Doha Misconceptions

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IMF has released a policy discussion paper clarifying what it sees as misconceptions on trade issues; “Trade Issues in the Doha Round: Dispelling Some Misconceptions”- it addresses the following four issues-

- Developing countries would benefit more from liberalization by rich countries than they would from their own liberalization. In fact, research shows that developing countries have much to gain from their own trade reforms.

- Tariff reductions on a multilateral basis could wipe out a large portion of trade between rich countries and developing countries as a consequence of preference erosion. On the contrary, research shows that the magnitude of any erosion is small in aggregate and is of concern for only a few countries and products.

- Agricultural subsidies in many Organisation for Economic Co-operation and Development many (OECD) countries are more damaging than other types of policies, such as tariffs. Actually, import tariffs in OECD countries harm developing countries much more than either production or export subsidies, with the exception of subsidies on cotton. Export subsidies in OECD countries actually benefit developing countries that are importers of subsidized products because they reduce the price of imported goods.

-The recipients of agricultural subsidies in rich countries tend to be small, lowincome farmers. The facts, based on data for both the United States and the European Union, are that a disproportionately large share of government support goes to wealthy farmers.

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I think this paper is very useful in clarifying some areas of the Doha Round that have been misunderstood or where emphasis may have been misplaced.

I would like to add one other comment about the balance between subsidy and market access reforms. It is true that most of the global gains from rich-country agricultural reform come from lowering tariffs and other restrictions on imports. That is because most rich countries, including the European Union, which provides by far the most support to its farmers in dollar terms, support their farmers in this way. But the United States relies relatively more heavily on subsidies than tariffs and it has to contribute as well. Thus, while subsidy reductions are not as quantitatively important, they are essential to getting a deal done.


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This page contains a single entry by Paul published on August 23, 2006 1:12 AM.

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