Global Economic Prospects Realizing the Development Promise of the Doha Agenda phần 1 ppsx

28 Trade, growth, and poverty in developing countries 38 Looking ahead to the Doha Round 47 Annex 1 Historical trade dynamics for developing countries 55 References 60 Chapter 2 Trade Pa

Global Economic

Prospects

Realizing the Development Promise

of the Doha Agenda

2004

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ISBN 0-8213-5582-1

ISSN 1014-8906

Cover photo credit: AFP/CORBIS

Workers at the Los Ausoles coffee plantation in Ahuachapan, El Salvador, clean coffee beans,August 14, 2002

Foreword ix

Acknowledgments xi

Overview xiii

Abbreviations and Data Notes xxxi

Chapter 1 Global Outlook and the Developing Countries 1

The industrial countries: Deficits, confidence, capital spending, and the dollar 4

The external environment for developing countries: Gradual improvement, but a

bumpy road ahead 19

The developing countries: Back on track toward growth? 28

Trade, growth, and poverty in developing countries 38

Looking ahead to the Doha Round 47

Annex 1 Historical trade dynamics for developing countries 55

References 60

Chapter 2 Trade Patterns and Policies: Doha Options to Promote Development 63

Changing patterns in developing-country exports 65

Behind the patterns: Economic and policy determinants 73

Market access for development: The agenda 78

From Doha to Cancún and beyond: How should protection be reduced? 88

References 98

Chapter 3 Agricultural Policies and Trade 103

Poverty, rural households, and trade in agriculture 105

Trade and export growth in agriculture 109

Global agricultural protection: The bias against development 114

Proposals for reforms in the Doha Round 131

References 139

Contents

Chapter 4 Labor Mobility and the WTO: Liberalizing Temporary Movement 143

The bigger picture: Global migration and remittance trends 145Temporary movement of workers 150

Bilateral and regional approaches to labor mobility 152Understanding the impact of temporary foreign workers 155

References 174

Chapter 5 Reducing Trading Costs in a New Era of Security 179

Why transport, trade facilitation, and logistics matter 181The new international security dimension in trade 182The anticompetitive effects of international transport regulations 188Trade facilitation 191

Trade facilitation and the WTO agenda 195Lowering transport costs, increasing security, and facilitating trade 198

References 202

Chapter 6 Development and the Doha Agenda 205

Special and differential treatment and the WTO 207Market access for development 208

Toward a new regime for WTO rules 220Putting development into the Doha agenda 227

References 229

Appendix 1 Regional Economic Prospects 233 Appendix 2 Global Commodity Price Prospects 257 Appendix 3 Global Economic Indicators 279 Figures

1.1 Growth in the OECD countries falters 41.2 OECD manufacturing shows a distinct “double dip” 51.3 Consumer confidence recovers from pre-war lows 61.4 The drop in U.S household net worth has been offset by real estate appreciation 81.5 Capital spending has been hesitant in all industrial countries 9

1.6 Corporate profits have risen moderately in the United States and Japan 91.7 Business confidence remains poor, but better in the United States than in Europe 101.8 The U.S fiscal deficit is widening quickly 11

1.9a The U.S current account deficit is at record levels 111.9b The U.S current account deficit is at record levels 131.10 Market interest rates have dropped 14

