Global Economic Prospects 2004: Realizing the Development Promise of the Doha Agenda (Global Economic Prospects and the Developing Countries)

336 Pages·2003·1.52 MB·English

by  World Bank

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Doha,Qatar,was intended to be a Realizing the Development Promise of the Doha Agenda analyzes the o
“development round.”Those good m PPrroossppeeccttss
most critical multilateral trade issues and suggests policy options
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that would raise living standards in developing countries and c
Trade ministers from all over the
reduce global poverty. P
world are discussing ways to reduce
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trade barriers—barriers that greatly
The fourteenth annual edition of Global Economic Prospects
s
harm development and poverty p
• explores the short-,medium-,and long-term outlook for the e
reduction.Global Economic Prospects
global economy,including driving forces,commodity prices, c
2004explores the tough issues t
and capital flows,and their implications for major regions s
under discussion—protection of
• reviews recent trends in exports from developing countries,
agriculture,trade in labor-intensive
trade barriers that work to the disadvantage of poor people,
manufactures,labor services,and
and policies to reduce protection and other inequities in the
special treatment for developing
world trading system
countries,among others—to present
• examines trade in agriculture—the most important and politically
options that would indeed reduce
contentious sector for global poverty reduction—including key
poverty and advance development.
lessons from development experience,possible changes to the
The global talks will not be easy and
current system of subsidies and protection,and the potential
may take time,but allowing poor
for liberalization in both rich and poor countries
people greater access to world
• investigates the temporary movement of labor—so-called
markets will offer them new
Mode 4 of the General Agreement on Trade in Services—
opportunities to improve their living
evaluating its advantages and disadvantages to both the home
standards.If agreements are to be and the host countries
genuinely pro-development,these
• discusses trade facilitation in light of post-9/11 concerns for
discussions must be informed by
security to suggest new policies that would promote greater
clear analysis of measures that are and more-secure trade
likely to benefit poor people the
• reviews the special treatment of developing countries in
most.That is the purpose of this
the world trading system and the role of trade preferences,
Global Economic Prospects. exemptions from WTO rules,and technical assistance to
implement WTO trade regulations.
—Nicholas Stern 2
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Senior Vice President and Global Economic Prospects 2004 provides essential information for
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Chief Economist those concerned with developments shaping today’s global economy. 4
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ISBN 0-8213-5582-1
Global
Economic
Prospects
Realizing the Development Promise
of the Doha Agenda
2004
© 2003 The International Bank for Reconstruction and Development / The World Bank
1818 H Street, NW
Washington, DC 20433
Telephone [phone]
Internet www.worldbank.org
E-mail [email protected]
All rights reserved.
1 2 3 4 04 03
This volume is a product of the staff of the World Bank. The findings, interpretations, and
conclusions expressed herein do not necessarily reflect the views of the Board of Executive
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ISBN 0-8213-5582-1
ISSN 1014-8906
Cover photo credit: AFP/CORBIS.
Workers at the Los Ausoles coffee plantation in Ahuachapan, El Salvador, clean coffee beans,
August 14, 2002.
Contents
Foreword ix
Acknowledgments xi
Overview xiii
Abbreviations and Data Notes xxxi
Chapter 1 Global Outlook and the Developing Countries 1
The industrial countries: Deficits, confidence, capital spending, and the dollar 4
The external environment for developing countries: Gradual improvement, but a
bumpy road ahead 19
The developing countries: Back on track toward growth? 28
Trade, growth, and poverty in developing countries 38
Looking ahead to the Doha Round 47
Annex 1 Historical trade dynamics for developing countries 55
Notes 59
References 60
Chapter 2 Trade Patterns and Policies: Doha Options to Promote Development 63
Changing patterns in developing-country exports 65
Behind the patterns: Economic and policy determinants 73
Market access for development: The agenda 78
From Doha to Cancún and beyond: How should protection be reduced? 88
Notes 98
References 98
Chapter 3 Agricultural Policies and Trade 103
Poverty, rural households, and trade in agriculture 105
Trade and export growth in agriculture 109
Global agricultural protection: The bias against development 114
Proposals for reforms in the Doha Round 131
Notes 138
References 139
iii
G L O B A L E C O N O M I C P R O S P E C T S
Chapter 4 Labor Mobility and the WTO: Liberalizing Temporary Movement 143
The bigger picture: Global migration and remittance trends 145
Temporary movement of workers 150
