Enhancing Global Trade Impact: Doha Development Agenda Analysis

1. The Doha Development Agenda Yvan Decreux1, Lionel Fontagné2 WTO, November 2, 2010 1: CEPII, ITC 2: CEPII, University Paris 1

2. July 2008 package Based on two different studies • Decreux, Y. & Fontagné, L. (2009). Economic Impact of potential outcome of the DDA, CEPII Research Report 2009-01 More comprehensive: includes trade facilitation • Decreux, Y. (2009). Effets d’un accord commercial multilatéral sur la base des propositions de décembre 2008, Report for the French Government More recent: • Includes precisions added in the December 08 package (anti-concentration clause and other elements related to sensitive products) • Some technical improvements • More sector details in agriculture

3. Downloadable Both studies downloadable here: https://sites.google.com/site/ydecreux/

4. Subjects covered • Agriculture • NAMA • Services • Trade facilitation

5. Agriculture • Domestic support: mostly the US and EFTA • Export subsidies • US, EU • Agreement found long ago • Tariffs: EU, EFTA, Japan

6. NAMA • Tariffs only • Most efforts to be made by developing countries (despite special and differential treatment) • But many are exempt of actual tariff reductions: Small and Vulnerable Economies, LDCs

7. Export subsidies • Not really damaging in a deterministic world (stable prices and production), except for countries strongly specialised in agriculture • The world is not deterministic, especially in agriculture • Export subsidies (and tariffs) used to moderate internal instability, to the expense of other countries • Early agreement to phase out all export subsidies by 2013

8. Modelling • Based on the Mirage model (CEPII) + MAcMap data (ITC, CEPII) • Some data missing (historical AMS for instance) → relied on INRA work (J-C Bureau, J-P Butault) for static impact • Inflation and growth: all commitments (except de minimis) expressed in LCU

9. Inflation issue (illustrated)

10. Inflation issue (continued) • Not taking it into account leads to • Overestimate the effect of export subsidy suppression • Underestimate the effect of domestic support reduction • Overall, broadly neutral on agricultural production as a whole for the EU, but significant differences at the product level (milk, sugar)

11. Tariff reductions • Agriculture: tiered formulas • Sensitive products (tariff-rate quotas) • Special products • Tariff escalation issue • Tropical products • NAMA: Swiss formulas • Sensitive products for developing countries • Anti-concentration clause

12. Implementation • Formulas applied to bound tariffs, at the HS6 level (MAcMap-HS6 2004) • Impact on applied tariffs • Aggregated at the sector and region level

13. Other subjects • Services • Developed and emerging countries, on a free basis • Much less quantified at this stage • Trade facilitation • Potential source of significant gains • Not really a negotiation issue

14. Mirage • Computable General Equilibrium Model of the World economy • Sequential dynamics setting • Capital accumulation • Exogenous labour, population and TFP growth • Exogenous labour supply & unemployment • Based on GTAP, MAcMap and other data sources (ILO, IMF, ...)

15. Scenarios • Goods: December 08 proposals • Services: • Study 1: 3% cut for country participating in the specific negotiations on services • Study 2: 10% cut of the estimated ad-valorem equivalent of barriers to services trade, all countries except Sub-Saharan Africa and Rest of the World (mostly non-WTO members) → really optimistic

16. World welfare

17. Welfare: industrialized regions

18. Welfare: Asia

19. Welfare: Latin America

20. Welfare losses

21. Sources of gains / losses • Allocation efficiency: gains especially generated on high tariffs • Terms of trade: balance of concessions & preference erosion • Capital accumulation

22. Employment in agricultural sectors

23. NAMA exports (selected, bn USD)

24. NAMA production (selected, bn USD)

25. Trade facilitation • Based on estimates of time spent to export and import, by Minor and Tsigas • Time spent at the port supposed to partially converge to the median performance, for all countries over that median • No reduction of transport cost assumed • Expressed as an iceberg cost • Minor P. & Tsigas M. 2008. “Impacts of Better Trade Facilitation in Developing Countries, Analysis with a New GTAP Database for the Value of Time in Trade”, GTAP 11th Conference, Helsinki. • USAID 2007. “Calculating Tariff Equivalents for Time in Trade”, March

26. Trade facilitation impact • Adds almost 100 bn USD gain per year (from 68 bn to 167 bn) • Especially favorable to developing countries, in particular Sub-Saharan Africa • Lack of a clear commitment by all partners to let trade facilitation benefits be an outcome of Doha negotiations

27. Limitations of the methodology • Actual impacts of export subsidies not properly measured in a deterministic framework • Preference erosion may be overestimated: rules of origin actually reduce current preference benefits + importance of the EU in Sub-Saharan Africa tend to decrease more quickly than projected • Impact on poverty and inequality not assessed • Possible impact of trade competition on productivity not accounted for

28. Conclusion • Balanced proposal, employment in agriculture rises in developing countries • Concern on preference erosion • Conservative estimates: benefits expected to be at least as large as the ones mentioned • Current situation corresponds to a non-cooperative equilibrium