How much will trade liberalization help the poor?: comparing global trade models

"Trade liberalization is expected to act positively on development and poverty reduction... The traditional argument in favor of a positive relationship between liberalization and poverty reduction focuses on... [key] linkages. A large proportion of poor people work in the agricultural sector, where trade distortions are particularly high. Liberalization could lead to higher world agricultural prices and raise activity and remuneration in this sector in developing countries. The same beneficial outcome could occur in the textile and apparel sectors, where protection remains high and developing countries have a comparative advantage. But openness can also have negative effects. First, government transfers can shrink as liberalization cuts the government's receipts of trade-related taxes. Second, terms of trade can deteriorate as liberalization affects world prices. Third, liberalization can impose adjustment costs and raise short-run risk owing to competition from imports and reallocation of productive factors. As a consequence, it is uncertain how much trade liberalization would reduce poverty, and many studies have attempted to assess the size of these benefits. The main empirical tool for this work is the multicountry computable general equilibrium (CGE) model—a sophisticated and complex tool of analysis that often appears as a “black box” from which results are difficult to understand." from Texttrade liberalization, Development, Poverty reduction, agricultural sector, Agricultural prices, Computable general equilibrium (CGE) modeling, Manufacturing industries,

Trade protection and tax evasion: evidence from Kenya, Mauritius and Nigeria

Trade protection and tax evasion: evidence from Kenya, Mauritius and Nigeria

The potential cost of a Failed Doha Round

The potential cost of a Failed Doha Round

Why is the Doha development agenda failing? And what can be done?: A computable general equilibrium-game theoretical approach

"We herein use a world Computable General Equilibrium (CGE) model to simulate 143 potential trade reforms and seek solutions to the issues hampering progress in the Doha Development Agenda (DDA). Inside the domain defined by all these possible outcomes, we apply the axiomatic theory of bargaining and select the Nash solution of cooperative games. The solutions vary according to the objective functions adopted by the trade negotiators. When real income is the objective and services are excluded, or when optimizing terms of trade is the objective, the Nash solution is the status quo. Trade liberalization is feasible only when the negotiators focus on national exports or Gross Domestic Product (GDP). Our assessment of some possible solutions reveals that excluding members having a GDP below a certain threshold improves the bargaining process, regardless of the governments' objective. Formation of coalition, such as the G20, constitutes an option for its members to block outcomes imposed by rich members. We also find that side payments may be a solution, but represent a very high share of the global income gain." from authors' abstractTrade negotiations, Computable general equilibrium (CGE) modeling, Nash solution, Side payments, Cooperative games, Globalization, Markets, Doha Development Agenda,

Eight Years of Doha Trade Talks: Where Do We Stand?

In 2001 the World Trade Organization launched a highly ambitious program of multilateral liberalization. Eight years later, concluding the negotiations is uncertain, though an opportunity still exists. Since 2001, many proposals on market access have been brought to the negotiating table by the European Union, the United States, and the G20. Because it is politically and economically acceptable to many parties, the final December 2008 package could be the basis of an agreement. An evaluation of these various proposals shows how trade negotiations have been following countries’ strategic interests. In eight years, the ambition of the formula in agricultural market access tariff reduction has increased, but additional flexibilities designed to accommodate domestic political constraints have offset delivered market access. The various scenarios imply losses for least-developed countries, reflecting eroded preferences and rising terms of trade for imported commodities, including food products. We study how this trade reform can be more development-friendly.computable general equilibrium modeling, least developed countries, trade negotiations, Financial Economics, International Development, International Relations/Trade, Political Economy, Public Economics,

Economics of export taxation in a context of food crisis

This paper aims to assess the rationales for the use of export taxes, in particular in the context of a food crisis. First, we summarize the effects of export taxes using both partial and general equilibrium theoretical models. When large countries have an objective of constant food domestic prices, in the event of an increase in world agricultural prices the optimal response is to decrease import tariffs in net food-importing countries and to increase export tariffs in net food-exporting countries. The latter decision is welfare improving while the former is welfare reducing: it is the price to pay to get domestic food prices constant. Small countries are harmed by both decisions. Second, we illustrate the costs of a lack of cooperation in and regulation of (binding process) such policies in a time of crisis using a global computable general equilibrium (CGE) model illustration, mimicking the mechanisms that have appeared during the recent food price surge. We conclude with a call for international regulation, in particular because small net food-importing countries may be substantially harmed by these beggar-thy-neighbor policies that amplify the already negative impact of the food crisis.Computable general equilibrium (CGE), export taxes, Food crisis, optimum tariff,

