News Releases

No. 24/06
March 17, 2006

EU WELCOMES CARNEGIE RESEARCH ON DEVELOPMENT IN DOHA TALKS

A Carnegie Endowment study entitled "Winners and Losers: Impact of the Doha Round on Developing Countries," released this month, reinforces a number of the EU's basic contentions about Doha and the nature of a development round. It rightly cautions against seeing simple liberalization in the Doha Round as a panacea for development.

The Carnegie research reminds us that the bulk of the benefits of agricultural liberalization are limited to developed countries and a core group of highly competitive farm exporters - especially Brazil, Argentina and South Africa. The EU has always argued that these are valuable gains for these economies but that they are not synonymous with development in the broadest sense.

The Carnegie research suggests that, for subsistence farmers, exemptions from tariff cuts and policy space to support agricultural development subsistence and small-scale farming should be taken into account. So too should due recognition of the impact of preference erosion in poorer developing countries when faced with steep farm tariff reductions in the developed world. The EU has long ceded both these points.

The Carnegie research suggests that the key gains for developing countries in the DDA (Doha Development Agenda) lie in trade in industrial goods, especially in labor intensive industries like shoes and textiles. The EU has always argued that a balanced Doha Round must focus on the value of manufactures trade for developing countries.

The Carnegie research suggests that the value of new trade generated by the Doha Round could be less than $50 billion per year. However the study uses a static model to estimate the value of new trade generated by the Doha Round that does not consider the cumulative effects of liberalization. For example, in industrial goods liberalization there are spill-over benefits as imports raise competitiveness and industries learn from each other. This is even more true of services trade, where opening can have a snowball effect by importing expertise and foreign capital. The Carnegie research openly concedes that it does not estimate the potential benefits of services negotiations.

The Doha Round also has important non-market access dimensions which have to be factored into any measure of potential benefits for developing countries. What about Aid for Trade? Billions in new annual funds for infrastructure and trade capacity are huge development gains above and beyond the potential benefits of market opening. This Carnegie estimate of the value of the Doha Round also does not factor in the potential benefits of Trade Facilitation agreements, which can improve customs rules, reduce corruption and boost customs revenues.

All available economic studies indeed indicate that services and trade facilitation are the two major sources of gains in the Doha Round. Better port efficiency, customs environment, regulatory environment and service sector infrastructure are key to the ability of low income countries to access third countries’ markets.

Text: "Winners and Losers: Impact of the Doha Round on Developing Countries"

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