Trade policy options for developing countries and in the Syrian Arab Republic

1
Trade policy options for developing countries
and in the Syrian Arab Republic

• Assigned Activities
• Review Paper The Impacts of Agricultural Trade
  Liberalization on Development (Lessons for
  Syria).
• Policy Brief Trade policy reform in Syria, what
  has changed?
• Commodity Brief Syrian agriculture Trade

2

• The Impacts of Agricultural Trade Liberalization
  on Development (Lessons for Syria).

3

• Protection and Liberalization
• Why Agricultural Trade Liberalization?
• Trade-liberalization advocates
• proposals for higher protection in DingC have a
  net negative effect
• Increasing the protection of agriculture by DingC
  (where most of the future market growth is
  expected) will undermine the limited support for
  agricultural policy reforms that can be energized
  in DedC
• The current process of agricultural trade reform
  at the WTO requires less tariff and subsidy
  reductions by DingC than by DedC
• Development advocates
• favor special-and-differential treatment less
  or slower trade liberalization to occur in DingC.
• Argue that these measures are justified in DingC
  that suffer from chronic balance-of- payments
  deficits and where large agrarian populations
  depend on local production for food and other
  needs.

4

• Potential Winners and Losers from Agricultural
  Trade Liberalization
• Reform would reduce rural poverty because in the
  aggregate they have a strong comparative
  advantage in agriculture and because the
  agricultural sector is important for income
  generation in DingC.
• Liberalization of value-added activities is
  crucial for expanding employment and income
  opportunities beyond the farm gate. (The
  importance of a multi-commodity approach to
  reform, as gains and losses will differ by
  market).
• Consumers in highly protected markets will
  benefit greatly from trade liberalization as
  domestic (tariff-inclusive) prices fall and
  product choice expands. Consumers in poor,
  net-food-importing countries could face higher
  prices if these markets were not protected before
  liberalization, because of higher import unit
  costs.

5

• Cont
• Multilateral trade liberalization erodes the
  benefits from preferential bilateral trade
  agreements and pits low-cost producers in some
  DingC (such as sugar producers in Brazil and
  Thailand) against less efficient producers in the
  least-developed countries who are currently
  helped by preferential access
• global liberalization of primary commodity
  markets should be accompanied by further
  effective opening of value added markets, along
  with some targeted assistance to overcome supply
  constraints.
• higher market prices would prevail in traditional
  agricultural commodity markets (sugar, cotton,
  dairy, rice, and to a lesser extent, wheat) if
  trade and domestic distortions were removed

6

• The impact of agricultural trade liberalization
  on development
• The trade and development linkage
• The role of human and physical capital
  accumulation, and technical progress. Trade is
  seen as an instrument of capital accumulation or
  as a means of stimulating efficiency through
  better resource allocation and enhanced
  competition.
• trade and development are linked through the
  effect of trade policy on the level and pattern
  of domestic aggregate spending, and hence on the
  savings-investment mechanism.
• if trade policy cannot by itself affect the
  domestic savings rate, it can be used to address
  a temporary disequilibrium in a country's balance
  of payments resulting from temporary external
  factors, such as variations in commodity prices
  or abrupt movement of foreign capital.

7

• Achieving Agricultural Development through
  Agricultural Trade
• Agricultural trade distortions inflict huge costs
  on developing countriesfarmers, importers and
  exporters alike.
• Trade distortions and biased agricultural
  policies make it impossible for these farmers to
  escape poverty and hunger. Most countries are net
  food importers because trade distortions dont
  give them a chance to produce their own food.
• There is great potential for agriculture in Asia,
  Africa and Latin America. However some problems
  against boosting agricultural trade in these
  countries
• Macroeconomic policies (stability) and the lack
  of fiscal and monetary discipline, and the where
  real exchange rate is allowed to appreciate
  uncontrollably
• Urban bias in agricultural and food policies and
  low food prices urban dwellers (penalize
  farmers).

8

• Cont
• Land is the third problem facing farmers in
  developing countries. In many Asian countries,
  farms are too small and cannot achieve economies
  of scale, nor can they satisfy the demands of the
  growing food processing industry (policymakers
  believe the only efficient farms are large
  farms).
• Inadequate infrastructure raises costs of needed
  inputs and raises costs of getting farm products
  to market.
• Inadequate private investment in farm inputs and
  food processing industries is also a problem.
• The lack of private investment is directly linked
  to the unstable macroeconomic policy environment
  in many countries.
• Trade liberalization can enhance regional and
  economic stability.
• In protected systems, tariffs and quotas are
  often allocated to the financially well off or
  the politically well connected. With fewer favors
  to buy and sell, everyonenot just the rich or
  politically well connectedcan participate in
  trade.

