Amman, November 2010
Why did the Doha Round fail? –
Prospects of a Development-friendly Solution
Mónica Jara Valenzuela
Hochschule für Technik und Wirtschaft
Master’s of International and Development Economics
Workshop “Trade Policies in International Comparison”
Outline
2
1.
Introduction
2.
Why did the Doha Round fail?
3.
Identifying the WTO´s economic guideline
4.
The discussed benefits of free trade
5.
Prospects of a development-friendly solution
1. Introduction
3
Quick facts about the Doha Round (DR)
a.
Fourth Ministerial Conference (Qatar, 2001): First negotiation round since the creation of the WTO
b.
Special feature: Focus on the needs and interests of developing countries “Doha Development Agenda”
c.
The DR Agenda: 21 topics some have been
dropped in following negotiations after Doha
(Singapore Issues)
1. Introduction
4
Quick facts about the Doha Round (DR) (cont. 2)
d.
Main Meetings
•
Three Ministerial Conferences (Doha 2001, Cancun 2003 and Hong Kong 2005)
•
Three smaller gatherings (Geneva in 2004-2006-2008)
e.
Collapses and suspension:
•
Original deadline: January 2005
•
Collapses (Cancun 2003, Geneva 2006 & 2008)
•
Suspension (Geneva 2006)
2. Why did the Doha Round fail?
5
Immediate reasons
2003
Collapses
2006 2008
Agricultural liberalization
G-20 v/s EU-US joint agricultural proposal
EU v/s US
EU Agricultural market access reductions and
US farm subsidies
G-33 v/s US Special Safeguard Mechanism (SSM) in
agriculture Singapore Issues
African Union (AU), ACP and LDCs groups v/s EU,
South Korea and Japan
Suspension
2. Why did the Doha Round fail?
6
Underlying reasons
1.
Increased participation of developing countries because of power asymmetries and
marginalization in past rounds
•
Lack of specified rules for decision-making procedures
•
“Club meetings” characterized by lack of transparency
•
Developing countries have not been able to use the
majority rule – decisions have been made by consensus and
with all present member countries
7
Underlying reasons (cont. 2)
2.
Broadness of the agenda
3.
No clear definition of “development”
•
No developing-country status
•
No clear principles regarding the path towards development
2. Why did the Doha Round fail?
“Single package”
3. Identifying the WTO´s economic guideline
8
WTO’s official economic guideline
“Reduce poverty”
“Reduce poverty”
“Raise standards of living”
“Ensure full employment”
“Sustainable development”
“Raise people's welfare”
“Foster peace and stability”
“Substantial reduction of tariffs and other barriers
to trade”
“Elimination of
discriminatory treatment in international trade
relations”
Marrakesh Agreement
About the WTO — a statement by the Director-General
Trade liberalization
9
WTO´s observed economic guideline
3. Identifying the WTO´s economic guideline
Average tariff reduction achieved
• Quad: 10% of effective applied tariffs
• Pcts.: Food, textile, leather, and footwear Tariff peaks
• Quad: Low technology textile industry, agriculture and forest manufactures Tariff escalation
Non-tariff barriers
10
WTO´s observed economic guideline (cont. 2)
3. Identifying the WTO´s economic guideline
Import licensing Rules for the
valuation of goods at customs
Preshipment
inspection Rules of origin Investment
measure Sanitary and
phytosanitary measures (SPS)
Technical barriers to trade (TBT)
WTO agreements on NTB NTBs faced by developing countries
11
WTO´s observed economic guideline (cont. 3)
3. Identifying the WTO´s economic guideline
Trade-related intellectual property rights
(TRIPS)
Special and countervailing measures (SCM) Sanitary and
phytosanitary measures (SPS)
International standards and
regulation
Exemptions
12
WTO´s observed economic guideline (cont. 4)
3. Identifying the WTO´s economic guideline
Developed countries
Essential for economic growth in the past
Necessary to produce new knowledge
Good for developing countries because it encourages technological
transfer, attract FDI and promotes R&D
Developing countries
Normative and monetary problems with the
implementation of the TRIPS Not enough flexibility to protect public health, food safety and socio-economic and
technological development Strong IPRs do not lead automatically to FDI, tech.
transfer or local innovation
TRIPS
13
SCM (Subsidies)
1.
Environment-related technologies
2.
Regional equality reduce regional disparities
3.
Agriculture cotton, biofuels, fisheries
4.
R&D to promote high-tech industries
3. Identifying the WTO´s economic guideline
WTO´s official
economic guideline WTO´s observed
economic guideline
WTO´s observed economic guideline (cont. 5)
14
“The data show a definite statistical link between freer trade and economic growth. Economic theory points to strong reasons for the link. All countries, including the poorest, have assets — human, industrial, natural, financial — which they can employ to produce goods and services for their domestic markets or to compete overseas. Economics tells us that we can benefit when
these goods and services are traded. Simply put, the principle of
“comparative advantage” says that countries prosper first by taking advantage of their assets in order to concentrate on what they can produce
best, and then by trading these products for products that other countries produce best.”