1.11 Is deflation a danger for Europe and the United States? 15

iv

1.12 Output gaps are widening, bringing deflationary pressures to bear 16

1.13 The dollar has fallen sharply since early 2002 16

1.14 OECD recovery begins in the United States 18

1.15 OECD-area imports have declined sharply since April 2000 21

1.16 China’s share of East Asian exports keeps rising 21

1.17 The price of oil fell sharply before the war in Iraq 23

1.18 Agricultural prices have begun to decline as crop prospects improve 25

1.19 Emerging-market spreads rallied sharply after late 2002 26

1.20 Bond issuance dominates capital market flows in 2003 27

1.21a Regional trends in industrial production are mixed 29

121b Inflation is moderating in the developing world 29

1.21c Major currencies in Latin America and East Asia are firming up 30

1.22 Developing countries are on track toward long-term growth 31

1.23 Growth rates in developing countries will rise through 2005 31

1.24 Before the SARS outbreak, East Asian GDP was growing robustly 32

1.25 Argentina, Brazil, and Chile see strong upturn in production 33

1.26 Growth will cool in CIS while picking up in Central and Eastern Europe 34

1.27 Middle East oil production has increased to prevent shortages 35

1.28 Indian production of food and automobiles recovered sharply in early 2003 37

1.29 Growth in Africa is expected to improve modestly 38

1.30 Income elasticity has risen globally, but particularly in the developing world 40

1.31 Export-to-GDP ratios have risen sharply in developing countries 41

1.32 Productivity will contribute more to GDP growth through 2015 than will capital or

1.33 The pro-poor reform scenario promises substantial income gains 50

1.34 Exports should rise sharply 52

1.35 Millions of people would be moved out of poverty 52

1.36 Gains for most, but adjustment costs for some 53

1.37 Significant shifts in global output patterns 54

2.1 Developing countries have become important exporters of manufactured

2.2 Manufactures account for a growing share of exports in all regions 67

2.3 Technology-laden manufactures have increased as a share of exports from each group

of countries, while the share of resource-based exports has diminished 702.4 Global production sharing is increasingly important for China and India 71

2.5 Soaring exports from China and India had only a moderate effect on China’s and

India’s terms of trade 722.6 Many developing countries face an adjustment when quotas are lifted 80

2.7 Antidumping barriers by sector and by country group 88

3.1 Countries that produce more cash crops also produce more food 109

3.2 Import growth rates of nontraditional export commodities decreased in industrial

countries but increased in developing countries 1123.3 Developing countries’ exports of nontraditional products have surged, but industrial

countries’ exports have changed little 1143.4 Developing countries lowered tariffs on manufactured products more than on

agricultural products 119

3.5 Rich countries use non–ad valorem tariffs more often than do developing

countries 1223.6 Throughout the world, tariff rates escalate with degree of processing 1233.7 The proportion of tariff lines containing non–ad valorem duties increases with degree

of processing 1253.8 Tariff rate quotas protect a substantial portion of output in many industrial

countries 1263.9 High protection of sugar and wheat has increased domestic production and reduced

net imports 1284.1 Workers’ remittances are an important source of income for many developing

countries 1495.1 Customs clearance takes longer in the developing world than in the OECD,

lowering the competitiveness of developing-country trade 1855.2 Higher trade costs reduce global welfare 186

5.3 Facilitating trade in less-efficient countries would bring significant gains 1945.4 The impact of individual trade-facilitation measures differs significantly from region

to region 1955.5 Domestic reforms alone would produce many of the same gains as global

joined regional trade blocs 2176.7 The trade policies of countries in the U.S generalized system of preferences are more

protectionist than those of countries not in the program 2186.8 Countries enjoying preferences have increased their exports of apparel to the

United States 219

Tables

1.1 Global growth should accelerate, but risks persist 31.2 Weak fundamentals underlie sluggish growth in the rich countries 51.3 The difficult environment for developing-country growth should improve 201.4 Developing countries’ exports will grow faster than those of the high-income

countries 221.5 GDP per capita will grow faster in the developing world than in the OECD area 431.6 Global poverty will decrease significantly, but not uniformly across regions 461.7 Tariffs could be cut clearly and simply 48

1.8 The pro-poor tariff scenario would significantly lower protection 491.9 A large share of real income gains comes from lowering of barriers in agriculture and

1.A1 Sectoral export decomposition for developing countries 55

vi

1.A2 Regional export decomposition for developing countries 57

2.1 Developing countries are becoming exporters of high-value products 68

2.2 Developing countries’ exports became more competitive in the 1990s 74

2.3 Investment in people and in capital grew rapidly 75

2.4 Tariffs hurt exports—but less so in the 1990s than in the 1980s 77

2.5 Quota abolition in China will move resources from other activities to textiles

and clothing 812.6 Industrial countries levy higher tariffs on imports from developing countries than from

other industrial countries—and some regions have high tariff walls 822.7 Developing countries pay large amounts in tariffs to their neighbors 83

