Winners and Losers: Impact of the Doha Round on Developing Countries FINDINGS FROM A GLOBAL GENERAL EQUILIBRIUM MODEL Director, Trade, Equity and Development Project February 9, 2006 Sandra Polaski Carnegie Endowment for International Peace Director, Trade, Equity and Development Project September 2006

An applied general equilibrium model of global trade Uses the latest global trade database (GTAP Version 6.0) Labor markets in developing countries are modeled in a more realistic way than in most models (e.g., unemployment) Results today are comparative static Overview of model

Gain in US$ billion Hong Kong Full Free Trade Gain over base year GDP 0.14%0.53% Global Real Income Gains under Trade Scenarios

Global Real Income Gains Under Plausible Doha Scenarios, Different Models Change in Real Income, Billions of Dollars

Sectoral Gains from a Plausible Doha Round Change in Real Income, Billions of Dollars

Distribution of Sectoral Gains Change in Real Income, Billions of Dollars

Net food importer status Preference erosion Structure of agricultural sector in many developing countries: Dominated by small-scale, low- productivity farming Why do many developing countries lose under agricultural trade liberalization scenarios?

Table Share of Working Population Engaged in Agriculture, 2003

High-income exporters High-income importers Low-income importers 15-0 Low-income exporters 3110 Table 4.3. Destination of Exports under Agricultural Liberalization in the World Bank Model Change from Baseline in Bilateral Trade Flows from World Bank Doha Scenario 7 (Billions of Dollars) 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, 2006), table Note: World Bank Scenario 7 is based on tariff reductions from bound rates based on a tiered formula. Resulting average agricultural tariffs are reduced by 50 percent by developed countries and 21 percent by developing countries. Least developed countries do not make tariff reductions. Tiered reductions in domestic support of agriculture are made from bound aggregate measures of support. Export subsidies for agriculture are eliminated.

Achieving a positive result for all countries in the Doha Round will require much greater attention to the defensive needs of developing countries. Failure to address these defensive issues risks imposing net income losses on low- income countries and serious adjustment costs and welfare losses on low-income farmers in most developing countries. Conclusions

Careful sequencing of liberalization: manufacturing liberalization by developed countries should come first Much longer phase-out periods for agricultural protection in developing countries Special and differential treatment for developing country agriculture Development assistance to diversify and modernize agriculture in developing countries Recommendations

Duty-free quota-free treatment for 100% of least developed countries exports to allow exports of manufactured goods and value- added agricultural products to grow before low value-added agriculture faces full competition. Extend some preferences to other low- income countries to avoid economic decline Recommendations, continued

Winners and Losers: Impact of the Doha Round on Developing Countries FINDINGS FROM A GLOBAL GENERAL EQUILIBRIUM MODEL Director, Trade, Equity and Development Project February 9, 2006 Sandra Polaski Carnegie Endowment for International Peace Director, Trade, Equity and Development Project September 2006