95(17.918)(5.609)[53.053]46.15926.1525.88178.192(41.204)(21.953)[150.870]108.66787.73515.974212.376(81.562)(50.657)[367.281]The figures in round brackets refer to the constant returns to scale case; allother figures refer to the increasing returns to scale case.The figures in square brackets refer to the overall welfare gains of a fullliberalization (100 percent; scenario III of Table 10).Source: Francois / van Meijl / van Tongeren (2003), Table 2.6 and Tables4.1 to 4.4.
The results for manufacturing liberalization are more consistent and generally positive. Generally, with increasing returns toscale the effects are twice that of constant returns to scale. Similarto the UNCTAD results the developing countries gain nearly twiceas much as the OECD countries from opening-up the markets formanufactures. The gains in the industrial world must be lower because the OECD tariffs are, on average, already below 3 percent formanufacturing whereas the tariffs of the developing countries arefive time as high (see Table 11a). China will be hurt by significantmanufacturing liberalization. Once the WTO accession is fully implemented, the Doha round cannot be expected to yield much additional gains for China. The negative results for China follow primarily from an erosion of its terms of trade.Another important source of overall effects is services, whichyield static income gains similar to those of liberalizing manufacturing. One obvious winner from services liberalization is the
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United States, which picks up more than half of the global welfaregains. Another big (not so obvious) winner is India.An astonishing result of the simulations by Francois, van Meijland van Tongeren is that the gains from trade facilitation amount tonearly half of the total welfare gains (see Table 15).177 Biggest winners are North America and High Income Asia but also the EU.Overall the total welfare gain from a really comprehensiveDoha round liberalization would be between US$ 212 billion (for apartial 50 percent liberalization) and US$ 367 billion.In terms of labour market effects, both unskilled and skilled labour gain from the partial and full liberalization scenarios in mostregions, except for some cases in the CEEC economies and inChina. Similarly, there are positive wage effects for unskilledworkers in all regions, except for China in all scenarios and theCEEC in some cases.178Overall export effects are clear-cut.179 Export growth, under allscenarios, is greatest in the developing countries, especially in Asiaand the Pacific (including India and China), but also in the Mediterranean, African, and Latin American economies. The CEEC sufferfrom trade-erosion with respect to market access to the EU-15economies. A decomposition of bilateral trade effects shows thatmuch of the potential gains for developing countries depend on therealization of South-South trade opportunities. This would fosterthe positive development in this respect in the last decade.180The bilateral trade effects – decomposed into the broad aggregate trade flows between the major world regions: North-North,North-South and South-South – resulting form the liberalizationexperiments by Francois, van Meijl and van Tongeren underpin theabove raised question whether the EU needs the WTO at all (seechapter II.F.2).181
177 Ibidem.178 Ibidem, 13.179 Ibidem, 13 and Figure 4.2.180 See WTO (2003), 24 et seqq.181 Francois / van Meijl / van Tongeren (2003), 14.
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Table 16: Trade Effects of a Linear 50% Liberalization Experiment(percentage change in value of bilateral exports; short-run resultswith increasing returns to scale)ÈfromÆto
EU-27NORTH-6
Non-OECDSOUTH21
OtherNORTH13
EU-27NORTHNon-OECD303925SOUTHOther12268NORTHTotal32814imports(5)(35)(15)The figures in brackets refer to the long-run (dynamic) results.Source: Francois / van Meijl / van Tongeren (2003), Table 4.5.
Totalexports2(4)30(38)14(15)12(15)
The enlarged EU-27 can increase its total exports only by 2percent compared to a 12 percent growth in world trade (see Table16). One reason is that EU countries mostly trade amongst themselves. The benefits from removing the intra-EU barriers have already been realised in the past (customs union, Single Market) andthere are no additional gains for intra-EU trade in a new WTOround. A second driver of this result is the increased competitionfor non-EU countries on EU markets. Simulated intra-EU-27 tradeshrinks by 6 percentage points as other suppliers enter the EUmarkets. While in the past the share of trade within the EU (intraEU trade) was biased upward (trade creation) lowering externaltrade barriers by the EU in the Doha round will inevitable lead tothe erosion of the intra-EU trade preferences. One can expect thatthe current bias towards intra-EU trade will be reduced. The mostimpressive growth in markets share is realized by suppliers fromdeveloping countries, who are simulated to expand their exports tothe EU by 30 percent, compared to the 12 percent increase of imports from other developed countries. Because there is no positivegrowth to be expected from intra-EU trade, European exports canonly be increased by expansion in non-EU markets. Exports todeveloping countries will grow with 21 percent and exports to theother regions will grow with 13 percent. Developing countries obtain the highest growth in exports (30 percent). They expand exports to all destinations, though the largest trade surge is observedfor intra-developing country (South-South) trade. This will expandby 39 percentage points.
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The simulation experiments by Francois, van Meijl and vanTongeren, including nearly all possible issues of market accessissues under the Doha Round show remarkable welfare gains. Nevertheless Singapore issues (the relationship between trade and investment policy, the interaction between trade and competitionpolicies, transparency in government procurement practices, andtrade facilitation practices) are only partly and then somewhat exaggerated (e.g. in the case of trade facilitation) included. Very littleis known about the welfare and/or growth effects of a more securenetwork of regulations concerning Foreign Direct Investments(FDI), a cornerstone of globalization of multinational firms.V. Conclusions
The development agenda of the Doha Round may turn out to be amere act of window-dressing. Most empirical studies confirm thatthere is no simple relationship between openness (trade liberalization) and growth and therefore development. Recent experiencewith the success and/or failure of poverty alleviation programs atthe World Bank and the IMF may, however, help to teach the WTOthat it should concentrate on its primal business, namely marketaccess. The mandates of the WTO increased from Round to Round.In the Doha Round a climax in complexity seems to have beenreached which may well be the reason that it is so difficult to reachan overall agreement. Given the heterogeneity of mandates, it is notalways clear whether the various objectives (development, Singapore issues, market access in general) in the DDA are mutuallycompatible.The simulation studies discussed above give a clear picture ofwinners and losers of a delayed Doha Round. The large industrialcountries and regions (United States with NAFTA) and the enlargedEuropean Union with its extended regional trade agreements (e.g.with the ACP) have no distinctive interest in further liberalizingworld trade. Its intra-trade shares are already – in particular in thecase of the EU – so large that any further liberalization only hurtsthem. The big losers of further delayed trade liberalization are thedeveloping countries. All simulations studies show that they wouldgain the most from further market access in particular when eliminating the still considerably high tariff peaks in products where theyhave comparative advantage vis-à-vis the industrial countries. Although the average industrial goods tariffs are already very low,there are still in place many subtle forms of protectionism (like
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tariff peaks and escalation and contingent protection) – in particularin the relations between the North and the South. Furthermore thetariffs in the developing countries are generally higher than in theindustrial countries. It is therefore of utmost importance to eliminate the tariff peaks and generally to cut tariffs in developing countries. This would increase welfare in the developed world and spurSouth-South trade.
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Appendix: Tables and Figure on World Trade
Table A1: World Merchandise Exports by Product, 2002(Billion US$ and percentage)Value20026,272583468114788636151104,7081426604602,539
Share19951