9

• The impacts of agricultural trade liberalization
  on food security and poverty alleviation
• Trade liberalization enhances DingC food
  security position and reduce their food gap
• Trade liberalization implies a change in the
  relative prices of goods and factors in a
  previously protected sector or economy )changes
  in both subsectoral and aggregate levels of
  production(.
• Changes in income levels have the potential both
  to reduce poverty levels and in doing so, to
  improve the food security status by increasing
  the access of the poor to food.
• In the short-run, agricultural sectors will not
  benefit from trade liberalization (even
  significant impact on income level).
• Two broad options to achieve adequate levels of
  food security food self-sufficiency and food
  self-reliance. food security can be interpreted
  as being determined by purchasing power.

10

• Cont.
• The tax revenue from additional imports can be
  used to finance the adjustment of those
  disadvantaged.
• Trade liberalization damages food security
  because liberalization benefits only the larger,
  and the more export-oriented farmers leads to
  scale incentives and size concentration,
  marginalizes small farmers, and creates
  unemployment and poverty.
• Agriculture plays a special role in developing
  countries contributing to employment, income,
  poverty reduction, export earnings in ways that
  other sectors do not.
• Low income country agricultural sectors lack the
  necessary institutional and capital support to
  compete in a global market with better
  infrastructure, institutions and social capital.
• Food security is an important development need so
  increased domestic food production is essential
  to increasing food security.

11

• Cont
• Low income producers in developing countries are
  too vulnerable to international price variations
  because of their limited capacity to respond,
  adjust and adapt.
• Special protection is justified because of the
  asymmetry of support. In essence, the AoA
  sanctioned the large levels of support for
  agriculture in the developed countries, while
  obstructing the developing countries from doing
  so in the future.
• Trade will only help towards poverty reduction
  if developing countries are given the policy
  space they need to develop and implement adequate
  environmental and developmental measures

12

• Some Key Questions
• Is the goal of future policy more concerned with
  self-sufficiency or food security?
• How would domestic production be affected by a
  more liberal import regime?
• What are the employment implications of a more
  open trade regime?
• Food security for whom who would be affected and
  how?
• What complementary and/or compensatory policies
  might be required?

13

• The Role of Multilateral Trading System in
  Development Process
• Uruguay Round did little to actually liberalize
  trade.
• Cancun failure, July Package, Hong Kong Round
• Large commodity exporters have benefited first.
  Least DedC have not yet benefited, yet many have
  significant comparative advantages to exploit in
  more open trade.
• Improved market access, larger quotas and lower
  tariffs on value added products, would help DingC
  as they try to generate employment and develop
  their food processing industries.
• Elimination of export subsidies is also vital to
  creating a fairer market for all. DingC stand to
  gain from a substantial reduction in the trade
  distorting domestic subsidies used by wealthy
  countries.
• The multilateral trading system is heavily biased
  towards export-led development (the needs and
  interests of transnational corporations)

14

• Lessons for Syria
• Syria is not member of the WTO and if agriculture
  is further liberalized in the multilateral
  trading system remote areas are adversely
  affected, costs of living go up and earnings
  decline, thus leading to a net income decrease.
• If Syria accessed to the WTO prices increase over
  all sectors especially agriculture,
  costs-of-living go down due to the high share of
  subsistence production.
• Earnings go up because households in some rural
  areas get most of their income from agriculture.
  Both costs of- living and earning developments
  lead to a raise in net incomes and declines in
  poverty rates.
• Syrian government has to determine the impact of
  international policies on various groups of the
  population, like the rural and the urban poor.
  These analyses have to be integrated in national
  poverty reduction policies.

15

• Cont
• The first channel to reduce poverty is through an
  increase in earnings and less through a reduction
  in costs-of-living.
• The government has to create better income
  opportunities in those sectors where the poor
  have their highest income share (i.e. through the
  creation of functioning markets to sell
  agricultural products).
• By ameliorating infrastructure or extension
  services to produce a higher quality product
  which is especially relevant for remote areas
  like the mountainous regions in agricultural
  regions in Syria, poor households can be linked
  to market opportunities created through
  liberalization. Moreover, sustainable
  agricultural systems need to be promoted which
  allow for more income and which do not harm the
  environment.