Introduction
Doha Development Round (DDR) also referred to as Doha Development Agenda (DDA), is recognized as the world trade organization (WTO). This organization had organized a trade negotiation round that took place in the year 2001 at a place called Doha. The major objectives of this negotiation were to try and set up lower trade barriers all over the globe.
Such low trade barriers were meant to inspire a positive influence in developing and increasing the world trade endeavors. Contrary to the expectations, the 2008 talks stalled over divided major issues concerning certain strong trade sectors including; agriculture, industrial tariffs, services, trade remedies and finally on non-tariffs barrier (Guardian.co.uk 2011).
This disagreement that came about was between the developed and the developing countries. The developing countries accused the developed and rich countries of their plots to maintain agricultural subsidies without considering the interest of others.
This led to collapse of the 2008 Doha round negotiations after the two sides (developed and developing countries) failed to attain a uniform rule governing agricultural imports among many others. The most involved countries include; the United States, China and India who represented the developing countries.
There are many impacts both positive and negative as a result of this failed negotiation. Such results face both the developed and developing countries, although it expresses a higher degree of negativity than positivity to the developing countries (Bhaghwati 2011).
Causes of the collapse of the negotiation
This section will briefly discuss several reasons as to why the Doha Development Agenda failed in order to have better background information about the WTO failed negotiations.
It is important to note that, the major cause for the collapse was the United States and the European Union, who completely declined the request to lower down tariffs and subsidies just to pave way for developing countries to access agricultural markets without facing variety of obstacles like competition (Moberg 2006).
This was further worsened by the action of United States to insist on implementing a freer access to the developing countries industrial goods and services, not considering their rights of protecting their infant industries (Guardian.co.uk 2011).
The Doha declaration had put in place very strong emphasis focused on the past economic practices like agriculture rather than focusing and concentrating on today’s manufacturing and services sectors.
Moreover, as a matter of facts, the embedded values of land from agriculture subsidies ranges up exceeding US$ 1 trillion, especially in the developed countries for example; the United States, European Union and Japan (Hufbauer 2006). Therefore it is unfair and non-democratic for anyone to embrace policies that slash properties values overnight, without considering others.
The other factor is that, the farm lobbies in the developed countries were very unwilling to pass the policy of liberalization of market access and also they didn’t agree on slashing subsidies (Hufbauer 2006).
This is, because most emerging economies posses a very long list of sensitive agricultural products primarily insulated from trade liberalization and that it was unfair to the developing countries that benefited handsomely from the public good of open markets.
In addition to that, majority of least developed states were demanding on assimilation of 99% duty free access to their tariffs lines (Hufbauer 2006). This was never negotiable, since the developing countries were not willing to open their own markets to the other countries. Furthermore, the European Union had skipped and completely retreated from some of the demands they had earlier requested in the negotiation (Hufbauer 2006).
This made most developing countries to also refuse further considerations regarding those issues. Finally, there are some critics who claimed that the provided agenda was too complicated to confuse poor countries thus the collapse was praised and referred to be a great victory. Little did they know that such a collapse on world trade negotiation carried both severe loses and slight benefits (Hufbauer 2006).
After seven years of strict negotiations, many participants of the world trade organization (WTO) mini ministerial at country level could not arrive at a straight agreement in the Geneva meeting, which was to be focused on Doha round liberalization modalities. Nevertheless, several conflicts are still exhibited regarding the commitment, which both the developing and developed countries should each make.
For instance, the world superpowers the United States is still reluctant in tackling the issue of domestic support especially on the cotton sector. This automatically affects most developing countries like India, who wish to completely avoid some restrictions like the anti-concentration clause. This is contrary to their ability to use the flexibility in non-agriculture liberalization (Bouet &Laborde 2008).
Beyond this specific element of the disagreement, it is clear that this Doha round are generally weak. Since the developed countries have already achieved a large market access via manufacturing sectors, it is obvious that the impetus for the previous multilateral agreements and negotiation had already vanished (Bhagirath 2011).
