Back when the U. The Tariff Act of , the first major piece of legislation passed by the Congress after the ratification of the Constitution, gave Congress the authority to raise enough revenue to service its then large government debt. It did this by imposing tariffs, which became the main source of federal revenues from until Britain was the U. So when the U. But why might the U. The WTO sets the rules for global trade, and the world depends on these rules to provide some stability.
WTO agreements have provisions that protect developing countries and LDCs, usually with special provisions that give them more time to implement agreements or measures that increase their trading opportunities. Developing countries and LDCs also tend to be dependent on the U. So while they might be opposed to some aspects of the numerous WTO consensus agreements, they tend to work cooperatively rather than be obstructionist. In line with twin goals of eradicating extreme poverty and increasing shared prosperity, the World Bank Group helps its client countries improve their access to developed country markets and enhance their participation in the world economy.
Prominent results from IBRD operations include:. Bosnia and Herzegovina: A Bank operation supported reforms to facilitate cross-border trade. The reductions in trade-related administrative costs helped strengthen the business environment and reduced the costs of doing business in the country.
Macedonia: the WBG supported government efforts to improve the efficiency of trade logistics services two projects under a programmatic approach.
The operation included measures to make inspections more efficient to foster cross-border trade and to support the transport industry to be export-ready by incentivizing fleet upgrades to comply with EU emission standards. Results include a 70 percent reduction in physical border inspections, with reduced transit times for both exports and imports. Furthermore, the compliance rate of new vehicles with Eurozone standards was percent. The DPL supported work to implement procedures, customs, and formulation of reduced and simplified non-tariff barriers.
Results include a reduction in the number of days needed to export and import: between and , time to export was reduced from 21 to 17 days and time to import was reduced from 27 to 23 days. The IPF operation financed investments and technical assistance for the Directorate General of Customs and Excise to strengthen client services through improved customs operations and trade facilitation. The World Bank Group works with a wide range of stakeholders, including donor and client countries, the private sector, CSOs, multilateral institutions and regional economic communities among others.
Among the partners are trade champions that are leaders in promoting an open, rules-based international trading system. The private sector is increasingly interested in ensuring that free trade is protected and helps support business opportunities including entry and growth for SMEs and MSMEs as well as participation in global value chains. Donors contribute to WBG trust funds that support trade and investment climate.
Further, the negative impact of indirect protection e. Total net taxation of agriculture was greater than 25 percent of the value of production in all regions, and exceeded 50 percent in the SSA countries. The unilateral reforms implemented during the s and s reduced this quantifiable anti-agricultural bias in domestic policy, particularly that associated with indirect taxation.
Given fiscal constraints on the use of subsidies, trade policy is now the primary tool used to protect agriculture in developing countries. Nevertheless, partly as a result of the adjustment programmes, protection in developing countries has decreased, with the halving of average tariff rates and a reduction in the variation in their levels . Whilst the average tariff in developing countries for all manufactured and agricultural tariff lines is 14 percent On average the highest tariffs in developing countries are about 12 times the average level, compared to about 40 times higher in the OECD.
These peaks invariably hit agricultural exports from developing countries. However, the opening of markets in developing countries, in the context of a global agriculture still characterized by high levels of protection in developed countries, left the reforming developing countries less able to prevent a the flooding of their domestic market import surges with products sold on the world market at less than their cost of production; and b the displacement of local trading capacity which was intended to, and in some circumstances initially did, fill the void left following the deregulation of local markets and associated dismantling of parastatals.
On point a , the Washington institutions promoting structural adjustment did not take into account the existing imbalance in designing and proposing the reforms and therefore did not predict the resulting disincentive effects on local production in some regions. On point b rather than the emergence of sustained local private sector involvement, internal markets have often been overwhelmed by larger companies dominant in global value chains.
