The Uruguay Round Agreement on Agriculture (URAA) is regarded by many econo- mists as a major progress in the international debate on tradeliberalization. In all ear- lier rounds under GATT, there had been the intention to liberalize agriculturaltrade but it had never been successful prior to the finalization of the URAA in 1994. The major policy decisions of the URAA include (i) the tariffication of nontariff barriers, (ii) the re- duction of the level of agricultural protection in stages between 1995/1996 and 2000/01, (iii) the reduction of agricultural subsidies, and (iv) the setting of a minimum access to the domestic agricultural markets of WTO members. With the decision on tariffication, important nontariff barriers in agriculture, like variable import levies are prohibited. Given this background, international organizations like OECD stress that the number of nontariff barriers has declined strongly since 1994 (OECD 1997, Table 8.1). There is the general impression by many economists that the decline in the level of protection was not yet very strong, but that the URAA was the first important step to- wards a further reduction of trade distortions (JOSLING, TANGERMANN 1999). The actual liberalization steps, however, are combined with some substantial new non- tarifftrade barriers, at least if we define nontariff barriers meaningfully in economic terms. This point has been unobserved in the general economic debate and has only been discussed in detail by some agricultural economists. In some cases, no real tarif- fication did occur as in the case of the EU grain policy (THOMPSON, HERRMANN, GOHOUT 2000). More importantly, the URAA has led to a very large number of tariffratequotas (TRQs) (SKULLY 1999a, BOUGHNER, DE GORTER 1999). Many coun- tries including the EU and the US introduced quotas besides the bound tariffs to fulfil the minimum access rule. Tariffication and quotification occured simultaneously. In many cases, there is considerable "water in the tariff" and the quota component is bind- ing. Quota rents occur then like under traditional nontariff barriers, although TRQs are counted like tariffs under the WTO rules.
rticle 20 of the Agreement on Agriculture (AoA) mandates member countries of the World Trade Organization to negotiate and continue reform in agriculture. Even though farm policy reforms in developed countries have been along the lines of Uruguay Round rules, there has been widespread skepticism about the effectiveness of these reforms (Josling & Hathaway, 2004). Among other measures, tariffratequotas 1 (TRQs) were implemented as a policy instrument in the Uruguay Round, primarily to ensure “minimum” market access for sensitive agricultural products and to safeguard current access levels in the face of high tariffs (Mathews & Dupraz, 2002; Abbott, 2002). At present there are 1425 TRQs notified by member countries of the WTO (WTO, 2004a). Studies, however, indicate that the results of TRQ implementation are not what this number would lead us to expect, and nearly 28-30 percent of the domestic production in developed countries is protected by TRQs (OECD, 2003). This is a matter of concern for developing countries that are potentially large exporters of agricultural products; TRQs are, therefore, widely debated from a development perspective (Abbott & Paarlberg, 1998; Skully 1999, 2001; Boughner & de Gorter 1999; Abbott & Morse, 1999; Hermann, Mönnich & Kramb, 2000; Abbott, 2002; Mathews & Dupraz, 2002; Beghin & Aksoy, 2002; de Gorter & Hranaiova, 2003). There are three main reasons to question the feasibility of employing TRQs as a market access instrument. First, studies show that the choice of administrative method influences the extent of market access afforded to trading partners (Skully, 2001; Abbott, 2002; Panagariya, 2002; de Gorter & Hranaiova, 2003). Second, there has been a persistent low fill of TRQs at the multilateral level (WTO, 2002). Finally, quota rents are often associated with TRQ regimes; these generate costs for both the preferred and excluded countries and in turn distort trade flows of the partner countries (Binswanger & Lutz, 1999; Skully, 2001; Vanzetti et al., 2004). 2
The entry of China into the WTO has a dramatic impact on the country's estimated 800 million farmers. About two-thirds of China's population lives in rural areas but agricultural output only makes up 16 per cent of the gross domestic product (GDP) and 4.9 per cent of exports (Satapathy,2002). It is to be noted that during the last three years after WTO entry, the country's farming sector hit the hardest. The Chinese Government formally disclosed the detailed rules on new tariffquotas for agricultural imports, which follows the commitment made by Beijing to the WTO. The Chinese Government has reduced the average import duty to 17.5 per cent by 2004 and to 15.6 per cent by 2005 from the average of 21.3 per cent before 2003. China has pledged to use a tariff-rate quota (TRQ) system, instead of the original quota administration system, for certain sensitive products such as wheat, corn, rice, edible oil and sugar, as well as to cancel export subsidies, keep its subsidy rate for farming at 8.5 per cent and abide by the WTO agreement on Sanitary and Phytosanitory Measures (SPS).
