**3. Overview of WTO's trade liberalization policy**

Trade liberalization means removing or reducing restrictions or impediments to the free movement or exchange of goods between and among countries. This

includes removing or reducing tariff barriers such as surcharges and duties as well as non-tariff barriers which include quotas and licensing rules. The idea behind the policy is to minimize the role of government in making decisions on the allocation of resources and to change the incentive structure in favour of exports through the liberalization of imports to follow the path of export promotion instead of traditional import substitution [4]. The policy did not start with the WTO. It was part of a policy package of market-oriented reforms advocated by the International Financial Institutions (IFI), that is, the World Bank and the International Monetary Fund (IMF), in response to the economic crisis in Africa, brought about by the global economic crisis that followed the two oil crises of 1973 and 1979 [5, 6]. Then it was referred to as Structural Adjustment Programmes (SAP). It gained momentum with the establishment of the WTO in 1995, and became one of the major policies that guide international trade, especially in agriculture. The trade liberalization policy under the WTO regime has three fundamental components. They include:


Accordingly, it has been noted that:

*Under the Agreement, countries agreed to substantially reduce agricultural support and protection by establishing disciplines in the areas of market access, domestic support, and export subsidies. Under market access, countries agreed to open markets by prohibiting non-tariff barriers (including quantitative import restrictions, variable import levies, discretionary import licensing, and voluntary export restraints), converting existing non-tariff barriers to tariffs, and reducing tariffs. …countries also agreed to reduce expenditures on export subsidies and the quantity of agricultural products exported with subsidies, and prohibits the introduction of new export subsidies for agricultural products. Domestic support reductions were realized through commitments to reduce an aggregate measure of support (AMS), a numerical measure of the value of most trade distorting domestic policies [9].*

Market access simply means the right which exporters have to access a foreign market. The WTO agreements allow WTO members to protect their markets, to the extent necessary to protect human, animal or plant life or health. In practice, 'market access' indicates the means in which this protection can be implemented. In the context of the WTO, it is a legal term that indicates the conditions imposed by a government for a product to enter a country and be released for free circulation in that country under normal circumstances [10]. Before the Uruguay Round, protection for agricultural products at the border did not always consist of tariffs only. In addition to tariffs, other non-tariff measures at the border have also been applied. One of the key elements of the Uruguay Round trade negotiations was the agreement by parties to convert these other types of border protection mechanisms into tariffs. The process of this conversion is known as 'tariffication'. With respect to export subsidies, they are governments' special incentives provided to promote more foreign sales. These subsidies, which depend on export performance, can take the following forms: divestment of government shares at lower market prices; cash payments; subsidies funded by producers or processors as a result of government measures such

**129**

*World Trade Organization's Trade Liberalization Policy on Agriculture and Food Security…*

for commodities based on their incorporation into export products [10].

as assessments; marketing subsidies; transport and freight subsidies; and subsidies

Some of the specific provisions of the Uruguay Round which were meant to enhance and accelerate the process of trade liberalization have been articulated as

1.Tariffs: tariffs for industrial products were reduced on average from 4.7% to 3% and the share of zero-tariff products increased from 20% to 22% to 40–45%. Tariffs were completely removed on construction equipment, phar-

2.Quotas: countries replaced import quotas for agricultural products, textiles and clothing (under the multi-fiber agreement) with less restrictive tariffs over a 10-year period. Tariffs for agricultural goods were reduced at the rate of 24% in developing countries and by 36% in industrialized countries. Tariffs for

3.Subsidies: the quantity of agricultural exports to be subsidized was reduced by

4.Antidumping: antidumping procedures were made more rigorous, thereby ensuring that it became much more difficult to use them for protectionist

5.Safeguards: voluntary export restraints, orderly marketing arrangements and similar trade-restrictive measures were prohibited. Existing schemes were

