Agricultural Trade, Rural
Development, and Policy
Coherence
Association for International
Agriculture and Rural Development
June 7, 2004
John Nash
The World Bank
Agriculture is Important
for Developing Countries

63 percent of population live in rural areas

73 percent of poor live in rural areas

Agriculture and agro-processing account for 30-60 percent
of GDP in developing countries, and an even larger share
of employment

Even with rapid urbanization, more than 50% of the poor
will be in rural areas by 2035

Most of the rural poor are not in countries that receive
significant trade preferences
Rural-Urban Poverty Gap
Country
Burkina-Faso
Mauritania
Mozambique
Tanzania
Bolivia
Honduras
Nicaragua
Source: PRSP documents.
Different incidence of rural
and urban poverty
(Rural%-Urban%)
 35%
 41%
 9%
 16%
 42%
 23%
 38%
Increased Trade is the Best
Lever for Enhancing
Agricultural Growth

Sustained trade reforms doubled growth in
agricultural sector (Michaely, Choksi,
Papageorgiou)

Agricultural trade liberalization gives much
higher ag growth rate – 5.7% vs. 1.1% (Valdes)

SSA – countries with large improvement in
macro/ trade policies had higher ag growth rate
-- 3.5% vs. 0.3% for those with deterioration
(World Bank)
Doha Development Agenda

Intended to have central focus on poverty
reduction in developing countries

Key role of agriculture – developing countries’
main concern

But – major case of “policy incoherence” by
developed countries (interference of government
policy in one sphere with achievement of
objectives in another)
Many developing countries have
undertaken structural reform
programs since 1980s, including
trade policies, but now face very
low world prices for their products
and access barriers to
industrialized country markets …
Agricultural Protection is Still High
and Mostly at the Border
160
Subsidies
Border Protection
120
100
80
60
40
Japan
EU
OECD
developing
OECD
0
QUAD
Manufacturing
20
US
Protection Rate (%)
140
Average Agricultural Tariffs are
Much
Higher Than Manufacturing
QUAD Countries
Japan
US
EU
Large Middle Income Countriesa
Other Middle Income Countriesb
Lower Income Countriesc
Agriculture
10.7
10.3
9.5
19.0
26.6
35.4
16.6
Manufacturing
4.0
3.7
4.6
4.2
13.1
12.7
13.2
Percentage of
lines covered in
Agriculture
86.7
85.5
99.3
85.9
91.3
97.7
99.8
a. Brazil(2001), China(2001), India(2000), Korea(2001), Mexico(2001), Russian Federation(2001), South Africa(2001), and Turkey(2001).
b. Bulgaria(2001), Costa Rica(2001), Hungary(2001), Jordan(2000), Malaysia(2001), Morocco(1997), Philippines(2001), and Romania(1999).
c. Bangladesh(1999), Indonesia(1999), Kenya(2001), Malawi(2000), Togo(2001), Uganda(2001), Guatemala(1999) and Zimbabwe(2001)
Tariff Peaks in Agriculture
Average
Tariff
Canada
Japan
US
EU
Korea
Brazil
Costa Rica
Morocco
Indonesia
Malawi
Togo
Uganda
3.8
10.3
9.5
19.0
42.2
12.4
13.2
63.9
8.5
15.3
14.7
12.9
Maximum
St. Deviation
Tariff
238.0
50.0
350.0
506.3
917.0
55.0
154.0
376.5
170.0
25.0
20.0
15.0
12.9
10.0
26.2
27.3
119.2
5.9
17.4
68.2
24.1
9.1
6.5
3.7
Percentage
of lines
covered
76.0
85.5
99.3
85.9
98.0
100.0
100.0
100.0
100.0
100.0
99.9
100.0
Tariffs Escalate in Final Products
Tariff rates by stage of processing (percent)
50
40
30
20
Final
Intermediate
Raw
10
0
QUAD
Japan
US
EU
Source: WTO IDB (MFN Applied Duties)
Large
Other
Lower
Middle
Middle
Income
Income Income Countries*
Countries*Countries*
Specific Duties Mask High
Protection
Average Ad Valorem Duties vs. Ad Valorem Equivalents in Agriculture
58.0
60
Duty Rate (%)
50
40
35.2
30
21.6
20
11.7
8.1
10
10.6
5.0
1.2
0
Australia
US
Average Ad Valorem Tariff
Source: WTO IDB (MFN Applied Duties)
EU
Jordan
Average Ad Valorem Tariff Equivalent
Many Products are Protected by
Quotas
Share Of Agricultural Output Under Tariff Rate Quotas (percent)
60
50.1
50
39.2
40
TRQ (%)
49.0
28.4
30
26.2
20
13.6
13.1
10
0.0
at
es
St
Ja
Ea
pa
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n
e
Au
rn
st
Eu
ra
ro
l ia
pe
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ew
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O
la
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er
In
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O
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st
er
ria
l
D
ev
el
op
in
g
U
ni
te
d
m
un
ity
om
C
pe
an
Eu
ro
O
EC
D
Av
er
a
ge
0
“Eastern Europe” = Czech, Hungary, Poland and Slovakia; “Other
Industrial” = Norway, Switzerland and Iceland; “Other developing” =
Korea, Turkey and Mexico
Source: OECD, Agriculture Market Access Database (AMAD)
DCs’ Own Policies Also Impede
Their Agricultural Development





