No full-text available
To read the full-text of this research,
you can request a copy directly from the authors.
Agricultural Trade Liberalization and the Least Developed Countries
Abstract
Although the current round of international trade negotiations was called a `Development Round¿, very little was accomplished before the negotiations stalled in mid-2006. Developing countries as a group stand to gain very substantially from trade reform in agricultural commodities. It is less clear how the 50 countries identified by the United Nations as the `Least Developed Countries¿ (LDCs), which have been subject to special consideration in international trade negotiations, would fare. Would they lose their preferential trade access to the OECD markets and, if so, would these losses exceed the potential gains from liberalized trade? Or would low-income countries that currently receive high prices for commodities such as sugar in some OECD-country markets be out-competed by countries such as Brazil in a liberalized market? More generally, would any benefits from liberalized agricultural trade be captured by middle-income countries with good domestic infrastructure and well-functioning markets, leaving few or no economic benefits to the LDCs? How should the LDCs prepare for multilateral reform of agricultural trade, and should they take policy action now in response to the continuation of the trade-distorting agricultural policies pursued by the OECD countries? To what extent do the LDCs and the middle-income developing countries have common interests with respect to the desired outcomes of the trade round? Are the LDCs well represented by the Group of 21, which consists primarily of middle-income countries with strong export potential in agriculture, or should they pursue a different set of goals in future negotiations? In this book, several experts on international trade and development address these and related questions
... Despite the current lower levels and lower frequency of use of export refunds, a number of studies continue to argue in favour of their complete elimination (Anderson, 2012;Anderson & Martin, 2006;Boulanger, 2009;Capreform.eu, 2012;FAO et al., 2011;Koning and Pinstrup-Andersen, 2007;Matthews, 2010). The view is held that, as long as they can be legally used and their level/frequency of use can be increased if circumstances 'require' it, export refunds remain a potential threat to trade liberalisation. ...
... Some authors (for example, Anderson & Martin, 2006;Boulanger, 2009;Capreform.eu, 2012;FAS-USDA, 2003a;Koning & Pinstrup-Andersen, 2007;Matthews, 2010) consider EU export refunds to be distortive and consequently harmful for developing countries. ...
The EU’s export refund policy has long been a source of controversy for its perceived impacts on third country markets. However, the EU Commission maintain that these concerns are largely historic as CAP reforms mean that export refunds are now used infrequently. The purpose of this article is therefore to assess the impacts of refunds in the wake of the 2003 reform of the CAP using two complementary analyses: first, an analysis using a computable general equilibrium model and second, two case studies to assess the potential impact of export refunds in selected African developing countries.
... It is widely believed that strong protection of French agriculture " diverted attention away from the need for a constructive long - term policy ( Tracy , 1989 , p . 78 ) , while the German agricultural protection is believed to have contributed to the country ' economic development by providing stable markets for infant industries ( Koning , 2007 , p . 207 ) . ...
... Major agricultural tariffs were imposed even in Denmark , a country that had not used agricultural tariffs even in the late - 19 th century ( Tracy , 1989 , p . 206 ; Koning , 2007 , p . 201 ) and the Netherlands , a country with the most consistent tradition of free trade since the 18 th century and a very strong agriculture ( Knibbe , 1993 , pp . ...
This article reviews the histories of agricultural policy in 11 of today's developed countries between the late-nineteenth and the mid-twentieth century and in 10 developing and transition economies since the mid-twentieth century. After discussing the theoretical limitations of the prevailing orthodoxy, the article discusses the history of a wide range of agricultural policies concerning issues like land, knowledge (e.g., research, extension), credit, physical inputs (e.g., irrigation, transport, fertilizers, seeds), farm income stability (e.g., price stabilisation measures, insurances, trade protection), marketing, and processing. The article ends by discussing the policy lessons that may be learned from these historical experiences.
... As a reaction , many countries have stabilized and/or supported their domestic agricultural prices. In most of them, rapid agricultural development contributed to overall growth, reducing poverty and food insecurity (Koning 2007; for Asian Green Revolution countries, Dorward et al. 2004). Conversely, poor countries that failed to stabilize and/or support farm prices have seen their agriculture stagnate. ...
... After the 1950s, many Asian developing countries followed their example (Dawe 2001; Francks et al. 1999; Kajisa and Akiyama 2005; Timmer 2002). These policies mostly enabled a rapid agricultural development that contributed to overall growth, reducing poverty and food insecurity (Dorward et al. 2004; Koning 2007). Conversely, poor countries that failed to stabilize and/or support farm prices have seen their agriculture stagnate. ...
The increasing demand for biomass for energy use is further escalating existing food security risks. Managing these risks
is a task for global institutions. These should ensure timely investment in the world’s capacity for producing biomass and
balance the use of this biomass for foods and for non-foods. To achieve this, institutional arrangements for global food markets
must fulfil two important goals: reduce the short-term price instability of food markets and prevent a structural scarcity
of food in the long term. This paper analyses how agro-food markets, energy markets and biofuel markets are currently regulated.
