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

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  • Hoekman, Bernanrd
  • Ng, Francis
  • Olarreaga, Marcelo

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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Bibliographic Info

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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References

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  1. Fink, Carsten & Mattoo, Aaditya & Neagu, Ileana Cristina, 2001. "Trade in international maritime services : how much does policy matter?," Policy Research Working Paper Series, The World Bank 2522, The World Bank.
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  6. Dimaranan, Betina V. & Hertel, Thomas W. & Keeney, Roman, 2003. "OECD Domestic Support and the Developing Countries," 2003 Annual meeting, July 27-30, Montreal, Canada, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 22000, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Aaditya Mattoo & Devesh Roy & Arvind Subramanian, 2003. "The Africa Growth and Opportunity Act and its Rules of Origin: Generosity Undermined?," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 26(6), pages 829-851, 06.
  8. Anderson, Kym, 2003. "Trade Liberalization, Agriculture, and Poverty in Low-income Countries," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
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  11. Hoekman, Bernard, 2002. "Strengthening the global trade architecture for development: the post Doha agenda," World Trade Review, Cambridge University Press, Cambridge University Press, vol. 1(01), pages 23-45, March.
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  13. 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, Springer, vol. 122(1), pages 93-112, March.
  14. 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, Estey Centre for Law and Economics in International Trade, vol. 4(2).
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Citations

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Cited by:
  1. Pan, Suwen & Welch, Mark & Mohanty, Samarendu & Fadiga, Mohamadou L. & Ethridge, Don E., 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, Estey Centre for Law and Economics in International Trade, vol. 6(2).
  2. Chad E. Hart & John C. Beghin, 2004. "Rethinking Agricultural Domestic Support under the World Trade Organization," Center for Agricultural and Rural Development (CARD) Publications, Center for Agricultural and Rural Development (CARD) at Iowa State University 04-bp43, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  3. Hoekman, Bernard & Martin, Will, 2012. "Reducing distortions in international commodity markets : an agenda for multilateral cooperation," Policy Research Working Paper Series, The World Bank 5928, The World Bank.
  4. Stephen Tokarick, 2003. "Measuring the Impact of Distortions in Agricultural Trade in Partial and General Equilibrium," IMF Working Papers, International Monetary Fund 03/110, International Monetary Fund.
  5. Hoekman, Bernard, 2002. "Developing Countries and the Political Economy of the Trading System," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  6. Robert N. Stavins & Ruben N. Lubowski & Andrew J. Plantinga, 2008. "What Drives Land-Use Change in the United States? A National Analysis of Landowner Decisions," Working Papers, Fondazione Eni Enrico Mattei 2008.83, Fondazione Eni Enrico Mattei.
  7. 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.
  8. Gawande, Kishore & Hoekman, Bernard, 2010. "Why Governments Tax or Subsidize Trade: Evidence From Agriculture," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7787, C.E.P.R. Discussion Papers.
  9. Rude, James & Meilke, Karl D., 2005. "Implications of the July 2004 WTO Framework Agreement for Canadian Agriculture," Trade Policy Briefs, Canadian Agricultural Trade Policy Research Network 24150, Canadian Agricultural Trade Policy Research Network.
  10. Peter Neary & Ainars S¡lesers & Edward G. Krubasik & John M. Weekes, 2003. "Advancing Global Trade: Pro Liberalisation and Development," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 4(2), pages 52-67, October.
  11. Valdes, Alberto & Foster, William E., 2006. "Latin America's "New Open Regionalism" and WTO Negotiations: the case of agriculture," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, Spanish Association of Agricultural Economists, vol. 6(12).
  12. Porto, Guido G., 2003. "Trade reforms, market access, and poverty in Argentina," Policy Research Working Paper Series, The World Bank 3135, The World Bank.
  13. Hoekman, Bernard & Vines, David, 2007. "Multilateral Trade Cooperation: What Next?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6458, C.E.P.R. Discussion Papers.
  14. Dimaranan, Betina & Hertel, Thomas & Keeney, Roman, 2003. "OECD Domestic Support and Developing Countries," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  15. Shakur, Shamim & Rae, Allan N. & Chatterjee, Srikanta, 2004. "A Road Ahead From Cancun? Weighing Up Some Give-And-Take Scenarios In A Dda Spirit," Discussion Papers, Massey University, Department of Applied and International Economics 23709, Massey University, Department of Applied and International Economics.

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