Moreover, for developed countries, liberalization of agriculture markets strongly remains very complex. This is because the developing countries who also wanted to maintain trade protection in their manufacturing industry, neglected the new commitments regarding nascent industry.
Its important to note that, impact assessments using a computable general equilibrium (CGE) technological model, has provided clear information relevant for the gains and loses that are associated with Doha Development Agenda (DDA).
Comparatively, there were great improvements in terms of world trade when the Uruguay Round Assessment (URA) was operational, in that lack of information on tariffs resulted to an overestimation of potential gains (Bouet &Laborde 2008). Moreover, the improved current information on tariffs has revealed that, the gains previously registered when the previous URA was operational had decreased.
The Shrinking gains that are associated with Doha round have also triggered both economists and policymakers to state that, “the real gain go far beyond the tariff reductions effects, which can be found outside the standard model” (Bouet &Laborde 2008).
In addition, most traditional studies on the impact of Doha negotiation have assessed all the potential gains by simply comparing the perceived consequences of the negotiation modalities to the baseline status.
Notable to mention is that, it is hard for the current trend of multilateral trade liberalization to survive this Doha negotiation failure. This failure also involves the global public good availed by the WTO, which helps to free international trade in a free environment (Bouet &Laborde 2008).
Methodology employed in assessing impact of failed DDA negotiations
The SIA methodology of assessment was precisely developed to ensure there is consistency and also to facilitate on the report on the impacts of failed DDA. The main components involved in this assessment include; screening and scoping key issues. This is followed by the negotiation scenarios as a result of failed DDA negotiation (Colon, Clive & Serban 2006).
The whole analysis revolves around full Doha Development Agenda which is basically divided into three areas. The agriculture and non agriculture market access, services, rule and other measures.
Notable to mention is that, the most technical analysis must always begin with first identifying the common effects of liberalization of scenarios on the economy and other opportunities (Colon, Clive & Serban 2006). Definitely, this will thereafter cause significant economic, social and environmental impacts. Often, some impacts may be short term or temporal whereas others will appear to be long term.
DDA scenarios
Inspite of WTO negotiation (Doha Development Agenda (DDA)) not being successful, it is evident that several negative impacts have emerged with a wider effect on international trade (Bouet &Laborde 2008). First of all, there was an escalation in trade wars between countries.
Almost at the same time, there was an n increase in the number of litigations at WTO, whereby most countries tried to reverse to the former unilateral trade liberalization moves they used to practice (Bouet &Laborde 2008). Furthermore, based on the current financial crisis globally may foster protectionist behaviors. This was exactly witnessed after the October 1929 crisis.
Following the current situation, a parallel can easily be drawn between whatever happened back then and what is happening currently. Back in 1930, the greatest fear worldwide was unemployment, deflation and lack of enough public resources. These conditions were also more pronounce especially in those countries that paid war reparations.
Such conditions strongly inhibited most government from remedying the economic crisis. Today, things are different because whenever the world prices are very low, there are strict restrictions in the context of mechanically decreasing prices (Bouet &Laborde 2008). Such price reductions can generally result in reinforcement and protection of specific duties.
Moreover, in such economic context it is clear that protectionism is a tempting instrument specifically when it comes to policymakers. This policy short-sightedly contributes to the increase of domestic prices of goods supporting all domestic activities and also provides new public receipts. In this case, such a government would not be categorized to correctly anticipate world retaliation and anti-retaliations.
This happened to United States in the year 1930 and also a few years ago, where the US government banned all exportations right in the middle of a food crisis and in presence of successive rounds of retaliations and counter retaliations (Bouet &Laborde 2008).
The failure of DDA was mainly as a result of disagreement between those rich (developed) and the developing countries. On the other hand, it is evident that the world trade super powers will always promote their markets access at their own interest.
This can be achieved when such countries negotiate new free trade areas (FTAs) with closely selected key partners (Bouet &Laborde 2008). In addition to this, it is clear that, whether DDA succeeds or whether it fails, the trade policy dynamics will always differ. However, it appears to be very challenging to guess or even tell the reaction of other different countries belonging to a non-cooperative world (Bouet &Laborde 2008).
