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Globalisation: gains and losses

By Saul Eslake - posted Friday, 29 August 2003


Developing countries are not themselves immune from hypocrisy on this score: their tariffs on imports of agricultural goods from othe r developing countries average 25 per cent, more than double the average tariff rate they impose on imports of manufactured goods.

By contrast, agricultural policies in the US, the EU and smaller European economies, Japan and Korea provide perverse economic signals and produce perverse outcomes. In particular, and contrary to what many farmers in those countries appear to believe, they do little to maintain the viability of small family-owned farms. Rather, benefits accrue disproportionately to large producers.

The same occurs in Europe. High land prices encourage intensive farming techniques and practices which damage the environment (for example through excessive fertilizer and pesticide use) and human health (through the sort of feeding practices which led to the outbreak of BSE in Europe).

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It is highly significant, in my view, that the response of developing countries to these policies which harm them so much is to demand more globalisation, not less. They want fairer globalisation, to be sure: but they do not endorse the demands of the protestors from rich countries who seek to prevent globalisation from being discussed at all, except on their terms, that it be rolled back.

Removal of all post-Uruguay Round barriers to trade in agricultural products would produce welfare gains for the world as a whole of around US$165 billion - nearly two thirds of the total gains to be had from eliminating the remaining barriers to all forms of merchandise trade.

Where and when it has been permitted, globalisation has, on balance, been a "good thing". It has usually resulted in faster economic growth, improving living standards and a reduction in poverty.

But those outcomes are not guaranteed, and they cannot be obtained by trade and investment liberalization alone, in isolation from other reforms, robust domestic institutions and mechanisms to ensure that costs and benefits are widely distributed rather than narrowly concentrated. Trade and investment liberalization are not a substitute for aid; nor do they imply a diminished role for governments. Rich and poor country governments alike need to do more to enhance the potential gains from globalisation, spread them more fairly and reduce its risks.

Globalisation in general, and trade liberalization in particular, are not ends in themselves. globalisation is a "good thing" in principle because it is consistent with human aspirations for greater freedom and for improvements in their well-being and that of their fellow citizens and descendants.

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Article edited by Jenny Ostini.
If you'd like to be a volunteer editor too, click here.

This is an edited version of an address to the 14th International Farm Management Congress in Perth on 13 August 2003. Click here to download the full text (PDF, 36kb).



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About the Author

Saul Eslake is a Vice-Chancellor’s Fellow at the University of Tasmania.

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