Bilateral and regional approaches to labor mobility 152
Understanding the impact of temporary foreign workers 155
Mode 4 and the WTO 166
Notes 172
References 174
Chapter 5 Reducing Trading Costs in a New Era of Security 179
Why transport, trade facilitation, and logistics matter 181
The new international security dimension in trade 182
The anticompetitive effects of international transport regulations 188
Trade facilitation 191
Trade facilitation and the WTO agenda 195
Lowering transport costs, increasing security, and facilitating trade 198
Notes 200
References 202
Chapter 6 Development and the Doha Agenda 205
Special and differential treatment and the WTO 207
Market access for development 208
Toward a new regime for WTO rules 220
Putting development into the Doha agenda 227
Notes 228
References 229
Appendix 1 Regional Economic Prospects 233
Appendix 2 Global Commodity Price Prospects 257
Appendix 3 Global Economic Indicators 279
Figures
1.1 Growth in the OECD countries falters 4
1.2 OECD manufacturing shows a distinct “double dip” 5
1.3 Consumer confidence recovers from pre-war lows 6
1.4 The drop in U.S. household net worth has been offset by real estate appreciation 8
1.5 Capital spending has been hesitant in all industrial countries 9
1.6 Corporate profits have risen moderately in the United States and Japan 9
1.7 Business confidence remains poor, but better in the United States than in Europe 10
1.8 The U.S. fiscal deficit is widening quickly 11
1.9a The U.S. current account deficit is at record levels 11
1.9b The U.S. current account deficit is at record levels 13
1.10 Market interest rates have dropped 14
1.11 Is deflation a danger for Europe and the United States? 15
iv
C O N T E N T S
1.12 Output gaps are widening, bringing deflationary pressures to bear 16
1.13 The dollar has fallen sharply since early 2002 16
1.14 OECD recovery begins in the United States 18
1.15 OECD-area imports have declined sharply since April 2000 21
1.16 China’s share of East Asian exports keeps rising 21
1.17 The price of oil fell sharply before the war in Iraq 23
1.18 Agricultural prices have begun to decline as crop prospects improve 25
1.19 Emerging-market spreads rallied sharply after late 2002 26
1.20 Bond issuance dominates capital market flows in 2003 27
1.21a Regional trends in industrial production are mixed 29
121b Inflation is moderating in the developing world 29
1.21c Major currencies in Latin America and East Asia are firming up 30
1.22 Developing countries are on track toward long-term growth 31
1.23 Growth rates in developing countries will rise through 2005 31
1.24 Before the SARS outbreak, East Asian GDP was growing robustly 32
1.25 Argentina, Brazil, and Chile see strong upturn in production 33
1.26 Growth will cool in CIS while picking up in Central and Eastern Europe 34
1.27 Middle East oil production has increased to prevent shortages 35
1.28 Indian production of food and automobiles recovered sharply in early 2003 37
1.29 Growth in Africa is expected to improve modestly 38
1.30 Income elasticity has risen globally, but particularly in the developing world 40
1.31 Export-to-GDP ratios have risen sharply in developing countries 41
1.32 Productivity will contribute more to GDP growth through 2015 than will capital or
labor 44
1.33 The pro-poor reform scenario promises substantial income gains 50
1.34 Exports should rise sharply 52
1.35 Millions of people would be moved out of poverty 52
1.36 Gains for most, but adjustment costs for some 53
1.37 Significant shifts in global output patterns 54
2.1 Developing countries have become important exporters of manufactured
products 65
2.2 Manufactures account for a growing share of exports in all regions 67
2.3 Technology-laden manufactures have increased as a share of exports from each group
of countries, while the share of resource-based exports has diminished 70
2.4 Global production sharing is increasingly important for China and India 71
2.5 Soaring exports from China and India had only a moderate effect on China’s and
India’s terms of trade 72
2.6 Many developing countries face an adjustment when quotas are lifted 80
2.7 Antidumping barriers by sector and by country group 88
3.1 Countries that produce more cash crops also produce more food 109
3.2 Import growth rates of nontraditional export commodities decreased in industrial
countries but increased in developing countries 112
3.3 Developing countries’ exports of nontraditional products have surged, but industrial
countries’ exports have changed little 114
3.4 Developing countries lowered tariffs on manufactured products more than on
agricultural products 119
v
G L O B A L E C O N O M I C P R O S P E C T S
3.5 Rich countries use non–ad valorem tariffs more often than do developing
countries 122
3.6 Throughout the world, tariff rates escalate with degree of processing 123
3.7 The proportion of tariff lines containing non–ad valorem duties increases with degree
of processing 125
3.8 Tariff rate quotas protect a substantial portion of output in many industrial
countries 126
3.9 High protection of sugar and wheat has increased domestic production and reduced
net imports 128
4.1 Workers’ remittances are an important source of income for many developing
