A modest proposal for the ‘G-20’ summit

A proposed market-opening initiative for the G-20

Sum­ma­ry: the G-20 Meet­ing in Wash­ing­ton should agree on an imme­di­ate across-the-board mea­sure to open goods mar­kets using the Uruguay Round modal­i­ties (pend­ing even­tu­al con­clu­sion of the Doha Round).

Rationale

Con­sid­er­ing that the world econ­o­my now faces a seri­ous reces­sion, G-20 gov­ern­ments should open mar­kets quick­ly in a co-ordi­nat­ed, mul­ti­lat­er­al action to encour­age the recov­ery of trade flows.

The con­clu­sion to the com­plex Doha Round nego­ti­a­tions is too far off and too uncer­tain to help with rebuild­ing the glob­al econ­o­my now.

If, as seems like­ly despite the anti-glob­al­iza­tion rhetoric of its cam­paign, the Oba­ma Admin­is­tra­tion agrees to restart the Doha Round nego­ti­a­tions speed­i­ly, it is very unlike­ly that those nego­ti­a­tions can be con­clud­ed before the end of 2009, well into the pro­ject­ed glob­al eco­nom­ic down­turn. Elec­tions in India and the cycling of the EC Com­mis­sion also sug­gest agree­ment on Doha is at least a year away.

A dif­fer­ent approach¾but an old tech­nol­o­gy¾­could bring about an ear­ly mul­ti­lat­er­al trade agree­ment on an effec­tive response to the eco­nom­ic cri­sis. G-20 gov­ern­ments should agree to imme­di­ate­ly imple­ment an across-the-board tar­iff cut in agri­cul­tur­al and non-agri­cul­tur­al prod­ucts using the same approach as the Uruguay Round:

Uruguay Round: cuts to bound rates of duty
Agri­cul­ture tar­iff cut (aver­age across all lines) Min­i­mum tar­iff cut per tar­iff line Tar­iff quo­tas Non-Agri­cul­ture* cut (aver­age across all lines)
Devel­oped coun­tries 36 15 Expand in-quo­ta vol­umes by 4% of domes­tic con­sump­tion (33.3)
Devel­op­ing Coun­tries 24 15 (25.0)

* There was no for­mu­la tar­iff cut for non-agri­cul­tur­al prod­ucts. The Quadri­lat­er­al Trade Min­is­ters announced in July 1993 that they were look­ing for a 50 per­cent reduc­tion in bound rates over 15% (with cer­tain excep­tions) and nego­ti­at­ed cuts aver­ag­ing at least one-third. The tar­get for devel­op­ing coun­tries was an infor­mal under­stand­ing in Gene­va.

Impact assessment

Agri­cul­ture: A review of the lat­est WTO data on aver­age bound rates of duty (see graphs based on WTO Tar­iff Pro­files, 2008) sug­gests that this lev­el of cut could be agreed by most of the G-20 gov­ern­ments with­out sig­nif­i­cant dis­rup­tion to cur­rent trade poli­cies. In these economies, bound rates of duty in the agri­cul­ture sec­tor that are more than 33% above than the trade-weight­ed (applied) rate of duty. Those economies where the bound rate is less than 133% of the applied rate (high­light­ed) would see a cut in the over­all applied aver­age duty. The biggest impacts would be in Korea (a 52-point cut in the t/w aver­age rate) and Mex­i­co (an 11-point cut). Chi­na would see its t/w aver­age cut by 6 per­cent­age points.

All agri­cul­tur­al tar­iff quo­tas should be expand­ed by the same amount as in the Uruguay Round (or some sub­stan­tial frac­tion; e.g. by 2%).

Non-agri­cul­ture: The lat­est WTO data on bound rates of duty (see graphs) shows that all G-20 coun­tries could meet the Uruguay Round tar­get with­out cut­ting their t/w applied rates of duty.

tariffLevelsG20.gif

A positive contribution

The appar­ent­ly non-dis­rup­tive char­ac­ter of this tar­iff cut may seem to be an argu­ment against it. There are, how­ev­er, two fac­tors that stand in its favour in addi­tion to its sim­plic­i­ty:

  1. It will cut the bound rates on which any resumed Doha Round tar­iff cut will be based, increas­ing the lever­age of what­ev­er modal­i­ties are final­ly agreed in Doha
  2. It can be imple­ment­ed with­out any explic­it pro­vi­sion for sen­si­tive or spe­cial prod­ucts. The Uruguay Round tar­iff cut is an aver­age across all tar­iff lines (not a cut in the over­all tar­iff aver­age; a much stronger result). This means that par­tic­i­pants can reduce the inci­dence of the tar­iff cut on sen­si­tive tar­iff lines¾but not below the min­i­mum rate of cut¾while rais­ing the inci­dence on oth­er lines to meet the over­all aver­age. In oth­er words, the modal­i­ty has built in flex­i­bil­i­ty.

This agree­ment could be agreed all G-20 Mem­bers for imme­di­ate appli­ca­tion. It would be an MFN agree­ment to which oth­er WTO Mem­bers out­side the G-20 (and Rus­sia) would be encour­aged to adhere. But its imple­men­ta­tion by G-20 Mem­bers would not be con­di­tion­al on any oth­er WTO Mem­ber tak­ing the iden­ti­cal action. In oth­er words, the G-20 would con­sid­er that imple­men­ta­tion by all G-20 Mem­bers com­prised a crit­i­cal mass that allowed them to extend the ben­e­fits of the agree­ment on an MFN basis.

This agree­ment would not be a sub­sti­tute for even­tu­al com­ple­tion of the Doha Round.

Lib­er­al­iza­tion of ser­vices trade is equal­ly impor­tant but no for­mu­la has been found to open ser­vices mar­kets. G-20 Mem­bers could com­mit to an ear­ly re-start of the Doha Round ser­vices pluri­lat­er­al process.

More details for agriculture:

(a) There would be no modal­i­ties that dif­fer­en­ti­ate among prod­ucts on the basis of their sen­si­tiv­i­ty or spe­cial char­ac­ter; tar­iff cuts will be across the board.

(b) Devel­op­ing coun­tries will have few­er oblig­a­tions as a con­se­quence of the Uruguay Round tar­gets but no oth­er cat­e­gor­i­cal excep­tions would be made

© There will be no new safe­guard mech­a­nisms (Arti­cle XIX safe­guards will remain avail­able, the SSG could remain as is until fur­ther con­sid­ered in the Doha nego­ti­a­tions)

(d) The EC and USA should be asked uni­lat­er­al­ly to cut their domes­tic sup­ports in line with the offers that they made dur­ing Doha Round nego­ti­a­tions in July 2008.

(e) Those gov­ern­ments that have more ambi­tious agen­das may make sep­a­rate pluri­lat­er­al agree­ments as long as they are pre­pared to offer the ben­e­fits of those agree­ments, once reached, to all WTO Mem­bers on an MFN basis

(f) The Hong Kong Min­is­te­r­i­al Con­fer­ence deci­sion on export sub­si­dies should be made final.

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