As this regulation is ill-suited to manage food price instabilities and balance food and non-food use of biomass, new institutions
need to be put in place. A coordinated system of global commodity management — not unlike the Commodity Control Organization
proposed by Keynes for the post-WWII era — is proposed to deal with these coming challenges.
KeywordsFood security-Biofuel-Food prices-Agricultural policy-Energy policy
... Elimination of domestic support and export subsidies has a small negative effect on world welfare. This conclusion is quite similar to the issue raised by Panagarya (2005). Elimination of domestic support and export subsidies raises world prices of food and affects negatively net food-importing countries, which represent the large majority of low-income countries: Panagarya (2005) concludes that as many as 48 out of 63 low-income countries are net food importers. ...
... This conclusion is quite similar to the issue raised by Panagarya (2005). Elimination of domestic support and export subsidies raises world prices of food and affects negatively net food-importing countries, which represent the large majority of low-income countries: Panagarya (2005) concludes that as many as 48 out of 63 low-income countries are net food importers. Even if the removal of these distortions increases the welfare of countries where they are applied (this effect is minor, because price elasticities of agricultural supplies are small) and in food-exporting developing countries (such as Argentina and Brazil), it reduces welfare more substantially in these low-income net food importers. ...
"Trade liberalization is expected to act positively on world economic development and poverty alleviation, both of which have become high priorities of the international community. This emphasis explains why numerous studies have focused on assessing the expected benefits of trade liberalization on development. The main empirical tools for these assessments have been the use of spatial and nonspatial partial equilibrium models, gravity equations, and single- and multicountry computable general equilibrium models (CGEMs). Multicountry CGEMs, however, have produced strikingly divergent results. As demonstrated by recent studies, the associated increase in world welfare from full trade liberalization ranges from 0.2 to 3.1 percent—results that differ by a factor of 15! The objective of this study is to examine the efficiency of trade modeling in capturing the benefits from trade liberalization. It provides a survey of methodologies utilized to assess the impact of trade liberalization, putting an emphasis on multicountry CGEMs, and examines the extent to which such assessments diverge. The survey also demonstrates the benefits of “complementary analysis,” which utilizes different methodologies to study a specific topic. The report presents global modeling results using a general equilibrium model—the modeling international relations under applied general equilibrium (MIRAGE) model—the results of which are compared to those obtained in recent studies. Using the MIRAGE model,1 full trade liberalization is estimated to increase world real income by US$100 billion (+0.33 percent) after 10 years of implementation. This trade reform would be development-friendly, as it entails a larger growth rate of real income for developing countries and especially for least-developed countries." "Authors' Abstract
... To achieve inclusive and sustainable growth, the socio-economic and environmental trade-offs of international trade must be systematically assessed, confronted and reduced. Despite trade's positive association with food security, it could also make low-income food-deficit countries more dependent on food imports -putting local producers under uneven competitive pressures and making consumers more vulnerable to external shocks in food availability (Koning and Pinstrup-Anderson, 2007;De Schutter, 2011;Hepburn, 2019). ...
Ifad flagship publication: transforming food systems for rural prosperity
... One of the most cited arguments against free trade is that trade liberalisation increases food dependency (and import bills) and makes consumers more vulnerable to external shocks in food availability (e.g. Koning and Pinstrup-Andersen 2007;de Schutter 2011). Also, the nutritional balance of increased access to cheaper and more diversified food is not evident as by creating a 'nutritional transition', trade openness can also be responsible for obesity and diseases due to increased access to unhealthy food (Global Panel on Agriculture and Food Systems for Nutrition 2020). ...
Berkum, S. van, and E. Berkhout, 2021. How trade can drive inclusive and sustainable vegetable sector development in Africa: options for Dutch policy support. Wageningen, Wageningen Economic Research, Report 2021-078. 46 pp.; 6 fig.; 3 tab.; 129 ref. This report discusses the role of trade in addressing global challenges of food security and sustainable production, first within a general food system framework context, followed by an application of this framework on the opportunities in African countries to increase vegetable production. The report concludes with a reflection of implications of findings for the Dutch food security policies. Potential options for Dutch development assistance to support the horticultural sector in Africa and to stimulate associated trade evolve around further enhancing participation of smallholder farmers in horticultural markets (inclusivity), further developing and adhering to food safety standards also in domestic markets (safe nutrition) and mitigating environmental trade-offs (environmental sustainability).
