Modeling a Doha agreement on agriculture

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

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. 

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