Global Agricultural Trade and Developing Countries

World Agricultural Trade Experiences Sizable Growth but Still Faces Barriers
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Note that all the calculations are made on the basis of the changes that took place for each individual tariff line, i. Changes in MFN tariff rates between and can be decomposed arithmetically as follows: 1. If the bound rate in falls below the initial Applied MFN duty rate, , then the country must lower its Applied MFN level at most to this new bound level, in order to abide by its commitment. Accordingly, the term in the second square bracket corresponds to the change in Applied MFN duty resulting from the country's commitments under the multilateral trading system. In contrast, further changes in the Applied MFN duty computed in the first square brackets are the result of the country's unilateral tariff change.

A reciprocal trade agreement reflects an exchange of commitments between two partner countries. Overall, the lower curve the average agricultural Preferential applied tariff decreased by 6.

World Bank PRAXIS Discussion Series - Food and Agriculture

Acknowledging the higher base value, this represents a larger absolute cut than the one observed for industrial products quoted above, i. In particular, the distance between the upper and lower curves increases. This shows that there are several phenomena behind the decrease in applied tariffs. Examination of the tariff ladder at the country level shows that most of the observed cuts in applied tariffs implemented since occurred in emerging countries.

The cut in the average Preferential applied tariff was particularly large in some Asian countries: Cuts have also been important in other emerging countries such as Nigeria This decrease, observed in the beginning of the period of interest i.

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High level of chemicals, insufficient information on nutritional content, inadequate labeling, and high levels of pesticide are the main reasons; some African products are frequently banned in the global markets. Measurement of agricultural trade distortions is complicated by the prevalence of non-ad-valorem trade distortions and non-tariff measures more generally, such as specific tariffs, seasonal tariffs, export bans and other restrictions, tariff-rate-quotas, and discretionary adjustments to tariff rates designed to achieve goals such as the insulation of domestic from world prices. Less developed countries are also using agriculture to create an economic future and to reduce the poverty that has stricken these countries. The indicators covered in this report provide assessments of important ch Article activity alert. Closely related to price fluctuation is the problem of import surges—generally defined as sharp temporary rises in import volumes above a trend level, potentially threatening otherwise viable and efficient domestic sectors.

Rather, it mainly corresponds to the end of the URAA's implementation period the transition period for the cuts decided in ended in for developing countries. Egypt, South Korea. This is particularly the case for China and Vietnam. Indeed, WTO membership resulted in a significant reduction in their agricultural protection in their bound tariffs.

For example, the average Bound MFN tariff for agriculture went down from Those in Vietnam went down by 6. That is, while the initial binding overhang could have led to a reduction in bound tariffs without changes in the applied tariffs in many cases, this was not the case. Overall, the large level of binding overhang even slightly increased over time, despite the reductions in bound tariffs. This is a small amount, but suggests that unilateral liberalisation also took place in the agricultural sector.

This was particularly the case in Nigeria, where the decrease in agricultural Applied MFN tariffs reached This type of trade liberalisation has become less significant since ; countries such as India did not pursue this tariff reduction policy after the economic crisis, for example. Joining globalised value chains, or the risk of being excluded from them, have been major motivations for unilateral cuts in tariffs on raw materials, parts, and the various inputs in the manufacturing sector, as described by Baldwin In agriculture, unilateral tariff cuts may have different objectives than in the manufacturing sector.

Indeed, the insertion in global food chains appears to be part of the development strategy of several developing countries, and some have registered success stories Maertens and Swinnen, However, the food industry has often developed on the basis of local agricultural production. Hence, the risk of being excluded from large and dynamic markets when imposing duties on some raw materials is probably less an issue than in the automobile or electronic goods sectors. A more compelling motivation for unilateral cuts in agricultural tariffs lies in the political interest of keeping domestic food prices at a low level.

Lower food costs help avoid political unrest and to reduce salaries, hence labour costs in the manufacturing sector. Such cuts may also reflect a growing political bias in favour of urban consumers, in some developing countries. This bias probably existed at the beginning of the period and was reflected in the tariff structure, but it may have increased because of the higher share of urban population at the end of the period.

Overall, both the initial binding overhang and the unilateral cut in applied MFN tariffs observed since the URAA suggest that developing and emerging countries have shown considerable restraint in protecting their agriculture, compared to what they are allowed to do under the WTO discipline.

The narrow gap between Applied MFN and Unilaterally applied tariffs tends to remain constant over time 0. Reforms of the GSP e. However, the overall impact over world tariff protection also remains limited.

Agricultural trade

The stalemate in the multilateral arena contrasts with the developments that have taken place in regional and bilateral negotiations. Note that the figure includes agreements in services and agreements with a limited scope. The WTO headcount of notified and enforced RTAs is often quoted to illustrate how regionalism and bilateralism have progressed, and how this preferential trade is now the dominant path for trade liberalisation. However, because agreements vary widely in breadth and depth, counting RTAs actually tells us little about the importance of preferential trade, and about the extent to which these agreements deliver effective trade liberalisation Grant, Agriculture generally receives special treatment in RTAs.

