Economic Impact of Potential Outcome of the DDA

Abstract

Using a dynamic computable general equilibrium model of the world economy (MIRAGE), we simulate the impacts of the most recent drafts circulated in the multilateral trade negotiations arena, augmented by a modest outcome of the negotiation in services.

The liberalization of tariffs is implemented at the product level in order to take into account exceptions, flexibilities as well as the non-linear design of the formulas. A reduction in domestic support and the phasing out of export subsidies are taken into account. We integrate dynamic gains up to 2025.

We observe a $US70bn world Gross Domestic Product (GDP) long run gain when agriculture and industry are liberalized, a $US85bn gain when a 3% reduction in protection for services is added to certain services sectors. Calculation of the gains associated with trade facilitation suggests roughly a doubling of the expected gains ($US152bn); port efficiency adds another $US35bn.

In total, the $US187bn gains identified here in the scenario combining liberalization in trade in goods and services with trade facilitation and port efficiency, would accumulate to world GDP every year in the medium term, compared to the situation without agreement. Recent proposals for sectoral initiatives would add a further $US15bn on top of these gains.

Keywords: Doha development round, computable general equilibrium models, trade facilitation

JEL Classification: F13, F17