2.8 Most antidumping actions are filed by developing countries against other developing

countries 862.9 Antidumping rates are much higher than tariff rates 86

2.10 Antidumping duties are high 87

2.11 Competing formulas make a big difference for tariffs 95

2A.1 The various liberalization proposals have very different features 97

3.1 Most of the world’s poor live in rural areas outside the least developed countries

1063.2 Rural poverty is higher in poorer countries 107

3.3 Even in subsistence economies, cash is important 107

3.4 U.S farmers earn less from farming than from other sources 107

3.5 Manufacturing exports grew much faster than agricultural exports 110

3.6 South-South exports in agriculture are rising as South-North export shares fall 110

3.7 Developing countries have shared unequally in export market gains 117

3.8 Agricultural tariffs are higher than manufacturing tariffs in both rich and poor

countries 1183.9 Agricultural tariffs: High peaks and deep valleys 119

3.10 Most subsidies go to producers—and come from border protection 120

3.11 Subsidies account for a large share of farmers’ revenues 121

3.12 Specific tariffs are higher than ad valorem rates 123

3.13 Tariffs rise with level of processing 124

3.14 The Harbinson proposals could greatly reduce applied tariffs in the European Union

and the United States 1333.15 The Harbinson proposals would not significantly reduce protection in the developing

world—if reductions were taken from bound rates 1333.16 U.S trade preferences—a plethora of programs 136

4.1 Migration is rising in many OECD countries 147

4.2 Workers’ remittances are the second-largest source of external funding for developing

countries 1484.3 Remittances are a significant source of income in all regions of the developing

4.4 Temporary movement is rising in rich countries 150

4.5 Foreign-born workers meet skill shortages in rich countries 152

4.6 The distribution of costs and benefits associated with Mode 4 trade 157

4.7 TMNP is the smallest of the four modes of international service supply 168

4.8 Most Mode 4 commitments by WTO members are in management categories 169

5.1 Elimination of anticompetitive private practices can cut costs drastically 1906.1 Developing countries rarely receive significant preferences in sectors in which they

would have a comparative advantage 2096.2 Utilization rates for preference-eligible products with high MFN tariffs are low 2106.3 Actual use of preference programs is declining 211

Boxes

1.1 Consumer confidence and U.S private consumption 71.2 Financing the U.S current account deficit: From equity to debt 121.3 OPEC struggles to achieve higher prices amid growing supply competition 241.4 Economic effects of Severe Acute Respiratory Syndrome (SARS) 33

1.5 AIDS is taking a rising toll in Sub-Saharan Africa 392.1 Poor export performance in 43 countries 69

2.2 Swimming upstream: The case of Vietnamese catfish 852.3 The scourge of the specific 89

2.4 “Average cuts,” the cut you have when you’re not having a cut 922.5 The implications of five tariff-cutting proposals 93

3.1 The impact of national trade integration and reform on poverty 1063.2 Did agricultural exports slow down solely because of falling prices? 1113.3 Decomposing export growth in manufacturing 113

3.4 Food safety standards: From barriers to opportunities 1153.5 Decoupling agricultural support from production decisions 1273.6 Fewer subsidies, stronger agricultural sector 132

3.7 The potential impact of real preferences 1343.8 Rules of origin in preferential schemes are complicated—and often

contradictory 1363.9 Food aid principles 1374.1 Population aging and migration 1464.2 Temporary labor movement and the East Asian crisis of 1997–98 1514.3 Recent initiatives to facilitate temporary movement of highly skilled workers 1534.4 A trade facilitation approach to labor mobility: NAFTA and APEC 154

4.5 Initiatives to encourage return migration 1604.6 Wages and conditions 163

4.7 E-commerce and temporary movement 1644.8 Boosting intra-EU labor mobility 1654.9 Measuring Mode 4 is still imprecise 1674.10 Key impediments to Mode 4 trade 1694.11 Elements of a possible GATS visa/permit regime 1715.1 The evolving definition of trade facilitation 1815.2 The logistics needs of a German car part manufacturer in Tunisia 1925.3 Tackling corruption in customs: Peru 197

5.4 Customs reform in Lebanon 1986.1 EU and U.S preference programs 2136.2 Major WTO provisions allowing developing countries greater freedom to use

restrictive trade policies 2216.3 A “development box” for the Agreement on Agriculture? 223

viii

The international community finds itself at a crossroads as it goes into the last

quar-ter of 2003 Will the Doha Agenda regenerate the multilaquar-teral consensus that has been the

hallmark of successive rounds of trade liberalization since 1947 and in doing so provide

new impetus for global integration? Or will the Doha Agenda collapse in stalemate and perhaps

be viewed as the moment when the international community retreated from multilateralism and

opened the floodgates for less desirable bilateral and regional arrangements?

