AGRICULTURE AND RURAL DEVELOPMENT 38078 v 1 Reforming Agricultural Trade for Developing Countries Alex F. McCalla and John Nash, Editors VOLUME ONE KEY ISSUES FOR A PRO-DEVELOPMENT OUTCOME OF THE DOHA ROUND Reforming AGRICULTURAL TRADE FOR DEVELOPING COUNTRIES AGRICULTURE AND RURAL DEVELOPMENT Reforming AGRICULTURAL TRADE FOR DEVELOPING COUNTRIES Volume One: Key Issues for a Pro-Development Outcome of the Doha Round Alex F. McCalla & John Nash, editors THE WORLD BANK Washington, DC © 2007 The International Bank for Reconstruction and Development/The World Bank 1818 H Street, NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org E-mail [email protected] All rights reserved. 1 2 3 4 :: 09 08 07 06 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. e-ISBN: 0-8213-6497-9 DOI: 10.1596/978-0-8213-6496-3 Library of Congress Cataloging-in-Publication Data Reforming agricultural trade for developing countries / edited by Alex F. McCalla, John Nash. p. cm. — (Agriculture and rural development) Includes bibliographical references and index. Contents: v. 1. Key issues for a pro-development outcome of the Doha Round negotiations — v. 2. Quantifying the impact of multi- lateral trade reform. ISBN-13: 978-0-8213-6496-3 (pbk. : v. 1) ISBN-10: 0-8213-6496-0 (pbk. : v. 1) ISBN-13: 978-0-8213-6716-2 (pbk. : v. 2) ISBN-10: 0-8213-6716-1 (pbk. : v. 2) 1. World Trade Organization—Developing countries. 2. Agriculture and state—Developing countries. 3. Developing countries—Commerce. I. McCalla, Alex F., 1937– . II. Nash, John D., 1953– . HF1385.R42 2006 382′.41091724—dc22 2006049111 CONTENTS Boxes, Figures, and Tables viii Preface xiv 1. Agricultural Trade Reform and Developing Countries: Issues, Challenges, and Structure of the Volume 1 Alex F. McCalla and John Nash Why Are Agricultural Trade Reforms Important? 2 What Is Important to Ensure a Pro-Development and Pro-Poor Outcome from the Doha Negotiations? 5 How to Design, Sequence, and Implement Trade Policy Reform at the Country Level 12 Roadmap for the Volume 14 Notes 17 Bibliography 17 2. An Overview of the WTO Agricultural Negotiations 20 Tim Josling The Legacy of the Uruguay Round and the Current Situation in Agricultural Trade Policy 21 Progress, Options, and Proposals in the Current Talks 41 Options for Improving Market Access 44 Developing Countries and the Agricultural Negotiations under the Doha Development Agenda 59 Negotiation Outcomes and Interests 62 Annex. Background Papers 64 Notes 65 Bibliography 71 v 3. Developing Country Experience with the Key Policy Issues of the Uruguay Round Agreement on Agriculture 74 Ramesh Sharma How Should Implementation Experiences with the Uruguay Round Agreement on Agriculture Be Evaluated? 75 Domestic Support Measures 76 Market Access 81 Export Competition 84 Experience with Agricultural Exports and Food Imports Since 1995 85 Concluding Remarks 91 Notes 96 Bibliography 97 4. The Impact of Agricultural Support Policies on Developing Countries 100 Bernard Hoekman, Francis Ng, and Marcelo Olarreaga Who Subsidizes What? 101 Who Is Affected? 103 The Importance of Complementary Trade Policy Reform 122 Conclusion 123 Annex. Data Sources 129 Notes 129 Bibliography 130 5. Coalitions and Alliance Strategies for Developing Countries in the Doha Round of Agricultural Negotiations 132 Rashid S. Kaukab Developing Country Positions and Groups in Agricultural Trade Negotiations 132 Experience of Coalitions of Developing Countries in the Multilateral Agricultural Trade Negotiations 135 Elements of Possible Strategies for Effective Alliances and Coalitions in the Current Agricultural Negotiations 145 Concluding Remarks 150 Notes 150 Bibliography 152 6. Domestic Management of Price Risk in the Context of Trade Reform in Developing Countries 154 William Foster and Alberto Valdés Greater Price Transmission and the Limits to Managing International Price Variability under Trade Liberalization 155 The Role of Developed Country Subsidies in Lowering World Prices 157 What Do We Know about Price Variability and the Persistence