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

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

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

Components  Aid  Trade  Investment  Environment  Migration  Peacekeeping

Overall Scores

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

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

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

Trade Results

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

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.

The Impact of Global Agricultural Liberalization on Poverty in Selected Countries Biggest Reductions in Poverty, (%) Biggest Reductions in Poverty, (millions) Malawi (15.2)China (72.1) Vietnam (15.1)India (59.2) Kenya (14.8)Bangladesh (12.0) Tanzania (12.0)Pakistan (10.4) Bangladesh (11.8)Indonesia (9.9) Source: William Cline, “Trading Up: Trade Policy and Global Poverty,” CGD Brief 7, September 2003.

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.

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.

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.

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.

Poverty Intensity of US Imports from Developing Countries RegionsHeadcount Weighting Income Share Weighting Total LDC HIPC SSA Source: William Cline, “Trading Up: Trade Policy and Global Poverty,” CGD Brief 7, September 2003.

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