Trade Policy and Global Poverty

William R. Cline

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

Poverty Intensity of Imports from Developing Countries (%)

0

10

20

30

40

50

60

70

All LDCs HIPCs SSA

headcountincome

Growth Elasticity of Poverty

Lognormal distribution: elasticity function of inequality (G), ratio of average to poverty income (z)

Lower where inequality higher Higher where z higher Asia typically 3 or more Typically lower in Latin America (1 to 2)

because high G; and in Africa (1 to 2) because low z

Average GDP&Export Growth

-15

-10

-5

0

5

10

15

-15 -10 -5 0 5 10 15 20 25 30

Average Annual Export Growth

Aver

age A

nnua

l GDP

Gro

wth

80s 90s

Special-regime export growth, 1981-2001

gx* = -6.9 + 1.93 gw (2.5) +0.41 gylag (1.6)

+0.079 mfshr (1.97) +7.76 R*lag (2.36)

-.0004 y*lag (1.0) +8.83 LOME (2.36)

+7.23 CBI (2.39) +1.66 ATPA (0.29)

-10.8 SSA (2.36)Adj R2 =.016; # obs. = 1412

Total Tariff Equivalent of Agricultural Protection Against Developing Countries(percent tariff equivalent)

US Can. EU Japan

Tariffs 8.8 30.4 32.6 76.4

Tariff-Equivalent of domestic subsidies

10.2 16.8 10.4 3.2

Total Tariff-Equivalent

19.9 52.3 46.4 82.1

Aggregate Measure of Protection (AMP, %)

US EU JPN

Agriculture 19.9 46.4 82.0

Textiles, Apparel 10.9 11.6 9.2

Other Manufactures 2.1 3.2 1.5

Oil, other 0.9 0.6 0.3

All (AMP) 4.0 9.5 16.6

DC agricultural protection and global povertyπ=εw {ΦR[θRγR-] +ΦUθUγU}

π= proportionate rise in poverty

ε= poverty elasticity

w= % increase in world price

Φ=share of total poor in sector

θ=share of food in budget

γ= elast. food price wrt world price

=elast. farm income wrt farm price

=elast. farm price wrt world price

LDC food trade and comparative advantage

Country Poor

(mn)

# of

countries

Bangladesh –food trade

deficit & comp. disadv.

99 1

Others: total 374 44

Food trade deficit 213 34

Food comparative

disadvantage

110 21

Welfare Effects of Free Trade: CRTS Model($ billions and percent of GDP)

Agriculture Txtl & Ap. Other Total % GDPANZ 8.42 0.07 0.04 9.17 2.41CAN 3.98 1.31 -0.44 4.39 0.90USA 22.31 8.04 2.00 39.20 0.57JPN 21.67 1.25 14.03 31.70 0.85KOR 5.92 1.19 4.48 9.44 2.41E_U 21.62 6.25 14.94 38.96 0.61IDN 0.20 -0.02 1.15 1.43 0.74MYS -0.71 0.05 0.86 -0.02 -0.02PHL 1.39 -0.21 -0.16 1.20 1.50THA 0.64 -0.01 2.01 3.08 2.21CHN 1.64 1.64 0.97 4.47 0.62AG3 2.05 1.85 3.32 7.30 1.55ARG 3.62 -0.03 1.15 5.27 1.65BRA 5.83 0.23 3.95 10.20 1.54MEX -1.42 -0.46 -0.04 -2.06 -0.60OLA 2.64 0.13 1.26 4.12 1.23SSA 1.32 0.07 1.22 2.66 1.41MNA 9.56 1.14 10.77 17.05 3.00EIT 3.71 0.67 2.18 6.20 0.82XAS 3.44 0.03 1.63 5.45 1.33EFTA 6.83 1.01 12.54 17.86 5.73IND 0.82 0.57 0.43 2.22 0.63TUR 2.24 0.17 0.53 3.08 1.72XCM 2.32 0.08 1.51 4.09 4.03XSC 0.46 0.10 0.89 1.37 1.28DGC 45.68 7.20 38.09 86.51 1.35DEV 84.83 17.94 43.11 141.29 0.78WLD 130.51 25.14 81.20 227.80 0.93Memorandum: from P26 results:BGD n.a. n.a. n.a. 0.39 0.90XSA n.a. n.a. n.a. 0.98 1.51MOZ n.a. n.a. n.a. 0.12 3.24UGA n.a. n.a. n.a. 0.09 1.33TZA n.a. n.a. n.a. 0.29 4.11