Trade liberalization was forced on Africa in the form of Structural Adjustment Programmes (SAP) by the International Financial Institutions (IFIs) in the 1980s. The late 1970s and early 1980s witnessed a combination of factors that created a large-scale economic crisis in Africa. First, there was a global economic crisis occasioned by the two oil crises of 1973 and 1979 which strongly and negatively affected the demand for African exports and resulting in falling commodity prices. Secondly, interest rate hikes dramatically increased the cost of servicing foreign debt. The Gross Domestic Product (GDP) growth rate of the region plunged from 4.3% per annum in the period 1971–1975 to 1.1% in 1981–1985 [6]. In response to this economic crisis in Africa, the World Bank and IMF advocated and actually imposed a policy package of market-oriented reforms, otherwise known as SAP or economic liberalization. As a result of these structural adjustment programmes, agricultural policy in many developing countries (including West Africa) was characterized by a

high level of market openness even before the Uruguay Round reforms [8].

Before this period, trade policies in most African countries were characterized by extensive state involvement in the economy, both in production and in marketing. In the decades following independence, most African countries adopted heavily interventionist policies [12]. Governments were involved in agricultural marketing and food processing through the creation of marketing boards, parastatal processing units, and government controlled cooperatives. The trade policies of many countries in Africa were informed by the doctrine of Import-Substitution Industrialization (ISI). This is from the 1960s to the 1980s. ISI was widely accepted then as a viable policy package to help developing countries achieve structural transformation and lessen their dependence on primary products. This strategy

maceutical products, medical equipment, steel and paper products.

*DOI: http://dx.doi.org/10.5772/intechopen.86558*

textiles were reduced by 25%.

21% over a six-year period.

removed in 4 or 5 years [11].

purposes.

follows:

### *World Trade Organization's Trade Liberalization Policy on Agriculture and Food Security… DOI: http://dx.doi.org/10.5772/intechopen.86558*

as assessments; marketing subsidies; transport and freight subsidies; and subsidies for commodities based on their incorporation into export products [10].

Some of the specific provisions of the Uruguay Round which were meant to enhance and accelerate the process of trade liberalization have been articulated as follows:


Trade liberalization was forced on Africa in the form of Structural Adjustment Programmes (SAP) by the International Financial Institutions (IFIs) in the 1980s. The late 1970s and early 1980s witnessed a combination of factors that created a large-scale economic crisis in Africa. First, there was a global economic crisis occasioned by the two oil crises of 1973 and 1979 which strongly and negatively affected the demand for African exports and resulting in falling commodity prices. Secondly, interest rate hikes dramatically increased the cost of servicing foreign debt. The Gross Domestic Product (GDP) growth rate of the region plunged from 4.3% per annum in the period 1971–1975 to 1.1% in 1981–1985 [6]. In response to this economic crisis in Africa, the World Bank and IMF advocated and actually imposed a policy package of market-oriented reforms, otherwise known as SAP or economic liberalization. As a result of these structural adjustment programmes, agricultural policy in many developing countries (including West Africa) was characterized by a high level of market openness even before the Uruguay Round reforms [8].

Before this period, trade policies in most African countries were characterized by extensive state involvement in the economy, both in production and in marketing. In the decades following independence, most African countries adopted heavily interventionist policies [12]. Governments were involved in agricultural marketing and food processing through the creation of marketing boards, parastatal processing units, and government controlled cooperatives. The trade policies of many countries in Africa were informed by the doctrine of Import-Substitution Industrialization (ISI). This is from the 1960s to the 1980s. ISI was widely accepted then as a viable policy package to help developing countries achieve structural transformation and lessen their dependence on primary products. This strategy

