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Trade Liberalisation and Food Security Studies

CIDSE's Task Group on the EU, Trade and Food Security (1) last year commissioned John Madeley and Yannick Jadot (Solagral) to undertake a literature review on the relationship between trade liberalisation and food security. John Madeley's earlier research in this area had focussed on NGO studies in anglophone literature. To complement this work, this review covers perspectives mostly from multilateral agencies, including UN agencies, the International Monetary Fund, World Bank and national governments, including reports in French.

These perspectives often focus on the macroeconomic level - the effect on countries - whereas NGO studies have been more orientated to the microeconomic - the effects of people, on the food security of vulnerable households. While NGO studies are generally more critical of the impact of liberalisation, many official studies also show that there is cause for concern.

The impact of trade liberalisation over the past twenty years, since the introduction of structural adjustment programmes in the early 1980s, and especially since the setting up of the World Trade Organisation (WTO) in 1995, has become one of the most hotly contested debates in international economic policymaking. It has become the rallying ground for protests against the negative impact of globalisation - protests, which came to a head in Seattle at the November 1999 third WTO Ministerial.

Over the past two years, CIDSE's work on trade policy has focussed largely on biopatenting, TRIPs and food security. This publication is intended as a contribution to a wider trade policy agenda and as a foundation for our network's forthcoming policy position paper on the impact of agricultural trade liberalisation on food security. This paper will be published this September in advance of the fourth WTO ministerial in Qatar and the World Food Summit plus Five, both of which take place in November 2001.

The literature review does not claim to be exhaustive in terms of its coverage but it does throw up a number of key findings. There is a close interaction, for example, of economic factors that affect food security. Trade liberalisation policies, wider financial policies, a government's spending on the domestic economy, privatisation, its need for foreign exchange, etc. are all important. Poverty and unemployment, unrelated to trade, can also be key factors. Other matters too have an impact - institutional, cultural and social factors, the incidence of HIV/AIDS, more erratic weather patterns, for example.

Separating and identifying the precise impact of liberalisation on food security is analytically not easy. But it is clear that trade liberalisation, carried out under SAPs and under the WTO's Agreement on Agriculture and regional trade agreements, is a major factor affecting the food security prospects of the world's poor.

In particular, the studies reveal:

• the people negatively affected by sudden trade liberalisation measures are the poorest, those with limited access to capital. Moreover, in most cases, liberalisation policies overlook the gender dimension;
• the impact on farmers varies, according with their produce and according to whether their countries are exposed to imports. The greater the exposure of a country to food imports, either through dumping or commercial channels, the greater the possibility that farmers will be negatively affected;

• while most developing countries are giving priority to export crops, total export values are often not increasing;
• most of the impact of trade liberalisation on small-scale farmers has come from SAPs, or regional trade agreements rather, than from the WTO's Agreement on Agriculture (AoA). The impact of SAPs has been particularly harsh, with adjustments required in a short time frame that has burdened the poor;
• while some countries are feeling the effects of the AoA (as the FAO study has shown) the agreement's full impact may not be known for some years;
• the benefits and costs of liberalisation are influenced by the pace, sequencing and scope of liberalisation measures, as well as by the presence or absence of government regulatory and supporting policies. Examples of the latter include pubic investment in education and other sectors;
• prices of food to consumers do not always fall under liberalisation;
• while the short-term impact should be distinguished from the medium to long term impact, trade liberalisation has led to many farmers leaving their land and to countries becoming increasingly dependent on food imports. A loss of food sovereignty has resulted; this could lessen a country's room for manoeuvre in agricultural, trade and food policies and make long term recovery of its agricultural sector more difficult;

• the seriousness of the impact of trade liberalisation and related factors. "It is becoming obvious", points out the UNICEF paper by Jan Vandemoortele, "that the fruits of liberalisation and globalisation are not reaching the table of the poor. Disparities are on the rise around the world; a new face of 'apartheid' seems to be spreading across the globe as millions of people live in wretched conditions side-by-side those who enjoy unprecedented prosperity".

The studies presented here vary. The World Bank papers show varying views on the impact on liberalisation. But overwhelmingly, from the majority of these studies, there emerges a strong case for the reform of international trade liberalisation policies.

The review is meant to raise questions and spur future research. Some readers may conclude that the challenge is to address the negative effects of trade liberalisation. Others will look for a more comprehensive reassessment of the current model of liberalisation so as to give greater flexibility to governments - including national ownership of policymaking.

Clearly the double standards of many of the world's richest nations in preaching liberalisation while practising protectionism in crucial sectors such as agriculture once again emerges as an obstacle to food security.

We thank the authors of the research, John Madeley, Yannick Jadot and Gregore Lopez who wrote the synthesis chapter and George Gelber who edited the final text. We would welcome comments on or additions to this literature review and hope that it will be a useful resource for anyone working on trade policy.

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• The literature review on trade liberalisation and food security by John Madeley and Solagral looks at studies from various multilateral institutions, governments and academia together with non-governmental organisations.
• Significant methodological difficulties are encountered in trying to evaluate the impact of particular liberalisation processes (structural adjustment, regional integration, Agreement on Agriculture) because they all push in the same direction and interact and reinforce each other.
• Many of the studies in this review deal with trends at the national level and use macroeconomic data and statistics. Only a few contain micro-level information.
• This document is a synthesis of the studies in the literature review and does not question the quality, assumptions or methodology of the studies reviewed.

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1. In most of the studies, trade liberalisation leads to or is accompanied by a reduction of state intervention in various sectors of the economy and certain social support functions.
2. In many of the studies income inequality is a recurrent theme and is linked to the manner in which trade liberalisation is implemented.
3. In most of the country studies, the most severely affected groups are those that have limited access to capital (education, skills, land) and are further excluded due to lack of finance or credit and therefore [a] unable to benefit from the opportunities of the liberalisation process and/or [b] unable to cope with the changes it brings about (competition, new demands). Since most liberalisation policies do not take into consideration of the differential impacts on men and women (gender dimension), the burden of adjustment often falls disproportionately on women. The gender dimensions of these policies are important and require further study.
4. Most of the studies reviewed from the World Bank, IMF, WTO, governments and academic institutions agree that trade liberalisation contributes to the alleviation of poverty, increases prosperity and speeds the development process. Most WB, WTO and IMF studies, while promoting further trade liberalisation also recognise that it creates losers as well as winners. The studies of the UN, UN specialised agencies, international research organisations and academia have as their central theme, the ill effects of accelerated or incautious trade liberalisation. While they conclude that there are certain benefits from trade liberalisation, the studies noted that for liberalisation to support pro-poor growth and development, public investment (especially in education), regulatory and social policies and enhanced export capacity must accompany the opening up of economies.

The solutions put forward in the literature studied can thus be categorised into two schools of thought:

1. The advocates of liberalisation, often represented by the WB, IMF, WTO and a number of academics, call for liberalisation to continue but also for policies to address the negative side effects of liberalisation. They also call for the removal of trade-distorting subsidies and protectionism on the part of developed countries.
2. The second school of thought, represented mostly by research from the UN, UN specialised agencies, international research organisations and perhaps a majority of academics concludes that governments should re-examine the current trade liberalisation model and to review it at both the national and international level. They say that developing countries should have more flexible policy options, that capacity building within the country is crucial and the pace of trade liberalisation must take into account the level of development, ability of society, economic sectors and national institutions to cope with the changes.

   Like the first group, they also call on developed countries to remove protectionism in crucial sectors, such as agriculture, in order to allow developing countries to take advantage of the sectors in which they have a natural advantage. They advocate more flexible multilateral rules that take into consideration the differing levels of development in developing countries. /LI>

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Trade liberalisation is a process of systematically reducing and eventually eliminating all tariff and non-tariff barriers between countries as trading partners. It builds on the theory of comparative advantage in a free market, which holds that countries will benefit more if they focus their resources on sectors in which they have some sort of advantage and that the free market is the best mechanism for ensuring the optimal allocation of resources. The wealth generated as a result will benefit the economy as a whole. The theory has nothing to say about winners and losers within national economies. The theory of comparative advantage is a strong argument in favour of free international trade and specialisation among countries.

• ‘The supporters of trade liberalisation generally maintain that openness to international trade is good. It ‘raises the income of the poor by raising overall income, with insignificant effects on the distribution of income…standard pro – growth macroeconomic policies are good for the poor, raising mean income without significantly affecting the distribution of income…Other policies such as establishing the rule of law and openness to trade, benefit the poor and the rest of the economy equally’ (2).

• A paper on trade policy for the Dominican Republic (3) by the WB recommends that "Increased openness to trade is one of the most important pending policies to sustain strong economic growth in the Dominican Republic." The paper suggests that trade reforms can play an important role in supporting growth by making modern technology more profitable for domestic firms and by increasing specialisation. Also, by reducing the implicit and explicit tax on exports, trade liberalisation would provide an added boost to tourism….and help develop more efficient and outward looking agriculture and industrial sectors.

  The paper goes on to state that, "……failure to proceed with liberalisation in the agriculture sector will limit the benefits of this reform, especially for the poor. The government would be well advised to pursue a gradual but more aggressive policy towards trade liberalisation while providing adequate safety net mechanisms to the most vulnerable farmers. In this same area, even if in the short run current high protection were to be maintained, the country and the government would benefit by a more transparent management of non – tariff barriers."

