EVENTS

Date:	Thursday, August 28, 2003
Time:	10:00 AM -- 11:45 AM
Location:	Wohlstetter Conference Center, Twelfth Floor, AEI 1150 Seventeenth Street, N.W., Washington, D.C. 20036

August 2003
Is There Any Development in the Doha Development Agenda?

On August 28, 2003, AEI continued its trade policy series with a conference addressing the development issues in the Doha negotiations. J. Michael Finger of AEI moderated the discussion and was joined by Sarath Rajapatirana of AEI, Arvind Panagariya of the University of Maryland, and Ambassador Rubens Barbosa of the Embassy of Brazil.

J. Michael Finger
AEI

My own particular interest is the Singapore issues and the expansion of trade negotiations in so-called new areas, including services, intellectual property, standards, competition policy, investment, and government procurement, which are proposed in the current agenda. Expansion in these new areas at the Uruguay Round brought with it a troubled approach to development, and indeed I interpret the attempt to label the current round as a development agenda as a recognition of the fact that taking these up as trade negotiation issues has not adequately addressed development dimensions. This thesis is based on Dr. Lawrence J. Peter’s Peter Principle, which states that in any organization its elements rise to levels of incompetence. It is not that the new areas are not important to trade and not that they are not important to development, but that trade negotiations are not an effective means to deal with these issues. The WTO and GATT have a long tradition of using international commitment, or the carrot of reciprocity, as a way of overcoming the difficult politics of economic reform, which makes sense from the perspective of the domestic economy. The question is whether negotiating a new agreement is the way to carry the economic sense of these issues more broadly among the WTO membership.

A more effective way to spread the usefulness would be to negotiate new members in one at a time. The benefits would be more closely identifiable and align domestic politics. This would spread good policies from one country to another, especially when we consider local ownership of these policies. In sum, it looks as if in these areas the legal confidence of the trade negotiation has passed beyond its managerial or operational confidence. My conclusion is that one should give the benefit of the doubt to local solutions and remember that support for local solutions is not the same thing as dictating what local solutions should be.

Sarath Rajapatirana
AEI

What are the areas that should be handled in order for the Doha agenda to be considered a development agenda? First, we would like much greater market access for the developing countries as opposed to what they have now. Second, I would like to see much lower tariffs and less protection in general in developing countries, due to the strong connection between trade and development. Trade is not the enemy of development, but a very good friend. On issues of market access, developing countries are facing tariffs of 15–100 percent in some cases and huge domestic subsidies in agriculture. For example, the European Union cow receives $4 a day in assistance, and many people in the developing countries live below $4 a day. This type of distortion needs to be addressed if we are going to be seriously thinking about market access.

Also, liberalization of services is of interest to developing countries. Developing countries have tariffs that are three-to-four times higher than developed countries, yet developing countries can get a lot more return by liberalizing in these areas. The question is whether the Doha agenda leads to this type of reduction in domestic protection. It turns out that countries that have liberalized in the past have done it on a unilateral basis and did not wait for others. They were convinced it was a good thing to do. You do it because it is good for your own country. With respect to trade barriers, many are due to local and domestic conditions, which should be addressed through domestic policy, not trade policy.

 There are three issues with which I will make specific comments: special and differential treatment, technical assistance, and policy coherence. First, special and differential treatment enables countries that are not prepared to liberalize and take advantage of the world market to maintain barriers and avoid liberalization. I am skeptical with respect to such special and differential treatments, but I also realize that liberalization takes time. Second, there is a lot of verbiage when discussing technical assistance. The fact is that large financial institutions are not keen on technical assistance if one looks at their lending programs. It is not a favored area given the incentive systems of these institutions. Finally, policy coherence is also important. Linking issues of trade, debt, and finance is rather ambitious and often does not lead to realistic agreements. Rather, introducing trade first creates an incentive for the other elements to follow. If you try to combine all at once, it does not make sense. The connection between all these factors comes from the country and cannot be imposed from outside. To summarize, there is much to be achieved from improving market access, trade liberalization, and tariff reduction.

Arvind Panagariya
University of Maryland

I would like to speak from the viewpoint of the country that I follow most closely: India. Anything that discusses trade liberalization is a development driven agenda. The U.S. proposal to phase out industrial tariffs, 8 percent by 2010 and zero by 2015, is very much in the interest of developing countries. The modification I would suggest if one wants special and differential treatment is to phase these decreases in over a longer period of time; for example 8 percent in 2015 and zero in 2020. This is not less liberalization, but it makes it more politically feasible for developing countries. It is important to consider, specifically in regards to India, but certainly also to Brazil and China, is that nothing will happen unless it is part of a negotiation and is reciprocal.

Also worth noting is the proliferation of trade agreements. This is generating a “spaghetti bowl” of agreements but also causing discrimination against the countries that are left out of these agreements. There is no better way to eliminate these negative byproducts than by eliminating tariffs altogether. The most important reason to go through with the zero tariff liberalization of industrial tariffs is because it paves the way for an orderly liberalization of trade within the developing countries. This is in the countries’ best interest from a development perspective. Evidence suggests that countries that have chosen to open up and liberalize have grown a lot faster than those who stay protected. There are big gains to be had by both developed and developing countries liberalizing.

Rubens Barbosa
Embassy of Brazil

When we discuss the Doha Round agenda for development we have to take in to consideration what happened in 1994 after the Uruguay Round. Many developing countries were unhappy with the results and could not understand what had been approved in the negotiations. This is where the issue of technical assistance became even more important. Frustration of developing countries grew after the Uruguay Round. The idea of a development round catering to the interests of developing countries was created and labeled the Doha development agenda. Since that time the developing countries are still frustrated and all deadlines in the Doha agenda, including the agricultural deadline, were missed. The idea of this round was to discuss interests pursuant to developing countries, including special treatment, market access, implementation issues, TRIPS, and health.

Among all of them, agriculture is of utmost importance since this was left over from Uruguay. In 1994, the United States and the European Union met and decided to close an agricultural agreement between the two and imposed it on the developing countries. We are now in the middle of talks and still facing a difficult negotiation. Without progress in agriculture, there will be no Doha round. Overall, the agenda for development and the themes left over from Uruguay have not made progress. This is a fact. Now the developing countries have a clearer idea of what we want to achieve. We think that there is an imbalance in the negotiations so far, and to answer the question of this panel, no, there is no development in the Doha agenda.