Reducing Agricultural Tariffs versus Domestic Support : What's More Important for Developing Countries?

High levels of protection and domestic support for farmers in industrial countries significantly affect many developing countries, both directly and through the price-depressing effect of agricultural support policies. High tariffs--in both rich and poor countries--and domestic support may also lower the world price of agricultural products, benefiting net importers. The authors assess the impact of reducing tariffs and domestic support in a sample of 119 countries. Least developed countries (LDCs) are disproportionately affected by agricultural support policies. More than 18 percent of LDC exports are subject to domestic support in at least one World Trade Organization (WTO) member, as compared to only 9 percent of their imports. For other developing countries the figures are around 4 percent for both their exports and imports. So, the prevailing pattern of trade suggests the world price-reducing effect of agricultural domestic support policies may induce a welfare loss in LDCs. The authors develop a simple partial equilibrium model of global trade in commodities that benefit from domestic support in at least one WTO member. The simulation results suggest there will be large differences between LDCs and other developing economies in terms of the impact of a 50 percent cut in tariffs as compared to a 50 percent cut in domestic support. Developing countries as a group would suffer a welfare loss from a cut in support, while LDCs would experience a small gain. For both groups of countries, tariff reductions by WTO members--including own liberalization--will have a positive effect on welfare. The results show both the importance of focusing on tariffs as well as subsities, and the need for complementary actions to allow a domestic supply response to occur in developing countries if world prices rise

Bibliographic Details

Main Authors:	Ng, Francis, Hoekman, Bernard M., Olarreaga, Marcelo
Language:	English en_US
Published:	World Bank, Washington, DC 2003-03
Subjects:	PROTECTIVE TARIFFS, AGRICULTURAL TAXATION, AGRICULTURAL PRICES, AGRICULTURAL PRODUCT TARIFFS, WORLD TRADE ORGANIZATION, TARIFF REDUCTIONS, TRADE LIBERALIZATION, AGRICULTURAL SUBSIDIES, ELASTICITY (ECONOMIC), SENSITIVITY ANALYSIS, SIMULATIONS, MOST FAVOURED NATION CLAUSE AGRICULTURAL COMMODITIES, AGRICULTURAL EXPORTS, AGRICULTURAL GOODS, AGRICULTURAL MARKETS, AGRICULTURAL POLICIES, AGRICULTURAL PRODUCTS, AGRICULTURAL PROTECTION, AGRICULTURAL SUPPORT, AGRICULTURAL SUPPORT POLICIES, AGRICULTURAL TARIFFS, AGRICULTURAL TRADE, AGRICULTURAL TRADE LIBERALIZATION, AGRICULTURAL TRADE POLICIES, AGRICULTURE, ARBITRAGE, AVERAGE TARIFF, AVERAGE TARIFFS, BENCHMARK, BORDER PROTECTION, CONSUMER SURPLUS, CONSUMERS, DEMAND ELASTICITIES, DEMAND ELASTICITY, DEMAND FUNCTIONS, DEVELOPED COUNTRIES, DOMESTIC DEMAND, DOMESTIC PRODUCTION, DOMESTIC SUPPORT, ECONOMIC POLICY, ELASTICITIES, ELASTICITY, EMPIRICAL ANALYSIS, EQUILIBRIUM, EXCHANGE RATE, EXPORT PRICES, EXPORT SUBSIDIES, EXPORT SUPPLY, EXPORTERS, EXPORTS, FIXED COSTS, GDP, GDP PER CAPITA, GLOBAL TRADE, HIGH TARIFFS, IMPORT COMPETITION, IMPORT PRICES, IMPORTS, INCOME, INDIVIDUAL COUNTRIES, INDUSTRIAL COUNTRIES, LDCS, MARKET ACCESS, MARKET SEGMENTING, MARKET SEGMENTING EFFECT, NET EXPORTERS, NON-TARIFF BARRIERS, OIL, OVERVALUATION, PATTERN OF TRADE, PER CAPITA INCOMES, POLICY CHANGES, POLICY MEASURES, POLITICAL ECONOMY, POOR COUNTRIES, PREFERENTIAL ACCESS, PRICE ELASTICITIES, PRICE SUPPORT, PRICE VOLATILITY, PRODUCERS, PRODUCT MARKETS, PROTECTION DATA, PROTECTIONIST POLICIES, QUOTAS, REDUCTION IN TARIFFS, RESTRICTIVE RULES OF ORIGIN, ROUND AGREEMENT, RULES OF ORIGIN, SPECIALIZATION, SUPPLY ELASTICITY, SUPPLY FUNCTIONS, TARIFF BARRIERS, TARIFF PREFERENCES, TARIFF PROTECTION, TARIFF RATE, TARIFF RATE QUOTAS, TARIFF REDUCTION, TARIFF REVENUE, TERMS OF TRADE, TIME SERIES, TRADE FLOWS, TRADE NEGOTIATIONS, TRADE POLICIES, TRADE POLICY, TRADE POLICY REFORM, TRADING PARTNERS, TRANSITION ECONOMIES, TRANSPORT COSTS, URUGUAY ROUND, VOLATILITY, WELFARE GAINS, WELFARE LOSS, WELFARE LOSSES, WORLD MARKETS, WORLD PRICES, WORLD TRADE, WTO, WTO AGREEMENT, WTO MEMBERS,
Online Access:	http://documents.worldbank.org/curated/en/2003/03/2166843/reducing-agrcultural-tariffs-versus-domestic-support-whats-more-important-developing-countries https://hdl.handle.net/10986/19043
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