Trade policy options for developing countries
This paper provides a quick reference overview and data relevant to developing country interests, as they engage in continuing agricultural trade negotiations set forth in the World Trade Organization Ministerial held in Doha in November Country performance in agricultural trade, income levels, and population characteristics with a focus on developing country member of the Asian Development Bank ADB are examined. The paper concludes that trends in agricultural trade in past 10 years are quite heterogeneous across developing regions.
Moreover, data indicate that trade reform in export partners, particularly, the OECD countries, will affect a significant share of population in these countries, resulting in rural poverty alleviation. Trade liberalization is expected to benefit these net exporter countries, particularly those that are highly open to trade.
For example, Thailand is highly specialized in exports. The impact of trade reform through the WTO negotiations, particularly reforms undertaken in exporting partners, therefore, can have important implications for its exports and policy positions advanced in the negotiations. The developing countries, including those in Asia, have an trade policy options for developing countries stake in the success of continued liberalization in agriculture.
As the World Development Report in noted, between 40 and 60 percent of the poorest in the developing world live in rural areas World Bank Expansion of agricultural trade has a direct relationship to poverty reduction and accelerated economic growth.
A more integrated world economy in which existing trade barriers are reduced will provide increased opportunities for all countries to take advantage of gains that growth in trade can provide. Developing countries should seize this new opportunity to actively participate in the process of shaping a more integrated world economic environment. Developing countries now represent approximately two-thirds of the WTO members, with 54 new members joining since January As these countries move toward liberalization and implement domestic reforms necessary to meet international obligations, both opportunities and challenges will emerge from trade policy options for developing countries development perspective.
Initially, as with all trade liberalization, there will be winners and losers both among and within countries, and between consumers and producers. Trade policy discussions largely continue to focus, however, on developing countries as a single bloc with few distinctions made between them.
In fact, the implications of reform and trade policy options that drive reform may be very different among developing countries. The basic rules and commitments of the WTO Committee on Agriculture that concluded in centers on the following areas: These issues largely remain on the WTO agenda in in provide the baseline for the negotiation framework agreed in Qatar at the WTO ministerial in November WTO members will continue to negotiate over domestic price support trade policy options for developing countries, export competition rules, and the wide range of issues related to sanitary and phytosanitary standards.
Among the latter, debate over food safety rules and the use of genetically modified organisms have dominated public news reports and media coverage of trade in many developed and developing countries during the past year. The objective of the paper is to provide background information and data relevant to developing country interests, as they engage in agricultural trade negotiations at the WTO as reassessed in the trade ministerial in Doha in November The paper first briefly reviews world trends in agricultural trade, with a specific focus on developing country members of the Asian Development Bank ADB.
The paper then investigates the performance in agricultural trade, income levels, and population characteristics of ADB developing country members. Following this outline of trends, selected issues and positions taken in Geneva in the agriculture talks underway are reviewed.
The conclusions trade policy options for developing countries recommendations, priorities, and positions for moving forward from a developing country perspective. In contrast to gains made by developing countries in penetration of developed country markets in goods, the share of developing country exports in global agricultural trade increased only slightly over the period from throughfrom Trade barriers in both goods and agricultural markets confronted by developing countries in other developing country markets remain significantly higher than those in the industrialized nations World Bank Average agricultural tariff rates faced by developing trade policy options for developing countries exporters in other developing country markets is This is particularly important as shares of south-south trade in totaled approximately 40 percent.
Based on data from the Organization for Economic Cooperation and Development OECDfrom the mids to the mids, agricultural producer support has declined as a share of gross farm receipts. The largest level of subsidy is provided by the European Union. The average annual value of subsidies is approximately 60 percent of total world trade in agriculture and about double the value of exports from developing countries World Bank The Uruguay Round made progress in restraining tariff escalation overall.
In areas of particular concern to the least developed nations, however, a number of serious barriers remain. This includes tariffs on processed foods. Imports of processed foods from developing countries as a percent of apparent consumption has fallen in the United States, Canada, and European Union, for example, trade policy options for developing countries the period Tariffs on fully processed foods are subject to high rates of protection, including 65 percent rates in Japan, for example.
