Potential gains from post-Uruguay round trade policy reform: impacts on developing countries.

The impacts of further trade liberalization after the Uruguay Round are assessed using the GTAP model, a multi-region, general equilibrium model. The analysis quantifies the trade impacts and welfare gains from trade liberalization by developed countries only, by developing countries only, from full multilateral liberalization, and from partial multilateral liberalization. It goes beyond past modeling of global trade reform by incorporating key tariff preferences. The simulation results indicate that each liberalizing country group benefits more from liberalization by its partners than from its own reforms. Liberalization by developing countries only will result in expansion of trade two and half times greater than the trade expansion from developed country liberalization. Developed countries reap a larger share of the gains (73%) from full liberalization, than their own liberalization contributes (47%) to global gains. They benefit most from agricultural tariff liberalization and the removal of domestic farm support, whereas developing countries benefit most from the liberalization of manufactures trade. Developing countries garner only 27% of the global gains from full liberalization while their liberalization contributes 53% of this total. When the global gains are broken down by type of instrument being liberalized, we find that 84% of the global gains derive from tariff liberalization, of which 35% is associated with agriculture and food tariffs and 48% is from manufactures. The remaining 16% of the global gains derive primarily from the elimination of domestic support for agriculture. When viewed in total, about half of the global gains available from merchandise trade liberalization following completion of the Uruguay Round are associated with food and agriculture – a sector which accounts for just 10% of global GDP. This highlights the critical importance of making progress on the agriculture negotiations in the Doha Development Round.