These outcomes were from a once every four year effort by the Copenhagen Consensus Center of Denmark to apply economic and cost-benefit analyses to major policy challenges. The ten challenges were air pollution, conflicts, diseases, education, global warming, malnutrition and hunger, sanitation and water, subsidies and trade barriers, terrorism, women and development. Papers on each challenge area were written by recognized experts. The subsidies and trade barriers analysis was written by Kym Anderson, Professor of Economics at the University of Adelaide in Australia, and L. Alan Winters, Professor of Economics at the University of Sussex in the United Kingdom.
The ten papers resulted in proposed solutions that the eight economists considered in four days of meetings. The economists were Jagdish Bhagwati, Columbia University; François Bourguignon, Paris School of Economics and former World Bank chief economist; Nancy Stokey, University of Chicago, and Nobel Laureates Finn E. Kydland, University of California, Santa Barbara; Robert Mundell, Columbia University in New York; Douglass C. North, Washington University in St. Louis; Thomas Schelling, University of Maryland; and Vernon L Smith, Chapman University.
The Doha trade talks do not fit the standard mold of projects where lives are directly and immediately at risk, but the economists concluded that sizeable reductions in tariffs and subsidies would yield exceptionally large benefits with only modest adjustment costs and have impacts across most of the challenge areas. These major benefits could be achieved without spending any of the $18.75 billion per year ($75 billion over four years). Developing countries have relatively large tariffs on imports of agricultural and manufacturing goods, and lowering the tariffs would lower costs for consumers and improve the competitive position of exporters.
The paper by Anderson and Winters, which draws on their previous work at the World Bank, explains that the link between trade and economic growth is largely due to the efficient use of knowledge in the market and the disciplines imposed on firms and governments. Countries that have liberalized trade have had on average 1.5 percent greater annual economic growth. Countries with closed economies have not had sustained economic growth. Korea, China and India are cited as developing countries that have liberalized trade in recent years and achieved increased economic growth well beyond the average of an extra 1.5 percent per year.
In 2005 the average world trade-weighted applied import tariff was 15.2 percent for agriculture and processed food, 9.3 percent for textiles and clothing and 3.1 percent for other manufacturing. The U.S. was at 2.4 percent, 9.6 percent and 0.9 percent, respectively, while high income countries as a group were at 15.9 percent, 7.3 percent and 1.2 percent. Middle income developing countries had applied tariffs for the three categories of 12.1 percent, 13.6 percent and 6.0 percent, respectively, while low income developing countries were at 22.0 percent, 17.9 percent and 14.1 percent. Agricultural tariffs are high across all countries, and non-agricultural tariffs are highest in lower income countries. Developing countries impose high costs on themselves and other developing countries. Anderson and Winters estimate that, “developing countries’ losses due to their own policies are more than twice those of the higher income countries, in percentage terms, which is consistent with differences in tariffs.”
The Anderson and Winters analysis points out the importance of making real reforms for developing countries in the Doha talks. A pessimistic scenario with agricultural subsidies phased out, but with only modest reductions in tariffs and no reductions in tariffs for sensitive and special agricultural products for developing countries resulted in economic gains of only $18 billion per year for the world and none for developing countries. A “central” scenario with no special treatment for agricultural products and a 50 percent reduction in non-agricultural tariffs would result in a global gain of $96 billion per year with $30 billion of that achieved by developing countries. If developing countries had the same percentage reductions in tariffs as developed countries, the global gains would be $120 billion per year with developing country gains increasing to $40 billion per year.
It is no coincidence that the numbers one, three, five and six solutions are part of the malnutrition challenge and related to the lack of economic growth in developing countries, which could be partly solved by trade expansion through the Doha talks. The number one solution was vitamin A and zinc supplements for children; number three was iron and salt iodization fortification; number five was biofortification by enhancing nutrient contents of staple crops and number six was deworming and other nutrition programs at schools. The four solutions had total yearly costs of only $433 million. The development of traditional crop breeding programs and the use of biotechnology can help to meet the nutrient requirements of billions of people who now lack essential vitamins, minerals, protein and calories.
Nutrition programs that improve the lives of people and more open trade policies that improve incomes were judged good uses of scarce resources.