Trade Policy and Global Poverty

by William Cline

Overview

The stakes of the poor in trade policy are large: Free trade can help 500 million people escape poverty and inject $200 billion annually into the economies of developing countries, according to author William R. Cline. This book provides a comprehensive analysis of the potential for trade liberalization to spur growth and reduce poverty in developing countries.

It quantifies the impact on global poverty of industrial-country liberalization, as well as liberalization by the developing countries. Half or more of the annual gains from trade would come from the removal of industrial-country protection against developing-country exports. By removing their trade barriers, industrial countries could convey economic benefits to developing countries worth about twice the amount of their annual development assistance. By helping developing countries grow through trade, moreover, industrial countries could lower costs to consumers for imports and realize other economic efficiencies. The study estimates that free trade could reduce the number of people earning less than $2 per day by about 500 million over 15 years. This would cut the world poverty level by 25 percent. Cline judges that the developing countries were right to risk collapse of the Doha Round at the Cancun ministerial meeting in September 2003 by insisting on much deeper liberalization of agriculture than the industrial countries were then willing to offer.

The study calls for a two-track strategy: first, deep multilateral liberalization involving phased but complete elimination of industrial-county protection and deep reduction of protection by at least the middle-income developing countries, albeit on a more gradual schedule; and second, immediate free entry for imports from "high risk" low-income countries (heavily indebted poor countries, least developed countries, and sub-Saharan Africa), coupled with a 10-year tax holiday for direct investment in these countries.

Product Details

ISBN-13:	9780881324594
Publisher:	Peterson Institute for International Economics
Publication date:	06/16/2004
Sold by:	Barnes & Noble
Format:	eBook
Pages:	344
File size:	4 MB

About the Author

William R. Cline has been a senior fellow at the Peterson Institute for International Economics since 1981. During 1996–2001 while on leave from the Institute, Dr. Cline was deputy managing director and chief economist of the Institute of International Finance (IIF) in Washington, DC. From 2002 through 2011 he held a joint appointment with the Peterson Institute and the Center for Global Development, where he is currently senior fellow emeritus. Before joining the Peterson Institute, he was senior fellow, the Brookings Institution (1973–81); deputy director of development and trade research, office of the assistant secretary for international affairs, US Treasury Department (1971–73); Ford Foundation visiting professor in Brazil (1970–71); and lecturer and assistant professor of economics at Princeton University (1967–70).

Editorial Reviews

The Doha Round of trade negotiations has been called the "development round," because it is focused on trade liberalization that will help poor countries. Cline here attempts to answer the question of just how much help is possible through such liberalization. He draws extensively and imaginatively on scholarly research to estimate the static and dynamic impact of global free trade on developing countries. He finds that protection against imports from developing countries has a significant impact: global free trade would raise their GDP by 5.5 percent after 10 to 20 years and reduce world poverty by 20 percent-bringing more than 500 million people above the poverty line, defined as earning $2 a day. Roughly half of the benefit is due to liberalization of trade in agricultural products, which are much more important than textiles and apparel. And although much of the gain for developing countries comes from liberalization by rich countries, they also gain significantly (and increasingly over time) from liberalization among themselves. The study is well reasoned but closely argued, so much of it is difficult reading for non-economists. Still, its conclusions are accessible and noteworthy.

Foreign Affairs