The Doha Round, the Future of the WTO, and the Role of India and China: Implications for Agricultural Policy

1. THE DOHA ROUND, THE FUTURE OF THE WTO, AND THE ROLE OF INDIA AND CHINA: IMPLICATIONS FOR AGRICULTURAL POLICY Razeen Sally Workshop on Liberalising Domestic Agricultural Markets in India, Claridges Hotel, New Delhi, 10 February 2006

2. WTO DDA, INDIA, CHINA, AGRICULTURE • The Doha Round and the future of the WTO • The Hong Kong MC: another failed event • A runt of a package: all major market-access decisions postponed; leaving LDC market access, aid-for-trade, TRIPS-and-public health • What needs to be done: simultaneous movement by DC and developing-country majors on Ag., NAMA and GATS.; rules; G90

3. WTO DDA, INDIA, CHINA, AGRICULTURE DDA prospects: three scenarios  Scenario One: collapse  Scenario Two: a very modest package … but will it get through US Congress?  Scenario Three: a substantial package … unlikely without a global crisis  UN-isation: WTO drifting dangerously away from non-discrimination and market access towards an aid agency  Is a modest result really better than collapse??

4. WTO DDA, INDIA, CHINA, AGRICULTURE WTO prospects post-DDA • Structural shifts from GATT to WTO: overloaded agenda; UN-isation; lack of political glue after Cold War • Need to refocus on market access and restore effective decision making • Outer and inner cores … the vacuum of leadership in G5 • How to deal with the rest • NGOs; rise of anti-liberal ideas; implications for Single Undertaking • More modest goals in future; rules matter more than further significant multilateral liberalisation

5. WTO DDA, INDIA, CHINA, AGRICULTURE The wider trading system:  FTAs: illusion, distraction, complications, politicisation … now in Asia-Pacific  The silver lining: unilateral liberalisation, led by China  Trade negotiations have diminishing returns; future liberalisation will come largely outside negotiations  But it leaves gaps, esp. in rules and agriculture

6. WTO DDA, INDIA, CHINA, AGRICULTURE 2. Agriculture in the DDA • HK MC:  Export subsidies abolished by 2013 (parallel moves on export credits, food aid and STEs)  Domestic support: three bands, but no figures or disciplines on boxes  Market access: four bands but no figures; SSM; no specifics on sensitive and special products  Cotton: abolition of export subsidies and full market access for LDCs, but no agreement on domestic support  Related issues: GIs, trade-and-environment, implementation, S&D

7. WTO DDA, INDIA, CHINA, AGRICULTURE What needs to be done? • Export subsidies • Domestic support: size of cuts in bands; de minimis support; blue box/green box disciplines; S&D • Market access: size of cuts in bands; tariff caps; sensitive and special products; SSM; S&D

8. WTO DDA, INDIA, CHINA, AGRICULTURE • World Bank estimates:  Ag. liberalisation 2/3rds of overall gain from goods liberalisation  93% of ag. liberalisation gain from market access  >50% of developing countries’ gain from own liberalisation  Significant gains require huge cuts in bound AMS and bound tariffs; must include developing countries; narrow limits on sensitive and special products  Large developing countries gain; some LDCs lose slightly (can be compensated, e.g. for preference erosion)

9. Agriculture and food Textiles and clothing Other manufacturers All goods Percentage due to: Developed country policies Developing countries’ policies All countries’ policies 30 33 63 17 10 27 3 7 10 50 50 100 Table 1. Effects on developing country economic welfare of full trade liberalization by groups of countries and products, 2015 (%) From full liberalization of: Note: Developed countries include the transition economies that joined the European Union in April 2004. The definition of developing countries used here is that adopted by the WTO. Thus it includes the four East Asian tigers: Hong King (China), Korea, Rep., Singapore and Taiwan (China). Source:Anderson and Martin (2005, Table 4)

10. Agricultural liberalization component High-income countriesª Developing countries World Import market access Export Subsidies Domestic support All measures 66 5 4 75 27 -3 1 25 93 2 5 100 Table 2. Distribution of global welfare effects of removing all agricultural tariffs and subsidies, 2001 (%) Beneficiary region ª High income countries include the newly industrialized East Asian economies of Hong Kong (China), Korea, Rep., Singapore, and Taiwan (China) as well as the transition economies that joined the European Union in April 2004. Source: Anderson and Martin (2005, Table 5); Anderson, Martin and Valanzuela (2005).

