## 4. Net Food Imports of Small and Poor Countries

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### Context and definitions
- Small: countries that account for less than 0.05 percent of the world’s imports of goods and services.  
- Poor: countries defined as low income by the World Bank (per capita GDP in purchasing power parity (PPP) terms of US$4,630 or below).  
- The 62 countries on the list for which data are available individually account for less than 0.05 percent of world trade and collectively for about 1.1 percent of global trade.

### Growing influence and the institutional dilemma
- Since the Uruguay Round and the Single Undertaking, small and poor countries:
  - Comprise more than 50 percent of WTO membership, giving them de jure veto power under the WTO consensus tradition for many decisions.
- De jure veto matters particularly for:
  - Amendments to the WTO (two-thirds majority required) and creation of new plurilateral agreements (consensus required).
  - Deepening of rules (e.g., anti-dumping, subsidies, strengthening GATT/GATS rules).
- De facto influence stems from:
  - Perception of having been required to take on “costly” Uruguay Round obligations (e.g., TRIPs, customs valuation) without commensurate market access gains.
  - Limited ability to obtain reciprocal market access concessions because of small market size.

### Size and benefits from WTO membership — empirical indicators
- Market-access limitation:
  - Small countries are structurally disadvantaged in reciprocal bargaining because they are not attractive enough to trading partners.
- WTO as commitment device — summary statistics (averages for the small and poor WTO members from WTO IDB & CTS databases and IDB CD-ROM 2002):
  - Binding coverage (Total Goods): 61.82
  - Average Bound Rate (Total Goods): 50.56
  - Average Applied Rate (Total Goods): 13.44
  - Wedge (Total Goods): 38.08
  - Binding coverage (Industry): 55.99
  - Average Bound Rate (Industry): 36.51
  - Average Applied Rate (Industry): 12.67
  - Wedge (Industry): 23.96
  - Binding coverage (Agriculture): 64.44
  - Average Bound Rate (Agriculture): 17.21
  - Average Applied Rate (Agriculture): 45.75
- Interpretation:
  - For a vast majority of the poor and small countries, both the proportion of bindings in the industrial sector is small and the wedge between actual and committed tariffs is large, indicating large margin for policy reversal without WTO consequences.
- Net food import status (Table 4):
  - Of the small and poor countries for which data exist, 42 out of 71 are net importers of food.
  - Of the WTO members on the list, 26 out of 48 are net food importers.
  - Selected net food export/import figures (exports minus imports in US$ millions in 2001):
    - Cote d'Ivoire: 1,690.1
    - Ecuador: 2,489.7
    - Haiti: -315.9
    - Kenya: 630.6
    - Yemen, Republic: -555.5
    - Zimbabwe*: 777.7
    - (“(*) indicates WTO member”.)
- Estimates of world food price effects from agricultural liberalization:
  - Most studies estimate a rise in food prices of between 4 and 8 percent (Cline, 2004; Tokarick, 2003).
- Welfare effects from subsidy liberalization (Hoekman and others 2004):
  - A 50 percent cut in export subsidies by industrial countries reduces the welfare of the least developed countries by about 3 cents per capita.
  - An equivalent cut in domestic support increases welfare by about 3 cents per capita.
  - Net overall impact of liberalizing non-tariff agricultural support policies on the smaller countries is negligible by this estimate.

### Imperfect alignment of interests
- Preference dependence:
  - Many small and poor countries benefit from preferential access schemes (EU GSP/EBA, U.S. AGOA, Canada, Japan GSP), making MFN liberalization politically costly for recipients because it erodes preference margins.
  - Ianchovicina et al. (2002) illustrative estimates: unrestricted preferential access for 37 sub-Saharan African countries raises welfare by about $1.7 billion; a 25 percent MFN tariff liberalization by Quad countries would reduce that welfare increase by about $0.5 billion (about 30 percent).
- Other misalignments:
  - Obligations with significant implementation costs (e.g., Customs Valuation Agreement) and obligations seen as welfare-deteriorating (e.g., TRIPs) have disproportionately adverse effects on small and poor countries.
  - Small countries lacked offsetting market-opening gains in the Uruguay Round (e.g., MFA elimination was a loss for many small preferential exporters).

