An “ambitious” agreement in the WTO’s Doha Development Round of trade talks would reduce poverty, says a new World Bank research study, but some countries such as Brazil and China would make immediate gains, while others, such as Bangladesh, would need help to achieve the projected long-term poverty reduction a trade deal offers them.
“Poverty is reduced under an ambitious Doha Development Agreement, and this reduction is more pronounced in the longer run,” said L. Alan Winters, Director of the World Bank’s Research Group, and co-editor, with Thomas Hertel, Professor of Economics at Purdue University of Poverty and the WTO - Impacts of the Doha Development Agenda. “To fully realize their potential to stimulate growth and thereby reduce poverty, trade reforms need to be far-reaching, addressing barriers to services trade and investment in addition to merchandise tariffs.”
Poverty and the WTO is the first book that attempts to assess the impact of trade liberalization negotiations on poverty in the developing world by following the effect of global shocks, through their effects on prices, trade, production and earnings right down to the household level. The research tackles a serious methodological challenge in that it bridges the gap between country case studies -which focus on the details of the choices faced by individual households in Asia, Africa, and Latin America - and a broader assessment of the global impacts of the Doha Development Agenda.
Of 10 countries analyzed in the 17 commissioned chapters that make up this wide-ranging research study, those countries with agricultural export potential to the markets that liberalize the most—East Asia and Europe - are identified as obvious winners from trade reform, in both the short- and long-term. In Brazil, liberalization would drive rapid poverty reduction by prompting increased agricultural production and employment in regions with relatively higher poverty incidence, while in China, the poor would gain as exports would increase to agricultural markets in East Asia that are highly protected at present.
Doha reforms would have the greatest impact, authors Hertel and World Bank researcher Maros Ivanic conclude, on world market prices and trade volumes for farm and food products, followed by textiles and clothing - key industries in any strategy to reduce poverty. The strongest world price increases would be for farm products currently subsidized the most: rice and other grains, cotton, dairy products, and beef. The authors warn that there is no single “world price”, however, and that close attention should be paid to bilateral patterns of trade and country-specific price changes.
One chapter shows that Brazil’s near-term gains would be 0.4 percent reduction in poverty headcount under the proposed Doha framework; another shows its long-term gains to be 1.1 percent poverty reduction under Doha and 2.9 percent in the event of full goods trade liberalization. Similar short-term and long-term gains are shown for China -1.1 percent and 1.3 percent reduction under Doha, and two percent and 2.7 percent under full liberalization.