• A paper by the International Monetary Fund, Malawi – Enhanced Structural Adjustment Facility Policy Framework Paper (4) notes that Malawi’s first democratically elected government adopted a set of prudent financial policies with complementary structural reforms which were initiated to liberalise the economy and redirect public spending to priority areas such as health, education and agriculture in order to alleviate poverty. This paper also notes that the liberalisation of agriculture brought benefits of high growth accruing primarily to the smallholder farmers, most of whom belong to the poorest segment of the population.

• Another study by the WTO secretariat, Trade, Income Disparity and Poverty (5), concludes that ‘trade liberalisation is generally a strong positive contributor to poverty alleviation…It also acknowledges that some people do lose in the short run from trade liberalisation, and argues that the plight of the losers should not be ignored, and that it should be addressed by with proper social safety nets and job retraining ‘rather than by abandoning reforms that benefit most people’.

• The report of a UNU – UNDP project, Poverty and Inequality (6), that compiled all available data on inequality trends into the World Income Inequality Database (WIID), based on data from 149 countries, shows clearly that ‘inequality has risen in most countries since the early-mid 1980s.’ ‘What caused the increase? The project analyses indicate that, to an important extent, the rush to implement liberalisation policies…in the absence of adequate regulatory capacity triggered the recent surges in inequality.’

• In the report True World Income Distribution, 1988 and 1993: First calculation based on household surveys alone (7), the World Bank calculates income distribution for individuals based on household survey data from 91 countries, and adjusted for differences in purchasing power parity between the countries. The study found that ‘inequality (measured by Gini coefficient) increased from an already very high 63 in 1988 to 66 in 1993.’

• The WB paper, The simultaneous evolution of growth and inequality (8), Mattias Lundberg and Lyn Squire, finds that greater openness to trade is ‘correlated negatively’ with income growth the poorest 40% of the population and ‘strongly and positively’ with income growth among the remaining 60%. ‘While greater openness benefits the majority, it harms the poorest. The results based on a sample of 38 countries between 1965 and 1992 – are both strong and striking say the authors.

• The paper, Trade Liberalisation and Poverty (9) from the ODI states that trade policy, ‘potentially affects poverty through its effects on both growth and income distribution’, and that …. ‘positive trade liberalisation effects may eventually relieve the poor, but in the short/medium term the whole adjustment process may be more harmful than helpful. We need to know much more about this. In order to benefit, the poor need to enjoy trade-induced price reduction in consumer goods, as well as reduced input and increased output prices which they face as producers…..the poor may experience increased income risks in the short-run when they switch from producing subsistence-local goods to producing tradable goods. Given the imperfect working of credit markets, these risks may considerably worsen conditions for the poor.’

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It is assumed that trade liberalisation in the agriculture sector removes trade distortions, both in the international and domestic markets, and rewards efficient producers, thereby making food cheaper and simultaneously increasing food security of people world-wide.

The studies reviewed generally conclude that agricultural trade liberalisation has not necessarily benefited developing countries in ways that it promised. The WTO Agreement on Agriculture (AoA) was seen as disappointing since not only did the benefits promised fail to materialise, but it further eroded the policy options of developing countries to safeguard national food security and legitimised protectionism and farm support policies on the part of the developed countries, particularly the European Union and the United States.

Those in favour of agricultural trade liberalisation argue that it will increase efficiency, stabilise prices in the international market and increase market share for efficient producers; thereby increasing prosperity in the sector. Yet the findings in the literature review are mixed.

• Merlinda D. Ingco in her paper (10) argues that most of the gains from multilateral liberalisation come from developing countries’ own liberalisation efforts. Least developed countries (LDCs) that failed to liberalise trade policies lost the opportunity for gains opened by the Uruguay Round (UR) agreement..

  This paper evaluates the progress in agricultural liberalisation and the welfare effects for LDCs and net food importing countries (NFIDCs) – as a result of agricultural price shocks resulting from the UR and finds that:

1. The changes in welfare are significantly affected by the structure of trade and by distortions in the domestic economy.
2. Although many economies are hurt by increases in world prices, losses in terms of trade are small relative to total GDP. Only in a few countries does the estimated welfare change constitute more than 1% of GDP.
3. In several countries, the distortion effects are significantly larger than the terms of trade effects. In some cases, the distortion effects work in opposition to the terms of trade effects and are large enough to reverse the sign of the net welfare change.

   This study concludes states that, ‘In short, removing policy distortions could convert the small loss in terms of trade to potential gains. But many least developed, net food-importing countries did not use the Round to support domestic efforts at trade reform and therefore lost the opportunity for gains from the UR’.

• The FAO’s assessment of the impact of the Uruguay Round on agricultural markets and food security, Oct 1999 (11) points out that on the global level, world food security has improved. This was based on a comparison between 1985-1994 and 1995-1998 on the six indicators of world food security concerning the cereal sector. The same study also advises the reader to be careful, as there is no causal link between this improvement in food security and the UR. The reverse also holds.

  This study also notes that from 1993-4 to 1995-96, LDCs as well as net food importing countries (NFIDCs) recorded substantial increases in the cost of their cereal imports, amounting to 83% for LDCs and 61% for NFIDCs. This is attributed to the increase of the world prices for cereals in 1995-96.

• A Symposium on Agriculture, Trade and Food Security (12) by the FAO on 16 countries and their experience in implementing the WTO/AoA finds that the implementation of AoA has led to a surge of imports but no corresponding increase in their exports, and this is forcing local farmers out of business. On the overall impact of the 16 countries, the study says: ‘a common reported concern was with a general concentration of farms, in a wide cross – section of countries. While this led to increased productivity and competitiveness with positive results, in the virtual absence of safety nets the process also marginalised small producers and added to unemployment and poverty. Of the 16 countries studied, only Thailand that saw its food exports increase since the implementation of the WTO/AoA.

• Another FAO study, Central America’s Free Trade Flop. Why liberalisation failed to boost agricultural performance (13) found that liberalisation had no real impact on growth of exports in general. This study on five Central American countries shows that in most respects the five countries did far better during the interventionist period (the1970s) than they have fared since liberalisation. Only in Costa Rica did liberalisation coincide with a rise in net agricultural exports.

• The case study on Zambia notes that more than just trade liberalisation is needed to ensure that productivity increase and poverty alleviation. The paper, Why Liberalisation Alone Has Not Improved Agricultural Productivity in Zambia: The Role of Asset Ownership and Working Capital Constraints (14), argues that policies to foster accumulation of the assets needed for agricultural production (draft animals and implements) and to provide complementary public investment programmes (e.g. education, credit, good agricultural extension services) could greatly help reduce poverty and improve productivity.

  One of the conclusions of this paper was that Zambia’s lacklustre performance after liberalisation was that lack of access to (ownership of) productive assets limits improvements in agricultural productivity and household welfare.

• The review of African trade liberalisation case studies (15) also showed divided results. In Burkina Faso, although food imports have stabilised, there are regions within the country where food insecurity still persists. This is due to lack of infrastructure – transportation, marketing and income disparities. Consumers have not experienced any reduction in food prices although the agriculture sector has been liberalised.

  Cameroon (16) has implemented three structural adjustment programmes since 1988. This is a reversal of policies in the 1960-1988 period when the government intervened in the rural and agricultural sector. The private sector now determines prices. Cameroon is basically food self-sufficient. This, however, is a consequence of the government's import substitution policy on food and its intervention the 1960-1988 period. Cameroon is concerned that Northern countries have not yet reduced their domestic support for agriculture and export subsidies as well as the SPS measures which it regards as disguised trade protectionism. It is also concerned by the removal of trade preferences by the European Union as the EU is its principal market.

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The studies reviewed show that developing countries have fundamental problems to address before trade liberalisation can be introduced.

• Most developing countries have not developed market mechanisms sufficiently to capture the benefits of trade liberalisation. Policies (especially competition policies and laws), the rule of law, access to information, institutions, producer associations, consumer groups, efficient transportation systems, and many other elements that are necessary for the orderly functioning of markets are deficient or absent altogether.

  A recurrent theme in Burkina Faso, Central African Republic, Mali, Madagascar, Senegal and Nicaragua was that of lack of government capacity in deregulating the economy in an efficient and effective manner.

• In almost all of sub-Saharan Africa, domestic prices (both for producer and consumers) did not reflect trade liberalisation gains due to imperfect market conditions. In Burkina Faso (17), urban traders have kept control of the sector to a large extent. This is also the case in Cameroon and Mali.

• In Mali (18), research shows that the location of producers has an impact on the prices they receive. The closer they are to trading centres, the better the prices they receive.

• In terms of pricing, most small producers face constraints bringing the produce to the market and getting a good price for the produce. Burkina Faso, Cameroon and Mali all suffered from cartel pricing of staple commodity products due to liberalisation of the domestic market.

• Only certain type of farmers benefit from globalisation. The UNCTAD report, Globalisation and Liberalisation: effects of international relations on poverty, 1996 (19) stated that ‘the benefits of globalisation/liberalisation to low-income agricultural producers are likely to be very limited…The greatest scope for increased trade is in relatively high- value sub-sectors such as horticulture; but their relative capital intensity…limits the scope for low income producers to benefit.’