Specific Economic Scenarios caused by failure of WTO negotiations
The Doha scenario
This presents the real outcomes of the Doha July 2008 modalities, which took seven years of trade talks and still collapsed. Unfortunately, the market access modalities have been rated to have reached a higher level of sophistication contrary to its objectives.
Though the general philosophy of this Doha negotiation appears to be very simple, it is true that there have been a progressive tariff reductions formula imposed on both the agriculture and non-agriculture goods. Moreover, there are many flexibilities that have been introduced recording a general different degrees of special treatment exhibited for different categories of developing countries.
Such scenario implements all the relevant details for these modalities specifically in terms of the overall market access and also the initiative for the least developed countries (LDCs). Basing the concern on domestic support, this scenario primarily supported the overall constraint that emerged on overall trade distorting support (OTDS) for developed countries like the US and European Union.
Due to such gains, the complexity of again integrating other elements in the simulations as per the DDA agenda was omitted. These elements include; liberalization in service, WTO rules and also the intellectual property rights (Bouet &Laborde 2008).
The Up to bound scenario
Categorically, this up to bound scenario swiftly examines any arising possibilities for the WTO countries to increase their tariffs with time until they reach the Uruguay round (UR) bound level. It is believed that the entire entire binding overhang will be terminated whereas for the unbound lines, the same binding overhang that still exists will impose new tariffs on them (Bouet &Laborde 2008).
This scenario aims at eliminating all the unilateral liberalization, but is very keen on not advocating for an open trade war between WTO countries. Though this scenario respects the existing commitments, it appears to be very extreme. This is because majority of developing countries strongly bound their tariffs during the UR with help of a ceiling option, to a higher level they have never applied.
Moreover, even though such strict tariffs are still in place many countries have independently decided to apply zero tariffs especially on selected imported inputs and raw materials (Bouet &Laborde 2008).
The Up to max scenario
In this case, due to the failure of Doha negotiations, historical data were used to determine the previous highest ever applied protection rate by all WTO countries during the year 1995 to 2006 (Bouet &Laborde 2008).
The next step was to identify and selecting the minimum between that historical maximum level and the existing bound tariff. This corresponds to a case whereby the government practices and applies more adverse trade policies of the past years, but still respects the current UR commitments (Bouet &Laborde 2008).
Historically, such tariffs evolved to answer changes occurring in the world markets prices and political pressure. Most importantly is that, this scenario also allows the sharing of binding overhang very relevant for capturing private agents. This occurs because it corresponds to the formed behavior expressed by the policy makers since the end of the UR.
Its important to include that, in both Up to Bound and Up to Max scenarios, there is no changes made to the preferential tariffs, which are protected by bilateral or regional arrangements (Bouet &Laborde 2008). It is only the MFN and non-reciprocal preferential rates that are prone to modification.
In addition, the only non-reciprocal program that never undergoes modification is the EU “everything but arms,” which strictly follows the EU legislation (Bouet &Laborde 2008).
Contrary, many countries have not yet bound their import tariffs enabling them not to be constrained by any upward limitation in today’s world of trade. Significantly, the anti-dumping duties together with safeguarding mechanisms when activated can restrict trade even in the so called rich countries especially when binding overhang exhibited is nil or limited (Bouet &Laborde 2008).
The FTA-HIC Scenarios
This came about due to the failed Doha negotiation. Most countries were more likely to individually seek market access gains through any necessary means. This could either be via bilateral or plurilateral agreements (Bouet &Laborde 2008). It is possible not to imagine of how the multiplication of this FTAs would worsen the already in place spaghetti bowl and increases the trade costs.
This costs increase is basically due to lack of transparency and the overlapping trade rules of origin. This scenario emphasizes on implementation of one plurilateral agreement, which assume that HICs to adopt a zero for zero approach allowing each member of plurilateral agreement to liberate about 95% of its total tariffs (Staiger 2005).
