Sunday, November 29, 2009

Evolution of various proposals under the Doha Round

Antoine Bouet and David Laborde, in a short IFPRI short brief, discuss tariffs rate in five different proposals that have evolved since 2001 under the Doha Round. Here are some of the points:

  • In 2001 the WTO launched a highly ambitious program of multilateral liberalization. Eight years later, concluding the negotiations remains uncertain, though an opportunity still exists.
  • From the onset, the negotiations were complicated due to the high number of participants (now 153 countries) and trade regimes.
  • Since 2001, many proposals have been brought to the negotiating table by the EU, the US, and the G-20. Because it is politically and economically acceptable to many parties, the final December 2008 package could be the basis of an agreement.
  • An evaluation of these various proposals shows that trade negotiations have been following country-strategic interests. For instance, in eight years, the agricultural market access tariff-reduction formula has grown more ambitious, but additional flexibilities have offset delivered market access.
  • The December 2008 package would reduce average tariffs by 27 percent. This has to be compared to the 29 percent reduction involved by the Harbinson and Girard proposals of 2003 and the 49 percent reduction in world protection of a very ambitious 2005 US proposal. Both the G-20 and the EU proposals from 2005 were intermediate, with a cut in average applied tariffs of around 36 percent.
  • The December 2008 proposal implies a reduction of agricultural protection by 6 percentage points in high-income countries and 0.5 percentage points in middle-income countries. Had the US proposal been applied, these figures would have been 12.4 and 4.7, respectively; had the G-20 proposal been applied, the figures would have been 8.9 and 1.2, respectively.
  • Different scenarios imply losses for LDCs, reflecting eroded preferences and rising terms of trade for imported commodities (including food products).
  • Under the December 2008 proposal, the protection faced by the agricultural exports of LDCs declines by 2.3 percentage points, while it falls by 4.6 percentage points for high-income countries. These figures are respectively 2.9 and 10.2 under the US proposal, and 2.7 and 5.7 under the EU proposal.
  • Duty-free, quota-free market access given by rich countries to poor ones could boost the benefits of trade liberalization for the poorest, especially if it does not include product exemption and if the number of preference-giving countries is increase.
  • South-South trade improvements will be limited in the Doha Agreement due to generous flexibilities, which allow developing countries to maintain high levels of protection.
  • A very positive impact of the Doha Development Agenda is that it would reinforce binding commitments and reduce existing bound duties while also consolidating the unilateral preferences granted to least-developed countries into the multilateral framework.
  • Trade negotiations have been been constrained by defensive interests.

Based on the most recent modalities package, the Doha agreement has an ambivalent impact on developing countries and does not offer enough to the poorest countries. It has to offer more in terms of market access and reduced trade costs. International cooperation needs to be extended further to other challenging areas for least-developed countries.