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
Developmental challenges
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
2x size of California
135 million people
Islamabad
97% Muslim
English common
World’s 8th largest
army
Insert
map here
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
Muhammad Ali Jinnah
Create a bifurcated Muslim state separated by 1,600 kms
• including present day Bangladesh
6 million Hindus from Pakistan to India and 8 million
Muslims vice-versa
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 Bahadur
Maharaja of Kashmir
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 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 Jales
ICONE Projects Coordinator
OECD Producer Subsidy Equivalents (PSEs)
by Country
80
73%
70
69%
Percent
60
50
48%
45%
42%
42%
40
35%
30%
30
20%
20
10
16%
10% 9%
0
Australia
Canada
EU
1986-88
Japan
US
OECD
1997
Source: Agricultural Policies in OECD Countries, Organisation for Economic Co-operation and
Development (OECD) Secretariat, 1998.
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
Loan rates and target prices
• program crops
• spurred production
Export subsidies
Tariffs and quotas
U.S. Wheat Stocks and Prices Received
Price
Received
5
Stocks
200
175
4
150
125
3
100
Stocks
2
75
50
1
25
0
0
70/71
73/74
76/77
79/80
82/83
85/86
88/89
Crop Year
Source: U.S. Dept. of Agriculture, 1995. Wheat: Background for 1995 Farm Legislation, AER-712, Economic Research
Service, Washington, DC, Appendix Table 3.
Million metric tons
Dollars/bushel
Price Received
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.
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)
Tariffs
average cut for all
agricultural products
minimum cut per product
Domestic support
total AMS cuts for sector
(base period: 1986–88)
Exports
value of subsidies
subsidized quantities
(base period: 1986–90)
Developed countries
6 years:
1995–2000
Developing countries
10 years:
1995–2004
–36%
–24%
–15%
–10%
–20%
–13%
–36%
–24%
–21%
–14%
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.
Total
Domestic
Support
2. Total DomesticSupport
Figure
160,000
140,000
Million US dollars
120,000
100,000
Green
Blue
Amber
80,000
60,000
40,000
20,000
0
EU
US
Japan
Korea
Norway
Canada
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.
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
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
Ministerial Decision on Measures Concerning the Possible
Negative Effects of the Reform Programme on LeastDeveloped 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?
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?
According to who?
Market access (World Bank), but…
Subsidies matter too, underestimated
Process outcome most important
Shift in balance of power
within the WTO
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
Rice
Wheat (importer to exporter)
Cotton
Agriculture: 60% of
export earnings
Protection Facing Pakistani Exports
100
80
60
40
20
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Bound Tariff %
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PSE
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.
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
Export competition pillar
• food aid
• export subsidies
• export credits
• state trading
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
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
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
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 the
Central Asia Institute
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
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
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
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
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
Questions?