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Matt Griffith has rightly called for a more nuanced approach to agricultural trade in terms of assessing who will benefit from it and how; Tom Lines has reasonably asked that developing countries be allowed more room for manoeuvre on agricultural tariffs as part of food security, Lameen Abdul-Malik remains understandably sceptical about the link between trade and poverty reduction (while acknowledging the link between trade and growth) and many subscribers have noted that the increasing exposure of small farmer economies to global trade has had mixed results at best. We must be very careful not to let the undoubted benefits for overall economic growth of liberalising international agricultural trade blind us to the unintended and negative consequences for small farmer and rural development that can occur when developing countries in certain situations are pressured into removing or excessively reducing tariffs that partially protect domestic agricultural markets and help support internal farm prices. There are a number of points to be made here: 1) Ours is an imperfect world. Complete liberalisation of international trade in agricultural products is highly unlikely. Yet is is not at all clear that the intermediate positions along this road in the case of some commodities will result in world price and market access outcomes that will benefit small, poor farmers in agriculturally poorly endowed countries, as opposed to larger, corporate farmers in more favourable agro-climatic zones. (A similar point to Matt's, I think). An example is sugar: reductions in EU and US protection levels and more imports into these markets from the rest of the world may well put upward pressure on international prices. However, these prices will also continue to be heavily influenced by Brazil's low production costs (helped by its exchange rate policy). Brazil's undisguised intention to increase its share of the global sugar trade from its recently achieved one-third will put substantial downward pressure on world prices. 2) Some countries do not have a competitive advantage in any of the farm products that feature prominiently in their agricultural economies. Good development programmes may be able to increase productivity and reduce unit costs, but this may take time. Even then, the result may only be to lift the country from, say, the bottom quartile of international competitiveness, to the next quartile above. Options for diversification into other products that can use rural labour on the scale required may be very limited. If unrestricted imports of farm products are allowed, to meet the needs of the urban poulation, say, local farmers may find their access to their own domestic markets impeded and they may become trapped in the semi-subsistence economy. 3) Small, poor farmers need to be encouraged to engae in commercial agriculture: to take risks with new technology and becoming dependent on purchased inputs and market connections. We know the inter-sectoral and consumption linkages of this process are highly effective in reducing poverty (John Mellor's basic thesis is still valid for much of the developing world, in my view). Experience shows that pragmatic policies of domestic price support and market management, with sufficient flexibility to allow adjustment to long run shifts in domestic resource cost relativities, helps this rural transition to succeed. If this requires tariffs on agricultural imports, not set so high as to be technically inefficient (by encouraging smuggling) or to have peverse welfare transfer consequences (corrupt rent-seeking), then so be it. 4) Market protection is too often seen as some kind of economic 'evil'. Another way of viewing it is as a socio-economic compact between the producers and consumers of the products concerned, mediated by government: the country's consumers are being asked to pay more for the products than they would if more of total demand was met by (cheaper) imports, and the producers are being offered better prices than they would obtain if the domestic market were fully open to international trade. In return for this privilege, government requires producers to become more efficient, with government help, so that tariffs can be lowered over time. For those consumers who will be badly affected by higher prices, government will provided targeted assistance. The import duties collected will provide government with some additional resources for the producer and consumer direct support programmes. Poor governance, as ever, will always threaten the effectiveness of such policies, but the answer is to improve governance not to outlaw the policies. 5) The key point is that in devising aid strategies that may contain elements of policy conditionality, we should not deprive the receipient countries of control over their socio-economic destiny in critical areas. If the production of certain agricultural commodities has benefits in terms of farmer commercialisation, upstream and downsteam linkages, food security and rural developoment generally, then these countries should be able to choose to produce these commodities even if this requires some market protection. It all depends on HOW they intend to to effect this protection and WHO will benefit (with or without ancillary special measures to offest negative impacts). It is hard to improve on the words of the Parliamentary select committee that recently considered the matter: "Even if there were a greater concensus on what constitutes the best trade policies for poverty reduction, it is a 'big step' from recommending these policies, to enacting international agreements which prohibit governments from using other policies. ... Sovereign states may have the right to surrender or exchange policy space, but such exchanges must only ever take place on a level playing field where developing countries can participate effectively. The WTO is not such a place." [Trade & Development at the WTO: Issues for Cancun, Seventh Report of Session 2002-03, Vol. 1, p 66; House of Commons International Development Committee, 7 July 2003 Martin Evans ------------------------------------------------- ============================================================= To send a reply to this message that goes to all list members, make sure that you send your reply to <address removed> To unsubscribe from this list, send an email to "<address removed>", with the message body: unsubscribe global-trade <your-email-address>
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