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protection for farmers in poor countries
Poor countries in the World Trade Organisation are attempting to retain tariff protection for farmers they say are vulnerable, conflicting with the search for new markets by farmers in rich nations.
A study published today by Oxfam, the international development campaigner, argues that poor nations should be allowed to protect their rice farmers from low-cost - and often subsidised - competition from abroad.
Oxfam calculates that, under proposals being discussed in the WTO, 13 poor countries with around half the world's production of rice - including Egypt, India and China - would be forced to cut tariffs protecting their rice producers. "Low-cost imports threaten to destroy the livelihoods of millions of farming families and the prospects for rural development," says Kate Raworth, one of the report's authors.
American rice, which many poor countries import after liberalising their trade, receives heavy domestic subsidies. Jackie Loewer, chairman of the US rice producers' group, himself farms some 1,600 acres of rice in Louisiana. He estimates that government subsidies average 20-30 per cent of his revenue, rising above 50 per cent when market conditions are poor.
But he argues: "It is a chicken and egg situation. We wouldn't need the subsidies if we had enough markets opened to us." The US already exports about half its rice, and is currently trying to get more access for exports to central America.
Mr Loewer's rice ends up in places such as Accra, capital of the west African state of Ghana. After liberalisation of the Ghanaian rice market, urged on the country by the International Monetary Fund and the World Bank, the markets in Accra are piled high with sacks of US rice, backed by an aggressive marketing campaign portraying it as a superior product. So successful has this been that many of the sacks - even those from Thailand, the US's biggest global competitor - are stamped with the Stars and Stripes.
In the WTO framework agreement last summer that got the Doha round of talks back on track, poor countries secured a vague pledge permitting them to retain more protection for so-called "special products" - based on criteria of "food security" (ensuring an adequate national supply of food), "livelihood security" and "rural development needs".
But the US government argues that this should only apply to a narrow range of farm products, essentially those produced by subsistence farmers, and that consumers pay the price for trade protection.
"Food security is often better served by opening markets to high-quality, low-cost produce than favouring domestic producers," says a US trade official.
The rice lobby is very well connected politically in the US, being large donors to political campaigns. In a 2003 open letter to Robert Zoellick, then US trade representative, a group of agricultural exporters including the US rice producers' association argued against protection for special products. "Since developing countries offer the most potential for demand and import growth in the future, these provisions would severely undermine potential market access gains from tariff reductions," it said.
Oxfam says that consumers' access to cheaper rice is important, but it is for poor countries' governments to decide on the right trade-off. www.oxfam.org www.ustr.gov
farmers in poor nations is wrong policy
From Prof Arvind Panagariya.
Sir, Oxfam has been arguing for some years that the Organisation for Economic Co-operation and Development agricultural subsidies and protection have seriously damaged the least developed countries. But as many as 45 out of 49 are net importers of food and will in fact be harmed by the rise in world prices of their imports, as is now finally being understood by the policymakers in these countries. Now, Oxfam strikes yet another blow against the developing countries by arguing that they should be allowed to keep their agricultural protection even as the OECD countries knock down theirs ("Oxfam backs protection for farmers in poor countries", April 11).
If the developing countries such as China, India and Egypt are to take advantage of the increased access to the OECD agricultural markets in the post-Doha world, they cannot afford to handicap their farmers by maintaining high agricultural protection of their own which undercuts their export incentives by increasing the profits to be made on domestic sales. Unlike the Republic of Korea, India failed to take advantage of the progressively opening OECD markets in industrial goods in the 1960s and 1970s precisely because it chose autarkic (those not relying on imports) over outward-oriented policies. Oxfam does these countries no good with this wrong-headed indulgence of harmful protectionism.
The case of Ghana, cited as an instance of wrongful agricultural liberalisation, only illustrates the opposite. Ghana has seen its exports of goods and services rise from a paltry 5 per cent [of the GDP] in 1981 to 17 per cent in 1991 and a hefty 52 per cent in 2001.
Arvind Panagariya, Professor of Economics and Bhagwati Professor of Indian Political Economy, Columbia University, School of International and Public Affairs, New York, NY 10027, US
Alas, trade realities bear little resemblance to the theories
By Duncan Green
Published: April 25 2005 03:00
From Mr Duncan Green.
Sir, Arvind Panagariya (Letters, April 19) misrepresents Oxfam's position on the World Trade Organisation and provides a somewhat eccentric interpretation of the impact of agricultural trade liberalisation on poor farmers.
He suggests that the best outcome would be a continuation of the vast trade-distorting subsidies in the north in order to keep import prices down in poor countries, and across-the-board trade liberalisation. Unfortunately, trade realities bear little resemblance to the trade theories that underpin this position.
First, dumping subsidised surplus goods may provide cheap food in the short term, but it stifles agriculture in countries where the vast majority of poor people are farmers or farm workers who rely on getting a fair price for their goods. These are countries that have little prospect of growth in any other sector. Second, most poor country farmers lack the infrastructure, capital and technology to access export markets even if they do exist. Market opening commonly results in an increase in food imports, but the expected boost in farm exports fails to materialise because poor countries lack the capacity to take up the opportunity.
As for Prof Panagariya's comparison between South Korea and India, the real difference does not lie in import tariffs - South Korea in fact made judicious use of trade policies, protecting and building up its domestic industries before opening up to trade when the time was right. Rather, the difference is that in South Korea the state pursued an active export-oriented industrial policy with remarkable results. It is precisely that kind of development policy that is in danger of becoming illegal as the WTO and regional trade agreements encroach ever further into domestic regulatory issues.
Duncan Green, Head of Research, Oxfam, Oxford OX2 7DZ, UK
protection creates a 'bias against exports'
From Prof Arvind Panagariya.
Sir, Lest your readers get the impression that Duncan Green of Oxfam (Letters, April 25) has the better of the argument on the appropriate trade policy for developing countries, permit me to point out that his assertion that my criticism of Oxfam's pernicious advice to unsuspecting developing countries relies on theories and that of Oxfam relies on facts fails to stand up to closer scrutiny. Whereas his facts look more like fiction, I have relied on empirical studies of postwar commercial policy with which all trade experts are familiar.
That their own protection will generally undermine export performance was a conclusion that emerged from several empirical studies and can be understood easily once you realise that such protection creates what trade economists call a "bias against exports". Mr Green's suggestion that India's abysmal export performance and Korea's spectacular trade performance were despite similar trade policies in the 1960s and 1970s is contrary to the well-established facts of the case.