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Contributions from
the Column
Media
Africa’s youth: patience
at an end
Doha Round:
striking projection
“Human security” as leitmotiv
for foreign policy
Islamist parties:
greater integration
05/2006 |
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Doha Round: striking projection
Sandra Polaski:
Winners and losers. Impact of the
Doha Round
on developing countries.
Washington, D.C., Carnegie Endowment for
International Peace 2006, 110 pages,
download free from: www.carnegieendowment.org/trade
What does the liberalisation of world trade do for the developing countries? A new study from the Carnegie Foundation contradicts many popular assumptions. It expects no welfare benefits for the poorest countries from a more liberal policy on the trade in agricultural products.
According to the study, the world economy would grow by an extra 0.5 % if all restraints on trade were abolished. However, that demand is not even made in the talks. The study therefore concentrates on the consequences of different liberalisation measures, which could really result from the current negotiation round of the World Trade Organisation. The most ambitious market opening would accordingly produce gains of less than 0.2% of current global GDP. Trade in manufactured goods would make up 90% of this gain. According to the study, the greatest benefits of liberalising agricultural trade would flow to the industrialised nations (where costly subsidies would disappear) as well as big exporters such as Argentina, Brazil and Thailand. The remaining developing world would lose out, however. The less competitive, small-scale farmers, typical of most developing countries’ agriculture, would be left with nothing – even those in Brazil. The study also states that the problem could be alleviated, without great cost to other nations, if the poorest countries were allowed to take special measures to protect their agricultural trade.
According to the study, the benefits from the liberalisation of trade in manufactured goods would be much greater, in particular for emerging markets with competitive light industries. China would gain the most, with benefits also accruing to India and some other Asian nations, but hardly to Latin America. The industrialised countries would also be in a better position, but the poorest countries would be even worse off than they are now. Sub-Saharan Africa and Bangladesh would be adversely affected under all Doha scenarios. However, the forecast does not even take into account the cost of compliance with of the new regulations.
The study explains that earlier assessments came to quite different conclusions with the availability of more up-to-date data, as well as different assumptions about the extent of liberalisation. Moreover, the Carnegie Foundation study claims to use an improved economic model. It examines urban and rural job markets for unskilled workers separately, and takes the high level of unemployment in the poor countries into account. Previous models wrongly assumed that increasing exports from say, China, would lead to higher wages and prices there, opening up export opportunities for other countries. This assumption has proved unrealistic in view of the abundant supply of labour. Mass unemployment worldwide means that higher wages cannot generally be expected in the course of globalisation, according to the study. If its forecast is correct, liberalisation will make manufactured goods (unlike agricultural goods) cheaper, not more expensive. According to the Carnegie Foundation, free trade will make only a modest contribution to the development of the poorest nations. And even that effect would depend on industrialised nations and emerging markets opening their markets to all the products of these countries, allowing them to take special measures to protect their trade, and increasing development assistance – for agriculture, in particular. The authors warn against basing liberalisation steps on economic models alone, because of the harm which may result. All models are unreliable, in their opinion. It would in any event be more honest to discuss the under-lying interests behind calls for liberalisation. Compared with models, political horse-trading could turn out to be the lesser evil in the decision-making process.
Bernd Ludermann
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