A Literature Review of the Doha Development Agenda

A LITERATURE REVIEW OF THE DOHA DEVELOPMENT AGENDA

Introduction

The Doha Development Agenda (DDA) is an on going round of WTO negotiations that is tackling issues regarding trade facilitation of agricultural and manufacturing goods, services and further integration of developing and least developing countries. Rodrick (2001) who has been a very vocal critic of the WTO, states that WTO has become more emphasized on maximizing trade rather than the promoting of economic growth.

The purpose of this paper is to critically analyze Rodrick (2001) arguments in light of the on going trade liberalization trend. The relationship between development and trade openness, the right way for successful liberalization and the Doha agenda are amongst the topics that will be covered in this paper in light of the arguments, recommendations and conclusions made by Rodrick (2001). Various other literatures on the topic of relationship between trade liberalization and economic growth are revised to substantiate Rodrick's clarifications. Lastly recommendations that Rodrick has made is taken into account for the conclusion.

Trade Liberalization and Economic Growth

According to Rodrick (2001) WTO and other multilateral agencies have a strong view that in order for countries to achieve successful economic growth integration into the global economy is vital. He goes onto argue that there is no substantial link between trade liberalization and economic growth. Consider the examples from the 80's where Viet Nam was protective of its market while Haiti practiced trade liberalization, shows that Viet Nam increased its economic growth rate and experienced high integration into the global economy whereas Haiti's economy failed to grow. Using these examples he shows that a proper policy that accounts for development would not just push for openness to trade and also that trade liberalization will only be successful after a certain level of high growth is achieved.

(Rodrick, 2001) "The contrasting experiences of these two countries highlight two important points. First a leadership committed to development and standing behind a coherent growth strategy counts for a lot more than trade liberalization. Second, integration with the world economy is an outcome, not a perquisite, of a successful growth strategy"(p.22).

Hassan, Sukar and Ahmed (2006) gives supports to Rodrick's statement by saying that openess of trade for countries that aren't so strong economic growth wise has brought about negative results. This conclusion was drawn from the example of the Sub-Saharan African countries that had blindly leapt into liberalization in the early 1990's which led to a few years of growth in GDP. Experts had gone to forecast that the contribution of exports made by these African countries would increase their economic growth and development. However present studies are showing that most of these countries have not made successful economic growth developments within the years.

"Ten years later individual country-by-country investigations and cross-sectional calculations reveal that in Sub-Saharan Africa the terms of trade continue to deteriorate, exchange rates continue to be distorted, manufacturing exports continue to grow at the same rate, their share of manufactured exports as a share of their own total exports continue to deteriorate, and their share of world trade is not any better than it was before the early 1990s. Moreover their foreign direct investment as a percentage of GDP is still low and has even precipitously declined from countries"(p.20).

This view is also supported by Foster (2008) who says that while some countries have gained from liberalization others have had no advantages whatsoever. He states that through the use of quartile regression methods it is seen that, countries that enjoy advantages from liberalization in the long-run are also most anticipated to endure disadvantages, which might lead to the attrition of reforms and the loss of the prior advantages for good.

Another important point Rodrick (2001) makes is that most developed countries themselves at the beginning were protecting their own markets by putting trade barriers until they reached a certain level of economic growth and richness which led them to slowly reduce barriers. This proves as evidence that industrialized countries such as the United States, EU's, were also not too open to the idea of trade liberalization until they were much wealthier economies. Therefore Rodrick goes onto question why there is so much priority on developing countries to apply such a policy when industrialized countries did not do the same when their economies were more vulnerable.

The path to successful Liberalization