Trade Liberalization, Agriculture and Poverty in Low-Income Countries

Abstract

This paper offers an economic assessment of the opportunities and challenges provided by the WTO's Doha Development Agenda, particularly through agricultural trade liberalization, for low-income countries seeking to trade their way out of poverty. After discussing links between poverty, economic growth and trade, it reports modelling results showing that farm product markets remain the most costly of all goods market distortions in world trade. It focuses on what such reform might mean for countries of South Asia and sub-Saharan Africa in particular, both without and with their involvement in the MTN reform process. What becomes clear is that if those countries want to maximize their benefits from the Doha round, they need also to free up their own domestic product and factor markets so their farmers are better able to take advantage of new market-opening opportunities abroad. Other concerns of low-income countries about farm trade reform also are addressed: whether there would be losses associated with tariff preference erosion, whether food-importing countries would suffer from higher food prices in international markets, whether China's WTO accession will provide an example of trade reform aggravating poverty via cuts to prices received by Chinese farmers, and the impact on food security and poverty alleviation. The paper concludes with lessons of relevance for low-income countries for their own domestic and trade policies.

Democratization and Economic Globalization

“…Several economists and political scientists have recently documented the remarkable surge in trade openness across developing countries since the late 1970s (Anderson 2003, Goldberg & Pavcnik 2004, Harrison & Hanson 1999, Milner & Kubota 2005, Wood 1997). Preceding and concurrent with the move to free trade in the developing world, there has been a global movement toward democracy.…”

Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries

“…However, various policies in developed countries, such as export and production subsidies, import tariffs, and quotas that shelter agricultural and food products in the developed world from foreign competition potentially also have important implications for poverty in developing countries, especially in rural areas. World Bank (2000), for example, views the removal of these protectionist measures as an important tool in combating global poverty, and simulations based on computable general equilibrium models suggest large welfare gains stemming from the removal of such barriers (Anderson (2003)). Yet, we are not aware of any empirical studies that analyze the implications of these policies for the well-being of the rural poor in developing countries by linking intertemporal variation in trade policy measures to household surveys that span trade liberalization episodes.…”

Global Income Distribution And Poverty In The Absence Of Agricultural Distortions

“…According to Winters (2000), McCulloch et al (2001) and Hoekman et al (2002), trade liberalization and household welfare are linked via prices, factor markets, and consumer preferences. International prices of agricultural products will, most likely, increase as a result of the removal of agricultural trade barriers such as subsidies and tariffs (Anderson, 2003). Assuming some degree of pass-through, the increase in international prices will be followed by a rise in domestic agricultural prices enhancing a redistribution of resources from non-agricultural to the agricultural sector of the economy.…”