Doha Development Round Issues and Benefits

Introduction
The Doha Development Round or Doha Development Agenda (DDA) is the current trade-negotiation round of the World Trade Organization (WTO) which commenced in November 2001. Its objective is to lower trade barriers around the world, which allows countries to increase trade globally. As of 2008, talks have stalled over a divide on major issues, such as agriculture, industrial tariffs and non-tariff barriers, services, and trade remedies. The most significant differences are between developed nations led by the European Union (EU), the United States (USA), and Japan and the major developing countries led and represented mainly by China, Brazil, India, and South Africa. There is also considerable contention against and between the EU and the USA over their maintenance of agricultural subsidiesseen to operate effectively as trade barriers. The most recent round of negotiations, 2329 July 2008, broke down after failing to reach a compromise on agricultural import rules. (Refer Table 1: Chronology of Events) In the EU, 54 billion of subsidies are paid every year. An increasing share of the subsidies is being decoupled from production and lumped into the Single Farm Payment. The subsidies combined with tariff on imported products are the core issue behind Doha Negotiations. The aim is to reduce, or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs, and tariff escalation, as well as non-tariff barriers, in particular on products of export interest to developing countries. These negotiations shall take fully into account the special needs and interests of developing and least-developed countries, and recognize that these countries do not need to match or reciprocate in full tariff-reduction commitments by other participants. While average customs duties are now at their lowest levels after eight GATT Rounds, certain tariffs continue to restrict trade, especially on exports of developing countries for instance tariff peaks, which are relatively high tariffs, usually on sensitive products, amidst generally low tariff levels. For industrialized countries, tariffs of 15% and above are generally recognized as tariff peaks. Another example is tariff escalation, in which higher import duties are applied on semi-processed products than on raw materials, and higher still on finished products. This practice protects domestic processing industries and discourages the development of processing activity in the countries where raw materials originate.

Before Doha
Before the Doha ministerial, negotiations had already been under way on trade in agriculture and trade in services. These ongoing negotiations had been required under the last round of multilateral trade negotiations (the Uruguay Round, 19861994). However, some countries, including the United States, wanted to expand the agriculture and services talks to allow trade-offs and thus achieve greater trade liberalization. The first WTO ministerial conference, which was held in Singapore in 1996, established permanent working groups on four issues:

1. 2. 3. 4.

Transparency in government procurement Trade facilitation (customs issues) Trade and investment Trade and competition.

Doha, 2001
It began in November 2001 committing all countries to negotiations opening agricultural and manufacturingmarkets, as well as trade-in-services (GATS) negotiations and expanded intellectual property regulation (TRIPS). The intent of the round, according to its proponents, was to make trade rules fairer for developing countries. However, by 2008, critics were charging that the round would expand a system of trade rules that were bad for development and interfered excessively with countries' domestic "policy space".

Issues in Doha Round

Some of the issues related to Doha round have been continued from the Uruguay round of talks where developing nations found it difficult to implement many of the agreements were reached. In the 80s the North(the northern continents which are mostly developed) had an almost complete domination of the South(The southern continents which are developing)[See Fig 2] when it came to framing treaties and policies related to international trade. But with developing countries making their impact in the world economy the North-South, debates regarding formulations of treaties and policies have become a major roadblock in the progress of Doha Round. Apart from North-South contentions, there also exist contentions within each block. Though such internal conflicts exists within the blocks, we can concentrate on the North-South debate or rather the debate between the developed vs. developing countries. Some of the main issues in contention are

Agriculture: While the North (majorly US and EU) follow highly protectionist
measures for their agricultural goods, the South wants them to scrap the protectionist measures. US has been giving a lot of subsidies for domestic agricultural production. Many of the developing countries have a comparative advantage in agriculture and they are not able to access the Northern markets either due to import quotas, high tariffs or domestic subsidies. Developing countries linked any concessions they would provide on Industrial market access, services trade to the developed countries concession in agriculture. The most recent of the talks, held in Geneva in July 2008, came to an impasse majorly due to issues related to tariffs in agriculture. While US agreed to reduce the tariffs, they demanded that countries like India should also do so. But India insisted on allowing special product status to many of its farm goods and also special safeguard measures to control imports in support of its large number of subsistence farmers. Figure 1 will give a picture of how protectionist measures in agriculture have changed in various countries over time.