countries 149
5.1 Customs clearance takes longer in the developing world than in the OECD,
lowering the competitiveness of developing-country trade 185
5.2 Higher trade costs reduce global welfare 186
5.3 Facilitating trade in less-efficient countries would bring significant gains 194
5.4 The impact of individual trade-facilitation measures differs significantly from region
to region 195
5.5 Domestic reforms alone would produce many of the same gains as global
reform 196
6.1 The benefits of U.S. trade preferences are distributed unequally 211
6.2 Countries “graduating” from U.S. generalized system of preferences have better export
performance than those still in program 212
6.3 Preferences have not increased the share of the least developed countries in imports
into the European Union and the United States 215
6.4 Market shares of countries eligible for three U.S. “deep preference” programs have not
increased 215
6.5 Preferred countries’ apparel exports to the United States have risen 216
6.6 Agricultural exports from Mexico and Spain rose dramatically after the two countries
joined regional trade blocs 217
6.7 The trade policies of countries in the U.S. generalized system of preferences are more
protectionist than those of countries not in the program 218
6.8 Countries enjoying preferences have increased their exports of apparel to the
United States 219
Tables
1.1 Global growth should accelerate, but risks persist 3
1.2 Weak fundamentals underlie sluggish growth in the rich countries 5
1.3 The difficult environment for developing-country growth should improve 20
1.4 Developing countries’ exports will grow faster than those of the high-income
countries 22
1.5 GDP per capita will grow faster in the developing world than in the OECD area 43
1.6 Global poverty will decrease significantly, but not uniformly across regions 46
1.7 Tariffs could be cut clearly and simply 48
1.8 The pro-poor tariff scenario would significantly lower protection 49
1.9 A large share of real income gains comes from lowering of barriers in agriculture and
food 51
1.A1 Sectoral export decomposition for developing countries 55
vi
C O N T E N T S
1.A2 Regional export decomposition for developing countries 57
2.1 Developing countries are becoming exporters of high-value products 68
2.2 Developing countries’ exports became more competitive in the 1990s 74
2.3 Investment in people and in capital grew rapidly 75
2.4 Tariffs hurt exports—but less so in the 1990s than in the 1980s 77
2.5 Quota abolition in China will move resources from other activities to textiles
and clothing 81
2.6 Industrial countries levy higher tariffs on imports from developing countries than from
other industrial countries—and some regions have high tariff walls 82
2.7 Developing countries pay large amounts in tariffs to their neighbors 83
2.8 Most antidumping actions are filed by developing countries against other developing
countries 86
2.9 Antidumping rates are much higher than tariff rates 86
2.10 Antidumping duties are high 87
2.11 Competing formulas make a big difference for tariffs 95
2A.1 The various liberalization proposals have very different features 97
3.1 Most of the world’s poor live in rural areas outside the least developed countries
106
3.2 Rural poverty is higher in poorer countries 107
3.3 Even in subsistence economies, cash is important 107
3.4 U.S. farmers earn less from farming than from other sources 107
3.5 Manufacturing exports grew much faster than agricultural exports 110
3.6 South-South exports in agriculture are rising as South-North export shares fall 110
3.7 Developing countries have shared unequally in export market gains 117
3.8 Agricultural tariffs are higher than manufacturing tariffs in both rich and poor
countries 118
3.9 Agricultural tariffs: High peaks and deep valleys 119
3.10 Most subsidies go to producers—and come from border protection 120
3.11 Subsidies account for a large share of farmers’ revenues 121
3.12 Specific tariffs are higher than ad valorem rates 123
3.13 Tariffs rise with level of processing 124
3.14 The Harbinson proposals could greatly reduce applied tariffs in the European Union
and the United States 133
3.15 The Harbinson proposals would not significantly reduce protection in the developing
world—if reductions were taken from bound rates 133
3.16 U.S. trade preferences—a plethora of programs 136
4.1 Migration is rising in many OECD countries 147
4.2 Workers’ remittances are the second-largest source of external funding for developing
countries 148
4.3 Remittances are a significant source of income in all regions of the developing
world 149
4.4 Temporary movement is rising in rich countries 150
4.5 Foreign-born workers meet skill shortages in rich countries 152
4.6 The distribution of costs and benefits associated with Mode 4 trade 157
4.7 TMNP is the smallest of the four modes of international service supply 168
4.8 Most Mode 4 commitments by WTO members are in management categories 169
vii
G L O B A L E C O N O M I C P R O S P E C T S
5.1 Elimination of anticompetitive private practices can cut costs drastically 190
6.1 Developing countries rarely receive significant preferences in sectors in which they
would have a comparative advantage 209
