TWN Info Service on WTO and Trade Issues (Jan07/03)

20 January 2007

New G33 criticism on World Bank paper on Special Products

Below is a SUNS report on the latest criticism of the Group of 33 on the revised World Bank paper on special products (in the context of the agriculture negotiations at the WTO).

With best wishes
Martin Khor


G33 criticizes World Bank paper on Special Products
Published in SUNS #6170 dated 17 January 2007
By Kanaga Raja, Geneva, 16 Jan 2007

The Group of 33 developing countries in the WTO has warned the World Bank that its revised draft paper on agricultural special products (SPs) is fundamentally flawed in its assumptions and methodology and could have adverse consequences for the Doha Round negotiations.

According to a press release issued in New Delhi on 12 January, the Group had sent a detailed critique on the initial draft paper on SPs authored by Maros Ivanic and Will Martin for the World Bank.

India is one of the 46 countries that make up the Group of 33.

In its critique, the Group had pointed out that the World Bank paper was fundamentally flawed in its assumptions and methodology, ignored the reality of the prevailing agrarian structures in most developing countries, and misinterpreted the proposed operation and impact of SPs.

The initial draft paper by the two authors titled "Potential Implications of Agricultural Special Products for Poverty in Low-Income Countries" had inferred that raising agricultural prices substantially through SPs "would create large increases in poverty - sufficient in some cases to undo decades of development progress - and push the already poor deeper into poverty".

The G33, which is championing the concepts of Special Products and a Special Safeguard Mechanism to defend the interests of their small farmers in the WTO agriculture negotiations, had conveyed to the World Bank that there would be a serious reputation risk for the Bank in promoting such a paper.

The G33 includes Indonesia (the coordinator), India, China, Pakistan, the Philippines, Sri Lanka, Mongolia, Korea, Nigeria, Kenya, Tanzania, Mozambique, Benin, Senegal, Mauritius, Uganda, Bolivia, Peru, Venezuela, Nicaragua, Cuba, Dominican Republic, Jamaica, Barbados, Trinidad and Tobago, Antigua and Barbuda, and several other African, Caribbean and Central African countries.

The G33 has cautioned that such a ''misleading paper'' could have adverse consequences for the Doha Round negotiations in the WTO.

The initial draft paper was presented by the two authors to the World Bank President in October 2006, but following strong protests by G33 countries, the authors subsequently revised the paper.

However, according to the press release, the G33 is dismayed that even the revised draft paper remains essentially the same, with the slight difference that instead of assuming a direct price increase of 50%, it assumes unjustifiably high import substitution elasticities to get a similar effect on prices.

Clearly, the objective of the instrument of SPs has not been understood by the authors, it said.

The G33 has repeatedly explained that the aim of SPs is not to raise prices of qualifying products over an extended period of time. Rather, SPs are a flexibility intended to enable developing countries to address externally generated shocks that could disrupt incomes and food security, particularly for low income and resource poor agricultural producers.

According to the press release, the paper makes a sweeping generalization 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 G33 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.

The G33 has pointed out that the Ivanic-Martin paper ignores the reality of price declines, price volatility and predatory competition, including dumping of heavily subsidized 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.

In this context, the G33 has also cited an independent evaluation of World Bank Research, 1998-2005, carried out on behalf of the Bank by Angus Deaton of Princeton University along with two other distinguished academics of MIT and Harvard and a representative of UNDP.

This independent evaluation had sharply criticized the use of questionable evidence, the drawing of conclusions that are not supported by evidence, in order to "... proselytize on behalf of Bank policy, often without taking a balanced view of the evidence, and without expressing appropriate skepticism."

The evaluation had added: " Internal research that was favourable to Bank positions was given great prominence, and unfavourable research ignored. ... The evaluators repeatedly found that too large a fraction of Bank research ... had neither great relevance to policy nor claim to academic distinction ... The concern was that large fraction of papers, on reading, did not seem to be very useful from the perspective of, either an academic or a policymaker".

According to the New Delhi press release, it is noteworthy that the external audit has been critical of the research done by the Bank on globalization, growth and poverty, and has concluded that "... much of this line of research appears to have such deep flaws that, at present, the results cannot be regarded as remotely reliable, much as one might want to believe the results. There is a deeper problem here than simply a wrong assessment of provocative new research results. The problem is that ... it proselytized the new work without appropriate caveats on its reliability... and as new results come in, it is becoming clear that the Bank seriously over-reached in prematurely putting its globalization, aid and poverty publications on a pedestal. Nor has it corrected itself to this date."

In conveying their serious concerns on the revised draft paper, the G33 urged the World Bank to undertake a more useful study that examines these phenomena, but does not seek to generalize misleading findings. The World Bank was also urged to substantially modify this fundamentally flawed paper as a matter of priority.