Welfare Effects of Alternative Trade Liberalization Scenarios($ billions and percent of free trade potential)

2-tier asymmetric differential liberalization free trade liberalization

$ bn %FT $bn %FT $ bn %FTANZ 2.72 29.67 7.20 78.46 2.56 27.89CAN 1.93 43.89 2.43 55.45 2.78 63.24USA 21.44 54.68 17.51 44.67 13.63 34.76JPN 20.97 66.16 18.70 58.97 10.18 32.12KOR 6.37 67.50 1.47 15.57 12.11 128.35E_U 39.60 101.65 7.66 19.66 24.80 63.64IDN 1.25 87.24 1.70 118.69 2.02 140.86MYS 0.89 a -0.15 728.57 2.15 aPHL 0.19 16.14 1.53 127.68 0.51 42.56THA 2.82 91.59 3.44 111.72 3.64 118.05CHN 4.42 98.77 6.99 156.31 9.48 212.03AG3 4.64 63.62 4.48 61.42 9.35 128.08ARG 2.89 54.91 3.66 69.50 4.95 93.98BRA 6.04 59.20 4.35 42.64 10.94 107.17MEX -0.59 28.62 -2.63 127.84 -0.15 7.29OLA 2.30 55.89 3.73 90.70 3.70 89.85SSA 1.86 70.09 3.00 112.96 2.14 80.45MNA 13.63 79.95 3.27 19.20 14.48 84.92EIT 3.57 57.68 8.03 129.63 6.89 111.14XAS 3.06 56.25 4.78 87.73 3.53 64.90EFTA 17.44 97.63 15.52 86.90 16.19 90.63IND 1.80 81.06 1.31 59.09 2.66 119.76TUR 1.52 49.45 2.20 71.65 2.35 76.53XCM 2.49 60.96 4.41 107.90 2.74 66.98XSC 1.19 86.75 0.98 71.52 1.59 116.18DGC 60.35 69.75 56.55 65.37 95.05 109.87DEV 104.09 73.68 69.02 48.85 70.12 49.63WLD 164.44 72.19 125.57 55.12 165.17 72.51

a. < -1,000

Decomposition of static welfare gains Benefit: DGC

$bn

%

FT

DEV

$bn

%

FT

Total

$bn

%

FT

Liberalize:

DGC 41 48 59 42 100 44

DEV 57 65 69 49 126 55

sum 98 113 128 91 226 99

Global 87 100 141 100 228 100

Interaction -11 -13 13 9 2 1

MFN Tariffs (%)

