McCalla, Alex F. and John Nash, Editors. Reforming Agricultural Trade for Developing Countries (Vol. 1): Key Issues for a Pro-Development Outcome of the Doha Round.

McCalla, Alex F. and John Nash, Editors. Reforming Agricultural Trade for Developing Countries (Vol. 1): Key Issues for a Pro-Development Outcome of the Doha Round. The World Bank: Washington, D.C. 2007, 308 pp., $45.

This book is the first of a two-volume set that outlines key issues/problems that developing countries face regarding globalization and trade liberalization. The underlying theme is to bring together the literature to summarize what a "successful" Doha Round of negotiations under the World Trade Organization could mean for developing countries. As the preface of volume one states: one might believe "that the papers are now of limited, mainly historical, value" (p. xiv) because of the delays in the negotiations. Yet the agricultural issues covered in this book will be relevant for decades to come unless agricultural policies change drastically throughout the world.

The book begins with a chapter by McCalla and Nash, which outlines why agricultural reforms are important in general, and to developing countries in particular. Agriculture is a much higher percentage of GDP in developing countries, so it is quite important. Agricultural exporters from developing countries face numerous tariff-rate quotas, tariff escalation with more processed food products, export subsidies that lower world prices, and food safety standards that are escalating. They emphasize also that developing countries need to reform too. It sets the stage for the rest of the book.

Josling covers familiar ground in chapter two, the three pillars from the Uruguay Round Agreement on Agriculture (URAA) of negotiations, with some updated statistics on agricultural tariffs. One gets an excellent sense of how restrictive agriculture trade remains--at his writing the average tariff was a staggering 62% and there were 1371 TRQs with an average over quota tariff of 123%. He suggests that notification requirements from the URAA are important to clarify the current state of trade barriers.

Sharma, in chapter three, argues that the URAA has meant little to developing countries. He suggests that the developed countries need to give more concessions to developing countries, especially with respect to export subsidies. Furthermore, developed countries need to allow developing countries more flexibility in liberalizing trade. The need for price stability in key commodities is a real concern for developing countries. Thus, the current difference between applied and bound tariffs for many countries is necessary so they can change tariffs to stabilize prices.

The impact of agricultural support policies in developing countries is covered by Hoekman, Ng, and Olarreaga. This chapter is filled with interesting numbers that are very useful to outline the current state of domestic subsidies. Developing countries face high levels of domestic support and export subsidies in concentrated products from a few countries--mostly Canada, the European Union, Japan, and the United States.

One of the most interesting chapters involves the formation and history of the various coalitions that have involved agriculture and agriculturally related issues. Kaukab observes that the political dynamics of the WTO have been markedly changed by these new groups that often involve developing countries. If the Doha Round has a successful conclusion it will not be based on an agreement that is exclusively drafted by the EU and United States.

There is some overlap among the chapters of the book, so the chapter on managing price risk in developing countries (by Foster and Valdes) reiterates many of the concerns about export subsidies, the difficulties in dealing with WTO rules, and the difference between applied and bound tariffs. The authors address the need for developing countries to have safeguards against extended periods of low prices, which commonly occur with agricultural commodities. The supply process in agriculture is not a reversible process, so periods of low prices fluctuations can have long-term supply consequences in developing countries when the production capacity is destroyed. "Water" under the bound tariffs gives developing countries the flexibility to hold domestic prices higher than world prices when the later are artificially depressed.

An increasingly important and contentious issue for developing countries is the escalation in food standards in developed countries. In chapter seven Josling outlines the Sanitary and Phytosanitary (SPS) agreement from the URAA, including the need for science-based standards, a risk assessment for standards, and notification of changes in standards. He provides four illustrative examples of disputes between developing and developed countries. What he does not talk about is the new quality and food safety demands by the private sector in developed countries that are more stringent than government standards.

Paarlberg, Bredahl, and Lee apply their social welfare framework that incorporates multifunctionality to analyze cases where developing countries might be affected. Included in their analysis is the spillover case when developed countries use subsidies to support agriculture under the guise of multifunctionality and various cases where a production subsidy could be used by developing countries for multifunctionality considerations. They recognize that budget constraints severely limit the feasibility of the later.

Gulati and Narayanan use India as an example of the troubles that developing countries have in managing agricultural trade liberalization with a slow-reforming domestic economy. Again, the problem of irreversible damage from long periods of low prices is highlighted. India had a special waiver that allowed many quotas because of balance of payments problems (Article 4.2). This changed in 1997 when the United States challenged India's eligibility to this special waiver. Most quantitative restrictions were eliminated by 2001. The authors analyze the situation over time for many commodities and conclude that Indian agriculture needs more border protection than low tariffs can provide.

The final chapter, by Valdes and Foster, attempts to debunk the myth that developing countries have that past trade reforms have not helped their cause. They argue that in most developing countries there have been a host of other factors, macroeconomic reforms, technological changes, structural adjustment programs, exchange rate changes, etc., which have happened coincidentally with trade liberalization. It is very difficult to pinpoint the effects of all these changes (they try but cannot either; nonetheless their point is well taken). They compared Argentina, Chile, and Columbia on various measures of health for the agricultural economy during and after their times of reform. The problem, though, is that the data are inconclusive because of the currency appreciations and falling commodity prices that coincided with agricultural trade reforms.

This compilation of papers helps one understand the new power blocs that have emerged within the WTO--their situation, objectives, and viewpoints. The book provides a convenient, one-stop source for many negotiation issues that are important to developing countries. It is critical for agricultural trade and development economists to understand these issues deeply and for policy-makers to be aware of them. The issues will not go away soon and helping to solve them will be important for all countries in this increasingly interconnected world.

Michael R. Reed

University of Kentucky