Nonetheless, most commentators agree that the Agreement did relatively little to actually liberalise trade. Agricultural tariffs remain at very high levels and the process of tariffication produced a number of very high tariffs which effectively prohibit trade. The introduction of tariffratequotas has created a network of managed bilateral trade flows with associated quota rents which ensure continued state involvement. The disciplines on export subsidies have only belatedly come to bite because of relatively high world market prices in 1995 and 1996, although they will become increasingly constraining over time even without any further reduction requirements. The rules on domestic support commitments may have encouraged changes in the policy instruments used to support domestic agriculture (as in the EU, for example) but the practical effect on market access has been limited. Finally, trade disputes around the issue of food safety standards remain highly contentious despite the more rigorous requirements of the SPS Agreement. Producer Support Estimate figures in the most recent OECD report monitoring agricultural policies suggest that support levels in 1998 have now returned to the levels of the early 1990s despite a dip due to favourable world prices in 1995 and 1996 (OECD 1999).
* Department of Economics, Faculty of Economics and Management, Bogor Agricultural University. The views presented in this paper are those of the authors and do not necessarily reflect the views of Bogor Agricultural University, ARTNeT members, partners and the United Nations. This study was conducted as part of the Asia- Pacific Research and Training Network on Trade (ARTNeT) initiative, aimed at building regional trade policy and facilitation research capacity in developing countries. This work was carried out with the aid of a grant from the WTO. The technical support of the United Nations Economic and Social Commission for Asia and the Pacific is gratefully acknowledged. Any remaining errors are the responsibility of the authors, who can be contacted at email@example.com
Increased trade can also bring with it access to new technologies that can in turn have a significant impact on productivity. High trade barriers, both tariff and non-tariff in nature, often prevent access to some technologies/goods altogether, thereby impeding productivity growth (Romer, 1994). Gisselquist and Pray (1997) provide a compelling example of the importance of imported technology in the case of maize production in Turkey. Prior to 1982, Turkey restricted importation of new varieties of agricultural commodities through a single- channel system, which gave the Ministry of Agriculture authority over seed production and trade. Between 1982 and 1984, this was relaxed, permitting foreign investment in this sector, importation of new varieties and elimination of price controls on seeds. The impact on yields was dramatic. Gisselquist and Pray have compared actual with predicted yields under previous technology to show that these reforms contributed to a 50% increase in maize yields in Turkey. They estimate that the increase in average returns to maize production amounted to 25% of gross economic value. This is precisely the kind of non-marginal gain from more liberal trade that Romer refers to in his influential 1994 paper.
How important is the contribution of preferential tradeliberalization to opening of a country? As noted above, declarative aspirations of all agreements are to transform trade among partners into duty-free trade. In many agreements, in fact, this is expressed as an ultimate goal; however, partners are taking many different routes to achieve this end. Table 4 summarizes the difference in approaches to tariff reduction in the enforced agreements that provide this information. A positive list approach is considered, in principle, less liberalizing and it consists of members agreeing to the list of products on the (positive) list whose tariffs will be reduced or eliminated. A negative list approach assumes a reduction/elimination of tariffs on all products except on those that are included in the negative list. This approach is closer to the spirit of GATT, even though it may often include a long list of excluded products. Another important factor is the determination of a base tariffrate as a benchmark for reduction. In most cases, the MFN- applied rates are used for this purpose (cf. Feridhanusetyawan, 2005, p.16). In an effort to comply with the WTO rules on regional agreements, most of them contain an intention to eliminate tariffs within what is considered a reasonable period. When an LDC is involved, it is provided with either longer transition periods (e.g., AFTA) or lesser or no reduction commitments (e.g., APTA). Another interesting feature, and supporting previous claims about “made-to-measure” agreements, refers to asymmetrical reciprocity in tariff reduction even when there is no LDC involved. Feridhanusetyawan (2005, p.17) describes how, in the Singapore-United States FTA, which follows “negative list approach” the United States kept tariffs on about 8 per cent of products over the transition period of eight years, while Singapore eliminated all tariffs immediately, binding them to zero. In the Singapore-Japan FTA, which follows a positive list approach, Singapore again reduced all tariffs to zero immediately while Japan committed to eliminating its tariffs gradually over a 10-year period.