The answers to these questions matter a great deal to the world’s poor The round of trade

talks launched in November 2001 in Doha, Qatar, is the first negotiation focused primarily on

is-sues of concern to developing countries, and the first trade round since the birth of the World

Trade Organization (WTO) Moreover, the Doha round is the first trade round for many new

WTO members, including the world largest developing economy, China Consequently, the round

has the opportunity to remove many of the inequities in the global trading system that put

de-veloping countries—and poor people in particular—at a disadvantage in their trade

Three trade barriers are of particular concern Poor people work in agriculture, and

agricul-tural products are subject to the highest barriers to trade In addition, poor people produce

labor-intensive manufactures, which are subject to peak tariffs in a world that has already reduced

average tariffs in manufactures to historic lows Poor people could benefit from greater

tempo-rary migration

Governments everywhere have worked hard to create the opportunity to reduce these and

other barriers And they will have to work hard to capitalize on that opportunity To fulfill the

development promise of the Doha Agenda, rich countries will have to reduce protection of their

(relatively wealthy) farmers Their tariff walls and huge subsidies depress global prices of the

products that poor farmers produce throughout the developing world These subsidies cost the

average working family in the European Union, Japan, and the United States more than $1,000

a year Middle-income countries, though their protection is generally lower and less distorting in

agriculture, have high average tariffs in all sectors, and are more restrictive in services As

south-south trade increases in importance, protection of sectors in middle-income countries undermines

their poorer trading partners and often undercuts the countries’ own productivity growth

Fi-nally, low-income countries should look to the international system to meet their very reasonable

demands—not for special preferences to some markets and exemptions from rules, but for

nondiscriminatory market access to every market in products in which they have a comparative

advantage, for appropriately phased introduction of international regulations, and for

develop-ment assistance in impledevelop-menting administratively costly WTO rules Like other countries,

low-Foreword

income countries will find it in their interest to reduce their own external levels of protection aspart of an integrated development strategy aimed at reducing poverty.

Reducing barriers to trade is not enough to fulfill the development promise of Doha Trademust be part of a larger development strategy for each country, a strategy that includes attention

to macroeconomic policy, infrastructure, education, and health as well as to accountable andresponsible governance These elements of investment climate take time to develop but are es-sential for growth and poverty reduction and are crucial to make a sound trade strategy pay itsgrowth and poverty reduction dividends

The World Bank, working in partnership with the other international institutions and bilateraldonors, is committed to supporting a pro-poor Doha outcome Our objectives in trade are two-fold: promoting a world trading system in which global, regional, and bilateral rules are con-ducive to development and poverty reduction, and helping individual developing countries lever-age trade to promote their own growth The latter objective hinges on integrating appropriatelysequenced trade reforms into national development and poverty reduction strategies

The Bank is increasing its investment in research, technical assistance, and lending for trade

A casual perusal of the bibliography in each chapter of this report will give the interested reader

an idea of the scope of the Bank’s research program Moreover, in the last two years, the Bankhas undertaken at the request of governments more than 20 diagnostic studies of obstacles totrade integration In conjunction with six partner institutions, the Bank has led the IntegratedFramework program—studies of trade obstacles in a dozen least-developed countries to date Ithas completed several regional studies of trade

In addition to studies and policy advice, the Bank has provided technical assistance in the form

of lending to improve trade-related institutions and transport logistics The Bank has programsthat finance activities in 49 countries (approximately one-third of its active client countries).These projects span all regions and range from export competitiveness projects in Ghana andBangladesh, to transport and trade facilitation projects in Eastern Europe, to support for im-proving customs–border control agencies and training the trading community in Pakistan TheBank is also implementing projects to improve quality standards and is leading the “Standardsand Trade Development Facility,” an interagency partnership with the WTO, the FAO, and theWorld Health Organization, to deliver technical assistance for food safety and related standards.Should trade ministers reach an agreement on the Doha Agenda, the Bank will expand its lend-ing and technical assistance to help countries take advantage of new market access, to use trade

to promote their domestic competitiveness, and to manage any transitional costs—such as thosearising from erosion of trade preferences, changes in prices of imports, or reallocation of domes-tic resources from inefficient sectors to more efficient ones

A pro-poor outcome in the Doha Agenda is only one step toward a world more supportive ofdevelopment But this step is an important one And it can be achieved only if everyone under-stands what is at stake in this historical moment—and moves purposefully and together to seizethe opportunity

Nicholas SternChief Economist and Senior Vice PresidentWorld Bank

x

THIS REPORT WASprepared by the World Bank Development Prospects Group, drawing on

re-sources throughout the Development Economics Vice Presidency and the World Bank’s

op-erational units Richard Newfarmer was the lead author and manager of the report, under

the direction of Uri Dadush The principal chapter authors were Richard Newfarmer (Overview);