Agric TxAp OthMf OilRMDCs 35.6 11.6 3.1 0.1

EU 32.6 18.0 4.1 0.0

US 8.8 12.1 2.8 0.1

JPN 76.4 10.2 1.2 0.0

DGCs 30.3 18.2 11.5 0.7

China 29.9 27.9 15.3 0.5

India 31.5 31.6 24.6 1.1

Korea 50.7 7.9 6.9 0.4

Brazil 22.9 17.6 15.4 0.4

Colom 14.7 18.0 11.9 0.8

Tanz 22.8 17.3 20.3 2.2

S Afr 37.8 19.3 7.8 0.2

"Steady State" Welfare Gains from Free Trade

Region $ billion %GDP %dK dK %GDPNet change in welfare (a) $ billion %GDP

ANZ 21.90 5.76 11.32 37.58 11.89 3.13CAN 6.53 1.34 1.80 4.88 4.86 1.00USA 80.23 1.17 1.92 5.22 55.06 0.80JPN 44.25 1.18 1.78 5.85 28.92 0.77KOR 16.44 4.20 17.88 48.44 3.17 0.81E_U 89.34 1.41 1.90 5.69 64.02 1.01IDN 7.06 3.64 13.98 33.28 2.55 1.31MYS 3.21 3.73 22.91 54.53 -0.07 -0.09PHL 3.91 4.91 14.81 35.25 1.95 2.44THA 43.39 31.16 67.03 159.53 27.84 19.99CHN 6.46 0.90 14.14 33.51 -10.45 -1.45AG3 16.06 3.42 9.69 26.27 7.42 1.58ARG 15.66 4.89 11.53 34.93 7.83 2.44BRA 40.13 6.04 12.85 38.94 22.02 3.32MEX 3.47 1.02 3.41 10.04 1.07 0.31OLA 27.32 8.16 17.92 54.31 14.60 4.36SSA 13.90 7.36 19.80 51.48 7.09 3.75MNA 50.60 8.91 18.40 47.83 31.58 5.56EIT 24.55 3.26 10.82 36.24 5.44 0.72XAS 26.90 6.58 18.20 43.31 14.51 3.55EFTA 20.98 6.73 6.37 21.14 16.37 5.25IND 23.86 6.74 21.99 51.46 11.10 3.14TUR 9.76 5.45 9.72 25.28 6.59 3.68XCM 12.72 12.55 37.42 113.37 4.67 4.61XSC 5.22 4.88 13.10 34.06 2.67 2.49DGC 350.62 5.48 15.75 42.18 161.59 2.52DEV 263.22 1.45 2.15 6.46 181.13 1.00WLD 613.84 2.50 5.70 15.77 342.71 1.40Memorandum: from P26 results:BGD 1.72 3.94 13.66 32.52 0.73 1.67XSA 14.11 21.72 69.07 164.39 6.64 10.21MOZ 0.38 9.84 25.99 67.84 0.20 5.09UGA 0.32 4.90 13.37 34.89 0.16 2.45TZA 0.91 12.89 33.10 86.40 0.48 6.84a. At capital cost of 7 percent hrtrunsRF04 s5

Impact of Free Trade on Real Factor Prices and Welfare: CRTS Model (percent change)

Region Land Unskilled Skilled Capital & Weighted Welfare lambda Labor Labor Resources Sum

B25ANZ 124.90 4.50 1.90 1.80 3.62 3.3 0.91CAN 140.50 2.10 1.80 2.30 2.80 1.2 0.43USA 4.80 1.00 1.00 1.00 1.02 0.7 0.69JPN -70.90 3.50 4.00 3.70 3.50 1.3 0.37KOR -31.20 9.40 9.60 9.60 8.54 4.0 0.47E_U -51.30 1.20 1.70 1.40 0.96 0.8 0.83IDN 8.60 2.40 1.40 2.00 2.63 1.1 0.42MYS -0.60 8.60 8.30 8.50 8.07 1.0 0.12PHL 12.40 5.20 3.40 3.20 4.46 2.0 0.45THA 51.30 10.60 5.80 5.20 7.44 3.6 0.48CHN 0.70 8.30 8.50 8.20 7.89 1.1 0.14AG3 6.40 3.70 3.10 3.30 3.41 2.3 0.68ARG 36.50 2.50 1.20 1.50 2.94 2.1 0.71BRA 23.40 1.60 1.70 2.30 2.27 2.0 0.88MEX -2.30 1.00 1.10 1.10 0.97 -0.8 -0.83OLA 32.50 4.30 2.60 2.60 3.89 1.6 0.41SSA 18.90 6.00 4.00 3.90 5.12 1.7 0.33MNA -22.40 9.60 11.40 12.20 10.91 4.2 0.38EIT 10.80 4.40 4.00 4.00 4.25 1.1 0.26XAS 7.20 5.00 4.60 4.40 4.83 1.7 0.35EFTA -65.30 12.90 12.90 12.00 11.97 7.9 0.66IND 3.40 2.80 2.50 2.50 2.71 0.9 0.33TUR 14.30 4.30 3.30 3.50 3.85 2.4 0.62XCM 26.50 9.70 8.10 9.20 9.91 5.2 0.52XSC 56.00 4.30 4.10 5.00 4.81 1.7 0.35

Memorandum: P26BGD 4.7 6.4 5.5 5.4 5.8 1.1 0.19XSA 7.2 9.7 10.0 9.0 9.1 1.9 0.21MOZ 8.3 6.5 6.2 6.0 6.3 3.9 0.62UGA 3.3 2.8 2.3 2.3 2.6 1.6 0.61TZA 32.4 8.8 2.1 3.4 7.3 4.9 0.67

Impact of Free Trade on Global Poverty: CRTS Static Model

Poor Poverty Elasticity Percent change in real Change in number (mn) poverty-level income of poor (mn)

