G-33 to World Bank: Paper on special products flawed

The initial draft paper titled “Potential Implications of Agricultural Special Products for Poverty in Low-Income Countries”, was presented by the authors to the World Bank president in October 2006. The paper was subsequently revised by the authors but G-33 is dismayed by the revision, which resulted in a slight difference that instead of assuming a direct price increase of 50 per cent, it assumes unjustifiably high import substitution elasticities to get a similar effect on prices.

The paper has argued that if poverty is to be successfully reduced, there is a need for caution in using the flexibility provided by SPs. This is despite the fact that the G-33 critique had clearly mentioned that the product coverage in the study was very narrow, its scope was confined to only four countries, and that the situations which were sought to be simulated were completely arbitrary.

Developing countries have hit back saying that the objective of the instrument of SPs is not to raise prices of qualifying products over an extended period of time but to address externally generated shocks that could disrupt incomes and food security particularly for low income and resource-poor agri producers. Further, it is alleged that the paper ignores the reality of price declines, price volatility and predatory competition, including dumping of heavily subsidised products, which raises the risk levels of developing countries without providing an adequate safety mechanism or flexibility to deal with the adverse impacts of trade policy changes for their vulnerable agricultural sectors.