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Third world has higher stake in free trade

BS Bureau in New Delhi

"Developed countries call for reduction in barriers to trade while erecting barriers where developing countries have a comparative advantage. Removal of these barriers will result in significant gains for the developed and developing countries," said Nicholas Stern, senior vice-president and chief economist at the World Bank.

Developing countries have more to gain from trade liberalisation than high-income countries. Citing the Organisation for Economic Cooperation and Development figures, he said while developing countries stood to gain $116 billion from removing barriers in agriculture, textiles and other sectors, high-income countries would gain only $76 billion.

Delivering a lecture entitled "Making trade work for poor people", Stern advocated trade liberalisation as a way of reducing poverty. "Trade plays an important part in promoting growth, the most powerful mechanism to reduce poverty. Growth, however, has to involve the poor, in order for it to result in poverty reduction," he said.

However, the rich countries continue to protect their economies. The level of subsidies in rich countries was high and was not decreasing, he said.

Also, the pattern of tariffs is such that products subsidised at home are given greater protection and processed goods imports attract higher tariffs. For instance, while the US tariff on raw tomatoes is only 2.5 per cent that on tomato paste is 11 per cent.

Also, 80 per cent of the US anti-dumping investigations were directed against the products of developing countries while trade was mostly carried on with developed countries, he added.

Also, in the services sector, which was gaining as an export segment for developing countries, non-tariff barriers like obstacles to the movement of personnel were quite serious, Stern said.

Moreover, the introduction of the US Farm Bill and the European Union agreement, pushed by France and Germany to slow down reforms in the Common Agricultural Policy, were regressive steps, he added.

For developing countries, bigger gains will come from removing trade barriers against one another. Tariffs on manufactured goods traded between two developing countries were four times those imposed by developed countries, he said, adding that developing countries were also increasingly employing non-tariff barriers like anti-dumping duties.

He cautioned developing countries against increasing non-tariff barriers while reducing tariff barriers. Advocating unilateral dismantling of restrictions, Stern said there was no need to wait for the World Trade Organisation negotiating process to do away with barriers to trade.

India made significant gains in productivity and improved living standards as a result of trade liberalisation undertaken during the 1990s, he said. However, trade barriers are still among the most restrictive in the world, something that hurts the poor in India.

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