Developing countries must open their markets

There’s a real dan­ger that devel­op­ing coun­try nego­tia­tors will allow ‘polit­i­cal cor­rect­ness’ to get in the way of a good result for their own trad­ing inter­ests in the WTO Agri­cul­ture nego­ti­a­tions. The PC view is that devel­op­ing coun­tries need to pro­tect their mar­kets to allow their ‘infant’ agri­cul­tur­al indus­tries to grow or to safe­guard their pre­car­i­ous food secu­ri­ty. Again and again devel­op­ing coun­tries have argued in the agri­cul­ture nego­ti­a­tions (see the “extend­ed story”:http://www.petergallagher.com.au/cgi-bin/blosxom/blosxom.cgi/pwg/wto/developingMarketAccess.html?seemore=y) that they should make small­er cuts in their very high agri­cul­ture tar­iff aver­ages and that the ‘bur­den’ of mar­ket access reforms should fall on indus­tri­al­ized coun­tries. This is poten­tial­ly a very expen­sive, pure­ly ide­o­log­i­cal line for a devel­op­ing coun­try to run. Whether they are net exporters of agri­cul­ture or not there is over­whelm­ing evi­dence that devel­op­ing coun­tries as a group need greater access to oth­er devel­op­ing coun­try mar­kets and that as a group devel­op­ing coun­tries gain much more from mar­ket access reforms than from, for exam­ple, cuts to export sub­si­dies.


This chart, drawn from the IMF’s World Eco­nom­ic Sur­vey (2002) illus­trates the Fund’s esti­mates (con­firmed by many oth­er such exper­i­ments) that the whole world will see pos­i­tive results both from cut­ting export sub­si­dies and from cut­ting tar­iffs on agri­cul­tur­al prod­ucts. But the first bar of the chart shows that the net wel­fare gains from cuts to tar­iffs are much big­ger than the gains from cuts to export sub­si­dies. In fact, the sec­ond set of bars shows that devel­op­ing coun­tries as a group lose from cuts to sub­si­dies alone (because their import prices go up more than their export prices). But devel­op­ing coun­tries in every region of the world gain from cuts to tar­iffs includ­ing their own tar­iffs. The PC view that devel­op­ing coun­tries should be excused from cut­ting their own pro­tec­tion is strong­ly espoused by “India”:http://www.business-standard.com/today/story.asp?Menu=19&story=21049, now with some sup­port from Brazil, and also by old-fash­ioned “G77” strate­gists who see the world through the blink­ers of a ‘North-South’ debate anchored in the 1980s or the even ear­li­er ‘cen­tre-periph­ery’ metaphors of “Raúl Prebisch(link to exerpt from PBS series ‘Com­mand­ing Heights&#8217)”:http://www.pbs.org/wgbh/commandingheights/shared/minitextlo/ess_dependencia.html. Here’s a recent, typ­i­cal exam­ple from Malaysia’s Straights Times news­pa­per (often the voice of the rul­ing par­ty in Malaysia): bq. “Built around the eco­nom­ic inter­ests of the so-called “Quad” — the Unit­ed States, Euro­pean Union, Japan and Cana­da — the WTO rel­e­gates devel­op­ing coun­tries to the des­per­ate pur­suit of advan­tage in the inter­sti­tial spaces. In Can­cun, they must play the game of revers­ing the roller­coast­er by refus­ing to accept fur­ther trade lib­er­al­i­sa­tion oblig­a­tions until they are placed with­in the frame­work of a devel­op­ment agen­da.”

But refus­ing lib­er­al­ize unless indus­tri­al­ized coun­tries go first and go fur­ther is a short­sight­ed pol­i­cy in view of the actu­al inter­ests of devel­op­ing coun­tries. This chart (also drawn from IMF data) shows that the pro­por­tion of the agri­cul­tur­al exports of devel­op­ing coun­tries going to oth­er devel­op­ing coun­tries (pur­ple bars) has dou­bled since the 1970s to almost 40 per­cent.

Devel­op­ing coun­tries have a very strong inter­est in see­ing the bar­ri­ers to doing busi­ness across bor­ders come down in oth­er devel­op­ing mar­kets. Fur­ther­more, since these growth trends are con­tin­u­ing, “accord­ing to WTO(link to a down­load page for the WTO’s World Trade Report, 2003)”:http://www.wto.org/english/news_e/pres03_e/pr348_e.htm, that inter­est is becom­ing stronger every year. It is time for devel­op­ing coun­try busi­ness­es to cut through the PC jar­gon and look close­ly at their export oppor­tu­ni­ties and import sup­ply oppor­tu­ni­ties in the com­ing decades. The Doha round nego­ti­a­tions are a once in a decade oppor­tu­ni­ty to achieve effec­tive improve­ments in the mar­ket out­look. Per­haps they need to be send­ing a very firm mes­sage to their own gov­ern­ments that broad­ly based mar­ket open­ing is in everyone’s inter­est.

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