THE 2002 US FARM BILL AND INTERNATIONAL AGRI-FOOD TRADE: DUSTING OFF THE PREBISCH THESIS; SPECIAL REPORT

Recent developments in American agricultural and trade policy suggest that the US is backing away from its position as a staunch supporter of freer trade. In the long run, this action will weaken the competitive position of US agriculture and the other protected sectors of the US economy, as was the case when the US did this in the 1920’'s. It will also clearly harm US trading partners, such as Canada. We'll discuss the direct impacts of the Farm Bill on Canada in another, forthcoming special report.However, for our purposes in this report, the more immediate impact is to deter developing countries from pursuing freer trade as a means of increasing economic growth and improving standards of living. Support for freer trade from developing countries is essential if the current round of WTO is to achieve meaningful gains in trade liberalization. In turn, trade liberalization is absolutely required if low cost/resource rich countries such as the US and Canada are to have prosperous agri-food sectors. Current US policy initiatives give developing countries every incentive to retreat from liberalized trade to highly protectionist policies, just as outlined by Raoul Prebisch nearly 40 years ago.The impact of current US agricultural policy initiatives is to weaken the Doha agenda by forcing developing countries to unilaterally liberalize trade without any significant concessions from the US. This places developing countries in a very difficult position, and dramatically reduces the prospects for future gains through freer trade.In this special report, we outline the following issues that will impact the world agri-food trade context in the coming years:* International trade in primary commodities from the developing country perspective* The US Farm Bill and recent US trade policy initiatives* The agenda for the Doha Round of WTO* Impact of US policy initiatives on the success of WTO