DohaDevelopmentRoundandLDC

Prepared by Phouphet

Plan

Introduction DohaRoundandLDC

ProductionandTrade(Khalid)

Welfare:AllocativeEfficiency(Dalila)

ImportanceofclosuresTradeBalance(Kirsten)

TaxReplacement(Wisit)

MultilateralVs.Unilateralliberalization:NAMA(Juthathip) ImpactofDohaonServicesExports(Bibek) Conclusion

WhatisDohaRound?

DohaRoundiscalledTheDevelopmentRound

Flexibilities

NewtariffpreferencesforLDCs

WhatistheimpactofDDR?

According to some empirical studies show that DDR has positive impact on poverty.

WhatistheimpactofDDR?

Whatisthisstudyresult?

LDC lose in term of declining GDP, Welfare, and Term of Trade

OurObjective

To investigate why LDC decline welfare, GDP, and Term of Trade

OutlineofModel

Closure: 1/ Fix Trade Balances;2/ Fix the Real Wage and Allow for UnEmployment;

Shock:1/ Agricultural proportional cuts based on four-tier formula (S4)2/ Agricultural proportional cuts base on a four-tier formula with

2% sensitive products.3/ Agriculural cuts based on harmonizing formula (S1) and NAMA cuts Based on a nonlinear Swiss-type (Girard) formula with a coefficient of 1 forDeveloped countries and 2 for developing countries and LDCs get the round for free

Model: Standard GTAP

ShareofExport(1)All good, from LDC to All REG

ShareofExport(2)All goods, from all REG to LDC

ImportTaxes(1)

all good, from LDC to All Reg

ImportTaxes(2)All goods, from all reg to LDC

Productionandtrade

13

qgdp 0.21 vgdp 0.45

Component GDP(r)*qgdp(r) GDP(r)*vgdp(r) shares

VGA 930.79 8249.15 0.07

VPA 40912.51 58852.61 0.48

REGINV 36418.52 52935.77 0.43

VIWS 66782.52 80235.83 0.66

VST 3738.5 3311.21 0.03

VIWS 84972.12 74849.24 0.61

Total 56333.72 122112.9 1

GDP

14

Output:volumeand%change

Sectors Volumechange %change

Apparel&leatherproducts 794.0 5.6

Transportationequipment 100.1 2.0

Othermanufactures 109.3 1.7

Vegetables,fruit&nuts 47.5 0.3

Processedfood&beverage 59.2 0.8

15

-6

-5

-4

-3

-2

-1

0SHRDM SHRXMD tradslack

indi

cato

rs

valu

es

AppLeat cartrn oMnfcs Vegftnt pfbev

Output decomposition

16

Exportsvs.domesticallocationofoutput

SectorsSHRXMD

qxs(LDC,reg) SHRMD

qds(i,r)

ps[i,LDC]

AppLeat 0.29 16.56 0.37 1.88 0.20

cartrn 0.19 3.16 0.70 0.62 0.31

oMnfcs 0.02 43.34 0.60 0.50 0.26

Vegftnt 0.10 12.74 0.78 1.44 0.19

pfbev 0.12 3.78 0.79 0.05 0.12

17

Volumechangeinexports

Sectors EU ROW Total

AppLeat 680.4 697.3

cartrn 29.0 78.9

oMnfcs 37.3 57.6 90.5

pfbev 54.9 61.9

Vegftnt 54.7 42.9

Total 1102.6 668.1

18

DemandforLDCscom.intheEUandROW

-100

-80

-60

-40

-20

0

20

40ams qim ESUBM

% c

hang

e

appleat oManfcs vegftnt pfbev

19

Prices

20

-12

-10

-8

-6

-4

-2

0AppLeat oMnfcs Vegftnt pfbev

% c

hang

e

pms (*, LDC, REG) pim(i, s)

Why?

Shock tms(AG_COMM, REG, REG) = ?Shock tms(NONAG_COMM,REG,REG) = ?Shock txs(AG_COMM,REG,REG) = ?

Sectorstms txs

base updated base updated

AppLeat 4.46 4.46 0.00 0.00

cartrn 0.76 0.76 0.12 0.12

oMnfcs 5.70 5.14 0.00 0.00

Vegftnt 11.79 11.78 0.02 0.02

pfbev 0.70 0.67 0.00 0.0021

WelfaredecompositioninLDCsunderDOHA

S5S9Experimentwith2%sensitiveagriculturalproducts

DOHAandLDCs

IfDohaisachieved,LDCcountrieswillhaveanegativeimpactinwelfare,equivalentto741milliondollars.

WithinthewelfaredecompositionwherearethemainelementsaffectingLDCs?

Welfare decomposition for LDCs

Allocative Efficiency34%

Terms of Trade27%

Endowments34%

I-S5%

-258

-249

-198

-36

-Total loss 741 million USD

AsweknowthatAllocativeEfficiencyisdrivenbytaxeffects:

AllocativeEfficiency

61%

22%

prodtax (productiontax)= 57million

39millionsduetoadecreaseofunskilledlabor(creationofunemploymenttokeeptherealwagefixed aclosureissue)of0.3%

11millionduetoadecreaseapparel/leatherproductionof5.69%

mtax (importstax)= 158million

52millionareexplainedbythereductionofimportsinlivestock(mainlyfromEU)and

44millionareexplainedbythereductionofimportsintextile(mainlyfromChina)

BecauseLDCsdidnotreduceimporttariffstheircannothaveaccesstocheaperproductsofthesetworegions,thereforetheirwelfareisdiminished.

