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Meeting
Series: Autumn 2005
The WTO: towards Hong
Kong
What type of effects can developing countries
expect from the Doha Round?
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Thursday 1 December, 1pm-2.15pm at
ODI
Agriculture and the WTO
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Oliver Morrisey opened the meeting by explaining that
his presentation was based
on work conducted by himself, a variety of people from ODI
and IIED and other associates from individual countries, aimed
at assessing the likely impacts of liberalising agriculture
under the Doha round on developing countries. He emphasised
that though he believed that removing distortions in trade
was generally a good thing, this did not imply that liberalisation
was always a good thing. He explained that the aim of the
presentation was to provide a succinct overall assessment
of the likely or potential economic, social and environmental
impacts of liberalisation on six different country types-
four different categories of developing countries and two
different categories of developed. An important aim would
be to highlight the danger of arguing that liberalisation
by itself would have a huge impact on low-income developing
countries.
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Morrissey continued by explaining that there
were important distinctions within the WTO on liberalisation,
with developed countries required to do more than developing
countries and the least developed countries not required to
do anything. He explained that the Doha liberalisation scenario
underlying the assessment comprised of three pillars- 1) Tariff
Reductions, where developed countries were expected to reduce
their tariffs by 36%, developing countries by 24% and least
developed countries had no reductions; 2) Reduction of export
support, where developed countries were expected to eliminate
all forms of export support, developing countries by 50% and
least developed had no reductions (typically they have no export
support); 3) Reform of trade related domestic supports where
developed countries were required to reduce their trade distorting
domestic support by 60%. According to Morrisey, altering the
scenario would not make much difference to the main assessments
- although there might be differences in magnitude, the overall
patterns of liberalisation would be similar.
He argued that the overall economic impact was likely to be
positive and globally significant with the main impacts of liberalisation
including a reduction of distortions, facilitation of an expansion
of global trade and production, and encouragement of increased
efficiency in the allocation of resources to agriculture. The
overall gains would include increased volumes and efficiency
of production, implying higher incomes and lower consumer prices
in general. But he pointed out that the important fact to be
noted here was that the countries that derived the least economic
benefits from liberalisation in agriculture were those where
domestic agriculture had the least capacity to respond (i.e.
the poorest countries). The overall social impact, he argued
would be positive though mixed from place to place. As a result
of liberalisation the poor in developing countries might benefit
from increased incomes in agriculture, poor consumers might
benefit from lower food prices and there might also occur reductions
in poverty and inequality, especially rural-urban and gender
inequality. Though there might be losses incurred by producers
in developed countries, agriculture was a relatively low share
in the economy and the countries with losses would be those
that had the resources to accommodate the adjustment (e.g. the
EU). In terms of the impact on the environment, he argued that
the overall effect would be negative due to excessive use of
agro-chemicals, increased emission of pollutants, soil degradation
and deforestation. There could be benefits though from technological
and resource management improvements and global shifts from
less to more efficient producers.
He then looked at the impacts that might be faced by the six
different groups of countries. 1) In terms of developing countries
that are major exporters of agricultural products, the economic
benefits were unambiguously positive, social impacts small but
positive and environmental impacts would differ for different
products. 2) In terms of developing countries with a relatively
protected agricultural sector the net economic impact was likely
to be positive, as gains to consumers and exporters offset losses
to income competing producers, social impacts mixed but again
positive since small scale farmers might respond to better incentives
and environmental impacts would depend on the net effect on
use of agro chemicals and marginal land. 3) In terms of least
developed countries, those that are net food importers stood
to suffer from the higher world prices. The only way in which
they could benefit would be if domestic producers would respond
to the high prices and increase domestic production which would
ultimately lead to a fall in domestic prices implying a long
run gain. Environmental impacts for such countries would be
low since the use of agro chemicals would be low 4) For low
income developing countries the impacts would be different from
less developed countries since they would be expected to reduce
their tariffs. Further they also stood to benefit from the elimination
of dumping practices as a result of liberalisation. Social impacts
would be positive and environmental impacts would be insignificant.