Elliot Riordan and Dominique Van der Mensbrugghe (Chapter 1); William Martin and Vlad

Manole (Chapter 2); Ataman Aksoy (Chapter 3); Pierre Sauvé, drawing on work by the OECD

(Chapter 4); John Wilson, Shweta Bagai, and Carsten Fink (Chapter 5); and Bernard Hoekman

and Caglar Ozden (Chapter 6) We are grateful for the ideas and insights of several peer reviewers

who provided comments at various stages: Bijit Bora (World Trade Organization); J Michael

Fin-ger (American Enterprise Institute); Gary Hufbauer (Institute for International Economics); Mari

Pangestu (Center for Strategic and International Studies), Gary Horlick (Wilmer, Cutler, and

Pick-ering), and Julia Nielson (OECD); Julio Nogues (United Nations Development Programme); and

Olivier Cattaneo (Agence Française de Développement) The report was prepared under the

gen-eral guidance of World Bank Chief Economist and Senior Vice President Nicholas Stern

Many staff from inside and outside the World Bank contributed to the report In the Overview,

Aart Kraay contributed a note on trade and poverty, and Carsten Fink, Bernard Hoekman,

William Martin, and Aaditya Mattoo provided helpful suggestions In Chapter 1, Hans Timmer,

Caroline Farah, Himmat Kalsi, Robert Keyfitz, Annette I De Kleine, Robert Lynn, Fernando

Martel Garcia, Mick Riordan, and Bert Wolfe contributed to the global trends analysis;

Do-minique Van der Mensbrugghe provided the long-term analysis; Shaohua Chen and Martin

Ravallion contributed to the poverty analysis; and Katherine Rollins was the staff assistant

Chapter 2 benefited from background papers and other inputs from J Michael Finger and Andri

Zlate For Chapter 3, John Beghin, Donald Mitchell, John Baffes, Harry De Gorter, Ndiame

Diop, Paul Brenton, Steve Jaffee, and Mirvat Sewadeh provided background papers, and Baris

Sivri, Tarek Soueid, Konstantin Senyut, and Gaston Gohou undertook data collection and

analy-sis Chapter 4 drew on research papers prepared by the OECD Trade Directorate and on the

an-nual OECD report Trends in International Migration; the chapter reflects insights from Jeffrey

Lewis, Julia Nielson (OECD), and Olivier Cattaneo (AFD) Tsunehiro Otsuki and Katherine

Mann (IIE) worked closely with the team on Chapter 5, and Ranga Rajan Krishnamani provided

research assistance Chapter 6 draws on research by Bernard Hoekman, Constantine

Michalopoulos, and L Alan Winters The regional annexes benefited from the written input of

regional chief economists around the Bank and their staff, particularly Milan Brahmbhatt John

Baffes, Betty Dow, Donald Mitchell, and Shane Streifel prepared the commodity annex The staff

assistant for the report was Awatif Abuzeid Steven Kennedy provided editorial assistance Denis

Acknowledgments

Medvedev provided research assistance Dorota Nowak coordinated the report’s publication anddissemination activities, working closely with the World Bank’s Office of the Publisher.

Several experts provided written comments that have immeasurably improved the quality ofthe report at various stages: Paul Brenton, Robin Carruthers, Jean-Jacques Dethier, ShahrokhFardoust, Coralie Gevers, Ian Goldin, Gary Horlick, Elena Ianchovichina, Mark Juhel, HansPeter Lankes, Jeffrey Lewis, Patrick Low (WTO), Kunio Mikuriya (World Customs Organiza-tion), John Nash, David Rosenblatt, John Panzer, Luiz Perreira da Silva, Byungdoo Sohn, MarkSundberg, Helena Tang, Yvonne Tsikata, and L Alan Winters

