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July 2004, Volume 11, Number 3

Copenhagen Consensus

The Copenhagen Consensus is a DK5 million effort led by Bjorn Lomborg (author of The Skeptical Environmentalist) to rank 10 challenges facing the world that could be met with an additional $50 billion from industrial countries. The challenges, from climate change to trade barriers, were assessed in a benefit-cost frame work, under the theory that challenges that could be ranked by or prioritized according to their ratio of benefits to costs. The highest benefit-cost ratios were generated for imposing a carbon tax to slow global warming and for liberalizing trade, especially in farm commodities.

The rich-country members of the OECD'S Development Assistance Committee provided $68.5 billion in ODA in 2003, which represented 0.25 percent of their $27 trillion GDP. The US provided the most ODA, $16 billion, followed by Japan, $9 billion, and France, Germany, and the UK, $6-$7 billion each.

The highest-ranking challenge was hunger and malnutrition. About 800 million of the 6.4 billion people worldwide are hungry or malnourished, a sixth of the residents of developing countries; about three-quarters live in rural areas. The challenge of reducing hunger begins in pregnancy, since low-birth weight babies (under 2.5 kilograms or 5.5lb) incur more health costs and result in lower-productivity adults- 12 million or a sixth of babies born each year in LDCs have low birth weights. Breast-feeding babies and ensuring that children get appropriate micronutrients are investments that yield healthier adults, but the major recommendation is to improve agricultural productivity so that the half of the world's work force that are farmers can produce more food.

Migration was one of the challenges examined, and the challenge paper emphasized that, in an ideal world, there would be few migration barriers and little migration. The challenge is to maximize the benefits of the migration that is occurring, using recruitment, remittances and returns to accelerate economic growth in migrant countries of origin and thus promote the convergence in per capita incomes that would reduce economically motivated migration.

In order to increase the flows of professionals and unskilled workers, the two types most likely to move from developing to developed countries, industrial countries could select those most likely to be economically successful, but compensate their countries of origin to promote convergence. Unskilled workers could be admitted via guest worker programs that include economic incentives for employers to reduce their dependence on migrants over time, and for guest workers to receive refunds of their social security contributions to induce a return to their countries of origin after a year or two abroad.

Protectionism, the absence of free trade, was another challenge. Freer trade could increase global GDP by $254 billion per year (in 1995 dollars), with $122 billion of the global gains coming from rich countries reducing agricultural subsidies and tariffs. Most of the gains from freer farm trade, $110 billion, would remain in rich countries but poorer countries could gain $65 billion from liberalizing their own trade regimes, regardless of what rich countries did. However, some African countries may be worse off with freer agricultural trade, since they are net importers, and world prices may rise if subsidies are reduced.

Economists have long pondered why there is protectionism in the face of such potential gains from freer trade. Most explanations assert that the benefits of trade liberalization are spread widely but thinly, while the benefits of protectionism are concentrated on small and well-organized groups, and that an empowered World Trade Organization could do more to promote free trade.

Lomborg, Bjorn. 2004. Ed. Global Crises, Global Solutions. Cambridge University Press.