Elimination of Japan’s domestic subsidy (WTO 2007/Japan No Domestic Subsidy) has little effect on other Asian countries’ consumer surplus, producer surplus and farm milk prices. But if this is combined with the elimination of trade policies in Japan (WTO 2007/Asia liberalization), it will help to increase exports for potential exporters and/or ease importing pressure for potential importers in this region. If other Asian countries except Japan eliminate tariffs and tariffrate quota (WTO 2007/Other Asia No Tariff and TRQs), Korea’s dairy producer surplus will decrease $507 million, but China, South East Asia and other South Asian countries’ dairy producers surplus only decreases slightly (less than $70 million). The farm milk price of Korea, China, South East Asia and other South Asian countries will decrease 44.8%, 1.33%, 9.94% and 1.21%, respectively. Milk production of Korea, China, South East Asia and other South Asian countries will decrease 304 thousand MT, 22 thousand MT, 68 thousand MT and 31 thousand MT, respectively. Together with above analysis, this indicates that Japan, Korea, China, South East Asia and other South Asian countries can be classified as potential dairy importers under unilateral tradeliberalization in Asia. The exception is India; it is the only country that can compete with other countries from the rest of the world to pick up some gains ($40 million) from the unilateral trade
The pre-reform period in Kenya and Zambia, as in many other developing countries, was rife with government intervention in the economy, and strict controls over the pricing and marketing of agricultural commodities. In the face of the control of domestic and external economic activities, serious economic imbalances began to pile up in developing country economies (Thomas, 2006). Economic growth rates were stagnating or mostly in the negative (Mohan et. al., 2000). Reforming the structural economic and political policies was deemed a recipe for correcting the economic bottlenecks and for reversing the rapid decline and economic instability characterized by weakening macroeconomic indicators (Mohan et al., 2000). The slow economic growth evident in the 1980s and the 1990s, which marked a stark contrast to the moderate rates of growth experienced in the 1960s and 1970s, was perceived to have resulted from imprudent economic management. In part, weak national economic policies and structural weaknesses also contributed to rapidly collapsing economies (Mohan et al. 2000).It is against this economic backdrop that the World Bank (WB) and the International Monetary Fund (IMF) initiated structural adjustment programs 4 (SAP). The core of these policies favoured functional liberal markets and institutional reforms to strengthen them. The unfolding market era was preceded by institutional barriers to the exchange rate system, domestic interest rates and an economic system mostly relying on the state. The wide-ranging reform policy proposals were of immense interest to the agricultural sector and the economy at large. Reforming the agricultural sector was critical in the economy given the sector's contribution to gross national product (GDP). For instance, import and export sectors of inputs and outputs were subject to greater reform. Previously, governments had an upper hand in external trade through the issuance of import and export licenses. Publicly financed marketing enterprises 5 participated in the procurement of inputs and the purchasing of agricultural outputs. The procurement of agricultural inputs and the marketing of tradable agricultural output managed by these publicly financed enterprises impeded free market functioning. Financing these institutions was a liability to the national treasury (exchequer). Therefore the objectives of reforms were to remove policies that impeded markets and decelerated economic progress. The core of the structural reorientation was considered
The results showed that reducing the US out-quota tariff by one-third would result in net welfare gain for the US, but a net income loss for exporting countries because of the erosion of quota rents become larger than the gains from expanded exports. The analysis showed that in the case of sugar TRQs, the welfare implications of partial tradeliberalization are determined by the interplay of economic rents and the changes in the volume of trade. If the US expands its quotas by one-third, net welfare gains would be realized by the quota-holding exporters while the US shows a net income loss from reduced tariff revenues. The results of the combined reduction in out-quota tariffs and quota expansion resulted in welfare gains for both the US and exporting countries. The same results were noted for the EU unilateral sugar liberalization exercise. However, since the EU is the biggest player in world sugar trade and it is a significant producer as well, the impact on world sugar trade and regional welfare was larger when compared with liberalization of the US sugar sector itself. The authors noted that their results highlight the complexity of the TRQ mechanism and that the modalities in reforming the TRQs can be critical in determining the distribution of gains from tradeliberalization between exporters and