“In other words, liberal trade policies — policies that allow the unrestricted flow of goods and services — sharpen competition, motivate innovation and breed success. They multiply the rewards that result from producing the
best products, with the best design, at the best price.”
Source: Understanding the WTO http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact3_e.htm
4. The discussed benefits of free trade
15
1.
Unrealistic assumptions: Market imperfections, international labor mobility, increasing returns to scale, etc.
2.
No exchange rates equilibrium: Manipulation and large fluctuations lead to permanent trade deficits/surpluses and instability
3.
Disparities in infrastructure and expertise between developed and developing countries
4.
The role of TNC’s: Global monopolies, “absolute advantage” determine trade patterns
4. The discussed benefits of free trade
Bottom line
16
How would development- friendly trade look like?
Unclear concept of development Unclear
concept of free trade
Unclear economic guideline in
the WTO
5. Prospects of a development-friendly solution
17
1.
Historical approach on NDC’s
2.
Rejects pressure on developing countries to liberalize trade and investment
3.
Long term view change current specialization patterns build up new comparative advantages active government intervention
4.
The role of the government: Correct market imperfections, ensure minimum installed capacities and protect affected industries.
5.
Policy space: Country specific industrial and trade policy in order to achieve industrial diversification and technological upgrading
6.
Restrictive FDI policies: Targeted investment towards priority sectors
18
Ch an
C ha ng g
5. Prospects of a development-friendly solution
19
1.
Income disparities between developed and developing countries are explained by the knowledge gap
2.
“Infant economy” protection technological progress in the industrial sector transmission of knowledge
develop dynamic CA
3.
Government intervention in order to create an
adequate business climate, construct infrastructure and promote education
4.
Sequenced liberalization process according to country- specific needs problems of premature trade
liberalization in developing countries
S ti g lit z
5. Prospects of a development-friendly solution
20
1.
Economic development requires diversification, not specialization production structure is not only
determined by factor endowments
2.
Diversification needed (industrial development) in order to sustain growth: It is not a natural process
3.
Need for the implementation of industrial policy information and coordination externalities
diversification to a more sophisticated export basket
4.
Government intervention in collaboration with the private sector industrial policy as a learning process
5.
Policies should be country-specific
5. Prospects of a development-friendly solution
Ro d ri k
21
1.
Focuses on technological progress and industrial capacities for economic growth
2.
Building up of local industrial capabilities and
technological learning have to take place in order to transfer new technologies to developing countries selective government intervention
3.
The role of TNC´s on technological transfer
4.
Diversify exports away from resource extraction and low-skilled labor activities
5.
The role of the government should go beyond infant industry protection to strengthening industrial
competitiveness, coordinate factor markets and regulate FDI flows
5. Prospects of a development-friendly solution
La ll
22
Comments regarding the WTO and the DR
1.
Shrinking policy space within the WTO: TRIPS, TRIMS, GATS, and constrained use of subsidies (except the one in the interest of DC) (all authors)
2.
The broadness of the agenda (DR) increased
developing countries’ difficulties to negotiate - Stiglitz
3.
Power imbalances have overshadowed the
development aspect of the DR (abuse of political power by DC)- Stiglitz
4.
Developing countries face high implementation costs with new WTO regulation - Rodrik
5. Prospects of a development-friendly solution
23
Recommendations to the WTO and the DR
1.
Shift from “Agricultural-industry swap” towards
“development” – Chang & Rodrik
2.
Increase developing countries’ participation in trade negotiations achieve a fair agreement - Stiglitz
3.
Increase market access in the interest of developing
countries (Temporary labor mobility, tropical products, and textiles) - Stiglitz
4.
The WTO should be in charge of shaping the trade regime in accordance to members diversity instead of promoting
“trade openness” – Rodrik
5.
Increase transparency and accountability – Rodrik &Stiglitz
5. Prospects of a development-friendly solution
24
Proposed economic guideline
1.
Long-term view of economic development
2.
Creation of dynamic comparative advantages through government intervention
3.
Industrial diversification produce more technologically advanced products
4.
Foster technological upgrading
5.
Develop country-specific trade and industrial policies
5. Prospects of a development-friendly solution
Questions?
25
Thank you for your attention!
Amman, November 2010
Supplementary information
Mónica Jara Valenzuela
Hochschule für Technik und Wirtschaft
Master’s of International and Development Economics
Workshop “Trade Policies in International Comparison”
Topics included in the DR
27
1.
Implementation-related issues
2.
Agriculture
3.
Services
4.
Non-agricultural market access (NAMA)
5.
Intellectual property
6.
Trade and Investment
7.
Trade and Competition
8.
Transparency in government procurement
9.
Trade facilitation
10.
Antidumping
11.
Subsidies
Singapore
Issues
Topics included in the DR (cont. 2)
28
12.
Regional agreements
13.
Dispute settlement
14.
Environment
15.
E-commerce
16.
Small Economies
17.
Trade, debt and finance
18.
Trade and technological transfer
19.
Technical cooperation
20.
LDC
21.
Special and differential treatment
Broadness of the agenda
29
Weighted MFN tariffs applied by Quad countries on technology-differentiated exports from developing countries, 2000
30
Source: UNCTAD, 2003, p. 26