6.2 Utilization rates for preference-eligible products with high MFN tariffs are low 210
6.3 Actual use of preference programs is declining 211
Boxes
1.1 Consumer confidence and U.S. private consumption 7
1.2 Financing the U.S. current account deficit: From equity to debt 12
1.3 OPEC struggles to achieve higher prices amid growing supply competition 24
1.4 Economic effects of Severe Acute Respiratory Syndrome (SARS) 33
1.5 AIDS is taking a rising toll in Sub-Saharan Africa 39
2.1 Poor export performance in 43 countries 69
2.2 Swimming upstream: The case of Vietnamese catfish 85
2.3 The scourge of the specific 89
2.4 “Average cuts,” the cut you have when you’re not having a cut 92
2.5 The implications of five tariff-cutting proposals 93
3.1 The impact of national trade integration and reform on poverty 106
3.2 Did agricultural exports slow down solely because of falling prices? 111
3.3 Decomposing export growth in manufacturing 113
3.4 Food safety standards: From barriers to opportunities 115
3.5 Decoupling agricultural support from production decisions 127
3.6 Fewer subsidies, stronger agricultural sector 132
3.7 The potential impact of real preferences 134
3.8 Rules of origin in preferential schemes are complicated—and often
contradictory 136
3.9 Food aid principles 137
4.1 Population aging and migration 146
4.2 Temporary labor movement and the East Asian crisis of 1997–98 151
4.3 Recent initiatives to facilitate temporary movement of highly skilled workers 153
4.4 A trade facilitation approach to labor mobility: NAFTA and APEC 154
4.5 Initiatives to encourage return migration 160
4.6 Wages and conditions 163
4.7 E-commerce and temporary movement 164
4.8 Boosting intra-EU labor mobility 165
4.9 Measuring Mode 4 is still imprecise 167
4.10 Key impediments to Mode 4 trade 169
4.11 Elements of a possible GATS visa/permit regime 171
5.1 The evolving definition of trade facilitation 181
5.2 The logistics needs of a German car part manufacturer in Tunisia 192
5.3 Tackling corruption in customs: Peru 197
5.4 Customs reform in Lebanon 198
6.1 EU and U.S. preference programs 213
6.2 Major WTO provisions allowing developing countries greater freedom to use
restrictive trade policies 221
6.3 A “development box” for the Agreement on Agriculture? 223
viii
Foreword
The international communityfinds itself at a crossroads as it goes into the last quar-
ter of 2003. Will the Doha Agenda regenerate the multilateral consensus that has been the
hallmark of successive rounds of trade liberalization since 1947 and in doing so provide
new impetus for global integration? Or will the Doha Agenda collapse in stalemate and perhaps
be viewed as the moment when the international community retreated from multilateralism and
opened the floodgates for less desirable bilateral and regional arrangements?
The answers to these questions matter a great deal to the world’s poor. The round of trade
talks launched in November 2001 in Doha, Qatar, is the first negotiation focused primarily on is-
sues of concern to developing countries, and the first trade round since the birth of the World
Trade Organization (WTO). Moreover, the Doha round is the first trade round for many new
WTO members, including the world largest developing economy, China. Consequently, the round
has the opportunity to remove many of the inequities in the global trading system that put de-
veloping countries—and poor people in particular—at a disadvantage in their trade.
Three trade barriers are of particular concern. Poor people work in agriculture, and agricul-
tural products are subject to the highest barriers to trade. In addition, poor people produce labor-
intensive manufactures, which are subject to peak tariffs in a world that has already reduced
average tariffs in manufactures to historic lows. Poor people could benefit from greater tempo-
rary migration.
Governments everywhere have worked hard to create the opportunity to reduce these and
other barriers. And they will have to work hard to capitalize on that opportunity. To fulfill the
development promise of the Doha Agenda, rich countries will have to reduce protection of their
(relatively wealthy) farmers. Their tariff walls and huge subsidies depress global prices of the
products that poor farmers produce throughout the developing world. These subsidies cost the
average working family in the European Union, Japan, and the United States more than $1,000
a year. Middle-income countries, though their protection is generally lower and less distorting in
agriculture, have high average tariffs in all sectors, and are more restrictive in services. As south-
south trade increases in importance, protection of sectors in middle-income countries undermines
their poorer trading partners and often undercuts the countries’ own productivity growth. Fi-
nally, low-income countries should look to the international system to meet their very reasonable
demands—not for special preferences to some markets and exemptions from rules, but for
nondiscriminatory market access to every market in products in which they have a comparative
advantage, for appropriately phased introduction of international regulations, and for develop-
ment assistance in implementing administratively costly WTO rules. Like other countries, low-
ix