The impact of the unilateral reforms preceding the first multilateral negotiations on agricultural trade negotiations that essentially excluded developing countries was to leave developing countries potentially more vulnerable to greater openness, and to impose further constraints on policy intervention aimed at promoting agricultural growth. Indeed, many commentators, particularly among the international NGO community, suggest that developing countries far from benefiting, have suffered damage to their agricultural production capacity related to import surges following the reduction or elimination of tariffs, and to the intense competition to domestic production resulting from subsidization of exports and from dumping practices .
These commentators do not however, use these facts to argue against the benefits of increased trade in agricultural commodities. Rather, they are concerned that the mechanisms by which increased trade is being pursued are fundamentally flawed and strongly biased against the interests of developing countries. Multilateral reforms, if followed through to complete liberalization, should in theory begin to redress the current imbalance in levels of protection.
However, even if OECD agricultural policy were to be radically reformed, there would still be an imbalance in terms of the ability of developing country agriculture to compete, particularly those countries whose sectors are dominated by many resource-poor low-income producers who do not have access to the institutional support for example mechanisms to offset risk, the research, development and extension capacity, and market information systems that is widely available to producers in the OECD. The imbalance that has been manifested in multilateral reform processes, notably the WTO, is reviewed as a series of specific issues in a critique by Green and Priyadarshi  :.
The current visible imbalance in levels of protection has been used by some to argue for a rectification of the imbalance before poorer countries commit to further reductions in their levels of protection. From this standpoint, the current international NGO focus on reducing levels of protectionism in developed country agriculture could be argued to be taking attention away from efforts to alleviate constraints to responsiveness within developing countries.
While less distorted world agricultural markets are certainly a precondition for improving the incentives required to stimulate developing country agriculture, they are by no means a sufficient condition. However, it is not clear that protectionism, and more specifically, the use of domestic support, should incur a negative connotation in all cases. The fact that the terms of trade move against the agriculture sector as economies develop and become more diversified has been used as an argument for supporting the agriculture sector even as it declines in relative importance. Indeed, as countries become less fiscally constrained, there is a tendency for them to support their agriculture sectors, as evidenced in two of the poorer OECD countries, Mexico and Turkey, which have both increased levels of support recently.
Even if these arguments are negated to some extent by calls for less distorting redistributive policies towards the sector, there may still be strong arguments for the use of subsidies in the early stages of agricultural transformation. However, whilst such state intervention has been credited as having supported the Green Revolution in India, for example, as such countries continue to grow, these forms of supportive policy can become locked in.
This can put a strain on budgetary resources and prevent their allocation to more efficient uses. There is, therefore, a need to consider, before subsidies are first initiated, how they would be phased out when the returns to their use diminish. In attacking OECD protectionism, interest groups need to ensure that the types of policy instruments they want to see dismantled remain flexible.
One way may be to target support reduction on commodities other than basic foods, for example cotton. The consequence would be that whilst higher world cotton prices would be beneficial for poor producers, higher world prices of basic food commodities could harm net consumers . Equally, in determining whether it is advisable for developing countries to resist opening their markets further to agricultural imports, two factors appear central: first, the extent to which unbalanced liberalization during the past few decades has mitigated the potential and expected benefits of unilateral liberalization; and second, even if trade barriers in rich countries are reduced by multilateral liberalization, whether this will actually result in an increase in the market share of poorer developing countries, given that they generally lack the infrastructure, skills and capability, and the institutional support, to take advantage of increased openness.
The role of the agriculture sector in reducing levels of food insecurity goes far beyond simply increasing the amount of available food. It is therefore important to understand how agriculture can make its contribution, so often suppressed in the past, before considering the types of opportunities for appropriate intervention, and the threats that the sector may face following further liberalization in the context of the increasing force of globalization.
An emerging consensus view is that in many rural economies, agriculture has greater potential than other activities to stimulate initial growth and improvements in income . Increases in agricultural productivity have the potential to increase incomes as rural households specialize and intensify production. The FAO State of Food Insecurity report suggests that weak rates of growth in agricultural production can be related to deteriorations in food security indicators, and that in countries where the number of undernourished increased significantly, the average agricultural growth rate was 0.