  It goes on to say that ‘Where additional agricultural income (brought about by globalisation/liberalisation) is concentrated in the hands of larger producers, and/or liberalisation gives rise to an increase in the concentration of land ownership, an increase in overall poverty is possible.’ It quotes Mindanao, Philippines as an example – ‘many of these factors (limited availability of capital, credit, technology and inputs) are compounded by the potential short-term costs of liberalisation.’

• The International Fund for Agriculture Development (IFAD) in its Rural Poverty Report (20) quoted the example of Chile where the boom in exports of fruit from Chile’s central valley, partially reversed the impact on land structure of a 1968 land reform as capital and information requirements discriminate against small landowners. Smallholders, especially the recent beneficiaries of the land reform, could not make the large initial investments in fruit trees with no return over an extended gestation period, nor the investments in standardised production and packaging, and were rarely able to obtain credit. They also lacked the necessary technical expertise in fruit production. But at the same time, since fruit production is fairly labour intensive, demand for labour rose significantly, providing employment for many poor households.

• Many countries face balance of payments problems caused, at least in part, by declining terms of trade, and this in turn leads to reduced income from their exports as well as increased costs for their imports. One consequence of the rise in international price of cereals and devaluation of currencies is decreasing real income for citizens in developing countries..

  At their annual meeting in 1998 (21) the ASEAN Ministers on Agriculture and Forestry Meeting discussed the impact of the East Asian economic crisis on food, agriculture and forestry sector. The Ministers noted that ‘the rapid increase in unemployment, rise in poverty and in some cases shortage of food especially in the urban area.’ They agreed that, by providing food and employment, the food, agriculture and forestry sectors play an important role in responding to the social impact of the crisis. At the same time, these sectors can bring in foreign exchange through their exports or saving the foreign exchange by minimising imports.

While regional groupings may make economic sense as trading blocs, the relative strength of the members within such groups has a significant impact on the outcomes that countries experience.

• In the Mexican case, the UNDP paper Globalisation and Liberalisation: Implications for poverty, distribution and inequality, (22) pointed out that as a result of trade liberalisation through NAFTA, Mexico will gain in net income terms by further specialisation and trade with US and that the winners in the agricultural sector will be concentrated on predominantly large-scale, irrigated farms. The losers from free trade will be concentrated among producers of maize, the country’s staple food who will have to compete with producers from the mid west in USA. Mexican maize yields in rain-fed areas is one fifth of the average of the US mid-west.

• The Central African Republic (CAR) (23) too shows the importance of economic strength within a regional grouping. It is part of the Central African Economic and Monetary Community (CEMAC) and has agreed to implement Tax and Tariff Reforms at the regional level in line with WTO principles (lowering of custom duties, producer support) and structural adjustment aims of rationalising public spending. The impact of these reforms on farm incomes, on the availability of food and on food security has been negative. The regional grouping has not benefited the Central African Republic as its exports account for only 1.2% of intra-Community trade. On the contrary, with regional trade liberalisation, imports have risen, since the Central African Republic has now become a market for cheaper imports from neighbouring states.

• The paper Toward a Caribbean Vision 2020: A Regional Perspective on Development Challenges, Opportunities and Strategies for The Next Two Decades stated, ‘…..It is not clear whether the international trade environment will be global and driven by international trade rules and by an international body such as the World Trade Organisation or will be dominated by trade within economic ‘blocks’ such as North American Free Trade Association (NAFTA) or Free Trade Area of the Americas (FTAA)’.

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Much of the literature reviewed found that trade liberalisation has different impacts on different groups. While most studies suggest that, on balance, the general population will benefit, they also find that it is the poor who experience greatest difficulty. And, within the poor, certain sub-groups, namely small farmers, women and children suffer the most.

This group is hardest hit by trade liberalisation in the agricultural sector, by Structural Adjustment Programmes, regional trade blocks and WTO AoA-led measures.

• The UNDP paper Globalisation and Liberalisation: Implications for poverty, distribution and inequality (UNDP Occasional Paper 32, 1997) on Mexico and the NAFTA states that ‘Estimates of the number of livelihoods that will be lost in the maize sector are between 700,000 to 8000,000, representing 15% of the economically active population in agriculture.’ According to the World Bank, the depth and scale of poverty is increasing in Mexico and over 30% live below the poverty line.

• In all studies on Africa, those who experience most difficulty were those who saw their purchasing power reduced and their access to food products limited. In most cases consumer prices increased or stabilised at a high price, reflecting high international prices or as a result of imperfect domestic markets [cartels, restricted licensing, private monopolies, poor infrastructure](24).

• In Niger (25), where only 12% of the land surface is arable and more than 60% of the population live below the poverty line, the World Bank estimates that 50% of the people of Niger are food insecure. Trade liberalisation has intensified difficulties because imports are now a major source of food for the urban population and this has caused a weakening demand for local crops in the urban area.

• The World Bank paper, Poverty and Inequality During Structural Adjustments in Rural Tanzania (26) (Policy Research Paper 1641; M. Luisa Ferreira, Aug 96) found that ‘The rural average per capita income in 1991 was, in real terms, significantly higher than in 1983, i.e. poverty declined from 65% to 51%. The population near the poverty line benefited the most, while those with extremely low incomes appear to have become somewhat poorer.’ This paper also reaffirms the importance of improving the quantity and quality of education to increase the ability of the poor to benefit from market reforms.

The studies reveal both positive and negative consequences of trade liberalisation for women.

• A report from UNIFEM Gender and Globalisation, liberalisation and the economic crisis, says ‘The current globalisation of the world economy, brings negative impacts, but also positive effects and new opportunities. Women, however, have tended to be the least able to seize these opportunities, and are most likely to suffer from the rapid changes that societies undergo. ’

• The UNCTAD paper, Globalisation and Liberalisation: effects of international economic relations on poverty (27) states that ‘The gender dimensions of globalisation/liberalisation are ambiguous. On the one hand there is little doubt that some aspects of the process have increased income-earning opportunities for women’. On the other hand, where structural adjustments have adverse effects on the households, the burden of adjustment may fall disproportionately on women..’

• The UNDP report on Globalisation and Liberalisation: implications for poverty, distribution and inequality (28) on trade liberalisation in Mexico found that ‘The consequences on women are crucial too. Research on the Tarascán plateau of Michoacán has shown how male labour migration increases the workload on women and children. The withdrawal of children from schools in response to these pressures is an example of poverty across generations. Also, there has been a sharp increase in the frequency with which women are forced to migrate in search of work as day labourers. ’

• A paper by Prof. Bhattacharya (29) found that, ‘Whilst some groups have indeed been able to take advantage of liberalisation, large segments of the population including female-headed households, unskilled labourers, workers in import-substituting industries which are incurring losses in the face of liberalisation, and also workers in the privatised industries who have been laid off, are becoming increasingly vulnerable due to income erosion under a liberalised and decentralised regime.’

  The paper quotes data on poverty in Bangladesh (Source: Bangladesh – Promise and Performance (2000), ed. Professor Rounaq Jahan, University Press Ltd., Dhaka, Bangladesh) which shows that in 1983/84 population in poverty was 53.8% in the rural areas and 40.9% in the urban areas. In 1995/96, the corresponding figures were rural areas were 51.1% and urban areas were 26.3%.

  This paper concludes that, ‘Although there has been some (not very significant, marginal) decline in poverty level in the country over the corresponding period, three parallel developments are also significant:

1. GDP growth average about 4.8% over the decade but inequity is on the rise;
2. The rural-urban gap in terms of people living under the poverty line has also been on the rise;
3. The percentage of people in the extreme poverty group has continued to remain more or less the same.’

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In general the information drawn from the literature shows the importance of rigorous country by country analysis (on each product, sector and target groups) of the pros and cons and the sequencing of trade liberalisation.

• A UNDP report (30) states that, ‘Trends towards income inequality are not inherent in globalisation. The commercialisation of production for domestic markets can have similar effects, as can domestic investment activity. However, to the extent that liberalisation exposes domestic producers to more volatile global markets and flows of capital which are large in relation to the local economy, integration in global economy is a policy choice which carries high risks as well as the potential of delivering benefits.’

• In The Simultaneous Evolution of Growth and Inequality, Mathias Lundberg and Lyn Squire state that, ‘At least in the short term, globalisation appears to increase both poverty and inequality; the results suggest that there is no single policy which advances both greater growth and greater equity simultaneously… It may be possible, through careful selection of a combination of policies, to improve both growth and distribution. But these policies may do nothing to reduce poverty’.

• The UNDP (31) recommends that, ‘With appropriate policies, the poor can participate in trade and growth, and contribute to both. Marked declines in poverty and inequality are consistent with trade-led growth, as witnessed by the experiences of Southeast Asia. By contrast, where growth processes are grafted on to highly unequal social structure and inequitable international trading arrangements, the distribution of benefits will reflect this’.

• UNICEF (32) recommends that ‘One way of neutralising the inherent inequalising effect of globalisation is by incorporating the principles and good practices of social policy in the global economic and financial architecture. The onus of these practices should not be placed on national policies alone. They should also have a bearing on the formulation of global rules and regulations – for fairer trade and more aid, limited protection of intellectual property rights, more effective commodity price stabilisation schemes, and other measures.’