In many cases, some agricultural products are excluded from tariff concessions, or are subject to smaller tariff cuts typically beef and dairy products in EU bilateral agreements. The US has also excluded sensitive sectors from a variety of agreements e. A question, therefore, is whether RTAs have been effective in lowering tariffs in this sector. Changes in the bottom ladder, i.

World Agricultural Trade Has Roughly Doubled in Real Terms Since 1995

For agriculture, RTAs contributed only 0. This suggests that RTAs have only marginally affected the level of agricultural protection provided by the combination of MFN and GSP tariffs in a majority of countries. However, it also shows that RTAs have played a comparable role in lowering agricultural tariffs as in the rest of the economy. That is, RTAs have played a larger role in absolute value in agriculture but a lower role in relative terms, given the higher level of protection in the agricultural sector. It also shows that, after , the role of RTAs in the small decline of average applied tariffs has become larger than the role of unilateral cuts in MFN Applied tariffs.

Indeed, the gap between the average Unilaterally applied and Preferential applied tariffs worldwide was only 0. However, since the early s, a growing number of RTAs have been concluded with geographically remote partners. The case of Chile, which signed RTAs with a large number of European and Asian countries, is illustrative: its bilateral agreements contribute to an average Preferential applied tariff that is less than half of its Applied MFN tariff.

Recent political developments raise questions about the future of trade policies. Some of the recently launched trade negotiations between large economic entities have already been shelved e. The US has long been a strong defender of freer trade and a major driver of multilateralism, but has recently been showing a tendency to move toward more protectionist policies.

However, several other countries are still inclined to reinforce regional integration, as a way to boost economic growth, China being a case in point. For good or bad reasons, such developments make the future of freer trade uncertain. Agriculture holds a particular place in this debate. On the one hand, those stakeholders who have long claimed that agriculture should be kept out of trade liberalisation agreements, for the sake of food security or sovereignty, feel comforted by the rise of protectionist ideas in the public debate.

On the other hand, many countries, in particular developing ones, considering that they have a comparative advantage in agriculture, keep pushing for trade liberalisation in this sector. In doing so, we keep our model as stylised as possible. The set up of the supply side is rather standard and its main characteristics are described in online Appendix. We also update tariffs to , keeping the status quo in this arena for the subsequent years. In the following sections, we explore the potential consequences of the two polar scenarios on agricultural trade and production.

This does not imply that any country violates the WTO discipline on tariffs. Nor is a possible collapse of the WTO considered here. However, this scenario is an admittedly extreme case where ongoing surges in protectionism escalate, capturing the essence of the retaliatory surge in tariffs that took place between and These two cases are, obviously, stylised situations.

While they are not particularly realistic from a political standpoint, contrasting their results provides some information on the relative impact of the different paths that agricultural trade could follow in the coming years. Each scenario is enforced as of , in one shot, and results are computed as deviation to the baseline in While the scenarios include changes in tariffs for all products, we focus on the consequences for agricultural sectors in the following sections. It is noteworthy that general equilibrium effects are at stake behind variations in our sectors of interest, their changes being linked to those happening in the industrial sector and in the services sector.

We comment on each in the two following subsections.

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Global agricultural trade and developing countries / editor M. Ataman Aksoy, John . World Sugar Exports and Net Imports of Selected Countries (million of tons). Global Agricultural Trade and Developing Countries explores the outstanding issues in global agricultural trade policy and evolving world production and trade .

Under this scenario, EU agricultural exports would increase by 0. While these figures are small, they suggest that agriculture is not among the sectors where the EU would benefit from a deepening of trade liberalisation. Given these issues, global actors must engage in trade negotiations with a dose of realism. But they also protect their own.

Evaluating Nairobi: Impacts on Trade, Food Security, and Development | Food Security Portal

The EU is still the largest protected market in the world overall, intra-trade represents close to 30 percent of world agricultural trade and recently has again become a net exporter. The same applies to high-income countries in Asia and elsewhere that keep significant levels of protection, when they could help farmers more efficiently and equitably with less distorting instruments. It would be very useful for global welfare as well if the EU, which correctly insists on the important role of science to guide policies on climate change, applies the same approach to food and agriculture and resists bending to unsubstantiated claims from vociferous groups against the tools of modern science that are needed to improve efficient use of resources, ensure environmental sustainability, and produce healthy diets.

And crucially, the typical size of U. Other countries have reasons to question why on top of all these advantages, U. Both India and China still face serious rural development challenges, with millions of small farmers in each country, many of them poor. But they too have systemic impacts on global markets and on other countries, which cannot be wished away by arguing they are developing countries.

