The multilateral negotiation engaged in Doha in November 2001 has reached a very crucial point. Draft modalities have been finalized by the chairmen of the agriculture and Non agricultural market access (NAMA) committees. However, the multilateral agreement, and the ultimate fine tuning of the proposals missed target of reaching a consensus. Still negotiations resumed and helped removing some stumbling blocks.
In the stage of political lack of will among the main actors of a possible deal, it is utmost importance of precisely quantify the potential gains associated with the completion of the Round and how these gains are shared among countries.
The study used here to assess the consequences of the negotiations are highly technical and complex, pointing to the imagination of the negotiators to find a politically acceptable deal. The state of the art lies in the measurement of border protection at the most detailed level affordable, and in the computation of actual liberalization resulting from a tariff-cutting formula. Bound and applied duties (whether ad valorem, specific, mixed or compound) have to be measured at the HS-6 digit product level.
Using computable general equilibrium model of the world economy (GTAP), we simulate the impacts of the December 2008 drafts circulated by the WTO. The most important finding at the aggregate, global level is that any of the plausible trade scenarios will produce only modest gains, a one-time increase in world real income of $58 to $136 billion. This represents an increase of 0.1~0.3 percent of current global gross domestic product (GDP). The limited nature of the gains from the Doha Round goes far in explaining the lack of urgency demonstrated by WTO negotiators.
Given relatively low gains, the adjustment costs to which countries expose themselves when they change trade policies may loom larger than in the past. The modest overall gains would have quite different economic effects on different countries and regions. The biggest gainer is both China and Korea with gains ranging from 1.1 to 1.4 percent of GDP under different scenarios. More than half of these gains would be reaped within 5 years of implementation only.
In conclusion the crunch has come: 2011 is a real dead line. If Doha fails, it seems inevitable that the WTO's slow decline will accelerate. If it succeeds, then victory will have been snatched from the jaws of defeat. Either way, serious thought needs to be given to future methods of negotiation. In these process, Korea needs to participate actively in the negotiation, particularly with a possible compromise on essential issues such as SSM and sectorals.