The Paradox of Agricultural Trade Liberalization in Bangladesh and Tanzania

Abstract

This paper examines some of the contradictions and theoretical ambiguities of agricultural trade liberalizationon the welfare of smallholder farmers. Using production, consumption and price data for pre-and post-liberalization periods for two main agricultural crops from Bangladesh (rice) and Tanzania (maize) we critically analyse the correlation between domestic and international prices of rice in Bangladesh and maize in Tanzania to estimate impact of agricultural trade liberalization on price stability/volatility and food security to measure economic benefits of trade liberalization on smallholder farmers. Using coefficient of variation of the level of prices (CV) and corrected coefficient of variation (CCV) as measured by Huchet-Bourdon (2011) we found that the values of both CV and CCV for consumer price in the post-liberalisation were quite large suggesting greater volatility of consumer price of rice in Bangladesh and maize in Tanzania in the post-liberalization period. We conclude that price volatility diminishes the potential benefits of agricultural trade liberalization forsmallholder farmers who are net-deficit producers, net-deficit sellers and recommend supplementary policy interventions to achieve enhanced welfare from trade liberalization.