5) The EU was expected to be the largest single gainer, due
to consumer gains. Though there could be areas within the EU
which would suffer, the adjustment process was something they
could afford. 6) For other developed countries the welfare gains
and environmental impacts would be similar to that of the EU
with the only difference being for countries like Australia
and New Zealand where the increased production could lead to
an increase in environmental stress.
After outlining these probable country scenarios, Morrisey concluded
his presentation with a list of five extremely important mitigation
and enhancement measures which included technical assistance
to increase the environmental efficiency of agriculture, measures
to address increased pollution associated with increased transport
of commodities, agricultural policies in developing countries
to address non-price constraints on producers, poverty reduction
strategies focusing on agriculture and the rural sector and
the revenue implications in developing countries.
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Duncan Green opened his presentation
by explaining that agricultural growth was the best way to
reduce mass rural poverty since the linkages were strong.
As a caveat, he mentioned that the effect of growth in different
crops in different farms would be different. He then expressed
a doubt whether the case studies referred to in Morissey's
presentation were historical. He explained that Oxfam's study
of 6 successful agricultural take off countries (Indonesia,
South Korea, Malaysia, Vietnam, Chile and Botswana) showed
that there was some basis for an infant industry argument
in agriculture.
On the basis of work done individually by the Imperial college
of Wye and by Oxfam, Green identified three different phases
in the context of state intervention and withdrawal in agriculture.
The first phase was the low intensity, semi subsistence phase
which was the starting point. The second phase would be that
of the state coming in providing facilities such as credits,
inputs, irrigation and tariff protection at the national and
international level.
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The third phase was that when the agricultural
sector was generating surplus and the state had to withdraw.
The crucial question according to Green was whether phase two,
where the state entered, was becoming harder due to the restrictions
being placed by the WTO and whether the WTO could play a role
in encouraging state withdrawal in stage 3.
He continued to outline some of the other dilemmas faced by
low income countries, such as the difficulties faced in entering
agro export markets due to competition from Brazil and East
Asia and due to the existence of large buyer driven value chains,
high levels of technology and packaging standards. Given the
spread of supermarkets and the terrible squeeze small farmers
were facing, he asked whether there were alternate solutions
such as regional markets or import substitution strategies countries
could follow, although he acknowledged that supermarkets were
also spreading in developing countries.
He then went on to explain these dilemmas and difficulties faced
by low income countries in the context of the WTO. His argument
was that the rules of the WTO should be flexible towards countries
depending on the level of agricultural development they had
achieved.
After briefly speaking about the various agricultural groupings
in the WTO he went on to speak about the two main debates within
the WTO - market access and subsidies. He was of the opinion
there was a high degree of awareness on the issues relating
to preference erosion of market access in developed countries
as a result of liberalisation. He suggested that negative tariffs
could be an alternative for preference erosion.
He then spoke about the various proposals that would be discussed
at Hong Kong. He specified that the G20 would argue for a tiered
tariff reduction formula with possible caps on individual tariff
lines, the EU would want loopholes on sensitive products and
the G33 would want self designated special products for developing
countries (products that would impact on livelihood and food
security), and access to an easy to use special safeguard. He
emphasised that special products were not the same as sensitive
products. While special products would be those products that
impacted the livelihood and food security of farmers in developing
countries, the sensitive products according to him was purely
a loophole devised by developed countries to protect their farm
lobbies. In the case of subsidies he argued that export subsidies
were falling and were becoming largely a symbolic issue. The
key issue in subsidies according to him was domestic support,
which would definitely have an impact on trade. With a graphical
representation of the increase in "green box" subsidies,
he pointed out that the US and the EU were against the proposals
for the review of green box subsidies.
To emphasise his point about the trade distortioning nature
of domestic support subsidies he pointed out some figures.
