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Linda M. Young Political Science Dept. Montana State University

Pakistan: Agricultural Trade and Development Challenges. Linda M. Young Political Science Dept. Montana State University. My Talk Tonight. Will start with background on me on Pakistan Overview of the agricultural negotiations What Pakistan wants how that surprised me

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Linda M. Young Political Science Dept. Montana State University

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  1. Pakistan: Agricultural Trade and Development Challenges Linda M. Young Political Science Dept. Montana State University

  2. My Talk Tonight • Will start with background • on me • on Pakistan • Overview of the agricultural negotiations • What Pakistan wants • how that surprised me • Developmental challenges

  3. How Did I Get There? • Agricultural trade economist • dealing with agricultural trade issues, NAFTA, then WTO for numerous years • Member of the International Agricultural Trade Research Consortium • three commissioned papers on “export competition” • Other work on food aid and state trading • “Experts” meeting in Rome, over Thanksgiving • Pakistan new WTO unit • Agricultural position for Hong Kong Ministerial • November, 8 days, Islamabad

  4. Islamabad • 2x size of California • 135 million people • 97% Muslim • English common • World’s 8th largest army Insert map here

  5. Remember … • India wanted independence • Idea of a separate Muslim state • Muhammad Ali Jinnah, leader of the Muslim League • endorsed the Lahore resolution • 1947 Britain gave independence to India and Pakistan • “Princely States” could join either one • Create a bifurcated Muslim state separated by 1,600 kms • including present day Bangladesh • 6 million Hindus from Pakistan to India and 8 millionMuslims vice-versa Muhammad Ali Jinnah

  6. Conflict Over Kashmir • Maharaja of Kashmir – Hindu • population mostly Muslim • Maharaja hesitated, Muslims revolted to join Pakistan • Maharaja gave loyalty to India, for military assistance • Indian troops occupied eastern portion of Kashmir, including Srinagar • western part under Pakistan • Relationship with India tense ever since • But, India should be Pakistan’s natural trading partner Sir Hari Singh BahadurMaharaja of Kashmir

  7. Pakistan – Political Instability • 1948: The revered Jinnah assassinated • 1949-1970: Eleven administrations, sporadic martial law • 1970: Bhutto, civil war • 1971: East Pakistan split, independent Bangladesh, Bhutto rules • 1976: Bhutto put to death, Zia in power • 1988: Zia dies in airplane crash • 1988-1996: Benezair Bhutto in and out of power • 1997: Shariff and Tarar Note: President/Prime Minister change of powers • 1999: Musharraf (Chief Executive, now President)

  8. Pakistan and the World Trade Organization • Pakistan wants to develop technical capacity • Negotiations complicated, technical, data intensive • Many developing countries unhappy with URA • Brazil: • leader of G-20 • making a difference • one factor is new technical capacity • example? Mário JalesICONE Projects Coordinator

  9. OECD Producer Subsidy Equivalents (PSEs)by Country 73% 69% 48% 45% 42% 42% 35% 30% 20% 16% 10% 9% 1986-88 1997 Source: Agricultural Policies in OECD Countries, Organisation for Economic Co-operation and Development (OECD) Secretariat, 1998.

  10. Agricultural Markets • 1970s: Scarcity and high prices • 1980s: Abundance, high stocks and low prices • large government expenditures on agriculture • Agriculture • tariffs averaging 40-60% • quotas on 30% of agricultural products • history of domestic sub subsidies • export subsidies used by many

  11. U.S. Agricultural Policies • Loan rates and target prices • program crops • spurred production • Export subsidies • Tariffs and quotas

  12. U.S. Wheat Stocks and Prices Received PriceReceived Stocks Price Received Stocks Source: U.S. Dept. of Agriculture, 1995. Wheat: Background for 1995 Farm Legislation, AER-712, Economic Research Service, Washington, DC, Appendix Table 3.

  13. EU Self-Sufficiency Source: U.S. Department of Agriculture – Economic Research Service. 1999. The European Union’s Common Agricultural Policy: Pressures for Change. International Agriculture and Trade Report, Situation and Outlook Series, WRS-99-2, Washington, DC, October, Figure 2, p. 7.

  14. WTO Export Subsidy Notifications (Value), 1996 EU 84% South Africa – 9% Switzerland – 4% United States – 1% Rest of World – 2% Source: U.S. Department of Agriculture – Economic Research Service. 1999. The European Union’s Common Agricultural Policy: Pressures for Change. International Agriculture and Trade Report, Situation and Outlook Series, WRS-99-2, Washington, DC, October, Figure 3, p. 7.

  15. Outcomes of the Uruguay Round Agreementon Agriculture (URAA) Least-developed countries do not have to make commitments to reduce tariffs or subsidies. The base level for tariff cuts was the bound rate before January 1, 1995; or, for unbound tariffs, the actual rate charged in September 1986 when the Uruguay Round began. The other figures were targets used to calculate countries’ legally-binding “schedules” of commitments. Source: World Trade Organization. 2003. “Understanding the WTO.” Geneva, Switzerland, p. 28.

  16. Total Domestic Support Note: Data relate to 1998-00 for Canada and Korea, 1999-01 for the EU, Norway and the United States, and 2000-02 for Japan. National currency values converted to U.S. dollars at the average exchange rate applicable to the base period for each country.Source: David Blandford, “Disciplines on Domestic Support in the Doha Round,” Trade Policy Issues Paper 1, The International Agricultural Trade Research Consortium and International Food and Agricultural Trade Policy Council, July 2005, p. 14.

