The global and regional effects of liberalizing agriculture and other trade in the new round

Abstract

Introduction Agriculture is much more important in the economies of developing countries than in high-income countries, as the former remain small net exporters. Consumers in developing countries also spend over 30 percent of their incomes on food – almost three times the share in industrial countries – making them much more vulnerable to price shocks. Agriculture's contribution to GDP in developing countries, at 16 percent, is also around three times as high as its share in industrial countries. Yet the average rate of protection on bulk agricultural commodities in OECD countries actually rose from 32 to 37 percent between 1997 and 1998. Partly because of these barriers to market access, agricultural exports from developing countries fell from close to a half in 1965 to just over 10 percent in 1995, and are projected to fall further by 2005. Developing countries remain much more reliant on exports of bulk agricultural commodities than industrial countries: the former accounted for 44 percent of global exports of bulk agricultural commodities but only 23 percent of non-bulk agricultural exports in 1995. This locks developing countries into a declining share of world markets for agriculture, as bulk commodities have fallen from 70 percent to around 45 percent of world agricultural exports since 1965. In developing countries especially, farming is discouraged not only by farm protection policies in high-income countries but also by developing countries' own manufacturing policies and distortions in services markets.