What Next for Multilateral Trade Talks? Quantifying the Role of Negotiation Modalities

International audienceWhat are the lessons from the DDA from a forward looking point of view? A decade of negotiations is likely to go nowhere. This paper argues that absence of a landing-zone was in the data. Quantitative tools modelling the detail of the modalities predicted failure but were not taken seriously: the design of the negotiation implied that any achievements of the Round could only be limited. Such feebleness was induced by the way multilateral negotiations were organized – in separate groups, without much consideration for, or understanding of, how the different elements added up to more than the sum of the parts. We put sensible figures on that argument by using a dynamic computable general equilibrium model of the world economy, addressing exceptions, flexibilities as well as the non-linear design of the liberalization formulas, a reduction in domestic support, the phasing out of export subsidies in agriculture, as well as trade facilitation. Our conclusion is that negotiators have to go back to simplicity and re-bundle the topics if they wish to revamp multilateral negotiations

Multilateral agricultural trade liberalization: The contrasting fortunes of developing countries in the Doha Round

An applied general equilibrium model is used to assess the impact of multilateral trade liberalization in agriculture, with particular emphasis on developing countries. We use original data, and the model includes some specific features such as a dual labor market. Applied tariffs, including those under preferential regimes and regional agreements, are taken into account at the detailed product level, together with the corresponding bound tariffs on which countries negotiate. The various types of farm support are detailed, and several groups of developing countries are distinguished. Simulations give a contrasted picture of the benefits developing countries would draw from the Doha development round. The results suggest that previous studies that have neglected preferential agreements and the binding overhang (in tariffs as well as domestic support), and have treated developed countries with a high level of aggregation have been excessively optimistic about the actual benefits of multilateral trade liberalization. Regions like sub-Saharan Africa are more likely to suffer from the erosion of existing preferences. The main gainers of the Doha round are likely to be developed countries and Cairns group members. Classification-CGE model, Doha Round, agriculture, tariff preferences, domestic support.

What Next for Multilateral Trade Talks? Quantifying the Role of Negotiation Modalities

What are the lessons from the Doha Development Agenda (DDA) from a forward-looking point of view? A decade of negotiations is likely to go nowhere. This paper argues that absence of a landing-zone was in the data. Quantitative tools modelling the detail of the modalities predicted failure but were not taken seriously: the design of the negotiations implied that any achievements of the Round could only be limited. Such a weakness was induced by the way multilateral negotiations were organized-in separate groups, without much consideration for, or understanding of, how the different elements added up to more than the sum of the parts. We put sensible figures on that argument by using a dynamic computable general equilibrium model of the world economy, addressing exceptions, flexibilities, as well as the non-linear design of the liberalization formulas, a reduction in domestic support, the phasing out of export subsidies in agriculture, and trade facilitation. Our conclusion is that negotiators have to go back to simplicity and re-bundle the topics if they wish to revamp multilateral negotiation

MIRAGE, Updated Version of the Model for Trade Policy Analysis: Focus on Agriculture and Dynamics

MIRAGE is a multi-region, multi-sector computable general equilibrium model, devoted to trade policy analysis. It incorporates imperfect competition, horizontal and vertical product differentiation, and foreign direct investment, in a sequential dynamic set-up where installed capital is assumed to be immobile. Adjustment inertia is linked to capital stock reallocation. MIRAGE draws upon a very detailed measure of trade barriers and of their evolution under given hypotheses, thanks to the MAcMap database. The most recent version, presented in this paper, offers improvements in the modelling of agriculture policy and dynamics

Trade liberalization and the demand for natural resources

Is free trade harming the environment? This general concern has received particular attention in the case of energy use and emissions. But to what extent would “Buy local” save energy at the global level? Addressing this issue in general equilibrium and at the global level makes it possible to take into account the multifaceted impacts of trade on energy consumption. While transport is energy intensive, international specialisation concentrates production in the most economically efficient producers which can be, or not, more efficient in terms of energy use. Depending on the direction of trade specialisation and on the relative energy efficiency of exporters, more trade can lead to increased or reduced global energy efficiency. We examine this issue using MIRAGE-e and modelling two scenarios of trade liberalisation (Doha-like and full liberalisation). Results validate the hypothesis of enhanced global energy efficiency as trade increases

MIRAGE, Updated Version of the Model for Trade Policy Analysis: Focus on Agriculture and Dynamics

CGEM;Trade policy;Agriculture;FDI

What next for the DDA? Quantifying the role of negotiation modalities

Negotiators have reached a deal on a limited series of issues WTO Ministerial Conference in Bali (3–6 December 2013), one of these being trade facilitation. Based on a quantitative assessment taking into account the detail of the last proposals circulated, we argue however that due to the design of the negotiation, achievements of the DDA will eventually be limited. This is due to a lack of ambition making it difficult for negotiators to compensate their own concessions. Such feebleness is induced by the way negotiations were organized – in separate groups, without much consideration for, or understanding of, how the different elements added up to more than the sum of the parts. Our quantification of these issues is performed with a dynamic computable general equilibrium model of the world economy, while liberalisation of tariffs is taken into account at the product level in order to address exceptions, flexibilities as well as the non-linear design of the formulas. A reduction in domestic support and the phasing out of export subsidies in agriculture are taken into account, as well as trade facilitation. Our conclusion is that negotiators will have to re-bundle the bits of the negotiation and shift efforts towards the neglected issue of services to make progress towards the objectives agreed on in Bali

Economic Impact of Potential Outcome of the DDA

Using a dynamic computable general equilibrium model of the world economy (MIRAGE), we simulate the impacts of the most recent drafts circulated in the multilateral trade negotiations arena, augmented by a modest outcome of the negotiation in services. The liberalisation of tariffs is implemented at the product level in order to take into account exceptions, flexibilities as well as the non-linear design of the formulas. A reduction in domestic support and the phasing out of export subsidies are taken into account. We integrate dynamic gains up to 2025. We observe a $US70bn world Gross Domestic Product (GDP) long run gain when agriculture and industry are liberalised, a$US85bn gain when a 3% reduction in protection for services is added to certain services sectors. Calculation of the gains associated with trade facilitation suggests roughly a doubling of the expected gains ($US152bn); port efficiency adds another$US35bn. Recent proposals for sectoral initiatives would add a further $US15bn on top of these gains