The University of Auckland
Business School
The Doha Round
Problem Analysis and Proposals from the Perspective of Germany
as a Member of the European Union
August 31
st
, 2009
Master of International Business
INTBUS 723 Global Business Environment
2
TABLE OF CONTENTS
INTRODUCTION ... 3
BACKGROUND... 4
The Doha Declaration ... 4
The Economic Value ... 5
THEORETICAL FOUNDATIONS... 6
Absolute Advantage ... 6
Comparative Advantage... 6
The Heckscher-Ohlin Model ... 7
The New Trade Theory ... 7
The Competitive Advantage of Nations... 8
Protectionism... 8
ANALYSIS... 10
The German Economy and the EU's Common Agricultural Policy ... 10
The German Interests in the Doha Round ... 11
Major Impediments to the Doha negotiations ... 12
Political Interests ... 13
Protectionism of Developing Countries ... 13
Implementation-related Issues... 14
Impediments inherent to WTO-principles... 15
HOW TO MOVE THE DOHA ROUND FORWARD ... 17
REFERENCES ... 19
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INTRODUCTION
The World Trade Organization's (WTO) Doha Round was established in 2001 as the new
multilateral negotiation round, the first one of the still young WTO. The members agreed to set a
sign for market economy and development, not at last to undermine terrorism. Different from the
preceding Uruguay Round, initially scheduled on four but stretching over seven years, the
negotiations this time should last three years and reach consensus by the end of 2004. Almost
five years later the Doha Round could be closer to its exodus that its consensus.
This paper aims to provide an understanding of central impediments to the Doha
negations as well as proposals how to move towards a consensus on major subjects, in particular
from the perspective of Germany as a member of the European Union. For this purpose, the
background information provided will introduce sections of the Doha Declaration relevant to
later discussions. International trade theory, especially comparative advantage theory and
protectionism, provide the foundations for the analysis section. The starting point of the analysis
is a brief overview of Germany's economy and the Common Agricultural Policy (CAP) imposed
by the European Community (EC) as well as Germany's interests in the Doha negotiations.
The second part of the analysis discusses four major impediments to the success of the
Doha Round at present: Political interests, protectionism of developing countries,
implementation-related issues, and WTO-principles. The paper concludes with suggestions that
address the four impediments mentioned and provides a general idea how to restructure the
negotiations in order to improve efficiency.
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BACKGROUND
The Doha Declaration
The Doha Declaration constitutes a list of 21 subjects to provide a guideline that steers
negotiations towards development as intended when established in 2001. For the purpose of this
study, only two major issues will be introduced. The full list of negotiation subjects can be
reviewed under WTO (2009).
Agreement on Agriculture (AOA):
Strives to create fair competition and less distortion on
the world agriculture market. For this purpose, members have committed to engage in
negotiations that are aimed at:
· Market access: Average tariff reductions on agricultural products of 36% for
developed, and 24% for developing countries. The least developed countries
(LDC) are not required to reduce their tariffs.
· Export subsidies: Developed countries are required to reduce direct export
subsidies to a level that is 36% below1986-90 base period level. Total subsidized
exports need to be reduced 21%. Reductions for developing countries are two
thirds of the above rates.
· Food safety, animal and plant health regulations: Aims to prevent the use of over-
restrictive regulations as import barriers. Members need to accept the measures of
the import country if an equal level of health protection is achieved.
· Ministerial decisions concerning the least-developed and net-food-importing
countries:
Establish objective with regards to food aid, full grant food provisions,
agriculture development aid.
Different obligations for developing countries are grounded on the WTO-principle of
"special and differential treatment" which also intends a prolonged implementation period for
developing countries.
Market access for non-agricultural products (NAMA):
The initial indent was to reduce
trade barriers in particular for non-agricultural products of export interest to developing countries.
These negotiations also consider "special and differential treatment" for developing countries and
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no tariff reductions for LDC. However, current NAMA-negotiations rather focus on developed
countries' market-access interests.
Other major negotiation topics are trade-related aspects of intellectual property rights
(TRIPS), General Agreement on Trade in Services (GATS), and implementation-related issues.
However, the discussion in this paper mainly refers to the two introduced subjects.
The Economic Value
Several studies estimated the economic impact of the Doha Round and came to different
conclusions. The Carnegie Institute asserts that under a realistic trade scenario to be agreed on,
only a marginal long-term benefit plus a one-off world income increase of $40-60bn could be
expected. The World Bank on the other hand sees global annual benefits of $95-120bn, if the
Doha-Round reaches consensus on the Hong Kong proposal (EurActiv, 2006). The OECD
estimates that the liberalization of international trade in agricultural products alone would result
in nearly $100bn added economic welfare per year (Gurria, 2006).
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