Economic implications of the Doha round

In this study the key elements of the WTO Doha round are simulated and the main implications for international trade and national income are analysed. Based on negotiation positions at the recent Hong Kong ministerial conference, a number of Doha scenarios are carefully designed and implemented. All scenarios encompass goods, services and agricultural liberalisation as well as trade facilitation. For goods liberalisation, a socalled Swiss formula with two coefficients is used to cut bound tariff rates. Agricultural tariffs are cut according to a tiered linear formula with four bands. Considerable attention has been given to the modelling of trade facilitation. Indirect as well as direct trade transaction costs are modelled, using detailed cross-country data. For simulation of the services liberalisation we use quantitative estimates of the indirect trade barriers for each region and sector. The simulation results show that all regions in the aggregation gain in the simulated Doha scenarios, with a particularly strong result for developing countries. In this respect, the Doha round can be called a development round. A conservative estimate is that global income increases with 0.2-0.7 percent of initial GDP per year, depending on the level of liberalisation. Trade facilitation contributes the most to these results, with increased market access for non-agricultural goods coming in second place. However, services reforms contribute the least, as small real market openings are expected. Overall, simulations indicate the importance of countries’ own liberalisation for their national income gains. Therefore, a “round for free” does not seem to be a valid concept. Furthermore, the importance of a broad-based round is underlined. Excluding some elements of liberalisation from the round may turn potential gains into losses, for some countries.