### Options for accommodating small and poor countries — evaluation
- Potential accommodation instruments:
  - Preferential market access benefits in the Doha Round.
  - Nonpreferential market access benefits in the Doha Round.
  - Sparing/relieving of obligations that are financially costly or welfare-deteriorating.
  - Sparing/relieving of obligations that are welfare-enhancing.
  - Provision of financial and technical assistance.
- Assessment of options:
  - Preferential access:
    - Short-term rents for recipients but counter-productive and perverse for long-run growth; preferences do not sustain long-run growth and can incentivize more protectionist domestic regimes.
    - Preferences reinforce resistance to MFN liberalization; political economy makes offering and preserving preferences easier than granting unreciprocated MFN access.
  - Nonpreferential access:
    - Desirable in principle, but small countries lack bargaining leverage to obtain MFN market access via reciprocity; would require unreciprocated concessions by larger partners.
  - Limiting costly/welfare-deteriorating obligations:
    - Strong case to exempt small and poor countries from obligations that are financially costly or welfare-deteriorating (e.g., customs valuation, TRIPs). Consensus is emerging to avoid imposing Singapore issues on these countries.
    - Exemption also reduces negotiating and monitoring burdens on small delegations.
  - Limiting welfare-enhancing obligations:
    - Thorny: obligations like import liberalization or prohibitions on quantitative restrictions are welfare-enhancing but may be politically seen as impositions if unreciprocated.
    - Argument: such obligations should not be mandatory for small and poor countries; they can remain optional, allowing unilateral commitments by countries that wish to signal reform.
  - Financial and technical assistance:
    - Desirable and potentially more politically feasible for donor countries than unreciprocated market access.
    - Key challenges:
      - Additionality: will assistance be truly additional?
      - Credibility and bindingness of offers: prior perceptions of unmet commitments (e.g., Cancun stalemate).
      - Coordination: coherence between trade and aid/finance agencies domestically and across institutions (WTO, IMF, World Bank).
      - Effectiveness: will additional aid be used productively? (Easterly 2003 raises doubts about aid effectiveness.)
    - Political economy at recipient end: aid benefits may accrue to governments (diffuse), not to concentrated exporting constituencies that could offset import-competing resistance.

### Aggregate assessment and likely trajectory
- Desirable accommodation:
  - Provide improved nonpreferential access plus increased financial and technical assistance in return for small and poor countries consenting to broader liberalization and undertaking reciprocal reform.
- Political reality:
  - Desirable packages face significant feasibility constraints at both donor and recipient ends.
- Systemic trajectory:
  - System is gravitating toward feasible but less desirable options:
    - Granting further preferential access.
    - Relieving small and poor countries of financially costly and welfare-diminishing obligations (e.g., Customs Valuation, TRIPs).
    - Potentially relieving them of some welfare-enhancing market liberalization obligations.
  - This shift effectively reverts toward a two-tier system reminiscent of the pre-Uruguay Round arrangement, with current small and poor countries occupying the “second tier.”

### Policy implications and priorities
- Preferred policy mix (desirable but hard to implement):
  - Improved nonpreferential MFN access for small and poor countries (to the extent feasible).
  - Increased, credible, and additional financial and technical assistance targeted to offset adjustment costs and build supply-side capacity.
  - Quid pro quo mechanisms linking assistance and market access to verifiable liberalization commitments where politically possible.
- Feasible short- to medium-term measures likely to be adopted:
  - Exemptions from costly and welfare-deteriorating obligations for small and poor countries.
  - Continued use and expansion of preferential schemes, despite their long-term drawbacks, coupled with targeted aid to mitigate preference erosion.
  - Recognition of optionality for small and poor countries with regard to certain WTO obligations (allowing unilateral commitments rather than compulsory obligations).
- Institutional priorities:
  - Improve coherence and credibility across trade, aid, and finance agencies domestically and multilaterally to make aid-for-liberalization bargains more credible.
  - Focus assistance on capacity building to reduce negotiating and implementation burdens faced by small delegations.

### Conclusion
- Structural challenge:
  - Small and poor countries have acquired significant formal and informal influence, yet their limited market size constrains their capacity to participate effectively in reciprocal bargaining that underpins WTO liberalization.
- Political feasibility:
  - The most desirable accommodation—nonpreferential market access plus credible additional financial and technical assistance in return for reciprocal reform—is proving politically infeasible.
- Likely outcome:
  - WTO is likely to move toward less-desirable but more politically feasible options (preferential access, exemptions from costly obligations, optionality on some liberalization obligations), effectively reintroducing a two-tier outcome similar to the pre-Uruguay Round period, with today’s small and poor countries in the second tier.

*Source: IMF working paper chapter “4. Net Food Imports of Small and Poor Countries” (text and tables as provided).*

### References..............................................................................................................

