The document summarizes the status of negotiations in the Doha Development Round after eight years. It finds that while negotiations have evolved, the core issues remain difficult with an ongoing trade-off between ambition, fairness, and domestic political constraints. Economic modeling is used to analyze the impacts of potential agreements on trade, welfare, and development outcomes. Flexibilities are important for developing countries but come at the cost of reduced gains. An agreement could help secure existing liberalization but the economic and political context may be challenging.

1. Eight years of Doha trade talks:
Where do we stand? Why it matters?
David Laborde [IFPRI], Geneva 22nd March 2010
d.laborde@cgiar.org

2. Methodology applied
 Step 1: Assessing tariff cut effects.
 Needs a global database at a detailed level (at least HS6) with bound and applied
tariffs, including preferential agreements. Here MAcMapHS6v2 (see Laborde 2008,
Boumellassa, Laborde and Mitaritonna 2009)
 Step 2: Plugging information in an economic model.
 Most powerful/used tool = Computable General Equilibrium Model, multi country,
multi sector, dynamic. Here:
 The MIRAGE model used at IFPRI
 the LINKAGE model used at the World Bank
 Caveats:
 We do not consider:
 the effects of the liberalization in Services;
 Trade Facilitation;
 the links between FDI and trade;
 the pro-competitive/productivity enhancement effects of trade liberalization;
 The product diversification (new products).
 The absolute value of model results should be considered carefully, their relative
values across scenarios teach us much more.
 Check the background paper “Conclude Doha! It matters for a large discussion of
this issue”/

3. Where do we come from and where do we
stand?
 Difficult negotiations from
the beginning, the
emptiness of the “core”:
 Why is the Doha development agenda
failing? And what can be done? Bouet
and Laborde, 2004 & 2008
 A trade-off between:
 Ambition and efficiency
gains
 Domestic political
constraints and adjusment
costs
 Fairness of the outcome
between WTO members
 The role of flexibilities
IFPRI brief, 2009 and IFPRI Discussion Paper 2010

4. 8 years of adjusments around the same
cake?
Trade creation in AMA Trade creation in NAMA
with different proposals with different proposals
160 500
Agricultural World Trade, USD Blns, annual
Non-Agricultural World Trade, USD Blns, annual
450
140
400
120
350
changes by 2025
100
300
changes by 2025
80 250
200
60
150
40
100
20
50
0 0
Source: Bouet and Laborde, 2009 – MIRAGE model simulations

5. Fairness and Ambition
1.2
WTO members High Income Countries
1
Middle Income Countries Least Developed Countries
0.8
Real income changes by 2025, Percentage
Standard deviation in average gains
0.6
0.4
0.2
0
Full liberalization Harbinson-Girard G20 (2005) EU (2005) US (2005) Last modalities
(2003) (2008)
-0.2
-0.4
The exact design of
the DFQF will be
-0.6 crucial to cancel these
losses
-0.8
Source: Bouet and Laborde, 2009. MIRAGE model simulations

6. Implications of the 2008 Doha Draft
Agricultural and Non-agricultural Market
Access Modalities
David Laborde [IFPRI], Will Martin [World Bank],
Dominique Van Der Mensbrugghe [World Bank]
This work represents the views of the authors alone

7. Technical innovation
 In 8 years, negotiations have evolved but research
and methods too!
 Better aggregation solution
 Link between tariff scenario building and CGE simulations
 Consistent Tariff Aggregator
 Based on Laborde, Martin and van der Mensbrugghe
(2009) – implementing the idea of Anderson (2009), we
use a Consistent Tariff Aggregator: for the first time, we
really capture the effects of tariff harmonization: reduction
in tariff average and dispersion.
 Increased trade and welfare effects

8. Issues
 Outline of the December 2008 Modalities
 Implications for tariffs levied & faced
 Implications for welfare

9. Agricultural Modalities
 Abolition of export subsidies
 But current level is trivially low
 Limits on domestic support
 Unclear to what extent they will bind
 Market access reform
 Likely to bring about substantial reductions in tariffs in
some countries

10. The Tiered Formula for Agriculture
Developed Developing
Band Range Cut Range Cut
A 0-20 50 0-30 33.3
B 20-50 57 30-80 38
C 50-75 64 80-130 42.7
D >75 70 >130 46.7
Average cut Min 54% Max 36%

11. Specific cases – Our Implementation
Tariff Cut from next higher tier applied. In top
Escalation tier add 6 percentage points to the cut
Products
Tropical tariff ≤ 10%: Cut to zero;
products 10% <tariff≤ 75%: 70% cut
(first list) Tariff >75%, 78% cut
Cotton Cut to zero if originated in LDC countries

12. Product flexibilities: Sensitive Products
 Available to all members
 Reduced cut
 5% of lines for industrial countries; 1/3 more for
developing; 2% more if >30% of bindings in top tier.
Bonus for countries with bound tariffs at the HS6 level.
 Developing countries have a “low cost” option
 TRQ enlargement/creation are approximated here by
larger tariff cuts (smaller deviation).

