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					                        Chapter 6 - The WTO Doha Development Agenda:
        a possible Non-Agricultural Market Access outcome and implications for South Africa

                                              Chapter 6


   The WTO Doha Development Agenda: a possible Non-Agricultural Market Access
                          outcome and implications for South Africa


                             Ron Sandrey and Hans Grinsted Jensen


Summary and key points


The stalling of the talks in the Doha Round at the World Trade Organisation (WTO) in
Geneva are leading to questions about the value of such a round, and especially what the
value may be for the poorer nations of the world, many of whom are concentrated in Africa.
This chapter uses the Global Trade Analysis Project (GTAP) computer model to simulate a
likely outcome for Non-Agricultural Market Access (NAMA) from the Doha Development
Agenda (DDA). A feature of the analysis is that it uses as a ‘base’ or starting platform for the
simulation to assess the DDA against a trade picture that includes known global updates,
and this then enables us to isolate the effects of the Doha scenario from other changes over
the time period.


To set the scene a preamble to the World Trade Organisation (WTO) is provided. This
includes a review of some of the more recent analyses of a likely Doha Round outcome for
the world, African countries and South Africa. The striking feature of this analysis is that the
estimated benefits globally are reducing as (1) the limitations of a likely outcome from Doha
are being realised and (2) more realistic trade modelling is being done by researchers.


Next, the chapter introduces and describes the trade model used for simulations. Firstly, the
‘base’ or platform that takes into account all known changes and simulates South African
trade through to 2015 is developed. From there the assumptions pertaining to the most likely
Doha outcome (assuming there is one) are placed into the model and then an outcome is
simulated. An important part of these assumptions is that there will be a degree of flexibility
that enables countries to preserve their tariff protection on a few selected lines, and this
protection is allocated by the model to the most heavily protected tariff lines (the so-called
flexibility).


The global welfare gains from Doha are estimated to be some $48.2 billion, with a
lesser $3.3 billion of this from agricultural reform and the greater $45 billion from the
liberalisation of markets for non-agricultural goods. South Africa gains some
                      Chapter 6 - The WTO Doha Development Agenda:
      a possible Non-Agricultural Market Access outcome and implications for South Africa

$223 million, with $37 million of this from agricultural reform and the remainder from
NAMA reforms. The big gainers are China, Japan, EU and our ‘Rest of the World’, while the
US suffers a loss in welfare. Botswana has a loss in welfare of some $12 million, while the
‘Rest of SACU1’ aggregation of Lesotho, Namibia and Swaziland gains by $20 million. These
results are consistent with those presented in the literature review of recent analysis, and
reinforce that the shielding of some sensitive and special products in agriculture and using
the flexibility in NAMA considerably reduces the global gains.


By sector, output declines in many of the industrial products, with gains from agriculture and
the resultant move into these agricultural sectors accentuating the losses to NAMA. The big
NAMA gainers are apparel, non-ferrous metals and motor vehicles (South Africa is able to
retain protection against imports of motor vehicles and apparel by using its flexibility), while
both textiles and leather are big losers. Output increases marginally in all the resource
sectors.


Section 1: Introduction


The World Trade Organisation (WTO) deals with global rules of trade, as it determines and
oversees the multilateral trade rules among its 149 members. Its main function is to ensure
that international trade flows as smoothly, freely and predictably as possible and with no
undesirable side-effects. It aims to raise standards of living and ensure full employment in
member states by enabling the expansion of trade in goods and services in a sustainable
manner, and the current DDA2 aims to continue this momentum and further open global trade
across a broad front.


But within this (and on the road to this) potentially fairer and more market oriented trading
system there is no symmetry of negotiating power and opportunity between the parties, as
over three-quarters of WTO members are developing or least developed countries with many
of the latter situated in Africa. Developing countries are themselves not a homogeneous
group, but usually agriculture plays an important role in most of their economies and their
industrial base is generally weak. WTO members have recognised that liberalisation in these
developing countries’ own markets needs to be more gradual than for developed countries -
the principle of ‘special and differential treatment’ (S&D), while least-developed countries are
required to make very few adjustments. The latter comment is, however, tempered by the


1
  Southern African Customs Union.
2
  The DDA was launched in 2001, and progressed slowly until July 2006 when it was suspended
indefinitely.
                      Chapter 6 - The WTO Doha Development Agenda:
      a possible Non-Agricultural Market Access outcome and implications for South Africa

extent to which these least developed countries are an integral part of a common external
tariff (CET) arrangement involving other developing or even least developed countries, as in
these cases some will be unable to take full advantage of the S&D provisions. Such is the
case within SACU, with Botswana, Namibia and Swaziland, along with South Africa itself,
developing countries, while Lesotho is a least developed country.


Finally, it is important to always keep in mind that the WTO negotiates ‘bound’ tariffs, or tariff
rates that members have pledged not to exceed, rather than ‘applied’ or what is actually
levied at the border. When negotiators talk of ‘tariff reductions’, they are always in relation to
these bound rates and not necessarily to what may be happening to the applied rates at the
border. While in agriculture these bounds are often above and sometimes considerably
above applied rates, (and thus a reduction in bounds may make little or even no difference in
practice at the border), in industrial goods in the developed countries where most of the
changes will be mandated, the applied rates are usually at or near the bound rates and a
DDA reduction may well make a considerable difference to the actual applied rate. And
there is always the vexing question of government revenues, as many poorer countries rely
upon border taxes for these revenues (with Lesotho and Botswana that both rely on the
SACU revenue pool for over half of their total government funding good examples).


