Delivering on Dohas Promise The Role of Rich

Delivering on Doha’s Promise: The Role of Rich Country Policies Nancy Birdsall Center for Global Development Cancun Trade and Development Symposium September 11, 2003 Cancun, Mexico

Why a CDI? n Rich country policies matter for development n Time to hold rich countries accountable n Need a tool to measure rich country commitments to development – ex: Millennium Development Goal 8

What is the CDI ? of policy effort on policies that affect development prospects of poor countries n The index ranks 21 countries –members of the DAC (except Luxembourg) n Measure

Components § § § Aid Trade Investment Environment Migration Peacekeeping

Overall Scores

Goals of the CDI n Educate and inspire to action the richworld public and policy makers n Motivate a race to the top among OECD countries n Spark new research and data collection n Foster debate about the role of rich country policies in development

Trade Aggregate measure of protection in tariff equivalent terms: n Tariffs n Non-tariff barriers n Subsidies Revealed Openness

Total Tariff Equivalent of Agricultural Protection Against Developing Countries (percent tariff equivalent) Tariffs US Canada EU Japan 11. 2 62. 6 67. 4 202. 3 1. 8 19. 6 9. 8 65. 5 100. 2 231. 9 Tariff-Equivalent 20. 8 of domestic subsidies Total Tariff 34. 3 Equivalent Source: William Cline, “An Index of Industrial Country Trade Policy toward Developing Countries, ” CGD Working Paper #14, October 2002.

Trade Results

Global Free Trade Can Reduce Poverty in Developing Countries by: 1. Opening Agriculture Markets 2. Raising Unskilled Labor Wages 3. Boosting Productivity 4. Inducing Investment 5. An early harvest: free market access for poor nations

Liberalization of agricultural markets Agricultural protection against developing countries: n 34 percent in the United States n 100 percent in the EU n 230 percent in Japan n 65 percent in Canada Free trade in agriculture would reduce global poverty by an estimated 200 million people, or about 7 percent. Source: William Cline, “Trading Up: Trade Policy and Global Poverty, ” CGD Brief 7, September 2003.

The Impact of Global Agricultural Liberalization on Poverty in Selected Countries Biggest Reductions in Biggest Reductions Poverty, (%) in Poverty, (millions) Malawi (15. 2) China (72. 1) Vietnam (15. 1) India (59. 2) Kenya (14. 8) Bangladesh (12. 0) Tanzania (12. 0) Pakistan (10. 4) Bangladesh (11. 8) Indonesia (9. 9) Source: William Cline, “Trading Up: Trade Policy and Global Poverty, ” CGD Brief 7, September 2003.

Raising Unskilled Labor Wages n Global free trade would boost world income by about $230 billion annually n About $140 billion in gains for industrial countries and $90 billion for developing countries n In developing countries, real wages of unskilled labor would rise by an estimated 5 Source: William Cline, “Trading Up: Trade Policy and Global Poverty, ” CGD Brief 7, September 2003.

Boosting Productivity n Increasing trade spurs productivity, which in turn supports long-term increases in per capita income. n Productivity gains in developing countries would lift an estimated additional 200 million people out of poverty in the long term. Source: William Cline, “Trading Up: Trade Policy and Global Poverty, ” CGD Brief 7, September 2003.

Inducing Investment n Increased trade opportunities induce investment, which also generates longterm increases in per capita income. n Capital investment effects could conservatively reduce the number living in poverty by an additional 300 million people. Source: William Cline, “Trading Up: Trade Policy and Global Poverty, ” CGD Brief 7, September 2003.

An early harvest: free market access for poor nations LDCs, SSA and HIPC countries account for 64 countries with a combined population of 1 billion, of whom 715 million live in poverty. Estimated growth effects from preferential trade agreements: n US Caribbean Basin Initiative 7 -8% n EU Lome-Cotonou arrangement 7 -8% n Andean Trade Preference Act 2 % Source: William Cline, “Trading Up: Trade Policy and Global Poverty, ” CGD Brief 7, September 2003.

Poverty Intensity of US Imports from Developing Countries Regions Headcount Weighting Income Share Weighting Total 38. 11 8. 16 LDC 69. 2 44. 1 HIPC 66. 1 38. 7 SSA 70. 3 55. 8 Source: William Cline, “Trading Up: Trade Policy and Global Poverty, ” CGD Brief 7, September 2003.

Impact of Global Free Trade on Global Poverty Reduction (in millions, cumulative) Source: William Cline, “Trading Up: Trade Policy and Global Poverty, ” CGD Brief 7, September 2003.