As a result of the subsidies he argued that the European Union
cow had a pay hike of $2.62 per day which was more than that
earned by many poor people in the world. Further last year
25,000 US cotton farmers received $4.3bn in subsidies to produce
goods worth $3.4bn in exports, which was ultimately dumped
on the world market, affecting 10 million cotton farmers in
West Africa. Though an apparent subsidy cut for EU was on
the table in HK he argued that this wouldn't be effective
since this cut was purely on the bound, not the applied, level.
The impact according to him would be only when the cut affected
the applied level. Further, he argued that if there was a
genuine possibility of real cuts occurring, the EU would simply
start 'box shifting' subsidies into categories exempt from
reduction commitments. He concluded his presentation with
Oxfam's topline messages on agriculture. This included a proposed
2010 end date for export subsidies, a curb on domestic subsidies,
policy space for developing countries in the case of tariff
formula and special products/special safeguards and market
access for the poorest countries.
Before opening the floor to discussion, the chair pointed
out a few directions for discussion - The effect of liberalisation
under WTO and the different impacts this would have on the
EU and developing countries, the differential impacts of the
different pillars of agriculture market access and subsidies.
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| 1. In the discussion that followed Morrissey was
asked whether his models implied that no country stood to lose
from liberalisation. To this he answered that his analysis clearly
implied that not all countries stood to benefit from liberalisation
in agriculture. He further argued that even if all countries
stood to benefit that would not imply that everyone within these
countries stood to gain. There would be winners and losers in
every country. He pointed out that the difficulty in trade reform
was the fact that those who were to lose would know about it
and hence lobby against it while the probable winners would
either not be able to identify themselves or, even in a situation
in which the winners were able to know about the possibility
beforehand, the chances for individual gain would not be sufficiently
large for them to lobby actively. |
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2. Replying to a question on the efficacy of his country
scenarios Morrissey argued that sensitive products were the
latest result of political lobbying in developed countries
to ensure that their protection remained. He also pointed
out that the irony of protecting sensitive products was that
it stood to deny potential gains to EU consumers.
3. A comment was made on the negative impact of the suggested
negative tariffs on exporters in developing countries, as
governments could not coordinate to pay such tariffs and business
would seek products elsewhere. A specific question was asked
to Duncan on his ideas on how to make the negotiation rounds
more development friendly. On a question on whether Oxfam
was for or against liberalisation Green answered that it depended
on the situation and the countries in question. He further
stated that he believed that anyone who either argued that
liberalisation was a fully good thing or a fully bad thing
was confused and hadn't looked at historical evidence. On
a question on what Oxfam believed was a good deal in Hong
Kong he replied that would be one which cut subsidies, provided
an end date for export subsidies and provided developing countries
policy space.
4. It was pointed out that prices going down as a result
of agricultural liberalisation would not necessarily imply
that there would be benefit for the consumers in rural areas.
On an argument for corporate regulation Green suggested that
the WTO was not the best forum for this discussion though
the concept of corporate regulation was important.
5. One audience member asked whether a successful liberalisation
would imply that agro-business in the north would simply shift
production sites to the south, and therefore lead to increased
poverty. Green replied that it would depend on how the liberalisation
and shift occurred. Concerns were also expressed on the sustainability
of the economic benefits in the long term in the context of
environmental degradation.
6. A further question was asked whether there was any political
will for discussing supply side constraints. To this Morrissey's
response was that though there was space within the WTO for
discussing such issues, the WTO was not the best forum to
coherently discuss this. Related to this he also highlighted
that developing countries should put more attention on their
domestic production with import displacement as a possible
outcome rather than import substitution as the intention being
the focus.
7. On a final question on the "early harvest" concept
(getting things approved before Hong Kong), Green replied
that if this was meant as a down payment to get things moving
then it was good concept but if this was a way to conclude
the discussion on development then it was not good.
8. The chair ended the presentation and thanked the presenters
and the audience. He also mentioned that there would be the
last meeting in the series at SOAS on Monday 5 December.
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