The stalling of the talks in the Doha Round at the WTO in Geneva are leading to questions
about the value of such a round also for South Africa, and against this setting there is a
feeling that the there is little ‘up-side’ gain and even potential losses for the developing and
least-developed countries (LDCs). A large percentage of the LDCs are in Africa, therefore
the DDA becomes important for the continent.


This study uses the GTAP computer model to simulate a likely outcome from the Doha
Round, and concentrates upon reporting the implications for NAMA. The implications for
agriculture from the same model have been reported separately in the previous chapter. The
model details and assumptions used have been discussed in detail in Chapter 2 and in the
previous chapter.


The previous chapter also provided some background on the research that has been
undertaken globally examining the potential implications for Africa from a possible DDA
outcome. We will not duplicate this review here, but rather refer the reader back to
Section 2.1 in Chapter 5.
                      Chapter 6 - The WTO Doha Development Agenda:
      a possible Non-Agricultural Market Access outcome and implications for South Africa

2.    The GTAP analysis


2.1   Model, database and scenarios


The analysis undertaken in this paper is based upon a variant of the GTAP model as
discussed in Chapter 2 and used in the previous chapter. Our business-as-usual baseline
features a number of important policy initiatives by the EU and others that must be set in
place first, and, as discussed earlier, these do not include the full implementation of the
TDCA. The primary scenario considered in this paper therefore entails the result from a
possible Doha round, with the results as measured in the year 2015 in a world shaped by the
baseline scenario. Differences between the so-called initial baseline scenario and this so-
called primary Doha scenario are therefore the results of implementation of Doha. Note that
we are not modelling reductions in either services or any non-tariff barriers.


In the agricultural case, we use the tiered market access formula suggested by the G20
allowing developed countries take out two percent of their tariff lines as sensitive products
while developing countries are allowed to exclude three percent of their tariff lines. All
agricultural export subsidies found in the GTAP database are eliminated, while there is no
change to domestic support in our Doha scenario.


With regard to the NAMA reform we use the simple Swiss formula with coefficients 5 and 20
for respectively developed and developing countries, including newly acceded members.
Developing countries and newly acceded countries are allowed to exclude up to five percent
of their tariff lines if it does not exceed five percent of their value of imports. South Africa is
deemed to be protecting selected lines in wearing apparel and motor vehicles. Non-bound
tariff are bound by adding 20 percentage points (mark up) to the MFN rate. The so-called
Paragraph 6 countries and small vulnerable countries are not required to make any
reductions in their applied tariffs but have to bind all their tariffs so that the simple average of
all NAMA tariff lines do not exceed respectively 28.5 and 22 percent on average. LDCs are
not required to do anything themselves by way of reform, but gain duty-free access into
developed countries markets3.


The scenario is detailed below (the country classification is given in Annex Table A1):


3
  Most LDCs already effectively have this quota- and duty-free access into the EU under the
Everything But Arms (EBA) agreement into the EU, while all African countries except South Africa may
well have the same access into the EU under the proposed Economic Partnership Agreements with
the EU (except for rice and sugar).
                        Chapter 6 - The WTO Doha Development Agenda:
        a possible Non-Agricultural Market Access outcome and implications for South Africa

•       Least developed countries or LDCs: LDCs are exempt from making any
        commitments.


•       Paragraph 6 countries: Countries with less than 35 percent binding coverage are
        exempt from making tariff reductions through the Swiss formula. They are, however,
        expected to bind 95 percent of non-agricultural tariff lines at an average level that does
        not exceed the overall average of bound tariffs for all developing countries after full
        implementation of current concessions. This level is calculated as 28.5 percent.


•       Small vulnerable economies: These countries are exempt from making tariff
        reductions through the Swiss formula, although they must bind 95 percent of non-
        agricultural tariff lines at an average level that does not exceed 22 percent.


•       Newly acceded members and developing countries: These implement the Swiss
        formula with a coefficient value of 20.       They do, however, have the flexibility of
        retaining unbound tariffs or formula-cut exemptions for up to 5 percent of all lines, as
        long as the lines do not exceed 5 percent of the member’s total import value.


•       Developed countries: These countries implement the Swiss formula with a coefficient
        of 5 and they must grant duty-free and quota-free market access for non-agricultural
        products originating from LDCs.


The general instrument for specifying tariff reduction commitments is the so-called simple
Swiss formula, defined as:


       (a or b) × t 0
t1 =
       (a or b) + t 0


where,


t1 =      Final bound tariff
t0 =      Base rate
a=        Coefficient for developed members (= 5)
b=        Coefficient for developing members subject to the formula (= 20)
                          Chapter 6 - The WTO Doha Development Agenda:
          a possible Non-Agricultural Market Access outcome and implications for South Africa

The base rate is given as the current bound rate or, in the case of unbound tariff lines, the
MFN rate plus a constant mark-up of 20 percentage points. The Swiss formula is constructed
in such a way that the highest tariffs are reduced the most, thus eliminating tariff peaks. Also,
the final bound tariffs will be no higher than the coefficient used in the formula, i.e. 20 percent
for developing and five percent for developed countries.


