Asia and Pacific Latin America and Caribbean Africa South Asia Development assistance is key to improving ports, customs and trade infrastructure Source: International Exhibition Logistics Associates, based on a sample of countries in each region

27 Towards a more effective S&DT: some principles Improve market access for all products of all developing countries Duty-free/quota free access for all LDCs, and harmonize and reduce restrictions that limit usage of preferences Resource-intensive rules: search for ways to make rules supportive of, not distractions from development. calibrate implementation of rules to capacity to implement Provide development assistance to help ensure supply response Quid pro quo: lower border barriers and assume full responsibilities as incomes rise

28 For the development promise of the Doha agenda to be realized, all countries have to take responsibility Rich countries have to lead in agriculture, laborintensive manufactures, and development assistance as well as in services (mode 4) Middle-income countries have to be willing to lower high external tariffs benefiting themselves and their neighbors Low-income countries have to rely less on preferences and reform trade-related institutions.

29 Cancun Setback Missed Development Opportunity but not the end of the road

30 Causes of Setback: Substance More Than Process Unfilled expectations in agriculture Excessive caution of Developing Countries Deep divide on Singapore issues Developing countries now key

31 Need to Resume Progress Bilateralism not a valid development alternative Agriculture Balance Exclusion of many Preferences as part-solution Review of WTO working should not delay negotiations

32 Global Economic Prospects 2004: Realizing the Development Promise of the Doha Agenda Uri Dadush World Bank October 21, 2003