For countries that are net food importers, standard consumer welfare models register the lower food prices associated with northern production subsidies and export dumping as a positive gain. This situation raises an important policy question that has figured prominently in debates at the WTO: namely, would an end to export dumping by rich countries hurt food security in developing countries?
The answer is no. Standard consumer welfare models tend to obscure the damage caused by agricultural dumping. Export subsidies in industrialized countries undermine incentives for small farmers in developing countries, and destabilize local markets. These subsidies raise important questions for policy-makers in developing countries, notably with regard to import liberalization (United Nations, 1995).
In India, surges in imports of dairy products forced the government to sharply increase tariffs at the end of the 1990s. Some critical voices saw the move as a retreat from free trade. But what does free trade mean in a context where the world's largest exporter of dairy produce, the EU, is providing subsidies in excess of US$3 billion a year? (Kracht, 1997)
Under prevailing market conditions, rapid import liberalization can inflict enormous adjustment costs on small farmers. When Haiti opened up its rice market in 1995, imports from the U.S. flooded in, driving prices down by 25 percent and displacing local farmers. At the time agricultural subsidies to U.S. rice producers represented 40 percent of the value of output.
The upshot is that many developing-country agricultural exporters are operating in the least dynamic part of the global economy—and they are systematically excluded from a larger stake in higher-value-added trade. The present pattern of agricultural trade is thus reinforcing wider inequalities in globalization, with attendant implications for poverty (Paul II, 1998).
Of course, there are those who see restrictions on export opportunities for developing-country agriculture......
