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Market Access : the Heart of the DDA Kenneth HEYDON OECD Trade Directorate 0 Border protection down...merchandise trade up AVERAGE TARIFF LEVEL Average tariff level (industrial goods, left axis) and WORLD MERCHANDISE TRADE VOLUME, trade volume index (1950 = 100,1950=100 right axis) 50% 1,700 1,600 45% 1,500 1,400 40% 1,200 1,100 30% 1,000 900 25% 800 700 20% 600 15% 500 400 10% 300 200 5% 100 1997 1995 1993 1987 Post-Tokyo Round 1991 1989 1987 1985 1983 1981 1979 1972 Post-Kennedy Round 1977 1975 1973 1971 1969 1962 Pre-Kennedy Round 1967 1965 1963 1961 1959 1957 1955 1953 1947 GATT's establishement 1951 1949 0 1947 0% 1945 Average tariff level 35% Trade volume indices 1,300 1994 Post-Uruguay Round 1 OECD Study Welfare gains in developed and developing countries from tariff reductions and trade facilitation 180.00 83.51 160.00 140.00 48.1% US$ billion 120.00 100.00 55.22 45.1% Developed 90.05 Developing 80.00 60.00 40.00 67.22 54.9% 51.9% 20.00 0.00 Liberalization only by developed countries Full liberalization by all countries 2 OECD Study Initial differences between bound and applied tariffs (by sector) Average difference between bound and applied rates, 1998 (% points) 45 40 35 30 25 20 15 10 ry hi ne rts ac m le s hi c M ot or ve he m C O th er an d ro d al P ic an m O th er pa uc ur in uf ac t P d W oo ts g ct s ro du lo th i C til es Te x ce ss ro P an d gr A ed lR at ur a N ng re ic u ur es o gr ic A ar y rim P ltu ce s ul tu re 5 0 3 OECD study Sectoral origins of welfare gains going to developing countries from full tariff liberalisation Other Machinery, 2.76 Primary Agriculture, 7.19 Motor Vehicles and Parts, 27.31 Processed Agriculture, 19.80 Wood Products, 0.46 Chemical Products, 3.91 Other Manufacturing, 13.81 Natural Resources, 2.13 Textiles & Clothing, 22.62 4 Which farms benefit from support? share of 25% largest farms in … 100 Percent 80 60 40 Total Support 20 S U EU K or ea C an ad a Ja pa n Sw itz er la nd 0 5 Services make up a major and growing portion of the world economy In 2000, the estimated total value of world services was some US$ 1.4 trillion. In 2000, services made a major contribution to the GDP of both developed and developing countries: – services to GDP ratio in DCs ranged from 39% in Nigeria to 89% in Hong Kong, China – average services to GDP ratio in the 49 LDCs was 10% with peaks of 50% Services, value added (2000) % GDP 70 69.51 66.34 62.03 60 52.71 43.7 50 40 30 20 10 0 OECD countries Upper Low er Low middle middle income income income countries countries countries World Source: World Development Indicators 6 Gains from trade liberalisation Studies World gains from services liberalisation US$ 90 billion short run impact of full liberalisation of services trade and FDI in a multiregion, multisector general equilibrium model of trade and investment under conditions of imperfect competition, increasing returns to scale, and product differentiation (assumption of perf. int.l capital mobility and fix. world capital stock) US$ 703 billion long run impact of full liberalisation of services trade and FDI in a multiregion, multisector general equilibrium model of trade and investment under conditions of imperfect competition, increasing returns to scale, and product differentiation (assumption of less than perfect capital mobility and increasing world capital stock) Brown and Stern (2001) Note: Estimates vary on the basis of the size of initial barriers, theoretical frameworks, modeling techniques and datasets used 7 Scenario results on income effects Taking into account country, sector and trader diversity the larger gains from trade facilitation should accrue to developing countries % of GDP 1.0% 0.5% 0.0% OECD Former Soviet Union Middle East & North Africa Latin America & Caribbean Non-OECD Asia-Pacific Subsaharan Africa Rest of world 8 Backing up Trade Policy Reform Regulatory Reform Institutions for Conflict Resolution – property rights – anti trust – social insurance Sound Macro-economic Management Labour Market Flexibility Technical Assistance & Capacity Building 9