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WTO’s Doha Round Actually Manages Something: Abolition of Agricultural Export Subsidies

December 21, 2015

By Tim Worstall

The World Trade Organisation’s Doha Round of negotiations has often seemed like going absolutely nowhere. There are two major reasons for this: one is the decidedly democratic nature of the forum, where every country has one vote and also an absolute veto. One country can simply say no and that’s that: it’s not the majority that decides what is to happen. The other reason is that the simple stuff about trade has already been done. Under the WTO’s predecessor, GATT, and in the last 20 years of the WTO’s existence. The lowering of tariffs on goods and services for example, the simplification of certain non-tariff barriers like customs processes and so on. However, they do still, in this latest round of negotiations, appear to have pulled something out of the hat: a ban on agricultural export subsidies.

This is being lauded as being just great for certain exporters who traditionally have not been subsidised: and that’s true, it will be. It will also not be all that good for those who used to be subsidised (say, Thailand’s rice exports recently, India’s sugar exports) and that’s fine. Consumers of some products will lose the subsidies to their consumption which is a pity but not a great problem. Because the people who will really gain from this are the poor suffering taxpayers of the countries that used to offer the subsidies. And as is the way with these things, it has often been poor people in poor countries paying taxes to subsidise exports to richer people in richer countries. Whatever we might think about having a system of subsidies at all, that’s just not the way we would want one to work.

Yes, free trade is better than managed, market prices lead to a better allocation of scarce resources than planning and subsidies do, but even if you don’t agree with that the Indian taxpayer subsidising sugar exports for the, say, Saudi consumer is simply ridiculous, given that the average Indian is significantly poorer than the average Saudi.

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Issue Categories : Agriculture, Corporate Welfare, Trade