... This is also shown in the MLP model: transformation does not occur only through an adjustment in technology but requires a reconfiguration of the existing regime so that an enabling environment is created in which marginalized groups can benefit from technology. This may require radical changes in several regime dimensions, including for example: markets rules and international trade regulations that provide incentives to marginalised producers (Koning, 2017;Koning & Pinstrup-Andersen, 2007); land tenure arrangements that provide more security to those who depend on rented land (Adjei-Nsiah et al., 2007); logics and procedures for agenda setting in science that are able to capture issues that marginalised groups find important ; places and modes for conducting research that guarantee inclusion of women and youth (Meinzen-Dick et al., 2011); delivery of services like extension and credit to those who are not considered viable by private sector parties (Feder et al., 2011); arrangements for distributing a greater share of benefits along the value chain to farmers (McMichael, 2013); and creation of labour opportunities in and outside agriculture (Giller, 2020). Ignoring such social and institutional issues reflects an over-focus on technology and easily obscures the political character of interventions. ...
This paper argues that supporting food system transformation requires more than obtaining science-based understanding and analysis of how components in the system interact. We argue that changing the emergent properties of food systems (what we call food system synthesis) is a socio-political challenge that is affected by competing views regarding system boundaries and purposes, and limited possibilities for central steering and control. We point to different traditions of ‘systems thinking’ that each emphasize particular types of interventions for achieving system change, and argue that food systems are best looked at as complex multi-dimensional systems. This implies that we need to move beyond rational engineering approaches to system change, and look for approaches that anticipate and accommodate inherent social tensions and struggles in processes of changing food system dynamics and outcomes. Through a case study on the persistence of an undesired emergent property of food systems (i.e. poverty) we demonstrate that a multi-level perspective (MLP) on system transformation is useful in understanding both how food system transformation has happened in the past, and how desirable transformations is prevented from happening today. Based on such insights we point to key governance strategies and principles that may be used to influence food system transformation as a non-linear and long-term process of competition, negotiation and reconfiguration. Such strategies include the creation and nurturing of diversity in the system, as well as process interventions aimed at visioning, destabilization and formation of discourse coalitions. Such governance interventions imply a considerable re-orientation of investments in food system transformation as well as a rethinking of the role that policy-makers may play in either altering or reproducing undesirable system outcomes.
... Agricultural trade liberalization has arguably been accused of being one of the main causes of undernutrition in developing countries (WTO 2009;De Schutter 2011;FAO 2015aFAO , 2015bGayi 2006;Singh 2014;Matthews 2014;Diaz-Bonillo 2013). Free trade opponents typically argue that most developing countries are not competitive enough to take advantage of agricultural trade liberalization, especially in a context where the existence of large farm subsidies in developed countries prevents access to export markets and potential gains for developing countries (Bureau et al. 2006;Wise 2008;Koning and Pinstrup-Andersen 2007;Tokarick 2008). This paper investigates the impacts of food trade openness on extreme hunger in developing countries. ...
One of the greatest challenges of the twenty-first century is to ensure that the world population has reliable access to adequate, affordable and nutritious food sufficient to avoid hunger. Agricultural trade liberalization is often considered a central element of economic strategies aiming at improving food security in developing countries. Many, however, argue that most developing countries may not benefit from freer agricultural trade and that liberalization may accentuate food insecurity. From an empirical perspective, little is known about the effects of trade on food security in developing countries. We estimated the effects of food trade openness on extreme hunger in developing countries using a novel two-step approach. First, we estimated the reverse causal impacts of hunger on food trade openness using rainfall anomalies as instrumental variables to generate exogenous variation in hunger. In a second step, we estimated the effect of food trade openness on hunger using the residual food trade openness that is not driven by hunger as an instrument. We found that a 10% increase in food trade openness would increase the prevalence of undernourishment by about 6%. We also found evidence that developing countries reduce food trade openness as a response to increased hunger, suggesting protectionist policies. A percentage point increase in undernourishment prevalence would decrease food trade openness by 0.9%. Our results suggest that countries may be better off adopting food self-sufficiency for some time, despite such actions clashing with World Trade Organization’s regulations and current agenda.
... However, at the same time the CAP has long been criticised in regard to its negative effects on food security in developing countries (Koning and Pinstrup-Andersen, 2007). In particular, EU export refunds can lead to significant distortions of competition, pushing down agricultural prices (Elbehri and Sarris, 2009). ...
This report reviews the impact of the Common Agricultural Policy (CAP 2014-2020) on developing countries, it recommends a range of options for future CAP reforms and it suggests some alternatives for monitoring and evaluation of progress towards Policy Coherence for Development (PCD).
... There is a general perception among the policymakers and academia that the developing countries would gain much from the removal of existing distortion in the agricultural market because of the tremendous importance of the agricultural sector in their economies (Koning & Andersen 2007, pp. 1-2). ...
Although it is often argued that liberalization provides opportunities for growth and development in all over the world, there are divergent views about the effects of agricultural trade liberalization on growth and income distribution in developing countries. The developing countries’ main complaint in this regard is that trade distorting activities in agriculture by developed countries adversely affecting their exports and consequently growth, and income and employment of the people therein. There is a general perception among the policymakers and academia that the developing countries would gain much from the removal of existing distortion in the agricultural market because of the tremendous importance of the agricultural sector in their economies. The current paper has analyzed the effect of trade liberalization in agriculture on welfare, growth and income distribution in developing countries, using a computable general equilibrium (CGE) model and indicates that the effect is not similar for all the developing countries.
