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Top Story
The following story is from the August 27 issue of International
Trade Reporter
Current Reports:
WTO
Doha Deal Seen Boosting Global GDP
By
$300 Billion to $700 Billion a Year
A successful conclusion of the Doha Round of World Trade Organization negotiations, based on what is currently on the table, could boost global gross domestic product by between
$300 billion and $700 billion a year, according to a major study released Aug. 19.
The study—by Gary C. Hufbauer and Jeffrey J. Schott, senior fellows at the Peterson Institute for International Economics—also found that total world exports would rise by an estimated $180 billion to $520 billion annually.
“Our analysis reveals large potential gains from proposals now on the table,” the study says. “Moreover, we expect that current proposals in key areas, namely service-sector agreements and trade facilitation, will improve as negotiations draw to a close.”
Longest-Running Trade Negotiations
But the 121-page study said that there appears to be no end in sight for the negotiations, which began in November 2001 and now have the distinction of being the longest-running trade negotiation in the post-war era.
“Members of the [WTO] continue to differ on the depth of liberalization required in the areas of agriculture and nonagricultural market access (NAMA), thus hindering the discussion of other important issues on the negotiating agenda, particularly services,” the study said. “To date, the negotiating groups have elaborated general formulas for cutting tariffs and reducing agricultural subsidies but differ sharply on how countries could limit or exempt certain products from these ‘formula cuts.' ”
It said, moreover, that negotiations on services have “barely progressed” from when the initial offers were put on the table many years ago.
The G-20 group of developed and developing countries, including the United States and key players such as China, Brazil, and India, have pledged to work hard to narrow their differences between now and their next leaders' meeting, scheduled to be held in Pittsburgh, Pa., where the Doha Round is expected to be high on the agenda.
Last month, trade ministers from the 21-member Asia-Pacific Economic Cooperation (APEC) forum, including the United States, issued a declaration at the conclusion of their meeting in Singapore calling for “accelerating” efforts to conclude a “modalities” agreement in agriculture and NAMA and for completing the overall WTO talks by 2010.
The declaration also directed senior officials to meet in Geneva “to ensure direct engagement within the WTO so that progress can be made prior to the Pittsburgh [G-20] Summit. …”
‘Irreparable Harm' to WTO Credibility
The Hufbauer-Schott study said that it is essential that the Doha Round be successfully completed for two reasons, namely, to implement the tariff and subsidy reforms embedded in the draft negotiating texts developed to date and “pocket the gains already substantially agreed to” and to ensure the viability of the rules-based multilateral trading system.
“If multilateral solutions are put on hold,” the study said, “national governments—pressed by their domestic constituencies—will look elsewhere to resolve trade and investment problems, either through unilateral measures or through bilateral and regional trade pacts. Failure in the Doha Round would cause irreparable harm to the WTO's credibility as a negotiating forum, which would, over time, undermine its valuable dispute settlement mechanism.”
The study said that a “failure scenario”
is especially worrisome given the frailty of the global recovery from the financial and economic crisis and the possibility that a double-dip recession will deliver prolonged high unemployment, resulting in pressure for more trade protection.
U.S. Gets Small Gains
But the study said that the United States would reap small trade gains in agriculture and NAMA (export and import gains of $6 billion and $14.3 billion, respectively), which, it said, explains why a possible deal on modalities has not attracted active support from U.S. pro-trade constituencies. To acquire that support, it said, the deal would have to be supplemented, particularly in services, which could add $10.8 billion and $3.5 billion, respectively, in export and import gains.
It said that, moreover, “topping up”
NAMA in several sectors could yield further gains of $6.1 billion and $5.5 billion, respectively, in exports and imports).
“Combined,” the study said, “we estimate U.S. export gains of $22.9 billion and U.S. import gains of $23.3 billion from a Doha deal with modest ‘top-ups.'
The resulting GDP gains would be $38.7 billion.”
The study said that the European Union stands to gain more from agreements in agriculture and NAMA because its barriers are higher than those in the United States.
China GDP Boosted $60 Billion
As for China, liberalization of trade in goods and services through the Doha Round would boost its GDP by more than
$60 billion, the study found.
But in India, the trade gains would be “much more muted, with the notable exception of import gains on services of some $10.5 billion. Its GDP would rise by more than $22 billion
(or 2 percent) through the liberalization of services trade in the Doha Round, the study said.
The study said that Brazil would see its GDP increase by more than $33 billion, or about 2.5 percent.
“Our findings contradict the critics who argue that the world should trash the Doha Round because the payoff is too small,” Hufbauer and Schott wrote. “World export gains already on the table (i.e., agriculture and NAMA) are over $65 billion annually, and world export gains on the table and in the oven
(i.e., agriculture, NAMA, and sectors) are over $120 billion. World export gains from improved trade facilitation could double the impact of the Round. … The services negotiations, another potential source of large export gains, are struggling, but the potential gains in other areas could inspire key countries to improve their offers.”
Hufbauer and Schott said that all told the Doha Round could yield potential annual world GDP gains of between $300 billion and $700 billion. “While this figure represents optimistic thinking on our part,” they said, “it is not a ‘pie-in-the-sky'
number,” based on their calculations.
By Gary G. Yerkey
The Hufbauer-Schott study—“What's on the Table? The Doha Round as of August 2009”—has been posted on the Peterson Institute website at http://www.piie.com/publications/wp/wp09-6.pdf.
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