Peter Gallagher

The WTO’s ‘sin­gle under­tak­ing’ has enforced a very com­plex frame­work of ‘modal­i­ties’ (meth­ods, out­puts) on the nego­ti­a­tions. The pro­posed draft of the agree­ment is rid­dled with cas­cad­ing options, con­ces­sions, and excep­tions (see this sum­mary in an ear­lier post). But it also pro­vides for con­di­tional lim­its to the options, com­pen­sa­tions for the con­ces­sions and excep­tions to the excep­tions; twists and turns that are intended to keep every coun­try in the single-undertaking ‘on board’, includ­ing those coun­tries that intend to retain pro­tec­tion for agriculture.

Sim­u­lat­ing this com­plex­ity tests the lim­its of the ATPSM model. As you’ll see, I have had to employ some bru­tal sim­pli­fi­ca­tions keep the model man­age­able. But the scale of the results looks, broadly, right and the dis­tri­b­u­tion of gains and losses looks plau­si­ble to me. In case you’re inter­ested, I pro­vide a full jus­ti­fi­ca­tion for these simplifications—referring to the text of the 2008 ‘Modalities’—below.

Please, judge for your­self whether the results are plau­si­ble, and let me know if you dis­agree. Or, if you can see a bet­ter way to rep­re­sent either the Doha modal­i­ties, or crit­i­cal mass agree­ments, please down­load the ATPSM model and try it for your­self. One of the authors of the model, David Vanzetti from the Aus­tralian National Uni­ver­sity and UNCTAD, has kindly sup­plied me with some updates to the trade data used in the model. If you’d like to try repli­cat­ing my results, please drop me an email. I would be happy to pro­vide you with access to the updated data-set.

Finally, the down­load loca­tion for the ATPSM pro­gram, as men­tioned in the video is http://www.unctad.org/tab.

Sim­pli­fi­ca­tions in the model

In my pro­jec­tion of the Doha out­come, I elected to be ‘opti­mistic’ about com­pli­ance with the Decem­ber 2008 modal­i­ties by employ­ing some sim­pli­fi­ca­tions that not only make the model spec­i­fi­ca­tion eas­ier to man­age but also, prob­a­bly, over­es­ti­mate the likely outcome.

Tar­iffs (bound, over-quota rates): I assume that every devel­oped econ­omy will achieve the min­i­mum 54% aver­age cut in bound rates (but no more) tak­ing account of all devi­a­tions and excep­tions ( Para 62 of TN/AG/W/4/Rev.4). I assume that devel­op­ing coun­tries that are not oth­er­wise des­ig­nated in an ‘excep­tional’ cat­e­gory will achieve the max­i­mum aver­age cut in bound rates of 36% (but no more) tak­ing account of all devi­a­tions and excep­tions (Para 64 of TN/AG/W/4/Rev.4). I assume that devel­op­ing coun­tries able to access the ‘Small and Vul­ner­a­ble’ excep­tions and recently acceded mem­bers (RAMS) will make aver­age cuts of 24% in bound rates (Paras 65 and 66 of TN/AG/W/4/Rev.4). Least-developed coun­tries will make no cuts in bound rates (Para 151 of TN/AG/W/4/Rev.4). A group of ‘very recently acceded mem­bers’ (VRAMS) and a group of ‘small, low-income, RAMS with economies in tran­si­tion‘ are also exempted by the modal­i­ties from mak­ing any cuts in bound rates (Para 67 of TN/AG/W/4/Rev.4 and foot­note to that para.).

I have dif­fer­en­ti­ated the RAMS and VRAMS groups. The VRAMS com­prise Mace­do­nia, Saudi Ara­bia, Ukraine and Viet Nam. Their exemp­tion from cuts in the Doha modal­i­ties rec­og­nizes that they have recently agreed to make sub­stan­tial bound-rate cuts, on acces­sion; if I set their oblig­a­tions in the sim­u­la­tion to ‘no tar­iff cuts’, the model will fail to take into account that these coun­tries have recently made large cuts in their import bar­ri­ers: the esti­mated cuts on agri­cul­tural prod­ucts range from about 25% (Ukraine) to 44% (Viet­nam) to 60% (Saudi). I have there­fore included an aver­age ‘Doha’ tar­iff cut of 40% for these economies in the simulation.

