Market Access Proposals for Non-Agricultural Products

Abstract

Various proposals in the WTO non-agricultural market access negotiations are explained and analysed using a global general equilibrium model. 2 The results show that proposals involving deeper tariff cuts imply greater increases in imports and exports, but greater losses in tariff revenues that will need to be made up in some way. They also show greater welfare gains in the longer term, resulting from the improved allocation of resources and changes in the terms of trade, but there are several qualifications to this finding. First, the overall numbers conceal important adjustments in individual sectors and countries, and these adjustments will normally occur in the first several years of the implementation of the tariff changes, while the overall benefits only start to accrue later. Second, no account is taken of the potential benefits deriving from the use of tariffs for industrial policy purposes, in particular where there is a divergence between social and private costs and benefits (externalities), and the options for alternative policies have been limited by WTO agreements. Third, concomitant action is required on WTO rules and on market entry conditions to ensure that the potential benefits are realised. Under all proposals the greater adjustments would be made by developing countries, and it may well be that the proposals for deeper cuts entail going too far, too fast for many developing countries, They could also lead to increased use of contingency measures such as anti-dumping actions. If adjustment costs are too high, this could also endanger the reform process, and a more measured approach may be indicated – a case of make haste slowly.