We commit ourselves to comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support. We agree that special and differential treatment for developing countries shall be an integral part of all elements of the negotiations.
—Declaration from the World Trade Organization Ministerial Conference. Doha, Qatar, November 14, 2001
When this declaration was adopted twelve years ago, there was a great deal of enthusiasm about Doha’s highly ambitious program. Today the mood has changed, as negotiations are locked in a strategic impasse. And while concluding the Doha negotiations may still be an achievable goal, it is a goal that is clouded with much uncertainty.
The establishment of a development round in Doha (known as the Doha Development Agenda, or DDA) seemed to be the right political response to the failure of international cooperation seen during the 1999 Seattle WTO Ministerial Conference, where developing countries felt that their priorities were not being taken into account by multilateral trade negotiations. However, the twelve years of negotiations that have followed the establishment of the DDA have seen both failures and successes.
From the outset, the negotiations have been complicated. Cutting a deal among the original 143 countries (153 today) is a difficult task, since the world trading system is based on a combination of multilateral regimes with numerous regional agreements and preferential schemes. These latter schemes would be eroded by any WTO deal. In addition, trade distortions are concentrated in the agricultural sector and for a long time, a handful of high-income countries have resisted international pressure to liberalize this sector, which would benefit net food-exporting countries.
World trade and the world economy have also changed profoundly since 2001. WTO members such as Brazil, India, and the recently integrated China have emerged as major trading and economic powers. Together with South Africa, they are members of the G 20 coalition which has become a major player in the WTO negotiations. Thus, the negotiations are no longer the reserved domain of the European Union and the United States. In addition, the recent financial and economic crisis has affected economic growth worldwide, raising the fear of renewed protectionism and highlighting the need to have a secure and stable trading environment. The long-term volatility of global agricultural prices has also increased since 2001, and the international community is now much more concerned with potential imbalances in the world’s agricultural markets. Finally, environmental issues are receiving higher priority, particularly food supply and demand issues resulting from climate change.
Since 2001, many proposals have been brought to the negotiating table. In 2003, two proposals—the Harbinson and Girard proposals—were submitted. The Harbinson proposal focused on agriculture and included a tiered formula that was supposed to reflect a potential consensus. The Girard proposal, on the other hand, focused on industry and included a “modified Swiss formula,” under which tariffs were harmonized with a corrective parameter depending on the initial average.
Just before the Hong Kong Ministerial Conference in December 2005, the main negotiating parties submitted their own proposals. These proposals had different versions of the tiered agricultural formula concerning import tariffs and domestic subsidies and of the Swiss formula for industry with special and differential treatment. The United States made the most aggressive proposal, while the G-20 proposal included an ambitious liberalization program for developed countries and a more limited one for developing countries. The European Union (EU) proposal included a more protectionist approach for developed countries while preserving the main objectives of the Harbinson proposal.
Throughout the twelve years of negotiation, members’ various positions have evolved and converged, as represented by the December 2008 chairs’ proposals. Market-access modalities have reached a high level of sophistication. The general philosophy is simple, with progressive tariff-cut formulas for both agricultural and non-agricultural goods. Much flexibility has been introduced, however, with different degrees of special and differential treatment and special provisions for tariff escalation, tropical products, and long-standing preferences. Under the chairs’ proposals, OECD countries provide a duty-free, quota-free market access initiative for developing countries, with a three-percent exemption clause in terms of products. Export subsidies are to be phased out for developed countries. Regarding domestic support, this package includes a harmonizing cut on overall trade-distorting support as well as on sectoral disciplines.
We examine here how positions have evolved and converged to a package that was almost agreed upon in December 2008. It is especially important to compare the December 2008 package with various proposals that were put on the table originally either by diplomats Harbinson and Girard or by the EU, the G-20, and the United States. Such a comparison shows the direction in which the negotiations have gone, and especially whether they have evolved toward a specific proposal that was put forward years ago. It also evaluates the initial degree of the various stakeholders’ ambitions.
The December 2008 modalities scenario would reduce global protection by 26 percent, from 4.5 percent to 3.3 percent. In comparison, the U.S. proposal would have cut this world average by 50 percent, while the EU proposal would have resulted in a reduction of only 37 percent.
Given numerous flexibilities, global agricultural protection would decrease by 24.7 percent (that is, by less than industrial protection) if the December 2008 package were to be implemented, whereas it would decrease by 73 percent under the U.S. proposal. Concerning agricultural market access, the latest modalities scenario would cut applied protection by a little more than one-third for high-income countries (from 17.6 percent to 11.6 percent) and by less than 3 percent for middle-income countries (from 18.7 percent to 18.2 percent). This should boost developing-country exports to developed countries.
The latest modalities (2008) scenario would improve market access for high-income countries by 25 percent, for middle-income countries by 29 percent, and for developing countries by 37 percent. In terms of agriculture, the gains would be equivalent for the three groups of countries at around 25 percent.
Therefore, under the Doha Development Agenda, developing countries would see improved access to foreign markets but would also suffer an erosion of preferences, especially in agriculture; the protection faced by their agricultural exports would decline by 2.3 percentage points, compared with a 4.5 percentage point decline for high-income countries and 4.3 percentage points for middle-income countries.
Under the December 2008 modalities scenario, world real income would improve by a mere 0.09 percent—about $70 billion annual gains in 2025—and by 0.24 percent under the U.S. scenario. Overall global exports would increase by 2 percent under the 2008 scenario. This reflects the modest but positive ambition of the current market access modalities. Interestingly, the welfare outcome of these modalities would be close to the 2003 starting point. Although the 2008 tiered agricultural formula is more aggressive than that of the Harbinson proposal, its additional flexibilities would more than compensate for the stringent coefficients (agricultural exports would increase by 5.4 percent, compared to 5.6 percent in the Harbinson and Girard case). This illustrates the dilemma faced by negotiators: trying to accomplish a highly ambitious agenda while building in enough flexibilities to make that agenda politically acceptable.
Clearly, the negotiations have managed to evolve even though constrained by defensive interests. The December 2008 package would decrease agricultural protection in high-income countries by about as much as the Harbinson and Girard proposal, and even less than the EU proposal. In this same domain, the U.S. proposal would result in a much more ambitious liberalization of global agriculture. Regarding non-agricultural market access, a Doha agreement defined by the 2008 modalities would result in the liberalization of the economies of middle-income countries by about as much as was expected under the Harbinson and Girard and the G-20 proposals, while the EU proposal would liberalize these sectors much more.
More importantly, some scenarios imply losses for developing countries, reflecting eroded preferences as a result of a multilateral agreement and rising terms of trade for imported commodities, including food products. While these losses are significant in the case of the Harbinson and Girard, G-20, and U.S. proposals, they are almost nonexistent under the EU proposal and are quite small under the 2008 proposal. It is important to remember that the last two scenarios include a duty-free, quota-free initiative given by OECD countries to developing countries, while the other scenarios do not. Finally, by reducing the losses of the weakest economies and limiting the gains of the major global winners, the long negotiation process has reduced the unevenness in potential gains.
Although the Doha Development Agenda is often thought of as being overly constrained by defensive, protectionist interests, it still achieves significant liberalization. Indeed, by cutting applied tariffs by more than one-fourth on average among the 153 WTO members, it may deliver more relative gains in market access than did previous rounds of negotiation. This is particularly true for agricultural liberalization. In addition, the DDA could provide further, indirect gains through the reduction in binding overhang. Concluding the Doha Round, even with its constraints, would help WTO members grasp the gains within their reach.