Special and Differential treatment (SDT): SDT calls for special treatment
of the South. It has been a bone of contention since the Uruguay rounds. In the Uruguay rounds, South had been asking for greater market access to the North, technical assistance from the North and flexibility in fulfilling the obligations due to the development status of the countries in general. But they were disappointed after the Uruguay round results. Since then they have been demanding the following four

changes to the SDT provisions - Greater flexibility such as exemptions from trade rules because of the Souths development status and its difficulty in implementing agreements; stricter rules to ensure that the North provides increased market access to the South; technical assistance to enable the South to implement WTO agreements; and procedures to monitor and enforce SDT. The South insists on an early decision regarding SDT before any concessions are made while the North wants to use it as a bargaining chip to make the South agree to some of its demands. North also has demanded more accurate definitions of developing countries as it doesnt want to provide SDT status to major traders like India and Brazil. The South argues that calling Doha a development round itself should make SDT a priority item in the agenda.

Technical assistance and capacity building: Although it was promised in

the Uruguay rounds that North would provide technical assistance to the South, the results were disappointing. While developing countries needed a lot of technical assistance in the implementation of Uruguay round agreements, North failed to provide them with that and moreover any technical assistance promised were not legally binding. There is still contentions going on between North and South regarding the level of technical assistance and how it is going to be utilized.

The Singapore Issues: Investment, competition policy, government procurement

and trade facilitation comprise what is popularly known as the Singapore Issues. While the developed nations wants WTO to acknowledge the growing importance of these issues, developing nations still believe that concentrating on these issues will be detrimental to their development. AlsoSouth argues that including Singapore Issues will broaden the agenda of the Doha talks and they dont have enough resources for a wider agenda. Also since North already has many of the standards in place, it will be the South which will have the obligation to enforce them and also they fear that a tighter timeline will put a lot of pressure on their resources.

Nonagricultural market access (NAMA): South has linked progress in the

NAMA talks with progress in agriculture, and has demanded more special treatment in NAMA than the U.S. and EU are inclined to offer. In the talks leading to the July 2004 framework, developing countries were unwilling to engage in serious discussion of NAMA until the results of the talks on agriculture were clearer.

Services trade: The South favours some aspects of the services trade like the
movement of labor across to the North. Services talks are more complicated than other trade talks and so the progress in this front has been very slow. Also South wants some safeguard measures to protect its infant industries. Still many countries have their doubts regarding services liberalization. The Doha Round links progress in agriculture and manufacturing to progress in services, so the failure to reach a services agreement could threaten the entire round.

Access to patented medicines: A major topic at the Doha Ministerial regarded

the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The issue involves the balance of interests between the pharmaceutical companies in developed countries that held patents on medicines and the public health needs in developing countries. Before the Doha meeting, the United States claimed that the current language in TRIPS was flexible enough to address health emergencies, but other countries insisted on new language.

Also with the recession affecting almost all the developed nations, protectionism has seen a high which will affect any further talks in the Doha round. With increasing US trade deficits it is highly unlikely that US will be removing its protectionist measures anytime sooner. With the economic impact of countries like India , China and Brazil on the rise, it becomes even more difficult to reach a consensus by satisfying everyone.

Benefits of Doha Round of Talks

Doha round is named the Doha development round because it is started with a motive to negotiate a better deal for developing countries. A research study was conducted by more than 50 economists over 2 years, assessed by 8 top economists including 5 Nobel laureates to find the best solutions to ten of the worlds biggest challenges.Termed asCopenhagen Consensus 2008, the second-best investment the world can make to improve the state of the planet is to implement the DOHA development plan (First one is to provide micronutrients for 80% of the 140 million children who lack essential vitamins in the form of vitamin A capsules). The Net present value of a realistic Doha outcome is an increase of Global income by more than $3000 billion per year, $2500 billion of which would go to the developing world. The three major areas contributing to these benefits are Services, Trade facilitation and Agriculture.

Services Market access in service sector is more qualitative than quantitative since
the barriers are mixed with the local regulation. For example it is hard to judge just how open a particular nation is to foreign banks since the barriers are thoroughly mixed in with domestic regulation, standards and business practices. The current negotiations involve a mix of rules on FDI, movement of persons, and cross-border commerce. Table 2: Approximate gains from the various liberalizations, by Australian Productivity Commission report shows the gains from the various liberalisations

Trade facilitation Trade facilitation is the reduction in effort to reduce red-tape

barriers to trade such as delays at customs, excessive paper-work, etc. Areas covered by current negotiations include freedom of transit, fees and formalities in connect with importation and exportation, and publication and administration of trade regulations. Trade facilitation has the major potential to be the major source of gains for the world and particularly for the developing countries. UNCTAD also estimates that simple trade facilitation measures could reduce these costs by 2% of the value of trade. In numbers, the World Banks recent book indicates that trade facilitation would bring gains in revenue of $110bn a year. If other infrastructure projects which are not part of Doha negotiations are included, then the gains shoot up to $377Bn.

