News and Analysis • Volume 10 • Number 6 • September 2006
Assessing the Impacts of Liberalisation
Measuring the impacts of trade liberalisation on sustainable development is challenging, as the different results obtained by various recent modelling exercises have amply demonstrated.
At a meeting convened by ICTSD during the WTO’s September Public Symposium, experts agreed that it was less the model used than the underlying assumptions and data that influenced the result. To make such projections useful to policy-makers, modellers should clearly lay out the premises on which they are built. It is also important to assess whether the assumptions used are valid and the way they may have affected the projected outcome. Furthermore, politicians, trade negotiators and the media sometimes mislead the public about modelling results, for instance through highlighting certain figures – such as gains expected from total agricultural liberalisation – while ignoring the study’s caveats about uncertainties or other figures that reveal uneven benefits between or within countries.
The experts presenting their modelling results stressed the heterogeneity of developing countries and the differentiated potential impacts of an eventual deal in agriculture. Such impacts would depend not only on the details of the agreement, but also on supply side constraints and on natural factors such as smallness and agro-ecological conditions.
For instance, an assessment assuming a middle-of the-ground ‘friendly agreement’ saw diminished gains for strong developing (and developed) country exporters compared to more ambitious liberalisation, but also showed that preference-dependent and net food-importing developing countries would lose less. Under this scenario, Mauritius, the Philippines and Thailand would make sizeable real income gains compared to those of Argentina, Brazil, the EU or the US, although the latter four would also benefit.
Another study focused on how developing countries would be affected by changes in three key elements in the agriculture negotiations. It found that: (i) ‘sensitive products’ would have a dramatic impact on the level of ambition attached to the Doha Round; (ii) even one percent of agricultural tariff lines designed as sensitive would substantially reduce benefits, and (iii) least-developed countries’ (LDCs) gains would be multiplied by seven if their duty-and quota-free access to OECD markets were increased from the currently envisaged 97 percent to 100 percent. Fifty percent of the additional income gain – US$7.25 billion – would be captured by LDCs and the other half would go developing Asia. Malawi’s export volume could grow by 15 percent and that of Bangladesh by 13.5 percent.
There was also a general recognition that some key elements necessary for measuring sustainable development impacts were difficult to factor into the computable general equilibrium (CGE) model that is widely used to predict the outcomes of different liberalisation scenarios. For instance, assessing impacts on labour and employment cannot be effectively modelled at the global level (partial GE models could be more appropriate here). However, it would be most useful to focus such simulations at a single country level provided the availability of sufficient and reliable data.
Sustainability impact assessments (SIAs) are another way of measuring the likely effects of trade liberalisation. Undertaken on the global scale, such assessments are a particularly delicate exercise due to the multiple factors – economic, social and environmental – involved, and the difficulty in obtaining the right data. However, global SIAs can flag issues that must be addressed, while taking the process to a single country level – using more precise and detailed data – may yield valuable practical guidance to national decision-makers.
It was also suggested that a truly global assessment of the sustainable development impacts of trade liberalisation would benefit from the involvement of a multi-stakeholder steering committee comprising a wide range of international institutions, including the WTO and UNCTAD, as well as the WHO, UNEP, the ILO and others.