3.        The results: Part 1 - a plausible Doha Round outcome


3.1       The big picture


Table 1 shows the changes in welfare 4 from a possible Doha outcome, with the data
expressed in US$ million as one-off increases in annual welfare at the assessed end point of
2015. The welfare results are given as a total value, and then this total is split between
agriculture (which is itself split between agricultural export subsidy abolition and market
access changes) and NAMA. The overall gains of $48 billion are dominated by NAMA gains
of $45 billion, thus reinforcing the ‘modern’ GTAP results which show that use of the special
and sensitive products neuters an agricultural outcome from the DDA. Note that (a) global
welfare changes from the abolition of export subsidies are almost zero (a gain of $7 million),
and (b) that we have not modelled any changes to domestic supports.


Table 1: Welfare (EV) results from Doha outcome, $ million
                                        Agricultural       Agricultural
                          Total
                                          Export             market             NAMA
    EV $ million
                                         Subsidies           access
    ZAF                           223              17                 20                186
    BWA                           -12                -4                -3                 -5
    XSC                            20                 3                79                -62
    NGA                           198               -61                 2               257
    RAF                           983             -295               341                937
    EU                        5,907              1,040               591              4,275
    US                        -1,189               387               548             -2,124
    IND                       1,534                  -3                68             1,469



4
 The interpretation of results from a model is not straightforward. In the standard type of computer
general equilibrium (CGE) such as the GTAP model these results are expressed as welfare measures
that show how much better off a country/region and the world are as a result of the particular change.
There is no indication of the time-path of the welfare gains in a static model, so a welfare gain of
$10 million to South Africa means that South Africa is $10 million better off at the final year than it
otherwise would have been in the absence of that change. There is also little said about the
distributional aspects of these gains as there is only one ‘representative household’ in GTAP.
                         Chapter 6 - The WTO Doha Development Agenda:
         a possible Non-Agricultural Market Access outcome and implications for South Africa

                                       Agricultural       Agricultural
                         Total
                                         Export             market             NAMA
 EV $ million
                                        Subsidies           access
 CHN                         8,968                -67                 -9             9,044
 BRA                         2,611                 89               617              1,905
 JAP                         5,404                 -13              224              5,193
 RoW                        23,532              -1,086              787             23,831
 Total                      48,180                   7            3,265             44,907
Source: GTAP results


South Africa’s gains are $223 million: $17 million of these from abolition of export subsidies,
$20 million from better market access for agricultural goods, but the bulk ($186 million) from
the NAMA outcome. Note that Botswana loses some $12 million, while the Rest of SACU is
a relatively big small gainer in welfare terms with big gains in agricultural market access off-
set by the loss in NAMA.          The biggest loser in dollar terms is the US, with all other
countries/regions gaining. China and the Rest of the World (RoW) are the biggest gainers,
with all the gains coming from NAMA.


The previous chapter on the Doha and agriculture compared our results for the overall
welfare with the other research cited in the literature review section in Chapter 5. This will
not be repeated here, except to say that we took comfort from these ‘ballpark’ similarities and
concluded that our results are reasonable. Similarly, more details on the changes in welfare
for the complete simulation of both agriculture and NAMA are also shown in Chapter 5.


3.2 The changes by GTAP sector


Table 2 shows the relative changes in the South African GTAP NAMA sectors as a result of
this Doha outcome. Output declines in many of the industrial sectors, with gains from
agriculture and the resultant move into these agricultural sectors accentuating the losses to
NAMA sectors in most cases. The big gainers are apparel, non-ferrous metals and motor
vehicles (South Africa is able to retain protection against imports of motor vehicles and
apparel by using its flexibility). Both textiles and leather are big losers. Output increases
marginally in all the resource sectors.
                       Chapter 6 - The WTO Doha Development Agenda:
       a possible Non-Agricultural Market Access outcome and implications for South Africa

Table 2: Changes in South African production and trade (%) from base post-Doha
                           Change             Contributions from                Change in Quantity
                           Output       Ex Sub    Agr access     NAMA          exports    imports
Resources
Fish                           0.28          0.03          0.04        0.21          2.3         5.0
Forestry                       0.06          0.01          0.01        0.05          1.1         0.1
Coal/oil/gas                   0.11          0.00          0.00        0.12          2.3         1.4
Other minerals                 0.07         -0.02         -0.04        0.13         -0.1         0.2
Manufacturing
Textiles                      -2.69         -0.03         -0.12       -2.54          5.7       10.1
Apparel                        1.97         -0.07          0.01        2.03        11.1          3.3
Leather                       -9.04         -0.11         -0.66       -8.27         -6.8       11.8
Lumber                        -0.31         -0.06         -0.10       -0.15          0.4         3.1
Paper products                -0.30          0.02          0.01       -0.33         -1.2         0.7
Petrol/coal products          -0.07          0.00          0.02       -0.09         -0.4         0.1
Chemicals/plastic/rubber      -0.99         -0.01         -0.13       -0.85         -1.8         0.8
Other mineral products        -1.48         -0.02         -0.02       -1.44         -2.0         2.6
Iron & steel                   0.10         -0.08         -0.16        0.34          0.7         0.1
Non-ferrous metals             1.24         -0.13         -0.21        1.59          1.4         1.2
Metal products                -0.96         -0.03         -0.07       -0.86         -1.9         3.6
Motor vehicles                 1.37         -0.05         -0.12        1.54          4.6         2.1
Other transport               -0.26         -0.09         -0.08       -0.09         -0.7         0.2
Electrical goods              -0.85         -0.17         -0.20       -0.48         -1.7         0.1
Other machinery               -0.87         -0.10         -0.13       -0.64         -1.5         0.6
Other manufactures            -0.43         -0.08         -0.19       -0.15          0.3         2.0
Source: GTAP results


