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Reducing agrcultural tariffs versus domestic support : what's more important for developing countries?

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Author Info
Hoekman, Bernanrd
Ng, Francis
Olarreaga, Marcelo

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Abstract

High levels of protection and domestic support for farmers in industrial countries significantly affect many developing countries, both directly and through the price-depressing effect of agricultural support policies. High tariffs--in both rich and poor countries--and domestic support may also lower the world price of agricultural products, benefiting net importers. The authors assess the impact of reducing tariffs and domestic support in a sample of 119 countries. Least developed countries (LDCs) are disproportionately affected by agricultural support policies. More than 18 percent of LDC exports are subject to domestic support in at least one World Trade Organization (WTO) member, as compared to only 9 percent of their imports. For other developing countries the figures are around 4 percent for both their exports and imports. So, the prevailing pattern of trade suggests the world price-reducing effect of agricultural domestic support policies may induce a welfare loss in LDCs. The authors develop a simple partial equilibrium model of global trade in commodities that benefit from domestic support in at least one WTO member. The simulation results suggest there will be large differences between LDCs and other developing economies in terms of the impact of a 50 percent cut in tariffs as compared to a 50 percent cut in domestic support. Developing countries as a group would suffer a welfare loss from a cut in support, while LDCs would experience a small gain. For both groups of countries, tariff reductions by WTO members--including own liberalization--will have a positive effect on welfare. The results show both the importance of focusing on tariffs as well as subsities, and the need for complementary actions to allow a domestic supply response to occur in developing countries if world prices rise

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2918.

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Date of creation: 31 Mar 2003
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Handle: RePEc:wbk:wbrwps:2918

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Keywords: Consumption; Environmental Economics&Policies; Markets and Market Access; Economic Theory&Research; Trade Policy; Economic Theory&Research; Environmental Economics&Policies; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; World Trade Organization; Markets and Market Access;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Anderson, Kym, 2003. "Trade Liberalization, Agriculture, and Poverty in Low-income Countries," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  2. Fink, Carsten & Mattoo, Aaditya & Neagu, Ileana Cristina, 2001. "Trade in international maritime services : how much does policy matter?," Policy Research Working Paper Series 2522, The World Bank. [Downloadable!]
    Other versions:
  3. Rae, Allan N. & Strutt, Anna, 2003. "The Current Round of Agricultural Trade Negotiations: Should We Bother About Domestic Support?," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 4(2). [Downloadable!]
  4. Hoekman, Bernard & Anderson, Kym, 1999. "Developing country agriculture and the new trade agenda," Policy Research Working Paper Series 2125, The World Bank. [Downloadable!]
    Other versions:
  5. Dimaranan, Betina & Hertel, Thomas W. & Keeney, Roman, 2003. "OECD Domestic Support and the Developing Countries," GTAP Working Papers 1161, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University. [Downloadable!]
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  6. Aaditya Mattoo & Devesh Roy & Arvind Subramanian, 2003. "The Africa Growth and Opportunity Act and its Rules of Origin: Generosity Undermined?," The World Economy, Blackwell Publishing, vol. 26(6), pages 829-851, 06. [Downloadable!] (restricted)
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  7. Hoekman, Bernard, 2002. "Strengthening the global trade architecture for development: the post Doha agenda," World Trade Review, Cambridge University Press, vol. 1(01), pages 23-45, March. [Downloadable!]
  8. Francois, Joseph F & Wooton, Ian, 2001. "Trade in International Transport Services: The Role of Competition," Review of International Economics, Blackwell Publishing, vol. 9(2), pages 249-61, May. [Downloadable!] (restricted)
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  9. Paul Brenton & Miriam Manchin, 2002. "Making EU Trade Agreements Work: The Role of Rules of Origin," International Trade 0203003, EconWPA. [Downloadable!]
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  10. Joachim Zietz, 1986. "The potential benefits to LDCs of trade liberalization in beef and sugar by industrialized countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 122(1), pages 93-112, March. [Downloadable!] (restricted)
  11. Hoekman, Bernard & Ng, Francis & Olarreaga, Marcelo, 2001. "Tariff Peaks in the Quad and Least Developed Country Exports," CEPR Discussion Papers 2747, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  12. Beghin, John C. & Roland-Holst, David & van der Mensbrugghe, Dominique, 2003. "How Will Agricultural Trade Reforms in High-income Countries Affect the Trading Relationships of Developing Countries?," Staff General Research Papers 10665, Iowa State University, Department of Economics.
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  1. Mohamed Hedi Bchir & Lionel Fontagné & Sébastien Jean, 2005. "From Bound Duties to Actual Protection: Industrial Liberalisation in the Doha Round," Economics Working Papers 041, European Network of Economic Policy Research Institutes. [Downloadable!]
    Other versions:
  2. Ruben N. Lubowski & Andrew J. Plantinga & Robert N. Stavins, 2007. "What Drives Land-Use Change in the United States? A National Analysis of Landowner Decisions," NBER Working Papers 13572, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Chad E. Hart & John C. Beghin, 2004. "Rethinking Agricultural Domestic Support under the World Trade Organization," Food and Agricultural Policy Research Institute (FAPRI) Publications 04-bp43, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University. [Downloadable!]
    Other versions:
  4. Porto, Guido G., 2003. "Trade reforms, market access, and poverty in Argentina," Policy Research Working Paper Series 3135, The World Bank. [Downloadable!]
  5. Pan, Suwen & Welch, Mark & Mohanty, Samarendu & Fadiga, Mohamadou & Ethridge, Don, 2005. "Assessing the Impacts of the Chinese TRQ System and U.S. Subsidies on the World Cotton Market," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 6(2). [Downloadable!]
  6. Stephen Tokarick, 2003. "Measuring the Impact of Distortions in Agricultural Trade in Partial and General Equilibrium," IMF Working Papers 03/110, International Monetary Fund. [Downloadable!]
  7. Hoekman, Bernard & Vines, David, 2007. "Multilateral Trade Cooperation: What Next?," CEPR Discussion Papers 6458, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  8. John C. Beghin & Ataman Aksoy, 2003. "Agricultural Trade and the Doha Round: Lessons from Commodity Studies," Center for Agricultural and Rural Development (CARD) Publications 03-bp42, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
    Other versions:
  9. Margaret McMillan & Alix Peterson Zwane & Nava Ashraf, 2005. "My Policies or Yours: Does OECD Support for Agriculture Increase Poverty in Developing Countries?," NBER Working Papers 11289, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Rude, James & Meilke, Karl D., 2005. "Implications of the July 2004 WTO Framework Agreement for Canadian Agriculture," Commissioned Papers 24159, Canadian Agricultural Trade Policy Research Network. [Downloadable!]
  11. Shakur, Shamim & Rae, Allan & Chatterjee, Srikanta, 2004. "A Road Ahead From Cancun? Weighing Up Some Give-And-Take Scenarios In A Dda Spirit," Discussion Papers 23709, Massey University, Department of Applied and International Economics. [Downloadable!]
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