ETHIOPIA: Agriculture and the WTO 6:30 AM ET
JURIST Staffer Eric Linge, Pitt Law '10, interned in Addis Ababa last summer...
Will membership in the World Trade Organization (WTO) help Ethiopia's agricultural sector? Indeed, would the agricultural sector of any least-developed country (LDC) be helped by membership?
Not surprisingly, these were the first questions posed after distinguished world trade scholar Dr. Melaku Geboye Desta* spoke about WTO agricultural initiatives last summer in Addis Ababa. Ethiopia is currently undergoing the long process of applying for accession to the WTO, so Melaku's presentation was of great relevance to the audience of Ethiopian government ministers. The answer Melaku gave was straightforward: The WTO will help all of Ethiopia in the long run, but the results will not be immediate. He sought to leave no doubt that for Ethiopia, WTO membership is an important goal.
While joining the WTO may not instantly result in sudden economic growth, development, or drastically-improved living standards, Melaku believes that significant change will come about indirectly because WTO membership will give Ethiopia a reason to modernize its antiquated commercial laws. WTO membership would require more transparency and predictability in Ethiopia’s laws, and updating the code would send a message to the world that the country is a safe place for foreign businesses to expand.
Melaku said that when it comes to world trade, agricultural goods have always been different from other products, a disparity understood since the time of Adam Smith, the father of modern economics. Even in today’s age of globalization, many nations are reluctant to trade their agricultural goods. Melaku noted that when the WTO’s predecessor – the General Agreement on Tariffs and Trade (GATT) – was originally formed in 1947, agriculture did not figure prominently in the agreement. The GATT committed nations to reducing their tariffs and subsidies for products, excluding agricultural commodities, the trade of which could not be agreed upon. Not until the Uruguay Round began in 1986 could member countries begin to commit to reducing the subsidies and quotas which create “distorting” barriers to agricultural trade.
Understandably, the audience at Melaku's presentation was concerned by the obstacles still facing agricultural trade for developing countries in the WTO, pointing out reasons why agriculture may continue to be an obstacle when it comes to freeing trade. Ethiopia is a nation constantly plagued by food insecurity, leading many farmers to think that their people are put at risk unless the food they grow stays within the country's borders. Additionally, it is feared that if the nation becomes reliant on imported food, supplying countries could theoretically cut off shipments at any time. Attendees also pointed out that citizens in developed countries may have sentimental attachments to the nation’s farms and vote for politicians who help the nation’s farmers by maintaining subsidies and tariffs.
Despite these potential drawbacks, Melaku pointed out that the WTO could help Ethiopia to earn more revenue from trade in agricultural goods. Ethiopia has a comparative advantage because its farmers can produce goods for export at a much lower cost than developed nations, but its infrastructure and regulatory system must be improved for it to fully realize its potential. Other developing nations face similar internal supply constraints, but even when they address internal obstacles to exporting agricultural products, it remains difficult for them to fully benefit from their comparative advantage until the WTO resolves remaining issues surrounding agricultural trade.
The completion of the Uruguay Round in 1993 produced the Agreement on Agriculture, a component of the WTO which went into effect in 1995. The Agreement consists of three “pillars”: market access, decreased export subsidies, and reduction of domestic support. As the Agreement on Agriculture states in its preamble, these three pillars drive toward “establish[ing] a fair and market-oriented agricultural trading system.” As trade ministers from WTO member states continue to seek agreement on how much to reduce their subsidies and tariffs, the benevolent goals of the WTO, including the Agreement on Agriculture, may yet prove a stronger force toward reducing world poverty through trade.
WTO member states are currently engrossed in the so-called "Doha Round" of trade negotiations, and agriculture is a central subject. When the round began in 2001, the members drafted the Doha Ministerial Declaration, which made it the round’s goal “to place [developing countries’] needs and interests at the heart” of the negotiations so that all member countries’ people could “benefit from the increased opportunities and welfare gains that the multilateral trading system generates.”
Despite the ambitious and benevolent goals to be achieved in the Doha Round of negotiations, they are incomplete, and developed countries are not yet able to commit to the extensive reductions in subsidies they had originally intended. It had been hoped that reducing tariffs on agricultural imports and reducing subsidy payments would allow countries like Ethiopia to better compete in the international marketplace.
* Dr. Melaku, who grew up in Ethiopia and earned his first degree in law at Addis Ababa University, now lectures at the University of Dundee, Scotland, as part of the faculty of the Centre for Energy, Petroleum, and Mineral Law and Policy.
