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New EU study shows significant economic benefits from a Doha deal
A study published recently shows that the economic benefits arising from the Doha Development Agenda (DDA) negotiations in the World Trade Organisation amount to an increase of world exports of $359 billion on an annual basis from a deal on the liberalisation of industrial goods, agriculture, services and on the removal of red tape.
If an agreement on sectoral liberalisation of industrial goods (chemicals, machinery, electronics) could be reached, world exports would increase by a further $146 billion, totalling $505 billion annually, according to the study.
In terms of capturing the global benefits of the Doha Round, this timely analysis manages to grasp the complexity of the negotiating proposals currently on the table in Geneva at most detailed level, offering policy makers a thorough analytical basis for an informed decision on the importance of a successful DDA Agreement for the world economy.
Key findings of the study:
The deal on the table is well balanced. In terms of economic gains all regions – developing, emerging and developed countries - would profit from an ambitious Doha deal. This would mean 0.2% of additional economic growth at global level and an extra $30 billion in GDP for the EU on an annual basis.
The removal of red tape in trade, so-called trade facilitation (e.g. simplification of customs procedures, transport and trade logistics), is of major importance for a successful Doha Development deal. Almost half of the global gains ($100 billion in world exports) are to be reaped from this part of the agreement. In addition, the allocation of gains becomes more favourable to developing countries when trade facilitation is included.
A successful Doha agreement would not negatively affect wages of EU workers. Wages for skilled and unskilled labour would even increase by around 0.3%.
The negotiations on sectoral agreements for chemicals, machinery and electronics goods would further enhance the DDA benefits. With these sectoral agreements world exports would increase by an additional $146 billion, to as much as $505 billion annually (with yet another $8 billion if environmental goods are included).
Contrary to a common perception, an agreement would also lead to positive effects on tariff revenue for some regions, one of which is Sub-Saharan Africa. In the case of Sub-Saharan Africa reduced red tape would make trade volumes go up even when tariffs are kept at the same level. Higher trade volumes result in an increased tariff revenue.
A successful completion of the DDA would even lead to gains beyond those modelled in the study. The DDA has systemic value in preventing excessive tariff hikes. Lower tariff bounds have additional value in curbing protectionism. Concluding the Doha Round reinforces fundamentally the global and transparent set of rules, which is going to make every subsequent recession less painful.
This new study, commissioned by the European Commission, carried out by CEPII, a well known Paris-based research institute, uses a state-of the art CGE model (computable general equilibrium) and the latest negotiating texts (published December 2008 and updated 21 April 2011) and as a result has a significantly higher degree of specification than any other previous studies. It is based on new data for the world economy, which includes the impact of the financial and economic crisis. It is also one of the few studies which include a thorough simulation of a DDA agreement with sectoral liberalisation of industrial goods as well as environmental goods. In terms of capturing the benefits of the Doha Round, numerous studies preciously tried to quantify its effects, but few really managed to grasp the complexity of the proposals at most detailed level and the uncertainty about how members would use the flexibilities included in the draft agreement.
The EU has a deep interest in a strong and well-functioning multilateral trading system underpinning open markets and respect of trade rules. The EU has played a proactive and constructive role in the DDA negotiations, including by developing a solid compromise proposal in the key area of tariffs on industrial goods, and by consistently calling for deliverables to address specific challenges faced by Least Developed Countries. The EU is determined to work with its WTO partners to bring the Doha Round out from the present stalemate towards a successful conclusion.
The study "Economic impact of potential outcome of the DDA II"
MEMO on the Doha Round: MEMO/11/751
On EU submissions to the WTO during the Doha Round:
Statement by the Commissioner for Trade on DDA in the EU Parliament on 12 September 2011
John Clancy (+32 2 295 37 73)
Helene Banner (+32 2 295 24 07)