How Will Agricultural Trade Reforms in High-Income Countries Affect the Trading Relationships of Developing Countries?

The next three-year WTO round has been set in motion by recent negotiations in Doha, Qatar. Among the most contentious issues in that meeting, and probably over the course of the next round, is direct and indirect producer support for agricultural exporters in the North and forgone production, employment, and trading opportunities for farmers in the South. Our results indicate that real commitments to reduce agricultural support in high-income countries will induce substantial changes world food prices, domestic agricultural rates of return and output, and dramatic shifts in agricultural trade patterns. Total trade expands and real output, wages, and incomes in developing countries, especially among the rural poor, increase substantially. In particular, rural incomes in low and middle income countries increase by over $60B, a figure that comfortably exceeds even the most ambitious goals for increased development assistance and a substantial savings to OECD taxpayers. At the same time, EU and Japanese agricultural exports fall sharply and their imports rise. Other OECD countries see more balanced aggregate trade growth, but a number of strategic sectors are still adversely affected. These facts are likely to complicate negotiations in the Doha Round significantly.