### _wp0481 - References...............................................................................................................................24

### References
- References...............................................................................................................................24

### Text Tables
- 1. Small and Poor Countries, 2000............................................................................................4
- 2. Average and Bound Tariff Rates for Small and Poor WTO Members................................12
- 3.Tariffs Under Preferential Schemes......................................................................................14

*Source: _wp0481 - References...............................................................................................................................24*

### 4. Net Food Imports of Small and Poor Countries...................................................................16

### 4. Net Food Imports of Small and Poor Countries

### Context and definitions
- Small: countries that account for less than 0.05 percent of the world’s imports of goods and services.  
- Poor: countries defined as low income by the World Bank (per capita GDP in purchasing power parity (PPP) terms of US$4,630 or below).  
- The 62 countries on the list for which data are available individually account for less than 0.05 percent of world trade and collectively for about 1.1 percent of global trade.

### Growing influence and the institutional dilemma
- Ever since the Uruguay Round and the Single Undertaking, small and poor countries have acquired significant voice in the WTO; more than 50 percent of WTO membership comprises these countries, giving them de jure veto power under the WTO consensus tradition for many decisions.
- De jure veto matters particularly for:
  - Amendments to the WTO (two-thirds majority required) and creation of new plurilateral agreements (consensus required).
  - Deepening of rules (e.g., anti-dumping, subsidies, strengthening GATT/GATS rules).
- De facto influence stems from:
  - Perception of having been required to take on “costly” Uruguay Round obligations (e.g., TRIPs, customs valuation) without commensurate market access gains.
  - Limited ability to obtain reciprocal market access concessions because of small market size.

### Size and benefits from WTO membership — empirical indicators
- Market-access limitation:
  - Small countries are structurally disadvantaged in reciprocal bargaining because they are not attractive enough to trading partners.
- WTO as commitment device:
  - Table 2 (summary statistics from WTO IDB & CTS databases and IDB CD-ROM 2002) — averages for the small and poor WTO members:
    - Binding coverage (Total Goods): 61.82
    - Average Bound Rate (Total Goods): 50.56
    - Average Applied Rate (Total Goods): 13.44
    - Wedge (Total Goods): 38.08
    - Binding coverage (Industry): 55.99
    - Average Bound Rate (Industry): 36.51
    - Average Applied Rate (Industry): 12.67
    - Wedge (Industry): 23.96
    - Binding coverage (Agriculture): 64.44
    - Average Bound Rate (Agriculture): 17.21
    - Average Applied Rate (Agriculture): 45.75
  - For a vast majority of the poor and small countries, both the proportion of bindings in the industrial sector is small and the wedge between actual and committed tariffs is large, indicating large margin for policy reversal without WTO consequences.
- Net food import status (Table 4):
  - Of the small and poor countries for which data exist, 42 out of 71 are net importers of food.
  - Of the WTO members on the list, 26 out of 48 are net food importers.
  - Selected net food export/import figures (exports minus imports in US$ millions in 2001), examples from Table 4:
    - Cote d'Ivoire: 1,690.1
    - Ecuador: 2,489.7
    - Haiti: -315.9
    - Kenya: 630.6
    - Yemen, Republic: -555.5
    - Zimbabwe*: 777.7
    - (Full Table 4 lists country-specific net food exports for 2001; “(*) indicates WTO member”.)
- Estimates of world food price effects from agricultural liberalization:
  - Most studies estimate a rise in food prices of between 4 and 8 percent (Cline, 2004; Tokarick, 2003).
- Welfare effects from subsidy liberalization (Hoekman and others 2004):
  - A 50 percent cut in export subsidies by industrial countries reduces the welfare of the least developed countries by about 3 cents per capita.
  - An equivalent cut in domestic support increases welfare by about 3 cents per capita.
  - Net overall impact of liberalizing non-tariff agricultural support policies on the smaller countries is negligible by this estimate.

### Imperfect alignment of interests
- Preference dependence:
  - Many small and poor countries benefit from preferential access schemes (EU GSP/EBA, U.S. AGOA, Canada, Japan GSP), making MFN liberalization politically costly for recipients because it erodes preference margins.
  - Ianchovicina et al. (2002) illustrative estimates: unrestricted preferential access for 37 sub-Saharan African countries raises welfare by about $1.7 billion; a 25 percent MFN tariff liberalization by Quad countries would reduce that welfare increase by about $0.5 billion (about 30 percent).
- Other misalignments:
  - Obligations with significant implementation costs (e.g., Customs Valuation Agreement) and obligations seen as welfare-deteriorating (e.g., TRIPs) have disproportionately adverse effects on small and poor countries.
  - Small countries lacked offsetting market-opening gains in the Uruguay Round (e.g., MFA elimination was a loss for many small preferential exporters).