Estimated Constrained Base Alternative Base AlternativeAsia case case BangladeshBGD 99.3 5.76 3.5 1.2044 1.1398 -4.19 -3.96 China CHN 673.2 5.13 3.5 1.1558 0.943 -27.23 -22.22 India IND 859.9 4.98 3.5 0.9216 0.9612 -27.74 -28.93 Indonesia IDN 136.8 6.55 3.5 1.0172 1.538 -4.87 -7.36 Korea KOR 0.9 inf 3.5 0.2308 -2.6644 -0.01 0.08 Malaysia MYS 5.6 3.16 3.16 1.0288 0.808 -0.18 -0.14 Pakistan XSA 114.2 9.43 3.5 2.0233 1.9183 -8.09 -7.67 PhilippinesPHL 29.2 2.97 2.97 2.306 2.954 -2.00 -2.56 Thailand THA 17 5.91 3.5 4.9392 8.8464 -2.94 -5.26 HK, Taiw., Sgp.AG3 0 na 2 2.4944 2.8616 0.00 0.00 Other OAS 84.8 na 2 1.3368 1.108 -2.27 -1.88 subtotal 2020.9 -79.51 -79.90Latin America Argentina ARG 5.4 3.13 3.13 1.8075 6.6355 -0.31 -1.12 Brazil BRA 29.2 1 1 1.534475 5.304 -0.45 -1.55 Cen. Am.& Carib.XCM 26.6 na 2 5.0596 6.8068 -2.69 -3.62 Mexico MEX 41.1 1.95 1.95 0.82 0.16 -0.66 -0.13 Other OLA 45.9 na 2 1.7467 4.0591 -1.60 -3.73 subtotal 148.2 -5.71 -10.15Europe Central & E. Eur.EIT 92.2 na 2 1.1396 1.4724 -2.10 -2.72Middle East, North AfricaMNA Turkey TUR 11.6 6.06 3.5 2.6394 3.8794 -1.07 -1.58 Other MNA 76.42 na 2 3.7032 1.2712 -5.66 -1.94 subtotal 88.02 -6.73 -3.52Sub-Saharan Africa MozambiqueMOZ 13.56 1.39 1.39 4.017 4.2402 -0.76 -0.80 South AfricaXSC 15.07 1.18 1.18 1.5245 5.1435 -0.27 -0.91 Tanzania TZA 19.65 0.57 1 5.7964 8.9588 -1.14 -1.76 Uganda UGA 16.58 2.33 2.33 1.6972 1.7582 -0.66 -0.68 Other SSA 328.36 na 2 1.952 2.8034 -12.82 -18.41 subtotal 393.22 -15.64 -22.56

TOTAL 2742.54 -109.69 -118.85

Impact of Free Trade on Real Factor Prices and Welfare: Steady State CRTS Model (percent change)

Region Land Unskilled Skilled Capital & Weighted Net lambda Labor Labor Resources Sum Welfare

B25ANZ 142.7 7.9 4.5 -0.1 4.52 4.28 0.95CAN 156.6 3.3 2.9 2.4 3.61 1.33 0.37USA 10.2 2.2 2.1 1.4 1.92 0.98 0.51JPN -69.4 4.8 5.4 4.2 4.51 1.19 0.26KOR -27.5 14.2 14 5.6 9.44 1.35 0.14E_U -48.9 2.7 3 1.9 1.98 1.31 0.66IDN 15.9 6.9 4.7 -2 2.93 1.96 0.67MYS 11.8 16.2 14 2.8 7.86 3.69 0.47PHL 20.7 9.5 6.2 -0.4 4.90 3.24 0.66THA 74.4 38.3 21.6 -1.8 6.60 32.54 4.93CHN 5 12.7 12 3.2 8.45 -2.57 -0.30AG3 12.6 7 5.9 1.6 4.38 2.34 0.53ARG 45.7 6.5 4.4 -1 3.93 3.12 0.79BRA 37.6 5.7 4.6 -0.1 3.17 4.32 1.36MEX 2.1 3.2 2.9 1 1.70 0.42 0.25OLA 46.7 10.6 6.4 -0.9 4.53 5.67 1.25SSA 31.4 12.6 7.2 -2.4 5.49 4.53 0.83MNA -11.9 15.5 15.2 6.9 10.84 7.78 0.72EIT 18.4 7.7 6.5 1.2 4.91 0.97 0.20XAS 18.4 10.2 7.7 -0.6 5.38 4.53 0.84EFTA -62.6 14.9 14.9 10.4 12.68 7.24 0.57IND 16 8.6 5 -4.2 3.03 4.50 1.48TUR 24.6 9.2 7.1 2 4.87 5.13 1.05XCM 48.2 19.9 13.1 -0.6 9.46 5.94 0.63XSC 72.7 8.2 7 1.5 5.68 3.31 0.58

