We've talked before about policy space for developing countries, often in response to Dani Rodrik blog posts, but other times as well. The following piece seemed like a great case study of the issue: http://www.policyinnovations.org/ideas/commentary/data/000082 In a nutshell, the piece makes the case that Uganda has used protectionism -- "smart protectionism," the author calls it -- very effectively to develop it's rice industry. The suggestion is that Uganda used high tariffs (75%!) to help support its rice industry, and thereby succeeded in creating a competitive rice industry that has the ability to export, while at the same time consumer prices for rice stayed the same.
I don't know enough about the industry to argue the facts here. It's possible that there is a different view of the state of the Ugandan rice industry and the impact of the tariffs, but I'm not aware of it. So I'm just going to assume for the sake of argument that this description is accurate.
Instead, I'm going to focus on the issue of "policy space." I have made the argument (somewhere on this blog -- I can't remember exactly where) that WTO rules offer plenty of policy space for poor countries to take whatever development policies they would like, including protectionism. The Uganda rice example seemed like a great way to test my view. Was Uganda permitted to charge 75% tariffs on rice under WTO rules? Well, let's check its tariff schedule, which is available here: http://www.wto.org/english/tratop_e/schedules_e/goods_schedules_table_e.htm
Agriculture is always tricky, so somebody please correct me if I've missed something, but here's how I read Uganda's schedule. The relevant part is "PART I - MOST-FAVOURED-NATION TARIFF, SECTION I - Agricultural Products, SECTION I - A Tariffs." There is a note that says: "80% ceiling binding to all items included in Annex I of the Agreement on Agriculture, with the following exceptions." (Rice is not listed as an exception.) Looking at Annex I of the Agriculture Agreement, I see:
"ANNEX 1: PRODUCT COVERAGE
1. This Agreement shall cover the following products:
(i) HS Chapters 1 to 24 less fish and fish products"
Rice falls under HS Chapter 10 (Cereals), with the following specific codes: 100610, 100620, 100630, 100640. See http://www.foreign-trade.com/reference/hscode.cfm?code=1006 Therefore, it is covered by Annex I, and thus the note in the schedule applies.
The upshot of all this, as I understand it, is that Uganda is charging 75% duties on rice, and it is permitted to do so because its WTO tariff schedule has a binding of 80% for rice, which allows tariffs of up to 80%.
Granted, this is just one example, and there are thousands of industries among the 100+ developing country WTO Members that could be the subject of development policy. But at least in this one case, WTO rules seem to contain plenty of policy space for a developing country Member to engage in protectionism.
