Key issues for freer agricultural trade from the perspective of developing countries

Abstract

Almost eight years have passed since the Uruguay Round of multi-lateral negotiations were conducted under GATT, but developing countries are yet to see or benefit from the freer agricultural trade projected by most studies during the negotiations. Because most developing economies depend heavily on agricultural production and trade, the world agricultural market has a significant impact on their growth, as well as on their attitude towards the next round of negotiations. It was predicted that, following the completion of the Uruguay Round of negotiations and the establishment of the World Trade Organization (WTO), the prices of most farm products in the world market would greatly increase because of cuts in domestic price support and export subsidies in developed countries. As a result, developing countries – with the exception of the poorest and most food-deficient ones – would benefit significantly from freer trade in agriculture and see their GDP growth accelerate. In reality, however, this has not been the case. World prices for major farm products remain low, while trade volumes remain the same. The reason for this is not new: the developed countries have kept their domestic price support and export subsidies at the same high levels, though some have changed their forms. In addition, new barriers to agricultural trade have emerged in the form of ‘green’ criteria and other non-tariff measures, and the technological advances in genetically modified organisms (GMOs) and other biotech products may actually put developing countries in unfavourable positions in both production and trade. At the same time, developing countries have not seen any improvements in market access for the products of their labour-intensive manufacturing sectors, and they have not been able to increase the competitiveness of their agriculture by absorbing labourers from manufacturing. Since the agricultural sector plays such an important role in developing countries’ economies, the current situation raises the question of how developing countries can really benefit from the world trading system under the WTO. The low prices in the world market and the new barriers set up by developed countries have effectively thwarted developing countries’ efforts in economic growth, especially in the case of developing countries whose economies depend on exports of farm products. Meanwhile, importing countries find their agricultural sectors and the basic living conditions of a large portion of their populations threatened, though certain consumers may benefit. It is likely that issues such as these will be discussed in the next round of negotiations.