Asia Needs an Ambitious Doha Outcome

Op-Ed / Opinion | 2 May 2006

Developing Asia has a vital stake in the outcome of the troubled Doha "development round" of trade negotiations. The ingredients of a good deal would include: a reduction of tariffs on manufactured goods by developing countries, a meaningful reduction in agricultural protection by developed countries, an opening of trade in commercial services by all, and a format that limits special-treatment and protection measures such as antidumping.

Movement on "aid for trade" and assistance that helps developing countries get their goods to market -- more easily, more cheaply -- would also be a big step in the right direction. A recent Asian Development Bank study estimated, for example, that improvements to Chittagong Port in Bangladesh could cut costs for Bangladeshi textile and clothing producers by 30 percent.

Four compelling interests shape developing Asia's stake in an ambitious Doha outcome.

* Asia relies on a vibrant, open international marketplace. As the Sutherland Report rightly emphasizes, multilateral liberalization is the best antidote to the potential negative effects of bilateral and other preferential trade agreements. Reductions in tariffs on a most-favored-nation basis dilute the benefits of preferences. Failure in Doha could precipitate an avalanche of preferential bilateral agreements that would risk leaving poor developing countries behind.

* A point that is apparently much misunderstood by trade negotiators is that countries generally gain most from their own liberalization. It follows that those countries that protect their industry the most -- developing Asia and other low-income countries -- have lots to gain by reducing their protection. Likewise, liberalization of agriculture would benefit the European Union and the United States most, as well as some efficient developing countries like Thailand and Brazil. Appeals to "food security" and other popular slogans are just an excuse for old-fashioned protectionism by politically influential farmers in developed and developing countries alike.

In the area of services, developing countries can capture gains not only by attracting developed countries' "outsourcing" activities such as call centers and data processing, but also from the presence of modern business services owned overseas. Improved efficiency in business services will help developing countries take advantage of tariff cuts for merchandise trade by reducing trade costs. Services liberalization will help clinch the deal.

* An ambitious Doha outcome may help lock in developing countries' own domestic reform agendas. Participation in an international framework of liberalization may give more political clout to efficient sectors and to interest groups that stand to gain from reforms.

* Developing Asian countries that have increasingly been a target of antidumping and other surrogate protection measures have a direct interest in better rules governing the behavior of World Trade Organization members. Backdoor protection tends to create an additional layer of complexity in international trade, hurts competitive exporters and, as last year's "bra war" amply illustrated, costs consumers dearly. Failure to progress in the reform of contingent protection rules would leave fully loaded an important and increasingly dangerous protectionist weapon used primarily to harm developing countries.

Developing Asia can most immediately increase the level of ambition in Doha by offering cuts in nonagricultural tariffs and tariff peaks that lower applied rates. And it can add to pressure on the EU and U.S. to offer meaningful liberalization of agriculture.

Negotiating parameters would also be greatly simplified if Asian and other like-minded countries pressed for the same format in agricultural tariff cuts that has been agreed for nonagricultural tariffs. The EU and the U.S. must also make meaningful cuts that would reduce domestic subsidies below what's already been decided unilaterally, and was already in the pipeline.

Developing Asia's interests in Doha are not perfectly aligned. In particular, some of the poorer Asian countries, such as Bangladesh, stand to lose from the erosion of preferences it enjoys in the European textile and clothing markets. To address such concerns, Asia should push for a progressive "aid for trade" package that would allow assistance to be used to meet adjustment costs as well as ease frictions and constraints that impede poor countries from getting their goods to markets.

In sum, developing Asia must resist a "flexible" package that allows extensive exclusion of "sensitive" products, preserves tariff peaks, entails little real agricultural liberalization and provides "generous" provisions for special and differentiated treatment for the least developed countries.

If developing countries are excluded from obligations, they can do little to influence the negotiations. The notion of a Doha "Round for Free" is fantasy.