Table 3 expands the GTAP analysis in Table 2 above to look at the changes in market
prices. It shows that the price decreases for all manufacturing sectors (except petroleum/coal
products), and that the impacts of the agricultural sector on manufacturing are limited. There
is a large increase in the fishery sector in natural resources, with this sector helped along by
better market access for fisheries products as they are included in agriculture in GTAP.
                        Chapter 6 - The WTO Doha Development Agenda:
        a possible Non-Agricultural Market Access outcome and implications for South Africa

Table 3: South African market price changes and contributing factors (%)
                                                                    Contributions from
                                       Market                         Agricultural
                                        price          Export           market
                Sector                 change         subsidies         access            NAMA
 Resources
 Fish                                        3.84            0.47              0.58           2.79
 Forestry                                   -0.16            0.03              0.05           -0.24
 Coal/oil/gas                                1.40           -0.03              0.00           1.43
 Other minerals                              0.00           -0.03             -0.04           0.07
 Manufacturing
 Textiles                                   -0.94            0.02              0.03           -0.99
 Apparel                                    -1.37            0.02              0.02           -1.42
 Leather                                    -0.79            0.05              0.10           -0.93
 Lumber                                     -0.42            0.02              0.03           -0.47
 Paper products                             -0.27            0.02              0.04           -0.33
 Petrol/coal products                        0.51           -0.02              0.00           0.52
 Chemicals/plastic/rubber                   -0.16            0.02              0.03           -0.20
 Other mineral products                     -0.10            0.01              0.03           -0.14
 Iron & steel                                0.00            0.01              0.02           -0.04
 Non-ferrous metals                         -0.20            0.01              0.02           -0.23
 Metal products                             -0.24            0.02              0.03           -0.28
 Motor vehicles                             -0.46            0.01              0.02           -0.49
 Other transport                            -0.22            0.02              0.03           -0.26
 Electrical goods                           -0.24            0.03              0.03           -0.30
 Other machinery                            -0.23            0.02              0.03           -0.27
 Other manufactures                         -0.28            0.01              0.02           -0.30
Source: GTAP results


Tables 4 and 6 take the next step and expand upon the changes to relative prices to show
the specific details of the changes to, firstly, export destinations (in Table 4) and then import
sources (in Table 6). In resources are some major shifts in the exports (Table 4) of coal, oil
and gas, with a big increase to the rest of Africa – but much of this a trade diversion away
from the EU and others. In manufacturing, total exports increase by a relatively minor
$138 million, with increases to the Rest of the World and India dominating. There are
decreases to both SACU and more importantly the EU, destinations where South Africa has
largely duty-free access for manufacturing products. There is also a more substantial decline
to other African destinations where there are only two other countries in Africa that reduce
their NAMA tariffs (Egypt and Tunisia). The rest are either Paragraph 6 countries or LDCs.
                        Chapter 6 - The WTO Doha Development Agenda:
        a possible Non-Agricultural Market Access outcome and implications for South Africa

So when South Africa obtains better market access in other countries outside of Africa,
NAMA exports are drawn away from Africa towards other WTO members. The largest
increase by sector is in motor vehicles ($136 million), with this increase almost entirely to the
Rest of the World that outweigh reductions to the Rest of Africa and the EU. This is closely
followed by non-ferrous metals, with the large increase to India (most likely gold).


