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Contributions from
the Column
Studies and reports
World Bank: Only poor countries have reformed
State-centricity is the problem
Deciding on the Food Aid Convention’s future
“Poor choices for poor countries”
02/2005 |
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[ Agricultural trade ]
World Bank: Only poor countries have reformed
After the Uruguay Round on world trade was completed in the mid-1990s, free trade advocates promised liberalisation would provide poor countries with greater profits from agricultural trade. Ten years later, developing countries have still not seen much in the way of such benefits. The World Bank is now joining in non-governmental groups’ long-standing criticism. While rich countries have met their obligations under the Uruguay Round only in part, developing countries did indeed gradually open their borders for agricultural produce over the last twenty years. In January, the World Bank released its report “Global Agricultural Trade and Developing Countries”. It says that, since the end of the 1980s, the OECD countries reduced the subsidies for their farmers by only one quarter from 63 percent of the produce value to 46 percent. Developing countries, on the other hand, had almost halved their agricultural tariffs in the same period from an average of 30 percent to 18 percent and, in addition, eliminated other non-tariff restrictions.
Unsurprisingly, the World Bank’s new report sticks to the conviction that trade liberalisation is, in principle, good for the poor. In the Bank’s view, economic growth and job creation in developing countries based on agriculture will only be brought about by exporting products as it considers local markets as too small. However, an export-oriented policy should also take into account objectives such as food security and the development of local manufacturing capacities. According to the Bank, such aspirations can be thwarted if market opening is not properly thought through. “Knowing who is likely to gain or lose from reform is critical for sequencing reforms and putting in place complementary policies, including assistance to reduce the cost of adjustment in non-competitive sectors,” the report states.
Market distortion by industrial countries is so great that poor countries simply have no way to counter it. The European Union and the US subsidise their cotton sectors to the tune of more than 4 billion dollars per annum in a world market worth 20 billion dollars. The World Bank estimates that these subsidies cost farmers in West and Central Africa up to 250 million dollars every year. By way of comparison, according to the Bank’s calculations, all international aid for the region amounted to just 2 billion dollars in 1999, of which approximately 400 million dollars went into agriculture. “One can see the incompatibility between ODA and farm policy in donor countries that subsidise their rich farmers”, the document argues. Separating subsidies from production is said to be a step in the right direction, but not a sufficient one. Rather, rich countries are admonished to put a time limit on any payments to their farmers and only make them for the purpose of adjustment to market opening.
However, in the World Bank’s opinion, developing countries can only obtain profits from agricultural liberalisation if they improve their choice of products. For many countries, the problem is not protectionism by rich countries, but the fact that they simply do not have anything to sell. Advanced nations are required to open their markets to processed products in particular, and to help developing countries expand what they offer. Producers in poor countries must above all manage to fulfil the product standards (health and hygiene) required on the markets of rich countries. Such standards should not only be judged as a new form of protectionism because even some very poor countries have managed to build up the necessary capacities in production and controls. (ell)
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