Trade Liberalization Winners and Losers

“As the global trade regime has expanded to include most developing countries, the range of divergent priorities within the negotiations has widened. What would it take to produce a global trade agreement that addresses the interests of developing countries and holds the potential to lift their incomes, while at the same time offering advantages for developed countries? Winners and Losers: Impact of the Doha Round on Developing Countries presents a new, path breaking model of global trade as a tool to analyze the potential impacts of the negotiations and underlying economic interests of the WTO’s diverse members. This new Carnegie model makes several critical innovations—notably, modeling unemployment in developing countries and separating agricultural labor markets from urban unskilled labor markets. The result is a thorough, detailed, and more accurate analysis of the impact of trade policies on both developing and developed countries.”

• Any of the plausible trade sceanarios will produce only modest gains, on the order of a one-time increase in world income of $40 to $60 billion;
• There are both net winners and net losers under different scenarios, and the poorest countries are among the net losers under all the likely Doha scenarios;
• Among developing countries, about 90 percent of the gains from Doha scenarios would come from liberalization of trade in manufactured goods;
• The benefits of agricultural trade liberalization flow overwhelmingly to rich countries, while developing countries actually suffer slight losses as a group;
• Special treatment could be extended with only minor reductions in other countries’ gains from Doha Round, even for countries that are major agricultural exporters;
• Bangaladesh, East Africa, and the rest of Sub-Saharan Africa are adversely affected in almost every scenario;
• Liberalization of manufactured goods intensifies competition in several manufaturing sectors–including apparel, metal products, and motor vehicles and parts–and world prices decline slightly;
• The overall gains to the world are divided fairly evenly between the developed and developing world;
• The big winner in the developing world, China, is also home to large numbers of poor people, with more than 200 million living on less than $1 per day and an additional 600 million living on less than $2 per day.

The report then makes several recommendations in light of these findings:

• Developing countries will require long phase-in periods and careful sequencing of liberalization to take account of the impact of trade liberalization on their less diversified economies;
• Special treatment for developing countries’ agriculture sectors will be needed because of high concentrations of employment in those sectors;
• Additional development assistance for agriculture will be necessary in developing countries, including major new aid commitments;
• For LDCs, additional measures will be needed to ensure they are not net losers;
• Middle-income countries should extend market access to the LDCs;
• A solution must also be found for low-income countries just above LDC status;
• Doha negotiations should include trade adjustment assistance for poor people in low-income countries.