DDA Tasks

Updated: Nov 28 2002, 05:30am hrs
The annual report prepared by the trade policy review body of the World Trade Organisation (WTO) doesnt say anything new. But given the thrust of the Doha Development Agenda (DDA) on market access, its arguments are important. First, non-tariff barriers (NTBs) in the developed countries constrain export opportunities. The report mentions quantitative restrictions on imports of textiles and garments, although these will be phased out in December 2004. However, the report also mentions standards like technical barriers to trade acting as NTBs and there is no reason for these to be phased out in 2004. If anything, disciplines on tariffs lead to policy substitution and use of NTBs like standards, anti-dumping and anti-subsidy investigations and safeguards. In addition, the report highlights tariff peaks and tariff escalation in developed countries. Tariff peaks are concentrated in agriculture, textiles and garments and manufactured items where developing countries have a comparative advantage and export interest. Thus 1.6 per cent of tariff lines in Canada face tariff peaks, while the figure is 5 to 6 per cent in the European Union, Japan and the US. Tariff escalation, with low tariffs on raw materials, higher tariffs on intermediates and highest tariffs on finished goods also deter value addition in developing countries. The reports computations dont seem to have addressed specific duties. Had this been done, since specific duties convert to high ad valorem equivalents, the conclusions wouldve been stronger.

However, even with such underestimation, the removal of protectionism on manufactured products leads to annual welfare gains of between $250 to $620 billion. Some welfare gains naturally accrue to consumers in the developed countries, thanks to lower prices. But there are also welfare gains of between $80 bn and $310 bn to the developing countries, with the inclusion of agricultural liberalisation pushing up welfare gains to developing countries by another $30 bn per year. The resultant growth by 2015 will reduce poverty ratios by 13 per cent in the developing countries. Not only are these numbers huge, compared to such gains, any official development assistance by the developed countries is insignificant. Hence, there is an inherent hypocrisy in developed country attitudes. But before lambasting such countries, the developing countries should also note the reports point that average tariffs for trade between developing countries are higher than tariffs faced in developed countries. In general, high tariff bindings, the large gaps between bound and applied rates and complex procedures also harm the cause of developing country exports. The task before the DDA is not one of only projecting North/South dichotomies. Beyond scoring negotiating points, the more important issue is one of reducing protectionism across the globe. Huge welfare gains from opening up were promised in the course of the Uruguay Round (1986-94). Because of loopholes in agreements and imperfect liberalisation (such as in agriculture), those gains didnt materialise. The DDA has yet another opportunity of ensuring that promised gains and poverty reduction goals are not messed up once again.