SPECIAL AND DIFFERENTIAL TREATMENT IN MULTILATERAL TRADE….pdfVIP

SPECIAL AND DIFFERENTIAL TREATMENT IN MULTILATERAL TRADE NEGOTIATIONS Shamim Shakur, Allan N Rae and Srikanta Chatterjee Department of Applied and International Economics Massey University, Palmerston North, New Zealand Abstract WTO trade negotiations stalled in recent years because of north-south trade conflicts reaching their lows during the Cancun fiasco of September 2003. The developed countries with a much longer history as industrial economies have always argued - often with some justification - that the developing countries have long used many and varied instruments to restrict trade. The developed countries, in their turn, have maintained high protection to agriculture and textile imports to the detriment of the developing countries. One cornerstone of the Doha Development Agenda (DDA) is the provision of special and differential treatment (SDT) of developing countries. The WTO framework accord reached in July 2004 reaffirms that the least-developed countries, which will have full access to all SDT provisions as stated in section 2.2 of DDA, are not required to undertake tariff reduction commitments. We believe, however, that non-reciprocity as implied in SDT must be approached with caution. Standard trade theory literature suggests that the bulk of the gains from trade come from unilateral trade liberalisation and results of our experiments support this point. We quantify the gains and losses - and their sources - by simulating a trade liberalisation scenario with and without SDT in a computable general equilibrium (CGE) modelling framework. The welfare gains to most developing countries are shown to improve when SDT does not apply, and the LDC welfare gains turn out to be ei