Agriculture The gains due to market access of Agricultural products are a mixed
bag. Liberalization would lead to higher prices in US and EU. Some of the developing countries are net food importers and some are net food exporters. Liberalization would help only food exporting nations. Also some of the worlds biggest food exporters are developed countries like Canada, New Zealand and Australia. So any step in this direction may produce substantial gains for richnation consumers and rich-nation food exporters, but very uneven gains for developing nations.

Trade effects, Output effects, National income effects

The benefits in the various sectors arise mainly from the 3 effects, Trade, Output and Income. Trade effects arise from the increased trade among nations due to fewer barriers. Trade effects are estimated to be around 11% rise in global trade. Output effects arise from the factor that increased trade results in increased exports which results in increase in production. So only if a large share of domestic production is exported, increased trade can translate into increased output. National income effects arise from changes in trade and production, shifting terms of trade, and a mix of efficiency and scale effects. It is estimated to be additional income of .5% of global GDP with highest gains relative to their income level to developing countries.

Alternative to Doha Round

Right now any alternative to Doha round is bleak. Instead of making legislation, countries may file litigations with WTO and WTO may have to settle disputes instead of making the rules. This would result in proliferation of bilateral and regional trade deals which we have studied that is detrimental to world trade. Existing trade distortions in to trade and economic activity could become entrenched, making it increasingly difficult for developing countries to compete fairly in world markets
Table 1: Chronology of Events

Year 1986-1994 1994

Nov. 9-13, 2001 July 31, 2004 Jan. 1, 2005

Summer 2005 Oct. 10-14, 2005

Discussion Uruguay Round of multilateral trade negotiations. Uruguay Round culminated in the establishment of the World Trade Organization (WTO). The Agreement on Agriculture was one of 29 legal texts underwriting the WTO and its administration of rules governing international trade. Current Doha Development Agenda (DDA) or Doha Round of multilateral negotiations was initiated in Doha, Qatar. WTO Doha Round negotiations produce an interim guideline document, the Framework Agreement, to solidify existing commitments and to guide negotiations of details for final agricultural agreement. Current Doha Round of multilateral negotiations was scheduled to end, but several 2003 and 2004 deadlines were missed. As a result, DDA negotiations continue with no formal schedule, but subject to several looming deadlines. USDA initiates farm bill listening sessions around the country. Series of position papers released by major negotiations participants including the U.S., EU, G-10, and G-20.

Oct. 27, 2005 Dec. 13-18, 2005 July 24, 2006 July 1, 2007 Sept. 30, 2007 21 July 2008

EU released updated proposal in response to concerns about the inadequacy of its first proposals market access offerings. WTO Hong Kong Ministerial. Indefinite Suspension of Doha Development Agenda Negotiations. U.S. trade promotion authority expires. 2002 farm bill expires Failed due to impasse in agricultural subsidies

Table 2: Approximate gains from the various liberalizations, by Australian Productivity Commission report

Liberalisation Agricultural liberalisation Manufactures liberalisation Services liberalisation

Gain $50 bn $80 bn $130 bn

Figure 2: The north-south divide

References

Fergusson ps, Ian F. (18 January 2008). "World Trade Organization Negotiations: The Doha Development Agenda" (PDF). Congressional Research Service. http://www.oecd.org/doha - OECDs page on Doha round OECD policy brief (Oct 2005) The Costs and Benefits of Trade Liberalization Paul Bluestein ( July 2008) The nine day misadventure of the most favoured nations Brookings Global Economy and Development Theodore H Cohn The WTO Doha round: Its problems, challenges and prospects Department of political science, Simon Fraser University OECD policy brief (Sep 2005) Opening up Trade in services: Crucial for economic growth http://www.wto.org/english/tratop_e/dda_e/dda_e.htm - World Trade Organizations site on Doha round Where do the benefits of Doha Development Agenda (DDA) trade liberalisationcome from? (3 April 2006) Copenhagen Consensus 2008 Results Joseph Francois, Hans van Meijl and Frank van Tongeren, (April 2005) Gauging the WTO negotiations potential gains, Economic Policy Sandra Polaski(2006) Impact of Doha Round on Developing Countries Carneige Endowment for international peace