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Extra info for Agriculture And Development: The Case for Policy Coherence
She concludes that the overall impact of preferential trade arrangements on trade and welfare is generally positive, but also relatively small. While all studies find that there is some trade diversion, this is generally outweighed by the trade creation generated by an RTA. For reciprocal agreements including developing countries, the loss of tariff revenue emerges as an important issue. Not many studies specifically highlight the PCD question raised in this section, namely, whether the inclusion of agriculture in RTAs adds to the welfare gains of insiders and the costs to outsiders.
Opening up unrestricted access for agricultural imports under a preferential trade arrangement can put pressure on domestic market support policies and lead to their reform. For example, trade barriers were an integral pillar of the US peanut programme to support American growers. The removal of trade restrictions under NAFTA encouraged outAGRICULTURE AND DEVELOPMENT: THE CASE FOR POLICY COHERENCE – ISBN-92-64-01334-2 © OECD 2005 48 – 3. POLICY COHERENCE BETWEEN OECD COUNTRY AGRICULTURAL TRADE POLICIES… of-quota peanuts from Mexico to enter the US market as the US phased out its outof-quota tariffs on agricultural commodities.
Particularly where the beneficiaries are among the most vulnerable countries in the world, specific measures to address preference erosion must accompany either unilateral or multilateral trade reforms. Preference erosion is a sufficiently important issue for some developing countries that they have insisted that it should be addressed as part of the negotiations on the Doha Development Round. Slowing the pace of multilateral liberalisation in order to maintain the value of preferences is not the right response.