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Wolfowitz criticises rich nations' subsidy, tariff policies
'Full trade liberalisation to make Bangladeshis poorer in short-term'
12/10/2005
Bangladesh would face a short-term rise in poverty by 1.1 percent with full liberalisation of its trade, BDNEWS reported Friday quoting a World Bank (WB) research study.
"In the short-term, some countries are vulnerable to the shocks following agricultural trade reform," the study said.
"Bangladesh, for example, a net importer of agricultural products, will risk a short-term rise in poverty by 1.1 percent with full liberalisation, but its long-run gains will be a poverty decline of over 4.6 percent," it said.
L. Alan Winters, Director of the World Bank's Research Group, and coeditor with Thomas Hertel, Professor of Economics at Purdue University, carried out the study on "Poverty and the WTO - Impacts of the Doha Development Agenda".
Of the 10 countries analysed in the 17 commissioned chapters that make up this wide-ranging research study, those countries with agricultural export potential to the markets that liberalise the most-East Asia and Europe-are identified as obvious winners from trade reform, in both the short- and long-term.
In Brazil, liberalisation would drive rapid poverty reduction by prompting increased agricultural production and employment in regions with relatively higher poverty incidence, while China would gain as exports would increase to agricultural markets in East Asia that are highly protected at present.
The study said although an "ambitious" agreement in the WTO's Doha Development Round of trade talks would reduce poverty, some countries such as Bangladesh, would need help to achieve the projected long-term poverty reduction a trade deal offers them.
Doha reforms would potentially have the greatest impact on poverty (both positive and negative), the study finds, by raising world market prices and trade volumes for farm and food products. But reforms could induce even greater poverty reduction if the Doha Round was to include deeper liberalisation by developing countries themselves.
Governments need to improve infrastructure and reform domestic marketing institutions to ensure that higher world prices are transmitted to rural areas. They also need to educate rural population better to enhance labour mobility between farm and non-farm jobs, and help farmers benefit from new export opportunities.
To capture the long-term gain by poor countries, Hertel says, "the case for aid-for-trade is very clear: support vulnerable countries during the initial risk period so that they don't miss the opportunity for sizeable gains in the future."
Meanwhile, a report published in the December 08 issue of the FT said: With the Doha global trade talks stalled by US and European discord over agriculture, US lawmakers are warning that domestic political support for the round could be jeopardised if the Hong Kong ministerial meeting focuses exclusively on the narrow demands from a few developing countries.
In a strongly worded letter this week to US Trade Representative Rob Portman, a group of senators led by moderate Democrat Dianne Feinstein of California demanded that he state publicly before the Hong Kong meeting that the US will not agree to any increase in visas for skilled professionals as part of the Doha talks. They warned that failure to do so could force them to oppose any final agreement.
The issue is a key one for India, which is under pressure from the US and the European Union to open its heavily protected market for manufacturing goods.
But the Senate letter warned that the US should not give India or other developing countries "any false hopes that the administration would be amenable at any time to agreeing to include, bind or modify US immigration policy in trade agreements". Opposition is equally strong in the House of Representatives, largely because of growing concerns over illegal immigration and border security since the September 11 2001 attacks.
US textile companies and their congressional allies are also rallying against any quick movement to lift all quotas and tariffs on the poorest countries. That initiative is favoured by the EU, which has already removed most barriers to the poorest countries under its "Everything But Arms" initiative.
The US industry, which has fought successfully for quotas on Chinese imports, opposes the scheme because it would further open the US market to some large clothes- producing countries, particularly Bangladesh.
According to an Internet report: World Bank President Paul Wolfowitz said recently leaders of wealthy nations must tackle vested interests and work toward a successful trade liberalisation agreement in the Doha round of trade talks to aid the world's poorest people.
Wolfowitz's comments, in a speech at the National Press Club, were directed at trade ministers just ahead of their World Trade Organisation (WTO) ministerial meeting in Hong Kong. "The stakes are too high - not just for the poor, but also for the global economy - to let the trade talks conclude without real progress," Wolfowitz said. He continued, "The Doha Round presents an opportunity to rewrite the rules of an unfair trading system that holds back the potential of the poorest people."
Wolfowitz said under current trade rules, wealthy countries are allowed to keep tariffs highest on the goods produced by poor countries. For example, the US charges Bangladesh the same amount of tariffs on its $2 billion worth of exports as France pays on $30 billion of exports. Meanwhile, 70 percent of the world's poor live in rural areas and depend on agriculture to earn a living and feed their families, he added. Wealthy countries also use agriculture tariffs to prevent poor countries from moving up the production chain, he said.
Wolfowitz underscored that rich countries pay out a total of $280 billion in subsidies to their farmers each year. Of the total, the EU accounts for nearly half at $133 billion, while Japan and the US spend $49 billion and $47 billion respectively. According to Wolfowitz, that means that the US and EU spend up to $3 in support to their farmers for every $1 they spend on foreign aid. For Japan, the disparity is five-fold. "Ultimately, it is the taxpayers and consumers in rich countries that shoulder the costs of these support programs," the World Bank chief said. "But the real damage is done to farmers in poor countries who are denied markets to sell their goods. It is their children who go hungry -- who are deprived of clean water, medicines and the most basic necessities of life."
Wolfowitz additionally said that trade by itself will not transform poorer countries' fortunes unless they are also helped with improving their capacity to trade through better infrastructure. Pakistan, for instance, loses as much as six percent of its economic output because poor roads erode the competitiveness of its goods once they have transited the country to port at Karachi. The World Bank is working closely with the International Monetary Fund and WTO members on an "aid-for-trade package" to help poor countries improve their investment climate and invest in infrastructure, Wolfowitz said.
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