In-quota tar­iffs: I assume that all prod­ucts cur­rently sub­ject to a tar­iff quota will be des­ig­nated as ‘sen­si­tive’. I assume that all devel­oped economies will cut in-quota rates by 50%; one of the approx­i­mately equal options avail­able in the modal­i­ties. I have assumed that non-exempt devel­op­ing coun­tries (only) will cut in-quota rates by 15% (Para 109 of TN/AG/W/4/Rev.4).

The appro­pri­ate expan­sion fac­tor for tar­iff quo­tas is more dif­fi­cult to esti­mate. In the Uruguay Round agree­ment, WTO mem­bers Ire obliged to main­tain cur­rent mar­ket access through quo­tas at the cur­rent level and, where new MFN tar­iff quo­tas I’ve cre­ated as part of the ‘tar­if­fi­ca­tion’ process, to estab­lish a ‘min­i­mum access’ quota of 3–5% of 1986–1988 domes­tic con­sump­tion. In fact the expand­ing ‘min­i­mum access’ quo­tas rep­re­sent the smaller pro­por­tion of agri­cul­tural quota-trade by value (about 45%: see de Gorter, H., and E. Kli­auga (2005) “Reduc­ing Tar­iffs ver­sus Expand­ing Tar­iff Rate Quo­tas” in Ander­son, K and Mar­tin, W. (eds)., Agri­cul­tural Trade Reform and the Doha Devel­op­ment Agenda, Pal­grave Macmil­lan and the World Bank) so that the over­all pro­por­tion of domes­tic con­sump­tion cov­ered by both the min­i­mum and cur­rent access quo­tas was about 9% (assum­ing that ‘min­i­mum access’ quo­tas reached 4% of con­sump­tion) in the base years. Under the ‘sen­si­tive prod­uct’ pro­vi­sions of the Doha modal­i­ties the tar­iff devi­a­tion by devel­oped coun­tries is com­pen­sated by a quota (or quota expan­sion) equal to 3–4% of domes­tic con­sump­tion in the 2001 base year, but less under some cir­cum­stances. The rate of growth of global agri­cul­tural demand/consumption growth has fallen sharply over the past 30 years . I assume (opti­misti­cally) that domes­tic con­sump­tion in the devel­oped coun­tries grew by about 20% in the 16 years after 1988 (at 1.1% annual growth rate). So an expan­sion of devel­oped coun­try quo­tas by 3% of 2001 con­sump­tion would be equiv­a­lent to an expan­sion of 3.6% of 1988 con­sump­tion. This implies a growth in the over­all tar­iff quota from about 9% (‘cur­rent access’ plus ‘min­i­mum access’) of con­sump­tion to about 12.6% of con­sump­tion in devel­oped coun­tries using a con­stant 1988 con­sump­tion base, or about 40%. Devel­op­ing coun­tries that avail them­selves of sen­si­tive prod­uct tar­iff quo­tas are not required to make any expan­sion of the quota vol­ume in the Decem­ber 2008 modalities.

Export sub­si­dies: I have assumed that all export sub­si­dies are eliminated.

Domes­tic sup­ports: I have allo­cated all domes­tic sup­port in the ATPSM model data­base to the Over­all Trade Dis­tort­ing Sup­port cat­e­gory (‘amber’ + ‘blue’ + de min­imis sup­port) and applied the cuts imposed on devel­oped coun­tries by the Decem­ber modal­i­ties. Specif­i­cally: EC, 80% cut; USA and Japan, 70% cut; other devel­oped economies 55%. I have not imposed any sup­port cuts on devel­op­ing coun­tries in the model.