The Poverty Impacts of the Doha Round and the Role of Tax Policy: A Case Study for Cameroon

1. Workshop on Economic Partnership Agreements (EPAs) For Southern Africa Maputo (Mozambique) 4 – 5 April 2005 The Poverty Impacts of the Doha Round and the Role of Tax Policy: A Case Study for Cameroon Christian Arnault Émini The University of Yaoundé II - Cameroon John Cockburn Université Laval – Quebec, Canada Bernard Decaluwé Université Laval – Quebec, Canada

2. ...A Case Study for Cameroon... SUMMARY Background on economy and poverty in Cameroon Current patterns of trade and protection in Cameroon Synopsis of the Doha impacts on Cameroon Digression on the issue of tax replacement Conclusions

3. Background on economy and poverty in Cameroon

4. Openness of the Cameroonian Economy Real GDP Trends Before, During, and Beyond the 1986-1994 Economic Crisis

5. Trend in poverty Trend in poverty indices between 1996 and 2001

6. Trend in poverty Difference between the value of a poverty index among rural households and the value of that index among urban households

7. Trend in poverty

8. Trend in poverty

9. The Cameroon Social Accounting Matrix for 2001

10. Households’ Income Composition

11. Patterns of Trade and Protection in Cameroon

12. Openness of the Cameroonian Economy Trends in exports and imports

13. Openness of the Cameroonian Economy Trends in Trade Balance

14. Openness of the Cameroonian Economy Top-Five Import and Export Goods in 2003 55% 77%

15. Openness of the Cameroonian Economy Cameroon’s Trade Orientation in 2003

16. Openness of the Cameroonian Economy Import penetration and export orientation (in percentage)

17. Openness of the Cameroonian Economy Import tariffs and shares in the base run – 2001 (in percentage)

18. Synopsis of the Doha impacts on Cameroon

19. Synopsis of the Doha impacts on Cameroon Changes in import-export prices and in tariffs

20. Synopsis of the Doha impacts on Cameroon Macro and sectoral impacts

21. Synopsis of the Doha impacts on Cameroon

22. Synopsis of the Doha impacts on Cameroon

23. Synopsis of the Doha impacts on Cameroon Macro and sectoral impacts Change in CPI: +0.34

24. Change in households’ Income

25. Change in households’ Income

26. Change in households’ Income

27. Poverty impacts

28. Poverty impacts

29. Poverty impacts Estimates of changes in the number of poor following the Doha scenario

30. Digression on the issue of Tax Replacement

31. Digression on the issue of Tax Replacement VAT versus neutral consumption tax as replacement tax • To capture the possible bias induced by the choice of the replacement tax, we compare the effects of combined ROW and Cameroon liberalization using alternatively two taxation systems as replacement tax: • A Value Added Tax • A proportional household consumption tax.

32. Digression on the issue of Tax Replacement Importance of the VAT among indirect taxes in Cameroon – year 2001

33. Digression on the issue of Tax Replacement The VAT applied in Cameroon is progressive Average VAT effective rate

34. Digression on the issue of Tax Replacement Comparative effects on price indices

35. Digression on the issue of Tax Replacement Comparative effects on volume indices

36. Digression on the issue of Tax Replacement Comparative effects on factor remuneration rates, household income and welfare

37. Digression on the issue of Tax Replacement Comparative effects on household income

38. Digression on the issue of Tax Replacement Comparative effects on poverty headcount

39. Digression on the issue of Tax Replacement Comparative effects on the number of poor

40. Conclusions

41. Conclusions • Doha development round might contribute to poverty alleviation in Cameroon • However, policymakers should be aware of: • The importance of choosing appropriate replacement taxes • The negative poverty impacts of the elimination of domestic tariffs • The evidence that some households will lose out and possibly fall into poverty, even if national poverty rates fall.

42. Conclusions • Free-trade in ROW strongly alleviates poverty, at least at the national level • Whereas Cameroon’s own liberalization worsens the poverty and inequality situations • In case of combined ROW and own liberalization, the adverse impacts of own liberalization proves to strongly outweigh the favorable outcomes of the ROW liberalization.

43. ...A Case Study for Cameroon... Thank you for your attention !