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Issue #592

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2014 Media Kit

World Bank calls for 75% cut in farm tariffs

By: | at 07:00 PM | International Trade  

Developed countries must cut their highest farm tariffs by 75% if the world’s poorest nations are to benefit from a World Trade Organization attempt to liberalize agricultural trade, experts at the World Bank say.

“Unless you have a 75% cut in the highest tariffs there would be very little outcome at all,” Will Martin, lead economist of the World Bank development research group, said in an interview.

WTO members are due to meet in Hong Kong in December to put together a deal that would lower global trade barriers in an attempt to lift millions out of poverty. But efforts to agree first on cutting rich nations’ farm subsidies and duties have run into trouble.

Market access, or lowering duties on imported farm goods, is a major sticking point. The United States is calling for cuts of 90% on the highest tariffs and the EU is saying it would only go to around 50% on its top tariffs.

“A 50% cut in tariffs is nowhere near enough,” Martin said. “The 75% would generate global welfare gains of about $75 billion out of a potential welfare gain of $182 billion if you had complete liberalization of agriculture.”

Citing figures from research just completed by the World Bank, Martin added this scenario envisaged no special protection for particular commodities, or politically sensitive products.

Excluding even two percent of sensitive products from tariff cuts “was basically giving away the game—the welfare gains dropped from $75 billion down to $16 billion,” Martin said. The EU has proposed limiting sensitive products to eight percent of tariffs.

The report also found that removing cotton subsidies would allow developing countries to raise their share of global exports to 85% in 2015 instead of 56%, and would raise the export price of cotton.

“West African cotton is actually very competitive, both in terms of cost and quality,” Uri Dadush, director of the World Bank International Trade Department, said in the interview.

“Yes, they have big competitiveness problems in terms of infrastructure. Yes, they have weak capacity. Even with weak capacity and weak infrastructure, they are actually competitive in that area, period, and the subsidies are hurting them.”

Dadush added, “The alternative to a Doha deal is not the status quo. The alternative to a Doha is actually a deterioration of the status quo because it will undermine the credibility of the WTO.” (Reuters)