Globalization and Markets

Outcome Statement

Research on Global Trade Arrangements

IFPRI’s research on global agricultural trade negotiations focuses on how to include low-income countries in the world trading system in a way that will improve the food and nutrition security of poor people. To that end, IFPRI researchers have modeled various proposals before the Doha Round of the World Trade Organization (WTO) negotiations to highlight their effects for poor countries.

In 2006 researchers found that the compromise agreement then under consideration would yield global income gains of about US$55 billion but would do little for developing countries. IFPRI then modeled two additional changes. First, if free access of least-developed countries to wealthy-country markets increased from 97 percent to 100 percent, world income would increase by an additional US$14 billion over the compromise scenario. Most important, about half of these additional gains would go to the poorest countries, increasing their income dramatically from US$1 billion to US$7 billion. Second, if the percentage of agricultural products defined as sensitive and special were reduced from 5 percent to 1 percent, world income would increase by an additional US$7.3 billion over the compromise scenario. This change would especially benefit developing countries where agriculture is an important source of employment and export earnings, most notably the middle-income countries.

IFPRI’s work has contributed significantly to the debate over international trade negotiations and the Doha Round. Its research has received significant media exposure through print, broadcast, and Internet media worldwide, including in the New York Times, the Washington Post, Economist, Newsweek, Agence France-Presse, and Voice of America. In addition, based on an IFPRI position statement on the suspension of Doha Round negotiations in 2006, nearly 80 professional applied economists sent an open letter to heads of government and trade ministers, arguing in favor of the changes in trade rules modeled by IFPRI. An IFPRI researcher was an invited expert to a WTO meeting called “Modeling the Gains from Trade Liberalization” to help explain why various attempts to model the benefits of trade liberalization have produced divergent results.

The Carnegie Endowment for International for Peace cited IFPRI’s results of the 2006 study in a report called “Nickel and Diming the Poor: U.S. Implementation of the LDC Initiative” that was presented to the U.S. Congress.

A similar study in 2008 analyzed the implications of the Doha Round for the Least Developed Countries (LDCs). It warned that the benefits that least-developed countries (LDCs) could draw from a multilateral trade reform as designed by the modalities made public in May 2008 would be negligible, and some countries would even face adverse effects. The study emphasized the need for the WTO negotiators to consider additional measures in favor of the poorest countries, including the extension of the Duty-Free Quota-Free (DFQF) initiative not only in terms of product coverage—with a 100 instead of 97 percent application—but also in terms of geographic coverage. Based on the findings, the study urged Asian countries to prioritize full market access to OECD markets (a 100-percent DFQF regime) especially the U.S. market, while African countries to focus on extending their free market access geographically to Brazil, India, and China.

The uncertainty surrounding the WTO Doha negotiations led to another study in 2008 which dealt with the economic implications of a possible failed Doha Round and a subsequent rush into protectionism. The study warned of a US$1,064 billion potential loss in world trade if world leaders were to fail to conclude the Doha Development Round of trade negotiations soon and if subsequently countries were to implement protectionist policies, as it occurred after the end of the Uruguay Round. The study further noted that failure of the negotiations would prevent a US$336 billion increase in world trade that would have come from a reduction in tariffs and domestic support, while a worldwide resort to protectionism would contract world trade by US$728 billion.

These findings generated discussion among WTO officials, think tanks, and academics. Indeed, a WTO official pointed out the “incredible impact that IFPRI study has made! Now, instead of $9 billion, $100 billion in GDP, we see quoted ‘potential impact on trade would be $1 trillion. …we have been pushing these numbers since they came out.”

Similarly, organizations like the German Marshall Fund commented on the impact of IFPRI’s study. The GMF proclaimed the brief to be a “fabulous piece of work…!” Acknowledging further the impact of the study, it noted the following: “the brief was quotable—and quoted already!”

Drawing from the IFPRI study, an article about free trade in the Newsweek International Edition of December 8, 2008 warned against a potential resort to protectionism: “Average tariffs, for example, can triple around the world without a single treaty violation or recourse by trading partners. That alone—which is not even close to the 1930s-style trade war Brown alluded to when he warned Obama —would shrink global trade by $1.8 trillion and slash global GDP by $448 billion, or 0.8 percent, according to a soon-to-be-published study by the International Food Policy Research Institute. Those numbers dwarf the estimated $79 billion in estimated GDP gains from the Doha round. It’s an ‘insurance policy’ to bring certainty to markets and prevent ‘systemic risk’ from a backlash against trade, says Jennifer Hillman, a World Trade Organization appeals adjudicator”.

A related project at IFPRI in 2008 was aimed at developing an up-to-date set of estimated subsidy notifications to add transparency to international agricultural policy deliberations. The project concluded that the WTO domestic support rules impose little constraint on the policy options available to China and India, whereas among developed countries, the constraints play a more substantial role, but there is also latitude within the rules. Moreover, the study also showed that a Doha agreement based on spring 2008 discussions would reduce the latitude for U.S. and EU support polices.