Would Multilateral Trade Reform Benefit Sub-Saharan Africans?

Kym Anderson,Will Martin,Dominique Van Der Mensbrugghe

doi:10.2139/ssrn.754904

Abstract

This paper examines whether, in the presence of trade preferences, Sub-Saharan African economies, and especially its poorest households, could gain from multilateral trade reform. The World Bank's LINKAGE model of the global economy is employed to examine the impact first of current trade barriers and agricultural subsidies, and then of possible outcomes from the WTO's Doha round. The results suggest moving to free global merchandise trade would boost real incomes in sub-Saharan Africa proportionately more than in other developing countries or in high-income countries, despite a terms of trade loss in parts of the region. Farm employment and output, the real value of agricultural and food exports, the real returns to farm land and unskilled labor, and real net farm incomes would all rise in the region, thereby alleviating poverty. A Doha partial liberalization of both agricultural and no-agricultural trade could take the region some way towards those desirable outcomes, but more so the more both rich and poor countries reduce their applied tariffs.

Highlights

According to Chen and Ravallion (2004), Africa accounts for one-third of the world’s people living on less than $1 a day
The model used for this analysis is the World Bank’s global computable general equilibrium (CGE) model known as LINKAGE
The Everything But Arms (EBA) agreement, and likewise the US’s Africa Growth and Opportunity Act (AGOA) and Caribbean Basin Initiative (CBI). In preparing this new database, CEPII made the assumption that there are no rules of origin (ROOs) or the like which discourage developing countries from taking full advantage of those preferences; and we assume perfect competition between traders in the two sets of countries, which determines how rents from those preferences are shared between the exporting and importing countries

Summary

Introduction

According to Chen and Ravallion (2004), Africa accounts for one-third of the world’s people living on less than $1 a day (up from one-tenth two decades ago). Raising agricultural productivity in Sub-Saharan Africa (SSA) is one possible way to alleviate people’s poverty.1 Another possibility is through cuts to agricultural (and textile) protection in rich countries, for example via the World Trade Organization’s Doha Development Agenda. While a comprehensive multilateral trade reform should boost economic growth and thereby reduce poverty in general,2 Panagariya (2004) has questioned whether this applies to SSA countries in particular This paper seeks to address the empirical question implicit in that critique It does so using the World Bank’s LINKAGE model of the global economy and its new global trade and protection database that explicitly includes, for the first time, the non-reciprocal tariff preferences enjoyed by developing and especially least developed countries, including in SSA.

The global LINKAGE model and protection database

Market and welfare impacts of current protection policies

The Doha negotiations

Caveats

Findings

Summary and policy implications