### Options for accommodating small and poor countries — evaluation
Potential accommodation instruments:
- Preferential market access benefits in the Doha Round.
- Nonpreferential market access benefits in the Doha Round.
- Sparing/relieving of obligations that are financially costly or welfare-deteriorating.
- Sparing/relieving of obligations that are welfare-enhancing.
- Provision of financial and technical assistance.

Assessment of each option:
- Preferential access
  - Short-term rents for recipients but counter-productive and perverse for long-run growth; preferences do not sustain long-run growth and can incentivize more protectionist domestic regimes.
  - Preferences reinforce resistance to MFN liberalization; political economy makes offering and preserving preferences easier than granting unreciprocated MFN access.
- Nonpreferential access
  - Desirable in principle, but small countries lack bargaining leverage to obtain MFN market access via reciprocity; would require unreciprocated concessions by larger partners.
- Limiting costly/welfare-deteriorating obligations
  - Strong case to exempt small and poor countries from obligations that are financially costly or welfare-deteriorating (e.g., customs valuation, TRIPs). Consensus is emerging to avoid imposing Singapore issues on these countries.
  - Exemption also reduces negotiating and monitoring burdens on small delegations.
- Limiting welfare-enhancing obligations
  - Thorny: obligations like import liberalization or prohibitions on quantitative restrictions are welfare-enhancing but may be politically seen as impositions if unreciprocated.
  - Argument: such obligations should not be mandatory for small and poor countries; they can remain optional, allowing unilateral commitments by countries that wish to signal reform.
- Financial and technical assistance
  - Desirable and potentially more politically feasible for donor countries than unreciprocated market access.
  - Key challenges:
    - Additionality: will assistance be truly additional?
    - Credibility and bindingness of offers: prior perceptions of unmet commitments (e.g., Cancun stalemate).
    - Coordination: coherence between trade and aid/finance agencies domestically and across institutions (WTO, IMF, World Bank).
    - Effectiveness: will additional aid be used productively? (Easterly 2003 raises doubts about aid effectiveness.)
  - Political economy at recipient end: aid benefits may accrue to governments (diffuse), not to concentrated exporting constituencies that could offset import-competing resistance.

### Aggregate assessment and likely trajectory
- Desirable accommodation: provide improved nonpreferential access plus increased financial and technical assistance in return for small and poor countries consenting to broader liberalization and undertaking reciprocal reform.
- Political reality: desirable packages face significant feasibility constraints at both donor and recipient ends.
- System is gravitating toward feasible but less desirable options:
  - Granting further preferential access.
  - Relieving small and poor countries of financially costly and welfare-diminishing obligations (e.g., Customs Valuation, TRIPs).
  - Potentially relieving them of some welfare-enhancing market liberalization obligations.
- This shift effectively reverts toward a two-tier system reminiscent of the pre-Uruguay Round arrangement, with current small and poor countries occupying the “second tier.”

### Policy implications and priorities
- Preferred policy mix (desirable but hard to implement):
  - Improved nonpreferential MFN access for small and poor countries (to the extent feasible).
  - Increased, credible, and additional financial and technical assistance targeted to offset adjustment costs and build supply-side capacity.
  - Quid pro quo mechanisms linking assistance and market access to verifiable liberalization commitments where politically possible.
- Feasible short- to medium-term measures likely to be adopted:
  - Exemptions from costly and welfare-deteriorating obligations for small and poor countries.
  - Continued use and expansion of preferential schemes, despite their long-term drawbacks, coupled with targeted aid to mitigate preference erosion.
  - Recognition of optionality for small and poor countries with regard to certain WTO obligations (allowing unilateral commitments rather than compulsory obligations).
- Institutional priorities:
  - Improve coherence and credibility across trade, aid, and finance agencies domestically and multilaterally to make aid-for-liberalization bargains more credible.
  - Focus assistance on capacity building to reduce negotiating and implementation burdens faced by small delegations.

### Conclusion
- The WTO faces a structural challenge: small and poor countries have acquired significant formal and informal influence, yet their limited market size constrains their capacity to participate effectively in reciprocal bargaining that underpins WTO liberalization.
- The system’s most desirable accommodation—nonpreferential market access plus credible additional financial and technical assistance in return for reciprocal reform—is proving politically infeasible.
- Consequently, the WTO is likely to move toward less-desirable but more politically feasible options (preferential access, exemptions from costly obligations, optionality on some liberalization obligations), effectively reintroducing a two-tier outcome similar to the pre-Uruguay Round period, but with today’s small and poor countries in the second tier.

