18th March 2008
Embedding a Pro-poor Approach in Agriculture Trade Reform
Agriculture lies at the heart of the trade and sustainable development nexus. It comprises over 50percent of the GDP in some of the poorest countries and provides livelihoods for the large majority of developing country populations. Besides promoting economic growth and income generation, agriculture trade has significant implications for other key public policy objectives such as food security, poverty reduction, rural development, environmental and biodiversity protection, as well as food safety and health. Despite the importance of agriculture for many countries, and the idea that agriculture trade liberalisation should be the main driving force for integrating developing countries in world trade, the three-year-long agriculture negotiations under the World Trade Organisation (WTO) built-in agenda and the Doha mandate have yet to yield tangible results for the poor in many countries.
Today, there is a widely shared perception that the multilateral trade negotiations have not responded adequately to poverty reduction and sustainability concerns raised by developing countries. In agriculture, for example, developing countries’ exports are yet to achieve real access to developed country markets, which remain closed mainly due to relatively high, often escalating tariffs, overly burdensome food safety and other technical import requirements, or depressed prices due to high levels of internal support measures in developed countries with direct or indirect impacts on agricultural production. Moreover, highly subsidised developed country farm products are often ‘dumped’ on the world market, creating sudden import surges in developing countries and jeopardising the livelihoods of the small-income and resource-poor farmers. Subsidised exports from OECD countries frequently displace developing country products from third country. Many rich countries also continue to conceive their ‘development policies’ in terms of official development assistance (ODA) alone. Policies in other arenas – such as agriculture, trade, investment, intellectual property, environment, security – are usually crafted without due concern for their impacts on developing countries.
In addition, the prices of many primary commodities - such as coffee, cocoa, and palm oil – have declined by nearly 70 percent between 1980 and 2000.1 Similarly, the prices of cotton and sugar have fallen by nearly 50 and 70 percent over the same period. Rice prices have fallen by over 50percent during the last three years, bringing prices to lows last seen in 1986.2 As over 50developing countries depend on three or fewer commodities for a majority of their exports,3 the sharp decline in prices of these commodities has led to a steep fall in foreign exchange earnings for these countries, pushing farmers’ incomes to below poverty levels. Many of the poorest countries also appear to have lost their comparative advantage in the production of key commodities, such as coffee and cacao, to other richer developing countries.4 Limited market access alongside steeply falling foreign exchange earnings of some primary commodity exporters has fuelled the fears of many preference receiving developing countries. Further MFN (Most Favoured Nation) tariff reduction by key preference granting countries would lead to an erosion of preferential market access terms for a number of primary export commodities, driving vulnerable countries further into poverty.
Many developing countries have also been unable to diversify away from commodity dependence or capture significant gains in some other form, such as value-added processing, due in part to tariff escalation. Africa, for example, has hardly benefited at all from the global boom in manufactured exports. At around 30 percent in 2000, the share of manufactured exports in Africa’s total world merchandise exports has increased by only 10 percentage points since 1980.5
These alarming facts are not new. As the July deadline for negotiations on a framework for modalities in agriculture looms, it is imperative that policymakers place the emphasis on generating pro-poor outcomes by formulating a strategic agenda in agriculture trade negotiations. In the following sections, this paper will attempt to outline a number of systemic factors that have stood in the way of progressive policies, followed by discussions on some emerging elements for a pro-poor agriculture trade reform agenda as well as complementary mechanisms.