This compared with countries where the number undernourished decreased significantly, but which achieved an average agricultural growth rate of 3. Empirical evidence from the sectoral productivity literature also supports the view that agricultural growth promotes poverty reduction . The key issue is therefore not whether, but how changes in real income from increased agricultural production translate into improved food security. This is considered by turning to the literature on sectoral growth linkages.
Delgado et al. Hazell and Haggblade  calculated that on average in India, for each rupee increase in agricultural income, an additional 64 rupees are added to the local economy. The incremental income in high productivity areas was Rs. In all cases they found that the greater proportion of the overall multiplier was attributable to consumption linkages rather than to inter-industry production. In similar studies, the relative importance of consumption linkages is also demonstrated. Whilst there is less evidence that direct upstream and downstream linkages are significant sources of incremental income, savings and investment linkages are important, as increased income can result in increased investment and in reduced production risk and vulnerability.
This in turn contributes to increases in productivity and enhanced supply response. However, there may be leakage from the local economy if rates of local savings and investment are too low or if the local economy is strongly linked to the wider economy, such that local opportunities are already available to outside capital, or outside opportunities are already available to local capital, suppressing the multiplier effect. Indirect consumption linkages have potentially the strongest impact. There is, therefore, a requirement to determine whether any increased income is due to price or to productivity improvements.
Higher prices will increase producer income but may have negative effects on consumers this may include any local processing industry. This compares with productivity improvements, which increase producer income, but do not necessarily increase prices for consumers. Lower prices for tradables will reduce levels of income for net producers of these, but could also suppress any positive consumption linkages via wage income reductions.
The extent of any gains achieved via consumption linkages will again be limited by leakages.
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If increased incomes are used to buy tradables, this will reduce the stimulus to local demand. Even with a positive stimulus, if local producers of non-tradable foods cannot respond e. The distinction between expenditure on tradables as opposed to non-tradables is therefore important .
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Shifts in production between tradables and non-tradables as a result of changing incentives therefore need to be investigated in terms of their food security implications. Jaramillo,  examining the impact of reforms in Colombia in the early s, demonstrated that living standards improved in rural areas despite reduced overall agricultural performance following the reforms. He concluded that this was due to growth in employment opportunities driven by increased production of non-tradable crops and growth in the rural service sector.
Pre-reform, the sector was characterized by the protection of importables, whilst exportables benefited from export subsidies and subsidized credit programmes, but non-tradable production was generally ignored. The reforms of the s were expected to favour agriculture, but tariff reductions resulted in reduced areas planted to import-competing annual crops, and therefore reduced production of these, but they increased production of non-tradable crops. Although Jaramillo also discusses the fact that expansion in labour-intensive crops drew in landless labour with decreased employment in tradables compensated for by increased employment in non-tradables , an aspect not explored was whether the increase in the production of non-tradable crops resulted in decreased local market prices and whether this in turn increased real incomes and purchasing power.
The source of agricultural growth is therefore particularly important in understanding the extent to which agriculture can be expected to contribute to wider economic growth in an economy. On the basis of past studies and a review of countries that have experienced relatively high rates of agricultural growth during the past three decades, Dorward and Morrison  distinguish three categories of countries: extensive exporters, intensive exporters and those relying on semi-tradable, cereal-based intensification. The first two categories, which have generally been considered to offer the greatest scope for agriculture-led growth, are distinguished by the manner in which they have expanded the production of exportable products generally non-food commodities : this has been either through land expansion with the associated maintenance, or even reduction of, average yields; or through intensification to increase yields on existing cropped areas.
The authors suggest, however, that many countries in the early stages of agricultural transformation will need to follow the third strategy of cereal-based intensification if the multiplier effects explained above are to be significant enough to stimulate wider growth. Several other findings could be used to support this proposition. In most African countries, cereals are the staple food and provide the basis of the livelihood of large numbers of small farmers. Increasing the effectiveness of cereal marketing systems is likely to be vital to food security of these households .
