Agricultural Policy as a Barrier to Global Economic Integration

Abstract

For decades, trade between countries in agricultural products has been distorted by policies of richer countries favoring their farmers with import barriers and subsidies. Agricultural trade has often also been limited by an anti-agricultural, pro-urban bias in many developing country policies. Both sets of policies have reduced national and global economic welfare. They also have added to inequality and poverty in developing countries, because three-quarters of the world’s billion poorest people depend on farming for their livelihood. Over the past two decades numerous developing country governments have reduced their sectoral and trade policy distortions, while some high-income countries also have begun reforming their farm protectionist policies. Drawing on results from a new multi-country World Bank research project, this paper summarizes estimates of the extent of those distortions to prices of farm products over the past 5 decades, and of their effect in reducing the integration of the world’s agricultural markets.