Doha Merchandise Trade Reform and Developing Countries: What’s at Stake?

This paper provides new estimates of the global gains from multilateral trade reform and their distribution, in the presence of trade preferences, among developing countries. Particular attention is given to agriculture, as farmers constitute the poorest households in developing countries but the most protected in rich countries. The latest GTAP database (Version 6.04) and the World Bank’s LINKAGE model of the global economy are employed to examine the impact first of current merchandise 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 SubSaharan Africa proportionately more than in other developing countries or high-income countries, despite a terms of trade loss in parts of that region. Farm employment, the real value of agricultural output and exports, the real returns to farm land and unskilled labor, and real net farm incomes would all rise substantially in that and other developing country regions, thereby alleviating rural poverty. A Doha partial liberalization could take it some way towards those desirable outcomes, but more so the more developing countries themselves cut applied tariffs, particularly on agricultural imports.