Critical mass agreement vs the Doha Round

Among the advantages of a CM agreement are simplicity (it’s much easier to determine the scope of the agreement and to figure out what the benefits will be), and focus (countries join because they can see the benefit of an agreement where—by definition—all the major players will participate).

The contrast with the laborious negotiations required by the WTO’s ‘single undertaking’ approach could not be sharper. One of the reasons that developed country governments have found their own agricultural lobbies reluctant to pursue the current Doha round ‘modalities’ is their uncertainty about the impact that the 100-page ‘rule book’ will have on their trade opportunities.

Projected welfare impacts of a CM agreement on agriculture

We’ll cut to the chase, shall we, in this fourth of my posts on modeling the impact of a ‘critical mass’ agreement in agriculture? Click on the tags at the left-side or at the bottom of this article to find the earlier posts.

A ‘critical mass‘ agreement among 38 countries that account for 80 percent of world trade in the 30 top-traded agricultural products (all of them food) to eliminate import duties on those products would achieve about two thirds of the projected value of the global Doha agreement on agriculture. If the members of the CM eliminated production and export subsidies, too (turns out, they won’t have much choice) the global gains would be a third as much again as those projected for the Doha agreement.

Click the thumbnail to see the results in a table. A brief explanation of the table: the CM-35 scenario assumes that 3 of the potential members of the critical mass agreement decide not to join. They are China, India and Indonesia. As you can see the projected ‘static’ global welfare impact is actually slightly larger if they stand-back because China and India (especially) would benefit from the opportunity to ‘free ride’ on the open markets of the other 35 countries.

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