Tim Josling

ROA Panel Comments

Tim Josling

Stanford University

Tim Josling

Introduction

• I am an “outsider” to the project

• I currently work on trade issues

• I am more familiar with domestic policies of developed countries

• I know only a few of the 11 countries in ROA

• But I am very pleased to be on the panel!

Tim Josling

OUTLINE

• Focus my remarks into two topics– How do these case studies fit in with notions

about policy reform in developed countries?– Where is the interface between the ROA study

and the regional and multilateral trade system?

Tim Josling

Dynamics of Policy Reform

• Students of policy reform have made use of the concept of a policy paradigm

• Paradigms are a bundle of policy ideas, beliefs about reality, aims and objectives, policy instruments, and associated interest group/political support

• Agricultural policy paradigms are useful “shorthand” for different policy situations

Tim Josling

(Over)simplify policy choices

• Agricultural Policy Paradigms– Set of ideas about the nature of agriculture– Consistent objectives for government action– Instruments designed to achieve objectives– Political base and pressure from interest groups– World market view– Trade policy objectives

• Paradigm is the policy plus its rationale

Tim Josling

Paradigms in ROA

• Six paradigms apparent– Agriculture Ignored– Agriculture Exploited– Agriculture Supported– Agriculture Liberalized– Agriculture as Public Good– Agriculture Retail-driven

Tim Josling

Table 1: The Nature of Agricultural “Problem” implied by each Paradigm Nature of Agricultural Problem

Ignored Agriculture not seen as a high priority sector

Exploited Agriculture is low productivity sector Substantial labor reserves available for

industrialization Low prices for urban consumers needed for

development Supported Low incomes chronic in agriculture

Not competitive with other sectors without assistance

Not competitive with other countries without protection

Liberalized Average or above average income levels in farming Competitive with other sectors for resources only if

costs are kept under control Competitive in world markets only with “level

playing field”?

Public-Good Incomes from farming inadequate for support of rural areas

Production of public goods under-rewarded

Retail-driven Farmers as part of supply chain, managing land and livestock resources

Consumer-driven (i.e.: top-down) sector implies focus on market opportunities, product differentiation

Incomes depend on bargaining power within chain, not just on costs

Tim Josling

Table 2: Policy Objectives implied by each of the Paradigms Policy Objective

Ignored No explicit objective

Exploited Extract surplus resources from agricultural sector Maintain low food prices in urban areas by

imports Focus investment in more productive (industrial)

sectors Supported Government needed to find markets

Protection from low-cost imports Supply control necessary to avoid surpluses

Liberalized Move towards free market Relax supply control Provide safety-net in times of price weakness

Public Good Preserve countryside for recreational value Keep family businesses viable Stimulate rural development top provide off-farm

jobs Retail-driven Establish quality, reputation, and process

attributes High food and worker safety standards Promote fairness in contractual relationships

Tim Josling

Table 3: Suggested Policy Instruments for each Paradigm Policy Instruments

Ignored No policy instruments

Exploited Fixed farm prices Parastatal Export marketing Domestic sales targets

Supported Border protection Surplus buying State trading enterprises for imports Export assistance

Liberalized Decoupled payments in transition Risk management Low safety-nets

Public Good Environmental subsidies Cross-compliance to enforce environmental

regulations Protection against “mono-functional”

agriculture

Retail-driven Harmonization of regulations and standards Competition enforcement Protection of intellectual property

Tim Josling

Table 4: Alternative world market paradigms implied by different views of agricultural policy

World Market Paradigm

Ignored Food aid available to make up any domestic shortfall

Exploited World markets able to provide for urban demand Export sector parastatals have preferential access

Supported World market unstable Prices depressed and no basis for domestic policy

Liberalized World market stable and reliable if domestic policies are reformed

World prices best guide for domestic policy

Public Good World market reflects “mono-functional” agriculture Prices inadequate for supply of public goods

Retail-driven “World market” is often intra-firm sales Instability and uncertainty created by government

intervention

Tim Josling

Table 5: Differences among trade policy objectives implied by the paradigms Trade Policy Aims

Ignored Maintain Food Aid

Exploited Low tariffs on imported staples Avoid foreign export restrictions Maintain preferred access for exports

Supported Avoid restrictive trade rules on market access Keep high level of protection where needed Avoid restraints on export subsidies

Liberalized Improve market access in other countries Remove competitor export subsidies Constrain domestic support in other markets

Public Good Moderate pressure on agricultural markets Allow subsidies for process attributes Allow subsidies for costs of meeting higher standards

Retail-driven Strengthen intellectual property rules Harmonize SPS and TBT rules Ensure competitive conditions

Tim Josling

Paradigms and Countries

• Many countries exhibit more than one paradigm

• Can vary by commodity, depending on structure, efficiency and trade patterns

• Can vary over time, depending on non-agricultural policy paradigms, macroeconomic conditions and external situation

Tim Josling

Dynamics?

• Is there a progression through the stages?

• Can one skip a stage?

• Can one go backwards?

• Are some stages precluded by conditions in non-farm sector?

• Are these stages a useful way to think about future scenarios?

Tim Josling

Supported Agriculture

Liberalized AgriculturePublic Good Agriculture

Retail-Driven Agriculture

Exploited Agriculture Ignored Agriculture

Tim Josling

Links to Trade System

• WTO and RTAs have a significant role to play in the development of agriculture

• Some RTAs restrict policy options (Mexico and NAFTA)

• WTO/URAA is a “Framework” for national policies, even if it has not yet driven policy in ROA countries

• WTO will become even more “restraining” in future

Tim Josling

Links between Paradigms and Trade Rules

• Uruguay Round featured the paradigm clash between Supported and Liberalized models

• Agreement on Agriculture paved the way for Liberalized Agriculture rules system

• Supported agriculture still survived as a result of high levels of border protection, export subsidies and domestic support

• TRIPS, GATS paved the way for Retail-driven Agriculture rules

Tim Josling

Links between Paradigms and Trade Rules, contd.

• Public-goods paradigm not addressed in UR, but included as “non-trade concerns” in Doha round

• Retail-driven paradigm rising on agenda: EU now pushing for the inclusion of Geographical Indications (GIs); GM issue before a panel, etc.

• Current Doha Round floundering as developing countries complain about supported paradigms in developed countries but wish to retain them for their own economies

Tim Josling

Links to Trade System

• Market Access– NAMA– Agric tariffs– TRQs– Safeguards– Special Products– Preferences

Tim Josling

Links to Trade System

• Export Competition– Subsidies– Food aid– Export credit– Single-desk sellers

Tim Josling

Links to Trade System

• Domestic Support– Article 6.2– Development box– Benefits of cap on all developed country

subsidies

Tim Josling

Links to Trade System

• SPS– Representation on standard setting agencies– Meeting developed country standards– Use of biotech

Tim Josling

Links to Trade System

• TRIPS– Biotech patents– Plant breeders rights– GIs for foodstuffs

Tim Josling

Links to Trade System

• GATS– Liberalisation of infrastructure services– Wholesale services– Movement of natural persons

Tim Josling

Links to Trade System

• Singapore Issues?– Transparency in Government Procurement– Trade and Competition– Trade and Investment– Trade Facilitation

• Linkage to agriculture much less direct

Tim Josling

Links to Trade System

• RTAs– Preferential market access– Constraints on export competition– Trade remedies– Dispute settlement processes– Improved investment conditions– But not much on subsidies – Labor migration within RTAs?