GENEVA — The removal of trade-distorting subsidies by wealthy countries may increase world market prices for cotton and other agricultural commodities by as much as 15 percent, the United Nations Food & Agriculture Organization said Wednesday.
Many developing nations in which agriculture is the economic backbone would potentially benefit from such a move, according the report, “The State of Food and Agriculture.” Market distortions tend to lower world market prices and limit market access.
Hartwig de Haen, the food and agriculture unit’s assistant director general, said that subsidies, which average $250 billion to $270 billion a year, have an adverse effect on poor nations. The report said that, during the last four decades, developing nations’ share of world agricultural exports declined to about 30 percent from 40 percent.
Trade liberalization in agriculture is likely to “generate positive economic benefits at the global level and for most but not all participating countries,” the report said.
The World Bank has estimated the potential global benefits from scrapping all farm subsidies could be worth $291 billion.
However, Terri Raney, senior economist of the food and agriculture unit, said the results from a successful outcome in the Doha round of trade talks would be “more modest” than the dynamic scenario of the World Bank. Differences over farm trade issues, including subsidies, has stalled progress in the four-year talks.
Demands by four West African cotton nations — Benin, Mali, Burkina Faso and Chad — for wealthy nations to scrap all export subsidies on cotton by the end of this year is one of the most politically sensitive and difficult issues ministers will discuss at next week’s World Trade Organization trade summit in Hong Kong.