Agricultural Trade Liberalization Research Articles

Doha round of WTO negotiations and trade liberalization in Serbian agriculture

The accession of Serbia to the WTO is expected in 2008. In negotiations process, the most difficult is to reach agreement in agriculture. This sector is very sensitive in market access for biotechnological, economical and social reasons. The level of sensitivity varies between production branches. In the course of defining the schedules of market access commitments, it is crucial to keep in mind the need of reconciliation dynamics and level of market liberalization with the obligations comprised in the EU Stabilization and Association Agreement. Export support policy also must conform to the Doha negotiations commitments.

The impact of coffee price changes on rural households in Uganda

AbstractEmploying household survey data covering the periods 1992–1993, 1995–1996, and 1999–2000, this article shows for the case of Uganda that a coffee market liberalization followed by a price boom was associated with substantial reductions in poverty, which could even be sustained when prices went down again. Coffee is not planted by the richest farmers and the gains from higher coffee prices accrued to poorer and richer coffee farmers alike. Nor were poorer farmers hurt disproportionately when prices fell. In addition, we find strong spillovers from coffee production to other agriculture, which tends to favor the poor, and to nonagricultural activities. These multiplier effects are concentrated in coffee regions. In an economic environment characterized by a booming agricultural sector, coffee farmers were able to accommodate the negative price shock, in particular through agricultural diversification. General agricultural growth also cushioned possible negative multiplier effects in coffee regions. Overall, the case of coffee in Uganda thus lends support to the view that agricultural trade liberalization is beneficial for the poor.

Globalisation and Poverty in Latin America: Some Channels and Some Evidence

This paper provides an overview of the main mechanisms through which globalisation can affect poverty and household welfare in Latin America and presents supporting evidence from different case studies in the region. One case study explores the impacts of agricultural trade liberalisation in world markets on poverty in Argentina, with an emphasis on labour income effects via real wages. The second case study examines the impacts of CAFTA on net producers and net consumers among the indigenous population in Guatemala. The analysis explores short‐run impacts as well as medium‐run impacts as households adjust farm decisions. Finally, a last exercise is set up to study the role of agricultural liberalisation on wages, employment and unemployment when there are frictions in labour markets. These case studies show that the impacts of trade on developing countries are heterogeneous. In Argentina, there are gains from liberalisation of world agriculture and higher food prices. In Guatemala, instead, the indigenous population would benefit from lower food prices. It is clear that household adjustments and complementary factors are fundamental ingredients of any reasonable evaluation of the welfare impacts of trade reforms.

Distributional effects of WTO agricultural reforms in rich and poor countries

Rich countries' agricultural trade policies are the battleground on which the future of the WTO's troubled Doha Round will be determined. Subject to widespread criticism, they nonetheless appear to be almost immune to serious reform, and one of their most common defenses is that they protect poor farmers. The authors' findings reject this claim. The analysis uses detailed data on farm incomes to show that major commodity programs are highly regressive in the United States, and that the only serious losses under trade reform are among large, wealthy farmers in a few heavily protected subsectors. In contrast, analysis using household data from 15 developing countries indicates that reforming rich countries' agricultural trade policies would lift large numbers of developing country farm households out of poverty. In the majority of cases these gains are not outweighed by the poverty-increasing effects of higher food prices among other households. Agricultural reforms that appear feasible, even under an ambitious Doha Round, achieve only a fraction of the benefits for developing countries that full liberalization promises, but protect U.S. large farms from most of the rigors of adjustment. Finally, the analysis indicates that maximal trade-led poverty reductions occur when developing countries participate more fully in agricultural trade liberalization.

Scale, technique and composition effects in the Mexican agricultural sector: the influence of NAFTA and the institutional environment

More than a decade after NAFTA (North American Free Trade Agreement) entered into force, the environmental effects of agricultural trade liberalization in Mexico are still controversial, emerging, and not fully understood. This paper contributes to the literature that aims to explore trends in input use in the agricultural sector in Mexico during the post-NAFTA period among both commercial/industrial and traditional/rainfed farmers, and examines the influence of the national and multilateral institutional framework on these outcomes. We decompose the post-NAFTA agricultural production data into scale, technique and composition effects to estimate the impact that trade liberalization has had on the use of fertilizer and land use, two key agricultural inputs for which reliable aggregate data is available. We conclude that among commercial farmers patterns of crop type specialization and significant technological improvements have led to some declines in fertilizer use but they have been offset by growth in fertilizer use associated with growing agricultural output. Among traditional farmers increased output and specialization in land-intensive grain crops are contributing to an increase in land under cultivation and technological improvements show the potential, but not yet not the strength, to counteract these effects. We analyse the environmental institutional framework and rural development plans, observing that institutional weaknesses have, in several instances, reduced the environmental benefit of technique and composition effects. We conclude with recommendations about how the Mexican agricultural sector might reap the environmental benefits of international agricultural trade.

