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World Bank slams rich nations on farm subsidy

January 11, 2005 13:00 IST

Attacking the industrialised countries for agricultural protectionism, which was hurting the economies of poor nations, the World Bank has stressed that global trade liberalisation was critical for reducing poverty in developing countries.

In a new report, "Global Agricultural Trade and Developing Countries", the World Bank said high barriers that protect the agricultural sectors of industrialised and some middle-income nations hurt the economies of poor countries, which were unable to raise exports despite the rise in farm productivity.

Growth in agriculture has a disproportionately positive effect on poverty reduction, because more than two-thirds of the population in developing countries live in rural areas where poverty is highest, World Bank chief economist Francois Bourguignon said while releasing the report.

Developing countries have been improving agricultural productivity, but the impact of these gains on poverty reduction will not be fully realised unless richer countries reduce their agricultural trade protection, it said.

Without such liberalisation, increased productivity will lead to overproduction and price declines for many commodities, undermining poor countries' efforts to expand exports, the report said.

Also the agricultural trade surpluses of industrial countries and the agricultural trade deficits of developing countries will both increase, making rural poverty worse.

The report claims that tariffs and other border protections are more trade-distorting in most markets than domestic subsidies -- with the exceptions of cotton and seafood.

It recommended coordinated global liberalisation of agriculture polices rather than a regional or product-based approach, because gains and losses from such reforms differ significantly by market.

This approach would also allow countries to trade off gains in some commodities against losses in others, the World Bank said.

Addressing worries that consumers in some poor countries could face higher food prices as a result of the reforms, the report said that indeed such increases could occur in net-food-importing countries that do not protect their agricultural markets but calls those concerns "exaggerated."

The report said that despite the recent framework agreement, protection of agriculture continues to be among the most contentious issues in the World Trade Organization liberalisation talks.
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