WTO agricultural negotiations: a comparison of the Harbinson proposal and the Swiss formula

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Abstract:

The WTO agricultural negotiations of the Doha round are a key issue in the public debate. This paper analyses the effects of different options to improve market-access on the basis of a GTAP model, comparing the impact of the Harbinson proposal and the Swiss formula on trade balances. An extended version of the GTAP model is used to first project a base run that includes factors arising from Agenda 2000, EU enlargement, the EBA agreement and the EU's mid-term review. The policy simulation run additionally includes the WTO negotiations. Here, the model is differentiated between three experiments. While the first experiment simply implements the Harbinson proposal, the second one additionally takes into account an adoption of the EBA agreement by all industrialised countries. In the third experiment, the tariff cuts are based on the Swiss formula using a coefficient of 33 instead of the tiered approach of the Harbinson proposal. After comparing the results of the three experiments, the paper concludes that the results from the different options for improving market access show parallel developments, with more- or less-pronounced increases or decreases in trade balances. Implementation of the Harbinson approach results in negative changes in the EU's trade balances for most agricultural products, except for the sugar, milk and other animal products sectors. The application of the Swiss formula to cut tariffs predictably results in severe losses to highly protected sectors worldwide in comparison to the Harbinson approach. In the EU, the highly protected sectors of beef and other processed food products would be particularly affected.