Using the CGE model MIRAGE, one can study the impact of full liberalization of the borders of rich and emerging countries to estimate the potential benefits in terms of improved trade performance of countries poor, but also costs that implies in terms of contraction in the sector donor countries. MIRAGE model simulations also allow to study the various phenomena of erosion of preferences if preferences were extended to other developing countries. Indeed, the classifications of the poorest countries meet your criteria that vary across institutions: thus the United Nations defines the 50 poorest countries "Least-Developed-Countries", while the World Bank uses a classification called Low-Income Countries, ". It seems important to note the different effects of preferences when the list of eligible countries is changing. On the other hand, produce scenarios that simulate partial or total liberalization (97% or 100% of the products liberalized) can highlight the need to fight against the tariff exceptions that override any commercial benefit for countries whose specializations are extremely strong.
The main objective of the paper is to highlight the role or responsibility of developed countries but also emerging countries in development assistance, through exports, while highlighting how to optimize the gains and reduce costs, whether for countries recipient or donor countries, subject to the need for political feasibility.
The findings emphasize several points:
- Firstly, it is clear that the tariff peaks that characterize the trade policies of developed countries correspond exactly to the specialties of highly concentrated poor countries. Demonstrates, the total inefficiency of scenarios to 97% of the products liberalized. And full coverage can only bring benefits.
- Expand the preferred program to other poor countries does not systematically preference erosion, including Asian countries poor seem not to prejudice (Bangladesh does not suffer from the stand of Pakistan and Viet Nam, for example) . Cons by some African countries suffer from eligibility for preferences of certain Latin American countries, due to severe erosion of preferences from the European Union, which has already liberalized its borders to LDCs.
- Countries Emerging broad role to play in improving business performance.
- Finally, it is important to conclude on the idea that this type of preferential program is compatible with a certain political feasibility in the sense that sectoral contractions in rich countries are quite small . Evidenced by the key sectors of sugar, meat, rice or textiles and clothing. This is explained quite simply by the large differences of scale in production value (the Bengal Textile certainly represents 12% of the volume of U.S. production of textiles, but only 2.5% of its value).
Introduction It is widely accepted that trade integration is a vector of economic growth for the so-called "developing". It is certain that in the absence of a domestic market large enough to inspire mass consumption, sources of income, source of economic growth comes mainly from exports. However, we find that the poorest countries in the world, namely the Least Developed Countries as defined by the United Nations (LDCs) are poorly integrated into the global trading system. Evidenced by the share of exports in global flows, which fell by nearly two-thirds since 1970. This deterioration of business performance can not be explained by a proportional decline in GDP (which has fallen by one third over the same period), two elements can be put forward to explain this phenomenon:
- insufficient supply constraints, ie ineffective policies, lack of infrastructure and transparent institutions, an underserved population cared and / or poorly educated, unskilled in fact, the very limited production capacity.
- access to developed markets and emerging limited, namely a rate of protection supported much too strong for products from LDCs are competitive in developed markets. We focus on this second point, which , admittedly, involves the responsibility of developed countries and would be resolvable in the medium term on condition of political will.
Why would one say that the LDCs suffer from limited access to developed markets, even though they enjoy, especially since the agreements of the millennium (2000) preferential agreements increasingly numerous. The 'Everything But Arms (EBA) of Europe or the "African Growth and Opportunity Act (AGOA) of USA are examples. This is to remove all tariffs and quotas imposed ("Duty-Free Quota-Free" or DFQF) on products from LDCs to promote exports. And other developed countries such as Japan, Canada, Australia and New Zealand have introduced "Duty-free quota-free market access" or DFQF. There are also increasing efforts in emerging countries such as India, China, Brazil or Turkey, which have gradually increased the total liberalization on a growing share of products.
