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Why is the Doha Development Agenda Failing? And What Can Be Done? A Computable General Equilibrium–Game Theoretical Approach

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  • Antoine Bouët
  • David Laborde

Abstract

We use a world computable general equilibrium model to simulate 143 potential trade reforms and seek solutions to the issues hampering progress in the Doha Development Agenda (DDA). Inside the domain defined by all these possible outcomes, we apply the axiomatic theory of bargaining and select the Nash solution of cooperative games. The solutions vary according to the objective functions adopted by the trade negotiators. When real income is the objective and services are excluded, or when optimising terms of trade is the objective, the Nash solution is the status quo. Trade liberalisation is feasible only when the negotiators focus on national exports or gross domestic product (GDP). Our assessment of some possible solutions reveals that excluding members having a GDP below a certain threshold improves the bargaining process, regardless of the governments’ objective. Formation of coalition, such as the G20, constitutes an option for its members to block outcomes imposed by rich members. We also find that side payments may be a solution, but represent a very high share of the global income gain.

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File URL: http://hdl.handle.net/10.1111/j.1467-9701.2010.01302.x
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Bibliographic Info

Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 33 (2010)
Issue (Month): 11 (November)
Pages: 1486-1516

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Handle: RePEc:bla:worlde:v:33:y:2010:i:11:p:1486-1516

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  1. Mohamed Hedi Bchir & Sébastien Jean & David Laborde, 2006. "Binding Overhang and Tariff-Cutting Formulas," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(2), pages 207-232, July.
  2. Antoine BOUET & David LABORDE, 2009. "The potential cost of a Failed Doha Round," Working Papers 2, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Jul 2009.
  3. Antoine Bouët & Yvan Decreux & Lionel Fontagné & Sébastien Jean & David Laborde, 2008. "Assessing applied protection across the world," Working Papers 26327, Institut National de la Recherche Agronomique, France.
  4. Tyers, Rod, 1990. "Implicit policy preferences and the assessment of negotiable trade policy reforms," European Economic Review, Elsevier, vol. 34(7), pages 1399-1426, November.
  5. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
  6. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
  7. van Tongeren, Frank & van Meijl, Hans & Surry, Yves, 2001. "Global models applied to agricultural and trade policies: a review and assessment," Agricultural Economics, Blackwell, vol. 26(2), pages 149-172, November.
  8. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, Octomber.
  9. Harry G. Johnson, 1965. "An Economic Theory of Protectionism, Tariff Bargaining, and the Formation of Customs Unions," Journal of Political Economy, University of Chicago Press, vol. 73, pages 256.
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Cited by:
  1. Bouet, Antoine & Laborde, David, 2010. "Eight Years of Doha Trade Talks: Where Do We Stand?," eJADE: electronic Journal of Agricultural and Development Economics, Food and Agriculture Organization, Agricultural and Development Economics Division, vol. 11(2).
  2. repec:laf:wpaper:201003 is not listed on IDEAS

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