TermsofTrade

TotalwelfarelossduetoToTforLDCswas=198millionUSD

pexports=151 pimports=128 pworld=81

0.092

-0.172-0.146

-0.2

-0.15

-0.1

-0.05

0

0.05

0.1

0.15

World Exp Imp

Price changes (ToT)

Whenwelookatwhichitemintermsimportsiscontributingthemosttotheloss,wefoundthatlivestockcontributeswith60%ofthatloss.ThiswasduetoanincreaseinworldimportpricesoflivestockandanevenhigherincreasefromLDCsregion(1.57and6.96respectively)

Intermsofexportsotheragriculturalproductsitemcontributewith23%totheloss.InthiscasetheworldexportpriceswentupbutnotforLDCs(0.42versus0.10)

Endowments

249millionwelfareloss(labor) Aclosureissueaswell

LDCsimporttariffs PricesofLVS(LDCsimports)wentupandevenmoreupforLDCs

PricesofExports(otheragriculturalproducts)wentupbut,notforLDCs(priceswentdown)

Someconclusions

Closure

Assumption:

AllcountriesotherthandevelopedcountriesandtheemergingAsiangiantshavefixedtradebalances

swapdtbalr("Egypt") =dpsave("Egypt"); swapdtbalr("LDC") =dpsave("LDC");

Howdoesafixedtradebalancesinfluencestheresults?

WhathappensifweswapdbtbalrwithInvestments(cdgslack)?

Closurechanges

Thereforewechangedtheclosure:

flexibletradebalancesinallcountries fixedtradebalancesinallcountries fixedtradebalancesindevelopingcountries

byswappingdtbalrwithdpsave fixedtradebalancesindevelopingcountries

byswappingdtbalrwithcgdslack

Change in DTBALR

-2,000-1,000

01,0002,0003,0004,0005,0006,000

China

Egyp

t

EU India

Japa

n

LDC

MERC

OSUR

MEXIC

O

USA

Mn

USD

Flexible Trade BalanceFixed Trade BalanceFixed Trade Balance in Developing CountriesSwap with cdgslack

Welfare

-20000

2000400060008000

1000012000

China

Egyp

t

EU India

Japa

n

LDC

MERC

OSUR

MEXIC

O

USA

Mn

USD

Flexible DTBALR for all countries Fixed DTBALR for Developing Countries

Fixed DTBALR for all countries

Implications

Changesinthebalanceoftradeingoodsandservicesmustbebalancedchangesinthecapitalflows.

S I=XM

IntheGTAPmodelregionalinvestmentisdrivenbycurrentandexpectedratesofreturn

IfVKE(r)>VKB(r),thenRORE(r)

ChangeinInvestment

Egypt: Cap.Stock RORC Savings

EU: Cap.Stock RORC Savings

ChangeinEUTradeBalance

TheWelfareEffectunderTaxReplacementonDoha

Question

Whathappentowelfaregainifallregion'sgovkeepthelevelofincome?(Sim1)

Dotheresultdifferentifonlyoneregionhastaxreplacementpolicy?(Sim2)

Whatcausethedifferenceinimpactofthepolicy(China,EU)?

TaxReplacementforallRegion

Closure Sameasthepaper FixBOTforEgypt,LDC,CENTAMMexicoandMERCOSUR AllowunempinEgypt,LDC,India,CENTAM,China,Mexico,MERCOSURandROW

Addswaptp(reg)=del_ttaxr(reg);

TaxReplacementforallRegion

-5000

0

5000

10000

15000

20000

25000

30000

CENTAM China Egypt EU India Japan LDC MERCOSUR MEXICO ROW USA XME

NO TAXR

TAXR

TaxReplacementinoneRegion

Closure Sameasthepaper

FixBOTforEgypt,LDC,CENTAMMexicoandMERCOSUR

AllowunempinEgypt,LDC,India,CENTAM,China,Mexico,MERCOSURandROW

Add

swaptp(China)=del_ttaxr(China);

DoitforChina,Egypt,andEU

TaxReplacementinoneRegion

-5000

0

5000

10000

15000

20000

25000

30000

CENTAM China Egypt EU India Japan LDC MERCOSUR MEXICO ROW USA XME

NO TAXR

TAXRCH

TAXREgypt

TAXREU

WhatCause

Chinalostthewelfaregaininallocationefficiencyandendowmentcomponent

-3000

-2000

-1000

0

1000

2000

3000

4000

5000

6000

7000

alloc endw tot IS

No TaxR

TaxR

WhatCause(Endowment)

Theendowmenttermiscausebyunemployment NoTaxRtheoutputbyunskilledlaborincreaseby1.09%(Moreemploy) TaxRtheoutputbyunskilledlabordecreaseby0.32%(Moreunemploy)

Itcausebysubstitutioneffectsince withoutpolicypva(1.35)>pfe(0.65) withpolicypva(1.34)

WhatCause(AllocativeEfficiency)

ReductionofwelfaregainiscausedbytheproductionTaxduetoadecreasingofoutputinunskilledlaborandfinancesectorandaincreasingoftaxinbothsector

China

-1000

-500

0

500

1000

1500

2000

2500

1 pfacttax 2 prodtax 3 inputtax 4 contax 5 govtax 6 xtax 7 mtax Total

No TaxR

TaxR

MultilateralVSUnilateralLiberalization Previousanal