Link between Agricultural Assistance and International Trade

Abstract

AbstractThis paper investigates a central part of the argument that agricultural assistance by the United States to developing nations leads to diminished export markets for U.S. farmers. A sizeable cross section of low‐income and lower‐middle‐income nations is used to provide statistical analyses of: (1) the link between agricultural productivity and economic performance, and (2) the link between economic performance and agricultural imports. The results show that a reasonably strong case can be made for the idea that advances in agricultural productivity are associated with long‐run increases in imports of cereals and other agricultural products by less wealthy nations. The connection comes via the positive income effect of general economic development. For these countries, investments in agricultural development through successful assistance are not detrimental to U.S. farm export interests in the long run. They are generally beneficial.For middle‐income nations, the case is less clear and more controversial. However, nothing in the cross‐section data used suggests that farm productivity improvements in these nations is systematically threatening to U.S. agricultural trade in the long run.