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Making Open Markets Work for Development

Organization for Economic Cooperation and Development | October 1, 2005

Organisation for Economic Co-operation and Development (OECD)

Will developing countries really gain substantially from further multilateral trade liberalisation? This is a vital issue for the Doha Development Agenda (DDA) talks at the World Trade Organization (WTO) and a requirement for their successful conclusion.

It is clear that many developing countries have benefited from multilateral trade negotiations and the resultant market-opening agreements in the decades since the Second World War. Further market opening should help more of them to better integrate into the world economy.

This may seem a straightforward proposition, but realising this objective is an extremely complex and time-consuming process. Before anyone can reap the benefits, countries have to agree on what aspects of trade to liberalise, when, and in what order. Each country has its own economic situation and priorities to consider, so it takes tremendous effort to develop the consensus required for successful negotiations.

Studies carried out at the OECD suggest the likely gains are well worth the effort for developing countries. One such study considered a variety of tariff liberalisation scenarios and found overall potential welfare gains for developing countries of up to USD 68 billion (or the equivalent of up to 2% per capita, depending on the region).

But these gains would be shared unevenly between developing countries, and the changes could cause particular problems for certain countries or sectors. Three potentially thorny issues are the likely effect of reductions in developing countries’ trade preferences; the impact on government revenue of tariff changes and the impact of liberalising services trade. All these issues need to be addressed if the Doha Development Agenda talks are to fulfil expectations.

This Policy Brief offers an overview of the OECD’s work on the likely impact of changes in all three areas, identifying positive and negative impacts and suggesting ways to ensure positive outcomes.

For permission to use or distribute this paper, please contact the OECD.

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Read More: Development, Economy, Governance, Trade

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