Other research  argues that cereal-based intensification is an increasingly important strategy in the face of declining tropical export commodity prices and the terms of trade facing producers of these commodities. A decreasing, but not insignificant, number of poor countries are highly dependent on a single commodity without being the major supplier e. Economies that are becoming more marginalized generally have a narrow export base and are therefore prone to terms of trade shocks .
In , manufactured goods comprised 25 percent of exports from developing countries as a group. By , this figure had risen to 80 percent . In countries that have not benefited from trade-led growth, primary commodities still tend to dominate. How will further liberalization impact upon the relative incentives for production in terms of crop mix; on the relative roles of area expansion and intensification in any increased output and therefore on food security?
Handbook of Trade Policy for Development
Changes in cropping patterns as a result of reforms have generated extensive debate. For example, on the question of whether an increase in the production of tradable non-food cash crops is beneficial for food security, it is suggested that this is undesirable at the national level because it implies large-scale, capital-intensive production . However, whilst the commercialization of such plantation type export crops does not usually enhance food security, especially if it is not associated with increased food imports or increased productivity in food production, the outcome will depend on the technology used and whether the structure of production is dominated by large-scale or small-scale producers.
For example, in Bangladesh the production of jute, a key export crop, is more labour-intensive than rice production. Additionally, countries that have seen increases in the growth rates of basic food production have also had positive growth in the production of non-food cash crops, and vice versa.
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Recent research provides some convincing evidence from a range of African countries that commercialization of production, especially into export commodities, can increase both cash incomes and the productivity of food crops, both of which contribute positively to food security . An interesting agenda for research that follows from this finding is to determine the conditions that promote commercialization among smallholders. This research suggests that with appropriate policies cash crop production can offer a route to equitable growth .
At the national level, such increases in production levels are, however, not necessarily distinguishable. Lamb  provides a useful illustration of the extent of substitutability between food and non-food export crops. He finds that there is substitution in production in the short run, with total agricultural output responding negatively to increased export prices and positively to increased food prices, and suggests that this result is consistent with diversion of resources into perennial cash crops, resulting in short-run reductions in food crops with any increase in the production of export crops taking longer to come through.
The preceding text has established that there are a range of avenues by which improvements in agricultural productivity can contribute to economic growth and improved food security. In the following sections, potential constraints, particularly to smallholder agriculture, that may result either from inappropriate policy advice or from recent changes in global food systems are discussed. Most episodes of unilateral reform have been characterized by a dominant policy orthodoxy with respect to promoting sectoral efficiency as a mechanism for stimulating the development of poorer countries, and which is closely related to the concepts introduced in Part I.
Such reforms are on the one hand, defended as necessary for promoting agricultural growth; and on the other, attacked for resulting in the marginalization of resource-poor farmers in many developing countries and thereby limiting the extent to which the agriculture sector can contribute to wider growth. He notes that whilst there has been considerable success of many elements of the package, the consensus has come in for criticism over the past decade, and suggests that it is not so much the instruments themselves but the context in which they have been used that has resulted in lower than expected results.
For instance, he makes the point that the response to any policy change, such as trade liberalization, that operates through price incentives depends both on non-price factors and the time horizon; and that if domestic supply constraints other than the price received are severe in the short to medium run, removing all price distortions would have only a limited favourable response.
In analysing the impact of reform, assessment of complementary policies and of the context is therefore essential. Stiglitz  takes a similar tack, suggesting that ideas developed for Latin America - the three pillars of fiscal austerity, privatization and market liberalization - have been inappropriately used in other developing countries at earlier stages of development. Partly as a reflection of these criticisms and internal evaluations  , the Washington Consensus has evolved considerably since the early s, and now includes strong emphasis on poverty, institutions and governance, participation and environmental sustainability.
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The World Bank makes the important point that structural adjustment is policy and institutional reform that takes place at a country level with or without external support . It gives the example of Malaysia as country that has adjusted without external support. Indeed, only as recently as did structural adjustment lending first exceed a quarter of total World Bank lending. A shift in donor financing took place between and from project based towards structural adjustment lending.