Reducing Agricultural Tariffs versus Domestic Support : What's More Important for Developing Countries?
High levels of protection and domestic support for farmers in industrial countries significantly affect many developing countries, both directly and through the price-depressing effect of agricultural support policies. High tariffs--in both rich an...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2003/03/2166843/reducing-agrcultural-tariffs-versus-domestic-support-whats-more-important-developing-countries http://hdl.handle.net/10986/19043 |
| Summary: | High levels of protection and domestic
support for farmers in industrial countries significantly
affect many developing countries, both directly and through
the price-depressing effect of agricultural support
policies. High tariffs--in both rich and poor countries--and
domestic support may also lower the world price of
agricultural products, benefiting net importers. The authors
assess the impact of reducing tariffs and domestic support
in a sample of 119 countries. Least developed countries
(LDCs) are disproportionately affected by agricultural
support policies. More than 18 percent of LDC exports are
subject to domestic support in at least one World Trade
Organization (WTO) member, as compared to only 9 percent of
their imports. For other developing countries the figures
are around 4 percent for both their exports and imports. So,
the prevailing pattern of trade suggests the world
price-reducing effect of agricultural domestic support
policies may induce a welfare loss in LDCs. The authors
develop a simple partial equilibrium model of global trade
in commodities that benefit from domestic support in at
least one WTO member. The simulation results suggest there
will be large differences between LDCs and other developing
economies in terms of the impact of a 50 percent cut in
tariffs as compared to a 50 percent cut in domestic support.
Developing countries as a group would suffer a welfare loss
from a cut in support, while LDCs would experience a small
gain. For both groups of countries, tariff reductions by WTO
members--including own liberalization--will have a positive
effect on welfare. The results show both the importance of
focusing on tariffs as well as subsities, and the need for
complementary actions to allow a domestic supply response to
occur in developing countries if world prices rise |
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