Aaditya Mattoo and Arvind Subramanian are not very optimistic about the prospects for the Doha Round of trade negotiations. Mattoo and Subramanian are World Bank and IMF economists.
I posted on their recent article in the IMF magazine Finance & Development here: "Why is it so hard to reduce trade barriers?".
If things go wrong, they don't expect a spectacular meltdown. They expect negotiators to cobble together a weak agreement and claim success:
If our analysis here is correct, the prospects for a meaningful Doha Round may not be too bright. We fear a scenario in which a limited set of concessions is agreed to, based largely on what has already been done—subsidy reduction in agriculture in the EU and locking in (“binding”) the already undertaken services reform in developing countries—and this package is trumpeted as a successful Doha Round.
After all, that's what happened last time:
...Ten years ago, a “successful” Uruguay Round was concluded, leading to estimates of large global welfare gains. But liberalization assumptions built into the models were disconnected from what the Round actually achieved. The models assumed substantial liberalization in agriculture and manufacturing by developed and developing countries. For many developing countries, however, “liberalization” attributed to the Round was notional, even illusory.Very little incremental liberalization took place: in both agriculture and manufacturing, developing countries agreed to bind tariffs at levels that often were higher than prevailing levels.
For industrial countries, meaningful liberalization took the form of quota dismantling, but apart from that very little was achieved. In agriculture, countries set tariffs at very high levels to offset the elimination of quotas (“dirty tariffication”). Cuts in tariffs were rendered notional by an arcane process of choosing a base year well before unilateral reductions had been made. Furthermore, the model estimates conveniently ignored the impact of the intellectual property agreement, which would have reduced welfare gains, especially for developing countries.
We are not saying that there was no liberalization during the 1990s. Nor are we claiming that there is no value in locking in reforms that have already occurred. What we are saying is that the benefits of the Round were exaggerated and its costs were underplayed. Cutting through all the hype, the Uruguay Round was all about industrial countries eliminating clothing quotas in return for which developing countries increased their intellectual property protection [And recall that the developed countries exploited the rules to delay most of the impact of the quota reductions for almost 10 years - Ben]. The rest did not amount to much. While framework agreements in services and tariffication in agriculture set the stage for future liberalization, much greater claims were made on their behalf...
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