Does Trade Liberalization Make the Poor Better Off? Sub-Saharan Africa and the Doha Agricultural Trade Reform

This paper attempts to explore the implications of trade liberalization for the poor considering the case of Sub-Saharan African Countries. Using agricultural trade as a case, we employ the Agricultural Trade and Policy Simulation Model to analyze the impacts of the Doha agricultural trade policy reform negotiations on Sub-Saharan African countries’ agricultural terms-of-trade and welfare. The results reveal that Sub-Saharan Africa will experience positive net aggregate term-of-trade but negative aggregate welfare change. Moreover, even in the presence of aggregate trade gain, there is expected to be negative net aggregate consumption of agricultural commodities as nearly all individual countries will observe shortfalls in net consumption. Furthermore, though there is expected to be net gains in producer surplus across the region, the inadequacy of these gains to compensate losses in consumer surplus and government revenue leaves the region poorer. This leads us to the conclusion that trade liberalization does not necessary benefit poor countries as they lack capacities to compete with the wealthy. Therefore, if poor countries are to benefit from global trade liberalization, they must implement preferential policies that enhance development of local industries, and formulate domestic investment policies that enable them capture a certain proportion of the profit generated by foreign direct investments into their economies.