Christian Arnault Émini The University of Yaoundé II - Cameroon Workshop on Economic Partnership Agreements (EPAs) For Southern Africa Maputo (Mozambique)

Christian Arnault Émini

The University of Yaoundé II - Cameroon

Workshop on Economic Partnership Agreements (EPAs)

For Southern Africa

Maputo (Mozambique) 4 – 5 April 2005

The Poverty Impacts of the Doha The Poverty Impacts of the Doha Round and the Role of Tax Policy:Round and the Role of Tax Policy:

A Case Study for CameroonA Case Study for Cameroon

The Poverty Impacts of the Doha The Poverty Impacts of the Doha Round and the Role of Tax Policy:Round and the Role of Tax Policy:

A Case Study for CameroonA Case Study for Cameroon

John CockburnUniversité Laval – Quebec, Canada

Bernard DecaluwéUniversité Laval – Quebec, Canada

Background on economy and poverty in Cameroon

Current patterns of trade and protection in Cameroon

Synopsis of the Doha impacts on Cameroon

Digression on the issue of tax replacement

Conclusions

SUMMARYSUMMARYSUMMARYSUMMARY

4

Openness of the Cameroonian EconomyOpenness of the Cameroonian Economy

Real GDP Trends Before, During, and Beyond Real GDP Trends Before, During, and Beyond the 1986-1994 Economic Crisisthe 1986-1994 Economic Crisis

-1400

-1050

-700

-350

0

350

700

1050

14001

98

1

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

Years

Real

GD

P p

er

cap

ita .

in 1

99

0 U

S$

.

-20

-15

-10

-5

0

5

10

15

20

Gro

wth

Rate

s in

% .

Real GDP per capita in 1990US$ Real GDP per capita Growth Rate (%)

Real GDP Growth Rate (%)

5

Trend in povertyTrend in poverty

53.3

40.2

19.113.8

9 6.4

0

10

20

30

40

50

60

Per

cen

tag

es .

Poverty headcount Poverty gap Poverty severity

Poverty indices

1996 2001

Trend in poverty indices between 1996 and 2001Trend in poverty indices between 1996 and 2001

6


18.2

27.8

6.8

12

3.2

6.6

0

5

10

15

20

25

30

Perc

en

tag

e p

oin

ts .

Poverty headcount Poverty gap Poverty severity

Poverty indices

1996 2001

Difference between the value of a poverty index among Difference between the value of a poverty index among rural households and the value of that index among rural households and the value of that index among

urban householdsurban households

7


Bounds of Poverty HeadcountIndex at Provincial level

20.9 %33.7 %40.2 %46.8 %58.5 %

Bounds of Poverty HeadcountIndex at Subdividional level

03.3%37.0%41.9%48.6%96.2%

8


Relative Contribution to PovertyBounds Based on Poverty Headcount by Division

0.1%1.2%1.5%2.1%8.0%

9

The Cameroon Social Accounting Matrix for 2001 The Cameroon Social Accounting Matrix for 2001

Sets Sets Description of elementsDescription of elements

Activities(10)

Agriculture (2) Foodstuffs agriculture, Cash crops agriculture

Industries (6)Forestry, Crude oil, Processed food, Processed wood, Refined petroleum, Miscellaneous industries

Services (2) Tradable services, Public services

Institutions (10995)

Households (10992)As processed from the results of the 2001 household survey in Cameroon (ECAM II)

Others (3) Firms, Government, Rest of the World

Production Factors

Agricultural Labor Skilled Labor, Unskilled Labor

Nonagricultural Labor Skilled Labor, Unskilled Labor

Capital Sector-specific

Land Used by agricultural activities

10

Households’ Income CompositionHouseholds’ Income Composition

Income sources

Household groups

Urban Rural Male-led Female-led PoorNon poor

Skilled agricultural labor 1.5 13.4 7.2 4.6 11.1 5.1

Unskilled agricultural labor 1.0 33.9 15.9 14.7 33.7 8.2

Skilled nonagricultural labor 58.4 19.6 40.9 41.5 18.1 50.6

Unskilled nonagricultural labor 11.8 11.4 11.7 10.6 13.4 10.8

Agricultural capital 1.2 12.1 6.4 4.0 14.7 2.5

Nonagricultural capital 26.0 7.8 16.9 23.7 7.4 22.2

Land 0.1 1.8 0.9 0.8 1.7 0.5

Total factor income 100.0 100.0 100.0 100.0 100.0 100.0

12


Trends in exports and importsTrends in exports and imports

0

200

400

600

800

1000

1200

1400

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

Years

Val

ues

(Bill

ions

of

CF

A F

ranc

s)...

