Two Opportunities to Deliver on the Doha Development Pledge

In this brief, we evaluate the effects of a possible Doha agreement based on proposals currently on the table from the United States, the European Union, and the Group of Twenty (G20). We first begin with a basic scenario that represents a compromise between the more and less ambitious aspects of these proposals.1 As assessed in the MIRAGE general equilibrium model of the world economy, this basic scenario yields a global income gain of $54.7 billion, or about one-fourth of the global income gains that are estimated from full trade liberalization.2 Gains are distributed among countries in a slightly progressive manner but are largely proportional to initial income shares, so the LDCs gain only a paltry $1.0 billion. We next consider two specific development-oriented modifications to the basic scenario. These modified scenarios demonstrate that more can be done to benefit poor countries. In the first alternative scenario, free access of LDCs to wealthy-country OECD markets is increased from 97 percent to 100 percent, as proposed by the European Union. This raises world income by an additional $14.3 billion. Nearly half of these additional gains go to the LDCs, and the increase of their income rises dramatically, to $7.0 billion. In the second scenario, the number of sensitive and special products exempted from the agricultural tariff formula in the basic scenario is reduced from 5 percent of tariff lines to 1 percent, as proposed by the United States. This raises world income an additional $7.3 billion compared to the basic scenario. The additional gains are distributed widely among countries, and are beneficial among heterogeneous developing countries especially to those where agriculture is an important source of employment and export earnings. Though this scenario has the advantage of providing a multilateral, nonpreferential improvement to the basic scenario, gains are limited because the tariff cuts applied to nonsensitive agricultural products in the basic scenario are not very ambitious.