Catalog

	Table of Contents
p. 25 of 77 BACK | NEXT Foreword, Acknowledgments, Contents, Acronyms and Abbreviations, Definitions I. Developing Asia and the World Developing Asia and the Pacific: Performance and Prospects Prospects for the World Economy in 2006-2007 Subregional Summaries Textiles and Clothing in the Post-Quota Era: The Outlook for Asian Suppliers The Doha Development Agenda: Asian Challenges and Prospects after the Ministerial Meeting in Hong Kong, China Introduction Key issues in the Doha Development Agenda Gauging the gains of Doha trade liberalization for the region Beyond Doha Endnotes and references II. Economic trends and prospects in developing Asia III. Routes for Asia's Trade Statistical appendix

Asian Development Outlook 2006 : I. Developing Asia and the World

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Introduction

The Doha Development Agenda constitutes the ninth trade "round" since the founding of the General Agreement on Tariffs and Trade (GATT) in 1947, and the first under the aegis of the GATT successor, the World Trade Organization (WTO) (Box 1.5.1). It is also the first set of multilateral negotiations that are intended to focus on issues of interest to developing countries.

There is a great deal at stake for Asia at Doha. First, given the outward-oriented policy strategy that essentially all Asian countries now embrace, the region relies increasingly on a vibrant, open international marketplace. All sectors currently being negotiated under the Doha Development Agenda are relevant to the economic prosperity of the region, including manufactures, agriculture, services, and trade facilitation measures. Many of these areas have hitherto been neglected or ignored completely in earlier rounds of negotiation, suggesting a unique opportunity for the region. Bringing down peak tariffs (known as "mega-tariffs" at Doha) in manufactures and pervasive obstacles to trade in agriculture are particularly important to Asia. Better rules governing the comportment of WTO member states in regulating trade will also be extremely useful. Developing member states have often been the target of contingent protection (i.e., antidumping duties, countervailing duties, and the like). The People's Republic of China (PRC) has recently been the most obvious target of such actions, but it certainly is not alone: practically all developing member states have been subject to antidumping duties. Better rules are even more important now that Asia has become extremely active in creating its own web of free trade areas, for improved rules could lead to better agreements and less policy distortions.

Second, the potential negative effects of the recent surge in free trade areas, discussed at length in Part 3 of Asian Development Outlook 2006, will be amplified in the case of a Doha failure. This is likely for two reasons: (i) the more liberalized the global economy, the less the potential impact of discrimination inherent in free trade areas; and (ii) a failure at Doha could (and, most likely, will) lead to considerable disillusionment with the multilateral system, and starting a new set of negotiations would probably only be possible in the medium or long term. Regionalism and bilateralism will continue to be important with or without a successful conclusion to Doha. However, if there is no progress at the multilateral level, these preferential trade agreements will no doubt fill the void. This scenario could create spheres of influence and trade blocs that could easily work to the region's detriment.

Third, since a country will generally gain more from its own liberalization, a positive outcome at Doha would facilitate domestic reform and restructuring, as well as open foreign markets and create a more level trade "playing field." Negotiators consider offering tariff reductions as a bargaining chip that is only to be given in exchange for something in return. It is, therefore, ironic that almost all simulations of trade liberalization in a global context show the more protected economies gaining much more than the more open ones. Hence, a successful Doha Round would show greatest gains in agriculture for the European Union (EU) and the United States (US), whereas developing countries would generally gain more through their own liberalization of manufactures (Anderson and Martin 2006). One can expect that ultimately Asian countries with the highest trade barriers will tend to gain the most through liberalization.

A fourth and related point regards support for the national economic reform programs of Asian countries. The linking of a broad array of sectors in a concerted, international framework of liberalization negotiations under WTO tends to give greater political clout to those favoring more open trade. Hence, WTO sets in motion a political-economy dynamic that makes liberalization easier than, say, on a unilateral basis.

Finally, like GATT/WTO negotiations before it, the Doha Development Agenda will be critical in setting the stage for deeper liberalization in future rounds.

However, Doha negotiations have not been smooth sailing. Indeed, the waters have been more frequently choppy than smooth. In large part, this is a reflection of the complicated nature of the WTO talks, at which a wide variety of sensitive issues have been put on the table, including such areas as agricultural export subsidies; domestic support for agriculture; tariff reductions; and harmonization in labor-intensive manufactured goods, trade in services, antidumping duties, and rules governing regional trading agreements.

Indeed, the oft-cited difficulties of Doha are in part a reflection of previous successes in multilateral negotiations: earlier GATT rounds were able to reduce considerably tariffs on nonsensitive manufactured goods, leaving the most difficult items to be tackled. Moreover, the nonuniformity of cuts in tariffs and nontariff barriers resulting from compromises in earlier GATT rounds has been problematic because they can create their own distortions.¹ Further, the exigencies of globalization require far more extensive liberalization packages than in the past.

No doubt another complicating factor concerns the necessary emphasis on developing countries, which are extremely diverse and often have different priorities and interests. The least-developed countries (LDCs), in particular, face a complicated situation. The LDCs require open international markets in order to boost growth and reduce poverty—and, so, a successful Doha Development Round would help achieve this. However, as they benefit from preferential access to developed-country markets for the lion's share of their exports, a good Doha deal will inevitably have the effect of reducing this advantage ("preference erosion"), a process that is being exacerbated by the trend toward regionalism. Doha is seeking a way to compensate them for this (under the "aid for trade" rubric).

In any event, the going has been tough, and at some points, it seemed as if the talks would fail. The successor to the Uruguay Round was originally intended to be launched in Seattle in December 1999, rather than in Doha in November 2001. The Seattle debacle is well known. The Cancun Ministerial Meeting in September 2003 ended in failure as well, and the negotiations were saved only in July 2004 when a framework agreement for negotiations (the "July Package") was finalized. Hence, while many believe that the Ministerial Meeting in Hong Kong, China in December 2005 could have gone much further in terms of ambition and progress in defining modalities of liberalization, others were relieved that the talks are at last moving forward.

Asia can serve as a key protagonist at Doha. Given the less than stellar progress in negotiations, leadership in fostering a proactive approach in all areas under discussion is essential. As one of the most open regions in the world whose outward-oriented development strategy has been highly successful, Asia can contribute significantly in this regard. Moreover, active participation of Asian countries will ensure that the sectors and rules deemed most important to the region will be included in the final package. In addition, Asia is able to overcome the (usually counterproductive) division between "north" and "south." Most countries in Asia subscribe to the same types of outward-oriented policies, and while the region does have divergent interests, differences are not generally drawn along north-south lines.

In short, Asia has a strong interest in a positive outcome at Doha. The goal of this section of Asian Development Outlook 2006 is both to summarize the ongoing Doha negotiations, which should be completed in 2007 at the latest, and to consider the negotiations' implications for the developing member countries of the Asian Development Bank (ADB). First, the evolution of the Doha negotiations is considered, followed by a review of the liberalization strategies currently being discussed. The subsequent section offers some estimates of the economic effect of Doha on the region's economies. Finally, prospects for the global system after Doha are considered.

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