However, the latter made the transition to the relative failure of these preferential agreements, which to date have failed to LDCs to derive profit. Why? Simply because all such agreements contain exceptions to DFQF, that is to say that a list of products is excluded from liberalization. Indeed, excluding the European initiative that grants DFQF total (except arms), all These agreements contain at least 3% of products exempt from lower rates to maintain a degree of protection. However, it is well known that a primary characteristic of very poor countries is the very high proportion of their production equipment that allows them to export some products. Exceptions and tariff agreements correspond exactly to the specializations of LDC, making any move unnecessary and inefficient. In addition, although exceptions are squeezed, such as Europe has done, it is nevertheless binding rules (rules of origin, sanitary standards and pesticides) are imposed on those countries that lack the financial and human resources to meet them, making it impossible for exports to developed markets.
Although awareness of a shared responsibility of developed and emerging countries is undeniable, the fact remains that efforts are still needed to help the extremely poor countries to generate revenue from their exports. To do this, it is important to assess the "good terms" to make effective these preferential agreements and measure their impact on both the performance of the LDCs but also on production countries giving preference to highlight a political feasibility.
Four questions can be asked:
1 - What are the earnings of LDCs if the preferences granted by OECD concern 100% (97%) of tariff lines?
2 - What is the impact of extending preferences to other poor and vulnerable economies on the earnings of LDCs? (Erosion of preferences)
3 - What role can emerging countries such as India, China, Brazil or Turkey?
4 - What are the consequences of DFQF on donor preferences?
The methodology adopted is a
MIRAGE computable general equilibrium model adapted to the analysis of trade policies (Decreux Y and H Valin, 2007), which can be studied in great depth, rate shock on all components of the economy in a multinational, dynamic and multi sectoral.
Based on comprehensive data of GTAP (Narayanan and Walmsley, 2008) and the base version7 MAcMapHS6 version 2 for data tariff (Boumellassa, Laborde, and Mitaritonna, 2009), updates are necessary in order for the model to precisely account all the efforts in terms of preferential agreements today. MAcMap and tariff data were updated by the integration of DFQF from 2004 until 2008.
While the data we have are more detailed about 230 countries and sectors concerned HS6 disaggregated level, the MIRAGE model can simulate scenarios of liberalization on a slightly more aggregated. And choices necessary to demonstrate the aggregation of data must be made: 36 countries or regions, 28 sectors. Some LDCs are necessarily encompassed in a wider region, for lack of reliable data. The choice of sectors is still done in order to target key specializations poor countries (textiles and clothing, sugar, milk, vegetable oil ...)
Ten scenarios (or ten shocks to the baseline) are simulated in order assess the various impacts and to identify the modalities for liberalization most suitable.
A. Liberalization to 97% of tariff lines for LDCs from OECD countries
B. Liberalization 97% for LDCs and the poorest countries as defined by the World Bank, only those for which the GDP \u0026lt;50milliards (Sri Lanka, Paraguay, Bolivia ...)
C. Liberalization 97% for LDCs granted by OECD countries as well as emerging countries (Brazil, China, India) D. Liberalization
to 97% for all countries defined by B by all countries defined in C
E. Liberalization 100% of tariff lines provided to LDCs OECD Countries
F. Liberalization 100% for LDCs and the poorest countries as defined by the World Bank, only those for which the GDP \u0026lt;50milliards (Sri Lanka Paraguay, Bolivia ...)
G. Liberalization 100% for LDCs granted by OECD countries as well as emerging countries (Brazil, China, India)
H. 100% liberalization for all countries defined in B by all countries defined in C
Finally, two scenarios More:
I. liberalization to 100% for LDCs and the Low Income Countries (LIC) whose population is less than 75millions
J. We extend the program to LIC larger, thus including Viet Nam and Pakistan
(1) The impact of full liberalization for LDCs (100% DFQF)
Analysis of scenarios A, B, C and D demonstrates the ineffectiveness of partial liberalization, excluding 3% of revenue. It thus shows that the price spikes of the country OECD correspond to specializations of LDC (highly convex shape), this whatever the extent of program eligibility and donor countries. Given this inefficiency, we will focus on scenarios that simulate a full liberalization of products. The results are shown in the following table:
Table1: Impact of DFQF 100% granted to LDCs by the OECD countries,% change
What are the LDCs which record the benefits of such a preferential policy?
