Presented by Will Martin, senior research fellow, IFPRI

1. Balancing Disciplines &
Policy Space in Agricultural Trade
Will Martin
February 23, 2016

2. Roadmap
• Policy space & collective action
• Developing country growth & policy change
• Policy options

3. Policy space & collective action
• Unilateral trade policy very attractive to policy makers
– Quantitative restrictions allow control of trade volumes &
discrimination
– Protection can improve the terms of trade
– Insulation can stabilize domestic prices
• But these policies are sub-optimal for the world
– QRs create international & domestic price volatility
– Protection reduces world income
• Rising protection can cause trade to collapse
– Insulation is beggar-thy-neighbor
• Collective action can improve outcomes
– Ban QRs
– Limit & reduce protection levels
– Discipline price insulation

4. • When developing countries were small their
markets didn’t matter for partners
– Developing countries have grown dramatically
• And policies have changed sharply
Developing country size & policies

5. From High Y DCs Total
High Y 20 23 42
Developing 24 34 58
Total 44 56 100
From High Y DCs Total
High Y 39 20 59
Developing 28 12 41
Total 67 33 100
Increasing importance
of developing countries
1992-93 2012-13

6. Policy patterns also matter
• Historical pattern in developing countries
– Taxation of relatively poor farmers
• Reduced exports, encouraged imports
• Developing countries moving to positive protection
• And price insulation strong
– As it was in industrial countries in the past

7. -30
-20
-10
0
10
20
30
40
50
60
70
1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
percent
HIC & ECA HIC & ECA, incl. decoupled payments Developing countries
Industrial & DC protection levels

8. Price insulation in developing countries
• Very strong insulation against price shocks
– Creating serious collective action problems
• Substantial increases in world price volatility
– Ineffective in protecting the poor
• But longer term price changes passed through

9. 0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
2.3
2.5
2.7
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Domestic
International
Indexes of staple food prices

10. • Improving information & market efficiency
• Social safety nets
• Disciplines on protection & insulation
Potential policy options

11. • Poor information about stocks played an
important role in the 2008 food crisis
– AMIS seeks to improve market information
• Market-based risk management may play a role
– Futures and, especially, options
– Insurance
Improving information
& market efficiency

12. • Social safety nets individually & collectively
effective
• Domestic food aid exempt from WTO disciplines
Social safety nets

13. • Disciplines on protection levels
– Uruguay Round introduced limits for developed countries
– Need more discipline on developed & developing countries
• Proved challenging in the Doha Agenda
– Nairobi agreement to abolish export subsidies a major step
• Disciplines on insulation have some WTO precedents
– Abolition of variable levies a success
– Price-based SSM proposal disciplines insulation against price falls
• Quantity-based SSM proposals make no sense
• Some, partial discipline on export restrictions needed
– Otherwise importers feel they can’t rely on markets
Disciplines on protection & insulation

14. Conclusions
• Most WTO trade reform involves agreed reductions
in policy space to achieve goals
• Rapid growth in developing country agricultural
trade makes developing country reform important
– Only 20% of world agri trade between industrial ctries
• Nairobi agreement moves forward on some fronts
– Especially export subsidy disciplines
– But much remains to be done

15. References
• Anderson, K., Ivanic, M. and Martin, W. (2014), ‘Food price spikes, price
insulation and poverty’ in Chavas, J-P, Hummels, D. and Wright, B. eds. The
Economics of Food Price Volatility, University of Chicago Press for NBER.
• Ivanic, M. and Martin, W. (2014), ‘Implications of Domestic Price Insulation
for Global Food Price Volatility’ Journal of International Money and Finance
42:272-88.
• Ivanic, M. and Martin, W.(2014) ‘Poverty Impacts of the Volume-Based
Special Safeguard Mechanism’ Australian Journal of Agricultural and
Resource Economics 58(4):607-21.
• Laborde, D. and Martin, W. (2015), ‘Formulas for failure? Were the Doha
tariff formulas too ambitious for success? World Trade Review 14(1): 46-65.