Evidence suggests that if protection via tariffs and subsidies were lowered, even the poorest countries would expand exports. Successful exporters of fruits, vegetables, and cut flowers in developing countries over the past decade support this assumption.
What are the estimates of the benefits of reducing traditional trade barriers through tariffs and quantitative restrictions in agriculture? Ianchovichina, Mattoo, and Olarreaga estimate, for example, that if the Quad countries of Japan, the U. The agricultural commodities included in this analysis follow the definitions outlined in the WTO Agriculture Agreement. According to the World Bank classification of world regions, developing countries can be divided into six regions:.
The region's trade position after the WTO was created, however, has been fluctuating. The region became a net importer in followed by rapid growth in net exports in SA is also a net agricultural exporter throughout this period.
This reflects the fact that trade flows from India and Sri Lanka, both net agricultural exporters, dominates that in other South Asia countries, which are net agricultural importers. The ECA region was net agricultural importer during most of this period, with imports rising dramatically after conclusion of the Uruguay Round. The LAC region exhibits quite different trends than the other developing regions.
These countries were net agricultural exporters in and agricultural exports have increased rapidly during the period MENA has rapidly increased net imports during the period, whereas net agricultural imports have generally remained unchanged. Trends in the share of agriculture in total trade are not homogeneous across the developing regions.
The share of agriculture in EAPAC has been 7 to 10 percent and has declined slightly during the period This trend can also be seen in ADB developing member countries' trade profiles. This indicates that agriculture is still an important component of trade in SA.
The ECA region shows a great fluctuation in the share of agriculture in trade, varying from the low of 1. Trade policy options for developing countries trend has stabilized around 7 percent after The share of agriculture was low in MENA inbut has increased during the period to nearly 5 percent. As indicated previously, its net agricultural import has increased. This suggests that agricultural export actually did increase, but the growth in agricultural import was greater in MENA.
This trend can also be seen in SSA, but not as strong. Finally, agriculture is highly important in LAC. The impact of trade liberalization, therefore, should be analyzed considering this heterogeneity. GDP per capita grew for most of the members from toindicating a greater growth in GDP than population. South Asia had the highest growth at 14 percent. The highest GDP share for agriculture is found in Laos at 52 percent inwhereas the lowest share is 6 percent in Korea.
GDP share of agriculture slightly declined on average in all regions from to While the shares of rural populations have a high correlation with GDP shares of agriculture, they are quite high in most of the countries, ranging from 23 percent in Korea, to 94 percent in Bhutan. The difference in these shares appears to be accounted trade policy options for developing countries by a high degree of non-farm agricultural production, such as textiles.
These facts imply that domestic agricultural policies and a changing agricultural trade environment will have an effect on low-income countries, particularly those with trade policy options for developing countries rural populations. They group countries in three income levels: Their findings are summarized as follows:. While two-thirds of the developing countries are net food importers NFIMstwo-fifths 63 are net agricultural exporters NAEXs including 33 low-income countries.
These findings lead to their conclusion that many more developing countries are net agricultural exporters than commonly thought. The same framework is employed here for ADB developing country members, and is presented in Table This rate is greater than that for the entire group. This implies that the ADB developing countries have a comparative advantage in non-food agricultural export.
The Agricultural Tradability AT index, which is a ratio of total agricultural import and export and agricultural GDP, measures how open or vulnerable a country is to changes in trade patterns. Food import capacity FICwhich is a ratio of value of food imports to trade policy options for developing countries of total non-food exports, measures the capacity of a country to have foreign exchange to finance food imports.
Malaysia and the Fiji Islands are the most open 1. The least open are Laos and India 0. This range is quite high, and hence the vulnerability to trade is highly heterogeneous among ADB developing countries.
Table 4 indicates FIC scores for the country group. A higher score implies a lower capacity to finance food imports. Among the members, Thailand has the highest capacity 0.
The five differ in income levels, trade policy options for developing countries trade positions, rural population, and agricultural labor composition. Thailand and the Philippines are LMICs; the former is a net agricultural and food exporter, while the latter is a net agricultural and food importer. Vietnam and Bangladesh trade policy options for developing countries LICs; the former is a net agricultural and food exporter, while the latter is a net agricultural and food importer.
