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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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slide1

Pakistan: Agricultural Trade and Development Challenges

Linda M. Young

Political Science Dept.

Montana State University

slide2

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
how did i get there
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
slide4

Islamabad

  • 2x size of California
  • 135 million people
  • 97% Muslim
  • English common
  • World’s 8th largest army

Insert map here

remember
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

conflict over kashmir
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

pakistan political instability
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)
pakistan and the world trade organization
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

oecd producer subsidy equivalents pses by country
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.

agricultural markets
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
u s agricultural policies
U.S. Agricultural Policies
  • Loan rates and target prices
  • program crops
  • spurred production
  • Export subsidies
  • Tariffs and quotas
u s wheat stocks and prices received
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.

slide13

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.

slide14

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.

outcomes of the uruguay round agreement on agriculture uraa
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.

slide16

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.

slide17

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

idea of decoupled support
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
slide19

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
what do developing countries want
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
what outcome is most important
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
pakistan food and agriculture
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
pakistan s agricultural exports
Pakistan’s Agricultural Exports

Rice

Wheat (importer to exporter)

Cotton

Agriculture: 60% of export earnings

protection facing pakistani exports
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.

slide25

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.

my job
My Job
  • Export competition pillar
    • food aid
    • export subsidies
    • export credits
    • state trading
the dilemma of food aid
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
divergent interests but sticking with the g 20
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.

intra developing country trade
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

pakistan isolated
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

easterly growth without development
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.

ethnic diversity
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

educational gaps in pakistan
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.

how and why
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%
duality the challenge
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