David Laborde

A consistent, ad-valorem equivalent measure of applied protection across the world: The MAcMap-HS6 database

MAcMap-HS6 is a database providing with a consistent, ad valorem equivalent measure of tariff duties and tariff rate quotas for 163 countries and 208 partners, at the six-digit level of the Harmonized System (5,111 products). Based on a joint effort by ITC (UNCTAD-WTO, Geneva) and CEPII (Paris) to systematically collect and harmonize the relevant information, we describe here the methodology used in MAcMap-HS6 to compute and aggregate an ad valorem equivalent of applied protection, well suited for analytical purposes (in particular computable general equilibrium analysis). Special emphasis is put in minimizing the endogeneity bias in the aggregation procedure, by making use of a weighting scheme based on groups of countries (reference groups). Structural differences in export specialization, as reflected in different unit values, are also acknowledged when computing ad valorem equivalents, and tariff rate quota rents are computed. The resulting quantitative assessment is illustrated by giving an overview of ad valorem equivalent, applied protection across the world, in terms of average as well as distribution.

Assessing Applied Protection Across the World

This paper presents MAcMap-HS-6, a database providing a consistent, ad valorem equivalent measure of tariff duties and tariff rate quotas for 163 countries and 208 partners, at the six-digit level of the Harmonized System (5111 products), accounting for all preferential agreements.We describe the methodology used to compute and aggregate an ad valorem equivalent of applied protection. Emphasis is placed on minimizing the endogeneity bias in the aggregation procedure, while acknowledging structural differences in export specialization.The resulting quantitative assessment is illustrated by giving an overview of applied protection across the world in 2001, in terms of average as well as distribution.

The Potential Cost of a Failed Doha Round

This study presents scenarios where countries decide to increase current tariff rates to protect domestic industries or raise revenues in order to finance domestic programs. Using the highest applied or bound rate imposed by countries during the period from 1995–2008 as an indicator, it offers new conclusions on the economic cost of a failed Doha Round. In a scenario where applied tariffs of major economies would go up all the way to currently bound tariff rates, world trade would decrease by 7.7 percent. In a more modest scenario where countries would raise tariffs to maximum rates applied over the past 13 years, world trade would decrease by 3.2 percent. These increases in duties would reduce world welfare by USD353 billion under the first scenario, by USD134 billion under the more modest scenario. This study concludes there would be a potential loss of at least USD1,064 billion in world trade if world leaders were to fail to conclude the Doha Development Round of trade negotiations in the next few weeks and were to implement subsequently protectionist policies such as observed since the end of the Uruguay Round. Another point of view is to consider the WTO agreement as an insurance scheme against potential trade wars. So we compare a resort to protectionism when the DDA is implemented with a resort to protectionism when the DDA is not implemented. The findings show that this trade agreement could prevent the potential loss of US

The Costs and Benefits of Duty-Free, Quota-Free Market Access for Poor Countries: Who and What Matters

809 bn of trade and, therefore, acts as an efficient multilateral insurance scheme against the adverse consequences of trade “beggar-thy-neighbour” policies.

Why is the Doha Development Agenda Failing? And What Can Be Done? A Computable General Equilibrium–Game Theoretical Approach

This paper examines the potential benefits and costs of providing duty-free, quota-free market access to the least developed countries (LDCs), and the effects of extending eligibility to other small and poor countries. Using the MIRAGE computable general equilibrium model, it assesses the impact of scenarios involving different levels of coverage for products, recipient countries, and preference-giving countries on participating countries, as well as competing developing countries that are excluded. The main goal of this paper is to highlight the role that rich and emerging countries could play in helping poor countries to improve their trade performance and to assess the distribution of costs and benefits for developing countries and whether the potential costs for domestic producers are in line with political feasibility in preference-giving countries.

A Global Assessment of the Economic Effects of Export Taxes

We use a world computable general equilibrium model to simulate 143 potential trade reforms and seek solutions to the issues hampering progress in the Doha Development Agenda (DDA). Inside the domain defined by all these possible outcomes, we apply the axiomatic theory of bargaining and select the Nash solution of cooperative games. The solutions vary according to the objective functions adopted by the trade negotiators. When real income is the objective and services are excluded, or when optimising terms of trade is the objective, the Nash solution is the status quo. Trade liberalisation is feasible only when the negotiators focus on national exports or gross domestic product (GDP). Our assessment of some possible solutions reveals that excluding members having a GDP below a certain threshold improves the bargaining process, regardless of the governments’ objective. Formation of coalition, such as the G20, constitutes an option for its members to block outcomes imposed by rich members. We also find that side payments may be a solution, but represent a very high share of the global income gain.