Table 4: Changes in South African NAMA exports, $ million
                            SACU      RAF       EU     US      India   China   BRA     JAP     RoW     Total
 Resources
 Fish                           0.2     -0.2     6.5    -0.4     0.0     0.0     0.0     0.0     0.0      6
 Forestry                       0.1     -1.1     0.2    0.0      0.5     0.1     0.0     0.1     1.6      1
 Coal/oil/gas                  -0.4   492.1    -235     -2.3   -13.7     0.3    -5.2    -6.1   -63.1    167
 Other minerals                -0.2     -0.1     2.0    -0.1     0.4    -7.3     0.0     2.3     0.1      -3
 Manufacturing
 Textiles                      -7.4    -14.5    -7.3   31.8      2.0     0.2     1.6    -0.4    16.7     23
 Apparel                        0.2      0.0    -6.7   26.4      0.0     0.4     0.0     1.1     3.1     25
 Leather                       -0.2     -2.3    -4.0   -13.7     0.7     2.8     0.0    -8.0     3.9     -21
 Lumber                        -0.8     -9.6     4.1    0.7      0.0     0.3    -0.1     0.8     4.3      0
 Paper products                -3.7    -25.2     0.9    0.3     -0.2     0.7     0.9     0.4     5.9     -20
 Petrol/coal products           2.8     -6.1     0.7    0.2      0.2     0.9     0.0     0.1     2.0      1
 Chemicals/plastic/rubber      -7.6    -70.6    -5.6   -11.0    10.8     6.8    -1.3     0.0     9.3     -69
 Other mineral prod            -0.7     -9.3    -1.5    -3.0     0.1     0.4     0.1     0.1     2.7     -11
 Iron & steel                  -1.1    -14.1    -2.0    -1.7    11.6     2.8     0.1     5.6    13.8     15
 Non-ferrous metals            -0.2     -4.2    10.8    -4.0    78.0     3.2     1.5    18.6    11.7    115
 Metal products                -1.9    -23.4    -2.1    -1.1     0.3     0.2     1.3     0.2     4.5     -22
 Motor vehicles                -1.2    -16.5   -23.7    -2.5     0.6     0.6     1.0     7.5   169.8    136
 Other transport               -0.1     -1.0    -1.7    -1.0     0.0     0.0    -1.0     0.0     0.4      -4
 Electrical goods               0.2     -6.5    -0.9    0.0      0.0     0.0     0.0     0.0     0.7      -6
 Other machinery               -2.7    -81.4    -2.6    -5.1     1.3    12.6     1.1     0.2    14.8     -62
 Other manufactures            -0.3     -4.5    -2.0    -9.0     0.2    15.2     0.0     0.0     1.2      1
 Manufactures Subtotal        -24.7   -289.2   -43.6    7.3    105.6    47.1     5.2    26.2   264.8    138
 Grand Total*                  -4.0   211.7    235.0    3.4     97.0    55.3     0.9     0.6   317.7    448
Source: GTAP results, where ‘Grand Total’ includes agricultural trade and services.


The flexibility options (effectively called sensitive and special products in agriculture) allow
countries to protect their sensitive sectors. Table 5 takes South Africa’s motor vehicle tariffs
as the main NAMA sector protected in this case and shows the pre-Doha weighted tariff
rates and the rates both with and without flexibility after the Doha outcome. In most cases
                          Chapter 6 - The WTO Doha Development Agenda:
          a possible Non-Agricultural Market Access outcome and implications for South Africa

there is a substantial difference. The differences from the individual sources are the result of
the trade weighted calculations being done on South Africa’s 2001 imports at the HS 6 level,
and as there are different tariffs at these HS 6 levels the differing import compositions from
individual sources will reflect this. We note that in 2007 South Africa announced that from
2008, tariffs on vehicles from the EU would be reduced to 18 percent under the TDCA, and
this will alter the data in Table 5 and therefore subsequent analysis results5.


Table 5: The effects of flexibility on potential South African imports, $ million
reductions.
    MHV               Nigeria      RAF        EU      US       India     China      BRA        JAP      RoW
    South African tariffs
    Pre-Doha             33.5.       16.4     19.3     24.0      15.9       10.8      23.6      16.3        19.0
    post, flex              33.5     14.5     18.1     21.4      14.1        9.7      21.9      14.8        16.8
    post, no flex           14.3       9.5     9.7     12.0      11.4        9.1      12.7      10.4        11.8
    Difference           -19.2        -5.0    -8.5     -9.4       -2.7      -0.6      -9.2       -4.4       -5.0
Source: MacMaps database and Doha calculations.


Table 6 duplicates Table 4 above, but this time to show changes to the NAMA imports into
South Africa. Again, in resources there is increased activity in the coal, oil and gas sector as
imports increase from ‘other Africa’ (Nigeria and the Rest of Africa) and the Rest of the
World. In manufacturing, the increase in imports of some $337 is more than double the
increase in exports, although, again, the motor vehicle sector shows a lot of activity. This
sector is however trumped by textiles6 (but note that South Africa is deemed to have used its
flexibility in the motor vehicle and apparel sectors, thus limiting the import penetration in both
of these sensitive sectors). By source, the large increase is from China (in textiles, apparel,
leather goods and ‘other mineral products’) and the Rest of the World (textiles and other
machinery). There is a decline in imports from the EU as the considerable tariff preferences
accorded to the EU under the Trade and Development Cooperation Agreement are eroded
and other markets are able to compete on a more even playing field. Similarly, imports from
SACU also decline as their preferences are eroded.




5
  The new 18 percent tariff will apply to built-up passenger cars, and since these are but one part of
the sector that also includes buses, trucks, farm tractors and vehicle parts, the overall reduction will
result in the pre-Doha figure being much lower.
6
  As the production of apparel increases, the increase of textiles as the major input into that sector is
consistent.
                      Chapter 6 - The WTO Doha Development Agenda:
      a possible Non-Agricultural Market Access outcome and implications for South Africa