The shares of agriculture in GDP and population and shares of rural population are compared between these five countries in Figure 3. While Thailand is the largest agricultural exporter, the shares of agriculture in GDP are the lowest among the five.
This appears to be the case due to the fact that a large share of agricultural production in Thailand is devoted to exports. This is supported by the country's high value of agricultural exports per agricultural labor as seen in Table 4. In contrast, the Philippines has a higher GDP share of agriculture than Thailand, but its value of agricultural exports per agricultural labor is much smaller. In addition, the deviation between agricultural labor shares and shares of rural population in Thailand implies a significant degree of non-farm agricultural production.
Part of this can be accounted for by processing firms that intend to export their products. Vietnam and Bangladesh appear to have similar characteristics in terms of the role of agriculture, but their positions in trade are different.
Vietnam is active in trade policy options for developing countries exports and outward oriented according to its high AT value. The divergence of the shares of agricultural labor and rural population in Sri Lanka resembles that of Thailand.
Create account Login Subscribe. Gary Hufbauer, Sherry Stephenson 11 May The crisis has delivered a particularly strong blow to export revenues of small developing countries. These nations have limited room for deploying anti-cyclical packages and, as a group, do not account for a significant amount of total world trade. They should thus be temporarily awarded policy space to adopt trade measures to counter the impact of the current economic crisis.
The impact of the crisis on small developing countries has been severe. Some smaller countries have experienced even larger drops as a result of stiff reductions in export prices.
The situation is dramatic. Faced with the worst economic setback since the Great Depression, most small African, Asian, and Latin American developing countries lack resources for fiscal and monetary interventions. Many among them have turned to the multilateral development banks for financial assistance, but these solutions take time. What else can these countries do trade policy options for developing countries One bad alternative is to follow the example of developed governments and enact financial, investment, and labour protection measures.
Indeed, many G7 governments have requested financial firms to focus on domestic borrowers, instructed non-financial firms to reduce their investments abroad, and trade policy options for developing countries have even passed legislation favouring native-born workers. Another bad alternative -- one which is popular these days among governments lacking deep pockets -- is to enact overtly protectionist actions. Evidently the leaders of impoverished nations are under tremendous pressure to deliver immediate actions, and unsophisticated trade policy stands out as a cheap-to-implement lever at their disposal "to relieve some of the pain.
Based on those guidelines, developing country leaders, G20 governments, and presidents of multilateral banks should lead a concerted effort to oversee the implementation of the following measures:. While these measures concern a large number of small developing countries, few countries would want to resort automatically to all of them.
Developing countries should not be viewed as a monolithic bloc in this current environment. Unlike the successfully-globalised top emerging exporters who now have an interest and responsibility in preserving the openness of the trading system, most developing countries neither represent a significant amount of total world trade nor can they inflict a large detrimental effect on the trade policy options for developing countries system.
They should thus be given more flexibility to respond to domestic pressures and to adopt well-crafted trade measures to counter the impact of the current economic crisis on a short-run basis. WTOdeveloping countries. Trade policy in a time of crisis: Suggestions for developing countries Gary Hufbauer, Sherry Stephenson 11 May The crisis has delivered a particularly strong blow to export revenues of small developing countries.
Based on those guidelines, developing country leaders, G20 governments, and presidents of trade policy options for developing countries banks should lead a concerted effort to oversee the implementation of the following measures: Small trade policy options for developing countries countries should depreciate their currencies to boost both exports and import-competing sectors.
Afflicted developing countries trade policy options for developing countries provide across-the-board rebates to their exports during a two-year period. At the same time, WTO members should not enforce rules forbidding export subsidisation against these countries.
Developing countries should also defer payment of corporate income taxes and customs duties on capital-goods imports by export-oriented firms. Multilateral development banks, the IFC, and G20 export credit agencies should ramp up export credits for products sold by small developing countries. Multilateral development bank should extend further funding for trade facilitation programs in developing countries.
All G20 members should implement the duty-free quota-free provisions for developing countries outlined in the Doha negotiations. Conclusions Developing countries should not be viewed as a monolithic bloc in this current environment.
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