Agricultural trade liberalization and economic development: the role of downstream market power

AbstractA model is developed to characterize the vertically linked and concentrated nature of developed‐country food markets. This model is then parameterized and used to simulate the effects of varying food market structures on the benefits to developing‐country exporters of agricultural commodities from trade liberalization by developed countries. Results demonstrate that even relatively modest departures from perfect competition can cause much of the benefits from trade liberalization to flow to marketing firms instead of producers in the developing country. The distributional effects under downstream market power differ significantly from the perfectly competitive case and may result, somewhat paradoxically, in developing countries receiving a lower share of the total value added within the food chain as trade reform occurs.

Agricultural Trade Liberalization Under Doha: The Risks Facing African Countries

African countries tend to be affected by global agricultural policies in the same way as other economies but with much more severe economy-wide repercussions... The present discussion paper 1) examines the vulnerability of Africa economies with respect to global agricultural trading policies and their induced changes in world agricultural markets, based on the above characteristics; 2) analyzes the efficiency effects within Africa's agricultural sector of world market distortions resulting from agricultural trading policies; 3) illustrates the impact of global protectionism on poverty levels and distribution among rural households in Africa and the implication for the objective of poverty reduction; 4) reviews the options and risks facing African countries in their pursuit of opportunities for greater participation in the global trading system, in particular in connection with the Doha trade agenda; and 5) discusses options for global trade liberalization that would best benefit African economies. The paper argues that the insistence on the part of African countries on Special and Differential Treatment entails much more risks than benefits for their economies. It also indicates that trade preferences have been less beneficial to African economies than usually assumed and at any rate have not been significant enough to compensate African countries for the negative impact of global protectionism. Finally, the paper also disagrees with the widely accepted conclusion that African countries would suffer from liberalization of global agricultural policies because they tend to be net food importers. That conclusion does not sufficiently take into consideration the dynamic long term effects of global policy changes on production and trading patterns among African countries and the potential efficiency effects that would emanate there from.

FRAMING MULTIFUNCTIONALITY: AGRICULTURAL POLICY PARADIGM CHANGE IN SOUTH KOREA AND JAPAN?

the aftermath of the Uruguay Round Agreement on Agriculture (URAA) and the bsequent establishment of the World Trade Organization (WTO), South Korea after Korea) and Japan face some of the most serious agricultural policy adjustment problems of all WTO signatories. Attempts during the last three or four decades to maintain politically acceptable farm income levels within their minifarm structures of agriculture relied upon a combination of protectionist domestic price support, import control, and high tariff policy measures. These policies must be gradually dismantled under the agricultural reform “disciplines” stipulated in the URAA (Nelson, et al. 2001). Ongoing challenges faced by both countries in meeting reform targets are evident in their present ranking among the most protectionist OECD countries in terms of Producer Support Estimates (PSE) used by the OECD in its periodic agricultural policy reviews (see Table 1 below; OECD 2004). I During the course of the URAA negotiations, Korea and Japan, along with the EU and other European countries, insisted that Non-Trade Concerns (NTCs), such as food security and rural socioeconomic stability, be recognized as legitimate rural/agricultural sector policy objectives (Normile and Bohman 2002). The subsequent inclusion of a NTC provision in the URAA accords has provided the impetus for the development of a new multifunctionality (hereafter MF) policy paradigm, codified in such OECD publications as Multifunctionality: Toward An Analytical Framework (2001). In this new paradigm, policy attention is directed to a range of valuable public goods that are co-produced as by-products of agricultural production, but that are not presently marketised in ways that reward producers for their provision. Examples of such by-products, in addition to aforementioned NTC food security and rural socioeconomic stability concerns, include environmental service, aesthetic landscape maintenance, and cultural heritage preservation social amenities. MF proponents argue that such valuable positive externalities of agricultural production may be threatened in regions where agricultural trade liberalization measures jeopardize the survival of the farm sector and surrounding rural communities. Policymakers in Korea and Japan have found MF ideas inviting rationales for continued support of their domestic agricultures in a changing global agricultural