... There is a recurrent opinion in the literature that "old CAP" imposed considerable externalities on DCs, in particular negative ones on developing-country producers (Koning & Pinstrup-Andersen, 2007). Indeed, several authors argue that EU export refunds caused significant distortions of competition and pushed farm prices down especially in countries where producers were fully exposed to world markets (Elbehri and Sarris, 2009;Anderson, Martin, & Valenzuela, 2006). ...
This study assesses the effects of CAP changes on the agricultural commodities' price
transmission mechanism between selected developing countries and world markets. The
analysis refers to four different countries: Bangladesh, Ethiopia, Ghana and Tanzania and
three important staple food: maize, rice and wheat. Time series econometric models
analyze price dynamics within different levels of EU subsidies. During the evaluation
period (2000-2010) no empirical relationship has been detected among the EU subsidies
for rice and world price of rice. On the contrary at least for maize sector and for Ethiopia
and Tanzania, EU agricultural policies seemed not neutral.
... This conclusion is quite conform to the issue raised byPanagarya (2005). ...
"Trade liberalization is expected to act positively on development and poverty alleviation, both of which have become a high priority of international community...The objective of this study is to examine the efficiency of trade modeling in capturing the benefits from trade liberalization. It will provide a survey of methodologies utilized to assess the impact of trade liberalization on poverty and will examine the extent to which such assessments diverge. The survey also demonstrates the benefits of “complementary analysis”, which utilizes different methodologies to study a specific topic." from Authors' Abstract
The evolution of the Common Agricultural Policy (CAP) has been conditioned by a number of factors. Among them is the so-called external aspect of the CAP on which this work focuses, being the main objective to analyze the relationship between the evolution of the CAP and the negotiations leading to the liberalization of international agricultural trade, which were held within the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO). In the same way, we also consider the consequences for European agricultural foreign trade derived from the commitments assumed by the European Union (EU) in those two negotiating forums. To achieve these objectives, this research proposes two working lines: first, a literature review for better understanding how international agricultural trade has been regulated since the end of the Second World War to the present, and second, a research effort to know the possible implications that said regulation have had for the evolution of European agricultural foreign trade. In this latter case, the issue is addressed through an empirical analysis using two of the main specialized statistical databases in international trade: EUROSTAT and COMTRADE. The results of the research show that, as the changes introduced by the CAP reforms have been consolidated (based on the trade commitments assumed by the EU), there has been a gradual decrease in the share of European exports in the international markets for continental products.
In an international duopolistic market, the consumer-oriented CSR initiatives will make the domestic government lower the tariff rate if the weight is relatively high in both cases of dual CSR and unilateral CSR by the foreign firm; however, the government will raise the tariff rate if the weight is relatively high in the case of unilateral CSR by the domestic firm. Furthermore, the consumer-oriented CSR initiative of both firms is the dominant strategy if the CSR cost is sufficiently low. More importantly, the consumer-oriented CSR initiative of both firms is the global social welfare optimum if the CSR cost is sufficiently low coupled with trade liberalization.
The study aims to analyze Korea's import trade in agricultural products with (i) the least developed countries (LDCs) and (ii) the Organization for Economic Co-operation and Development (OECD) countries. Extended versions of a gravity model are adopted and the balanced panel data for the unilateral trade over the period of 2003 to 2008 are constructed using the Harmonized System Codes. The Heckman two-stage analysis is incorporated to detect the potential selection bias arising from many zero trades. We find that only preferential tariffs on the LDCs have significantly contributed to the trade flows. However, in contrast, gross domestic products (GDPs), free trade agreements (FTAs), the applied tariff rates, and the exchange rates turn out to be statistically significant in the trade with the OECD countries, thus highlighting the possibility of the potential trade benefits associated with the trade policy reforms. The study is unique in that it empirically estimates the determinants of agricultural trade between the LDCs and developed countries and reveals the potential effectiveness of the preferential treatment and the implementation of the trade policy reforms.
This article examines the relationship of free trade with agriculture in view of agriculture's distinctive features in the following three ways. First, agriculture produces a wide array of local and national nonmarket goods and services (in addition to market commodities) collectively known as multifunctionality of agriculture. Second, agriculture is intimately associated with global public goods of grave importance to humanity such as climate change, sustainability, and food security (poverty/hunger) in developing countries that require transnational cooperation to minimize free-rider and consequent under-provision problems. Third, embodying the first and second problems, agriculture plays distinctively different roles across countries. Specifically, this article views the global agriculture as consisting of four broad groups of countries with widely divergent needs from agriculture. This article concludes that the above agriculture-related problems are too diverse and complex to be left to free trade. When the global community is too much preoccupied with the illusive mission of agricultural trade liberalization, the great danger is that such preoccupation may distract it from effectively addressing the agriculture-related problems of the 21st century in a timely manner that pose imperative challenges to humanity. The governance for global agriculture should prioritize managing/taming such global problems rather than squandering time for unworkable liberalization of agricultural trade.
