False Promises on Trade (response to NY Times)

[AntiLempa]

This was written in response to a long article by the Editorial Board of the New York Times on Sunday, July 20, 2003, "The Rigged Trade Game" available at http://www.commondreams.org/views03/0720-03.htm

For more information see "The Relative Impact of Trade Liberalization on Developing Countries," by Mark Weisbrot and Dean Baker, available at http://www.cepr.net/relative_impact_of_trade_liberal.htm


False Promises on Trade
By Dean Baker and Mark Weisbrot
25 July 2003

The New York Times editorial (7-20-03) on the developed countries' agricultural subsidies and trade barriers massively overstates the potential gains that developing countries might get from their elimination.
While many of the agricultural subsidies in rich countries are poorly targeted, and in some cases hurt farmers in developing nations, it is important not to exaggerate these impacts. The risk of doing so is that it encourages policymakers and concerned NGOs to focus their energies on an issue that is largely peripheral to economic development, and ignore much more important matters.

To put the problem in perspective: the World Bank, one of the world's most powerful advocates of removing most trade barriers, has estimated the gains from removing all the rich countries' remaining barriers to merchandise trade -- including manufacturing as well as agricultural products -- and removing agricultural subsidies. The total estimated gain to low and middle income countries, when the changes are phased in by 2015, is an extra 0.6 percent of GDP. In other words, an African country with an annual income of $500 per person would then have $503, as a result of removing these barriers and subsidies.

The Times editorial misrepresents current economic research on this topic in a number of ways. For example, the $320 billion in annual agricultural subsidies in rich nations is a highly misleading figure. This is not the amount of money paid by governments to farmers that would be less than one-third this size. The $320 billion figure is an estimate of the excess cost to consumers in rich nations that results from all market barriers in agriculture. Most of this cost is attributable to higher food prices that result from planting restrictions, import tariffs and quotas.

This distinction is important, because not all of the $320 billion ends up in the pockets of farmers in rich nations. Some of it goes to exporters in developing nations, as when sugar producers in Brazil or Nicaragua are able to sell their sugar in the United States for an amount that is close to three times the world price. The higher price that U.S. consumers pay for this sugar is part of the $320 billion in subsidies to which the Times editorial referred.

(much more http://cepr.net/false_trade.htm

[AntiLempa]

1. Kick

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