Australian Centre for International Agricultural Research (under PN9449) and the World Bank for financial assistance. Will Trade Liberalization Harm the Environment? The Case of Indonesia to 2020

Any opinions expressed here are those of the author(s) and not those of the IIIS. All works posted here are owned and copyrighted by the author(s). Papers may only be downloaded for personal use only. Poverty Impacts of an Economic Partnership Agreement between Uganda and the EU ∗ Ole Boysen and Alan Matthews † Revised Version: Friday 8 th August, 2008 This paper analyzes the poverty impacts of an economic partnership agreement (EPA) between Uganda and the EU. As Ugandan exports are also eligible for duty-free access to the EU under the Everything But Arms scheme the main impact of the EPA will be to require liberalization of EU exporters ’ access to the Ugandan market. There are fears this could threaten the incomes of poor people through lower prices for agricultural commodities, the crowding out of vulnerable industries, and loss of government revenue. We examine these fears by means of a qualitative analysis using data from a 1999 social accounting matrix of the Ugandan economy and the 2002/2003 household budget survey. We then quantify the effects on the economy and poverty employing a combined CGE-microsimulation model. The qualitative analysis shows that the scope for trade liberalization with the EU is very limited and that particularly the poor have only weak links to formal markets. The quantitative analysis suggests that the macroeconomic impacts of an EPA are minor but positive, implying that the economic adjustment costs might turn out to be low. Whether the very small poverty effects are positive or not depends on the selection of sensitive products in the EPA, although under all scenarios the very poorest appear to lose. 1

Graeme Wells and an anonymous reviewer for constructive comments on earlier drafts. Capital-Skill Complementarity and Wage Outcomes following Technical Change in a Global Model We estimate the extent of factor bias in technical changes consistent with observed changes in skill premia. To control for the effects of expanded trade on wages we use a structural model with multiple regions and comparative static analysis. Two alternative biased technical change stories emerge: skill enhancement when capital and skill are substitutes and capital enhancement when capital and skill are complements. These imply different underlying technical change processes and macroeconomic behaviour in response to technical change shocks. Capital enhancement offers the more credible process, however, and is consistent with observed rises in the “equipment content ” of the capital stock. 1.