Tuesday, August 19, 2008

The Doha Round stalemate: does it matter?

We will be discussing elements of trade this semester and one of our topics will be trade liberalization. The WTO (World Trade Organization)is responsible among other things for conducting multilateral trade negotiations and the latest 'round' of such trade negotiations is the Doha Round. It is the Doha round because it was officially launched back in 1991 in Doha, the capital of Qatar.These trade talks have reached a stalemate and the most recent attempt to revive them collapsed. Much has been written on the benefits of a successive round, especially to the developing countries. Many have doubted these benefits and Rodrik's latest Project Syndicate piece 'Don't cry for Doha' contains some very interesting points that I think you should be aware of (please save his article for later use):

But look at the Doha agenda with a more detached set of eyes, and you wonder what all the fuss is about. True, farm-support policies in rich countries tend to depress world prices, along with the incomes of agricultural producers in developing countries. But for most farm products, the phasing out of these subsidies is likely to have only modest effects on world prices – at most a few percentage points. This is small potatoes compared to the significant run-up in prices that world markets have been experiencing recently, and it would in any case be swamped by the high volatility to which these markets are normally subject.

While higher world farm prices help producers, they hurt urban households in developing countries, many of which are also poor. That is why the recent spike in food prices has led many food-growing countries to impose export restrictions and has caused near panic among those concerned about global poverty.

It is hard to square these fears with the view that the Doha trade round could lift tens, if not hundreds, of millions out of poverty. The best that can be said is that farm reform in rich countries would be a mixed blessing for the world’s poor. Clear-cut gains exist only for a few commodities, such as cotton and sugar, which are not consumed in large quantities by poor households

Read it here or here

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