Agricultural trade liberalization in the Uruguay Round : one step forward,one step back?

The Uruguay Round appears to have made import protection in agriculture more transparent, but at the expense of significant liberalization in most countries. The gains from multilateral trade liberalization depend mainly on each country's own policy reforms and, to a lesser extent, those of their trading partners.

After evaluating the Uruguay Round's impact on agriculture and border protection in the next decade, Ingco concludes that while there was significant reform of the rules --- particularly the conversion of non tariff barriers into tariffs and the reduction and binding of all tariffs --- in practice, trade will probably be liberalized less than expected.

The objective of the Round was to reverse protectionism and remove trade distortions. This may not be achieved in practice, at least not until further reductions are carried out in future rounds of negotiations. The major exception to this conclusion is in high income Asian countries, where protection for major commodities will be significantly reduced.

The tariffication and binding of all tariffs on agricultural products represents a significant step forward. Liberalization is implicit because countries are prohibited from arbitrarily raising tariffs to higher new levels. But many of the newly established tariffs are so high in many countries as to effectively prohibit trade.

Patterns of liberalization vary considerably by commodity and by country. Generally, the extent of liberalization was diminished by binding tariffs to the base period of 1986 88, when border protection was at a high point. In most OECD countries, this was worsened by "dirty tariffication:" the new base tariffs offered even greater protection than the non tariff barriers they replaced. Even after the commitments to tariff reductions in the Round, the ad valorem measure of the final binding tariffs will remain higher than the average rate of protection in 1982 93.

A number of developing countries in East Asia, Latin America, and the Middle East chose to lock in previous liberalization efforts on some products. But for most commodities, there will be little actual liberalization, since most developing countries chose to bind their tariffs at a maximum level.

Even when countries reduced alreadybound rates, bound tariffs remained significantly higher than current applied rates, giving countries the flexibility to raise tariffs later.

The high level of bound tariffs may allow countries to apply variable tariffs below the bound level, thus failing to stabilize tariffs and improve market access.

Moreover, the Round did not touch many of the worst distortions in developing countries, such as import subsidies, export taxes, statetrading monopolies, and domestic policies that implicitly tax agriculture.

This paper --- a product of the International Trade Division, International Economics Department --- is part of a larger research effort in the department to evaluate the impact of trade policy reforms in developing countries. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Jennifer Ngaine, room R2052, telephone 2024737947, fax 2026761341, Internet address jngaine @worldbank.org. (60 pages)

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