Economists question big gains from Doha deal

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Forecasts that completing the World Trade Organisation's Doha round would boost the world economy by hundreds of billions of dollars with most gains going to developing countries are wide of the mark, a new study says.

"The claims that developing countries will be the big winners from Doha rest on shaky assumptions, controversial economic modelling, misleading representations of the benefits and disregard for the high costs of Doha-style liberalisation for many developing countries," the study said.

"These costs are even higher in the turbulent wake of the triple crises in finance, climate and food," said the study, by economists Kevin Gallagher and Timothy Wise of the Global Development and Environment Institute at Tufts University in the United States.

Gallagher and Wise take aim in particular at a study by the Peterson Institute for International Economics in August which said a successful Doha deal could boost the global economy by $300-700 billion a year, with over half of the upper range coming from helping developing states trade more efficiently.

The Tufts economists say the gains from proposals on the table in the long-running Doha liberalisation talks in agriculture and manufacturing would be about $100 billion, most of which would go to rich countries.

Estimates of the gains from services, eliminating duties in certain industrial sectors, and trade facilitation -- removing red tape and corruption and improving infrastructure -- are highly speculative, they said.

A World Bank study from 2005 projecting global gains from a likely Doha deal of $96 billion, of which only $16 billion goes to developing countries, seems most likely, plus a further $24 billion -- including $7 billion for developing countries -- from services like construction and finance, they said.

Many studies look only at the potential gains for developing countries and ignore the costs, such as foregone tax revenues from cutting tariffs, they said.

Tariff revenue losses for developing countries from opening industrial markets could total $63.4 billion, poor countries may not have the capacity to tax effectively any consumption arising from increased economic activity, and liberalisation could push more workers into the informal sector, they said.

Developing countries that export light manufactures such as textiles and import food would also suffer from a likely decline in their terms of trade -- the ratio of export to import prices -- from any deal, they said.

The market opening under discussion at the Doha talks could prevent poor countries from pursuing development policies like Europe and the United States in the 19th century and more recently South Korea and China, where export industries were protected to allow them to become competitive, they said.

That runs counter to the development agenda that is supposed to be at the heart of the Doha talks, they said.