This paper is an attempt to contribute to the research on poverty-alleviation potential of trade, by exploring the poverty effects of agricultural trade liberalization in Tunisia. Specifically, the study uses a small open economy computable general equilibrium (CGE) that includes technology transfer and endogenous productivity effects from trade openness in agriculture to investigate whether the trade reforms benefit the poor and whether agricultural productivity growth boosts the potential gains from trade. The structure of the paper is as follows. Section 2 outlines the plan for empirical investigation and presents the procedure to measure total factor productivity. Section 3 describes the CGE model and explains how the link between productivity and trade policy is incorporated. Section 4 presents some features of the Tunisian economy, in particular with regard to the agricultural sector and reviews the data used in the econometric and CGE models. Section 5 reports the empirical results and section 6 synthesizes the main findings and draws some conclusions.
Free trade agreements between countries at different ends of the development spectrum have become increasingly common over the past decade. The impact that this type of arrangement has on trade flows has been widely modelled; however, the extent to which it can be expected to affect economic vulnerability is an aspect that has largely been overlooked. Yet as the economic distance between negotiating partners widens, the likelihood that changes in trade flows will affect the economic structure of the less developed partner increase. This paper explores the components of two prominent highly asymmetric negotiations – the Dominican Republic – Central America Free Trade Agreement and the European Union – Caribbean Forum Economic Partnership Agreement – to assess the channels through which the resulting organisation of trade may impact the vulnerability profile of the developing country partners. We find that these FTAs have the potential to address economic vulnerability in the developing country partners in ways that would not be possible in their absence.
Trade-weighted aggregated tariffs (TWPT) are often used in analyzing the issues of erosion of non-reciprocal preferences. This paper argues that commonly used TWPTs under-estimate the true protection on imports originated from preference-receiving countries, including LDCs. When used in numerical simulations of preference erosion and expansion scenarios, the TWPTs tend to incorrectly downplay preference erosion effect of MFN tariff cuts, and understate the export promotion effect of expanding preferences. In light of these claims, an alternative aggregation scheme is developed to calculate aggregated preferential tariffs imposed by a number of developed coun-tries on African LDCs. These are shown to be higher than the TWPTs aggregated from the same disaggregated tariff data set. Numerical simulations conducted with the two sets of aggregated tariffs confirm the two claims and suggest that TWPTs may lead to misleading policy implications concerning expanding preferences for the LDCs.
Computable General Equilibrium (CGE) models have gained continuously in popularity as an empirical tool for assessing the impact of trade liberalization on agricultural growth, poverty, and income distribution. However, conventional models ignore the channels linking technical change in agriculture, trade openness, and poverty. This study seeks to incorporate econometric evidence of these linkages into a CGE model to estimate the impact of alternative trade liberalization scenarios on poverty and equity. The analysis uses the Latent Class Stochastic Frontier Model (LCSFM) and the metafrontier function to investigate the influence of trade openness on agricultural technological change. The estimated productivity effects induced from higher levels of trade are combined with a general equilibrium analysis of trade liberalization to evaluate the income and price changes. These effects are then used to infer the impact on poverty and inequality following the top-down approach. The model is applied to Tunisian data using the social accounting matrix of 2001 and the 2000 household expenditures surveys. Poverty is found to decline under agricultural and full trade liberalization and this decline is much more pronounced when the productivity effects are included.
Phasing out distortionary government subsidies and barriers to international trade will yield extraordinarily high benefits relative to any adjustment costs, notwithstanding the considerable reforms that have already taken place over the past two decades. The present paper surveys recent estimates, using global economy-wide simulation models, of the benefits of reducing remaining distortions by means of unilateral reform, multilateral trade negotiations and preferential trading arrangements. Distortionary trade policies harm most the economies imposing them, but the worst of them (in agriculture and clothing) are particularly harmful to the world's poorest people. Opportunities to reduce remaining distortions, including by means of the WTO's Doha Development Agenda as compared with subglobal preferential reform, are examined, before drawing out the implications of liberalisation for poverty and the environment. Copyright 2005 The Economic Society Of Australia.
This report presents a new, path breaking model of global trade as a tool to analyze the potential impacts of the negotiations and underlying economic interests of the WTO's diverse members.
Alors que les gains à attendre suite à la libéralisation des échanges, en particulier pour les PED, sont généralement présentés comme essentiels aux progrès de la lutte contre la pauvreté, cette étude souligne leur faiblesse lorsqu'ils sont exprimés en termes relatifs et leur sensibilité aux hypothèses réalisées sur le fonctionnement des marchés. En effet, alors que l'imperfection de l'information est largement admise, parmi les spécialistes, comme caractéristiques des marchés agricoles, sa prise en compte dans le modèle transforme des gains extrêmement faibles en pertes parfois importantes, soulignant ainsi l'utilité sociale des politiques agricoles.