*Source: IMF working paper chapter “4. Net Food Imports of Small and Poor Countries” (text and tables as provided).*

### References

### _wp0481 - References

### Cited works on trade policy, development, and globalization
- Anderson, K., B. Dimaranan, J. Francois, T. Hertel, B. Hoekman, and W. Martín, 2002, “The Cost of Rich (and Poor) Country Protection to Developing Countries,” Journal of African Economies, Vol. 10, No.3 pp. 227–57.
- Bhagwati, Jagdish, 2004, In Defense of Globalization (New York: Oxford University Press).
- Cline, W., 2004, Trade Policy and Global Poverty, (Washington: Institute for International Economics), forthcoming.
- Easterly, W., 2003, “Can Foreign Aid Buy Growth?” Journal of Economic Perspectives, Vol. 17, No. 3, pp. 23–48.
- Messerlin, P., 2003, “Making the Doha Development Round Work for the Poorest Developing Countries,” in Rethinking Fair Trade, ed. by P. Griffith (London: The Foreign Policy Centre).
- World Bank, 2003, Global Economic Prospects 2004: Realizing the Development Promise of the Doha Agenda, (Washington: World Bank).

### Empirical and theoretical studies on tariffs, subsidies, and market access
- Hoekman, B., F. Ng, and M. Olarreaga, 2002a, “Eliminating Excessive Tariffs on Exports of Least Developed Countries,” World Bank Economic Review, Vol. 16, No. 1, pp. 1–21.
- ———2002b, “Agricultural Tariffs versus Subsidies: What’s More Important for Developing Countries,” forthcoming, World Bank Economic Review.
- Martin, W., and D. Tarr, 2001, “Liberalizing Agriculture and Manufactures,” The World Economy, Vol. 23, No. 4, pp. 455–70.
- Tokarick, S., 2003, “Measuring the Impact of Distortions in Agricultural Trade in Partial and General Equilibrium,” IMF Working Paper 03/110 (Washington: International Monetary Fund).
- Hoekman, B., C. Michalopoulos, and L.A. Winters, 2004, “Special and Differential Treatment of Developing Countries in the WTO: Moving Forward After Cancún,” The World Economy.

### Analyses of preferential schemes, rules of origin, and intellectual property
- Ianchovicina, Elena, Aaditya Mattoo and Marcelo Olarreaga, 2002, “Unrestricted Market Access for Sub-Saharan Africa: How Much Is It Worth and Who Pays?,” Journal of African Economies, Vol. 10, No. 4, pp. 410–32.
- Mattoo, A., D. Roy, and A. Subramanian, 2003, “The Africa Growth and Opportunity Act and its Rules of Origin: Generosity Undermined?,” The World Economy, Vol. 26, No. 6, pp. 829–51.
- Olarreaga, Marcelo and Caglar Ozden, “AGOA and Apparel: Who Captures the Tariff Rent in the Presence of Preferential Market Access?,” World Economy, forthcoming.
- Ozden, C., and E. Reinhardt, 2003, “The Perversity of Preferences: The Generalized System of Preferences and Developing Country Trade Policies,” World Bank Policy Research Working Paper No. 2955, (Washington: World Bank).
- Romalis, J., 2003, “Would Rich Country Trade Preferences Help Poor Countries Grow? Evidence from the Generalized System of Preferences,” (unpublished; Chicago: Graduate School of Business, University of Chicago).
- Chaudhri, S., P.K. Goldberg, and P. Jia, 2003, “The Effects of Extending Intellectual Property Rights Protection to Developing Countries: A Case Study of the Indian Pharmaceutical Market,” NBER Working Paper No. 10159 (Cambridge, Massachusetts: National Bureau of Economic Research).

### Policy perspectives, commentary, and related working papers
- Finger, J.M. 2002, The Doha Agenda and Development: A View From the Uruguay Round, (Manila: Asian Development Bank).
- Finger, J.M. and P. Schuler, 2000, “Implementation of Uruguay Round Commitments: The Development Challenge,” The World Economy, Vol. 23, pp. 511–26.
- Panagariya, A., 2003, “Your Move, Mr. Jaitley!,” Op-ed, Economic Times, February 26.
- Subramanian, A., and Shang-Jin Wei, “The WTO Promotes Trade, Strongly But Unevenly,” 2003, NBER Working Paper No. 10024 (Cambridge, Massachusetts: National Bureau of Economic Research).
- Wolf, M., 2003, “The Abominable No-Men,” Financial Times Column, September 23.

*Source: _wp0481 - References (PDF filename: _wp0481 - References).*

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