Table 6: Changes in South African NAMA imports, $ million
                                Other
                       SACU     Africa    EU      US     India   China    BRA      JAP      RoW    Total
Resources
Fish                     0.6       0.0     0.8     0.0     0.0      0.0     0.0     0.0      0.2      2
Forestry                 0.0       0.0     0.0     0.0     0.0      0.0     0.0     0.0      0.0      0
Coal/oil/gas             0.6      15.4     0.1     0.2     0.0      0.0     0.0     0.0     46.8     63
Other minerals           0.0       0.0     0.0     0.0     0.0      0.1     0.0     0.0      0.1      0
Manufacturing
Textiles                -13.0      2.8   -55.1     5.3    13.1     36.5      0.7    -0.9    95.4     85
Apparel                 -11.6      4.6   -42.0     2.9     4.8     35.4      0.0     0.2    18.8     13
Leather                  -1.8      1.9   -49.5     1.3    -0.5     87.4     -1.1     0.0     4.5     42
Lumber                   -1.5      1.2   -11.5     0.5     0.8     12.7      0.2     0.1     8.6     11
Paper products           -2.8      0.3    -5.9     2.4     0.4      0.5      0.2     0.1     8.8      4
Petrol/coal products      0.0      0.0     0.1     0.0     0.0      0.1      0.0     0.0     0.3      1
Chemicals/plastic/
rubber                   -3.8      3.3   -50.5    18.8     4.5      5.2      1.0   25.2     23.6     27
Other mineral prod       -0.2      0.3   -21.4    -0.6     1.5     30.1      4.1   -2.3     10.5     22
Iron & steel              0.0      0.4    -1.2     0.3     0.9     -0.4     -0.2    0.0      0.2      0
Non-ferrous metals        0.2     13.5    -0.5     0.1     0.1     -0.3      0.0   -0.1     -5.7      7
Metal products           -0.5      0.5   -13.6     0.2    14.6     15.5      0.2   -0.1      6.4     23
Motor vehicles           -4.0      0.6    22.6    18.1     1.7     -0.2      3.3    6.5     16.3     65
Other transport           0.1      1.1    -0.1     1.4    -0.1     -1.2     -0.8   -0.5     -0.2      0
Electrical goods          0.0      0.4   -11.2    -1.6     4.4      6.0      2.9   -2.5      2.5      1
Other machinery          -0.7      2.6   -54.0     3.2    11.1     23.4      1.8   -9.3     44.6     23
Other manufacture        -3.9      0.1    -8.5    -0.6     4.4     13.4      0.4    0.2      8.0     14
Manufactures
Subtotal                 -44        34    -302      52      62      264      13      17     242     337
Grand Total              -51        63    -333      65      65      263      12      17     304     405
Source: GTAP results, where ‘Grand Total’ includes agricultural trade.
Blank spaces represent a zero.

3.3   Key trade changes for the major global players in NAMA trade


The objective for this section is to provide a short summary of the key NAMA trade changes
for the major nations (the US, EU, Japan, China, India, Brazil, Rest of Africa and the BLNS).


There are large changes in the EU external (i.e. excluding intra-EU internal trade) NAMA
trading patterns, with imports increasing by $21.8 billion and exports by $7.0 billion. EU
exports to the US increased by $5.4 billion, to China by $3.5 billion, to Japan by 2.2 billion
and to the Rest of Africa by $1.9 billion. These increases were concentrated in chemical,
rubber and plastics, vehicles, other manufacturing and textiles. There was, however, a large
reduction in internal EU trade, with reductions of around $17 billion that was concentrated in
motor vehicles, textiles and apparel. The big winners in the increased imports into the EU
were from the US ($5.9 billion), China ($11.2 billion), Japan ($4.7 billion), Rest of the World
                      Chapter 6 - The WTO Doha Development Agenda:
      a possible Non-Agricultural Market Access outcome and implications for South Africa

($4.1 billion) and rest of Africa ($1.0 billion). By sector these imports were concentrated in
motor vehicles and apparel.


Imports into the US increased by $18.5 billion, $8.2 billion coming from China and $5.6 billion
from the EU. By product, apparel ($7.6 billion, with $4.5 billion from the Rest of the World
and a lesser $2.0 billion from China) dominates, followed by textiles (again from the Rest of
the World) and then leather goods (from China). Exports to the EU ($5.7 billion) constitute
over half of the total NAMA increase of $10.0 billion, with this increase driven by chemical,
plastics and rubber, motor vehicles and other manufacturing products. Another feature is the
decline in exports of motor vehicles to the Rest of the World of $1.3 billion but an increase of
$1.4 billion to the EU.


Brazil is better known as an agricultural exporter, and the data reflects this. Global NAMA
imports increase by $2.5 billion, with most increases in ‘other manufacturing products’ from
the EU, China and the US. Exports increase by a relatively low $1.1 billion, with motor
vehicles and other manufacturing products to the Rest of the World dominating these
increases.


Reflecting the highly protected nature of the Japanese agricultural market and the strength
of its industrial base it is no surprise that there is almost an even level between increased
imports of agricultural ($4.8 billion) and NAMA ($7.6 billion) products, while NAMA exports
($10.8 billion) totally dominate the total Japanese increase of $11.4 billion. Changes in
imports are focused on those from the EU ($2.4 billion, in leather goods and a wide range of
other products), China ($2.0 billion, all in apparel and textiles as every other sector declined
or hardly moved), the US ($1.2 billion across a range of sectors) and the Rest of the World
($1.4 billion). Nearly half of the large increase in exports are to the EU ($5.1 billion with
motor vehicles at $2.7 billion dominating) and then motor vehicles to the Rest of the World
($1.7 billion) as the next major feature. There is almost no change in trade with Africa.