The paper focuses on misconceptions about the compensation principle of neo-Paretian welfare economics, and argues that the efficiency interpretation often attached to it is a dubious one. Applied welfare analists should realize the real significance of 'potential Pareto improvement' and take it into account when formulating policy recommendations.
This paper examines whether the recent theoretical insights stemming from endogenous growth theory have provided a better guide to explaining actual growth experience than the neoclassical model. The paper considers the available empirical evidence on a number of related subjects, including the slowing of growth in the OECD countries over the last two decades; the acceleration of growth in several Asian countries since the early 1960s; studies of the determinants of growth in a cross-country context; and sources of the differences in international productivity levels. It concludes that the empirical confirmation, so far, of endogenous growth theory is limited. Copyright 1994 by American Economic Association.
Africa has had slow growth and a massive exodus of capital. In many respects it has been the most capital-hostile region. We review and interpret the aggregate-level and microeconomic literatures to identify the key explanations for this performance. There is a reasonable correspondence of the two sets of evidence, pointing to four factors as being important. These are a lack of openness to international trade; a high-risk environment; a low level of social capital; and poor infrastructure. These problems are to a substantial extent attributable to government behavior, and the paper includes a review of the political economy literature addressing that behavior.
Economic development and structural change result from the interaction of supply and demand factors. Supply factors include the accumulation and efficient use of factors of production such as labour and capital, whereas demand factors include changes in patterns of intermediate and final demand. Although economists realise the need for a simultaneous examination of both supply and demand factors in understanding the mechanisms of development and structural change, no studies have dealt with this issue satisfactorily. Instead, economists have tended to examine either supply or demand factors in isolation. In this paper we will follow the conventional approach, and analyse the effect of demand factors on economic growth and structural change.1
The widespread increase in rural purchasing power under the Green Revolution in Asia during the 1970s was key to increased rural employment and industrialization. Studies suggested that an extra dollar of agricultural income was typically associated with an additional $0.80 of nonagricultural income from local enterprises stimulated by the spending of farm households. Studies in Africa, where the Green Revolution was harder to discern, tended to be much more pessimistic. This report revisits these issues using especially detailed panel data sets on rural consumption and incomes, collected by IFPRI and collaborating national institutions for a variety of purposes during the mid to late 1980s in Burkina Faso, Niger, Senegal, Zambia, and Zimbabwe. Results suggest that household spending of higher rural incomes from increased exports has the potential to greatly stimulate further rural income increases, on a scale that even surpasses experience in Asia. Central to this is the claim that many of the goods and services that figure heavily in rural consumption patterns in Sub-Saharan Africa are nontradables at current transport costs and prices. These include perishable fruits, vegetables, animal products, and prepared foods, services of all kinds, local handicrafts, and some bulky local starches of too low value to bear the costs of importing or exporting. By focusing on the nontradable nature of large sectors of African rural economies, the report evokes a theme central to many of IFPRI's fieldwork-based studies: why some development strategies are more effective at achieving both growth and poverty alleviation than others. Sustained growth in rural incomes that is widely spread across households is shown to be an effective way to furnish the sustained additional local purchasing power necessary to promote aggregate production of nontradable items, while increasing the incomes of large numbers of poor people. The report does not deal with the interventions necessary to start growth in rural areas, other than to illustrate that it must involve bringing new external funds into localities on a recurring basis, such as would be the case from expansion of agricultural exports.
Small enterprises form a dynamic part of rural African economies. New firms are being created every year at a high rate, but a high percentage of them disappear within the first 3 yr. The annual growth rate of surviving rural enterprises is high, but this expansion is propelled by a minority of the enterprises. It is the jobs created through enterprise expansion that are more likely to reflect increasing efficiency and demand-pull forces in the economy. These expanding firms, are more likely to be younger, start smaller, and to be operated out of the home, in nontrade sectors, by males. In the African countries the authors reviewed the majority of new jobs came not from demand-pulled expansion, but from new starts. Agriculture has a crucial role to play in rural enterprise employment generation in most African countries. The majority of new enterprise jobs in rural areas have come from new starts rather than from demand-pulled expansion. At the policy level, an important lesson from the findings is that policies aimed at enhancing agriculture also provide the fuel for a demand-pulled expansion of existing enterprises, the type of rural enterprise employment growth that reflects increased prosperity. -from Authors
Concern with the living standards of farmers is central to the CAP yet it demonstrates the muddled objectives, inappropriate indicators and misdirected interventions that are the stuff of analysts’ worst nightmares. As a consequence, the performance of the CAP in terms of this fundamental aim has, in all likelihood, been very poor. Attempts to reorientate the CAP to be more in line with its declared objectives face enormous vested interests in the agricultural industry and among policy-makers.
