Will Martin and Aaditya Mattoo* 8 November 2011 *This presentation reflects the views of the authors only and not necessarily those of the World Bank.

Transcription

1 Will Martin and Aaditya Mattoo* 8 November 2011 *This presentation reflects the views of the authors only and not necessarily those of the World Bank.

2 it is clear that we will not complete the DDA if we continue to conduct negotiations as we have in the past we need to pursue in 2012 fresh, credible approaches to furthering negotiations, including the issues of concern for Least Developed Countries and, where they can bear fruit, the remaining elements of the DDA mandate. We direct our Ministers to work on such approaches at the upcoming Ministerial meeting in Geneva and also to engage into discussions on challenges and opportunities to the multilateral trading system in a globalised economy

3 What fruit is worth picking? What are the implications of existing contentious proposals? What are the lessons from Doha for fresh, credible approaches to furthering negotiations?

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5 Easy to evaluate the pain from reform Difficult to evaluate the gain from other countries reforms Depends on actions by over 150 economies Complex tariff-cutting rules Flexibilities in agriculture and non-agriculture Which products will be selected? What impact will this have? How to add up the resulting impacts? Weights on highly-protected products too low Is there any market access on the table?

6 Tiered formula to cut bound tariffs Different coefficients for industrial & developing ctries Wider bands & smaller cuts in developing countries Sensitive products for all countries Special products for developing countries Flexibilities used where formulas mean large cuts in protection on important commodities Reduces estimated cuts in protection more than when sensitive products are assumed to be those with the highest tariffs Many products with high tariffs are very minor

7 Final Tariff Tariff Cut equivalent 50% 1 45% 40% Post-Formula Tariff Rate Tariff Cut equivalent % % D % 20% C % B % 5% A % 0% 20% 40% 60% 80% 100% 120% Initial Tariff 0

8 60 50 Formula Flex Developed Developing

9 60 50 Formula Flex Developed Developing

10 Swiss formula Highest tariffs cut the most No final tariff, t 1 above the ceiling, a a. t0 t1 a t 0 Industrial country ceiling of 8%, ceilings for developing countries, 20, 22, 25% Only developing countries have flexibilities

11 Final Tariff Tariff Cut equivalent 18% 1 16% % 12% 10% 8% % 4% 2% Post-Formula Tariff Rate, Swiss Formula Coef 20 Tariff Cut equivalent (SW Coef. 20) % 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Initial Tariff 0

12 Formula Flex 10 0 Developed Developing

13 Formula Flex Developed Developing

14 40 35 Formula Flex Developed Developing

15 Full Formula Flex Developed Developing Global $bn/yr

16 Abolition of export subsidies Sharp cuts in domestic support in industrial countries 70% cut in US overall trade-distorting support 82.2% in cotton 80% cut in the EU Product-specific support limits based on levels

17 Services policies hugely important for many developing countries Both as exporting industries and as sources of efficient inputs Actual policies are much more liberal than WTO commitments Substantial binding overhang Proposed reforms would reduce this overhang slightly perhaps by 10% But not one iota of liberalization!

18 STRI for 62 countries SAR GCC LAC EAP MENA AFR OECD ECA Offer Improvement (Uruguay Round commitment-doha Offer) Offer gap(doha Offer-Actual policy) Actual Policy

19 Important for ensuring LDCs benefit from the Round No LDCs benefit from agreed reductions in their own trade barriers Some lose from preference erosion Some may lose from higher agricultural prices DFQF is important in helping ensure all members benefit But exceptions can have an outsize impact Exclusion of 3% of products substantially cuts benefits Also important whether developing ctries participate

20 GATT Articles V (transit), VIII (Customs) and X (transparency) Current proposals focus on areas that are easy to implement and have a high rate of return Mainly regulatory, administrative & institutional reforms Research suggests that many of the suggested reforms have extremely high rates of return.

21 Aid-for-trade assistance could generate substantial benefits In support of unilateral liberalization Particularly if it focuses on areas like border management, transparency & government procurement This initiative is facilitated by, but independent of, the DDA

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23 Could potentially lead to much larger increases in trade than the current NAMA agreement Perhaps 150% increase in the gains NAMA flexibilities play only a small role in diminishing the market access gains from Doha Much NAMA trade involves large trade flows and low tariffs and the low tariffs are not cut significantly But, under current proposals, many of the larger cuts in protection would be in developing countries

24 Many countries vary protection to insulate domestic prices from movements in world prices Reflects real concerns about access to food Price-based safeguard can achieve this for individual countries If all countries do this, the policy is ineffective Rise in world price volatility brings domestic price volatility to its original level Quantity-based safeguard needs to be implemented very cautiously Raising protection when domestic output falls is likely to compound the impact of an output shock on poverty

25 Relatively small volumes of trade affected But accounted for 20% of Appellate Body reports between 1998 and 2010 Mainly developed countries affected to date But 60% of products affected by US antidumping are exported by developing countries Potentially large impact if other countries adopted flawed procedures of this type

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27 Are formulas that cut the highest tariffs by the most the best way to proceed in goods trade? Generate the most economic gains The highest tariffs are the most costly economically But generate political costs & pressure for exceptions Might alternatives like proportional cuts allow more progress for a given amount of political capital?

28 Do the food security concerns of developing countries need more explicit consideration? How can the collective-action problem created by countries price insulation be taken into account? Agreed disciplines on the extent of price insulation? It may not be enough to focus just on import measures export restrictions cause importers to lose confidence in markets as a source of food supplies

29 So far domestic regulation considered only where its presence (accountancy) or absence (telecoms) might be an impediment to market access. More attention needed to identifying and remedying regulatory weaknesses in developing countries (in prudential & pro-competitive regulation) More attention to promoting international regulatory cooperation (e.g. in finance & Mode 4) Addressing good reasons for holding back from commitments could help unleash the power of reciprocal liberalization in services

30 The DDA is focused mainly on the international cooperation issues of the 1990s Concerned, for example, about low prices for food, when recent concerns about high food prices Little attention to trade & the environment Little attention to the trade consequences of exchange rates Recent G-20 Communiqué creates space to identify new issues requiring international cooperation

31 There is much in the proposals on the table Bigger cuts in bound tariffs than in any earlier negotiation Substantial cuts in protection faced- Agric & NAMA Worthwhile economic gains despite the exceptions Systemic benefits from abolition of agric export subsidies Considerable stakes in the difficult unresolved issues eg Sectorals, SSM, and Zeroing Greater ambition may require deeper reform of the negotiation methodologies in services and goods And perhaps a redefinition of the negotiating agenda to move to a mandate for the realities of the 21 st Century, rather than one inherited from the 20 th century

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