IFPRI and Globalization

Developing-Country Perspectives on Trade Negotiating

Since the first round of trade negotiations under the General Agreement on Tariffs and Trade (GATT) after World War II, developing-country participation has been limited. However, in the last round (the Uruguay Round, 1986-1994) those countries began to play a larger role. In particular, members of the Cairns Group of agricultural net exporters influenced negotiations.

Since the Uruguay Round, developing-country accession to the World Trade Organization (WTO) has continued apace. Of the 134 WTO members, about 80 percent are developing countries, including 29 of the 48 countries that the United Nations classifies as least-developed countries.

Late in 1999, trade ministers from member countries of the WTO were meeting in Seattle to decide whether to launch a new round. It is in developing countries' interest to be active and informed participants. If only because of their numbers, they could have a unique opportunity to influence the negotiations.

There is currently a heated debate on the impact of trade and agricultural policies in developing countries, as well as on the role and performance of the WTO. The concerns are that opening up agricultural markets may hurt poor countries, and also vulnerable groups within them. According to this view, higher and more volatile food prices hurt consumers, while poor farmers may be displaced by imports of cheap food. Also, those opposed to the WTO argue that placing decision-making in an international agency encroaches on national sovereignty. Some have called for a halt to negotiations for agricultural liberalization and for restrictions to the WTO.

Others believe that these proposals, however well intentioned, could inflict decisive damage on the same groups and countries they seek to help. In this view, continuing the negotiations will address agricultural protectionism in developed countries, which along with other trade restrictions such as in textile products, have hurt income and employment in developing countries. These analysts also view agricultural protectionism as a tax on food consumption (i.e., protectionism keeps prices of agricultural products artificially high). This hits poor families especially hard and mostly benefits larger agricultural producers.

According to this view, the process begun in the Uruguay Round should continue, completing the unfinished agenda while considering the needs of the vulnerable.

For example, unfair competition from subsidized developed-country agricultural exports, which hurts poor agricultural producers in developing countries irrespective of their net agricultural trade position, should be banned. Producers in developing countries cannot compete against the treasuries of industrialized countries.

Also, if the developing countries are to diversify their agricultural sectors, they need expanded access to markets in developed countries. When processed products are taxed more than raw materials, it harms employment possibilities in developing countries. Therefore, eliminating or reducing tariff escalation (the term for this practice) is important.

Future negotiations also need to address the special situation of least-developed countries and net food-importing countries. This means giving enough food aid, particularly avoiding cycles that tend to reinforce, instead of counteract, situations of oversupply and shortages. Future negotiations should also prioritize technical assistance and financial support to agriculture in these countries. Lastly, the special financial facilities that exist to help buy imported food must be continued and expanded. Food aid should be in grants, focused toward poor countries and social groups, and delivered in ways that do not displace domestic production in these countries.

Agricultural price volatility must also be carefully monitored. The expansion of world agricultural trade should limit overall fluctuations by spreading supply and demand shocks over larger areas. But the global decline in world public stocks of agricultural commodities may work in the opposite direction. Improving early warning of possible food shortages and providing better targeted food aid programs and financial facilities for emergencies should help allay those concerns.

Developing countries, as more disadvantaged players in the global arena, need an international legal system that limits the ability of larger countries to act unilaterally. Moreover, there is room for improving transparency and participation at the national as well as the international level. The implementation of internationally negotiated rules that limit the power of special interests and arbitrary government measures, can strengthen domestic legal and institutional frameworks in developing countries.

The emphasis therefore should be on improving the WTO. This institution applies rules that have been approved by the legislative bodies in each one of the member countries, and a great deal of work is carried out directly by officials from those same governments. At the same time, despite the WTO's formal structure based on one- country-one-vote, and consensus method of decision-making, much of the negotiating takes place in informal contexts from which developing countries are excluded.

Agricultural and trade policies, however, are only part of the comprehensive international framework needed to promote economic and social development in poor countries and groups. Attention must also be given to canceling the unpayable external debt of the poorest countries, further liberalizing trade in textiles, and adequately managing capital flows. At the same time, improved international conditions should go hand in hand with a better domestic framework in developing countries. This includes stable macroeconomic policies, open and effective markets, good governance and the rule of law, a vibrant civil society, and programs and investments that expand opportunities for all, with special consideration for disadvantaged groups and especially poor women. Internal peace and reconciliation are a prerequisite in conflict-torn countries.

Developing countries can secure some gains for themselves by pushing toward a transparent, rule-based trading system.

Eugenio Díaz-Bonilla, Ph.D., is a Research Fellow at the International Food Policy Research Institute (IFPRI). He has been a member of the Argentine government delegation to several agricultural trade negotiations. He also worked for many years in rural poverty alleviation projects as a consultant for international organizations, governments and NGOs in Latin America and the Caribbean.