13. Product Flexibilities: Special
Products
 Developing countries self-designate
 14% lines
 40% no cut
 60% with 15% average cut

14. NAMA modalities
 Swiss formula: stronger than a tiered formula
 Developed: Swiss Coefficient a: 8
 Developing. Options:
 x. a= 20 with sensitive products
i. No cuts/unbound on 6.5% of lines on ≤ 7.5% of imports, or
ii. ½ cuts on 14% of lines ≤ 16% imports
 y. a= 22 with
i. No cuts/unbound on 5% of lines on ≤ 5% of imports, or
ii. ½ cuts on 10% of lines ≤ 10% imports
 z. a= 25 with no flexibilities
 Base rate for unbound lines = MFN 2001 + 25%

15. Country flexibilities
 Some differences between AMA and NAMA.
 Least Developed Countries
 No cuts required. Contribute by raising bindings
 Small & Vulnerable Economies (SVEs)
 Broadly speaking: no liberalization on applied tariffs (relaxed
formula + enhanced flexibilities).
 Recently-Acceded Members (RAMs)
 Reduced cuts + more flexibilities
 Delayed implementation
 VRAM: no liberalization
 [Para 6] Countries (NAMA only)
 <35% of tariffs bound
 No cuts but must bind most tariffs
 Custom unions exceptions

16. Formula illustration for developed countries
40%
35%
30% Tiered formula for
agriculture Band IV :
25% Cut 70%
20% Band III :
Cut 64%
15% Band I :
Cut 50% Band II :
10% Cut 57,5%
5%
Swiss formula. Coef 8.
0%
0% 20% 40% 60% 80% 100% 120%

17. Approach to implementation:
 Apply rules based on the modalities to bound tariff rates
 Consider inter-products linkage (for the tariff escalation rule)
 Include sensitive/special products
 Search to ensure constraints not exceeded
 Define optimal “option” selection in NAMA
 Check that agric tariff cuts meet minimum average-cut
requirement for industrial countries/maximum average-cut for
developing countries
 Adjust cuts if needed
 Cumulative situation: a RAM SVE…
 Look at the effects on applied bilateral tariffs [careful treatment of
the unit values for AVE. Potential role of tariff simplification rules.]
 Cut only on tariffs and not on other charges (e.g. US ethanol
case)

18. Selection for product flexibilities
 Highest tariff rule frequently used
 Highest bound tariff includes many products with huge
binding overhang and no need to cut
 Many of the highest applied tariffs are on minor products
 Instead, we use a rule derived in Jean, Laborde and
Martin (2008,2010)-- based on political objective
functions
 Political-economy cost of tariff cuts v. simple rule for cost
of a particular product. Revealed preferences of policy
makers.
 Huge adverse impacts on efficiency. Much less on Access

19. Tariff Scenarios
 6 different scenarios analyzed
 Presentation limited to 3
 The Baseline, scheduled evolution of tariffs without the
DDA. e.g. :
 recent/new WTO members commitments
 new FTA/CU
 GATT Article XXVIII – DS related)
 ….
 B - Formula without flexibilities (pure formula)
 D - Formula plus flexibilities (both for countries and
products)

20. Average tariff reduction
Applied tariffs faced on exports Applied tariffs on imports
Agricultural Market Access Base Formula with flexibilities Base Formula with flexibilities
All countries 14.6 9.0 11.9 14.6 9.0 11.9
Developing (non-LDC) 14.3 8.6 11.5 13.3 11.3 13.2
High income countries 15.1 9.3 12.3 15.5 7.5 11.1
LDCs 7.4 6.5 7.1 12.5 12.2 12.5
Non Agricultural Market Access Base Formula with flexibilities Base Formula with flexibilities
All countries 2.9 2.0 2.3 2.9 2.0 2.3
Developing (non-LDC) 2.9 1.9 2.1 6.1 4.6 5.3
High income countries 3.0 2.1 2.4 1.6 1.0 1.0
LDCs 2.8 1.5 1.8 10.9 8.0 10.9
AMA NAMA
Developing High income Developing High income
All countries (non-LDC) countries LDCs All countries (non-LDC) countries LDCs
0%
Cut in the average tariff, %
-10%
-20%
-30%
-40%
-50%
Formula Flexibilities
Tarif reduction on applied duties, by importer
-60%