India is by many measures still a food insecure country we at IFPRI have some work trying to classify countries on food security dimensions , but it is also a net food exporter, with significant global presence in some key staple foods. The policy of buying domestic products for food security reasons through public stocks, and then exporting a portion of those products, directly or indirectly, is out of line with the goal of feeding the poor population.

Also, keeping high bound import tariffs and then suddenly moving applied tariffs according to internal needs generates damaging volatility in global markets. Finally, extensive subsidies for agricultural inputs are depleting water resources and increasing chemical pollution, posing threats to poverty alleviation and food security..

China is not a food insecure country according to many measures, but still has a rural poverty problem. Its former development strategy of moving rural residents to urban centers to produce industrial goods for exports has reached its limits while achieving a significant reduction in poverty. The current strategy of expanding credit and infrastructural investment also has its limits, leading to dangerous accumulation of overall debt in the economy.

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China needs a new rural development policy that helps to further reduce poverty while recognizing the systemic impact of its trade policies on other countries. Other developing countries that are large exporters should not claim developing country status on agriculture issues in WTO negotiations. At the very least, these large food exporters need to consider the sizable impact their policies have on food security in the rest of the world, and refrain from export bans and sudden changes in policies that disrupt world markets.

UN-designated least developed countries LDCs certainly deserves substantial special and differential treatment, as many of them are poor, agrarian, and food insecure. But LDCs are not the only countries that fit that profile. Different classification exercises see this one here using cluster analysis show that other developing countries also suffer significant food insecurity. The global trading system needs better categories for special and differential treatment that take these factors into account.

Developing countries should accept a more detailed categorization of countries for WTO disciplines, in exchange of developed countries moving themselves to a more market-based agricultural and trade policies. Finally, any trade framework must account for evolving food systems. On a global level and in many developing countries, food systems have been dramatically restructured by the expansion of food processing, supermarkets, and the lengthening of supply chains.

This requires policies that go way beyond primary agricultural and food production. Here is the main question that should guide governments: How to structure and operate a food system that creates good private sector jobs and employment, uses resources efficiently minimal food waste , is environmentally sustainable and resilient, and generates healthy diets. The question is how to do this now that the Doha Round has failed and there is no agreement on what should replace it. At least for the moment, big rounds conducted as single undertakings in which nothing is agreed until everything is agreed seem no longer viable.

But could that work for agriculture? Another option is to continue to pursue incremental progress on an issue-by-issue basis, as was done successfully in Bali on improved implementation of tariff rate quotas and in Nairobi on the elimination of agricultural export subsidies.

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On the first alternative, there are reasons to be sceptical of a plurilateral approach for agriculture. This is because exporters inside them do not want to end up competing with subsidised exports from parties outside the agreements. To get around that problem, and to be meaningful, a broader plurilateral agreement on agricultural issues would have to include key players that have contributed to the current WTO impasse, including the US and India.

It is unclear how that would lead to a better outcome. Continuing to pursue an incremental approach on an issue-by-issue basis may be a more fruitful approach. Among the items that should be at the top of this list are efforts to improve institutional functioning in the agricultural area.

Global Agricultural Trade and Developing Countries

This includes effective implementation of the Uruguay Round disciplines relating to timely notification, as well as the recent ministerial decisions on tariff rate quotas and export subsidies. Elimination of export subsidies in Nairobi was an important achievement, even though use of such subsidies is currently minimal, because it ensures that countries will have to bear more of the costs of their own subsidies if they increase them in the future. Aggressive monitoring of the new commitments on export competition will also keep pressure on the US to reform its notorious food aid practices and reduce the subsidy element of its agricultural export credit programs.

Members need to find a solution on public stockholding programs that does not permanently open a major new loophole for providing producer support. There are many proposals for how to do this with relatively modest changes to the Uruguay Round Agreement on Agriculture if only members would negotiate in good faith. In sum, the single undertaking approach to trade negotiations, and the Doha Round along with, have reached a dead end.

Rather than holding out for a grand bargain that may never come together, WTO members should pursue progress where and when they can. In agriculture, with domestic support programs spreading into large emerging markets, there would seem to be more than enough costly and trade-distorting policies in place to provide bargaining chips for a deal just within agriculture.

And it could evolve into a substantial, sectoral package if enough countries become frustrated with rising costs — to their budgets or their exports. In the meantime, an incremental approach will be slower and less ambitious than many would hope, but it is better than no progress at all. Skip to main content. Toggle navigation. International Centre for Trade and Sustainable Development.

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Bridges Africa. Analysis and news on African trade and sustainable development. Overview News archive Issue archive About. Kimberly Ann Elliott. Weak foundation: The GATT fails to discipline agriculture The strength of the agricultural lobbies in key countries plagued efforts to negotiate international rules to discipline these policies from the beginning. The Doha Round stalls over agriculture When the WTO decided to launch a new round of negotiations in Doha, Qatar, in , real agricultural prices were near historic lows.