doha round: where do we stand?
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Presentation given at the WTO during an ICTSD dialogue on the current situation of the Doha Round (22nd March 2010). Different quantitative estimates are presented based on research conducted at IFPRI and the World Bank. Papers quoted in this presentation can be downloaded from http://www.ifpri.org/book-6308/ourwork/researcharea/doha-roundTRANSCRIPT
Eight years of Doha trade talks:
Where do we stand? Why it matters?
David Laborde [IFPRI], Geneva 22nd March 2010
Methodology applied Step 1: Assessing tariff cut effects.
Needs a global database at a detailed level (at least HS6) with bound and applied tariffs, including preferential agreements. Here MAcMapHS6v2 (see Laborde 2008, Boumellassa, Laborde and Mitaritonna 2009)
Step 2: Plugging information in an economic model. Most powerful/used tool = Computable General Equilibrium Model, multi country,
multi sector, dynamic. Here:
The MIRAGE model used at IFPRI
the LINKAGE model used at the World Bank
Caveats: We do not consider:
the effects of the liberalization in Services;
Trade Facilitation;
the links between FDI and trade;
the pro-competitive/productivity enhancement effects of trade liberalization;
The product diversification (new products).
The absolute value of model results should be considered carefully, their relative values across scenarios teach us much more.
Check the background paper “Conclude Doha! It matters for a large discussion of this issue”/
Where do we come from and where do we
stand?
Difficult negotiations from the beginning, the emptiness of the “core”: Why is the Doha development agenda
failing? And what can be done? Bouet and Laborde, 2004 & 2008
A trade-off between:
Ambition and efficiency gains
Domestic political constraints and adjusmentcosts
Fairness of the outcome between WTO members
The role of flexibilities
IFPRI brief, 2009 and IFPRI Discussion Paper 2010
8 years of adjusments around the same
cake?
Trade creation in AMA
with different proposalsTrade creation in NAMA
with different proposals
0
20
40
60
80
100
120
140
160
Ag
ricu
ltu
ral
Wo
rld
Tra
de, U
SD
Bln
s,
an
nu
al
ch
an
ges b
y 2
025
0
50
100
150
200
250
300
350
400
450
500
No
n-A
gri
cu
ltu
ral
Wo
rld
Tra
de, U
SD
Bln
s,
an
nu
al
ch
an
ges b
y 2
025
Source: Bouet and Laborde, 2009 – MIRAGE model simulations
Fairness and Ambition
Source: Bouet and Laborde, 2009. MIRAGE model simulations
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
Full liberalization Harbinson-Girard (2003)
G20 (2005) EU (2005) US (2005) Last modalities (2008)
Real
inco
me c
han
ges b
y 2
025,
Perc
en
tag
e
WTO members High Income Countries
Middle Income Countries Least Developed Countries
Standard deviation in average gains
The exact design of
the DFQF will be
crucial to cancel these
losses
Implications of the 2008 Doha Draft
Agricultural and Non-agricultural Market
Access Modalities
David Laborde [IFPRI], Will Martin [World Bank],
Dominique Van Der Mensbrugghe [World Bank]
This work represents the views of the authors alone
Technical innovation
In 8 years, negotiations have evolved but research
and methods too!
Better aggregation solution
Link between tariff scenario building and CGE simulations
Consistent Tariff Aggregator
Based on Laborde, Martin and van der Mensbrugghe
(2009) – implementing the idea of Anderson (2009), we
use a Consistent Tariff Aggregator: for the first time, we
really capture the effects of tariff harmonization: reduction
in tariff average and dispersion.
Increased trade and welfare effects
Outline of the December 2008 Modalities
Implications for tariffs levied & faced
Implications for welfare
Issues
Agricultural Modalities
Abolition of export subsidies
But current level is trivially low
Limits on domestic support
Unclear to what extent they will bind
Market access reform
Likely to bring about substantial reductions in tariffs in
some countries
The Tiered Formula for Agriculture
Developed Developing
Band Range Cut Range Cut
A 0-20 50 0-30 33.3
B 20-50 57 30-80 38
C 50-75 64 80-130 42.7
D >75 70 >130 46.7
Average cut Min 54% Max 36%
Specific cases – Our Implementation
Tariff
Escalation
Products
Cut from next higher tier applied. In top
tier add 6 percentage points to the cut
Tropical
products
(first list)
tariff ≤ 10%: Cut to zero;
10% <tariff≤ 75%: 70% cut
Tariff >75%, 78% cut
Cotton Cut to zero if originated in LDC countries
Product flexibilities: Sensitive Products
Available to all members
Reduced cut
5% of lines for industrial countries; 1/3 more for
developing; 2% more if >30% of bindings in top tier.
