Why is the doha development agenda failing? And what can be done? A computable general equilibrium-game theoretical approach

Abstract

We use a world computable general equilibrium model to simulate 143 potential trade reforms and seek solutions to the issues hampering progress in the Doha Development Agenda (DDA). Inside the domain defined by all these possible outcomes, we apply the axiomatic theory of bargaining and select the Nash solution of cooperative games. The solutions vary according to the objective functions adopted by the trade negotiators. When real income is the objective and services are excluded, or when optimising terms of trade is the objective, the Nash solution is the status quo. Trade liberalisation is feasible only when the negotiators focus on national exports or gross domestic product (GDP). Our assessment of some possible solutions reveals that excluding members having a GDP below a certain threshold improves the bargaining process, regardless of the governments' objective. Formation of coalition, such as the G20, constitutes an option for its members to block outcomes imposed by rich members. We also find that side payments may be a solution, but represent a very high share of the global income gain. © 2010 Blackwell Publishing Ltd.