Agricultural trade liberalisation and developing countries

April 23, 2003

Free Market Foundation

Last week, members of the World Trade Organization (WTO), meeting in Geneva, failed to agree on guidelines for agricultural reform. This is a serious setback for the Doha round of multilateral trade negotiations scheduled to conclude by January 2005, says Mark Vaile, Australia’s trade minister.

The objective of the Doha round is to change trade distorting agricultural tariffs and subsidies instituted by developed countries:

Agriculture subsidies in developed countries now amount to over $300 billion per year.

This is six times the amount of all the aid sent to developing countries.

Typically 80 percent of the subsidies go to 20 percent of the richest producers and only a small fraction trickles down to the farmer on the land.

The Cairns Group (which includes Australia) and the United States support trade liberalisation. The European Union (EU) wants to keep markets closed. The EU has proposed that tariff cuts be based on the formula adopted in the Uruguay Round.

The Uruguay Round promised a 15 percent cut in tariffs but agricultural imports can face a several hundred percent tariff.

Overall, EU imports of agricultural products from all sources have remained virtually stagnant, while the share of its agricultural imports from developing countries has remained around 20 percent.

France has by far the most heavily subsidised agriculture, and Japan and the United States also have trade distorting agricultural policies.

However, developing countries’ share of agricultural exports into the United States are around 50 percent and in Australia over 30 percent.

The EU has put together a coalition of countries to oppose multilateral liberalisation. But trade liberalisation, says Vaile, is the key to reducing poverty in developing countries.

Source: Mark Vaile (Minister for Trade, Australia), A Missed Chance To Trade Up From Poverty, Wall Street Journal, April 8, 2003.

For text (WSJ subscription required)
http://online.wsj.com/article/0,,SB104976504270926700,00.html
For more on Trade Liberalization http://www.ncpa.org/iss/int/

FMF Policy Bulletin/15 April 2003