• The main conclusion of the study The WTO Agreement on Agriculture and Food Security (33), (Institute of Development Studies, UK) was that it should be possible to reconcile the ‘objective of international agricultural liberalisation with the pursuit of effective food security policies, but that this will require an explicit effort to achieve.’ But it warns that the AoA could be problematic in the future if it does not reflect developing country interest.

  The paper outlines the implications of agricultural protectionism by developed countries for food security in developing countries as:

1. increased supply may undermine agricultural development policies, but also reduce food costs;
2. artificially high OECD prices may support export diversification but new exports may be unsustainable;
3. over-subsidised prices of the exports of developed countries may undermine agricultural development policies;
4. increased world price instability disrupts long term development.

The paper recommends that, ‘The successful integration of international trade rules and food security policies (in the WTO negotiations) requires that developing countries are assisted to participate, and that their concerns are registered and not squeezed out by a small number of powerful agricultural states.’

• The Cairns Group (34) puts forward very clear demands for developing countries with regards to the Agreement on Agriculture:

1. concrete special and differential treatment provisions for developing countries
2. greater improvement of opportunities and terms of access for agricultural and agrifood produced in, and exported from, developing countries, including the fullest liberalisation of trade in tropical products and for products of importance to the diversification of production or from the growing of illicit narcotic crops. The final provisions should provide developing countries with effective market access to assist their economic growth, and appropriate tools to help them adapt to change, and cushion the impact of the reform process, specially on small and subsistence farmers.

The provisions should include:

1. faster and deeper cuts in, or elimination of, tariffs on all agricultural products, including value added products, produced in and exported by developing countries.
2. tariff quota administration rules which provide improved opportunities for exports from developing countries
3. differential treatment and related modalities as appropriate in the area of market access; the preservation of the current special safeguards for developing countries to assist with domestic and international agricultural reform efforts and in countering subsidised competition.

• Renegotiation of commitments to AoA.
  
  Senegal (35) had submitted an overall Measure of Support (MGS) basic of zero to the WTO/AoA. Therefore it is unable to make use of support measures included in the MGS. And many developing countries provide very low levels of support to the agriculture sector.

Access to developed countries' markets is a central theme of several research papers, which see it as essential to ensuring successful trade liberalisation in developing countries. At the same time the country case studies and government positions note the importance of and argue for increased market access. (36) Similarly it is noted that Sanitary and Phytosanitary Standards (SPS) are in effect acting as non-tariff barriers (NTBs) to developing country exports.

• The difficulty for developing nations to access the European market due to tariff structures and non trade barriers is noted repeatedly.

• For the African, Caribbean and Pacific countries, the changing relationship of the European Union with Least Developing Countries and the traditional preferential ACP treatment arrangement is a major cause for concern.(37)

• Several researches suggest investing in human capital (i.e. health and especially education), focusing especially to the very poor, as a means of allowing the benefits of trade liberalisation to be captured by all sectors of society. (38)

• Several governments (39) (India, Pakistan, Peru, and certain LDC’s) argue that:

1. developing countries should be allowed greater autonomy in determining domestic agricultural policies and should be able to provide domestic support.
2. consultations on market access, special and differential treatment of developing countries and on the possible negative effects of the AoA reforms should be included in the WTO.
3. their hopes for improved market access to developed countries have not materialised.

• IFAD’s (International Fund for Agriculture Development) suggests in its Rural Poverty Report (Feb 2000) that if a substantial group of poor smallholders experience difficulties then:

1. there should be a slower, staged (more cautious and more planned) liberalisation processes;
2. priority should be given to government and donor expenditure in the areas most affected, by promoting diversification, possibly out of agriculture.
3. appropriate expenditure including priority investment in the transport and communications infrastructure, and urgent research into alternative crops.

• There were also certain cases that demonstrated how certain basic rights could be won by organised groupings (such as trade unions (40), producer organisations (41)), as in Tunisia where trade unions were instrumental in setting a minimum wage and in maintaining food subsidies for the poor and in Honduras, where the rice producers were well organised and succeeded in putting pressure on the government that ensured an agreement between them and the agro-industrial sector that protected their interests.

(List of Contents)

World Bank

1. "The simultaneous evolution of growth and inequality", Mattias Lundberg and Lyn Squire, December 1999.
2. "Growth is Good for the Poor", David Dollar and Art Kraay, March 2000.
3. Has Agricultural Trade Liberalisation Improved Welfare in the Least-Developed Countries? Yes. Merlinda D. Ingco. Paper no 1748, April 1997.
4. Madagascar: Extract from draft of the World Bank's World Development Report, 2000.
5. Poverty and Inequality During Structural Adjustment in Rural Tanzania. Policy Research Paper 1641. M.Luisa Ferreira, August 1996.
6. Why Liberalisation Alone Has Not Improved Agricultural Productivity in Zambia: The Role of Asset Ownership and Working Capital Constraints. Klaus Deininger and Pedro Olinto, paper 2302, March 2000.
7. Bangladesh Agriculture in the 21st Century.. Protecting the poor during adjustment and transitions.
8. Conclusions of paper "Trade Policy in the Dominican Republic", (undated).
9. From WB website, research page: 1998 Abstracts of Current Studies: Poverty and International Economics, Poverty and the International Economy: What Are the Links? Ref. no. 681-83.
10. Feminisation of the Informal Sector: Evidence from Argentina, Brazil, and Costa Rica, Wendy Cunningham, World Bank Working Paper Series, February 2000.

International Monetary Fund

11. Malawi - Enhanced Structural Adjustment Facility Policy Framework Paper, 1998/99-2000/01.

World Trade Organisation

12. Trade, Income Disparity and Poverty, Dan Ben-David (Tel Aviv University) and L. Alan Winters (Sussex University), WTO secretariat study, June 2000.
13. Studies on the implementation and impact of the agreement on agriculture, WTO, October 2000.
14. Trade Policy Review of Peru, May 2000.
15. Trade policy review of Tanzania, February 2000.

Food and Agriculture Organisation

16. Symposium on Agriculture, Trade and Food Security, Synthesis of Case Studies, X3065/E., September 1999.
17. Assessment of the impact of the Uruguay Round on agricultural markets and food security, FAO, October 1999.
18. Central America's free trade flop. Why liberalisation failed to boost agricultural performance. Unpublished report to the FAO, December 1997, John Weeks, Centre for Development Studies, School of Oriental and African Studies, University of London.
19. The WTO agricultural agreement, consequences for Senegal, Jostein Lindland and Panos Konandreas, FAO, FONGS, 1997.

UN Development Programme

20. Globalisation and liberalisation: Implications for poverty, distribution and inequality, UNDP Occasional Paper 32. 1997.
21. Human Development Report, 1999, extracts.

UNICEF

22. Absorbing social shocks, protecting children and reducing poverty, Jan Vandemoortele. UNICEF Staff Working Papers Evaluation, Policy and Planning Series, No. EPP-00-001, January 2000.

UN Conference on Trade and Development

23. Globalisation and Liberalisation: effects of international economic relations on poverty, UNCTAD, 1996.
24. Poverty alleviation through international trade, report on a workshop, 1995.

UN Development Fund for Women

25. "Trade Liberalisation and Women: A Situational Analysis", Website, November 2000.

International Fund for Agricultural Development (IFAD)

26. Rural Poverty Report 2001: The Challenge of Ending Rural Poverty, (extract). February 2001. IFAD/OUP. ISBN:0-19-924507-X.
27. "The Asian Financial Crisis and the Rural Poor", February 1999.

International Labour Organisation

28. Should read: ILO Working Conditions and Environment Department Workshop, 1997.

UN General Assembly, 2000

29. Globalisation and its impact on the full enjoyment of human rights. Preliminary report of the Secretary General, August 2000.

UN Human Rights Commission, UN Sub-Commission for the Protection and Promotion of Human Rights

30. Resolution in its Fifty-second session, 17 August 2000, E/CN.4/Sub.2/2000/7

United Nations University

31. Poverty and Inequality, Hans van Ginkel, February 2000.

European Commission

32. The impact of liberalisation measures (world trade, regional trade and agricultural sectors) on the wheat and rice sectors of Burkina Faso. J.M. Sourisseau, K. Traore, S Sanon, IRAM-AEDES, (Consultants to the EC), November 2000.

33. The fall of competitiveness of local industry in Madagascar. RESAL (Réseau Européen de Sécurité Alimentaire)/IRAM-AEDES, August 2000.

34. The impact of liberalisation measures on the rice, maize and sorghum sectors of Nicaragua. IRAM-AEDES, September 2000.

Organisation for Economic Cooperation and Development

35. The impact of further trade liberalisation on the food security situation in developing countries, OECD, September 2000.

36. Government views on the WTO's Agreement on Agriculture, expressed in 1999 through a WTO process, Analysis and Information Exchange.

37. Toward a Caribbean Vision 2020: A Regional Perspective on Development Challenges, Opportunities and Strategies for the Next Two Decades, Caribbean Group for Cooperation in Economic Development, June 2000.

38. The 20th meeting of Association of Southeast Asian Nations (ASEAN) Ministers on Agriculture and Forestry, Hanoi, September 1998. Joint Press Statement.

39. Asia-Pacific Economic Cooperation. Assessing APEC Trade Liberalisation and Facilitation, 1999, APEC Economic Committee.

40. Forum on the Sectoral Impact of MERCOSUR, 1998.

41. Cairns Group: Negotiating Proposal to WTO Committee on Agriculture Special Session, WTO. Ref: G/AG/NG/W/54, 10 November 2000.