Meanwhile, Adeniran et al. (2014) studied the impact of exchange rate on economic growth over the period 1986 to 2013. Data used in the study was collected from Central Bank of Nigeria, Statistical Bulletin of various issues. This was done using correlation and regression analysis of the ordinary least square method to analyse the annual data. The result of this study revealed that the exchange rate has had a positive but not significant effect on the country‟s growth. Likewise according to Ogun (2006), the aim of the study was to evaluate the impact of real exchange rate on the growth of non-oil exports in Nigeria. Consequently, Ogun highlighted the effects of real exchange rate misalignment and volatility on the growth of non-oil exports. The results show that, both misalignment and volatility adversely affect the country‟s non -oil export growth. Therefore, the conclusion is supported by studies, that developing countries are relatively flexible in the choice of exchange rate regime. The result also showed that the interest rate and inflation have a negative impact on economic growth, however not significantly. Also, Opaluwa et al. (2012) studied the influence of exchange rate fluctuations on the Nigerian manufacturing industry for twenty years from 1986 to 2005. They used multiple regression econometric tools, which revealed a negative relation between exchange rate volatility and performance of the manufacturing sector. The reason behind this is that manufacturing production in Nigeria is highly dependent on overseas countries for importing inputs used in the production process, leading to the effect of devaluation of the exchange rate. Likewise, Taofeek Olusola (2014) assessed exchange rate fluctuation and its impact on the performance of the manufacturing sector in Nigeria. The study demonstrates data from 1986 to 2012 to investigate the relationship. The results show that there is a negative and significant relationship between the exchange rate and manufacturing performance in the country of the study.
European Union (EU) is also extensive. The model also removes intervention prices (which entail government purchases and then export sub- sidies), variable import levies, compensatory payments, acreage set-asides, and base-area bounds (which limit the total area of grains and oilseeds by cutting off payments if the base-area bound is reached). In addition, EU production quotas for raw milk and sugar are removed. Full elimination of all trade-distorting policies (as defined according to the WTO) can be viewed as an upper bound on possible U.S. production changes due to a WTO/Doha tradeliberalization agreement, as the final extent of elimination of trade-distorting policies under a WTO/Doha trade agreement is impossible to predict. Arguably, then, the most fruitful path for quantitative analy- sis is to examine the scenario of full elimination of trade distortions, which would likely result in the largest production and environmental impacts. Policy Simulations
The number of GPA parties has small marginal negative effects on trade in goods. For service exports it has the opposite sign. Service transactions tend to be repeated and based on reciprocal trust and satisfaction attained in previous deals. Switching costs for either service consumer or service producer are typically higher than for tangible goods consumer and producer. With more members participating in the GPA, bilateral trade in goods between pairs of countries may thus decrease slightly due to switching effects, while existing service trade partners tend to intensify. The log of index of government procurement values for importers or exporters is a positive determinant of bilateral trade in service, but has no effect on bilateral trade in goods, resulting from the high service share in the growth of government procurement value above threshold under the GPA.
The evidence from Argentina’s experience with safeguards under GATT Article XIX and the Agreement on Safeguards suggests that the government tried to operate the rules as a truly economic instrument to facilitate the adjustment of industries damaged by increased imports. Nevertheless, it was unsuccessful. Why? The general point here, well argued by Sykes (2003) 22 , is that the WTO dispute settlement process never found a thread of economic reasoning on which to build its interpretations against safeguards, but it did have the effect of preventing Argentina from attempting to put into effect its interpretation of economic application. The footwear case supports Sykes’ conclusions.