of Low Prices—the Stochastic Nature of World Prices 159 The Practical Relevance of Price Transmission to the Price Risks Facing Farmers 161 vi CONTENTS Policy Implications for Managing Price Risk in the Context of WTO Commitments 164 Notes 175 Bibliography 177 7. Implications of Food Import Regulations and Market Access for Developing Countries 180 Tim Josling Obligations under the Agreement on the Application of Sanitary and Phytosanitary Measures 180 The SPS Committee and Trade Disputes 184 Experience of Developing Countries in Resolving Disputes 189 Suggestions for Improving Market Access 198 Annex Tables 201 Notes 203 Bibliography 204 8. Implications of Multifunctionality for Developing Countries 205 Philip L. Paarlberg, Maury Bredahl, and John G. Lee The Multifunctionality Debate 205 Proposed Framework for Handling Multifunctionality 206 Implications for Developing Countries 208 Conclusions 217 Bibliography 218 9. Managing Import Competition When Developing Countries Liberalize Trade: India’s Experience 220 Ashok Gulati and Sudha Narayanan India’s Policy before the Uruguay Round 221 India’s Liberalization Experience, 1995–2002 221 Managing Import Competition 236 Notes 240 Bibliography 242 10. The Breadth of Policy Reforms and the Potential Gains from Agricultural Trade Liberalization:An Ex Post Look at Three Latin American Countries 244 Alberto Valdés and William Foster Complaints about the Results of Past Trade Liberalization and Model Estimates of Future Gains 246 A Review of Reform Efforts and Agricultural Performance in Latin America 250 Three Contrasting Cases: Agricultural Reforms in Argentina, Chile, and Colombia 260 Policy Implications and Conclusions 288 Notes 290 Bibliography 292 Contributors 297 Index 299 CONTENTS vii BOXES,CHAPTER FIGURES, TITLE AND TABLES Boxes 2.1 Accomplishments of Uruguay Round Agreement on Agriculture 22 3.1 Availability of Information on Trade-Distorting Domestic Support Measures 77 10.1 A Case Study of the Differential Effects of Reforms and Trade Liberalization 257 10.2 On Reform, Poverty, and Targeted Taxpayer Support 285 Figures 1.1 Average Tariffs, by Region, 2003 6 1.2 Coverage of Tariff Rate Quotas, 2003 6 1.3 Tariffs Escalate in Final Products 7 1.4 Border Protection and Direct Payments in High-Income Countries, 2000–2002 8 1.5 Food Aid and World Prices 8 2.1 World Agricultural Tariff Averages, by Region 24 2.2 World Agricultural Tariff Averages, by Commodity 25 4.1 Relationship Between Trade Shares Affected by Total Domestic Support in All WTO Members and GDP per Capita 114 viii 4.2 Relationship Between Trade Shares Affected by Quad Domestic Support Policies and GDP per Capita 114 4.3 Relationship Between Trade Shares Affected by Export Subsidies in All WTO 121 4.4. Relationship Between Trade Shares Affected by Quad Export Subsidies and GDP per Capita 121 6.1 Average Annual Real Price of Corn, Rice, Sugar, and Wheat, 1960–97 162 6.2 Price Band of Edible Oil in Chile, 1986–97 172 6.3 Price Band of Sugar in Chile, 1986–97 173 7.1. Stages of Counternotification and Dispute Procedures through the Sanitary and Phytosanitary Committee 185 7.2 Incidence of Developed Countries as Respondent in Sanitary and Phytosanitary Cases Raised by Developing Countries, 1995–2003 186 7.3 Nature of Sanitary and Phytosanitary Cases Raised or Supported by Developing Countries, 1995–2003 187 7.4 Issues Addressed in Sanitary and Phytosanitary Cases Raised or Supported by Developing Countries, 1995–2003 188 7.5 Outcomes of Sanitary and Phytosanitary Cases Raised or Supported by Developing Countries, 1995–2003 189 7.6 Solutions in Sanitary and Phytosanitary Cases Raised or Supported by Developing Countries, 1995–2003 190 7.7 Trade in Fish Fillets between Tanzania and the EU-15 195 7.8 Trade in Fish Fillets between Kenya and EU-15 196 7.9 Trade in Poultry between Thailand and the Czech Republic 197 7.10 Trade in Poultry between Thailand and Korea 198 8.1 Multifunctional Subsidy With an Import Quota 211 8.2 Multifunctional Subsidy With a Variable Tariff 211 9.1 India’s