Will membership in the World Trade Organization (WTO) help Ethiopia's agricultural sector? Indeed, would the agricultural sector of any least-developed country (LDC) be helped by membership?Not surprisingly, these were the first questions posed after distinguished world trade scholar Dr. Melaku Geboye Desta* spoke about WTO agricultural initiatives last summer in Addis Ababa. Ethiopia is currently undergoing the long process of applying for accession to the WTO, so Melaku's presentation was of great relevance to the audience of Ethiopian government ministers. The answer Melaku gave was straightforward: The WTO will help all of Ethiopia in the long run, but the results will not be immediate. He sought to leave no doubt that for Ethiopia, WTO membership is an important goal.
While joining the WTO may not instantly result in sudden economic growth, development, or drastically-improved living standards, Melaku believes that significant change will come about indirectly because WTO membership will give Ethiopia a reason to modernize its antiquated commercial laws. WTO membership would require more transparency and predictability in Ethiopia’s laws, and updating the code would send a message to the world that the country is a safe place for foreign businesses to expand.
Melaku said that when it comes to world trade, agricultural goods have always been different from other products, a disparity understood since the time of Adam Smith, the father of modern economics. Even in today’s age of globalization, many nations are reluctant to trade their agricultural goods. Melaku noted that when the WTO’s predecessor – the General Agreement on Tariffs and Trade (GATT) – was originally formed in 1947, agriculture did not figure prominently in the agreement. The GATT committed nations to reducing their tariffs and subsidies for products, excluding agricultural commodities, the trade of which could not be agreed upon. Not until the Uruguay Round began in 1986 could member countries begin to commit to reducing the subsidies and quotas which create “distorting” barriers to agricultural trade.
Understandably, the audience at Melaku's presentation was concerned by the obstacles still facing agricultural trade for developing countries in the WTO, pointing out reasons why agriculture may continue to be an obstacle when it comes to freeing trade. Ethiopia is a nation constantly plagued by food insecurity, leading many farmers to think that their people are put at risk unless the food they grow stays within the country's borders. Additionally, it is feared that if the nation becomes reliant on imported food, supplying countries could theoretically cut off shipments at any time. Attendees also pointed out that citizens in developed countries may have sentimental attachments to the nation’s farms and vote for politicians who help the nation’s farmers by maintaining subsidies and tariffs.
Despite these potential drawbacks, Melaku pointed out that the WTO could help Ethiopia to earn more revenue from trade in agricultural goods. Ethiopia has a comparative advantage because its farmers can produce goods for export at a much lower cost than developed nations, but its infrastructure and regulatory system must be improved for it to fully realize its potential. Other developing nations face similar internal supply constraints, but even when they address internal obstacles to exporting agricultural products, it remains difficult for them to fully benefit from their comparative advantage until the WTO resolves remaining issues surrounding agricultural trade.The completion of the Uruguay Round in 1993 produced the Agreement on Agriculture, a component of the WTO which went into effect in 1995. The Agreement consists of three “pillars”: market access, decreased export subsidies, and reduction of domestic support. As the Agreement on Agriculture states in its preamble, these three pillars drive toward “establish[ing] a fair and market-oriented agricultural trading system.” As trade ministers from WTO member states continue to seek agreement on how much to reduce their subsidies and tariffs, the benevolent goals of the WTO, including the Agreement on Agriculture, may yet prove a stronger force toward reducing world poverty through trade.
WTO member states are currently engrossed in the so-called "Doha Round" of trade negotiations, and agriculture is a central subject. When the round began in 2001, the members drafted the Doha Ministerial Declaration, which made it the round’s goal “to place [developing countries’] needs and interests at the heart” of the negotiations so that all member countries’ people could “benefit from the increased opportunities and welfare gains that the multilateral trading system generates.”Despite the ambitious and benevolent goals to be achieved in the Doha Round of negotiations, they are incomplete, and developed countries are not yet able to commit to the extensive reductions in subsidies they had originally intended. It had been hoped that reducing tariffs on agricultural imports and reducing subsidy payments would allow countries like Ethiopia to better compete in the international marketplace.
* Dr. Melaku, who grew up in Ethiopia and earned his first degree in law at Addis Ababa University, now lectures at the University of Dundee, Scotland, as part of the faculty of the Centre for Energy, Petroleum, and Mineral Law and Policy.
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