The closures for the model are as follows. In the case of the government, it is assumed that both government consumption and savings are fixed in real terms. This means that the level of surplus (or deficit) in the base year is maintained (Argentina had a surplus in 2005), and that one or more taxes are the equilibrating variables. Here all tax rates are kept at the base year level, except for the rate of direct taxes, which adjusts to equilibrate fiscal accounts, compensating the revenue lost from tradeliberalization. Therefore, the simulations are fiscally neutral. For the rest of the world, foreign savings (broadly defined to include other non-traded items) are fixed exogenously while the exchange rate adjusts. That is, the level of trade balance that existed in the base year is maintained in dollar terms, with the exchange rate acting as the equilibrating variable. For the savings-investment balance, investment is driven by savings as in the global Linkage model. Since both public and foreign savings are fixed, investment comes from changes in the savings behavior of households (specifically, the marginal propensity to
Most nations have restricted total estimation of backing for farming, aside from Japan and Korea (Campo and Beghin, 2005; Lee et al. , 2005). Japan utilizes value bolster programs for certain dairy items, furthermore gives inadequacy instalments for calves and assembling milk. Japan's value encourage program worked with production amount, which fits in with ''Blue Box'' approaches. Production share is under the control of the national and prefectural committees, yet ranchers additionally have the privilege to conform it. According to producer support estimate (PSE), which measures the real support got by makers in Japan, came to 50% in 2007, which was 67% during 1986. Korea likewise utilizes a value provision program for dairy items; its milk PSE came to 60% in 2007, which reached up to 70% during 1986. None of the other Asian nations use ''Blue Box'' strategies to bolster their dairy markets. On the other hand, the European Union raised PSE from 32% to 60% during the period of 1995 to 2014 year (OECD, 2009). The yearly milk production of 34 billion liters in Pakistan is shared between a 71% offer for the rural economy and a much littler urban offer of 29%. Just 3% of the milk production is handled and showcased through formal channels. Pakistan is one of the developing markets with driving development rate among the worldwide dairy industry like India and China (Jalil et al. , 2009).
This paper gives several suggestions. The first, unpredicted poverty possibly rises from market failure. In the case of Zambia, many farmers found difficulties to plant their maize due to the lack of skill and lost of seeds. It cannot be denied that the poor cannot take all of the advantages of tradeliberalization since they have less skill compared to labors in a big firm who are very well-skilled. The second, market segmentation seems to prevent the benefits of liberalization from optimally spreading. The third one is related to the uneven effect of liberalization on households. For example, there happens a high demand for clothing export in Southeast Asia while there is less demand for a manufacturing job in Africa. Considering this contrast, policymakers should prepare for the worst when they choose to implement tradeliberalization. Being capable to manage the consequences is very important after applying tradeliberalization.
capital, the short-run closure would include fixed regional population and labor supply, fixed regional wage differentials, and fixed national real wage. Regional employment is driven by the assumptions of wage rates, which indirectly determine regional unemployment rates. These assumptions describe the functioning of the regional labor markets as close as possible to the Brazilian reality. Firstly, changes in the demand for labor are met by changes in the unemployment rate, rather than by changes in the real wage. This seems to be the case in Brazil, given the high level of disguised unemployment in most of the areas in the country; excess supply of labor has been a distinct feature of the Brazilian economy. Secondly, interregional immobility of labor in the short-run suggests that migration is not a short-term decision. Finally, nominal wage differentials in Brazil are persistent, reflecting the geographical segmentation of the workforce (Savedoff, 1990).
In addition to the gender-specific analysis, the main contribution of the study is to focus on the growth processes set in motion by tradeliberalization. These channels are numerous. Increased openness provides the biggest boost, primarily through its impacts on the productivity and efficiency of domestic producers in these primarily agricultural and industrial sectors (technology transfer, increased competition, etc.). Indeed, when we remove this channel, tradeliberalization is found to lead only to a very small – 0.6 percent – increase in GDP relative to the business-as-usual (BAU) scenario by the final year of our 15-year simulations. This increased productivity reduces the demand for factors in these sectors, as less are needed to obtain a given production level. As a result, it is the urban workers, particularly female skilled urban workers, who are employed overwhelmingly in the service sectors, which benefits most from the productivity channel as their wages increase vis-à-vis male skilled urban workers. Indeed, this slight increase vanishes while the over-all wage gap widens whenever the productivity effects are not accounted for. However, the productivity channel is also found to reinforce the pro-urban bias of tradeliberalization.