*Regional Development in Africa*

includes removing or reducing tariff barriers such as surcharges and duties as well as non-tariff barriers which include quotas and licensing rules. The idea behind the policy is to minimize the role of government in making decisions on the allocation of resources and to change the incentive structure in favour of exports through the liberalization of imports to follow the path of export promotion instead of traditional import substitution [4]. The policy did not start with the WTO. It was part of a policy package of market-oriented reforms advocated by the International Financial Institutions (IFI), that is, the World Bank and the International Monetary Fund (IMF), in response to the economic crisis in Africa, brought about by the global economic crisis that followed the two oil crises of 1973 and 1979 [5, 6]. Then it was referred to as Structural Adjustment Programmes (SAP). It gained momentum with the establishment of the WTO in 1995, and became one of the major policies that guide international trade, especially in agriculture. The trade liberalization policy under the WTO regime has three fundamental components. They include:

1.Expansion of market access by requiring the conversion of all non-tariff barriers to tariffs (tariffication) and the binding and reduction of these tariffs.

3.Reduction of both the volume of and expenditures on subsidized exports [7, 8].

*Under the Agreement, countries agreed to substantially reduce agricultural support and protection by establishing disciplines in the areas of market access, domestic support, and export subsidies. Under market access, countries agreed to open markets by prohibiting non-tariff barriers (including quantitative import restrictions, variable import levies, discretionary import licensing, and voluntary export restraints), converting existing non-tariff barriers to tariffs, and reducing tariffs. …countries also agreed to reduce expenditures on export subsidies and the quantity of agricultural products exported with subsidies, and prohibits the introduction of new export subsidies for agricultural products. Domestic support reductions were realized through commitments to reduce an aggregate measure of support (AMS), a numerical measure of the value of most trade distorting domestic policies [9].*

Market access simply means the right which exporters have to access a foreign market. The WTO agreements allow WTO members to protect their markets, to the extent necessary to protect human, animal or plant life or health. In practice, 'market access' indicates the means in which this protection can be implemented. In the context of the WTO, it is a legal term that indicates the conditions imposed by a government for a product to enter a country and be released for free circulation in that country under normal circumstances [10]. Before the Uruguay Round, protection for agricultural products at the border did not always consist of tariffs only. In addition to tariffs, other non-tariff measures at the border have also been applied. One of the key elements of the Uruguay Round trade negotiations was the agreement by parties to convert these other types of border protection mechanisms into tariffs. The process of this conversion is known as 'tariffication'. With respect to export subsidies, they are governments' special incentives provided to promote more foreign sales. These subsidies, which depend on export performance, can take the following forms: divestment of government shares at lower market prices; cash payments; subsidies funded by producers or processors as a result of government measures such

2.Reduction of trade-distorting domestic subsidies or support.

Accordingly, it has been noted that:

**128**

advocated the protection of the domestic market from foreign competition in order to promote domestic industrial production. Therefore, the domestic market in these countries was shielded from foreign competition through these policy measures. Non-tariff measures (NTMs) such as quantitative import restrictions and government licenses were used profusely to restrict imports. For example, some African countries such as Burundi, Ethiopia, Madagascar, Sudan, the United Republic of Tanzania, Zambia, and Nigeria, Ghana and Senegal in West Africa all adopted inward-oriented policies with significant trade restrictions [6]. However, with the introduction of SAP, African countries started the process of economic liberalization.

Thus, Africa has liberalized its economy even before the policy became a guiding principle of international trade under the WTO regime. However, it gained momentum with the establishment of the WTO in 1995 and the multilateral trade obligations enshrined in its agreements for African countries that are members. Import liberalization measures focused on three main policy areas: to reduce the overvaluation of currencies of African countries and removing exchange rate rationing; the decommissioning of non-tariff measures by reducing the list of products for which import licenses are required; and to reform the tariff system by reducing tariff dispersion and the general level of tariffs [13]. Liberalization of exports was also necessary to improve the balance of payments. There were four instruments that were considered to be the most distorting of exports and they were targeted with the following measures: withdrawal of export licenses; devaluation of the national currency; reducing or eliminating export taxes; and dismantling of agricultural marketing boards for export crops [6]. Thus, the process of liberalization in Africa involved the tariffication of non-tariff barriers, cuts in the number and value of tariffs, exchange rate liberalization and the removal of export barriers.
