Trade Adjustment Costs in Developing Countries: - World Bank ...

14Bernard Hoekman and Guido Portomay facilitate trade between countries with diverging norms. On the question ofstandards as catalysts to development, the authors raise concerns that standardscan facilitate the exclusion of poor farmers from the supply chain and that theycan facilitate the exploitation of smallholders, who would lose bargaining power(vis-à-vis large food exporters and multinational food companies). The evidenceon the exclusion of smallholders because of high compliance costs and increasinglevels of vertical coordination is mixed: there are cases of complete verticalintegration with hardly any smallholder involvement (tomatoes in Senegal orfruits and vegetables in Zambia), and there are cases in which export productionremains dominated by smallholders (vegetables in Madagascar and Ghana). Incontrast, the evidence against exploitation of smallholder producers is more compelling.Swinnen and Maertens enumerate some of the benefits of high-standardscontract production, including productivity gains, increased household income,reduced income volatility, technology spillovers, employment (downstream), andpoverty reduction.Adjustment Assistance ProgramsThe volume concludes with reviews of the trade assistance program in the UnitedStates and the agricultural support program of the E.U. Most developing countriesdo not have trade-specific adjustment assistance programs, raising the questionwhat can be learned from the experience of high-income countries in this regard.The first paper, by David Richardson, analyzes the Trade Adjustment Assistance(TAA) program of the U.S. After a brief historical account of the American TAA, itsmandate and coverage, the author assesses the role of a revised TAA program thatcould successfully deal with the modern process of global integration. Richardsonargues that there are two main features of the current “integrated integration”process: large gains for the best-fitted agents (most productive firms, more able ormotivated workers) and an increasingly unbalanced distribution of those gainsagainst the less fit. In this context, Richardson claims that a successful TAA, onethat would actually help improve and economy’s overall performance and welfare,should increase its scale, its scope (and be transformed into a sort of structural adjustmentassistance), and its constituency to harbour both “natural” American institutions(labour unions, community colleges) and new American institutions (likenot-for-profit social services or insurance companies).The last chapter by Jo Swinnen describes the history of the E.U. Common AgriculturalPolicy (CAP). The main objective of agricultural policies in the E.U. wasto support agriculture in order to protect farm incomes and employment frommore general market liberalization. Initially, this was done by setting high importtariffs and export subsidies, and by fixing prices. Following the Uruguay Round,multilateral disciplines were negotiated for agricultural support policies in theWTO, and tariffs, export and production subsidies were partially replaced by“compensation” (direct) payments to farmers in the 1990s and, later, by so-calleddecoupled payments to farmers (not linked to output) in reforms in 2003 and2008. These reforms can be regarded in some sense as adjustment policies – the