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Implications of agricultural trade liberalization for the developing countries

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  • Salazar P. Brandao, Antonio
  • Martin, Will

Abstract

The authors examine the implications for the developing countries of a range of liberalization proposals along the lines of the Dunkel proposal. First, the analysis considers liberalization in the Organization for Economic Cooperation and Development (OECD) countries, alone then global liberalization of all (positive and negative) protection. Since the current Dunkel proposal requires reduction only in positive assistance, this specific proposal is assessed. Finally, the implications of the developing countries acting alone, perhaps in the absence of a successful Uruguay Round, are evaluated. Virtually all research on agricultural trade liberalization has focused on the case of total liberalization, an unlikely outcome in the near future. The earlier work provides useful insights into the effects of a partial liberalization on world prices, but may be misleading as a guide to the welfare implications of partial liberalization in a second best context of continuing distortions in both agriculture and manufacturing. The authors consider partial liberalization along the lines of the Dunkel proposal: a reduction of 36 percent in (positive) border protection and 20 percent in domestic support in industrial countries, This partial reform would produce gains of $20 billion a year for developing countries. These benefits are widely spread among developing countries. Few regions would suffer overall losses, and those would be small in relation to overall gains. If developing countries had chosen not to participate in the Round, and to relay on liberalization only by the industrial countries, their gains would have been less that $1 billion -- and a number of important regions would have suffered significant welfare losses. The gains to developing countries could be greatly enhanced by a more comprehensive liberalization. If developing countries reduced all agricultural distortions, including agricultural taxation, by the proportions specified in the Dunkel package, their total gains would increase to almost $60 billion a year -- even without productivity gains stimulated by rising world prices for agricultural commodities. With productivity gains taken into account, total gains from partial reform would be more than $130 billion a year for non-OECD economies. The predicted gains are greater here than in earlier studies because the authors have included more commodities and the welfare measure explicitly considers the partial nature of the liberalization being considered.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1116.

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Date of creation: 31 Mar 1993
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Handle: RePEc:wbk:wbrwps:1116

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Keywords: Insurance&Risk Mitigation; Poverty Assessment; Environmental Economics&Policies; Economic Theory&Research; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT;

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  1. Fulginiti, Lilyan E. & Perrin, Richard K., 1992. "Prices and Productivity in Agriculture," Staff General Research Papers 543, Iowa State University, Department of Economics.
  2. Valdés, Alberto & Zietz, Joachim A., 1980. "Agricultural protection in OECD countries: its cost to less-developed countries," Research reports 21, International Food Policy Research Institute (IFPRI).
  3. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January.
  4. Mundlak, Yair & Larson, Donald F, 1992. "On the Transmission of World Agricultural Prices," World Bank Economic Review, World Bank Group, vol. 6(3), pages 399-422, September.
  5. Love, H. Alan & Foster, William E., 1990. "Commodity Program Slippage Rates For Corn And Wheat," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 15(02), December.
  6. Krueger, Anne O & Schiff, Maurice & Valdes, Alberto, 1988. "Agricultural Incentives in Developing Countries: Measuring the Effect of Sectoral and Economywide Policies," World Bank Economic Review, World Bank Group, vol. 2(3), pages 255-71, September.
  7. Tyers, Rod & Falvey, Rod, 1989. "Border Price Changes and Domestic Welfare in the Presence of Subsidised Exports," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 434-51, April.
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Cited by:
  1. Ingco, Merlinda D., 1997. "Has agricultural trade liberalization improved welfare in the least-developed countries? Yes," Policy Research Working Paper Series 1748, The World Bank.
  2. De Silva, Nirodha & Malaga, Jaime E. & Johnson, Jeffrey W., 2013. "Trade Liberalization Effects On Agricultural Production Growth: The Case Of Sri Lanka," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 143106, Southern Agricultural Economics Association.
  3. Alston, Julian M. & Chalfant, James A. & Pardey, Philip G., 1993. "Structural Adjustment In Oecd Agriculture: Government Policies And Technical Change," Working Papers 14473, University of Minnesota, Center for International Food and Agricultural Policy.
  4. Brandao, Antonio Salazar P. & Lopes, Mauro de Rezende & Pereira, Lia Valls, 1995. "The Impacts of MERCOSUR on Brazil," 1995: Economic Integration in the Western Hemisphere Symposium, June 7-9, 1995, San Jose, Costa Rica 50816, International Agricultural Trade Research Consortium.
  5. Paul Schure & G. Cornelis van Kooten & Yichuan Wang, 2007. "Challenges for Less Developed Countries: Agricultural Policies in the EU and the US," Working Papers 2007-08, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
  6. Safadi, Raed & Laird, Sam, 1996. "The Uruguay Round agreements: Impact on developing countries," World Development, Elsevier, vol. 24(7), pages 1223-1242, July.
  7. Peter G. Warr & Helal Ahammad, 1996. "Food Aid, Food Policy And The Uruguay Round: Implications For Bangladesh," Departmental Working Papers 1996-03, The Australian National University, Arndt-Corden Department of Economics.
  8. Anderson, Kym & Martin, William J. & Valenzuela, Ernesto, 2007. "Long Run Implications of WTO Accession for Agriculture in China," China's Agricultural Trade: Issues and Prospects Symposium, July 2007, Beijing, China 55025, International Agricultural Trade Research Consortium.
  9. Will J. Martin & Kym Anderson & Cong S. Pham, 2009. "Effects of GATT/WTO on Asia's Trade Performance," School of Economics Working Papers 2009-11, University of Adelaide, School of Economics.
  10. Pursell, Garry & Gulati, Ashok, 1993. "Liberalizing Indian agriculture : an agenda for reform," Policy Research Working Paper Series 1172, The World Bank.
  11. Storm, Servaas, 1997. "Agriculture under trade policy reform: A quantitative assessment for India," World Development, Elsevier, vol. 25(3), pages 425-436, March.

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