Bonus for countries with bound tariffs at the HS6 level.
Developing countries have a “low cost” option
TRQ enlargement/creation are approximated here by
larger tariff cuts (smaller deviation).
Product Flexibilities: Special
Products
Developing countries self-designate
14% lines
40% no cut
60% with 15% average cut
NAMA modalities
Swiss formula: stronger than a tiered formula
Developed: Swiss Coefficient a: 8
Developing. Options:
x. a= 20 with sensitive products
i. No cuts/unbound on 6.5% of lines on ≤ 7.5% of imports, or
ii. ½ cuts on 14% of lines ≤ 16% imports
y. a= 22 with
i. No cuts/unbound on 5% of lines on ≤ 5% of imports, or
ii. ½ cuts on 10% of lines ≤ 10% imports
z. a= 25 with no flexibilities
Base rate for unbound lines = MFN 2001 + 25%
Country flexibilities
Some differences between AMA and NAMA. Least Developed Countries No cuts required. Contribute by raising bindings
Small & Vulnerable Economies (SVEs) Broadly speaking: no liberalization on applied tariffs (relaxed
formula + enhanced flexibilities).
Recently-Acceded Members (RAMs) Reduced cuts + more flexibilities Delayed implementation VRAM: no liberalization
[Para 6] Countries (NAMA only) <35% of tariffs bound No cuts but must bind most tariffs
Custom unions exceptions
Formula illustration for developed countries
0%
5%
10%
15%
20%
25%
30%
35%
40%
0% 20% 40% 60% 80% 100% 120%
Swiss formula. Coef 8.
Tiered formula for agriculture
Band I :Cut 50% Band II :
Cut 57,5%
Band III :Cut 64%
Band IV :Cut 70%
Approach to implementation:
Apply rules based on the modalities to bound tariff rates Consider inter-products linkage (for the tariff escalation rule) Include sensitive/special products Search to ensure constraints not exceeded Define optimal “option” selection in NAMA
Check that agric tariff cuts meet minimum average-cut requirement for industrial countries/maximum average-cut for developing countries Adjust cuts if needed
Cumulative situation: a RAM SVE… Look at the effects on applied bilateral tariffs [careful treatment of
the unit values for AVE. Potential role of tariff simplification rules.] Cut only on tariffs and not on other charges (e.g. US ethanol
case)
Selection for product flexibilities
Highest tariff rule frequently used Highest bound tariff includes many products with huge
binding overhang and no need to cut
Many of the highest applied tariffs are on minor products
Instead, we use a rule derived in Jean, Laborde and Martin (2008,2010)-- based on political objective functions Political-economy cost of tariff cuts v. simple rule for cost
of a particular product. Revealed preferences of policy makers.
Huge adverse impacts on efficiency. Much less on Access
Tariff Scenarios
6 different scenarios analyzed
Presentation limited to 3
The Baseline, scheduled evolution of tariffs without the DDA. e.g. : recent/new WTO members commitments
new FTA/CU
GATT Article XXVIII – DS related)
….
