WTO and policy reform in developing countries
TERRY L. ROE
I am pleased to be asked to participate, and to have the opportunity to comment on Professor Schuh's essay. I compliment Ed Schuh on effectively providing structure and substance to an exceptionally broad topic with numerous interrelated issues. The thrust of my remarks expands on some of the issues raised in his essay.
The essay begins, importantly in my view, with an overview of the historical background leading to pressures of imposing the discipline of the GATT on agriculture, pointing out that many developing countries, even today, continue to intervene in other sectors of their economies with deleterious consequencesfor agriculture. At the same time, the industrial market economies tend to support agriculture using instruments that overvalue the sector's sector-specific resources with various implications to rent-seeking activities by agricultural interests. These instruments induce the sector to “over produce, ” thus causing world market prices for many agricultural products to fall below their otherwise market clearing levels. I expand upon this theme later.
The next section of Schuh's paper considers two conundrums: interventions by government to restrict own country exports, and distortions in currency values. Distortions in currency values tend to implicitly tax the producers of agricultural exportables. These distortions in developing countries are closely tied to the actions of a country's import competing industries to limit foreign competition, and to the political economy problem of replacing the tax revenues earned from trade with broader based tax revenues. Thus, in developing countries, policies causing major distortions in agricultural trade lie outside of the sector, a point I will also return to later.
The third section of the paper focuses on the traditional issues of trade liberalization, technical standards, intellectual property rights, and agriculture's multifunctionality. The fourth section focuses on competitiveness and moving toward reform. The only marginally critical comment I might have is Schuh's omission of regional trade agreements (RTA) among nations which have had major implications for agricultural trade.
Since the incentives for trade reform depend on the global economic environment, it is useful to first comment on the emerging sources of economic growth in the global economy. Many (e.g., Baldwin and Martin, 1999, Sachs and Warner,