Root Cause Problm.Conclusion/Urban consumers 14

By: Lionne - April 24 2008, 7:26 PM

Given that the bulk of protection was directed at the rural sector, trade liberalisation would be
expected to benefit urban consumers the most. But the picture in Haiti and elsewhere is
ambiguous for urban consumers.

For some food products, the expected price fall did
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materialise.

But in the case of Haiti's most important food commodity ­ rice ­ consumers
hardly benefited at all. Instead the gains from liberalization were largely only realised by the
handful of traders who dominate the import market.

This factor, which erodes gains to urban
consumers, is often ignored.

At the same time, where the price gain to consumers does materialise, it does not produce a
net gain. For one, other taxes must be raised (or government-financed services reduced) to
compensate for the loss of tariff revenue.

More importantly, and what could tip the balance to a net loss, even for urban consumers, is
the lowering of urban incomes.

There is a link between liberalisation in the agricultural sector
and urban incomes.

Farmers who can't sell their produce because of food imports migrate
from the countryside to the towns.

They tend to join the unproductive component of the
service sector, resulting in falling urban wages.

There is ample evidence of increased urbanisation and shrinking urban incomes ­ see table 1
and the graph on page 38 showing real minimum wages.

The population of Port-au-Prince
rose from 13.4 per cent to 20.7 per cent of the total between 1986/87 and 1999/00, while the
rural population declined from 71.9 per cent of the total to 65.1 per cent during the same
period.

The plight of Haiti's growing urban population forced even the IMF to acknowledge that
there was no significant overall gain from the country's liberalisation.

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