xii

ON THE EVEof the World Trade

Organi-zation’s (WTO) Fifth Ministerial

Meet-ing in Cancún in September 2003, the

world’s trade ministers—and the governments

they represent—face enormous challenges The

global trade talks are stalled in several policy

domains vital to developing

countries—agricul-ture, nonfarm trade, access to patented drugs

for countries without domestic drug industries,

special and differential treatment, and dispute

settlement Nor is there much progress in other

contentious areas, such as the “Singapore

is-sues” of investment, competition, trade

facilita-tion, and government procurement

At the same time, the global recovery

con-tinues to sputter Although some signs of a

turnaround have been evident in the United

States, Europe seems to be losing momentum,

and Japan appears positioned for another

dis-appointing year The Chinese economy,

rein-forced by a positive performance in East Asia

in 2002, continues to bustle along, but

con-cerns over Severe Acute Respiratory Syndrome

(SARS) and lost export momentum in the face

of the world slowdown haunted the regional

outlook South Asia continues to grow more

rapidly than the world average Latin America

is showing signs of an upturn, driven in part by

renewed confidence in Brazil, a tentative

re-bound in Argentina, and an increase in

Mex-ico’s growth; however, the recession in the

República Bolivariana de Venezuela, when

coupled with political difficulties in the

An-dean countries, continues to weigh down gional performance Africa, suffering from lowcommodity prices, is growing slowly; althoughfaster than in the 1980s and 1990s, today’sgrowth is far short of the pace necessary tomake significant dents in the poverty head-count or to achieve the Millennium Develop-ment Goals in health and education War hasadversely affected regional performance in theMiddle East and North Africa; sluggish per-formance in Europe, especially Germany, hasadversely affected many countries in Centraland Eastern Europe Even though progress ontrade would undoubtedly boost investor confi-dence, politicians coping with slow growthand high unemployment at home have beenfinding it more difficult to risk alienating in-fluential constituencies by accepting bold pro-posals in the world trade talks

re-The outlook for the remainder of this yearand for 2004, though somewhat improved, isunlikely to produce growth strong enough tocut sharply into unemployment rates (figure 1)

Uncertainty in the global environment remainsunusually high Structural problems persist—

overcapacity in high-tech industries globally,rising twin deficits in the U.S fiscal and cur-rent accounts, and lingering bad loans inJapanese and (to a lesser extent) Europeanbanks Other problems may prove more tran-sitory The cessation of conflict in Iraq has notyet produced complete calm, and the inability

to reach consensus at the UN Security Council

Overview

has created a lingering distrust among lateral partners that clouds the global businessenvironment Nonetheless, policy responsesare promising Governments in the UnitedStates and Europe reacted to weak economicconditions with fiscal and monetary policy tostimulate their economies And at the globalpolitical level, the June meeting of the G-8, to-gether with several subsequent bilateral meet-ings, began to mend frayed multilateral rela-tions It remains to be seen whether this newpositive momentum will extend into multilat-eral collaboration in trade

multi-The precarious international environment isonly one reason why the global trade talkshave progressed slowly Deeper explanationscan also be found in the history of multilateraltrade talks themselves With the incorporation

of ever more countries—mainly from the veloping world—the sheer number of actorshas expanded, making coalitions more difficult

de-to build and consensus more elusive over, previous multilateral rounds producedagreements in areas of primary interest to therich countries that dominated these discus-sions, particularly in manufactured goods Itwas only with the Uruguay Round, concluded

More-in 1994, that tentative steps toward freeMore-ing uptrade in products of particular interest to de-veloping countries—notably agriculture andtextiles—were included Consequently, many

of the hardest issues for rich countries havebeen left to this negotiation

Realizing the development promise of the Doha agenda

The challenge is daunting But so is the ward to success With room for addi-tional fiscal and monetary stimulus rapidlyvanishing, progress on structural reforms such

re-as trade is important In addition to bolsteringinvestor confidence in the short term, a DohaRound agreement that slashed trade barriers,particularly in agriculture, would stimulatetrade and raise incomes around the world,leading to a substantial reduction in globalpoverty

The open question is whether a new lateral agreement will live up to the develop-ment promise of the Doha Agenda Severalissues under discussion are pivotal to develop-ment outcomes They are the focus of thisreport:

multi-• Because most poor people live in rural areas,

trade barriers in agriculture are among the

most important to poverty reduction

• Labor-intensive manufactures have been the

most dynamic market segment for everymajor region, including Africa, yet manydeveloping countries find that their exportsmeet obstacles in foreign markets—hightariffs, quotas, specific duties, and “anti-development” tariff structures that discour-age adding value in poor countries

• In services, the potential for promoting reciprocal gains is especially high.

development-Regulations in some developing countriesstill protect some inefficient state monopo-lies from competition—a drag on growth.(To be sure, proper regulation in some sec-tors must precede liberalization to avoid po-tential disruptions in socially important mar-kets, such as finance or basic services.) Also,

Figure 1 The recovery is building but slowly

GDP growth, percent per annum

Source: World Bank data and projections.

