Why do developing countries resist global trade agreements?

Abstract

Although the Doha Development Round was launched with much promise for developing countries in 2001, the global trade negotiations have collapsed. One of the reasons for the lack of progress in the negotiation is the developed countries' unwillingness to reduce their enormous farm domestic subsidies and massive agricultural trade distortions. The developing countries' economies are characterized by heavy dependence on farm sector, labor-intensive agriculture, and persistent unemployment. Consequently, rich nations' unfair agricultural policies are detrimental to the well-being of poor exporting countries. This study develops a model incorporating developed countries' domestic and trade policies and developing countries' economic characteristics to illustrate the adverse effects of rich countries' policies on poor countries. We show that elimination of developed countries' policies will increase the world prices of agricultural commodities, which will benefit the farm-dependent developing countries.

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