Can the G20 get Doha done?

There is little reason to hope that the Doha deal that was on the table in mid-2008—when the patient finally expired—would have delivered ‘hundreds of billions of dollars’ to the world economy. The wide range of exceptions (built-in, and ‘special’) for developing countries and the minute sculpting of the market access rules for the most ‘sensitive’ (i.e. protected) parts of the rich countries’ markets meant that there would be, at best, modest gains from market access (see my more detailed analysis of the problems here).

The reality of Doha was modeled in a prescient study for the World Bank in 2005. In the following table, the actual shape of the Doha deal lies somewhere between Columns 1 and 2 (but closer to Column 1). Note that most of the gains go to rich countries.

Gains from merchandise trade liberalization (static estimates: $2001 bn)
Agriculture only with the full range of exceptionsAgriculture + NAMA with limited exceptions for developing countriesAgriculture + Nama with no exceptions
Low-income countries0.112.517.1
Middle-income countries -0.516.122.7
High-income countries18.179.296.4
TOTAL, World17.796.1119.3
Source: Modeling by Anderson, Martin and van der Mensbrugghe for the World Bank. See Table 7 here for a convenient source.

It is certainly important to cut the ‘binding overhang’ in current WTO schedules. The opportunity the overhang offers to raise WTO-compliant protection is a moral danger, if nothing else, that encourages use of the ‘old standby’ protection options. If an ambitious schedule of cuts could be agreed by the G20 without importing all of Doha’s poisonous innovations on exceptional measures (‘special’ and ‘sensitive’ products, especially) into WTO, it would go a long way to restoring confidence in the global economy.

But if not, a smaller signal with a similar effect could quickly be agreed based on the simpler approaches adopted in the Uruguay Round in the mid-1990s. Here’s the idea in a nutshell:

Agriculture
A review of the latest WTO data on average bound rates of duty (see graphs based on WTO Tariff Profiles, 2008) suggests that the Uruguay Round tariff cuts could be agreed by most of the Group of Twenty governments without significant disruption to current trade policies. In these economies, bound rates of duty in the agriculture sector are generally more than 33% above than the trade-weighted (applied) rate of duty. Only those economies where the bound rate is less than 133% of the applied rate (highlighted in the graphs—click the thumbnail above) 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 for tariff cuts without cutting their trade-weighted applied rates of duty.

More details here (an excerpt from a longer paper on the way forward for the framework of agricultural trade agreements).

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