Developing economies

Forecast



High-income economies



0

1 2 3 4 5

access for developing countries’ services

ex-ports to industrial countries has yet to be

fully bound in the General Agreement on

Trade in Services (GATS) (World Bank

2001) Finally, national laws prevent greater

labor mobility that would otherwise

con-tribute to higher standards of living in both

receiving and sending countries

• Reducing the costs of trading by improving

international transportation services,

cus-toms and ports, and logistics management—

trade facilitation—requires substantial new

investment, additional technical assistance,

and coordinated multilateral efforts Trade

facilitation is fundamental to realizing the

expanded trade promise of Doha, but the

WTO agenda constitutes a small part of

the challenge

• Finally, the issue of special treatment for

de-veloping countries cuts across all of these

policy domains and affects trade preferences

and exemptions from WTO regulations

The pursuit of trade preferences and

exemp-tions from multilateral rules have not

al-ways served developing countries

partic-ularly well, both because preferences

have not proven reliable and because

selec-tive coverage has often left

productivity-detracting trade barriers in place The

resid-ual barriers sap growth in the protected

economies and in developing-country

trad-ing partners that are denied access Perhaps

most important, the majority of the world’s

poor do not live in the least developed

coun-tries (LDCs) Trade preferences targeted at

these countries do not benefit the

three-quarters of the world’s poor that live on

US$1 per day in other countries In

imple-menting new WTO rules, new accords will

be most effective if they recognize

differ-ences among individual countries’ capacity

to undertake new, resource-intensive rules

These differences require a new approach to

special and differential treatment

These areas pose difficult political

chal-lenges for all segments of the international

community—rich countries, middle-income

de-veloping countries, and low-income countries

alike Rich countries account for two-thirds of

world trade and comprise nearly three-quarters

of world GDP, so their domestic policies—mostevident in agriculture—have the greatest effect

on the global marketplace Despite the fact thatagricultural protection, tariff peaks, and anti-dumping measures shield powerful lobbies,rich-country leadership in reducing this protec-tion is a prerequisite for a pro-poor develop-ment outcome

Today’s middle-income developing tries have increased their global market share

coun-in the last two decades Because they coun-includemany of the most dynamic global economies,their domestic policies no longer have onlyminor consequences for trade With protectionrates in manufactures three times the level ofthose in rich countries and with ubiquitous re-strictions on services, the middle-income coun-tries have ample scope for undertaking reduc-tions in protection that will accelerate theirgrowth and provide access and a growth im-pulse to neighboring countries High protec-tion in these countries taxes their growth andtheir poor in much the same way as protection

in the North

Low-income countries have a special est in greater market access, but they cannotsuccumb to the siren calls of preferential mar-ket access nor opt out of reducing border pro-tections at home, which tax exports and cutinto productivity growth Preferences forLDCs can help, but would be more effective ifthey were made less restrictive and more reli-able than at present—and if benefiting coun-tries take the necessary policy steps, includingreductions in border protection, to promote asupply response Moreover, because other de-veloping countries are unlikely to be grantednew trade preferences, global reciprocal re-duction in trade barriers holds the mostpromise for the world’s poor

inter-Market access is not the whole ment story Even if developing countries suc-ceed in obtaining access to new markets, theywill have to adopt complementary policies—

develop-removing obstacles to private investment,

im-proving public investment in infrastructure,and providing education—to ensure that do-mestic firms respond to new opportunities as-sociated with greater integration, and that thebenefits of integration are transmitted to thepoor Put differently, trade policies must beembedded in a coherent national developmentstrategy—they are not a substitute for it Forall of these reasons, realizing the developmentpromise of the Doha Agenda requires the par-ticipation of all groups of the internationalcommunity.

This report: toward a pro-poor Doha outcome

This report analyzes central elements of theDoha Agenda that are important to developingcountries Chapter 1 describes the prospectsfor the global economy that form the back-drop to the Doha trade negotiations Chapters2–6 focus on agriculture, nonagricultural trade,services, transport and trade facilitation, andspecial development provisions In each area,

we expand on themes that have received lessanalysis in previous World Bank reports—

among them specific duties in agriculture, tidumping in manufactures trade, temporarymovement of labor in services, security issues

an-in trade facilitation, and trade preferences andexemptions from rules as part of special anddifferential treatment (SDT) The remainder ofthis overview weaves these findings togetherwith those of previous Bank studies1to lay outthe principal elements of a pro-poor outcomefor the Doha Agenda