Memorandum: P26BGD 14.5 10.3 7.4 0.7 6.11 2.05 0.33XSA 42.5 26.4 14.4 -11.3 9.43 12.86 1.36MOZ 23.8 14.3 10.1 -2.9 6.64 6.38 0.96UGA 9.1 6.8 4.2 -2.3 3.23 2.84 0.88TZA 55.5 21 -9.6 4.1 13.61 8.13 0.60

Impact of Free Trade on Global Poverty: Steady State ModelPercent change in real Change in number poverty-level income of poor (mn) Base Alternative Base Alternative

Asia Bangladesh BGD 3.3 3.5 -11.3 -12.3 China CHN 0.0 0.0 0.0 0.0 India IND 8.2 9.7 -246.5 -291.0 Indonesia IDN 4.4 5.6 -20.9 -26.6 Korea KOR 1.9 0.8 -0.1 0.0 Malaysia MYS 7.2 6.8 -1.3 -1.2 Pakistan XSA 25.0 28.3 -100.1 -113.0 Philippines PHL 6.0 7.4 -5.2 -6.5 Thailand THA 37.7 44.9 -22.4 -26.7 HK, Taiw., Sgp. AG3 3.6 4.2 0.0 0.0 Other OAS 8.2 9.5 -13.8 -16.2 subtotal -421.6 -493.6Latin America Argentina ARG 4.9 11.1 -0.8 -1.9 Brazil BRA 5.4 11.9 -1.6 -3.5 Cen. Am.& Carib. XCM 11.9 15.4 -6.3 -8.2 Mexico MEX 0.8 0.7 -0.6 -0.6 Other OLA 10.1 17.3 -9.3 -15.9 subtotal -18.6 -30.1Europe Central & E. Eur. EIT 1.5 1.9 -2.7 -3.5Middle East, North Africa MNA Turkey TUR 8.8 11.9 -3.6 -4.8 Other MNA 10.8 6.9 -16.5 -10.5 subtotal -20.1 -15.3Sub-Saharan Africa Mozambique MOZ 13.0 14.8 -2.4 -2.8 South Africa XSC 4.6 12.1 -0.8 -2.2 Tanzania TZA 12.2 16.3 -2.4 -3.2 Uganda UGA 5.7 6.1 -2.2 -2.3 Other SSA 9.9 13.0 -64.8 -85.3 subtotal -72.6 -95.8TOTAL -535.7 -638.2

Elasticity of outputw.r.t. 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

Poverty Impact of Dynamic Productivity Gains from Free Trade

(millions and percent change)

Number of Poverty Increase in Gain in Long-term Change inpoor (mn) elasticity Trade, % Productivity (%) poverty (mn)

Asia

Bangladesh 99.3 3.5 25.6 10.24 -35.6 China 673.2 3.5 5 2 -47.1 India 859.9 3.5 6.2 2.48 -74.6 Indonesia 136.8 3.5 4.6 1.84 -8.8 Korea 0.9 3.5 3.1 1.24 0.0 Malaysia 5.6 3.16 5.9 2.36 -0.4 Pakistan 114.2 3.5 14.3 5.72 -22.9 Philippines 29.2 2.97 8.4 3.36 -2.9 Thailand 17 3.5 3 1.2 -0.7 HK, Taiw., Sgp. 0 2 2.1 0.84 0.0 Other 84.8 2 4.2 1.68 -2.8 subtotal 2020.9 -- -- -196.0Latin America

Argentina 5.4 3.13 2.2 0.88 -0.1 Brazil 29.2 1 -0.3 -0.12 0.0 Cen. Am.& Carib. 26.6 2 5.4 2.16 -1.1 Mexico 41.1 1.95 0.7 0.28 -0.2 Other 45.9 2 -0.4 -0.16 0.1 subtotal 148.2 -- -- -1.3Europe