Exports Imports

13


Trends in Trade BalanceTrends in Trade Balance

104%97%95%

112%122%

112%

144%

164%

137%

67%59%60%

72%

87% 92%97%

107%100%

25%

50%

75%

100%

125%

150%

175%

1995 1996 1997 1998 1999 2000 2001 2002 2003

Cov

erag

e R

ate

of Im

port

s by

Exp

orts

.

.

-600

-400

-200

0

200

400

600

Tra

de B

alan

ce in

.B

illi

ons

of C

FA F

ranc

s .

Overall Trade Balance Net of Oil Trade Balance

Overall Coverage Rate of Imports by Exports Net of Oil Coverage Rate

14


44.50

14.83

7.99

4.91

4.81

9.89

13.41

15.26

17.82

8.15

30 15 0 15 30 45

Crude Oil

Processed Wood

Broad-Bean Cocoa

Refined Petrol

Raw Cotton

Cereals & starches

Vehicles

Chemicals

Machinery

Hydrocarbons

Percentage with regard to total Imports or Total Exports

Export Product Import Product

55%

77%

Top-Five Import and Export Goods in 2003Top-Five Import and Export Goods in 2003

15


Cameroon’s Trade Orientation in 2003Cameroon’s Trade Orientation in 2003

800 600 400 200 0 200 400 600 800 1 000

Latin America

Northern America

Asia

Africa

Europe

Billions of CFA Francs

Imports From …

Exports Towards …

16


0

10

20

30

40

50

60

70

80

90

100

Per

cen

tag

e

Crude oil Misc.industries

Foodprocessing

Refinedpetroleum

Tradableservices

Foodstuffagriculture

Forestry Woodprocessing

Cash cropsagriculture

Publicservices

Products

Import Penetration Export Orientation

Import penetration and export orientation (in percentage)Import penetration and export orientation (in percentage)

17


Import tariffs and shares in the base run – 2001Import tariffs and shares in the base run – 2001(in percentage)(in percentage)

0

10

20

30

40

50

60

Perc

enta

ge .

Processedwood

Processedfood

Refinedpetroleum

Misc.industries

Foodstuffsagriculture

Cash cropsagriculture

Forestry Crude oil Tradableservices

Publicservices

Products

Import tariff Share in total imports

19

Synopsis of the Doha impacts on CameroonSynopsis of the Doha impacts on Cameroon

Sectors of production

Percent changes in world prices from GTAP

Tariffs (in percent)

Export prices

Import prices

Original tariffs

Cut in tariffs

New tariffs

Foodstuffs agriculture 0.015 2.233 12.2 -2.77 11.9

Cash crops agriculture -0.177 -0.284 8.0 -0.49 8.0

Forestry -0.122 -0.108 7.4 -1.83 7.3

Crude oil 0.111 0.114 3.2 0.00 3.2

Food processing 0.115 3.234 23.8 -8.70 21.7

Wood processing -0.061 -0.064 28.1 -0.54 27.9

Refined petroleum 0.105 0.073 18.3 -0.27 18.3

Miscellaneous industries 0.103 0.017 14.6 -0.74 14.5

Tradable services -0.064 -0.024 0.0 -0.00 0.0

Public services 0.000 0.000 0.0 -0.00 0.0

All sectors 0.044 0.471 11.79 -1.10 11.66

Changes in import-export prices and in tariffsChanges in import-export prices and in tariffs

