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Carnegie Endowment

What could the Doha Round mean for Africa?1

Katherine Vyborny2
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Carnegie Endowment

Web Commentary, 12 June 2007

SARPN acknowledges the Carnegie Endowment as a source of this document: www.carnegieendowment.org
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Introduction

Since the launch of a new round of trade negotiations in 2001, members of the World Trade Organization (WTO) have been struggling to reach a deal that can deliver significant benefits for all member countries. This round of trade talks was christened the “Doha Development Round” at its launch in Doha, Qatar, because developing countries felt that earlier deals had created global trade rules that favored high-income countries and insisted that more attention be paid to their needs.

If history is any guide, the slow progress does not mean the round will fail: previous rounds have taken longer and floundered often before succeeding.3 And it is widely held that a good multilateral deal would be far better than more regional agreements, because it is less economically distorting, allows more balanced negotiations, and ensures access for all countries rather than just a few key players. But it is also clear that the Doha Round will have to be a development round to succeed politically – developing countries have taken a seat at the negotiating table as never before.

How can that be achieved? Many developing countries are poised to take advantage of global trade liberalization, and many of the millions of poor in those countries will benefit as a result. But it is less clear how to ensure that the poorest countries benefit from trade, particularly those in Sub-Saharan Africa, which saw their share of global exports drop from 6% to 2% in the last two decades.4 Advocates of the Round routinely cite studies showing millions of people in these countries will be lifted out of poverty, while opponents find numbers to the contrary. Could any trade deal really deliver on the promised “Doha Development Round” for the continent?

A closer look at all the numbers shows that the way forward is clear. A bad round will hurt Africa; no round would be a loss as well. Africa needs a development round, with full duty-free quota-free access as a part of multilateral liberalization. To revive the WTO negotiations and benefit the world’s poor, the U.S. should offer this development package and negotiate a true Doha Development Round.

The economic models cited to support the arguments for and against the round are helpful tools for assessing the relative impact of different trade policy choices on countries and sectors within countries. But confusion over the interpretation and reliability of the results has generated skepticism among policymakers. This brief aims to clarify the results relevant to Africa from leading current global equilibrium trade models. It looks at four studies that assess Africa’s prospects in a realistic outcome of the Doha Round. These are models designed by the World Bank, the French think tank Centre d’Etudes Politiques et Informations Internationales (CEPII), the International Food Policy Research Institute (IFPRI); and the Carnegie Endowment for International Peace (Carnegie). They represent analyses of how plausible Doha round liberalization in the agricultural and manufacturing sectors would affect developing countries.5 The models are not intended to predict how the world or country level economies will evolve in the future, but rather to estimate the specific role of trade policy changes apart from other changes in the economy. They measure the impact of the changes in tariffs and subsidies on prices, and thus on the exports, imports and income of countries. The models cannot measure well some impacts, such as technology transfer (see Section IV); but are the best way we have to measure the overall impact of trade. This brief examines in detail their results for Africa.6

Close examination of the models’ results reveals a common pattern. A range of possible cuts in trade barriers that could be achieved in a realistic Doha Round, while allowing some African countries and sectors to gain, will likely cause many African countries to experience net losses. All countries will experience some structural adjustment and will have to cope with its associated costs; for those with less diversified economies the adjustment costs could be daunting. It is not surprising that low-income African countries should gain less in absolute terms because their economies are smaller and they face many challenges that make them less competitive. However, the fact that they could lose income belies the notion of a development round.

But if the trade round is expanded to include a targeted “development package” of full preferential tariff treatment, then Africa’s losses would turn to gains. Limiting rich country exclusions to agricultural products that African countries can export (or “sensitive products”) would also help Africa win in the round. Aid to assist the poorest countries to build competitive advantage and increase exports will also be key to help African countries take advantage of the round.7 This “development package” would be cheap for rich countries, but would change a Doha deal from a win-win-lose outcome to a win-win-win outcome for high, middle, and lowincome countries, including African countries. In order to help African countries emerge as winners from the round, a full development package will be indispensable.


Footnotes:
  1. This outlook is a followup to the March 2006 report of the Carnegie Endowment, Sandra Polaski, Winners and Losers: Impact of the Doha Round on Developing Countries, available at http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=18083&prog=zgp&proj=zted. For additional detail and analysis of the Carnegie model, please see this report. The Africa-specific work was informed in great part by the input of a group of African and global modelers at an expert workshop held in Bellagio, Italy in March 2006 with the generous support of the Rockefeller Foundation.
  2. The author was Junior Fellow with the Trade, Equity and Development Project at the Carnegie Endowment from 2005-2006, and is now at the Center for Global Development. Correspondence: .
  3. See Sandra Polaski, “The Future of the WTO,” Carnegie Endowment for International Peace, 2006. Available online at http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=18684&prog=zgp&proj=zted
  4. 1980 to 2002. “Economic Development in Africa: Issues in Africa’s Trade Performance.” United Nations Conference on Trade and Development, 2003. Available at http://www.unctad.org/en/docs/tb50d6&c1_en.pdf
  5. A range of other studies have assessed the impact of full free trade or other highly ambitious trade liberalization. These illustrate the potential of trade for poor countries, but do not assess scenarios that are plausible outcomes of the Doha Round.
  6. More technical detail on a range of models, including those covered here, is available in a recent synopsis of global trade modeling by Antoine Bouet, “What Can the Poor Expect from Trade Liberalization? Opening the ‘Black Box’ of Trade Modeling,” International Food Policy Research Institute, March 2006. Available at http://www.ifpri.org/divs/mtid/dp/papers/mtidp93.pdf.
  7. Aid for trade is not incorporated into the CGE models, and it is difficult to quantify the impact it would have on the outcomes for the poorest countries. However, the allocation and management of aid would be an important element of the “development package.”


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