11. Bound tariff Applied tariffª Developed countries Developing countries of which: LDCs World 27 48 78 37 14 21 13 17 Table 3. Agricultural weighted average import tariffs, by region, 2001 (%, ad valorem equivalent, weights based on imports) a. Includes preferences and in-quota Trade Quota (TRQ) rates where relevant, as well as the ad valorem equivalent of specific tariffs. b. Developed countries include the transition economies that joined the European Union in May 2004. The definition of developing countries used here is that adopted by the WTO. Thus is includes the four East Asian tigers: Hong Kong (China), Korea, Rep., Singapore, and Taiwan (China). Source: Anderson and Martin (2005, Table 2).

12. WTO DDA, INDIA, CHINA, AGRICULTURE 3. China and India: trade-policy comparisons • Trade-policy differences reflect differences in market-based economic reforms, global integration and economic performance; China significantly ahead on most counts • China: massive external liberalisation from early ’90s, i.e. before WTO accession; India: smaller but still significant external liberalisation

13. WTO DDA, INDIA, CHINA, AGRICULTURE Trade-policy comparisons (cont.) • China: extremely strong WTO commitments (tariffs, NTBs, goods, services, transparency, domestic regulation, administrative/judicial review procedures); India: weak WTO commitments • China in DDA: low-key, pragmatic, flexible, mix of offensive/defensive positions, good alignment of domestic and WTO policies; India in DDA: better than before; but still too defensive and adversarial, too much rhetorical posturing, disconnect with policies at home

14. WTO DDA, INDIA, CHINA, AGRICULTURE Trade-policy comparisons (cont.) • China’s FTAs: more politics than economics, but still better than other Asian powers • India’s FTAs: unserious, trade-lite

15. Table 4. Changes in average statutory tariff rates in China Source: Elene Ianchovichina and William Martin, “Economic impacts of China’s accession to the World Trade Organisation,” World Bank Policy Research Working Paper 3053, May 2003.

16. Table 5. Coverage of specific commitments (%) Source: Mattoo, “China’s accession to the WTO”, p. 303. The breadth and depth of commitments by other countries are understated because their more recent commitments in telecommunications and financial services have not been taken fully into account.

17. Table 6: Tariff ProfilesFinal MFN bound tariffs Source: WTO - CTS

18. Table 7: Tariff ProfilesMFN applied tariffs Source: WTO-IDB and UN Tariff and Market Access Database

19. Cross country comparison of average tariff rates

20. WTO DDA, INDIA, CHINA, AGRICULTURE 4. China and India: agricultural trade-policy comparisons  China: Very strong external liberalisation after internal market reform phase; very strong WTO commitments on tariffs, NTBs and subsidies  Result: economic structure shifting in line with with comparative advantage (unlike rest of e. Asia); release of resources to non-ag. sectors; emerging powerhouse in labour-intensive exports  Mixed positions in DDA agricultural negotiations, but in context of all-round flexibility; keeping head down in G20  Now need to prioritise internal-market/domestic-trade reforms (e.g. land tenure, price liberalisation, labour mobility, infrastructure)

21. WTO DDA, INDIA, CHINA, AGRICULTURE  India: No significant external liberalisation; mismatch with manufacturing; very weak WTO commitments  Stagnant economic structure; drag on non-ag. sectors; not exploiting comparative advantage  Defensive in DDA ag. negotiations; the major obstacle to more credible G20 position  Need for external liberalisation and internal-market/domestic-trade reforms: much worse starting position than China

22. Table 8: Bound and Applied Agricultural Tariff Rates, by selected Countries and Regions, 2001 (%, trade-weighted average) Source: MAcMap-HS6 Database, CEPII, Paris (see Bouet and others, 2004).Note: CV is the weighted coefficient of variation for the power of the tariff (1+t). The bound average duty reported for China takes into account commitments not I effect in 2001, hence its lower levels in comparison with the MFN rate. Figures for regions are computed as import-weighted averages across countries.

23. Table 9: Key Features of Applied Agricultural Tariffs, by selected Countries and Regions, 2001 (%, trade-weighted average) Source: MAcMap HS6 Database, Centre d’Etudes Prospectives et d’Informations Internationalses (CEPIIs), Paris. (see Boulet and others 2004).Note: the Maghreb region consists of Algeria, Libya, Mauritania, Morocco, and Tunisia. Figures for regions are computed as import-weighted averages across countries.

24. Table 10: Pre- and post- accession import protection (tariff or tariff equivalent)

25. Table 11: Percentage PSEs for China and selected countries As per cent of gross farm receipts Note:EU15Source: OECD PSE/CSE databases 2005

26. Table 12: Standard rates of duty on import of selected agricultural commodities in India during 1991-92 to 2002 -03