  17. Developing Countries Unhappy Lack of faith in “de-coupled support” and high levels of support Decline in terms of trade for some Little implementation of Marrakech Decision

  18. Idea of Decoupled Support • Support income without distorting production, and trade • Producers respond to price incentives in the market • Subsidies not linked to production will not increase production • Researchers • support this LESS OVER TIME • new ideas about modeling and theory • Australia always suspicious

  19. Ministerial Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries • Concern: increased price volatility and import bills • An agreement open to interpretation • Food aid, technical and financial assistance included

  20. What Do Developing Countries Want? • Decrease in developed country tariffs and subsidies (mostly) • Developed country ag policies: • reduce ag exports by developing countries by $37 billion (25%) • End of export subsidies (mostly) • Technical assistance • Real access to developed country markets • Assistance with food imports • But: MUCH DIVERSITY BETWEEN DEVELOPING COUNTRIES • Preferences problematic

  21. What Outcome Is Most Important? • According to who? • Market access (World Bank), but… • Subsidies matter too, underestimated • Process outcome most important • Shift in balance of powerwithin the WTO

  22. Pakistan: Food and Agriculture • Rural population 66% of total • Ag employs 43% labor • Largest irrigation system in the world • Food consumption (calories consumed by average person) • 41% wheat • 11% milk • 10% sugar and products • Food production • buffalo milk 18 mmt • wheat 18 mmt • cotton lint 1 mmt

  23. Pakistan’s Agricultural Exports Rice Wheat (importer to exporter) Cotton Agriculture: 60% of export earnings

  24. Protection Facing Pakistani Exports Sources: (1) Organisation for Economic Co-Operation and Development (OECD). 2002. “Agricultural Policies in OECD Countries Monitoring and Evaluation 2002: Highlights,” Paris, France; and (2) US Department of Agriculture, Economic Research Service. 2003. WTO Agricultural Trade Policy Commitments Database, Washington, DC. Available at http://www.ers.usda.gov/db/wto.

  25. World Agricultural Tariff Averages, by Region India included here Note: Tariffs are bound MFN rates based on final URAA implementation. Source: Gibson, P., J. Wainio, D. Whitley, and M. Bohman. 2001. Profiles of Tariffs in Global Agricultural Markets. Agricultural Economic Report No. 796, Economic Research Service, U.S. Dept. of Agriculture, Washington, DC, Figure 2, p. 9.

  26. My Job • Export competition pillar • food aid • export subsidies • export credits • state trading

  27. The Dilemma of Food Aid • Subsidy element make it part of export competition, but… • Strong humanitarian component • Viewed as a historical US subsidy • discourse extremely difficult • Emergency food aid no disciplines but • disagreement on definitions • Relevant to Pakistan

  28. Divergent Interests but Sticking with the G-20 • Secretary disagreed: gave me homework • Shares with G-20: decline in tariffs and subsidies • “Policy Space” • Special products Finance ministers and heads of central banks of the G-20 countries at meeting in Berlin, Nov. 2004.

  29. Intra-Developing Country Trade One-third ag trade between developing countries High tariffs by Brazil, China, India, and Mexico (25%) United in calling for  in developed country tariff No consensus in developing country tariffs Developed country ag trade reform useful, but also developing country tariff reduction consumers lower prices MORE POLITICAL POWER

  30. Pakistan … isolated • US: help with terrorism but little opening for textiles • textiles 60% manufacturing exports • Doesn’t receive preferences from anyone • Geopolitically isolated • Limits to multilateralism • regional trade agreements • ASEAN • China Photo courtesy of theCentral Asia Institute

  31. Easterly: Growth Without Development • Compared to other countries, similar income, Pakistan has • 36% lower attended births • 42% less health spending per capita • 27 excess infant deaths per 1,000 • 23% less population access to sanitation • 24% higher illiteracy • Massive spending on defense and roads etc • defense spending 3.3% more GDP than countries same income • overspending on defense = under spending on health and education • Missing women-gender discrimination • girls 1 to 6 have a 66% higher death rate than boys Easterly, William. 2003. “The Political Economy of Growth Without Development: A Case Study of Pakistan.” In Rodrik, Dani, In Search of Prosperity: Analytic Narratives on Economic Growth, Princeton University Press, Princeton and Oxford.

  32. Ethnic Diversity • Research: ethnic diversity linked to poor institutional outcomes • ethnically diverse US cities • less investment in education and other public resources • bloated public payrolls • ethnically diverse countries – same outcome in terms of education and institutions • Pakistan: both elite dominance and ethnic diversity Photos courtesy of the Central Asia Institute

  33. Educational Gaps in Pakistan • Attained grade 1 • 92% of rich males • 12% of poor females • Attained grade 9 • 61% of rich males • 2% of poor females Photo courtesy of the Central Asia Institute.

  34. How and Why • Pakistani economist Ishrat Husain, “The ruling elites found it convenient to perpetuate low literacy rates. The lower the percentage of literate people, the lower the probability that the elite could be displaced.” • In the 1960s, 22 families controlled 66% of industrial wealth and 87% banking and insurance • Landowners – great power • rural gentry captured 70% of parliamentary seats in 2000 • blocked direct taxation of agricultural income • school teachers related to land owners and protected – and absent • Male elite: does not want to invest in women’s education-will demand greater rights • Foreign donors: low emphasis on social progress instead of GDP growth • tiny percentage of lending until 1990s, then only 22%

  35. Duality the Challenge • International community has a challenge • Development requires active participation in institutions and decision making • Pakistan faces difficulties in gaining voice in international institutions • my view the challenge and potential positive outcome of this round • Pakistan needs to promote at home • health and education required for more people to • Further and profitably participate in the workforce • Inequality in holdings of assets, including land

  36. Questions?

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