The first issue in discussing agricultural protection and developing countries requires a caveat. Developing countries are a heterogeneous group — there are food exporters, food importers, oil-rich exporters and so on. The implications of agricultural trade liberalisation for each of these developing countries is different. Notwithstanding the point, there are so many differences between developing countries that to deal with the subject practically, it makes sense to deal with common themes that apply to the bulk of countries in the knowledge that there may be some countries that might be exceptions. Whenever ‘developing countries' is used here, the above caveat should be borne in mind.

The problem for the agricultural sector of protection by high-income countries is threefold. The first is that this protectionism distorts production. It stimulates inefficient and larger production that gets dumped on to world markets, depressing world market prices. These lower world prices make it more difficult for developing countries to export. Even net food importers such as Egypt are adversely affected. These countries are still capable of exporting labour-intensive fruits and vegetables where they have a comparative advantage. Their trade is smaller than need be, their earnings constrained and hence imports and welfare are reduced. Even though urban dwellers in such countries may have access to cheaper food imports as a result of subsidised and dumped product, because the country does not use its resources efficiently, it ends up being worse off.

The second problem with agricultural support in high income countries is that the binding tariff-rate-quotas increase the volatility of international prices. Many rich countries refuse to share in the adjustment to international price shocks by shielding their producers with protection. This causes extra adjustment in unprotected markets. World prices are not only depressed, but have greater volatility than they otherwise would. Food-security is made worse.

Developing countries in general are hurt by both lower prices and greater volatility of price. This becomes a major problem because in most developing countries, their agricultural sectors ‘bulk large'. They bulk large in the formation of GDP, the balance of trade and in exchange-rate formation. Anything that shocks the agricultural sector in these countries will shock the macroeconomy and cause instability.

Analysts in high-income countries often glibly ignore the rest of the economy when examining the relatively small agricultural sector. Typically, in these countries, agriculture comprises just 2 per cent of GDP, or sometimes less. In developing countries, especially the poorer ones, agriculture can comprise over 50 per cent of the country's GDP. In developing countries, when agricultural prices are depressed and volatility increased, there are adverse spillover effects that ripple out through the entire economy.

The third problem with agricultural protection in high income countries is the impact on the poor. We know that 70–75 per cent of the world's poor live on less than a dollar a day. These people mostly live in rural areas and most of them are farmers. Actually, a similar generalisation can be made for the half of the world's population that live on less than $2 per day — these people also live in mainly rural areas and are heavily concentrated in agriculture. That is where the bulk of the poverty resides. Anything which reduces international prices that gets passed back into the markets of the developing countries will reduce the income-earning potential of the already lowest-income members of society. If there is a genuine concern about meeting the millennium development goals and reducing poverty in the world, protectionism for agriculture in high income countries should be reduced. That protection only stimulates larger production, lowers world market prices, increases the volatility of prices and prevents poverty reduction in low-income countries.