Measuring the Impacts of Global Trade Reform with Optimal Aggregators of Distortions

This study has been undertaken to understand and evaluate the potential negative consequences of export taxes which are implemented by many countries today and which are not disciplined by any international agreement. This paper uses a new detailed global dataset on export taxes at the HS6 (Harmonized System 6 level) level and the MIRAGE (Modeling International Relationships in Applied General Equilibrium) global computable general equilibrium model to assess the impact of export taxes on the world economy. We find that limitations on export taxes would have worldwide effects: the average export tax on global merchandise trade was 0.48 percent in 2007, with the bulk of these taxes imposed on energy products. The removal of these taxes would increase global welfare by 0.23 percent, which is a larger figure than the expected gains from the World Trade Organization’s Doha Development Round. Both developed and emerging economies, such as China and India, would gain from such policies, even if they currently impose export taxes. Medium and small food-importing countries without market power (such as the least-developed countries) would also benefit from the elimination of export restrictions, especially during food crisis situations. Both the energy sector and the export taxes implemented by Commonwealth of Independent States countries appear to play a critical role in the overall economic impact of such a policy change. However, the fact that some countries, such as Argentina, would experience income losses due to such a policy change is a major challenge to overall positive reform in this area.

Formulas and Flexibility in Trade Negotiations: Sensitive Agricultural Products in the WTO's Doha Agenda

Traditional weighted-average measures of trade distortions are widely used in analyzing global and regional reforms, despite well-known deficiencies. This paper develops and applies optimal aggregators for the real-world case of multiple countries and commodities with much more detailed information on trade than on production and consumption. The approach reflects the fact that different aggregators are needed for expenditure on imported goods and for tariff revenues, and allows for incorporation of both intensive and extensive margins of adjustment to reform. Applications confirm that the technique is straightforward enough for widespread use, and point to close to a doubling of the welfare gains at the intensive margin when using the highest possible level of international commodity disaggregation, with larger gains in developing regions than in the industrial countries. The measured income gains increase along the entire path of liberalization, with slightly larger increases in the earlier stages, where the gaps between the responses of the expenditure and tariff revenue aggregators are largest. Sensitivity analysis suggests that, for global trade reform, the ease of substitution between tariff lines is much more important than that between varieties from different countries.

What Can Least Developed Countries Really Expect from the Doha Development Agenda

Many trade negotiations involve large cuts in high tariffs, with flexibilities allowing much smaller cuts for an agreed number of politically-sensitive products. The effects of these flexibilities on market access opportunities are difficult to predict, creating particular problems for developing countries in assessing whether to support a proposed agreement. Some widely-used ad hoc approaches to identifying likely sensitive products -- such as the highest-bound-tariff rule -- suggest that the impacts of a limited number of such exceptions on average tariffs and on market access are likely to be minor. This paper uses a rigorous specification based on the apparent objectives of policy makers in setting the pre-negotiation tariff. Applying this approach with detailed data allows the authors to assess the implications of sensitive-product provisions for average agricultural tariffs, economic welfare, and market access under the Doha negotiations. The authors conclude that highest-tariff rules are likely to seriously underestimate the impacts on average tariffs, and that treating even 2 percent of tariff lines as sensitive is likely to have a sharply adverse impact on economic welfare. The impacts on market access are also adverse, but much smaller, perhaps reflecting the mercantilist focus of the negotiating process.

US trade wars in the twenty-first century with emerging countries: Make America and its partners lose again

In November 2001, a new round of multilateral trade negotiations was launched in Doha, Qatar, with a key objective of development. Although the initiative was politically laudable, doubts arise on the economic impacts of the negotiations, in particular on the Least Developed Countries (LDCs). LDCs have very specific economic features: they have been granted numerous trade preferences, their exports are characterized by a high product concentration and many of them are net food importers. Several measures such the Aid-For-Trade initiative and the Duty Free Quota Free (DFQF) regime have been proposed during the negotiations in order to compensate LDCs for potential losses that the multilateral trade liberalization could imply. Using the computable general equilibrium model, MIRAGE, the current proposals as well as more beneficial options for LDCs are examined. All of the implemented scenarios are based on detailed elements of the proposals and are designed at a much disaggregated level using the MAcMap-HS6 v.2 database. As expected, the Doha Development Agenda as defined by May 2008 does not bring significant economic benefits for LDCs and it even hurts most of them in terms of total exports and real income. Therefore, the introduction of a DFQF regime would lead to a better situation for LDCs only if the preferential access is extended to LDCs not only by the OECD members but also by major emerging economies for a very high number of products. LDCs are very diverse and have different interests in terms of sectoral and geographic extension of the DFQF access.