DP3576 Reducing Agriculture Tariffs Versus Domestic Support: What's More Important for Developing Countries?

Author(s): Bernard Hoekman , Francis Ng , Marcelo Olarreaga

Publication Date: October 2002

Keyword(s): agriculture trade , WTO , trade negotiations , tariffs , subsidies , developing countries

JEL(s): D58 , F13 , F14

Programme Areas: International Trade and Regional Economics

Link to this Page: www.cepr.org/pubs/dps/DP3576.asp

High levels of protection and domestic support for farmers in developed countries significantly affect many least developed countries (LDCs), both directly and through the price-depressing effect of agricultural support policies. High tariffs and domestic support may also lower the world price of agricultural products, benefiting net importers. This Paper assesses the impact of reducing these distortionary policies for a sample of 119 countries. We find significant differences in the impact of a 50 percent cut in tariffs and a 50 cut in domestic support for LDCs as compared to non-LDC developing countries. However, for both groups of countries tariff reductions have a much greater positive effect on exports and welfare.