Doha Scenarios, Trade Reforms, and Poverty in the Philippines: A CGE Analysis

PEP-MPIA Working Paper No. 2005-03

28 Pages Posted: 13 Jul 2005 Last revised: 11 Jul 2018

See all articles by Caesar B. Cororaton

Caesar B. Cororaton

International Food Policy Research Institute (IFPRI)

John Cockburn

Partnership for Economic Policy (PEP); Université Laval; Partnership for Economic Policy (PEP)

Erwin Corong

De La Salle University

Date Written: June 1, 2005

Abstract

Since the early 1980s, the Philippines have undertaken substantial trade reform. The current Doha round of WTO negotiations is now likely to bring further reform and shocks to world import and export prices and world export demand. The impact of all these developments on the poor is not very clear and is the subject of very intense debate. A detailed economywide CGE model is used to run a series of policy experiments. Poverty is found to increase slightly with the implementation of the Doha scenario. These effects are focused primarily among rural households in the wake of falling world prices and demand for Philippines agricultural exports. The impacts of full liberalization - involving free world trade and complete domestic liberalization - are found to depend strongly on the mechanism the government adopts to offset forgone tariff revenue. If an indirect tax is used, the incidence of poverty falls marginally, but the depth (poverty gap) and severity (squared poverty gap) increase substantially. If, instead, an income tax is used, all measures of poverty increase.

In both cases, full liberalization favors urban households, as exports, which are primarily non-agricultural, expand. In separate simulations, we discover that free world trade is poverty-reducing and favors rural households, whereas domestic liberalization is poverty-increasing and favors urban households. Under free world trade, rural households benefit from increasing world agricultural export prices and demand. The anti-rural bias of domestic liberalization stems from the fact that import prices fall more for agricultural goods than for industrial goods, as initial import-weighted average tariffs rates are higher for the former. In conclusion, the current Doha agreement appears likely to slightly increase poverty, especially in rural areas and among the unemployed, self-employed and rural loweducated.

The Philippines is found to have an interest in pushing for more ambitious world trade liberalization, as free world trade holds out promise for reducing poverty.

Keywords: Computable general equilibrium, microsimulation

JEL Classification: D33, D58, E27, F13, F14, I32, O15, O53

Suggested Citation

Cororaton, Caesar B. and Cockburn, John and Corong, Erwin, Doha Scenarios, Trade Reforms, and Poverty in the Philippines: A CGE Analysis (June 1, 2005). PEP-MPIA Working Paper No. 2005-03. Available at SSRN: https://ssrn.com/abstract=754845 or http://dx.doi.org/10.2139/ssrn.754845

Caesar B. Cororaton (Contact Author)

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

John Cockburn

Partnership for Economic Policy (PEP) ( email )

P.O. Box 30772-00100
ICIPE - Duduville Campus, Kasarani
Nairobi
Kenya

Université Laval ( email )

Dept. of Economics
Québec, Quebec G1V 0A6
Canada

Partnership for Economic Policy (PEP) ( email )

Duduville Campus, Kasarani
P.O. Box 30772-00100
Nairobi
Kenya

Erwin Corong

De La Salle University ( email )

Manila, 1004
Philippines

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
78
Abstract Views
1,367
rank
321,632
PlumX Metrics