21. Welfare gains, optimal weights, $bn
with Effects of
Formula
flexibilities flexibilities
Australia/New Zealand 4.8 2.4 -50%
EU 27 58.7 39.3 -33%
USA 14.5 9.9 -32%
Japan 29.2 21.8 -25%
Korea & Taiwan 21.2 9.8 -54%
Bangladesh -0.2 -0.2 0%
Brazil 9.8 4.7 -52%
China 9.7 8.9 -8%
India 6.1 2.4 -61%
Indonesia 1.5 1 -33%
Thailand 4.5 2.6 -42%
Sub Saharan Africa 6.6 0.6 -91%
High income countries 141 90.7 -35%
Developing Countries 61.5 30.7 -50%
World 202.1 121.4 -40%

22. Other gains

23. Tangible improvements in seruing services
access
80
60
40
20
0
SAR AFR LAC EAP MENA OECD ECA
Offer Improvement (Uruguay Round commitment-Doha Offer)
Offer gap(Doha Offer-Actual policy)
Actual Policy
Source: Martin and Mattoo, 2009

24. The LDCs initiative
 Fighting preference erosion with new preferences?
 Market access
 From full Market access to 97%
 Flexibility: Distribution of tariff revenue collected on WTO LDCs
exports by destination market:
 The role of MICs
 Growing Markets
 Remaining tariffs =
Value of Preferences
 Aid for Trade

25. Small details = Big differences: From losses
to gains
Export variations by 2025 (as compared to the baseline) - (Vol, no
intra) - %
Sub-Saharan Africa - Low Income
8
Zambia 6 Bangladesh
4
2
0
Uganda -2 Cambodia
-4 Central
-6 A
C
Tanzania Madagascar
Senegal Malawi
Mozambique C Scenario: DFQF OECD
97%
Source: The Development Promise: Can the Doha
Development Agenda Deliver for Least-Developed Countries? A: DFQF: 100% including
Bouët, Laborde, and Mevel, 2008, IFPRI’sResearch Brief. China and India
MIRAGE simulations

26. WTO as a public good
 WTO: a place for cooperation vs a
place of litigations
 Value of an agreement to secure
existing trade liberalization and
bound current distortions
 Status quo is not always the best
counter factual for the DDA:
 If there is no strong evidence of rising
protectionism today, at least until March
2009. However, it is also clear that trade
policies happen to be changed by
policymakers as a reaction to economic
situation. Current economic conditions could
contribute to a complete change of mood in
terms of trade policies implemented. In fact,
even the post Second World War period,
which is a remarkable period of history in
terms of trade policies becoming freer and
freer, trading partners, including WTO
members, frequently augmented tariff
protection when needed. This is in
particularly true for Middle Income Countries
in all sectors and OECD countries in
agriculture. [Laborde and Bouet, 2009]
IFPRI brief, 2008 and IFPRI Discussion Paper 2009

27. The role of Binding: Protection vs the risk of
tariff increase
Increase to last Increase to last
ten years tariff ten years tariff
Increase to UR Increase to post peaks within UR peaks within DDA
DDA bound tariffs DDA bound tariffs limits limits
100
World annual Real Income changes, $Blns by 2025
50
Direct gains from the DDA
0
-50
“Insurance” value of the
-100 DDA, intermediate case
-150
-200
-250
“Insurance” value of the DDA, extreme
-300 case
-350
-400
Source: Bouet and Laborde, 2009. MIRAGE simulations