Agricultural trade liberalization and poverty in China

The overall goal of this paper is to examine the impacts of trade liberalization on China's agriculture, in general, and poverty, in particular. The impacts on agriculture are analyzed by commodity and by region. Because different farmers (especially those in different income brackets) produce diverse sets of commodities, the main part of our paper analyzes the effects on households and their implications for the poverty through the simulation of household production and consumption changes in response to the trade-induced market prices changes on a disaggregated (by province), household-level basis. The results of our analysis lead to the conclusion that, unlike fears expressed in the popular press and by some scholars, the positive impacts of trade liberalization are actually greater than the negative ones. Although other effects on the rural economy from trade liberalization of other subsectors (such as textiles) may be equally large or even larger, this study's focus on the agricultural sector shows that there will be an impact from agricultural trade liberalization and that the net impact is positive for the average farm household in China. However, policymakers still need to be concerned. Not all households and not all commodities will be treated equally. Our findings show that poorer households, especially those in the provinces in the western parts of China, will be hurt. The main reason is that the farmers in Western China are currently producing commodities that are receiving positive rates of protection, rates of protection that will fall with additional trade liberalization. Hence, if policy makers want to minimize the impacts, there needs to be an effort to minimize the effect on these households either by direct assistance or by eliminating constraints that are keeping households from becoming more efficient by shifting their production more towards those commodities that will benefit from trade liberalization.

Cold Turkey? Dealing with agricultural trade liberalisation

Turkey has a particular interest in the WTO agricultural negotiations in view of its significant agricultural sector. This paper undertakes a quantitative analysis of trade liberalisation and its impact on Turkish agriculture. We use UNCTAD's Agricultural Trade Policy Simulation Model (ATPSM). A likely scenario suggests that Turkey may face higher import bills as world prices for cereals are expected to rise. They are likely to offset the expected gains from its exports of pulses, vegetables and fruits. Livestock producers, who would face lower import prices, would be the losers while cereal producers would be the winners at least on the short-run. Livestock and cereal production continue to be the least productive activities, mainly because the state intervention of the past has discouraged investment and adoption of innovations. Government involvement in production, processing and marketing of agricultural goods may have hindered rather than helped the sector to become more competitive.

AGRICULTURAL TRADE OPENNESS AND POVERTY REDUCTION: A CROSS-COUNTRY ANALYSIS

This paper explores the effects of general and agricultural trade openness on economic freedom and alongside with the quality of institutions, on income and poverty. Recent cross-country data for over 200 nations in global regions were used to estimate equations for income, poverty and economic freedom. Economic freedom appears to have positive impacts on income levels, which together with good institutions reduce poverty. It is also concluded that poverty is determined both directly and indirectly by institutions. A typical finding of this paper is that, in general, economic freedom is associated with trade openness and with agriculture trade liberalization.

Agricultural multifunctionality and trade liberalisation.

Les auteurs utilisent un modèle de commerce international en équilibre partiel pour analyser les interactions entre politiques tarifaire et environnementale en présence de bénéfices liés au caractère multifonctionnel de l’agriculture. Ils montrent que la libéralisation des échanges est sous-optimale si elle ne s’accompagne pas d’une politique environnementale efficiente encourageant la production des bénéfices liés à la multifonctionnalité. Toutefois, dans le cas d’un grand pays importateur net, la réduction des droits de douanes renforce les incitations à introduire une politique environnementale. Cette dernière incorpore une distorsion stratégique afin de compenser partiellement la baisse de droits de douane Malgré son caractère stratégique, cette politique environnementale permet d’accroître sans ambiguïté le bien-être global si elle est introduite conjointement avec une réduction des droits de douane. Les auteurs concluent que, bien que l’argument de la multifonctionnalité étaye certaines critiques de la libéralisation des échanges, il ne s’avère pas solide quand cette libéralisation induit l’introduction d’une politique environnementale.

Market deregulation, trade liberalization and productive efficiency in Bangladesh agriculture: an empirical analysis

The impact of trade liberalization and of market deregulation in general, on the performance of agriculture remains contentious and empirical issue in the literature. Following the random coefficient frontier modelling framework, this paper attempts to contribute to this debate by computing the farm-specific productive efficiency indices in Bangladesh agriculture before and after reform. It also examines the impact of some farm-specific and policy variables on productive efficiency. The empirical results show that there are wide variations in productive efficiency across farms and regions and the average efficiency of all regions increased modestly by 8 percentage points from the pre-reform to post-reform period. The efficiency differentials are largely explained by farm size, infrastructure, households' off-farm income and the reduction of government anti-agricultural bias in relation to trade and domestic policies. The implication of these results suggests the need for further policy reform to augment productive efficiency.

Integrated assessment of trade-related policies: agricultural trade liberalisation and the Convention to Combat Desertification

This article looks at the interconnections among agricultural trade liberalisation, land degradation, and poverty in the world's rural drylands. It seeks to better understand the implications of the Doha Round on United Nations Convention to Combat Desertification (UNCCD) implementation, and to derive policy implications to improve coherence among agricultural trade, poverty alleviation, and land management strategies, with a specific focus on activities to combat desertification under the framework of the UNCCD. In line with the UNCCD approach, the analysis considers both the environmental and socio-economic drivers of desertification.

