Why did the Doha Round fail? Prospects of a Development-friendly Solution

Transcription

1 Hochschule für Technik und Wirtschaft Master s of International and Development Economics Why did the Doha Round fail? Prospects of a Development-friendly Solution Workshop Trade Policies in International Comparison Amman, November 2010 Mónica Jara Valenzuela

2 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

3 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)

4 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 ) e. Collapses and suspension: Original deadline: January 2005 Collapses (Cancun 2003, Geneva 2006 & 2008) Suspension (Geneva 2006)

5 2. Why did the Doha Round fail? 5 Immediate reasons 2003 G-20 v/s EU-US joint agricultural proposal Singapore Issues African Union (AU), ACP and LDCs groups v/s EU, South Korea and Japan Collapses Agricultural liberalization EU v/s US EU Agricultural market access reductions and US farm subsidies Suspension G-33 v/s US Special Safeguard Mechanism (SSM) in agriculture

6 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 2. Why did the Doha Round fail? 7 Underlying reasons (cont. 2) 2. Broadness of the agenda Single package 3. No clear definition of development No developing-country status No clear principles regarding the path towards development

8 3. Identifying the WTO s economic guideline 8 WTO s official economic guideline Reduce poverty Raise standards of living Ensure full employment Sustainable development Raise people's welfare Foster peace and stability Marrakesh Agreement About the WTO a statement by the Director-General Trade liberalization Substantial reduction of tariffs and other barriers to trade Elimination of discriminatory treatment in international trade relations

9 3. Identifying the WTO s economic guideline 9 WTO s observed economic guideline Tariff peaks Average tariff reduction achieved Quad: 10% of effective applied tariffs Pcts.: Food, textile, leather, and footwear Tariff escalation Quad: Low technology textile industry, agriculture and forest manufactures Non-tariff barriers

10 3. Identifying the WTO s economic guideline 10 WTO s observed economic guideline (cont. 2) WTO agreements on NTB NTBs faced by developing countries Investment measure Preshipment inspection Rules for the valuation of goods at customs Rules of origin Import licensing Sanitary and phytosanitary measures (SPS) Technical barriers to trade (TBT)

11 3. Identifying the WTO s economic guideline 11 WTO s observed economic guideline (cont. 3) International standards and regulation Trade-related intellectual property rights (TRIPS) Exemptions Sanitary and phytosanitary measures (SPS) Special and countervailing measures (SCM)

12 3. Identifying the WTO s economic guideline 12 WTO s observed economic guideline (cont. 4) TRIPS 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

13 3. Identifying the WTO s economic guideline 13 WTO s observed economic guideline (cont. 5) 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 WTO s official economic guideline WTO s observed economic guideline

14 4. The discussed benefits of free trade 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

15 4. The discussed benefits of free trade 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

16 Bottom line 16 Unclear concept of free trade Unclear economic guideline in the WTO Unclear concept of development How would developmentfriendly trade look like?

17 17 5. Prospects of a development-friendly solution

18 5. Prospects of a development-friendly solution 18 Chang Ch an g 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

19 5. Prospects of a development-friendly solution 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 Stiglitz 3. Government intervention in order to create an adequate business climate, construct infrastructure and promote education 4. Sequenced liberalization process according to countryspecific needs problems of premature trade liberalization in developing countries

20 5. Prospects of a development-friendly solution 20 Rodrik 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

21 5. Prospects of a development-friendly solution 21 Lall 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

22 5. Prospects of a development-friendly solution 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

23 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

24 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

25 Questions? 25 Thank you for your attention!

26 Hochschule für Technik und Wirtschaft Master s of International and Development Economics Supplementary information Workshop Trade Policies in International Comparison Amman, November 2010 Mónica Jara Valenzuela

27 Topics included in the DR 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

28 Topics included in the DR (cont. 2) 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

29 29 Broadness of the agenda

30 Weighted MFN tariffs applied by Quad countries on technology-differentiated exports from developing countries, Source: UNCTAD, 2003, p. 26