42. The TRIPs Agreement. A Guide for the South, The Uruguay Round Agreement on Trade-Related, Intellectual Property Rights, South Centre, 1997.

43. The issues of multilateral agricultural negotiations for agriculture in Cameroon. J Engola Oyep, Ministry of scientific and technical research, Cameroon 2000.

44. Implementation of the Uruguay Round Agreements. The Central African Republic case. Bruno Dokon, Ministry of Trade, of Industry and of private sector promotion. International Workshop: "Support for the West and Central African countries as regards agricultural multilateral negotiations", Dakar, (Senegal), October 2000.

45. Agricultural policy and international agreements of exchange in the Sahel; case of Niger. Sherif Chako. International Workshop: "Support for the West and Central African countries as regards agricultural multilateral negotiations", Dakar, (Senegal), October 2000.

46. Eliminating World Poverty: Making Globalisation Work for the World's Poor (White Paper on International Development, Department for International Development (DFID), London, December 2000)

47. The WTO Agreement on Agriculture and Food Security, Institute of Development Studies, UK, (funded by DFID, published by the Commonwealth Secretariat). November 1999.

48. Can liberalisation boost farming in Southern Africa? University of Sheffield, 2000.

49. Trade Liberalisation and Poverty. Maurizio Bussolo and Henri-Bernard Solignac Lecomte, Overseas Development Institute, December 1999.

50. The impact of trade liberalisation on income distribution in China, Y Yang and Y Huang, Research School of Pacific and Asian Studies, 1997.

51. Global Economic Effects of the EU Common Agricultural Policy, Brent Borrell & Lionel Hubbard, Economic Affairs, June 2000 edition.

52. Globalisation and its impact on Zambia. A country report prepared for the Professors World Peace Academy. Venkatesh Seshamani, University of Zambia, Lusaka, November 1999.

53. Bangladesh: Trade liberalisation and a widening rural-urban gap. Prof.Bhattacharya, Centre for Policy Dialogue, Dhaka, 2000.

54. The Forestry Industry in the State of Chihuahua: "Economic Ecological and Social Impacts post-NAFTA", by Maria Teresa Guerrero and Francisco de Villa, Comisión de Solidaridad y Defensa de los Derechos Humanos, A.C.Chihuahua City, Chihuahua and Mary Kelly, Cyrus Reed, and Brandon Vegter, Texas Center for Policy Studies, Austin,Texas

55. Bittersweet Harvests for Global Supermarkets: Challenges in Latin America's Agricultural Export Boom; L A Thrupp with G Bergeron, W F Waters, World Resources Institute, 1995.

56. The liberalisation of the cereal sector in Mali. (Etude de l'impact de la libéralisation sur le fonctionnement des filières céréalières au Mali.) Johny Egg, French National Institute for Agronomic Research (INRA), Department of Economics and Rural Sociology. Rapport de synthèse. Programme de Restructuration du Marché Céréalier (PRMC). May 1999

57. Joint World Bank - NGO: SAPRI

58. Food security between the state and the market, Marie-Cécile Thirion, Laurence Tubiana, Benoit Vergriette, Solagral work, September 1998

59. Food security: constraints and issues around the World Trade Organisation for the Sub-Saharan Africa countries, Yannick Jadot, Solagral, April 1998.

60. The WTO and agriculture. Food sovereignty threatened by the trade agreements; D. V. D. Steen, A. Danau, M Poznanski, Collective on Food Strategies, November 1999.

61. Forum Syd studies.

62. CAFOD and Christian Aid, A Human Development Approach to Globalisation, (Duncan Green and Claire Melamed, June 2000), available at www.cafod.org.uk

63. Oxfam GB Policy Paper 5/00 – Globalisation: Submission to the UK Government’s White Paper on Globalisation, available at www.oxfam.org.uk/policy/papers/global/global1.htm

64. Trade Liberalisation - The Impact The Sustainability Issues Forum (SIF), Vancouver, Canada, 1997 People's Summit on APEC (Asia Pacific Economic Co-operation).

(List of Contents)

1. "The simultaneous evolution of growth and inequality", Mattias Lundberg and Lyn Squire, December 1999.

Finds that greater openness to trade is "correlated negatively" with income growth among the poorest 40 percent of the population, and "strongly and positively" with income growth among the remaining 60 per cent. "While greater openness benefits the majority, it harms the poorest", it says. The results - based on a sample of 38 countries between 1965 and 1992 - are both "strong and striking", say the authors.

The results show that the costs of adjusting to greater openness of trade "are borne exclusively by the poor, regardless of how long the adjustment takes", says the paper, "the poor are far more vulnerable to shifts in relative international prices, and this vulnerability is magnified by the country's openness to trade. This bodies ill for the poor and suggests that much more needs to be done to compensate those who lose from liberalisation".

"Even those who have never heard of the WTO, such as poor farmers, are affected by changes in the prices of their inputs and products. Considering that the prices of non-oil commodities have uniformly declined since the beginning of the 20th century, this bodes ill for poverty. At least in the short term, globalisation appears to increase both poverty and inequality; the results suggest that there is no single policy which advances both greater growth and greater equity simultaneously....It may be possible, through careful selection of a combination of policies, to improve both growth and distribution. But these policies may do nothing to reduce poverty".

The paper also finds that there "is a large and significant correlation between more equitable land distribution and faster growth among the poor".

Most World Bank papers appear to contain opposite findings to the Lundberg and Squire study.

Says that openness to international trade "raises income of the poor by raising overall income, with insignificant effects on the distribution of income.....Standard pro-growth macroeconomic policies are good for the poor, raising mean income without significantly affecting the distribution of income.....Other policies, such as establishing the rule of law and openness to trade, benefit the poor and the rest of the economy equally".

(In a critique of the Dollar and Kraay paper, the Washington-based Center for Economic and Policy Research point out that the growth slowdown of the last two decades, which has "coincided with increasing globalisation, should cause economists who advocate indiscriminate opening to trade and financial flows at least some cause for reflection...(it)..may mean that some of the development strategies that have proved successful in the past will require a wider range of interventions and flexibility on a number of policies".)

Most of the gains from multilateral liberalisation come from the countries' own liberalisation efforts, says the author. Least-developed countries that failed to liberalise their trade policy lost the opportunity for gains that the Uruguay Round made possible.

Evaluates the progress in agricultural liberalisation - and the welfare effects for least-developed and net food-importing countries - as a result of agricultural price shocks resulting from the Uruguay Round. Finds that: ° The changes in welfare are significantly affected by the structure of trade and distortions in the domestic economy. ° Although many economies are hurt by increases in world prices, losses in terms of trade are small relative to total GDP. (However) the price increases in wheat and vegetable oils, together with increased prices for coarse grains and sugar, result in adverse terms-of-trade changes particularly in least-developed countries in Africa and South Asia. This is because many least-developed countries in Africa are net-food importers, particularly in wheat, rice, and dairy products, but exporters of tropical beverages....the largest terms-of-trade loss are estimated for Egypt, at US$35.88 million. More than 90 percent of this income loss is due to higher costs of grains imports, estimated at US$32 million. Indonesia, Pakistan, Yemen, Sri Lanka, Nigeria, Honduras and Ghana will face terms-of-trade losses at more than US$5 million. The largest estimated terms-of-trade losses are....Yemen (8.05), Nigeria (6.16), Ghana (5.13), Ethiopia (4.71), Sudan (4.39), Kenya (3.75), Zaire (2.1), Mali (1.93), and Mozambique (1.35). The smallest terms-of-trade loss, at less than 0.5 million, are estimated for Rwanda, Madagascar, Gambia, Central African Republic, Burkina Faso and Comoros. ° In several countries, the distortion effects are significantly larger than the terms-of-trade effects. In some cases, the distortion effects work in opposition to the terms-of-trade effects and are large enough to reverse the sign of the net welfare change.

"In short, removing policy distortions could convert the small loss in terms of trade to potential gains. But many least-developed, net food-importing countries did not use the Round to support domestic efforts at trade reform. As most studies show, most gains from multilateral liberalisation come from the countries' own liberalisation efforts, so countries that failed to liberalise their trade policy lost the opportunity for gains".

Reforms in Madagascar seem to have hurt the rural poor despite the increase in their (food) output. Following reform, agriculture grew the fastest it had in 20 years (albeit still at a modest rate), with growth concentrated among the smallest farmers. But the evidence also shows deepening poverty during and following liberalisation, particularly in rural areas. Nutritional, educational and spending data all suggest significant deterioration in living standards among the country's primarily rural poor. An important cause appears to be the significant liberalisation-induced rise in.....all the major food crops prices, particularly rice.

Rice price changes, associated with liberalisation, are estimated to have led to welfare losses of more than 20 per cent for more than a third of the country's rice farmers who comprise most of the country's poor. Because most small farmers in Madagascar are net rice buyers, liberalisation seems to have induced significant welfare losses among the country's primarily rural poor, including a large proportion of rice producers. A natural response for immiserised smallholders is to increase their labour effort, which increases output. Hence the apparent paradoxical result of higher agricultural output and higher rural poverty.