20


Macro and sectoral impactsMacro and sectoral impacts

-0.130

0.170

0.07-0.15

0.210.06

0.29-0.55

0.22-0.01

0.34-0.2

-0.6 -0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4Percent changes

Real exchange rate

Output

Exports

Locally sold output

Imports

Total absorption

Household consumption

Effects on price and volume indices

Change in price indices Change in volume indices

21



Percent changes in prices by sector

Output Export Import

Locally sold

output without

tax

Locally sold

output with

taxes

Absorption

Household consumpti

on

Foodstuffs agriculture 0.44 0.19 1.95 0.44 0.44 0.46 0.46

Cash crops agriculture 0.09 -0.02 -0.32 0.16 0.16 0.16 0.16

Forestry -0.02 -0.06 0.03 -0.01 -0.01 -0.01 -0.01

Crude oil 0.11 0.11 0.11 0.11 0.11 0.11 0.00

Food processing 0.60 0.29 1.54 0.63 0.63 0.76 0.97

Wood processing -0.05 -0.05 0.05 -0.05 0.04 0.04 0.21

Refined petroleum 0.04 0.08 0.12 0.02 0.08 0.09 0.13

Miscellaneous industries 0.07 0.08 0.12 0.07 0.11 0.11 0.24

Tradable services 0.02 -0.02 -0.02 0.03 0.06 0.05 0.07

Public services 0.38 0.00 0.00 0.38 0.38 0.38 0.00

All sectors 0.17 0.07 0.29 0.19 0.21 0.22 0.34

22



Percent changes in volumes by sector

Output Export ImportLocally

sold output

AbsorptionHousehold

consumption

Foodstuffs agriculture 0.04 -1.03 -6.15 0.06 0.00 -0.1

Cash crops agriculture -0.30 -0.95 3.45 0.23 0.23 0.0

Forestry -0.14 -0.36 -0.32 -0.11 -0.11 0.0

Crude oil 0.00 0.00 -0.04 0.00 -0.03 0.0

Food processing 0.47 -1.07 -3.87 0.60 0.05 -0.4

Wood processing -0.06 -0.05 -0.06 -0.03 -0.03 -0.2

Refined petroleum -0.04 0.14 -0.26 -0.12 -0.13 -0.2

Miscellaneous industries 0.05 0.13 -0.02 0.05 0.03 -0.2

Tradable services -0.09 -0.25 0.24 -0.07 -0.05 -0.2

Public services 0.00 0.00 0.00 0.00 0.00 0.0

All sectors 0.00 -0.15 -0.55 0.06 -0.01 -0.2

23


Macro and sectoral impactsMacro and sectoral impacts

-0.21

0.13

0.13

0.3

0.260.25

0.39

0.15

-0.01

0.5

-0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5Percentages

Household welfare

Household consumption budget

Household gross income

Land

All capital types

Nonagricultural capital

Agricultural capital

All labor types

Nonagricultural labor

Agricultural labor

Effects on factor remuneration rates, household income and welfare

EV as percentage of initial consumptionChange in household budgetChange in factor remuneration rate

Change in CPI: +0.34Change in CPI: +0.34

24

Change in households’ IncomeChange in households’ Income

Income sources

Household groups

Urban Rural

Share (%) Change (%) Share (%) Change (%)

Skilled agricultural labor 1.5 0.47 13.4 0.48

Unskilled agricultural labor 1.0 0.40 33.9 0.51

Skilled nonagricultural labor 58.4 -0.04 19.6 0.00

Unskilled nonagricultural labor 11.8 0.02 11.4 0.00

Agricultural capital 1.2 0.49 12.1 0.43

Nonagricultural capital 26.0 0.03 7.8 0.70

Land 0.1 0.00 1.8 0.03

Total factor income 100.0 0.00 100.0 0.34

25


Income sources

Household groups

Male-led Female-led




Skilled nonagricultural labor 40.9 -0.03 41.5 -0.03

Unskilled nonagricultural labor 11.7 0.01 10.6 -0.01



Land 0.9 0.03 0.8 0.00


26


Income sources

Household groups

Poor in base run Non poor in base run




Skilled nonagricultural labor 18.1 -0.01 50.6 -0.03

Unskilled nonagricultural labor 13.4 0.01 10.8 0.01



Land 1.7 0.03 0.5 0.03


27

Poverty impactsPoverty impacts

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

Perc

en

t .

Cameroon Urbanhouseholds

Ruralhouseholds

Male-ledhouseholds

Female-ledhouseholds

Percentage changes in poverty and inequality indices

Poverty headcount Poverty gap Poverty severity Gini index

28


-10.00-8.00-6.00

-4.00-2.00

0.002.00

4.006.00

8.00

Perc

en

t

Food In

dust

ryB

uild

ing a

nd

Bre

edin

gA

gric

ultu

re,

Food T

rade

Min

ing

Text

ileW

ood

Chem

ical

Indust

ry o

fM

eta

ls,

Energ

y, G

as,

Tra

nsp

ort

Genera

lH

ote

l and

Banks

and

Not C

lass

ified

Oth

er T

rades

Mis

cella

neous

Public

Percent change in poverty headcount by occupational activity of the head of household

29


Number of former poor people who

escape from poverty

Number of former non poor people

who become poor

Net change in the number of poor

people

A B C=B-A

56,000 14,000 -42,000

Estimates of changes in the number of poor Estimates of changes in the number of poor following the Doha scenariofollowing the Doha scenario

31

Digression on the issue of Tax ReplacementDigression on the issue of Tax Replacement

To capture the possible bias induced by the choice of the replacement tax, we compare the effects of combined ROW and Cameroon liberalization using alternatively two taxation systems as replacement tax: A Value Added Tax A proportional household consumption tax.