28. The role of Binding: limit in future use of
domestic support
 “Natural” trend in production and Brazil EU USA
prices will increase the size of 5
existing policies
Percentage changes in agriclture and agri-businees production
 New constraint, if not binding 4
today, will become binding in the
future
volume in 2025 compared to the baseline
 An illustration from a CGE exercise 3
on OTDS With "dynamic" OTDS
constraint
 More details based on Blandford 2
and Josling estimates available in Without "dynamic" OTDS
ITCSD/IPC/IFPRI publications, in constraint
particular: 1
 “ Implications for the United States of
the May 2008 Draft Agricultural
Modalities”, Blandford, Laborde and
Martin (2008). 0
 “ Implications for the European Union
of the May 2008 Draft Agricultural
Modalities”, Jean, Josling and Laborde. -1
-2
Source: Bouet and Laborde, 2009. MIRAGE simulations

29. But also
A more sustainable environment:
 Fishery policies cost the world economy $50 billion
(60% of the landed value of the global catch); EU
and US production support > $1bn per year
 Important for food security & livelihoods of many small
developing countries/coastal regions
 Potential for tariff reductions on environmental
goods – averaging some 10% in low-income
countries
 For a complete overview:
 Conclude Doha: It Matters!, Hoekman, Mattoo and
Martin

30. Conclusions
 On the overall the DDA will cut significantly existing
applied level of protection by at least one-fifth in both
AMA and NAMA, a very sensible number compared to
previous GATT rounds (and very limited reduction on
applied tariffs in AMA during the UR) and the existence
of numerous PTA.
 The DDA will secure the global trading system, and
has an important value as a public good, in particular
during a global crisis time.
 The Development targets will be achieved, especially if
the LDC initiative is generous and followed by MIC
countries.

31. Detailed tables

32. Agricultural tariffs levied, %
Base Formula Flex
Australia/New Zealand 2.5 1.5 1.9
Bangladesh 16.4 16.4 16.4
Brazil 4.8 4.7 4.8
Canada 10.7 5.1 8.6
China 7.8 5.3 7.5
EU-27 15.9 6.6 10.2
India 59.2 54.6 59.2
Indonesia 7.6 7.0 7.6
Japan 29.8 14.0 20.4
Korea and Taiwan Pr. 27.8 18.5 27.1
USA 4.8 2.1 3.0
World Bank Classification
All countries 14.6 9.0 11.9
Developing (non-LDC) 13.3 11.3 13.2
High income countries 15.5 7.5 11.1
LDCs 12.5 12.2 12.5

33. Agricultural tariffs faced, %
Base Formula Flex
Australia/New Zealand 17.3 10.2 13.9
Bangladesh 14.7 12.6 14.4
Brazil 18.8 9.8 13.7
Canada 9.0 5.2 6.8
China 16.8 9.7 13.8
EU-27 16.6 10.6 13.6
India 10.1 7.2 8.9
Indonesia 21.5 19.4 20.4
Japan 14.0 9.9 12.7
Korea &Taiwan Pr. 16.0 10.8 12.8
USA 14.0 8.5 11.3
World Bank Classification
All countries 14.6 9.0 11.9
Developing (non-LDC) 14.3 8.6 11.5
High income countries 15.1 9.3 12.3
LDCs 7.4 6.5 7.1

34. NAMA tariffs levied, %
Base Formula Flex
Australia New Zealand 3.6 2.4 2.4
Bangladesh 18.3 12.5 18.3
Brazil 8.5 7.4 7.8
Canada 0.9 0.5 0.5
China 5.6 3.9 4.4
EU-27 1.8 1.0 1.0
India 12.9 11.7 12.0
Indonesia 3.9 3.5 3.9
Japan 1.3 0.7 0.7
Korea &Taiwan Pr. 4.0 2.8 3.1
USA 1.5 0.8 0.8
World Bank Classification
All countries 2.9 2.0 2.3
Developing (non-LDC) 6.1 4.6 5.3
High income 1.6 1.0 1.0
LDCs 10.9 8.0 10.9

35. NAMA Tariffs Faced, %
Base Formula Flex
Australia New Zealand 2.9 2.0 2.6
Bangladesh 3.7 1.7 1.8
Brazil 2.6 1.9 2.2
Canada 0.4 0.3 0.3
China 3.8 2.3 2.5
EU-27 3.6 2.7 3.0
India 4.6 3.1 3.6
Indonesia 3.4 2.2 2.5
Japan 4.5 3.0 3.5
Korea & Taiwan Pr. 3.8 2.6 2.9
Sub-Saharan Africa 2.1 1.4 2.0
USA 1.8 1.4 1.5
World Bank Classification
All countries 2.9 2.0 2.3
Developing (non LDC) 2.9 1.9 2.1
High income 3.0 2.1 2.4
LDCs 2.8 1.5 1.8