A Doha deal for development

Agriculture is at the heart

Uruguay Round trade agreements to reduceprotection, agriculture is among the most dis-torted sectors in international trade Eventhough levels of average tariff protection arecomparable in rich and poor countries, the ex-tensive use of producer subsidies in the OECDcountries and the fact that the OECD consti-tutes two-thirds of world agricultural trade un-derscore the centrality of their policies to de-velopment outcomes Reducing protection inagriculture alone would produce roughly two-thirds of the gains from full global liberaliza-tion of all merchandise trade

A few facts are enough to establish the text: protection facing developing country ex-porters in agriculture is four to seven timeshigher than in manufactures in the North andtwo to three times higher in developing coun-tries (IMF-World Bank 2002) Tariff peaks areparticularly high in rich countries againstproducts from poor countries Tariff escalationthat discourages development of further pro-cessing is more pronounced in agriculture inboth rich and poor countries (figure 2) Heftyspecific duties are particularly common in richcountries; they automatically increase protec-

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tion when commodity prices fall, throwing the

burden of adjustment onto global prices and

poor countries Subsidies in OECD countries

amount to US$330 billion—of which some

US$250 billion goes directly to producers The

effect is to stimulate overproduction in

high-cost rich countries and shut out potentially

more competitive products from poor

coun-tries It is no wonder that agricultural exports

from developing countries to rich countries

grew in the 1990s at just half the rate they did

to other developing countries

Consider how agricultural protection plays

through individual commodity markets Sugar

in the European Union (EU), Japan, and the

United States is commonly protected through

a combination of quotas, tariffs, and subsidies

allowing domestic sugar producers in those

countries to receive more than double the

world market price OECD governments

sup-port sugar producers at the rate of US$6.4

bil-lion annually—an amount nearly equal to all

developing country exports Prices are so high

that it has become economic to grow sugar

beets in cold climates and to convert corn to

high-fructose corn syrup Sugar imports in the

OECD have shrunk to next to nothing U.S

subsidies to cotton growers totaled US$3.7

bil-lion last year, three times U.S foreign aid to

Africa These subsidies depress world cotton

prices by an estimated 10–20 percent, reducing

the income of thousands of poor farmers in

West Africa, Central and South Asia, and poor

countries around the world In West Africa

alone, where cotton is a critical cash crop for

many small-scale and near-subsistence farmers,

annual income losses for cotton growers are

about US$250 million a year Rice support in

Japan amounts to 700 percent of production at

world prices, stimulating inefficient domestic

production, reducing demand, and denying

ex-port opex-portunities to India, Thailand, Vietnam,

and other countries

More than 70 percent of subsidies in rich

countries are directed to large (often corporate)

farmers These farmers have incomes that are

higher—often substantially so—than average

incomes in Europe, Japan, and, to a lesser

ex-tent, the United States The net effect of dizing the relatively rich in wealthy countries atthe expense of adverse price penalties for theproducts of the relatively poor in developingcountries is to aggravate global income inequal-ities Said differently, subsidies make the rela-tively rich even richer and the poor even poorer

subsi-Realizing the development potential ofDoha requires phased reductions of borderprotection and subsidies Of these, border pro-tection is the most important These reductionsought to be done in a way that cuts off anti-development tariff peaks, reduces tariff escala-tion, and phases out specific duties A pro-poor reform also means reforming policies thatdistort particular commodities of importance

to developing countries—sugar, cotton, rice,wheat, and dairy products

Because global prices may rise in some modities, the international community maywant to design—and help finance—a program

com-of adjustment in vulnerable countries that fer deterioration in their terms of trade Theseeffects are likely to be confined to a few coun-tries for several reasons: many food importersalso export other agricultural products thatwill experience positive terms-of-trade changesfrom liberalization; others now have tariffs onthose same food imports, tariffs that can be re-duced to offset any increase in global prices;

suf-some food importers will gain access to newmarkets in nonagricultural products and beable to export; and, because prices will changerelatively slowly, some food importers will in-crease domestic production in response tohigher prices and become self-sufficient or evennet exporters Nonetheless, even though thechanges are likely to be manageable at theglobal level, the issue requires study and insome countries may require action

Because rich and poor countries alike willbenefit from liberalization, all must make thepolicy changes necessary to realize its develop-ment promise The rich countries, whose poli-cies arguably distort international trade themost, cannot escape leadership on agriculture

Moreover, leadership among donors to nance a program to cushion adjustment is