WTO

1
WTOs Doha Development Agenda and South Asian
Agriculture

• Kym Anderson
• Development Research Group, World Bank
• SASAR seminar, World Bank, Washington DC, 8 June
  2006

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The issue

• India (with the G20) has been offensive on agric
  subsidy cuts in the DDA, but has been defensive
  on agric market access
• presumably because the government fears tariff
  cuts would add to rural poverty and erode its
  rural political base
• The US would bear the brunt of adjustment to cuts
  to domestic ag subsidies, the EU to cuts in ag
  export subsidies, so in exchange both want more
  market access in DCs (ag and non-ag)

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Multilateral DDA offers opportunity for easier
trade reform than if unilateral

• Access to foreign goods services markets
  increases at same time, making adjustment to
  own-reform easier
• Easier to sell the reform message domestically if
  other countries are adjusting at same time
• shared pain for mutual gain

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The key question

• If the DDA were to conclude this year (a big IF),
  and agric and other reform commitments were to be
  phased in over the next decade, how would South
  Asian economies, and especially their
  agricultural sectors, be affected?

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Answer depends on the regions

• net trade position of various industries
• the region is close to 100 self-sufficient in
  agric and food products
• current levels of actual own-protection and DDA
  commitments to change them
• the regions ag and food tariffs are well above
  the DC and global averages, but has few ag
  subsidies
• assumptions in global models used to address the
  question

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We use two global models

• GTAP model, based on 2001 baseline
• WBs recursive Linkage model (with slightly
  higher elasticities), whose baseline is projected
  to 2015
• Both use the GTAP protection database of 2001
  (which includes all key preferential tariffs),
  revised to 2005 to account for
• Chinas accession to WTO
• EU expansion to 25 members, and
• end of Uruguay Round implementation (including
  phase-out of textile and clothing quotas)

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Results are necessarily lower-bound estimates
because they ignore

• Dynamic growth effects of reform
• Pro-competitive effects of reform
• Impact of increase in product variety
• Gains from (most) services trade and investment
  reform
• The risk that, without Doha, agricultural
  protectionism could rise
• Complementary domestic reforms

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Why this issue also matters for the rest of the
world

• Because both models suggest almost 2/3rds of cost
  of current agric and trade policies to the world,
  and to developing countries, are due to
  agricultural policies
• as agric. applied (bound) tariffs now average
  nearly 5 (10) times manufacturing tariffs
  globally
• Because the majority of worlds poor depend
  directly or indirectly on ag for their livelihood
• And because most of the costs of agric policies
  are due to tariffs, not subsidies
• with the notable exception of cotton

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Relative importance of 3 agric pillars(Anderson,
Martin and Valenzuela 2006)
Welfare gains from of gain to Agric market access Agric domestic support Agric export subsidies All agric policies
Developing countries 106 2 -8 100
World 93 5 2 100
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How large are South Asian tariffs in GTAP
database ()?
Primary agric Processed food Textiles/ clothing Other manuf
India 26 76 27 24
Bangladesh 7 21 30 16
Other S. Asia 14 32 7 14
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How large are costs to South Asian overall
economies of global distortions ( of base
income)?
GTAP model, 2001 Linkage model, 2015
India 0.4 0.4
Bangladesh -0.5 0.2
Other S. Asia 0.5 0.5
All devel. countries 0.5 0.8
All high-income 0.6
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How large are costs to South Asian farmers of
global distortions ( of base net farm income)?
GTAP model, 2001 GTAP model (incl. services) Linkage model, 2015
India -2.5 -0.7 -8.1
Bangladesh -1.5 -1.5 -4.4
Other S. Asia 4.4 4.6 -1.3
All devel. countries 5.0 5.7 2.9
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Effect on costs to South Asian farmers of global
distortions if own-agric tariffs are zero( of
base net farm income)?
GTAP model, 2001 (incl. services libn) GTAP model, 2001 (incl. services libn)
Default tariffs Zero own-ag tariffs
India -0.7 4.1
Bangladesh -1.5 3.3
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Change in agric VA due to libn ()
Own libn Other DCs lib HIC libn Total global lib
India -4.1 -0.5 3.8 -0.7
Bangladesh -2.7 -1.4 2.6 -1.5

Brazil 1.6 1.9 39 43
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Elements of the Doha Agenda as in July 2004
Framework agreement HK Dec 05

• 3 agricultural pillars
• Non-agricultural market access
• Services
• Lesser tariff and subsidy cuts for developing
  countries (DCs) and zero cuts for least-developed
  countries (LDCs)
• What would it do for S. Asia, compared with full
  global libn?

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Key agricultural elements of the Doha Agenda to
watch

• Reduction in tariff and subsidy binding
  overhang
• Treatment of sensitive and special products
  (SSPs)
• Tariff cap, and whether it applies to SSPs
• Extent of Special and Differential Treatment
  (SDT) invoked by developing and least-developed
  countries in terms of their willingness to reform

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Our modelled Doha scenarios

• 75 tiered cut to bound agric tariffs
• without with sensitive and special products
• without with a tariff cap of 200
• with without Special and Differential Treatment
  (SDT)
• 75 tiered cut to domestic ag subsidy ceilings
• Abolition of agric export subsidies
• 50/33/0 cut in bound non-agric tariffs
• Services policies unchanged

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Big bound cuts needed to reduce applied agric
tariffs, because of binding overhang
Base With SD Without SD
India 50 46 37
Rest of S. Asia 21 21 17
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Effects of full Doha libn on DC welfare
change in Full global libn Doha (with lesser cuts by DCs) Doha (with full cuts by DCs)
Latin America 1.0 0.29 0.33
South Asia 0.4 0.21 0.36
Sub-Saharan Africa 1.1 0.10 0.27
All developing countries 0.80 0.16 0.30
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Effects of full Doha libn on ag incomes ()
change in Full global libn Doha (with lesser cuts by DCs)
India -8.1 02.
Rest of S. Asia -1.3 1.8
All S. Asia -6.8 0.5
All DCs 2.9 2.0
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Real farm income rise from Doha (percentage
change from baseline income in 2015)
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Lessons for the Doha round

• Agric subsidy cuts alone will contribute only a
  tiny gain
• Cuts in bound agric tariffs (and domestic
  support) need to be very large to get beyond
  binding overhang
• Even large cuts in agric tariffs do little if
  sensitive and special products are subjected
  to lesser cuts
• Adding non-agric market access to Doha package
  could nearly double the welfare gains to South
  Asia and other DCs even with their lesser cuts
• and it helps balance the North-South exchange of
  concessions

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This and all chapters from our book are now
available at www.worldbank.org/trade/wto