The Impact of a New WTO Agricultural Agreement ... - Tufts University

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NGOs and some developing countries in the WTO negotiations, the results are not surprising
when one considers the fact that most African countries are net importers of maize and wheat.
A limitation of this approach is that it treats producers and consumers as though they’re
separate groups. In reality, most of the poor obtain their food both by purchasing in the market
and by growing their own grain for domestic consumption. Households that are net buyers will
suffer if the price rises, but households that are net sellers will benefit. Thus, it is important to
understand the distribution of net buyers and sellers of cereals in African countries, in order to
predict the effect of price changes for the poor. The final section of this paper uses household
survey data from Ethiopia to determine household net expenditure on maize and wheat, by
household expenditure quintile, by location and by income source. The results indicate that the
majority of poor households, even those for whom farming is the main source of income, are net
buyers of maize and wheat. The implication is that the main assumption behind the argument
against subsidies – poor farmers would benefit if cereals prices increase – does not reflect the
situation in least developed African countries.
The paper’s first section provides background on the current WTO Agreement on
Agriculture, the use of subsidies by developed countries, and the negotiation process for the new
agreement. The second section discusses the effect of developed countries’ subsidies on Africa,
considering the significance of maize and wheat in Africa, the effect of OECD subsidy removal
on the price of cereals, and existing literature on the subject. The third section presents the
welfare analysis of a price increase in maize and wheat in Africa. The fourth section examines
the distribution of net buyers and sellers of cereals in Ethiopia, by household expenditure level
and by the household’s main source of income.