Would Multilateral Trade Reform Benefit Sub-Saharan Africans?

This paper examines whether the Sub-Saharan African economies could gain from multilateral trade reform in the presence of trade preferences. The World Bank's LINKAGE model of the global economy is employed to examine the impact first of current trade barriers and agricultural subsidies, and then of possible outcomes from the WTO's Doha round. The results suggest moving to free global merchandise trade would boost real incomes in Sub-Saharan Africa proportionately more than in other developing countries or in high-income countries, despite a terms of trade loss in parts of the region. Farm employment and output, the real value of agricultural and food exports, the real returns to farm land and unskilled labor, and real net farm incomes would all rise in the region, thereby alleviating poverty. A Doha partial liberalization of both agricultural and nonagricultural trade could significantly benefit the region.

Trade liberalisation and greenhouse gas emissions: the case of dairying in the European Union and New Zealand*

The link between trade and the environment has aroused considerable interest both in terms of the impact of trade liberalisation on the environment, and also the impact of environmental policy on production and trade. Of key environmental concern at present is global warming and its association with greenhouse gas emissions. Agriculture is a sector of the economy that both contributes to, and will be affected by, climate change. This paper models the impact of agricultural trade liberalisation on greenhouse gas emissions from agriculture around the world, focusing particularly on the effects on New Zealand, a small economy highly dependent on agricultural trade. A partial equilibrium agricultural multicountry, multicommodity trade model is used for the analysis, extended to include physical production systems and their greenhouse gas emissions. Two simulations are performed: removal of agricultural policies in the EU and in all OECD countries. The results indicate that although producer returns in New Zealand increase, greenhouse gas emissions also increase significantly. EU producers face lower returns but also lower greenhouse gas emissions.

Gainers and Losers from Agricultural Trade Liberalization*

We know from elementary trade theory that liberalization yields net gains and has distributional consequences. Computable general equilibrium models allow these impacts to be addressed in detail and the policy debate around the Doha Round WTO negotiations has created demand for such analysis. The three interesting case studies presented in this session illustrate the promise and pitfalls that arise in meeting this challenge. The authors face the difficult task of briefly describing relevant distributional issues for their countries, the assumptions of their models, and their simulation results. Two of the papers compare Doha and free trade outcomes and isolate the effects of the countries' own reforms, while the third reports only a Doha scenario with no separate treatment of a policy change by Brazil. All of the models include agricultural and manufacturing reforms, so the session title is a bit of a misnomer.

Lean Hong Kong Harvest and the Doha Round of Multilateral Trade Negotiations

The biennial Ministerial Conferences are the most important event of the WTO regime. The Hong Kong Ministerial Conference was the sixth biennial conference of the WTO, which aimed at a low-level equilibrium and achieved it. While it successfully eschewed another Cancún-like disappointing failure, the Hong Kong Ministerial did not achieve much of substance. If success is defined as not failing, the Hong Kong Ministerial Conference could be adjudged a success. Few bold decisions were attempted and important outstanding decisions were put off for the future. Liberalization of multilateral trade in agriculture was the most important as well as the most contentious issue in Hong Kong. A good number of significant secondary areas were also under negotiations. Core modalities that were to be determined on these issues in Hong Kong were not. A reasonably successful Hong Kong Ministerial Conference would have helped in advancing the Doha Round, which in turn would have meant welfare gains to the global economy, and its different regions and sub-regions. This opportunity was evidently missed.

The Doha Development Agenda: Mixed Prospects for Developing Countries

This paper uses the GTAP computable general equilibrium model to assess the impact of a Doha Development Agenda agreement on agricultural trade liberalisation. In particular, we examine the consequences for developing countries. The simulation incorporates further liberalisation in the areas of market access, export competition and domestic support. Most developing regions can expect strong positive results from this liberalisation, however some suffer a decrease in welfare. The magnitude of the welfare effect for these countries depends on measures to be taken by developing countries themselves, and whether they will materialise must be uncertain. The results highlight the importance of the impact of further liberalisation of the erosion of preferential trading arrangements enjoyed by developing regions.

The Economic Consequences of the Doha Round for Ireland

This paper provides a quantitative study of the economic effects of a stylised simulation of trade liberalisation for Ireland using the GTAP model. The experiment incorporates the liberalisation of agricultural, manufacturing and services trade as well as measures to improve trade facilitation. The simulation is implemented against a baseline projection of the Irish and world economy over the next decade. Overall, Ireland's welfare will increase as a result of further trade liberalisation, with particularly strong gains from services liberalisation. The industrial liberalisation scenario also generates positive gains to Ireland, while agricultural liberalisation has a slightly negative effect on the overall economy.