The World Development Report, as published, in Chapter 4, "Making Markets Work Better for Poor People", emphasises the benefits of liberalised trade and places the responsibility for making it work for the poor on complementary measures that have to be undertaken principally by national governments, e.g. "To reach poor people, many reforms need to be accompanied by institutional support, investment and infrastructure, and complementary reforms at the micro level."

Claims that growth attributed to structural adjustment has benefited the population generally, "shifting a significant portion of the population from below the poverty line to above it. Only that smaller fraction of the population with extremely low incomes was unable to benefit from the economy's improved performance - probably because the liberalisation process that encouraged growth rewarded those with education, excluding from benefits those with little education."

The Economic Recovery Program, launched in 1986, "has positively affected income, although the increase is not yet reflected in such basic social indicators as infant mortality rates or levels of primary schooling....possibly the lower incidence but greater severity of poverty is attributable to a liberalisation process that rewards those with education, who are better able to respond to new opportunities. This suggests the importance of improving the quantity and quality of education to increase the ability of the poor to benefit from market reforms.

The rural average per capita income in 1991 was, in real terms, significantly higher than in 1983. The population in poverty declined from 65 percent in 1983 to 51 percent in 1991. The population near the poverty line benefited the most, while those with extremely low incomes appear to have become somewhat poorer....Increases in the inequality of income distribution eroded some of the potential for poverty reduction that would have otherwise resulted from growth. In both years, the stock of human capital was low for the poor, as measured by educational achievement.

Possibly the lower incidence but greater severity of poverty is attributable to a liberalisation process that rewards those with education, who are better able to respond to new opportunities. This suggests the importance of improving the quantity and quality of education to increase the ability of the poor to benefit from market reforms. Targeting human capital investments to the very poor should be a high priority during adjustment".

Policies to foster accumulation of the assets needed for agricultural production (including draft animals and implements) and to provide complementary public goods (education, credit, and good agricultural extension services) could greatly help reduce poverty and improve productivity in Zambia, finds the paper.

Deininger and Olinto use a large panel data set from Zambia to examine factors that could explain the relatively lackluster performance of the country's agricultural sector after liberalisation. Zambia's liberalisation significantly opened the economy but failed to alter the structure of production or help realise efficiency gains. They reach two main conclusions.

First, not owning productive assets (in Zambia, draft animals and implements) limits improvements in agricultural productivity and household welfare. Owning oxen increases income directly, allows farmers to till their fields efficiently when rain is delayed, increases the area cultivated, and improves access to credit and fertiliser markets.

Second, the authors reject the hypothesis that the application of fertiliser is unprofitable because of high input prices. Rather, fertiliser use appears to have declined because of constraints on supplies, which government intervention exacerbated instead of alleviating.

This account says that the impact of liberalisation consists of two elements: (i) direct impact on agriculture due to changes in the level of input use, and (ii) indirect impact on the production of both agricultural and non-agricultural products arising from reallocation of budgetary savings through reduction or elimination of input subsidies.

Liberalisation of the fertiliser and irrigation equipment markets was the dominant feature of the reform that produced a substantial impact on production. In the case of fertiliser, the response of private trade was vigorous. It was estimated that there were 8,000 wholesalers and 50,000 retailers operating competitively in the fertiliser market by 1988 The share of private trade went up quite fast - from 75 per cent in 1989 to about 100 per cent in 1992.

Liberalisation of the markets for seeds and pesticides has only modest implications for impact in the short run, but in the long run the impact, particularly that of seed, is likely to be perceptibly large.

"Budgetary savings arising from liberalisation of the fertiliser market were quite significant...Measurement of the direct impact of policy reforms is no less complex than the indirect impact, particularly because of problems in deriving the counterfactual estimates of production and income without reform that are necessary for comparison with the post-reform outcome....There is a dearth of empirical studies on the measurement of impact of market reform".

A further Bank paper on Bangladesh, "Protecting the poor during adjustment and transitions" implicitly recognises that "periods of economic reform" could affect the poor. It says: "Protecting the poor and the vulnerable during normal times and during periods of economic reform is critical for alleviating poverty and sustaining the reform process. Inflation, contraction in output, decline in real wages, and other developments in some low-income adjusting countries, and countries in transition, underscore the need for public social safety nets to protect vulnerable groups from short-term poverty".

"Increased openness to trade is one of the most important pending policies to sustain strong economic growth in the Dominican Republic. Trade reform can play an important role in supporting growth by making modern technology more profitable for domestic firms and by opening up the possibility frontier for specialisation. Also, by reducing the implicit and explicit tax on exports, trade liberalisation would provide an added boost to the already thriving tourism..... and help develop more efficient and outward looking agriculture and industrial sectors.

.... failure to proceed with liberalisation in the agriculture sector will limit the benefits of this reform, especially on the poor. The government would be well advised to pursue a gradual but more aggressive policy towards trade liberalisation in agriculture while providing adequate safety net mechanisms to the most vulnerable farmers. In this same area, even if in the short run current high protection were to be maintained, the country and the government would benefit by a more transparent management of non-tariff barriers".

This research investigates the effects of increased economic openness on the very poor....the effects on poverty, with Indonesia and South Africa as case studies.

"The links between poverty and trade reform are an important policy issue, but one for which evidence is lacking. The heightened emphasis on addressing poverty in the development process suggests that evidence on the links between internationalisation and poverty is desirable both in its own right and to help with the design of policy packages or compensation policies. The issues are of particular relevance to South Africa, where a vigorous policy debate about liberalisation is under way.

In an ideal world this study would investigate the impact of internationalisation on the very poor using a well-specified and econometrically estimated general equilibrium model. This analysis would encompass both the link between policy and prices (of goods, services, and factors) and the link between prices and household welfare. But this has never been done in one step-for fairly obvious practical reasons.

The study starts by asking how trade liberalisation affects the prices of the goods consumed and produced and the wages and other incomes of the poor. It will examine detailed time-series data from particular liberalisation’s to establish a basis of evidence on these pass-throughs and couple this work with computable general equilibrium modelling to derive implications for a wider set of policy shocks than have actually been observed. It will then perform a careful household-level analysis of demand and supply to explore how households adjust to these shocks and what the net effects are.

For South Africa only one year of household data are available, so responses to price changes will need to be simulated. For Indonesia the household data span certain reforms, so responses and consequences can be observed".

The conclusions – to be followed up in a seminar planned for October 2000 – were as follows:

"Findings for Indonesia show that the very poor are not so poor as to be essentially insulated from the economic shocks of the Asian financial crisis. The very poor—especially the urban very poor—were severely affected by the price changes that resulted. The findings also highlight the muting effect of self-production by the rural poor and the substantial geographic variation in the impact of the crisis.

The South African study shows that different racial groups have very similar demand parameters, although consumption baskets differ. Initial results suggest that price and tax reforms will induce similar demand responses across different racial groups. As trade liberalisation results become available, they will allow better estimates of who will most suffer and who will most benefit from South Africa’s continued integration into the global economy."

"The gender impacts of structural change and trade liberalisation in Latin America are little understood despite the massive economic restructuring in the past decade. This paper does not pretend to establish a causality between the macro-adjustments and the gender balance of the labour market. Instead, it examines the gender composition of the labour force before and after periods of restructuring to identify if there has been a feminisation of the informal wage (unskilled) sector in Argentina (rigid labour market, extensive liberalisation), Brazil (flexible labour market, extensive liberalisation), and Costa Rica (flexible labour market, gradual liberalisation).

The informal sector has become less feminised in Argentina as men now dominate the sector but more feminised in Brazil and Costa Rica as women's share increases, even when controlling for other characteristics. The intra-gender differences show that both men and women are more likely to become informal wage workers relative to the other sectors in the later periods (except for Costa Rican men), as they shift out of formal sector jobs. The causes of the changes are due less to observable characteristics, as education level and household composition lose sorting power in the later periods, so policymakers will have a bigger challenge identifying intervention points to interrupt the informalization trend".

Malawi's first democratically elected government, which took office in May 1994...pronounced its overarching objective to be the alleviation of poverty. Key to achieving this objective was the adoption of a set of prudent financial policies designed to restore and maintain macroeconomic stability. "Complementary structural reforms were initiated to liberalise the economy and redirect public spending to priority areas such as health, education, and agriculture.

Initially, implementation of such policies led to major successes in both macroeconomic management and structural reform. Real GDP growth averaged 12 percent per annum in 1995-96, led by high agricultural growth, which was aided by favourable rainfall in that period, and the significant liberalisation of production and marketing arrangements in the sector. The liberalisation of agriculture brought the benefits of high growth accruing primarily to the smallholder farmers, most of whom belong to the poorest segment of the population.

The program for 1997-98 sought to consolidate the considerable gains of the previous two years. But Malawi's Enhanced Structural Adjustment Facility (ESAF)-supported program went seriously off track...in 1997, the pace of structural reform slowed markedly (but)...significant efforts have been made since early 1998 to accelerate the process of structural reform....consistent with this strategy, the government will seek to achieve an average annual real GDP growth of five and a half percent through strong agricultural expansion and continued efforts to raise investment.

As the subsistence economy - which accounts for some one-fourth of overall output in Malawi -becomes increasingly commercialised, and with further improvements in the infrastructure and marketing arrangements, smallholder output is expected to increase substantially over the medium term, contributing thereby to the reduction of rural poverty".

