Department of Economics International Agricultural Trade Chad Hart Farm-Church Discussion Group West Des Moines, Iowa September 12, 2008

Department of Economics Outlook from WTO On July 27, 2006, Pascal Lamy, Director- General of the World Trade Organization stated that the failure to reach an agreement on the Doha round negotiations would be a choice to forgo “the best hope for growth and poverty alleviation.”

Department of Economics Another Quote “Trade liberalization leads to economic gains for both developed and developing countries through more efficient use of resources as well as the productivity and investment growth that come with more open markets.” -- Anne Effland, Mary Anne Normile, and John Wainio, “Global Agriculture and the Doha Round: Market Access Is The Key”, Amber Waves, Sept. 2006

Department of Economics Projected Pathway More open markets More efficient resource allocation Higher economic activity values Higher incomes

Department of Economics Agriculture: Crucial to Developing Countries For most developing countries, agriculture is: 1.The largest employer, 2.The largest source of GDP, 3.The largest source of exports, and 4.The largest source of outside funds. Nearly three-quarters of the world’s poor live in rural areas and are dependent on agriculture for their living. Source: McCalla and Nash, 2007

Department of Economics Poverty Rates Source: McCalla and Nash, 2007

Department of Economics Agricultural Protection Source: McCalla and Nash, 2007

Department of Economics Agricultural Protection Source: McCalla and Nash, 2007

Department of Economics Trade Shares Source: McCalla and Nash, 2007

Department of Economics Reducing Barriers to Trade Agriculture is seen as the trade area with the greatest number of distortion and the greatest potential in economic gains from trade reform. Studies have shown that two-thirds of the potential economic gains from trade reform would come from agricultural trade reform (Anderson, Martin, and van der Mensbrugghe, 2006; Hertel and Keeney, 2006). Source: McCalla and Nash, 2007

Department of Economics Negative Size Effects Net agricultural importers could face higher market prices for agricultural commodities. Counterpoint: Prices for other products would rise as well, providing some offset from exportable goods. Reduction or elimination of preferential market access many developing countries currently have to developed country markets. Counterpoint: Several studies indicate the economic losses would on the order of $ million worldwide and can be made up with aid. Source: McCalla and Nash, 2007

Department of Economics Developing Country Power Developing countries have begun to “flex their muscles” during the Doha round. Targeting significant reductions in agricultural trade barriers and domestic support Specific targeting for liberalization of cotton trade Source: McCalla and Nash, 2007