Central & E. Eur. 92.2 2 1 0.4 -0.7Middle East, North Africa

Turkey 11.6 3.5 3.7 1.48 -0.6 Other 76.42 2 3.5 1.4 -2.1 subtotal 88.02 -- -- -- -2.7Sub-Saharan Africa

Mozambique 13.56 1.39 4.1 1.64 -0.3 South Africa 15.07 1.18 -0.8 -0.32 0.1 Tanzania 19.65 1 0.5 0.2 0.0 Uganda 16.58 2.33 0.5 0.2 -0.1 Other 328.36 2 0.3 0.12 -0.8 subtotal 393.22 -- -- -- -1.2Total 2742.54 -- -- -- -201.9

Combined Long-term Static and Dynamic Effects of Free Trade on Poverty(millions, change from baseline)

Country Static: Dynamic: Total: central high (a) Productivity 1/2 additional central high

effect net SteadyState effect (b)

Asia Bangladesh -4.1 -13.3 -35.6 -3.6 -43.3 -52.6 China -24.7 -87.2 -47.1 0.0 -71.8 -134.3 India -28.3 -74.8 -74.6 -109.1 -212.1 -258.5 Indonesia -6.1 -15.1 -8.8 -7.4 -22.3 -31.3 Korea 0.0 0.1 0.0 0.0 -0.1 0.0 Malaysia -0.2 -0.2 -0.4 -0.6 -1.1 -1.1 Pakistan -7.9 -13.0 -22.9 -46.1 -76.9 -82.0 Philippines -2.3 -2.0 -2.9 -1.4 -6.6 -6.4 Thailand -4.1 -4.0 -0.7 -9.2 -14.0 -13.9 HK, Taiw., Sgp. 0.0 0.0 0.0 0.0 0.0 0.0 Other -2.1 -8.8 -2.8 -5.9 -10.8 -17.5 subtotal -79.7 -218.3 -196.0 -183.3 -459.0 -597.6Latin America Argentina -0.7 0.1 -0.1 -0.1 -0.9 -0.1 Brazil -1.0 -0.4 0.0 -0.3 -1.3 -0.7 Cen. Am.& Carib. -3.2 -2.9 -1.1 -1.6 -5.9 -5.6 Mexico -0.4 0.4 -0.2 -0.1 -0.7 0.1 Other -2.7 -2.2 0.1 -3.3 -5.8 -5.4 subtotal -7.9 -5.0 -1.3 -5.3 -14.6 -11.7Europe Central & E. Eur. -2.4 -1.0 -0.7 -0.2 -3.3 -1.9Middle E., N. Africa Turkey -1.3 0.0 -0.6 -1.1 -3.0 -1.8 Other -3.8 -4.4 -2.1 -6.4 -12.3 -12.9 subtotal -5.1 -4.4 -2.7 -7.5 -15.4 -14.7Sub-Saharan Africa Mozambique -0.8 -0.4 -0.3 -0.8 -1.9 -1.5 South Africa -0.6 -1.1 0.1 -0.1 -0.6 -1.2 Tanzania -1.4 -3.1 0.0 -0.5 -2.0 -3.6 Uganda -0.7 -2.5 -0.1 -0.8 -1.5 -3.4 Other -15.6 -24.8 -0.8 -24.6 -41.0 -50.1 subtotal -19.1 -31.9 -1.2 -26.8 -47.0 -59.8

-114.3 -260.7 -201.9 -224.2 -539.3 -685.7Totala. Adjusts for chapter 3 agricultural sector estimates; see text. pehrtreslts2R3/14

b. One-half increment of steady state (induced capital investment) effects above static.

Long-term Impact of Free Trade on Global PovertyReduction (millions)

0

50

100

150

200

250

Static Productivity Investment

Reduction in Poverty from Global Free Trade (millions)

0

50

100

150

200

250

India China Pak Bangl Indons LatAm MENA SSAfr

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

Test for Preference Erosion ($bn gains)

“Country” Free trade US, EU freeze P7

Mozambique 0.13 0.09

Uganda 0.09 0.07

South Africa 1.33 0.28

Tanzania 0.29 0.24

Other sub-Saharan Africa 2.36 -0.02

Central America 4.02 1.78

Bangladesh 0.39 -0.20

Total, 7 poor (P7) 8.61 2.24