Does Africa trade less than it should, and if so, why?: The role of market access and domestic factors

"This paper addresses the question of whether Africa is an undertrading continent. We answer this question using a much-improved data set for obtaining predicted trade and by employing methods that correct for bias in estimates of undertrading. Our results indicate that globally Africa is an underexporter in our preferred Heckman specification. This result is robust to the addition of various controls and the application of variants of the gravity model of trade. We also looked for explanations for Africa's undertrading. We found that accounting for transport and communication infrastructure reduced the undertrading effect for Africa, and in some specifications of the gravity model, the under-trading effect vanished altogether. Results from a semiparametric model provided evidence of significant nonlinear impacts from infrastructure, and the effects for a large number of African countries was significant and compared favorably with the marginal effects of infrastructure in countries on other continents and in comparable income brackets. Using this model we also found evidence of complementarity across transport and communication infrastructure, implying that much greater impacts will be likely if the infrastructure are developed jointly rather than in isolation." from Author's AbstractGravity model, Undertrading, Trade related infrastructure, Market access,

The price and trade effects of strict information requirements for genetically modified commodities: Under the Cartagena Protocol on Biosafety

This paper assesses the global economic implications of the proposed strict documentation requirements on traded shipments of potentially genetically modified (GM) commodities under the Cartagena Protocol on Biosafety. More specifically, we evaluate the trade diversion, price, and welfare effects of requiring all shipments to bear a list of specific GM events (the does contain rule) in the maize and soybean sectors. Using a spatial equilibrium model with 80 maize- and 53 soybean-trading countries, we show that information requirements would have a significant effect on the world market for maize and soybeans. But they would have even greater effects on trade, creating significant trade distortion that diverts exports from their original destination. The measure would also lead to significant negative welfare effects for all members of the Protocol and nonmembers that produce GM maize, soybeans, or both. While non-GM producers in Protocol member countries would benefit from this regulation, consumers and producers in many developing countries would have to pay a proportionally much heftier price for such a measure.Cartagena protocol on biosafety, Genetically modified food, International trade,

Searching for an alternative to economic partnership agreements:

"On January 1, 2008, Economic Partnerships Agreements (EPAs), currently being negotiated between the European Union (EU) and nearly 80 African, Caribbean, and Pacific (ACP) countries, are expected to replace the Cotonou Agreement, which has governed trade relations between these countries since 2000. The Cotonou Agreement, implemented through a waiver from the World Trade Organization (WTO), expires on December 31, 2007. At the second EU-Africa summit, held in Lisbon on December 8–9, trade issues have been a major bone of contention, with several African heads of state denouncing the way the negotiation had been led by the European Commission. At the end of the summit, the Commission agreed to continue EPA negotiations in 2008." from textInternational agreements, Trade agreements,

The marginalization of Africa in world trade:

"In recent years, trade in Africa has assumed greater importance as a means of alleviating poverty, especially since the initiation of the Doha Round for development. At the same time, skepticism regarding the effectiveness of foreign aid has grown (Easterly 2006). Trade and aid have often been viewed as interchangeable, but “aid for trade” has recently gained prominence, with the result that the two factors are more often treated as complementary. Proponents of “aid for trade” argue that the capacity of developing countries to take advantage of any gains in market access through the Doha Round is hampered by a plethora of supply-side bottlenecks and costs, administrative constraints, and poor institutions. Aid for trade, thus, refers to additional aid to tackle trade-related constraints and adjustment costs in developing countries (Evenett 2005).1 Views differ as to what this package should entail, but many developing countries are in favor of building supplycapacity and trade-related infrastructure (IATP 2006)." from textTrade policy, Market access, Economic assistance, Poverty alleviation, Doha Developmental Round of the World Trade Organization (WTO), Trade reform, Protectionism, Trade barriers, exports, International trade,