Protection and anti-export bias
Cheap food policies to keep urban consumers quiescent –
often reinforced by food aid or subsidized exports from
OECD
Underinvestment in Green Box measures, such as rural
infrastructure and ag research
Lack of definition or enforcement of property rights and
contract sanctity
Corruption and/or macroeconomic instability
Result: Stagnating Developing Country
Trade Share in Agriculture
(percent of total world exports)
1980/81 1990/91 2000/01
Agriculture
Total
To Developing
To Industrialized
35.4
9.5
25.8
32.2
8.9
23.3
36.3
13.4
22.9
Manufacturing
Total
To Developing
To Industrialized
19.3
6.6
12.7
22.7
7.5
15.2
33.4
12.3
21.1
Source: COMTRADE
Way forward: Success in the
Doha Round

Reforms need to be global and across the
board

Only way to address domestic agricultural
subsidies

Large potential gains for developing
countries
Global Modeling of Doha Round
Results
Elimination of export subsidies
Decoupling of all domestic subsidies
Elimination of specific tariffs, TRQs and anti-dumping
Tariffs
Agriculture
Rich
Developing
Average
Maximum
5
10
10
15
1
5
5
10
Manufacturing
Average
Maximum
Income Gains are Substantial
(Real income gains in 2015 relative to the baseline, $1997 billion)
300
Dynamic
250
200
150
100
Static
50
0
High-income
Low- and middle-income
Source: World Bank model simulations.
Driven by Exports
(Change in export revenues in 2015 relative to the baseline, $1997
billion)
200
High
income
150
Developing
100
50
0
Agriculture
Processed foods
Textile, clothing
and footwear
Other
manufacturing
Rural Income Gains
(percent change in rural income in 2015 relative to the baseline)
XSS
RLC
XEA
VNM
SAC
IDN
CHN
BRA
JPN
USA
EUR
CAZ
-30
-20
-10
0
10
20
30
40
50
Source: World Bank model simulations. Note: XSS—Sub-Saharan Africa excl. SACU,
RLC—LAC excl. Brazil and Mexico, XEA—East Asia excl. China and Vietnam, VNM—
Vietnam, SAC—SACU countries, IDN—Indonesia, CHN—China, BRA—Brazil, JPN—
Japan, CAZ—Canada, Australia and New Zealand.
A “Development Friendly” Doha
Outcome in Agriculture Would
Include…
• Significant reductions in peak tariffs and tariff
escalation in developed and developing countries,
through a binding formula mechanism
• Completion of ad valorem “tariffication”
• Special safeguard for developing countries to handle
import surges/low world prices
• Expansion of within-quota imports; reduction of inquota tariff rates to 0
• Disciplines on TRQ administration
A “Development Friendly” Doha
Outcome (cont’d)
• Complete phase-out of export subsidies (including
•
•
•
•
subsidized export credits), and disciplines on STEs
and food aid
Disciplines on use of export taxes and controls
Deep reductions in trade-distorting domestic
support payments (Amber Box), with productspecific commitments, and switch to decoupled
payments
Caps and then reductions in fixed-production
subsidies (Blue Box)
Cap on Green Box payments, and review of extent
of trade distortion of mechanisms in Green Box
A “Development Friendly” Doha Outcome
(cont’d)
 Re-thinking S&DT:
• More emphasis on development impact;
• More on positive obligations of
developed countries;
• Less on blanket exemptions for
developing countries, but with some
differentiation.