25 March 2010

Quick Wins in Development Policy

Development is hard. There is plenty that the governments of rich countries can do to help, but sadly much of it is politically too difficult to contemplate (such as allowing more immigration from the poorest countries).

So how about a policy that can help but costs rich countries nothing?

This new working paper from CGD finds that providing Duty-Free Quota-Free access to OECD markets for poor countries provides significant benefits with very small to zero impact upon the rich countries.

A development policy no-brainer?

There are still significant benefits for LDCs from removing the remaining barriers they face in OECD countries, but only if all products are covered.  Since both rich-country tariff peaks and LDC exports are relatively concentrated, excluding as few as three percent of tariff lines, as proposed by the United States at the WTO ministerial meeting in Hong Kong in 2005, reduces the benefits to basically zero.

The LDCs account for a trivial share of global exports, the reason for the initiative, and preference-giving countries thus have little to fear from extending full market access to them. The quantitative results show that the expected impact on welfare, exports, and domestic production are very small to zero, including for the quota-controlled agricultural products excluded by Canada, Japan, and the United States, as well as textiles and apparel in the latter case.

providing market access is a step that this analysis suggests would be both beneficial for LDCs, and low-cost for preference-giving countries. UN Secretary General Ban Ki Moon just designated 2010 as the “year of development” and called for accelerated efforts to achieve the Millennium Development Goals. The goal of providing duty-free, quota-free market access for LDCs should be easily achievable by rich countries, as well as by Brazil, China, India, and other developing countries “in a position to do so.”


antibandit said...

There's an opportunity cost. We might be able to buy something we want with improved access at some point... maybe even some improved governance, or some such niceity

Lee said...

The endowment effect means (irrationally) we worry much more about losing what we currently have than losing some potential gains. So this makes it an easier sell politically.

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