Reducing poverty: a blueprint for successfully concluding the Doha Trade Round.

• Author: Cline, William R.

Half of the world's population is in poverty today and live on $2 per day or less (at purchasing-parity taking account of lower local cost of living). One-fourth of the world's population has income of $1 per day or less. The proportion in poverty declined gradually in the last decade, but the absolute number remained approximately constant growing populations.

The rich nations currently provide about $50 billion per year in official development assistance to poor countries. However, there is a second way the industrial countries could provide even greater benefits to the developing countries: trade liberalization. Removal of industrial country barriers would provide the opportunity to developing countries to boost economic growth through increased exports. Moreover, opening markets would give gains to the industrial countries themselves in the form of lower prices for consumers. These opportunities mean it is critical that the current Doha Development Round of trade negotiations in the WTO achieve deep liberalization that justifies the name. The Doha Round almost failed last September at Cancun, and it needs a new boost of political commitment from the leaders of both the rich G8 and the developing G-20 countries if it is to succeed.

The stakes are large. In a study just released, I have estimated that global free trade would confer long-term income gains of about $200 billion annually on developing countries. At least half of these gains would arise from removal of industrial country protection against developing country products, especially in agricultural goods and textiles and apparel. A truly forthcoming trade policy by rich countries could thus provide long-term gains to developing countries of about $100 billion annually, or about twice as much as present aid.

The most direct impact of new trade opportunities on world poverty could come through imports from "at risk" low-income countries, including the Heavily Indebted Poor Countries (HIPCs), Least Developed Countries (LDCs), and sub-Saharan Africa (SSA). One-fourth of the world's poor are located in these countries. Based on the share of the poor in national income, the weighted average of industrial country imports from these counties has a "poverty intensity" of 45 percent, compared to only 7 percent for imports from developing countries on average. So one efficient way to use trade policy to reduce global poverty would be to grant immediate free market access for imports from these at-risk countries. Because the base of imports from these countries is small (about 6...