D5 Agriculture and international trade

m a n zoor a h m a d *1

One billion people in the world were chronically hungry and mal-
nourished in late 2009, more than at any time in history. This fl ies in
the face of the target of the Millennium Development Goal (MDG)
to reduce by half the proportion of people who suffer from hunger by
2015.
Fortunately the world leaders recognize the problem and are giv-
ing the issue the priority that it deserves. At all the recent major
international conferences, the leaders have been making pledges to
take practical steps to meet the challenge. At the July 2009 G8
summit in L’Aquila, Italy, for instance, they agreed to formulate a
comprehensive strategy for sustainable agricultural development
and decided to mobilize US$20 billion over a three-year period.
This is a significant step, even though the amount committed falls
far short of the Food and Agriculture Organization (FAO)’s esti-
mates of US$30 billion required per year for investments in rural
infrastructure and other needs such as providing access to modern
inputs for food production, guaranteeing food safety and quality
and food safety nets.
Any strategy to reach these goals must start where the prevalence of
hunger and poverty is the highest; in rural areas in general and agri-
culture in particular. The ultimate goals of these strategies must be to
raise agricultural productivity and output so that agriculture incomes
will become comparable to those attained in other sectors. And, where
people are able to produce enough output, they often lack the means
to store, transport and process their primary products with the result

* Dr. Manzoor Ahmad is working as Director of the FAO Liaison Office with
the United Nations at Geneva. Previously, he served as Pakistan’s Ambassador
and Permanent Representative to the WTO from 2002 to 2008. He has been
an active member of the Evian Group for the last five years.
1
Views expressed in this article are those of the author and do not necessarily
reflect that of the Food and Agriculture Organization (FAO).

207

9781107000421cd05_p207-210.indd 207 6/4/2010 3:16:40 PM

 208 Manzoor Ahmad

that almost one-third to one-half of the agricultural produce perishes

in the field. If the farmers could be made more productive, if there was
more predictability in the prices of agricultural commodities and the
wastages could be reduced, a large number of people dependent on
farming could be lifted out of poverty and hunger.
There is abundant evidence that international trade and economic
growth are interlinked. Agricultural trade can also provide a cushion
against volatility in food production and prices. Under the prevail-
ing practices of high tariffs and non-tariff barriers, however, agri-
cultural trade has yielded much less benefit than it has potential for.
Only a quarter of the world farm output is traded globally compared
to 50% of industrial goods, and as a share of the world trade, agri-
culture accounts for less than 10%. The sensitivities of agriculture
have resulted in flexible international rules, which can be manipu-
lated to distort international trade. Whereas the rules for global trade
in industrial goods have been in place for sixty years and have been
gradually tightened with each successive GATT round, agriculture
was practically treated as an exception to GATT rules. The Agreement
on Agriculture concluded during the Uruguay Round (1986–1994)
was not ambitious enough, with the result that no significant progress
could be made towards its goal of a fair and a market-oriented sys-
tem. The hopes are that this could change to a large extent with the
successful conclusion of the Doha Round.
What are the major distortions in international trade of agricul-
tural products that deny a level playing field to farmers from develop-
ing countries?
• First, it’s the subsidies given by OECD countries to their farm-
ers which could add up to an estimated one billion dollars a day.
Such subsidies cannot be matched by the poorer countries, with the
result that their farmers cannot compete globally. The Doha Round
has to ensure that these subsidies are non-trade distorting and are
substantially reduced.
• Second, high tariffs hinder developing countries from exporting
their surplus produce. Tariffs on the import of agricultural com-
modities into OECD countries average about 14%, compared to
tariffs on industrial goods which average only 3%. The tariff levels
on agricultural products have to be reduced to about the same level
as for manufactured products.

9781107000421cd05_p207-210.indd 208 6/4/2010 3:16:40 PM

 Agriculture and international trade 209

• Third, tariff escalations (where tariffs increase on processed prod-

ucts with the degree of processing) ensure that developing countries
are unable to export processed and more value-added goods. On
average, tariffs on processed products are two to three times higher
than on unprocessed commodities. All tariff escalations should be
addressed in a manner so as to ensure that developing countries
share more of the value added of their produce.
• Fourth, tariffs are not the whole story. Agricultural exports to
OECD countries face several kinds of non-tariff barriers as well.
Some studies indicate that non-tariff protection is double that of
tariffs. Furthermore, the standards applied by some OECD mem-
bers for imports into their countries are much more difficult to
meet than the international ones. As standards have been gradually
becoming more onerous to all trading partners, they have become
particularly difficult to meet for countries with less advanced food
systems.
• Fifth, there is the undisciplined bilateral food aid especially at times
of low prices. Many donors buy food in their own countries and
dump it in developing countries, which prevents farmers in those
countries from earning enough from their agricultural products.
• Finally, there are no binding disciplines on restricting exports or
giving huge subsidies to convert food crops to biofuels even at times
of food crisis. The potentially large detrimental effect on inter-
national food security calls for reform in these areas.
While the Doha Round will be a step forward to correct some of
these distortions, it may not fully achieve a reduction in the current
applied level of domestic support or improve the objective of market
access. This is because the cuts in trade-distorting subsidies being
negotiated are not in the actual applied levels but the bound levels
which are much higher than the current levels. In the case of tar-
iffs too, the tentative agreement to cut them by an average of 54 per
cent for developed countries would not apply across the board. They
could be much lower for many important products of export interest
to developing countries which would nullify any additional market
access. Furthermore, for most other issues such as non-tariff barriers,
restricting exports from developed countries and diverting food crops
with the help of subsidies for industrial usage such as biofuels even at
the time of food crises, there seems to be no solution in sight.

9781107000421cd05_p207-210.indd 209 6/4/2010 3:16:40 PM

 210 Manzoor Ahmad

Finally, more emphasis has to be placed on achieving long-term

goals rather than merely reacting to emergencies. The UN’s Food
and Agriculture Organization has the objective of improving agricul-
tural productivity. Its budget is a fraction of that of the World Food
Programme, the main mission of which is emergency aid. If a lasting
solution is to be found, the global community has to adopt a long-
term outlook on agriculture, and more resources have to be provided
for achieving this.

9781107000421cd05_p207-210.indd 210 6/4/2010 3:16:41 PM