1. Trade, Growth, and Poverty Reduction William R. Cline Center for Global Development and Institute for International Economics

3. Change in long-term productivity for 1% rise in trade/GDP (%) Levine-Revelt ‘92 0.14 Frankel-Rose ‘00 0.33 Alcala-Ciccone ‘01 1.44 Dollar-Kraay ‘01 0.25-0.48 Easterly ‘03 0.14-0.96 Chaudri-Hakura ’00 (mid-tech industry) 0.18 World Bank GEP ‘02 0.8 OECD ‘03 0.2

4. Percent reduction in poverty for 1% per capita GDP growth Bangladesh2.3Brazil1.5 China2.9Mexico2.1 India2.5Turkey3.5 Indonesia3.0Mozambique1.0 Pakistan3.2South Africa1.7 Philippines2.2Tanzania1.0 Thailand3.5Uganda1.4 Argentina2.9

5. Aggregate Measure of Protection (AMP, %) US EU JPN Agriculture 19.946.482.0 Textiles, Apparel 10.911.6 9.2 Other Manufactures 2.1 3.2 1.5 Oil, other 0.9 0.6 0.3 All (AMP) 4.0 9.516.6

7. Global Free Trade Impact: Lift 500 million out of poverty in 15 years $200 billion annual long-term income gain for developing countries At least half from removing industrial country protection This is twice annual aid, and it benefits industrial country consumers Half of gains are in agriculture

8. Blueprint for a Doha Deal DCs: Phased deep tariff cuts or elimination, including in agriculture, textiles and apparel; DCs: Eliminate agricultural subsidies or fully “decouple” from production; Middle-income DGCs: cut protection at least 50-60 percent; longer phase-in. Second track: immediate free entry from LDCs, HIPCs, SSA; 10-year tax holiday on FDI

9. July ’04 Framework Eliminate agricultural export subsidies Substantially cut domestic ag. subsidies; 20% in 1 st year; deeper for higher subsidies Deeper cuts for higher agricultural tariffs (but ‘sensitive’ products) Manufactures: nonlinear tariff formula DgCs longer phase in, limited departures SUM: Framework can yield large or small liberalization

10. WTO Rulings on Cotton, Sugar Sound analytical cases Put US, EU on defensive Increases pressure to decouple agricultural subsidies from output Dovetails with rising fiscal pressure in US

11. FY2006 Budget trims farm subsidies 5% cut in the $16 billion/year program Maximum cut from $360,000 to $250,000 Needed: Decoupling from production US subsidies = 10% tariff

12. Does global agricultural liberalization hurt LDCs? Food deficit misleading; LDCs are “everything deficit” but have food comparative advantage So LDCs gain from terms of trade when ag prices rise (10%) and manufactured goods prices fall (only requires ½% decline for net gain on current flows) Stories about loss of EU quota rents are ad hoc, not convincing Bangladesh exception but gains in DgC manufactures markets as part of overall package

13. LDC food trade and comparative advantage CountryPoor (mn) # of countries Bangladesh –food trade deficit & comp. disadv. 991 Others: total37444 Food trade deficit21334 Food comparative disadvantage 11021

14. Does preference erosion from global free trade hurt LDCs? LDCs gain in access to markets in middle- income countries, industrial countries with constrained preferences LDCs gain from own-liberalization as part of package

15. Test for Preference Erosion ($bn gains) “Country” Free trade US, EU freeze P7 Mozambique 0.130.09 Uganda 0.090.07 South Africa 1.330.28 Tanzania 0.290.24 Other sub-Saharan Africa 2.36-0.02 Central America 4.021.78 Bangladesh 0.39-0.20 Total, 7 poor (P7) 8.612.24