Indian NAMA imports increase by $2.9 billion, with these increases concentrated in
chemicals, plastic and rubber ($331 million) from the EU ($97 million), the Rest of Africa ($76
million) and the US ($54 million); textiles ($271 million), mainly from the Rest of the World;
and non-ferrous metals, mainly from South Africa. Indian exports increase by $2.7 billion,
with wearing apparel and textiles to the EU, apparel to the US and the Rest of the World, and
iron and steel to rest of Africa the largest contributors to this increase.
                      Chapter 6 - The WTO Doha Development Agenda:
      a possible Non-Agricultural Market Access outcome and implications for South Africa

China is a major gainer in the NAMA products, with massive increases in exports of the
globally sensitive TCF products (textiles, clothing and footwear (leather)) and some large
increases of textiles and leather products to fuel this trade. Overall, Chinese imports increase
by $17.6 billion, with most ($9.6 billion) coming from the Rest of the World, the EU
($3.6 billion), Japan ($2.7 billion) and the US ($1.2 billion). By sector, there are increases in
textiles from the Rest of the World with Japan dominating this increase and even larger
increases in other machinery and equipment of $5.5 billion with most of this ($2.5 billion)
from RoW. There are, however, also sizable increases in chemicals, plastics and rubber and
wearing apparel, with most of these increases coming from RoW. Exports increase by an
even larger $22.7 billion, with wearing apparel ($11.2 billion) to the EU ($6.4 billion) and the
US and Japan ($2.0 billion) dominating, followed by textiles and leather, both around
$4.3 billion and both mostly to the EU and US. By destination, the largest increase is to the
EU ($10.2 billion), followed by the US ($7.7 billion), Japan ($1.9 billion) and the Rest of the
World ($1.6 billion). NAMA exports to South Africa increase by a sizable $247 million while
imports from South Africa are a more modest $40 million. There are very minor decreases in
exports directly to the BLNS countries ($7 million) but no changes in imports from these
countries.


Changes to the trade patterns within the BLNS countries of Botswana, Lesotho, Namibia and
Swaziland (with the latter three aggregated into Rest of SACU) are generally restricted to the
changes in both textiles and apparel in Rest of SACU. Here exports decline by $56.5 million
in textiles and $82.7 million in apparel, with almost all of this reduction in US exports. These
reductions account for $139.2 million from the $161.6 million NAMA reduction, with small
reductions in almost all other sectors contributing to the balance. By destination, exports to
the US decline by $133.6 million and those to South Africa by $28.4 million. For Rest of
SACU imports, these decline by $48.4 million, with the largest change being a reduction of
$23.6 million as less textiles are needed to service the smaller apparel sector. The changes
to Botswana’s trade flows are not good news: exports decrease by $35.6 million ($21.5
million to the EU and $12.8 million to South Africa), with overall losses concentrated in other
manufacturing products, textiles and clothing, while imports decline by a lesser $14.2 million.
These losses are concentrated in imports from South Africa ($-7.9 million), with reductions
spread across most sectors.


In the Rest of Africa, NAMA imports increase by $2,547 million, with textiles ($591 million)
the largest contributor to this increase. Imports in this sector increase by $1,118 million from
the EU but trade diversion from other sources (mostly China at -$317 million) reduces the
overall increase. Other increases are $374 million in coal, oil and gas (mostly from
                      Chapter 6 - The WTO Doha Development Agenda:
      a possible Non-Agricultural Market Access outcome and implications for South Africa

South Africa), $257 million in chemicals, plastics and rubber (again mostly from the EU) and
$174 in metal products. By source, the EU dominates, followed by the US, South Africa and
China (all around $250 million). Intra-RAF imports decline by $231 million. Global NAMA
exports increase by a much lower $1,047 million, with coal, oil and gas exports to mostly the
EU and the US increasing by $68 million. This is followed by non-ferrous metal products
($196 million to mostly the EU) and other machinery and equipment ($152 million). Exports
of wearing apparel decline by -$381 million, with a big decline of -$702 million to the EU
partially offset by increases of $202 million to the US.


Changes to Nigerian exports are concentrated in coal, where these exports account for
$179.7 million and are more than the change in total NAMA exports of $161 million as almost
all manufacturing sectors decline marginally. The coal exports are to the US, EU, South
Africa and Brazil, with some balancing reductions to the Rest of Africa. Reductions of leather
goods by some $13.7 million are the only other feature of exports. Imports increase by
$44.4 million, with most of these from the EU and India by source, and other manufacturing
products and petroleum and coal products by sector. Imports decline by $38 million from
China, and there is virtually no change with the SACU region except for the exports of coal to
South Africa.




References


Ackerman, F. 2005. The shrinking gains from Trade: A critical assessment of Doha Round
projections. Global development and Environment Institute Working Paper No. 05-01, Tufts
University, October 2005.


Anderson, K. and Martin, W.         (eds.). 2005. Agricultural Trade reform and the Doha
Development Agenda. Washington DC: World Bank.


Anderson, K., Martin, W. and Valenzuela, E. 2006. The relative importance of global
agricultural subsidies and market access. World Trade Review 5: 3, 357-376.


