TRADE-U.S: World Bank says Rich Countries Must Tackle Farm Tariffs First

By Emad Mekay Reprint | | Print |

Emad Mekay

WASHINGTON, Jul 27 2002 (IPS) - A day after U.S. trade officials called on both rich and poor countries to reduce trade tariffs and subsidies on agricultural products, the World Bank said it would be up to northern nations to make the first move.

On Thursday, the officials proposed drastic cuts in trade tariffs and the gradual elimination of domestic and export subsidies.

Under the proposal, all World Trade Organisation (WTO) members would be required to slash tariffs to a maximum of no more than 25 percent.

U.S. officials called on developing countries to back the initiative because they stand to gain the most from the changes in the long run.

The proposal would give southern producers easier access to the markets of rich nations, and developing countries would also be able to trade among themselves with fewer barriers, officials added.

But the onus for change should be on rich nations, which spend 350 billion dollars a year on agriculture subsidies, said World Bank spokesperson Caroline Anstey.

“This sum widely outweighs anything developing countries do,” she told IPS on Friday, “so there isn’t any doubt in anybody’s mind as who should take immediate action. We firmly believe that it is the rich countries that should take action.”

Tariffs, subsidies and free trade in agricultural products have been perennial issues in the debate over trade liberalisation, with many developing countries accusing the north of hypocrisy for preaching less protection for others while maintaining protectionist policies at home.

The trade proposal – coming just weeks after Washington massively boosted farm subsidies at home – appeared to put the United States squarely against ardent protectionists like the European Union and Japan, but was also received with raised eyebrows by Third World activists and anti-poverty campaigners.

The activists say they are worried that unchecked free trade would open the flood gates for farm produce from rich countries to enter the south; would lead to a loss of tariff revenues – that can account for as much as 20 percent of government revenue in some countries – and possibly translate into large-scale unemployment of agri-workers.

“The discussion shouldn’t be about rich countries lowering their trade barriers, but should be about allowing poor countries to retain a degree of their own trade protections because, after all, this is what the rich countries did successfully for 150 years,” said Rick Rowden, a researcher with the Washington-based advocacy group Results.

“We are saying that countries should be able to have control over the timing, sequencing and the pacing, and how they strategically integrate themselves into the global trading system, and not just be forced to fling the doors wide open, unlike what the rich countries have done. It’s a big distinction.”

Trade officials say their plan would lower the global tariff average from its current rate of 62 percent to an average of only 15 percent.

Quoting one World Bank study, Allen Johnson, U.S. chief agricultural negotiator, said that under full agriculture liberalisation, developing countries’ income would grow by 539 billion dollars. Eighty percent of that would come from other developing countries, he added.

“My point today is that this is a proposal that is very responsive to the calls that we have heard from developing countries for movement on agricultural subsidies and on market-access barriers, that would create a more level playing field for all of the world’s farmers, but in particular for the farmers in developing countries,” said Alan Larson, undersecretary of state for economic business.

The plan’s other measures includes capping trade distorting subsidies, which include market price support and direct payments, at five percent of the value of agricultural production.

International institutions have called on rich and poor countries to adopt different degrees of lower tariffs.

But the World Bank thinks that developed nations may need to act unilaterally rather than wait for the poor nations, said Anstey.

“Unilateral action would be preferable,” she said. “The point is that somebody’s got to take the leadership with action. The (U.S.) proposal is encouraging but it’s the action that counts.”