The Economy-Wide Impact of Multilateral NAMA Traiff Reductions:A Global and Danish Perspective

The Non-Agricultural Market Access (NAMA) negotiations were a key area in the Doha development round, which was suspended indefinitely in July 2006. In this paper, we model and estimate the economic effects on the world and Danish economies of some of the more important proposals that will likely re-emerge in some form in the near future. We used the GTAP computable general-equilibrium model and database to simulate trade shock scenarios that mimic WTO’s “August 2004 NAMA Framework”, which proposed a series of tariff reductions based on using the Swiss formula and flexibility rules for specific groups of countries. We illuminate the economic impacts of the proposed NAMA tariff reductions, with and without the developing country flexibility rule. Our results suggest modest NAMA-induced effects: relatively small average tariff reductions that in turn increase global trade by about 1 percent and global welfare by just over 9 billion US$. Trade would expand for most observed sectors, but vary across the sectors, with particularly high gains realised for the textile and clothing sectors. A number of Asian countries would particularly benefit from the NAMA tariff reductions. The NAMA tariff reductions with flexibility would generate modest increases in Danish trade and produce a slight improvement in the trade balance. They would also shift Danish trade patterns from EU and EFTA markets towards other world markets. The removal of the developing country flexibility rule would increase global welfare by 26 percent, with the largest gains occurring in the Asian countries. The removal of the flexibility rule has virtually no impact on Danish welfare.