Those who advocate that developing countries should be exempted from further tariff
reductions or alternatively should be allowed greater flexibility to set tariffs at whatever levels
they deem appropriate, at least for food security products, justify their case using four key
arguments.
• The case for development tariffs, i.e. high tariffs are necessary to provide adequate
incentives for producers in developing countries in order to encourage agricultural
growth with its accompanying poverty alleviation and multiplier effects;
• The case for food security tariffs, i.e. levels of food self-sufficiency at world market
prices or with low tariff bindings are insufficient to provide the level of national food
security that developing countries desire;
• The case for stabilisation tariffs, i.e. tariff bindings should be sufficiently high to give
developing countries the ability to vary applied tariffs in order to offset most or all of
the price volatility arising from world market prices;
• The case for compensatory tariffs, i.e. high tariffs in developing countries are justified
as a countervailing measure as long as developed countries continue to provide
significantly larger amounts of trade-distorting support.
These arguments can be criticised on a number of grounds. For instance, given that poor
households may spend as much as half of their income on food, raising tariff levels could
have a negative impact on the living standards and food security of an increasing number of
poor urban households and landless rural workers, as well as those poor small farmers who
tend to be net buyers of food. Thus higher tariffs will impact differently on food security
depending on whether the food-insecure are predominantly food producers or food
consumers.
Even if the poor are predominantly food producers, attempting to improve their situation by
raising food prices will be relatively ineffective. This is because it is the larger farmers, who
have most to sell, who will disproportionately gain from higher food prices. Therefore, there
will be a significant leakage of benefits away from the poor under this policy. On the other
hand, direct targeting of resources to directly benefit poor farmers may be administratively
very difficult in the circumstances of certain developing and least developed countries.
An important criterion in evaluating the case for treating developing country tariff policies
differently is whether there are alternative WTO-compatible policies available to developing
countries which could achieve the intended objectives. In many cases, other alternatives do
exist (Diaz-Bonillo et al., 2003). Most evidently, domestic policies which ignore or even
discriminate against domestic agriculture must be avoided. Farmers are still penalised in
many developing countries as a result of persistent exchange rate over-valuation or neglect in
public investment allocation. In such contexts, tariffs are often advocated as a second-best
policy to address some of the fallout from faulty macroeconomic policies. Developing
countries have the right under existing WTO rules to invest in a range of growth-enhancing
policies, such as research, extension, irrigation, infrastructure, land tenure and organisational
reforms, to address supply bottlenecks in their agricultural sectors. These measures are all
Green Box-compatible and not prohibited under the AoA. Ensuring that developed countries
reduce and eliminate their trade-distorting support to their farmers would also help to increase
incentives to developing country agriculture.
Developing country governments argue that they cannot afford to finance these growth-
enhancing policies. In this constrained environment, raising tariffs appears as an attractive
way of raising farm prices (in food-importing countries) at low fiscal cost. But low fiscal cost
should not be confused with low economic cost. There are real costs to a developing country
economy which sets out to maintain a high level of uncompetitive food production as a long-
term policy. Such transfers must ultimately be paid by someone, and if consumers are asked
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