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Regional economic integration and agricultural trade

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  • Goto, Junichi
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    Abstract

    The author analyzes the economic impact of regional integration on agricultural trade. Using a simple Krugman-type model with product differentiation, he derives two propositions about regionalism's impact on trade flows: 1) The higher the degree of pre-integration protection, the greater the impact of regional integration. 2) The lower the degree of product differentiation, the greater the impact of regional integration. Taken together, the two propositions predict that regionalism has more impact on agricultural trade than on manufacturing, because the initial level of protection is higher and the degree of product differentiation is lower for agricultural products. He tests these propositions against actual data for two incidents of European Community expansion: Greece's admission to the EC in 1981 and that of Spain and Portugal in 1986. The data generally support the theory. After the theoretical and ex post analysis, the author applies the model to examine the possible ex ante impact of the Asia Pacific Economic Cooperation (APEC) free trade agreement on Japanese rice imports, an issue on which (despite heated emotional debates) there have been no major studies. It is the popular belief in Japan that when the Japanese rice market is liberalized, Japanese rice production will be wiped out. The author's simulation results suggest that the impact of partial liberalization of Japan's rice market would be relatively minor, but total liberalization would have a profound impact on Japanese rice production.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1805.

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    Date of creation: 31 Aug 1997
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    Handle: RePEc:wbk:wbrwps:1805

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    Keywords: Environmental Economics&Policies; Economic Theory&Research; Rules of Origin; Trade Policy; Agricultural Knowledge&Information Systems; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Economic Theory&Research; Rules of Origin; Environmental Economics&Policies; Agricultural Knowledge&Information Systems;

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    References

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    1. Hamada, K. & Goto, J., 1996. "Regional Economic Integration and Article XXIV of the GATT," Papers 754, Yale - Economic Growth Center.
    2. Winters, L. Alan, 1996. "Regionalism versus multilateralism," Policy Research Working Paper Series 1687, The World Bank.
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    Cited by:
    1. Julio Nogués, 2003. "Mercosur's Labyrinth and World Regionalism," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(121), pages 452-459.
    2. Baffes, John & Meerman, Jacob, 1997. "From prices to incomes: agricultural subsidization without protection?," Policy Research Working Paper Series 1776, The World Bank.

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