This paper considers the prospects for constructing a neoclassical theory of growth and international trade that is consistent with some of the main features of economic development. Three models are considered and compared to evidence: a model emphasizing physical capital accumulation and technological change, a model emphasizing human capital accumulation through schooling, and a model emphasizing specialized human capital accumulation through learning-by-doing.
Sub-Saharan Africa and parts of South Asia are likely to hold large numbers of very poor rural people into the foreseeable future. Although both history and theory suggest a pre-eminent role for agricultural growth in poverty reduction in poor agrarian economies, such growth today faces new difficulties. Many of these difficulties are endogenous to today’s poor rural areas, others result from broader processes of global change, but some are due to changes in the dominant policy environment, emphasizing liberalization and state withdrawal. Examination of 20th century Green Revolutions suggests that active state interventions were important in supporting critical stages of agricultural market development. Unfortunately such interventions’ benefits in institutional development are easily overlooked, whereas their high costs are much more visible. Policy implications are discussed.
This paper investigates the relationship between exports and economic growth in a group of eleven developing countries that have already established an industrial base. Separate consideration is given to manufactured and to total exports; in the case of the latter, adjustment is made for domestic and foreign investment and for increases in the labor force.
Political discrimination has often pushed the domestic value of agriculture in developing countries below its value in markets at the border. This paper seeks to explain the reasons why border prices themselves undervalue the linkages that agriculture has to economic growth in the early stages of development. If agriculture is critically important to stimulating and sustaining rapid economic growth, those countries that fail to correct this discrimination exact a heavy toll in economic performance. Furthermore, the poorest countries will suffer the most. Agricultural development and development of the non-agricultural economy are closely linked. The traditional market-mediated linkages form the core of economic analysis of the role of agriculture in economic development: providing labour for an industrial work-force, food for an expanding population with higher incomes, savings for industrial investments, markets for industrial output, export earnings to pay for imported capital goods, and raw materials for agro-processing industries. A second category of linkages is not well mediated by market forces, even when markets are working well. The impact of agricultural growth on the rest of the economy through non-market linkages can be traced using a simple growth-accounting framework that examines contributions to the labour force, capital investment and the productivity with which these two physical factors are utilised. Several linkages stand out as likely to be important and potentially measurable because they draw on the efficiency of decision making in rural households, the low opportunity cost of their labour resources, the opportunity for farm investment without financial intermediaries, the potential to earn high rates of return on public investments that correct for urban bias, the contribution of food price stability to increased efficiency in investment decisions, and the impact of growth in food production on widespread improvement in nutrient intake and labour productivity. Each of these factors alone, as public investment and favourable policy stimulate growth in the agricultural sector, should cause an increase in the efficiency of resource allocation and thus higher total factor productivity. Several of these mechanisms will also serve to speed factor accumulation by increasing the savings rate or improving factor mobility.
Incluye bibliografía e índice
All is not well in Africa south of the Sahara. Western experts are looking for the causes in bad governance and insufficient social capital. At present, donors only support those administrations that endorse governmental and market-oriented reform. Results however are disappointing. In this paper I argue that domestic liberalisation is not enough to revitalise the economies of Sub-Saharan Africa. Farmers must also be protected from cheap imports. To explain why, I refer to the historical interaction between Africa and the world economy. The emergence of the European world trade system in the 15th century stimulated export agriculture in America and Asia. But in Africa high internal transport costs, malaria and the iron weapons of indigenous societies kept colonial plantation economies away. In the late 19th century, quinine and machine guns allowed Europeans to penetrate Africa, and the internal transport barrier was reduced. By that time, however, the Industrial Revolution had led to global agricultural overproduction and a fall in international prices. Western countries resorted to protection to safeguard farm progress. But African farmers were not protected. The prices they faced were further depressed as Western countries shifted their overproduction on to world markets. During the European population booms of the 16th and 18th centuries, the obstacles to sustainable agricultural intensification were hardly less than in Africa today. But overcoming them was simpler because population growth raised the prices of agricultural products, encouraging farmer investment and innovation. The new dynamics of international agriculture complicated this picture in 20th century Africa. Other than in a few places with sufficient market demand or during the rare times that world market prices improved, prices were too low to allow farmers to invest. Rather than leading to sustainable intensification, therefore, population growth led to vicious cycles of impoverishment and soil degradation. Agrarian malaise dragged the rest of society with it. Low rural incomes restricted the domestic market for industries and services, also depriving them of opportunities for warming up for competition on the world market. Rural poverty also bred conflict and distrust, which spread to the rest of society, plaguing modern enterprises with high transaction costs. Agrarian malaise caused a massive flight from the land. With no strong non-farm sector to flee to, this led to a proliferation of marginal activities and a jostling for jobs in the public sector, encouraging bad governance and further complicating the situation for farmers. The only way forward is to revitalise agriculture. Besides public investment in infrastructure, this requires better prices for farmers. Domestic reform will not achieve this as long as world market prices are too low. Trade policy reform in the World Trade Organisation will have little effect while Western countries continue to subsidise their farmers and reject a balanced system of managed agricultural trade. African policy-makers would be well-advised to consider the example of successful Asian countries like South Korea or Taiwan. There tariff protection against cheap imports was an important element in supportive policies that allowed agriculture to develop and become the driver for overall economic growth.
