Will the Doha Deadlock Persist?
Final Presentation for Case Study
International Political Economy
July 21, 2013
Chen, Kung Chen
Graduate School of Public Policy,
University of Tokyo
Contact: kc2710@columbia.edu

Outline
Research Question
Argument and Methodology
The outsider gameThe compensatory outsider game
Conclusion: FTA, the new possibility

Research question• Question: Will the Doha deadlock persist?
• The Doha Round is the latest trade negotiation of the World Trade
Organization (WTO). Since November 2001, the Doha Round hassought to reform the international trading system by introducing lower
trade barriers and revising trade rules to address developing countries’
appeal and focus on development.
• Although it was touted as the development round, today’s analysts
generally have a slim hope of productive outcome from the Doha
Development Agenda.

Argument and Methodology• YES, as long as actors are rational and structural conflicts of interest
exist, Doha’s deadlock will persist, while multilateral efforts or temporarycompromises will have no lasting benefits for solving this deadlock.
• Some literatures made conclusions about the causes of the Doha
deadlock without coherent logic through analytical causal connections.
In fact, government positions on and reactions to specific issues on thebargaining table are only a superficial phenomenon rather than the coreof disputes.
• This paper applies game theory to rationally demonstrate actors’decision making.

Before joining the WTO• Two reasons for joining trade integration : either to gain from the free
trade or to avoid being marginalized in trade competition.
• Regardless of their different motives, actors all realize the urgency toparticipate in the global trading system.

The outsider game••

Engagement or containment are two options available to players. Engagement
will be indicated by a “+” sign; containment will be indicated by a “–” sign.
Players only act pursuant to rational choice.
Free trade will only be established when both players choose engagement, andthe deriving gains are indicated by 1. If either one chooses containment, thanthe cooperation will fail, and the resulting losses are indicated by -1.

The outsider game

• Free trade may bring a certain degree of profit for the outsider’scompetitors, and therefore jeopardize the outsider’s position in tradecompetition by enhancing its competitors’ competitiveness.
• Considering the negative impact, it is likely that any rational actor will
participate in the WTO in an integrated global economy as illustrated bythe game.

After joining the WTO• WTO principles and rules that establish the free trading system include:(1) Non-discrimination: most-favored-nation and national treatment,(2) open market and free trade(3) predictability and stability of trade(4) promoting fair competition(5) encouraging development and economic reform• These seemingly fair and harmless values instead exposed actors,
especially developing countries, to a formally equal but essentially
unfair trading environment as evidenced through their imports andexports.
• As long as the developed-versus-developing structure exists,
developing countries difficultly benefit from the free trading system while
they still face challenges form the aggressive expansion of developedcountries’ export sectors.

After joining the WTO• Since most developing countries have democratic governments, their
free trade participation will face public pressure if unequal trading
relations under the WTO framework compromise their domestic
industries or even lead to unemployment and dumping.
• In such case, the governments must consider both trade and non-tradefactors, which skews their decision.

The compensatory outsider game•••

I therefore revise the outsider game by taking “el” for example. C receives two points ofutility (-1→1) if it engages A. For non-trade factors to influence C to contain A, C must
benefit at least 2 points from non-trade factors to compensate for its trade losses.
Due to trade competition between A and C, C’s 2 point gain in non-trade factors will be A’slosses, so the 2 points should be deducted from A’s payoff, resulting in e1 = (-1,3,-1) → (1-2,3,-1+2) → (-3,3,1).
I remodel the new payoff distribution as Table 3 by using the same method to calculate
the payoff in each chart. The equilibrium is at p2: even though its competitors ally in theWTO, the outsider will still contain them and disrupt free trade by considering the greater
non-trade interests.

The compensatory outsider gameThe implications are two-fold:
1.

Under the current rule of most-favored-nation treatment and nationaltreatment, abdicating WTO membership would lose these rights andsignificantly increase export product costs. The competitive reduction
would further increase risks of marginalization. Hence, rational actors
may prefer to remain in the WTO after weighing the costs and benefits,
except they would insist to modify the current arrangement and protect
their stripped interests, causing trade negotiations to deadlock.

2.

Rational actors may refocus on alternative bilateral or multilateral tradecooperation. This explains the increasing bilateral or multilateral freetrade agreements (FTAs) established in the recent decade.

Conclusion• Doha’s deadlock has exposed conflicting interests in the structure ofthe WTO. Since states are rational actors, the deadlock is inevitable
under the developed-versus-developing structure.

How could state actors pursue trade liberalization without
the WTO framework?
• FTA is a better approach than a global trade regime.
• FTA is exceptions to the principle of non-discrimination. With thebottom-up nature. It allow countries trading with each other based on
their needs and advantages without constraint from comprehensive
liability under the WTO framework.
• By removing the developed-versus-developing structure and allowing
certain special rules, FTAs empower actors to design a trade regime
which best suits each participant’s needs and interests.

Thank you!
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