Lukanyo Mnyanda
7 September 2003
Johannesburg — New World Bank report makes the case for doing away with agricultural protection
The widely anticipated failure of this week's global trade talks in Cancun, Mexico, would represent a tragic lost opportunity for the world's poor.
In a new report, the World Bank says that liberalisation in agriculture alone could benefit the global economy to the tune of $350-billion.
Further, it says that an appropriate deal addressing the concerns of developing nations could spur global growth and reduce poverty for as many as 144-million people by 2015.
The report, Global Economic Prospects 2004: Realizing the Development Promise of the Doha Agenda, comes on the eve of the meeting of world trade ministers in Cancun, Mexico, which begins on Wednesday.
The meeting was supposed to review the progress being made following World Trade Organisation (WTO) negotiations on the Doha Development Agenda. But the talks have stalled on issues important to developing countries, including agricultural reform, tariff reduction on manufactured products and special treatment for developing countries.
Uri Dadush, the bank's trade department director, said successful negotiations in Cancun were crucial to reviving the global economy and reducing poverty.
"If ministers can reach an agreement to reduce trade barriers affecting the products that poor people produce - especially farm products and labour-intensive manufacturing - it would help raise their standard of living. If not, an opportunity will be lost." But the talks are expected to end in failure like the previous round in Seattle in 1999, which was disrupted by violent anti-globalisation protests.
Agriculture is expected to be the most divisive issue and developed countries are expected to refuse to reform and open up their agricultural markets to developing country farmers .
President Thabo Mbeki said this week he feared the Cancun talks would end in failure, mainly due to the lack of a beneficial agreement on agriculture. Trade and Industry Minister Alec Erwin will lead the SA delegation to the talks.
Disagreements over agriculture overshadowed a key agreement on legal changes to make it easier for poorer countries to import cheaper generics to deal with public health crises such as HIV/Aids.
The World Bank report said the global trading system was characterised by inequities that drag down export growth in developing countries. "In agriculture, for example, Japanese support to rice producers amounts to 700% of production cost, which effectively shuts out exports from Thailand and other producers." It said the European Union was spending around 100-billion a year on direct budget subsidies to producers, depressing world market prices in sugar, dairy and wheat.
One of the biggest culprits was the US, which spent 50-billion annually on direct support to its agriculture sector alone. I ts annual cotton subsidy expenditure of 3-billion was three times its foreign aid to Africa.
The Bank said liberalisation would shift agricultural production from the so-called North to developing countries, and boost world prices for many commodities. For example, the price of rice in world markets would rise by as much as 90%, while those for cotton, dairy products, groundnuts and sugar would rise by 10%- 40%.
Cutting protection and agricultural subsidies, which go mostly to large farmers, would also benefit consumers in the developed world.
The Bank estimates that measures to protect large farmers cost the average family in Japan, US and the EU about 1 000 a year.
The report concluded that a "good" WTO agreement could produce between $290-billion and $520-billion in income gains for both rich and poor countries.
World Bank Chief Economist Nicholas Stern called on the rich countries to take the lead in negotiating a fair outcome to the Cancun negotiations.
"They are the dominant players and account for two-thirds of the global market," he says.
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