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World Bank Calls For Trade Reforms

posted on January 21, 2005

Resumption of the beef trade is a task for newly confirmed Secretary of Agriculture Mike Johanns. It's also a component of the economic expansion the president has promised to oversee in his second term. On that note, he's off to a good start.

*The government reports that housing starts posted their biggest gain in seven years in December. *The number of people filing first-time jobless claims plunged last week. *And the Federal Reserve's so-called Beige Book report found economic growth in 11 of the Fed's 12 districts.

*The downside of that growth is the threat on inflation. Consumer prices in 2004 rose at the fastest pace in four years, thanks largely to a big surge in energy costs.

Reducing the trade deficit also is a concern, even in farm country, where the trade surplus is shrinking. Farmers and ranchers want to protect their overseas markets, but there's pressure from developing nations to change what they label as trade-distorting policies in countries like the U.S. Now, a new report by the influential World Bank lends ammunition to that argument.

World Bank Calls For Trade Reforms A new report is calling for significant agricultural trade reforms to help lift poor countries out of poverty. The World Bank's 300-page report said developing countries are making investments to increase their agricultural productivity, but any gains they make don't help them reduce poverty because more prosperous countries impose tariffs and other barriers to trade.

Donald Mitchell, World Bank: "If you look at recent periods you can see the production, protection has actually been increasing in the industrial countries, not declining. Agricultural tariffs are still higher than they are in manufacturing. You see that you have individual cases of tariffs as high as 900% in some of the high-income countries."

World Bank economist Donald Mitchell said a global reduction in farm subsidies and tariffs would benefit poor countries but would cause higher prices for some other countries.

For example, the report said if U.S. and EU cotton subsidies were abolished, farmers and textile producers in industrialized nations might see price increases of 10 to 15%. But revenues for cotton farmers in West and Central Africa would increase by $250 (M) million.

Reforms in dairy would result in price increases of 20 to 40% and welfare gains of about 3 1/2 billion dollars globally.

Reforms in sugar would result in price increases between 20 and 40%. Removing price supports would hurt producers in the U.S., EU and Japan, but have global welfare gains of up to 4.7 billion dollars.

But the World Bank said any trade reforms must be made at the global level ... as it would be difficult to influence change to the agricultural protectionism of individual countries.

Donald Mitchell, World Bank: "The only way to get substantial reform is at the multi-lateral and multi-commodity level and that's because the vested interest in individual commodities are so strong that its very hard to get single reform, single reform in an individual commodity."

Tags: agriculture news reform trade