Claims that trade liberalisation helps poor countries to catch up with rich ones and that this faster economic growth helps to alleviate poverty. What distinguishes developing countries that are catching up is their openness to trade: "only a handful of developing countries - primarily in East Asia - have been able to grow out of poverty so far, although a second tier of developing, least-developed and transition economies have made rapid progress in more recent years, including countries as diverse as China, India, and Uganda".

The study claims that poor people within a country generally gain from trade liberalisation. One chapter asks whether trade liberalisation and poverty are connected, and what might be done to avoid negative outcomes. "The starting point of the analysis is the so-called 'farm household' model - a stylised model of a basic production-consumption unit in the economy. At the most general level of abstraction, an increase in the price of something the household sells (labour, goods, services), or a reduction in the price of something the household consumes (goods, services), increases the real income (purchasing power) of the household, and vice versa.

Thus, whether a trade reform is pro- or anti-poor depends not only on the induced price effects, which in turn depends on which tariffs are being reduced, and how much of a price change is passed through to the poor, but on how the poor earn and spend their incomes. More important than price changes is whether markets exist at all: trade reform can both create and destroy markets. Extreme adverse poverty shocks are often associated with the disappearance of a market, while strong poverty alleviation can arise when markets are introduced for previously un-traded or unavailable goods.

Opening up the economy will often reduce risk and variability because world markets (which have many players) are more stable than domestic ones. But sometimes it will increase risk either because official stabilisation schemes are undermined or because residents switch completely from one activity to another that offers higher average rewards but greater variability. In these cases economic vulnerability could increase, which could increase the incidence of poverty even as the average incomes of the poor increase.

Since the gains from trade rely largely on adjusting a country's output bundle, there is a possibility that people will suffer temporary adverse shocks".

Concludes that "trade liberalisation is generally a strongly positive contributor to poverty alleviation - it allows people to exploit their productive potential, assists economic growth, curtails arbitrary policy interventions and helps to insulate against shocks". It acknowledges that some people do lose in the short run from trade liberalisation, and argues that the plight of the losers should not be ignored, but that the right way to alleviate their hardship is through social safety nets and job retraining "rather than by abandoning reforms that benefit most people".

But the paper has this caveat: "Data limitations precluded the analysis of poor countries here - and it is far from obvious that the impact of trade liberalisation found on incomes in the middle and high-income countries could also be found in the poorest countries in the world. In the case of the poorest countries, a range of constraints to economic growth and development must be addressed if openness to trade is to have an impact on income levels and growth".

It is important to mention the summary compilation carried out by the Secretariat of the WTO concerning all work and analyses of the principal international organisations on the impact of the Uruguay Round on agriculture in general, or, for some products, on the interests of developing countries. Compilation also takes up the implementation of specific elements of the agricultural agreement on the stage of the special and differentiated treatment, as well as the situation of the LDCs and the countries with food deficits in the context of the Marrakech Decision. The compiled studies and analyses are in addition to current or programmed research.

The review notes that agriculture is an important sector in the Peruvian economy, both in terms of output and employment. "Difficult adjustments in this sector have resulted from the liberalisation and reductions in state assistance initiated in the early 1990s which, nevertheless, have underpinned strong output expansion directed at both domestic and foreign markets. However, the concentration of various border and internal support measures in a limited range of favoured products (certain crops and dairy products) may well hinder further gains by misallocating labour, land, and capital resources at the expense of other activities. The report also notes that driven by international demand, production of coca leaf and derived products still appears sizeable albeit declining".

Tanzania's agricultural sector constitutes over 50% of its national GDP and provides a majority of the country's export earnings, says the review. "The sector has been substantially liberalised since the mid 1980s and market forces have been allowed to prevail. The Government has withdrawn from direct involvement in production, processing, and marketing activities and has retained only its role in setting policies". The report notes that Tanzania has in the past few years experienced severe food shortages and varying levels of export earnings due to both droughts and floods.

Tanzania's exports are primarily agricultural commodities with coffee, cashew nuts, tobacco and cotton constituting the largest sectors. Despite duty free access to European markets under the Lome Convention and non-reciprocal preferential access to the markets of other developed countries through the Generalised System of Preferences, benefits to Tanzania from these preferential arrangements are minimal owing to its limited export capacity.

The report notes that Tanzania's tariff structure is "… somewhat escalatory with many processed products facing a higher effective rate of protection along the processing chain. The report states that such a tariff structure provides substantial import protection to higher-level processing activities, causing resource misallocation and inflicting higher costs to Tanzanian consumers." The report does not draw conclusions about the welfare benefits or otherwise to agricultural producers as a result of trade liberalisation.

Looks at the experience of 16 developing countries in implementing the WTO Agreement on Agriculture. Finds that the AoA has led to a surge of food imports into the countries but not to an increase in their exports, which is forcing local farmers out of business and into the urban areas. This is leading to a concentration of farm holdings. The countries studied were Bangladesh, Botswana, Brazil, Egypt, Fiji, Guyana, India, Jamaica, Kenya, Morocco, Pakistan, Peru, Senegal, Sri Lanka, Tanzania and Thailand.

"There was a remarkably similar experience with import surges in particular products in the post-Uruguay Round period; these were dairy products (mostly milk powder) and meat products (mainly poultry). Some regions, notably the small island states of the Caribbean and the South Pacific, seemed to be facing difficulties coping with import surges of these products, with detrimental effects on competing domestic sectors".

While their imports of food have increased, "these countries were not able to raise their exports. Significant supply side constraints prevented the countries studied from taking advantage of increased global market access", it says. On Egypt, the study says: "the experience with trade has not been favourable. Imports have risen much faster than exports". Kenya "has experienced negative impacts from market liberalisation in the production of cotton'. Jamaica's "agricultural imports have increased significantly since the liberalisation process began", says the study.

Thailand was the only country studied to increase its food exports. The report notes that Thailand "has a natural competitive advantage in agriculture based on its relatively abundant endowment of land" and that " 92. As an exporter of agricultural commodities, Thailand has benefited, directly or indirectly, from the UR market access commitments of other countries including, inter alia, Japan, the Republic of Korea, Indonesia, the Philippines, the EC and Malaysia. "

On the overall economic impact on the 16 countries, the study says: "a common reported concern was with a general trend towards the concentration of farms, in a wide cross-section of countries. While this led to increased productivity and competitiveness with positive results, in the virtual absence of safety nets the process also marginalised small producers and added to unemployment and poverty".

"Brazil: the dairy sector has undergone significant changes in the structure of production, and continues to do so. International competitive pressures are transforming the mode of production aimed at reducing costs to international levels. While the impact on overall productivity and production has been positive, this process is also causing high social costs of adjustment on the part of the large number of small farmers.

Guyana: food import trends - trade policy changes in Guyana that have led to increased access to the domestic market have resulted more from the World Bank/IMF SAP conditionality and compliance with CARICOM's CET (common external tariff) than from the AoA or WTO rules. However, there are concerns that a more liberalised market will cause imports to replace domestic production as the WTO-led liberalisation process deepens. Evidence to date on actual effects is inconclusive, but the date show rapidly increasing trends in food imports. Food imports increased by over three-fold from US$15 million in 1985-1987 to US$50 million by 1996-1998.

Trade liberalisation has played an important part in the recent surge in imports...fruit juices are now imported from as far as France and Thailand, which was not the case before. Producers and traders of beans feel that increasing imports have led to a decline in the production of the minca peas, developed and spread throughout Guyana in the 1980s. The same applies to local cabbage and carrot. There is, thus, the fear that without adequate market protection accompanied by development programmes, many more commodities that have historically been produced domestically would be imported. This would transform the domestic diet, leading to continued greater dependency on imported foods. The data suggest that this process is well underway for several basic foodstuffs.

Dairy: Import volumes particularly accelerated from 1991 onwards....it is very probable that the domestic dairy sector may not survive in the future if this trend continues.

Poultry: The liberalised investment regime made it easier and attractive to establish fast food centres, which found it cheaper and more reliable to import meat for further processing than purchase locally....there are real concerns that the absence of adequate health and inspection monitoring services has led to imports of inferior products than intended,

sometimes with expired dates.

Sri Lanka: Consequences for food security - on the whole, the impact on food security of the surge in imports of relatively cheaper food products, following the tariffication process, seems to have been adverse, but it is difficult to measure the impact in precise terms.

With regard to major food items, notably chillies, onions and potatoes, the situation seems precarious, as reflected in the significant drop in areas and production and the rise in imports. The risk of high dependence on imported food items such as onions became obvious in 1998 when India imposed a ban on onion exports, resulting in more than a quadrupling of retail prices of onions in Sri Lanka, to almost 80-100 rupees per kg. Moreover, local production fell to 17 000 tons as the area cultivated was reduced significantly, with unfavourable consequences for both the onion farmers and consumers...strategies need to be drawn up for the development of a more secure food production strategy in the medium term.

Impact on rural employment: Since the export sector in the developing countries generally specialises in labour-intensive products, an improvement in market access as a result of trade liberalisation may be expected to have beneficial effects on employment. In Sri Lanka, this effect is yet to be seen because the AoA has not as yet opened up markets in major developed countries.

In the country's import-competing sectors, the experience has not been favourable. Apart from rice, which has often suffered on account of imports and wheat flour pricing policies, there is clear evidence of an unfavourable impact of imports on domestic output of vegetables, notably onions and potatoes. The resulting decline in the cultivated area of these crops has affected approximately 300 000 persons involved in their production and marketing. The immediate possibilities for affected farmers to turn to other crops are limited. Consequently, the economic effects of import liberalisation in this sector have been significant".

