World Agricultural Commodity Markets, Developing Countries

and the Doha Development Round

Outline• Introduction: WTO negotiations, the Doha development round,

• Recent developments and long-term trends: current conditions and recent developments on agricultural commodity markets; long-term trends and structural changes; changing terms of trade for agricultural commodities

• Agricultural import bills: changing consumption patterns and international

trade; evolution of developing country food import bills

• Agricultural export earnings: importance of agricultural exports and the danger of dependency for developing countries; barriers to trade in developed countries – tariffs, tariff escalation and producer supports

• Changing patterns of agricultural trade: evolution of trade in primary and

processed agricultural products; market concentration and vertically integrated food chains

• Some conclusions

Recent developments

and long-term trends

The Prebisch-Singer thesis

• Raul Prebisch and Hans Singer • economic growth would cause the “barter” terms of trade between

primary goods and manufactured goods to fall over time and transfer of income from developing to developed countries.

• used to support a strategy of import substituting industrialization• economic growth means higher incomes and increased demand for

all goods, but smaller share on primary goods (food) and more on manufactured goods and services

• also productivity has increased most rapidly in primary products, driving their prices lower relative to those of manufactured goods. (productivity increased 20 percent faster in agriculture than in manufacturing worldwide, and more than 100 percent faster in developing countries than in developed countries).

Income terms of trade for agriculture

0

1

2

3

4

5

6

7

8

9

1961 1966 1971 1976 1981 1986 1991 1996 2001

$US

Bil -

LDC

s

0

20

40

60

80

100

120

$US

Bil O

ther

dev

elop

ing

LDCs

Other developing

Agricultural import bills

Agricultural Export Earnings

Changing patterns of agricultural trade

Some conclusions

• Tendency to market imbalance made worse by market distortions

• Increasing vulnerability of developing countries?

• Will WTO Doha development round help? – need to reduce agricultural tariffs, producer support and export

subsidies in developed countries – need to eliminate tariff escalation that penalizes exports of

processed goods from developing countries– developing countries also need to reduce tariffs to encourage

trade among developing countries and to allow their consumers to benefit from lower world prices.

• What else needs to be done?

• building capacity to take advantage of trading opportunities and to participate effectively in trade negotiations

• preserving and expanding trade preferences for low-income economies and possibly compensating them for any loss of these preferences

• mobilizing resources to support generic promotion campaigns, diversification into non-traditional agricultural exports and adding value by exporting processed goods

• improving the flow of information to producers and traders about opportunities for contractual arrangements with supermarkets and the technical requirements for organic agriculture and Fair-Trade certification

• designing international programmes to increase the flow of resources to agriculture and rural development, increasing the competitiveness of agriculture and developing non-agricultural sectors that will provide alternative sources of employment and income

• supporting cooperatives and other actions by producers to organize commercially in order to increase their leverage in markets dominated by powerful transnational corporations

• ensuring that farmers have access to the information, training, credit and other resources they need to diversify into higher-value crops, processing or other income-generating activities.

• increasing investments to improve the productivity of domestic food production in developing countries and make it more competitive with food imports