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

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

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

Subjects covered Agriculture NAMA Services Trade facilitation

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

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

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

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

Inflation issue (illustrated)

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)

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

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

Other subjects Services Trade facilitation 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

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, ...)

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

World welfare

Welfare: industrialized regions

Welfare: Asia

Welfare: Latin America

Welfare losses

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

Employment in agricultural sectors

NAMA exports (selected, bn USD) China & Hong-Kong Japan Korea & Taiwan Indonesia & Malaysia Thailand North Africa Sub-Saharan Africa Forestry 0.0 -0.1 Fishing 0.1 -0.0 Primary products 0.8 1.8 1.1 1.2 -0.2 Textile 11.5 0.9 12.4 7.0 0.5 -0.5 Clothing 36.4 0.2 2.2 0.7 -0.8 -0.6 Leather 7.6 2.3 2.1 Paper & editing -0.3 Chemicals 2.4 5.0 -0.7 0.3 Metals 1.0 Cars & trucks 32.9 7.4 Trains, Planes, Bikes, Boats Electronic equipment 3.9 -9.3 Machinery -6.4 2.5 -1.9 Other Manuf 3.1 -0.4 NAMA 66.2 28.6 20.1 6.5 5.8 -1.8

NAMA production (selected, bn USD) EU27 China & Hong-Kong Japan Korea & Taiwan US North Africa Sub-Saharan Africa Forestry 0.1 -0.2 -0.1 -0.0 0.0 Fishing Primary products 6.8 -7.6 -0.7 2.9 0.7 Textile -4.9 17.6 -1.4 15.5 -12.1 -2.4 -1.0 Clothing -5.8 35.1 -4.3 1.1 -9.6 -2.0 -0.8 Leather 6.1 9.9 -1.9 0.2 -1.5 Paper & editing 1.0 1.6 Chemicals -8.2 -0.3 7.8 6.5 -1.2 Metals 3.8 -10.4 0.5 -2.5 5.2 Cars & trucks -16.3 -9.5 53.1 3.1 0.4 -0.5 Trains, Planes, Bikes, Boats 4.3 -1.3 -1.1 1.7 Electronic equipment 2.3 2.8 -12.0 12.6 Machinery 15.4 -16.2 -8.3 -0.9 Other Manuf 2.4 1.5 NAMA 15.1 13.3 33.5 10.7 19.3 -2.7

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

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

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

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