(NB: The FAO is publishing all these country case studies in a single volume book, expected to be available in 2001)

The study points out the methodological difficulties that are inherent in making any assessment exercise. The basic difficulty is in identifying a basis for comparison: what would have been the course of world agriculture if there had been no agreements?

There is no data allowing the prediction of what would have been the situation in the absence of the Uruguay Round (UR). However, the comparison of developments in the period 1995-1998 with the longer-run trend based on data 1985-1994 gives some results.

In evaluating the impact of the UR on food security, the comparison of the two periods covers six indicators of world food security concerning the cereal sector. The comparison reveals positive divergences during the period 1995-1998 that point to some improvement in food security. However, the study stresses that it is advisable to be careful. There is indeed no proof that such indicators are correct for countries that import cereals.

The indicator figures relating to countries exporting cereals are compared with the downward trend resulting from the period 1985-1994. This decline can be connected to the UR, in consideration of the adoption of agricultural "anticipatory" policies compatible with the UR, before the implementation of the Agreement on Agriculture, which resulted in a considerable fall of transfer stocks.

Beyond world food security indicators, and in relation to the cost of cereal imports, the study shows that from 1993/94 to 1995/96, the LDCs as well as the countries with food deficits (PDV), recorded a substantial increase in the cost of their cereal imports, amounting to 83% for the LDCs and 61% for the PDV. The study stresses that this increase was nothing unusual in view of the strong rise of world cereal prices in 1995/96.

On the other hand, it is noted that the cost of cereal imports remained relatively high for both groups of countries in 1996/97 and 1997/98. The FAO says that several factors were responsible: the nominal cereal price, the volume of imports, and the structural change of imports through food aid components and export subsidies. The reduction in food aid in recent years contributed to reducing the cost of food imports. Similarly, the value of accompanied subsidy imports, which reached 26% of the cost of the cereal imports of the LDCs and 46% of that of the PDV in 1994/94, has been practically zero since 1995/96. This structural change reflects the importance assumed by the import of cereals under commercial conditions during the period 1997/98.

The FAO notes that the cost of cereal imports should moreover fall considerably in 1998/99, going back to a level similar to that in the middle of the 1990s. This fall would be explained by the reduction of the volume of the imports (following the resumption of domestic production), the fall in prices, and, to a lesser extent, the increase in the deliveries of food aid relative to the two previous years.

Concerning the movement of the world prices, the study recalls that one of the advantages of the UR was the stabilisation of the courses of the foodstuffs actually did not take shape, owing to insufficiently taking into account the fundamental role of stocks. The reform of policies, often associated with the UR, at the end of the 1980s and at the beginning of the 1990s, resulted in a significant lowering of transfer stocks which probably increased the price fluctuations. There is not, for all that, an observable tendency of the variability of the long-term prices.

Recent developments in trade theory challenge assumptions that trade protectionism is invariably bad – and abolition of exchange rate controls invariably good - for agriculture.

This study probes the performance of the agriculture sector in five Central American countries that have adopted liberalisation policies - Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. It found that liberalisation had no real impact on growth of exports in general. Liberalisation superseded interventionist trade policies such as import substitution, that were perceived to cause distortions and so work to agriculture's disadvantage. The report shows that in most respects the five countries did far better during the interventionist 1970s than they have since liberalisation. Only in Costa Rica did liberalisation coincide with a rise in net agricultural exports. In four out of five cases, agriculture exports declined after liberalisation.

"If fostering agriculture is a policy goal, there are better ways to do it. A judicious combination of export promotion and import substitution targeted on agriculture could be more successful. A country by country approach is needed to test whether such moves will improve agriculture's poor track record".

The document stresses an essential aspect of the evaluation of WTO agricultural agreement impacts - they can be appreciated only in the light of the effects and constraints that result from the country's structural adjustment programmes.

Under SAPs, Senegal committed itself to reducing its support for agriculture. In relation to its engagement in the WTO in 1995, Senegal submitted an overall Measure of Support (MGS), which is based of zero. That means that it cannot make use of the support measures included by the MGS, and has to reduce its overall support by 13.3%, at the end of the period of implementation (2001), compared with the base years (1986-88)

Remaining at its disposal are the supports given under the green box of the WTO's Agreement on Agriculture (AoA) and the special and differentiated treatment box. Because of the envisaged increase of the foodstuff prices, Senegal may have to modify its policies and strategies that aim to improve food security, in particular the policies of consumer prices for food.

Subsidies targeted at the more poor are compatible with the AoA. The constraints confronting Senegal in food and agriculture arise from the SAPs and not from the AoA. The Marrakech Decision, although it has not yet been implemented by the WTO, could be beneficial for the country. The Decision recognises the problems caused by rising world food prices and tries to compensate, to a certain extent, by means of the food aid, technical assistance to improve agricultural productivity, and, if required, by means of short-term aid for financing normal levels of commercial food imports.

Includes a section on trade liberalisation under NAFTA, looking at its impact on agriculture and poverty in Mexico. While analysis suggests that Mexico will gain in net income terms as a result of further specialisation and trade with the US, the winners in the agricultural sector will be concentrated "on predominantly large-scale, irrigated farms .

The losers from free trade will be concentrated among producers of maize, the country's staple food. Maize accounts for around half of Mexico's agricultural land area - and maize production occupies a pivotal position in maintaining rural livelihoods, generating income, and ensuring food supplies. Most smallholders are net-deficit households, selling maize in the post-harvest period and carrying out wage work to buy it after household supplies have run out. The vast majority of Mexico's maize farmers are operating on poor land, with limited access to credit, inputs, and equipment. Yields in rain-fed areas average around one fifth of the average for the US Mid-West, against which the maize sector will be required to compete as trade restrictions are withdrawn.

Estimates of the number of livelihoods which will be lost in the maize sector as a consequence of trade liberalisation vary. According to one study, between 700,000 and 800,000 livelihoods will be lost as maize prices fall, representing 15 per cent of the economically active population in agriculture. If this assessment is accurate, it has profound implications for rural poverty, and for regional inequality.

According to the World Bank, the depth and scale of poverty in Mexico has been worsening in rural areas. Over 30 per cent of the rural population live below the income poverty line, and the poorest rural areas are characterised by significantly lower access to water, electricity, and housing. With real wages in rural labour markets declining and unemployment rising, it is unlikely that an increase in off-farm employment will compensate for income losses from maize. As a result, households will be forced into increasingly desperate survival strategies, including labour migration to commercial farm areas, to urban centres, and to the US.

Gender: There are important consequences for women. Research on the Tarascan plateau of Michoacan has shown how male labour migration increases the workload on women and children. The withdrawal of children from schools in response to these pressures is one of the prime mechanisms for transmitting poverty across generations. At the same time, there has been a sharp increase in the frequency with which women are forced to migrate in search of work as day labourers. It has been estimated that women now comprise about one third of all the day labourers working in the Mexican countryside. To the extent that liberalisation accelerates these trends, it will exacerbate problems of inequality and rural poverty. Mexico is not an isolated example of the problems associated with trade liberalisation.

Trends towards income inequality are not inherent in globalisation. The commercialisation of production for domestic markets can have similar effects, as can domestic investment activity. However, to the extent that liberalisation exposes domestic producers to more volatile global markets and flows of capital which are large in relation to the local economy, integration in global markets is a policy choice which carries high risks, as well as the potential for delivering considerable benefits. Viewed from a poverty-reduction perspective, the challenge is to identify policies which enable poor people to participate more equitably in markets, at both the national and the global levels.

With appropriate policies, the poor can participate in trade and growth, and contribute to both. Marked declines in poverty and inequality are consistent with trade-led growth, as witnessed by the experience of Southeast Asia. By contrast, where growth processes are grafted on to highly unequal social structures and inequitable international trading arrangements, the distribution of benefits will reflect this".

"Competitive markets may be the best guarantee of efficiency but not necessarily of equity. Liberalisation and privatisation can be a step to competitive markets....markets are neither the first or last word in human development. Many activities and goods that are critical to human development are provided outside the market - but these are being squeezed by the pressure of global competition.

When the market goes too far in dominating social and political outcomes, the opportunities and rewards of globalisation spread unequally and inequitably - concentrating power and wealth in a select group of people, nations and corporations, marginalizing the others....when the profit motives of market players get out of hand they challenge people's ethics - and sacrifice respect for justice and human rights.

Since the 1980s many countries have seized the opportunities of economic and technological globalisation...at the other end of the extreme are the many countries benefiting little from expanding markets...these countries are becoming even more marginal..if global opportunities are not shared better the failed growth of the last decades will continue...Inequality has been rising in many countries since the early 1980s....inequality between countries has also increased.

Environment: the growing export markets for fish, shrimp, paper and many other products mean depleted stock, less biodiversity and fewer forests. Most of the costs are borne by the poor - though it is the world's rich who benefit most.

Food: Under the pressure of globalisation, Tunisia cuts public spending but without hurting the poor. Food subsidies fell less in Tunisia than in some other Arab states.....Tunisian labour unions, though not large, were instrumental is setting a minimum wage and in maintaining food subsidies for the poor".

"If globalisation holds the pro