Bouet, A., Decrex, Y., Fontagne, L., Jean, S. and Laborde, D. 2005. A consistent, ad-
valorem equivalent measure of applied protection across the world: The MAcMap-HS6
database. CEPII No 2004 – 22 December (updated September 2005). [Online]. Available:
http://www.cepii.fr/anglaisgraph/workpap/pdf/2004/wp04-22.pdf.
                      Chapter 6 - The WTO Doha Development Agenda:
      a possible Non-Agricultural Market Access outcome and implications for South Africa

Dimaranan, B.V. (ed.). 2005. Global trade, Assistance and production: the GTAP 6 Data
Base. Center for Global trade Analysis, Purdue University, West Lafayette.


Kirkpatrick, C., George, C. and Scrieciu, S. 2006. Sustainability Impact Assessment of
Proposed WTO Negotiations. Institute for Development Policy and Management, University
of Manchester, May 2006.


National Board of Trade. 2006. Economic Implications of the Doha Round. Stockholm,
Sweden. [Online]. Available: http://www.kommers.se/templates/Analyser.aspx?id=15.


OECD. 2006. Review of Agricultural Policies: South Africa. Paris: Organisation for Economic
Cooperation and Development.


Polaski, S. 2006. Winners and Losers: Impact of the Doha Round. Washington D.C.:
Carnegie Endowment for International Peace.


Sandrey, R. and Jensen, H. 2007. South African agriculture: a possible WTO outcome and
FTA policy space — a modelling approach. tralac Working Paper No. 5. [Online]. Available:
www.tralac.org.


Sandrey, R., Matlanyane, A. and Maleleka, D. 2006. Trade Liberalisation: What exactly does
it mean for Lesotho? tralac Working Paper No. 7. Stellenbosch: US Printers.


Sandrey, R. 2006, Trade creation and trade diversion resulting from SACU trading
agreements. tralac Working Paper No. 11. Stellenbosch: US Printers. [Online]. Available:
www.tralac.org.


Vyborny, K. Undated. What could the Doha Round mean for Africa?, New York: Carnegie
Foundation for International Peace. [Online].
Available: http://www.carnegieendowment.org/files/vyborny_wc1.pdf.

Walmsley, T.L. 2006. A Baseline Scenario for Dynamic GTAP Model. Revised March 2006
for the GTAP 6 Database. Center for Global Trade Analysis, Purdue University, West
Lafayette.
                                               Chapter 6 - The WTO Doha Development Agenda:
                               a possible Non-Agricultural Market Access outcome and implications for South Africa

Table A1. WTO member countries classification in the NAMA negotiations
                  Countries, with no reduction commitments                                       Countries with reduction commitments
                           Paragraph 6 countries                                         Newly acceded
                          Countries with less than         Small, vulnerable        Members from year 2000            Developing             Developed
LDC                    35 percent binding coverage            Economies             Demanding exceptions                countries            countries
Angola                 Cameroon                       Antigua and Barbuda        Albania                         Argentina              Australia
Bangladesh             Congo                          Barbados                   Armenia                         Bahrain                Canada
Benin                  Cote d’Ivoire                  Belize                     Croatia                         Brazil                 Iceland
Burkina Faso           Cuba                           Bolivia                    F. Yugoslav R. of Macedonia     Bulgaria               Japan
Burundi                Ghana                          Botswana                   Georgia                         Chile                  Liechtenstein
Cambodia               Kenya                          Brunei Darussalam          Jordan                          Colombia               New Zealand
Central African Rep    Macao                          Costa Rica                 Moldova                         Korea                  Norway
Chad                   Mauritius                      Congo Republic             Oman                            Hong Kong              Switzerland
Congo                  Nigeria                        Dominica                   Taiwan                          India                  USA
Dem. Rep. Congo        Sri Lanka                      The Dominican Republic     Kyrgyz Republic                 Indonesia              EU25
Djibouti               Suriname                       Ecuador                    China                           Israel
Gambia                 Zimbabwe                       El Salvador                                                Kuwait
Guinea (Conakry)                                      Fiji                                                       Malaysia
Guinea Bissau                                         Gabon                                                      Mexico
Haiti                                                 Grenada                                                    Morocco
Lesotho                                               Guatemala                                                  Pakistan
Madagascar                                            Guyana                                                     Peru
Malawi                                                Honduras                                                   Philippines
Maldives                                              Jamaica                                                    Qatar
Mali                                                  Mongolia                                                   Rumania
Mauritania                                            Namibia                                                    Singapore
Mozambique                                            Nicaragua                                                  South Africa
Myanmar                                               Panama                                                     Egypt
Nepal                                                 Papua New Guinea                                           Thailand
Niger                                                 Paraguay                                                   Tunisia
Rwanda                                                Saint Kitts and Nevis                                      Turkey
Senegal                                               Saint Lucia                                                United Arab Emirates
Sierra Leone                                          Saint Vincent Grenadines                                   Venezuela
                                             Chapter 6 - The WTO Doha Development Agenda:
                             a possible Non-Agricultural Market Access outcome and implications for South Africa

                Countries, with no reduction commitments                                       Countries with reduction commitments
                        Paragraph 6 countries                                       Newly acceded
                       Countries with less than         Small, vulnerable        Members from year 2000            Developing         Developed
LDC                  35 percent binding coverage           Economies             Demanding exceptions               countries         countries
Solomon Isles                                       Swaziland
Tanzania                                            Trinidad and Tobago
Togo                                                Uruguay
Uganda
Zambia

				
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