However, several justifications must be considered. The first being that North to South and South to South is very difficult to conduct the negotiations whereas the latter are weekly enforced.
Secondly, “HICs will place all the responsibilities of the failed DDA on MICs lack of commitments to open their own markets.” (Bouet &Laborde 2008, p. 34). As a reaction to this, it may be necessary to move on more quickly towards a freer trade partnering with countries that are willing.
Finally, by imposing the 95% duty free agreements, most of the rich countries will be at a better angle and consistent with GATT article XXIV. This will protect their most fundamental sectors for example, agriculture. On the other hand, FTA wouldn’t entail any form of commitment regarding to both the export subsidies and domestic policies for most delicate OECD states (Bouet &Laborde 2008).
Economic impacts of failed WTO negotiations
It is important to consider that the Doha scenario focuses mainly on a small section of the rich DDA Agenda, which the tariff liberalization and domestic support discipline. Considerably, world trade is depicted to be augmented by a mere 1.46% approximately US$336 billion whereas the world real income lies at US$50 billion by the year 2025 (Bouet &Laborde 2008).
Generally, all this figures are driven by the assumption that no political shock would take place if this DDA is never signed. This means that when DDA fails, there would be global economic collapse. Similarly, in the case of up to bound scenario, the world trade would depreciate to about 1,774 billions followed by the world real income also depreciating to about US$353 billions (Bouet &Laborde 2008).
Focusing on the less damaging scenario and the up to max scenario, the trend is still the same. The entire world trade would experience gradual reduction less by US$728 billion (Bouet &Laborde 2008). All this loses specifically hit the agricultural industry especially on exportations.
The most affected include the developing countries agricultural exports by -11.5% losses, which are closely followed by the exportation of industrial products with 2% reduction. Ironically, for developed countries the loss was very slight at 4.8% reduction.
However, this reduction depicts that there was no escape even for countries that decided to tighten their trade policies. Their trade was also affected even though it was only the tariffs on goods that were increased (Trade negotiation committee 2011).
It is evident that developing counties are the most negatively affected by the HIC-FTA trade diversion that comes as a result of failed WTO negotiations. Such diversions recorded negative 0.02% of their real income for the developing countries being reduced while positive 0.02 benefits being registered by the developed countries.
This is what happens when WTO negotiations fails, which sees off developing countries suffering more than developed countries. In fact, there would be development of clear disagreement between two or more WTO countries and this means the beginning of international non-cooperation (Trade negotiation committee 2011).
In addition, most of these exercises clearly predict simple calculations carrying a huge potential loss ranging to about US$1064 billions whenever WTO talks failed. Contrary, its not only the money loses that are experienced but also loss in general commitments towards global protectionism. This carries a roughly about US$728 billions that is lost annually (Bouet &Laborde 2008).
Finally, several recent studies focusing on the potential impact of the failed WTO negotiations have all concluded that, an augmentation will eventually arise specifically for world trade and world real income (Bouet &Laborde 2008). This failure of WTO would really mark the beginning of international non-cooperation era between many WTO countries (Hoekman & Prowse 2008).
Moreover, it would be a clear beginning of trade conflicts and litigations, precisely between high incoming developed and developing countries. In such a period of economic stagnation, it is widely feared that this WTO failures would pave way for members to seek and adapt to non-cooperative strategies, for example the foreign protectionist policies.
Statistically, such moves always records the highest loss ever recorded than the mere US$79 billion registered during the collapse of WTO negotiation (Hoekman & Prowse 2008).
In my own opinion, I recommend that trade leaders globally should take a vital step to make sure that Doha Development Round of trade negotiation turns out successful at whatever cost. This move would save approximately US$1064 billion potential loss on world trade if ignored (Bouet &Laborde 2008).
Assessed Economic impacts
Non- agriculture market access (NAMA)
The major objectives of Non- agriculture market access (NAMA), was to help most of the developing countries to consequently attain an appropriate formula that would fully allow a wider liberalization of markets for OECD countries (Uneca.org 2005). In addition, such developing countries would also have several chances to continue with industrial development and quickly boost their economy.