"Pop internationalists" -- people who speak impressively about international trade while ignoring basic economics and misusing economic figures are the target of this collection of Paul Krugman's most recent essays. In the clear, readable, entertaining style that brought acclaim for his best-selling Age of Diminished Expectations, Krugman explains what real economic analysis is. He discusses economic terms and measurements, like "value-added" and GDP, in simple language so that readers can understand how pop internationalists distort, and sometimes contradict, the most basic truths about world trade.
In Market Institutions in Sub-Saharan Africa, Marcel Fafchamps synthesizes the results of recent surveys of indigenous market institutions in twelve countries, including Benin, Ghana, Kenya, Madagascar, Malawi, and Zimbabwe, and presents findings about economics exchange in Africa that have implications both for future research and current policy. Employing empirical data as well as theoretical models that clarify the data, Fafchamps takes as his unifying principle the difficulties of contract enforcement. Arguing that in an unpredictable world contracts are not always likely to be respected, he shows that contract agreements in sub-Saharan Africa are affected by the absence of large hierarchies (both corporate and governmental) and as a result must depend to a greater degree than in more developed economies on social networks and personal trust. Fafchamps considers policy recommendations as they apply to countries in three different stages of development: countries with undeveloped market institutions, like Ghana; countries at an intermediate stage, like Kenya; and countries with developed market institutions, like Zimbabwe. Market Institutions in Sub-Saharan Africa caps ten years of personal research by the author. Fafchamps, in collaboration with such institutions as the Africa Division of the World Bank and the International Food Policy Research Institute, participated in the surveys of manufacturing firms and agricultural traders that provide the empirical basis for the book. The result is a work that makes a significant contribution to research on the continuing economic stagnation of many countries in sub-Saharan Africa and is also largely accessible to researchers in other fields and policy professionals.
Today, agriculture remains the most distorted sector of the world economy. Therefore, agricultural liberalisation in the Doha negotiations is rightly the top priority. But the public-policy discourse on the subject remains fogged by a number of fallacies. These fallacies probably originated with the leadership of the World Bank but have now been embraced by the IMF, OECD, Oxfam and the leading academic critics of globalisation. The paper identifies six fallacies and offers evidence and analysis to debunk them: (1) Agricultural border protection and subsidies are largely a developed-country phenomenon. (2) Developed-country agricultural subsidies and protection hurt the poorest developing countries most. (3) Developed-country subsidies and protection hurt the poor, rural households in the poorest countries. (4) Developed-country agricultural protection and subsidies constitute the principal barrier to the development of the poorest developing countries. (5) Agricultural protection reflects double standard and hypocrisy on the part of the developed countries. (6) What the donor countries give with one hand (aid), they take away with the other (farm subsidies). Copyright Blackwell Publishing Ltd 2005.
This paper examines the extent to which various regions, and the world as a whole, could gain from multilateral trade reform over the next decade. 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 and Southeast Asia (and in Cairns Group countries) proportionately more than in other developing countries or high-income countries. Real returns to farmland and unskilled labour, and real net farm incomes, would rise substantially in those developing-country regions, thereby helping to reduce poverty. A Doha partial liberalisation could take the world some way towards those desirable outcomes, but more so the more agricultural subsidies are disciplined and applied tariffs are cut, and the more not just high-income but also developing countries choose to engage in the process of reform. Copyright Blackwell Publishing Ltd 2005.
Exports and growth: an empirical re-investigation Putting development back into the Doha agenda: poverty impacts of a WTO agreement
- P S Heller
- R C N Porter
- P Pinstrup Koning
- Hertel
- T W Winters
Heller, P.S. and Porter, R.C., 1978. Exports and growth: an empirical re-investigation. Journal of Development Economics, 5 (2), 191-193. r12 N.KONING AND P.PINSTRUP-ANDERSEN Hertel, T.W. and Winters, L.A., 2005. Putting development back into the Doha agenda: poverty impacts of a WTO agreement. World Bank, Washington
Towards appropriate agricultural trade policy for low income developing countries. FAO, Rome. FAO Trade Policy Technical Notes on Issues Related to the WTO Negotiations on Agriculture no
- Fao
Putting development back into the Doha agenda: poverty impacts of a WTO agreement
- T W Hertel
- L A Winters
- T.W. Hertel
A policy agenda for pro-poor agricultural growth: paper presented at the Agricultural Economics Society Conference
- A Dorward
- J Kydd
- J A Morrison
Farm prices: myth and reality
- W Cochrane
- W. Cochrane
Agriculture in an unstable society
- T W Schultz
- T.W. Schultz