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40 J. World Trade 945 (2006)
Impact of Global Trade and Subsidy Policies on Developing Country Trade

handle is hein.kluwer/jwt0040 and id is 1039 raw text is: Journal of World Trade 40(5): 945-968, 2006. (0 2006 Kluwer Law International. Printed in The Netherlands. Impact of Global Trade and Subsidy Policies on Developing Country Trade Kym ANDERSON, Will MARTIN and Dominique VAN DER MENSBRUGGHE* The impacts of all merchandise trade distortions (including agricultural subsidies) globally are estimated using the latest versions of the GTAP database and the Linkage model of the global economy (projected to 2015). If all those trade-distorting measures were to be removed, the developing countries' share of global output as of 2015 would rise from 70 to 75 percent for primary agricultural goods, and from 62 to 65 percent for textiles and clothing. Developing countries' share of global exports would rise even more dramatically, especially in agriculture: from 47 to 62 percent in primary farm products and from 34 to 40 percent in processed farm products (an increase of two- thirds or around $200 billion per year in 2001 US dollars). Exports of non-agricultural goods would rise by $400 billion per year. This amounts to more than six times what was needed to service the foreign debt of all developing countries in 2003, and to eight times their receipts of official development assistance. Cotton exports alone would rise by more than $4 billion for developing countries as a whole, almost half of which would be enjoyed by Sub-Saharan Africa. To what extent are government trade and subsidy policies, particularly in high- income countries, affecting exports of and welfare in developing countries and thereby their capacity to manage foreign debt? Since the 1980s, many countries have been reforming their trade and subsidy regimes unilaterally, regionally and multilaterally (although least so for agriculture), and numerous high-income countries have provided preferential access to their markets for exporters of some products from selected developing countries. Nonetheless, substantial trade distortions remain. This article examines the pattern of remaining distortions and then provides estimates of the market and welfare effects they impose on different developing countries. It does so by making use of a recursive model of the global economy known as Linkage, which has formed the basis for the World Bank's standard decade-long projections of global economic prospects.1 We also make use of * Kym Anderson, e-mail: <kanderson@worldbank.org>, Will Martin, e-mail: <wmartinl@worldbank.org> and Dominique van der Mensbrugghe, e-mail: <dvandermensbrugg@worldbank.org>, are Lead Economists in the Development Economics Vice-Presidency of the World Bank in Washington, D.C. This article is a revision of a paper prepared at the request of the G24 (see <www.g24.org>) for its XXII Technical Group Meeting in Palais des Nations, Geneva, 16-17 March 2006. The views expressed are the authors' alone and not necessarily those of the G24, World Bank, its Executive Directors or the countries they represent, nor the UK's Department for International Development, which funded the World Bank research project from which this article is drawn. 1 The focus of this article is only on global merchandise trade reform itself. Several of the authors' other studies have concentrated on additional topics-e.g., possible Doha scenarios, impacts on agricultural markets and firm incomes, poverty impacts, and effects on Sub-Saharan Africa (Anderson, Martin and van der Mensbrugghe, 2006a,b,c,d,e).

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