Recent IFPRI research has articulated the distinctions between the legal obligations of WTO members and the underlying economic intention of reducing trade-distorting support; it has traced the extent to which WTO notifications have tracked and provided transparency about countries' policies and has assessed the extent to which a Doha agreement would constrain domestic support among key countries given projected policies to the mid 2010s.
In 2001, the World Trade Organization launched an ambitious program of multilateral liberalization known as the Doha Development Agenda. Since the beginning, these negotiations were complicated because of the large number of overlapping trade regimes currently in place, as well as the participation of so many countries with highly varied and conflicting interests. After eight years of talks, a successful conclusion to the negotiations is in doubt. Nevertheless, an opportunity to improve global trade still exists.
The book WTO Disciplines on Agricultural Support (Cambridge University Press), released in 2011, co-edited by David Orden, as well as the accompanying issue brief, has been endorsed by leading trade analysts and practitioners, including the former EU Commissioner of Agriculture, former director of the OECD agriculture and trade secretariat, and two former chairs of the WTO Committee on Agriculture. During the last public forum of the WTO in September 2011, IFPRI researchers hosted a session related to food security and trade and linked their research to this important debate, as well as the debate on export restrictions.
The IFPRI issue brief, Eight Years of Doha Trade Talks: Where Do We Stand?, provides an overview of the evolution of the proposals that key players have brought to the table over the years. This brief summarizes their potential impact on tariffs, trade and country’s real income. The research suggests that the last major proposal put forward in December 2008 could be the basis of an agreement. If a compromise is reached that comes close to this package, the Doha round would be beneficial for the world economy and for development.
In theory, this proposal would offer significant tariff reductions, but it also includes more exceptions, limiting the scope of liberalization for many products. Overall, the proposal would result in a 27 percent reduction of existing applied tariffs worldwide. By comparison, in 2005, the U.S. government suggested a 49 percent reduction in global protection, and the G-20 and EU proposed a cut of about 36 percent in applied average tariffs. It is noteworthy that this level of tariff reduction is quite similar to those accomplished by previous trade rounds (the Uruguay Round, the Tokyo Round, and the Kennedy Round) but it will cover more products and a larger number of countries.
IFPRI’s analysis shows that the expected gains from the December 2008 proposal – while limited – are positive. Real income would improve globally by about US$70 billion annually (this evaluation relies on conservative assumptions that do not take into account dynamic, and potentially important, benefits from trade liberalization). Overall, global exports would increase by 2 percent. Middle-income developing countries like Brazil, India and China would enjoy substantial gains.
Unfortunately, however, the impact would be modest, if not negative, for some least-developed countries (LDCs). For example, the protection faced by the agricultural exports of LDCs would decline by 2.3 percent, compared to 4.6 percent for high-income countries. The reasons are well-known: LDCs would be hurt by eroded preferences, rising agricultural prices (if they are net-food importing countries) and the absence of trade reform in their own economies.
The issue brief recommends that the OECD countries, along with Brazil, India, and China, provide 100 percent Duty-Free Quota-Free access to LDCs to boost their gains from a final trade agreement. This access should not include any product exemptions. Even a 97 percent coverage of Duty-Free Quota-Free access would undermine the positive impact of this approach due to the export concentration of LDCs (see IFPRI note The Development Promise: Can the Doha Development Agenda Deliver for Least-Developed Countries? for an analysis of this issue). The wealthy nations should also provide an ambitious aid for trade package aimed at reducing trade costs in the poorest countries, including improving market infrastructure.
One strongly positive potential outcome from a Doha agreement is that it would reinforce binding commitments and reduce existing bound duties, as explored in the IFPRI brief, The Potential Cost of a Failed Doha Round. If Doha is not concluded successfully, current protection would double when countries resort to bound levels, whereas protection would increase by only 41 percent if the Doha Development Agenda were to be implemented. This difference is worth up to US$809 billion in global trade volume and US$184 billion in real global income in 2025. Strikingly, these conclusions are especially true for poor countries. If one considers that the real value of the Doha Development Agenda is measured by the ‘preventive’ role that it plays, $128 billion, or about two-thirds of the gains in global income, would accrue to developing countries.
Overall, IFPRI’s analysis suggests that the efforts made by the WTO negotiators are worthwhile and positive for the world economy. If the needs of the world’s poorest and most vulnerable economies are addressed specifically, concluding the Doha round quickly will allow them grasp the gains of improved global trade.