VAT versus neutral consumption tax as VAT versus neutral consumption tax as replacement taxreplacement tax

32


Importance of the VAT among indirect taxes Importance of the VAT among indirect taxes in Cameroon – year 2001in Cameroon – year 2001

53

27

19 1

0

10

20

30

40

50

60

Perc

en

tag

e

Value AddedTax

Import tariffs Excises andmisc. Taxes

Export duties

Share in total revenue of indirect taxes

33


The VAT applied in Cameroon is progressiveThe VAT applied in Cameroon is progressive

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Perc

en

t

1 2 3 4 5 6 7 8 9 10

Household groups by deciles .

Effective rate of VAT paid by household deciles

Average VAT

effective rate

34


Comparative effectsComparative effects on price indices on price indices

9.02

5.98

-7.57

-4.92

-1.5 -0.79

-8.69

-4.59

-10.85

-5.71

-9.01

-4.72

-7.72

-2.4

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

Per

cent

cha

nges

Realexchange

rate

Output Exports Locally soldoutput

Imports Totalabsorption

Householdconsumption

Scenario with neutral consumption replacement tax

Scenario with VAT as replacement tax

35


Comparative effectsComparative effects on volume indices on volume indices

-0.03 -0.01

14.11

9.65

-2.41-0.8

13.91

9.53

-0.46 0.44

-4.62

-2.64

-6

-4

-2

0

2

4

6

8

10

12

14

16

Per

cent

cha

nges

Output Exports Locally soldoutput

Imports Total absorption Householdconsumption

Scenario with neutral consumption replacement tax

Scenario with VAT as replacement tax

36


Comparative effectsComparative effects on factor remuneration on factor remuneration rates, household income and welfarerates, household income and welfare

-12

-10

-8

-6

-4

-2

0

Per

cen

tag

e ch

ang

e .

Agr

icul

tura

lla

bor

Non

agric

ultu

ral

labo

r

Com

posi

tela

bor

Agr

icul

tura

lca

pita

l

Non

agric

ultu

ral

capi

tal

Tot

al c

apita

l

Land

Hou

seho

ldgr

oss

inco

me

Hou

seho

ldco

nsum

ptio

nbu

dget

EV

as

% o

fin

itial

cons

umpt

ion

Neutral consumption tax as replacement tax VAT as replacement tax

37


Comparative effectsComparative effects on household income on household income

-10

-9

-8

-7

-6

-5

-4

-3

-2

-1

0

Perc

en

t ch

an

ge

Urbanhouseholds

Ruralhouseholds

Male-ledhouseholds


Poor people inbase run

Non poorpeople in base

run


38


Comparative effectsComparative effects on poverty headcount on poverty headcount

16.38

10.69

33.67

22.93

13.19

8.43

18.65

12.31

8.88

5.36

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

Perc

en

t ch

an

ge

Cameroon Urbanhouseholds

Ruralhouseholds

Male-ledhouseholds



39


Comparative effects on the number of poorComparative effects on the number of poor

Number of former poor people who escape from

poverty

Number of former non poor

people who become poor

Net change in the number of poor people

A B C=B-A

Neutral consumption tax as the replacement tax

63,000 999,000 +936,000

VAT as the replacement tax

43,000 708,000 +665,000

41

ConclusionsConclusions

Doha development round might contribute to poverty alleviation in Cameroon

However, policymakers should be aware of:

The importance of choosing appropriate replacement taxes

The negative poverty impacts of the elimination of domestic tariffs

The evidence that some households will lose out and possibly fall into poverty, even if national poverty rates fall.

42

ConclusionsConclusions

Free-trade in ROW strongly alleviates poverty, at least at

the national level

Whereas Cameroon’s own liberalization worsens the

poverty and inequality situations

In case of combined ROW and own liberalization, the

adverse impacts of own liberalization proves to strongly

outweigh the favorable outcomes of the ROW

liberalization.

Documents

Christian Arnault Émini The University of Yaoundé II - Cameroon Workshop on Economic Partnership Agreements (EPAs) For Southern Africa Maputo (Mozambique)