The Dearth of Development in the Doha Development Agenda

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The Doha Development Agenda (DDA) of trade negotiations was launched in the WTO in 2001, with the claim that it would ‘seek to place their needs and interests at the heart of the Work Programme adopted in this Declaration’. The negotiations have now reached nearly into their 10th year, stalled repeatedly by an inability among the major players to find agreement. However, the broad outlines of a final agreement are in place, but with critical details remaining to be filled in.

So what chance is there that the WTO delegates, particularly the developed countries which were required to offer more than reciprocal concessions, will deliver a ‘developmental’ outcome?

Currently, the answer appears to be: slim to zero.

And this is being backed-up by a multitude of economic studies. These computable general equilibrium models have been used to predict the gains from trade liberalisation, and the benefits going to various regions. The findings are not happy reading for the WTO’s less developed members.

Many such studies in the past predicted huge gains from liberalisation: $367 billion by Harrison et al, or even a huge $2 trillion by Brown, Deardorff and Stern. However, these large estimates are based on complete liberalisation of trade, which is certainly not on the agenda. The highest estimates incorporate speculative elements such as liberalisation of FDI, about which we presently have little ability to model.

More recently, studies have turned to using the likely outcome of the DDA, based on draft texts, rather than full liberalisation. This has had a significant impact on the expected benefits. On this basis, the gains will be a like a meagre $38.4 billion globally, with only $6.7 billion going to developing countries. As Frank Ackerman puts it: ‘Doha is worth about $3 per year, or less than a penny a day, for each person in the developing world’.

And it should be remembered that these estimates are one-off gains (they are the ‘efficiency gains’ that result from moving production out of one sector of the economy and into another, in which the country has a greater comparative advantage). That is, the gains for the developing world expected from the DDA are not $6.7 billion per year. They are $6.7 billion in total.

Indeed, even that is an exaggeration. Computable general equilibrium models, though much improved over recent years, are blunt tools that leave out much of interest. For example, they generally assume either full employment, or fixed employment. The displaced workers, moving into the more productive sectors, are assumed to do so effortlessly. In reality this process is anything but easy, and may lead to a significant period of higher unemployment. Trade liberalisation has costs, which are almost always left out of economic models.

So where does that leave us with the DDA? Will it deliver on the needs and interests of developing countries? The evidence suggests, no.

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