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The impact of trade liberalisation
and CAP reform
Adrian Cooper
Oxford Economic Forecasting
October 2005
Tel: (44) 1865 268902
Email: [email protected]
Trade liberalisation and CAP reform
1
Oxford Economic Forecasting
Five key findings of the research
1. The potential benefits are significant - around
£1,500 a year for household of four.
2. EU could benefit most by reducing its trade barriers
bilaterally. This could help it catch up with the US.
3. Core continental economies could gain more than
the UK from CAP reform.
4. There are larger gains for developing countries.
5. Poorest tenth in UK gain proportionately much
more than top tenth.
Trade liberalisation and CAP reform
2
Oxford Economic Forecasting
Europe’s under-performance
Eurozone productivity falling behind US
%
Productivity (GDP/employee) - Eurozone as % of US
80
EU unemployment higher
%
12
80
12
EU15
10
75
10
75
70
70
8
8
6
6
4
65
4
US
65
2
60
1991
1993
1995
1997
1999
2001
2003
0
1980
60
2005
0
1984
1988
1992
1996
2000
2004
Source: European Commision, Ameco database
Source: OECD
Trade liberalisation and CAP reform
2
3
Oxford Economic Forecasting
EU trade barriers are higher than US
Applied tariff rate %
5.0
Applied tariff rate %
5.0
4.5
4.5
4.0
4.0
3.5
3.5
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
Switzerland
Taiwan
Philippines
EU15
New
Zealand
Botswana
US
Canada
Singapore
Hong Kong
Source: GTAP/OEF
Trade liberalisation and CAP reform
4
Oxford Economic Forecasting
‘Core’ continental economies have as
much to gain as Britain
% increase in GDP from global trade liberalisation and CAP reform
4
4
3
3
2
2
1
1
0
0
EU15
Sweden
Denmark
Spain
Portugal
Netherlands
5
Ireland
Trade liberalisation and CAP reform
Greece
Finland
Belgium
Austria
Italy
France
Germany
UK
Source: GTAP/OEF
Oxford Economic Forecasting
Bilateral trade reform brings
biggest gains for the EU and UK
% increase in GDP from trade liberalisation and CAP reform
2.5
2.5
EU
2.0
EU
UK
2.0
EU
UK
1.5
1.5
UK
UK
UK
1.0
0.5
EU
1.0
0.5
EU
0.0
0.0
Global
EU Bilateral
EU
UK Bilateral
UK
Unilateral
Unilateral
Source: GTAP/OEF
Trade liberalisation and CAP reform
6
Oxford Economic Forecasting
Liberalising first could help
EU catch up with US
% increase in GDP from EU bilateral liberalisation and CAP reform
2.5
2.5
2.0
2.0
Eurozone
1.5
1.5
UK
1.0
1.0
0.5
US
0.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
0.5
0.0
Source: GTAP/OEF
Trade liberalisation and CAP reform
7
Oxford Economic Forecasting
Gains from CAP reform
% increase in GDP from CAP reform
1.6
1.6
1.4
1.4
1.2
1.2
1.0
1.0
0.8
0.8
0.6
0.6
0.4
0.4
0.2
0.2
0.0
0.0
EU15
Sweden
Denmark
Spain
Portugal
8
Netherlands
Trade liberalisation and CAP reform
Ireland
Greece
Finland
Belgium
Austria
Italy
France
Germany
UK
Source: GTAP/OEF
Oxford Economic Forecasting
Poor countries are hit hardest…
Applied tariff rate %
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Poor countries income under £5000
per capita
Source: GTAP/OEF
Trade liberalisation and CAP reform
Medium income £5000 - 15000
9
Applied tariff rate %
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
High income over £15000
Oxford Economic Forecasting
… and so benefit more
% increase in GDP from trade liberalisation and CAP reform
6.0
6.0
5.0
5.0
4.0
4.0
3.0
3.0
2.0
2.0
1.0
1.0
0.0
0.0
Africa ex
S. Africa
Africa
10
Asia-Pacific
Trade liberalisation and CAP reform
Latin
America
NAFTA
Eastern
Europe
EU15
UK
Global
Source: GTAP/OEF
Oxford Economic Forecasting
In the UK the poor benefit most
% increase in income
5.0
% increase in income
5.0
CAP reform
Trade liberalisation
4.0
4.0
3.0
3.0
2.0
2.0
1.0
1.0
0.0
0.0
Lowest
Source: OEF
Trade liberalisation and CAP reform
Highest
Income decile
11
Average
Oxford Economic Forecasting
Five key findings of the research
1. The potential benefits are significant - around
£1,500 a year for household of four.
2. EU could benefit most by reducing its trade barriers
bilaterally. This could help it catch up with the US.
3. Core continental economies could gain more than
the UK from CAP reform.
4. There are larger gains for developing countries.
5. Poorest tenth in UK gain proportionately much
more than top tenth.
Trade liberalisation and CAP reform
12
Oxford Economic Forecasting