Agricultural trade liberalisation and price volatility in Bangladesh and Tanzania: a comparative analysis

Abstract

This paper examines the impacts of agricultural trade liberalisation on the welfare of smallholder farmers in Bangladesh and Tanzania. Using secondary data for the pre and postliberalisation periods for two main agricultural crops from Bangladesh (rice) and Tanzania (maize) we analysed the correlation between domestic and international prices of rice and maize to investigate impacts of agricultural trade liberalisation on price stability/volatility and food security with a view to analysing the economic benefits of trade liberalisation for smallholder farmers. To understand price volatility, we used the Huchet-Bourdon (2011) method to estimate the coefficient of variation of the level of prices (CV) and the corrected coefficient of variation (CCV). We found that the values of both CV and CCV for consumer price in the postliberalisation period were quite large, suggesting greater volatility of consumer price of both crops. We further found that productivity growth did not necessarily lead to income gains for smallholder farmers in either country due to price volatility and the lack of market integration. This study illustrates the contradictory outcomes of agricultural trade liberalisation. We recommend complementary policy interventions to achieve enhanced welfare outcomes from agricultural trade liberalisation.