Global Economic Prospects and the Developing Countries 2002 Global Economic Prospects and the Developing Countries 2002 October, 2001 Making Trade Work for the World’s Poor

The international environment has become harsh for developing countries

Simultaneous downturn in rich countries Simultaneous downturn in rich countries (Industrial production, percent change, 3-month/3-month, saar) EU-15 United States Japan

Sharp deterioration after September 11 th -15% -2.5% 125 bp 150 bp -6.5%-15%

Sharp downturn for developing countries… (Real GDP, percent change over previous year)

… and delayed recovery (Real GDP, percent change over previous year)

Poverty declines, but not everywhere Millions (Number of persons living on less than $2 per day)

Developing countries have now become major players in world trade... Developing countries’ share Percent

Developing countries have now become major players in world trade... Developing countries’ share (lhs) Percent US$ billion

–but poor countries did less well (Percentage point change world share, Non-energy merchandise exports)

… one reason is that products produced by the poor face higher barriers to trade Poor (<$2/day) Non-poor (>$2/day) Tariff faced by each group (in %, )

Reshaping the Global Trade Architecture for Development… Main Recommendations u WTO: A development round would improve market access for agriculture, textiles and services u High-income countries: ensure trade policies promote access and are not detrimental to poor countries u Developing countries: trade and other policies remain the most important determinant of growth prospects u Multilateral cooperation outside the WTO can help build trade capacity and create sound environmental and labor standards: ‘aid for trade’

Trade liberalization would accelerate growth (Cumulative additional (discounted) income in 10 years following liberalization) $ trillion

—implying a substantial additional reduction in poverty Millions (Number of persons living on less than $2 per day)

—implying a substantial additional reduction in poverty Millions (Number of persons living on less than $2 per day)