The failure of WTO negotiation has seen most developed countries being denied such an opportunity to access global markets (World Trade Organization 2006). Furthermore, the NAMA had put into consideration on non-linear formula of trade placing all developing countries on a special category where they will have reduced tariffs.
This was meant to ensure that most developing countries will struggle to boost their low economy. Nevertheless, this entire beneficial allegation is only a dream since the WTO negotiation was never passed by the same developing countries (Uneca.org 2005).
The DDA Agenda was also negotiating and insisting on an exchange system of trade. For example, developed countries would open their markets for the developing countries to access and in return, they would benefit from industrial goods from developing countries.
This negotiation popularly known as NAMA, was aiming at strengthening the traditional and transnational cooperation on developed countries who were indeed the real exporter of technological and high value goods (Mineiro 2008).
The failure of this WTO negotiation would deny developing countries a special chance to access all this advantages freely. Moreover, the least developed countries are also at risk of rapid deindustrialization, hindering their potential advancements as far as industrial and technological sectors are concerned (Mineiro 2008).
Impact on income generation
With reference to global economic welfare, the most attributed result shows that welfare impacts are similar to the real country income. Generally, it can be concluded that the potential positive effect of full trade liberalization may be more chronic whenever considering the dynamic effect as far as the capital formation is concerned.
Nevertheless, when the Doha scenario that exercises the partial trade liberalization is considered, there are smaller estimated welfare gains globally in terms of magnitude contrary to the case where full trade liberalization is practiced (Mutume 2003).
Employment effects
One of the most computable methods that access briefly the economic impacts of the collapsed WTO is the equilibrium model studies (Colon, Clive & Serban 2006). Most trading reforms including the WTO negotiation, assume that employments are always fixed specifically at national or regional level.
This can however permit any worker from one region to easily secure employments from another region. Contrary, such CGE modeling frame work will in most cases not fully evaluate any persistent unemployment’s (Colon, Clive & Serban 2006). This is due to the established labor market constrains that are associated with costs adjustments.
When WTO negotiation fails, many employment opportunities would be lost. For example, previously there was a constant percentage demand for unskilled workers in developed countries which rose from 0.76% to 1.4% (Colon, Clive & Serban 2006).
This entire people will eventually lose their employment due to the effects of WTO. Moreover, this DDA rule was unfair for the African countries as far as job creations are concerned. This is because whenever DDA is implemented; all the unskilled job opportunities would be lost precisely in manufacturing industries but only maintain opportunities in agricultural sector (Harris 2008).
Bilateral trade effects
When this WTO negotiation fails, the other remaining alternative many countries would go for is bilateral trade (Sauve 2004). Most countries will selectively choose their trade deals partners based on regional agreements. Such deals however, will at the long run pave way for investments diversion and discrimination.
This is because, the bilateral trade will definitely be between the rich hegemons from developed countries and the poor developing countries who in any case will never say no. considerably, on key factor that would be excluded are the policies WTO was imposing.
For example, agriculture subsidies and anti-dumping policies (Sauve 2004). These rich countries would tackle such issues in an exploitative way the poor country would not recognize; unlike the WTO would tackle it meaningfully and openly (Mutume 2003)
It is clear that the collapse of Doha negotiation will automatically block out the road out of poverty for most developing countries (Hufbauer 2006). This specifically imply to 400 million African, few people from Asia and Latin America. As an economic impact, the collapse of DDA would see most countries attempting to focus on trade imbalances via protections and subsidies.
Moreover, the world trade organization focus will diminish as it turns out to be a dispute. Bearing in mind that litigation no matter how much it is practiced, will never be an equal substitute for the negotiation and in bringing down trade barriers (Hufbauer 2006).
Economic benefits associated with failure of WTO negotiations
When WTO negotiations failed, there was introduction of the HIC free trade zones. This zones according to the agreement resulted to a slight increase of world trade by a small value of 0.4% (Bouet &Laborde 2008).