Malawi, Cambodia, Laos, Ethiopia, Bangladesh, Mozambique and Senegal. Where are the potential benefits, ie what are the key sectors previously excluded from preferential schemes? Mainly, unmanufactured tobacco in Malawi (which represents almost 70% of Malawi's exports, hitherto taxed at 350% by the U.S.), textiles and clothing for Cambodia and Bangladesh
What countries that suffer an erosion of their preferences? Except for a slight degradation of the Malagasy case, LDCs seem all benefit from such a program
Other developing countries, they suffer erosion of their preference? Mauritius, South Africa or Central America who, instead of seeing their situation deteriorate under competition from LDCs, are experiencing an increase in their exports and their well-being. As for other developing countries, the losses are substantial (-0.05%)
It should be noted that rules of origin have an essential role. Indeed, earnings estimates for such a program do not include the presence of some very restrictive rules that inhibit the benefits potential. Profits are "underestimated" because a deletion of these rules could boost business performance improvements.
(2) The impact of extending the eligibility of the program to other vulnerable economies.
results su MIRAGE model in terms of changes in export volumes in the scenarios involving different ways of extending eligibility for preferences are reproduced in the following table:
Table 2: Impact of extending the eligibility of preferences to other poor countries , % change
First, when the DFQF 100% is granted to Low -Income-Countries, LDCs do not suffer significant damage (and sci SCJ). This observation is especially true for Asian LDCs: Bangladesh, Cambodia, Laos, which could suffer heavily from the opening preferences in Vietnam and Pakistan are in the same way, specialized in textile and clothing ( SCJ). These results show that the phenomenon preference erosion is minimal when the preferences are extended to poor countries. This issue is important because the classifications of poor countries meet the criteria set by different institutions and it seems important not to focus solely on the classification of the United Nations.
Given the scenario that involves J Pakistan and Vietnam, their earnings are substantial. When preferences are extended to certain Low-Middle-Income Countries-(F sc), earnings of LDCs are greatly reduced by cons. On the other hand, the new beneficiary countries namely Bolivia, Paraguay and Sri Lanka are the big winners of the preferred program. The African LDCs hardest hit, because of competitive agricultural products, from countries in Latin America.
(3) The role of emerging markets
The results show the important role that emerging markets play in improving conditions of access for LDCs. This is especially true for African LDCs, namely Ethiopia, Senegal and Mozambique. The example of Senegal is very compelling. Indeed, while the benefits accruing when preferences came from the OECD countries were relatively small, the fact that India opened its borders to Senegal allows to significantly increase its exports to the Indian market. All LDCs have seen their profits improved by the introduction of emerging countries in the program. The following table illustrates this clearly:
Table 3: the role of emerging countries in improving business performance,% change 
(4) the impact of DFQF on OECD countries
Fairly obviously, the model results highlight Mirage ds granting preferences to the poorest countries in the world does not contractions Sectoral importantes.Au gaze following table, we find that these scenarios are compatible with a certain political feasibility in the sense that no contraction sectoral unemployment rates are unlikely to move.
Table 4: Impact on production levels of donor countries' national preferences, % change
There is such as textiles and clothing (textile and wearing apparel) U.S. knows that a decrease of 0.13%. In other words, if Bangladesh has an explosion of its exports of textiles and clothing, not to the detriment of U.S. domestic production. This can be explained fairly simply by a considerable difference of scales of production. Indeed, if the textile Bengal accounts for 12% of the volume of U.S. textile production, it represents value as 2.5%. Whatever the industry and the countries concerned and it is quite clear that the poorest countries lack the capacity to export massively to reach threaten domestic production developed countries. Indeed, because of supply constraints in developing countries, it is unfortunate to continue to protect our borders goods are produced on a small scale by countries that are already struggling to fulfill the norms and standarts that are imposed by developed countries.
Reference:
The Costs and Benefits of Duty-Free Quota-Free Market Access for Poor Countries: Who and What Matters. Bouet, Laborde-Debucquet, and Elliott Dienesch
http://ideas.repec.org/p/tac/wpaper/11.html
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