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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

Suggested Citation

  • Hoekman, Bernanrd & Ng, Francis & Olarreaga, Marcelo, 2003. "Reducing agrcultural tariffs versus domestic support : what's more important for developing countries?," Policy Research Working Paper Series 2918, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2918
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Porto, Guido G., 2003. "Trade reforms, market access, and poverty in Argentina," Policy Research Working Paper Series 3135, The World Bank.
    2. Ruben N. Lubowski & Andrew J. Plantinga & Robert N. Stavins, 2008. "What Drives Land-Use Change in the United States? A National Analysis of Landowner Decisions," Land Economics, University of Wisconsin Press, pages 529-550.
    3. 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, vol. 6(2).
    4. Dimaranan, Betina & Hertel, Thomas & Keeney, Roman, 2003. "OECD Domestic Support and Developing Countries," WIDER Working Paper Series 032, World Institute for Development Economic Research (UNU-WIDER).
    5. Hoekman, Bernard, 2002. "Developing Countries and the Political Economy of the Trading System," WIDER Working Paper Series 126, World Institute for Development Economic Research (UNU-WIDER).
    6. Chad E. Hart & John C. Beghin, 2004. "Rethinking Agricultural Domestic Support under the World Trade Organization," Center for Agricultural and Rural Development (CARD) Publications 04-bp43, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    7. Stephen Tokarick, 2003. "Measuring the Impact of Distortions in Agricultural Trade in Partial and General Equilibrium," IMF Working Papers 03/110, International Monetary Fund.
    8. Bernard Hoekman & David Vines, 2007. "Multilateral trade cooperation: what next?," Oxford Review of Economic Policy, Oxford University Press, vol. 23(3), pages 311-334, Autumn.
    9. Margaret S. McMillan & Alix Peterson Zwane & Nava Ashraf, 2007. "My Policies or Yours: Does OECD Support for Agriculture Increase Poverty in Developing Countries?," NBER Chapters,in: Globalization and Poverty, pages 183-240 National Bureau of Economic Research, Inc.
    10. Gawande, Kishore & Hoekman, Bernard, 2009. "Why Governments Tax or Subsidize Trade: Evidence from Agriculture," Agricultural Distortions Working Paper 50300, World Bank.
    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, vol. 6(12).
    12. Hoekman, Bernard & Martin, Will, 2012. "Reducing distortions in international commodity markets : an agenda for multilateral cooperation," Policy Research Working Paper Series 5928, The World Bank.
    13. 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.
    14. 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 23709, Massey University, Department of Applied and International Economics.
    15. Peter Neary & Ainars S¡lesers & Edward G. Krubasik & John M. Weekes, 2003. "Advancing Global Trade: Pro Liberalisation and Development," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 4(2), pages 52-67, October.

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