ARCHIVED MEDIA RELEASE
PA/23/2001 11 December 2001
Australian report questions benefits of trade preferences
Senior economists from the Australian Bureau of Agricultural Resource Economics (ABARE) are visiting India on 12-14 December to discuss with Indian politicians, officials and think tanks their new report assessing trade preferences schemes.
The recently-released report argues that the benefits of trade preferences to less developed countries are either illusory or grossly overstated, compared with the potential gains from domestic social and economic reforms combined with a genuine increase in market access brought about by comprehensive global trade liberalisation.
Visiting India, author of the report Vernon Topp said it was time for rich countries to acknowledge that their protectionism was "a fundamental cause of world poverty".
"If aid and development agencies are genuinely interested in improving the welfare of the world's poorest people they should forget about trying to increase preferential market access for developing countries," he said.
The ABARE report says that instead of providing direct development assistance, rich countries like the United States, Japan and the European Union have used their trade preference schemes effectively to buy off small countries by offering them privileged but restricted access to some of their high priced and heavily protected markets. However, any benefits to 'preferred' countries come at a cost to non-preferred countries.
To make matters worse, ABARE's study shows, the overall benefits to least developed countries from trade preferences have been minimal, even though some industries in some poor countries earn higher returns. Further large preferences lead to high cost industries in developing countries that cannot compete in non protected markets, leaving them vulnerable and dependent on rich countries for the continuation of preferences.
A better solution, the report says, is for developing countries to improve domestic policies combined with genuine and comprehensive trade liberalisation. At the same time, industrialised countries should reorient their assistance to very poor countries toward policies and programs that directly target poverty problems, along with assistance to improve the overall efficiency, capacity and flexibility of their economies.
For further information contact Elizabeth Ward, First Secretary on (011) 6888223 x 175.
The report is available on ABARE's website at www.abareconomics.com