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Benefits of trade liberalizat. may not reach poor

Benefits of trade liberalization may not reach poor without further changes – UN

Only days ahead of a make-or-break meeting seeking agreement on liberalizing agricultural trade, the United Nations Food and Agriculture Organization (FAO) today warned that urgent complementary policies and investments are essential to ensure that the benefits of trade reform reach the poor.

The 6th UN World Trade Organization (WTO) Conference in Hong Kong will make a final push to reach agreement on eliminating agricultural export subsidies and other trade-distorting support in the developed world, thus opening up market access there for the agriculture of developing nations.

In its latest report released today, The State of Food and Agriculture 2005 (SOFA 2005), the FAO examines agricultural trade and poverty, seeking to answer the question: Can trade work for the poor?

According to SOFA 2005, the answer is yes, but trade liberalization alone is not enough. Policies and investments must be put in place to allow the poor to benefit from trade opportunities and to protect the vulnerable against trade-related shocks.

“Agricultural trade and further trade liberalization can unlock the potential of the agriculture sector to promote pro-poor growth, but these benefits are not guaranteed,” it stresses.

The report says industrial countries have the most to gain from agriculture trade liberalization, because their agriculture sectors are the most distorted by existing policies. “Consumers in currently protected markets and producers in countries with low levels of domestic support would tend to gain the most,” it notes.

Developing countries as a whole would also benefit from liberalization, but SOFA 2005 warns that some groups could be hurt in the short run. Those groups include net food importing countries and countries that have been given preferential access to the highly protected markets of wealthier member countries of the Organization for Economic Cooperation and Development (OECD).

For developing countries as a whole the greatest potential gains from agricultural liberalization will depend not on reform of the agriculture support system in OECD countries but on reforming their own trade policies, which would encourage greater trade between them. Between 70 and 85 per cent of the potential benefits for developing countries would derive from their own reform policies in agriculture.

Because most of the world’s poor and food insecure people live in rural areas and depend on agriculture for their livelihoods, SOFA 2005 argues that a growing agricultural sector is crucial for sustainable poverty reduction.

The report has a number of recommendations to ensure that liberalization supports pro-poor outcomes, calling for basic market institutions and infrastructure to be set up before opening national agricultural markets to international competition, especially from subsidized competitors.

It urges a twin-track approach that would on the one hand invest in educating people, building institutions and infrastructure and on the other provide safety nets to protect the most vulnerable people in society during the transition to freer trade.

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