B - Formula without flexibilities (pure formula)
D - Formula plus flexibilities (both for countries and products)
Average tariff reductionApplied tariffs faced on exports Applied tariffs on imports
Agricultural Market Access Base Formula with flexibilities Base Formula with flexibilities
All countries 14.6 9.0 11.9 14.6 9.0 11.9
Developing (non-LDC) 14.3 8.6 11.5 13.3 11.3 13.2
High income countries 15.1 9.3 12.3 15.5 7.5 11.1
LDCs 7.4 6.5 7.1 12.5 12.2 12.5
Non Agricultural Market Access Base Formula with flexibilities Base Formula with flexibilities
All countries 2.9 2.0 2.3 2.9 2.0 2.3
Developing (non-LDC) 2.9 1.9 2.1 6.1 4.6 5.3
High income countries 3.0 2.1 2.4 1.6 1.0 1.0
LDCs 2.8 1.5 1.8 10.9 8.0 10.9
-60%
-50%
-40%
-30%
-20%
-10%
0%
All countries Developing (non-LDC)
High income countries LDCs All countries
Developing (non-LDC)
High income countries LDCs
AMA NAMA
Cu
t in
th
e a
ve
rag
e t
ari
ff,
%
Tarif reduction on applied duties, by importer
Formula Flexibilities
Welfare gains, optimal weights, $bn
Formulawith
flexibilities
Effects of
flexibilities
Australia/New Zealand 4.8 2.4 -50%
EU 27 58.7 39.3 -33%
USA 14.5 9.9 -32%
Japan 29.2 21.8 -25%
Korea & Taiwan 21.2 9.8 -54%
Bangladesh -0.2 -0.2 0%
Brazil 9.8 4.7 -52%
China 9.7 8.9 -8%
India 6.1 2.4 -61%
Indonesia 1.5 1 -33%
Thailand 4.5 2.6 -42%
Sub Saharan Africa 6.6 0.6 -91%
High income countries 141 90.7 -35%
Developing Countries 61.5 30.7 -50%
World 202.1 121.4 -40%
Other gains
Tangible improvements in seruing services
access
02
04
06
08
0
Serv
ices tra
de r
estr
ictive
ne
ss inde
x
SAR AFR LAC EAP MENA OECD ECA
Offer Improvement (Uruguay Round commitment-Doha Offer)
Offer gap(Doha Offer-Actual policy)
Actual Policy
Source: Martin and Mattoo, 2009
The LDCs initiative
Fighting preference erosion with new preferences?
Market access From full Market access to 97% Flexibility: Distribution of tariff revenue collected on WTO LDCs
exports by destination market:
The role of MICs Growing Markets
Remaining tariffs =
Value of Preferences
Aid for Trade
Small details = Big differences: From losses
to gains
Export variations by 2025 (as compared to the baseline) - (Vol, no
intra) - %
-6
-4
-2
0
2
4
6
8Sub-Saharan Africa - Low Income
Bangladesh
Cambodia
Madagascar
Malawi
Mozambique
Senegal
Tanzania
Uganda
Zambia
Central
A
C
Source: The Development Promise: Can the Doha
Development Agenda Deliver for Least-Developed Countries?
Bouët, Laborde, and Mevel, 2008, IFPRI’sResearch Brief.
MIRAGE simulations
C Scenario: DFQF OECD
97%
A: DFQF: 100% including
China and India
WTO as a public good WTO: a place for cooperation vs a
place of litigations
Value of an agreement to secure existing trade liberalization and bound current distortions
Status quo is not always the best counter factual for the DDA:
If there is no strong evidence of rising protectionism today, at least until March 2009. However, it is also clear that trade policies happen to be changed by policymakers as a reaction to economic situation. Current economic conditions could contribute to a complete change of mood in terms of trade policies implemented. In fact, even the post Second World War period, which is a remarkable period of history in terms of trade policies becoming freer and freer, trading partners, including WTO members, frequently augmented tariff protection when needed. This is in particularly true for Middle Income Countries in all sectors and OECD countries in agriculture. [Laborde and Bouet, 2009]
IFPRI brief, 2008 and IFPRI Discussion Paper 2009
The role of Binding: Protection vs the risk of
tariff increase
-400
-350
-300
-250
-200
-150
-100
-50
0
50
100
DDAIncrease to UR
bound tariffsIncrease to post
DDA bound tariffs
Increase to last ten years tariff
peaks within UR limits
Increase to last ten years tariff
peaks within DDA limits
Wo
rld
an
nu
al R
ea
l In
co
me
ch
an
ge
s, $
Bln
sb
y 2
02
5
Source: Bouet and Laborde, 2009. MIRAGE simulations
Direct gains from the DDA
“Insurance” value of the DDA, extreme
case
“Insurance” value of the
DDA, intermediate case
The role of Binding: limit in future use of
domestic support “Natural” trend in production and
prices will increase the size of existing policies
New constraint, if not binding today, will become binding in the future
An illustration from a CGE exercise on OTDS
More details based on Blandford and Josling estimates available in ITCSD/IPC/IFPRI publications, in particular: “ Implications for the United States of
the May 2008 Draft Agricultural Modalities”, Blandford, Laborde and Martin (2008).
“ Implications for the European Union of the May 2008 Draft Agricultural Modalities”, Jean, Josling and Laborde.