Furthermore, based on the agreement there was a slight reductions of tariffs bearer for only those countries that were very close to free trade. Nevertheless, such countries were further allowed to selectively exempt about 5% of their highly protected products from this process (Bouet &Laborde 2008).
In most cases, the collapse of Doha is seen as victory for the poor developing countries (Moberg 2006).This can be substantiated by the fact that, it would open many options and alternatives aiding the poor countries boost their economy.
First of all, it thwarts an expansion of the global economy focused primarily on opening global markets widely for multinational corporations. Furthermore, Doha collapse also symbolizes a turning point for the enforced world economy regulations, even though majority of developing countries experience very little benefits (Moberg 2006).
To some extend, most poor developing countries are likely to face it rough and suffer more economically when this Doha negotiations succeed, due to the policies reinforced at the interest of developed countries. Although many sources praise Doha negotiation for reducing global poverty by 0.3%, it never counsels the fact that its failure has also imposed several economic loses precisely to the developing countries (Moberg 2006).
Furthermore, due to new intellectual rights acquired; the cost of living will finally increase whereby prices of commodities such as drugs would increase. This would be followed by an increase in the number of displaced peasants migrating into slums. The number of unemployment’s would also shoot up and as those that are available, and then they would face poor salaries (Moberg 2006).
As the key element for the intensification and further spread of globalization, free trade has played a major role to this success. This free trade comprises countries that rejected the policies of DDA. As a major benefit for this collapse, many nations geared up opposing the formulation of DDA negotiation they consider to be exploitative.
Furthermore, this complete free trade that would arise as a result of failed DDA negotiation was predicted to register US$2 trillion delivery of each annual benefit to the world trade (Naiman & Niva 2000).
Many developing countries after realizing that the moment this DDA succeeded, developed countries like the US in conjunction with the IMF and World Bank would impose on them extreme policies that are disastrous to the economy (Naiman & Niva 2000).
As a result of this failed negotiations, many Arabian countries including Saudi Arabia, Algeria and Oman have preceded with the independent bilateral trade deals with some European countries. This has beneficially assisted these countries to grow economical.
One major reason for such growth is that, this bilateral deal first dismantled all the tariffs subjected on industrial products and again agreed on reduction of all agricultural and services barrier (Naiman & Niva 2000).
In fact this has attracted most countries especially those neighboring the Arab world especially those who were embracing the WTO policies but now fear that WTO would eventually lead them into economic suffering.
This failure of WTO negotiation however, empowered most governments especially from developing countries to focus on various degrees of democratic legitimacy that are completely independent of external forces (Naiman & Niva 2000). Many developing countries would benefit entirely on variety of factors including, relieve from depts.
Majority of developing countries who owe the World Bank and the IMF loans would have an excuse to delay repayments. In addition, there would be no more taxation and such amounts would be directed back to help the individual developing country in boosting their local development such as; education, healthcare and domestic investments.
Such progress can only be achieved in the absence of policies put in place by the WTO negotiations (Dni.gov 2000).
The other sector, in which most developing countries would benefit from this collapsed DDA, is the agricultural sectors (Weissman 2008). Most developing countries being the best known exporters of agricultural products will eventually benefit economically from the collapse of DDA.
This is because, majority of rich developed countries must agreed to independently lower down all tariffs on industrial and services just to gain access to the agricultural products from developing countries (Weissman 2008).
This reduced market barriers boosting most developing countries economical growth. Such good deals may suggest that developing countries should remain agricultural forever to continue increasing their demand in terms of agricultural trade. It is the best tool the poor can use to benefit from the rich (Weissman 2008).
Conclusion
It is evident that the collapse of the WTO negotiation may have hurt global economic development. Some people say that, “success breeds many a parent while failure is usually an orphan” (Sauve 2004).
The failure of WTO negotiation will have both positive impacts and negative impacts to both developed and developing countries. In my opinion, I believe for the future of global trade and economy, these negotiations should be revived and clear agendas created to satisfy all countries expectation thus improve on world trade and interactions (Sutherlaand et al. 2004).
References
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