-2
-1
0
1
2
3
4
5
Brazil EU USA
Perc
en
tag
e c
han
ges i
n a
gri
clt
ure
an
d a
gri
-bu
sin
ees
pro
du
cti
on
v
olu
me in
2025 c
om
pare
d t
o t
he b
aselin
e
With "dynamic" OTDS constraint
Without "dynamic" OTDS constraint
Source: Bouet and Laborde, 2009. MIRAGE simulations
But also
A more sustainable environment: Fishery policies cost the world economy $50 billion
(60% of the landed value of the global catch); EU and US production support > $1bn per year Important for food security & livelihoods of many small
developing countries/coastal regions
Potential for tariff reductions on environmental goods – averaging some 10% in low-income countries
For a complete overview:
Conclude Doha: It Matters!, Hoekman, Mattoo and
Martin
Conclusions
On the overall the DDA will cut significantly existing applied level of protection by at least one-fifth in both AMA and NAMA, a very sensible number compared to previous GATT rounds (and very limited reduction on applied tariffs in AMA during the UR) and the existence of numerous PTA.
The DDA will secure the global trading system, and has an important value as a public good, in particular during a global crisis time.
The Development targets will be achieved, especially if the LDC initiative is generous and followed by MIC countries.
Detailed tables
Agricultural tariffs levied, %Base Formula Flex
Australia/New Zealand 2.5 1.5 1.9
Bangladesh 16.4 16.4 16.4
Brazil 4.8 4.7 4.8
Canada 10.7 5.1 8.6
China 7.8 5.3 7.5
EU-27 15.9 6.6 10.2
India 59.2 54.6 59.2
Indonesia 7.6 7.0 7.6
Japan 29.8 14.0 20.4
Korea and Taiwan Pr. 27.8 18.5 27.1
USA 4.8 2.1 3.0
World Bank Classification
All countries 14.6 9.0 11.9
Developing (non-LDC) 13.3 11.3 13.2
High income countries 15.5 7.5 11.1
LDCs 12.5 12.2 12.5
Agricultural tariffs faced, %Base Formula Flex
Australia/New Zealand 17.3 10.2 13.9
Bangladesh 14.7 12.6 14.4
Brazil 18.8 9.8 13.7
Canada 9.0 5.2 6.8
China 16.8 9.7 13.8
EU-27 16.6 10.6 13.6
India 10.1 7.2 8.9
Indonesia 21.5 19.4 20.4
Japan 14.0 9.9 12.7
Korea &Taiwan Pr. 16.0 10.8 12.8
USA 14.0 8.5 11.3
World Bank Classification
All countries 14.6 9.0 11.9
Developing (non-LDC) 14.3 8.6 11.5
High income countries 15.1 9.3 12.3
LDCs 7.4 6.5 7.1
NAMA tariffs levied, %Base Formula Flex
Australia New Zealand 3.6 2.4 2.4
Bangladesh 18.3 12.5 18.3
Brazil 8.5 7.4 7.8
Canada 0.9 0.5 0.5
China 5.6 3.9 4.4
EU-27 1.8 1.0 1.0
India 12.9 11.7 12.0
Indonesia 3.9 3.5 3.9
Japan 1.3 0.7 0.7
Korea &Taiwan Pr. 4.0 2.8 3.1
USA 1.5 0.8 0.8
World Bank Classification
All countries 2.9 2.0 2.3
Developing (non-LDC) 6.1 4.6 5.3
High income 1.6 1.0 1.0
LDCs 10.9 8.0 10.9
NAMA Tariffs Faced, %Base Formula Flex
Australia New Zealand 2.9 2.0 2.6
Bangladesh 3.7 1.7 1.8
Brazil 2.6 1.9 2.2
Canada 0.4 0.3 0.3
China 3.8 2.3 2.5
EU-27 3.6 2.7 3.0
India 4.6 3.1 3.6
Indonesia 3.4 2.2 2.5
Japan 4.5 3.0 3.5
Korea & Taiwan Pr. 3.8 2.6 2.9
Sub-Saharan Africa 2.1 1.4 2.0
USA 1.8 1.4 1.5
World Bank Classification
All countries 2.9 2.0 2.3
Developing (non LDC) 2.9 1.9 2.1
High income 3.0 2.1 2.4
LDCs 2.8 1.5 1.8