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The Uruguay Round and welfare in some distorted agricultural economies

  • Anderson, James E.

There is widespread concern that the Uruguay Round may reduce the welfare of developing countries through its effect on world agricultural prices. Reduced agricultural price distortions among major supplying nations are predicted to increase basic food prices and decrease some important export prices such as those for coffee and cotton. It appears that raising food prices paid by food importers must be bad for them, while reducing world coffee and cotton prices appears bad for exporters of those products. Appearances may be deceiving, however, since theory shows that a distortion effect operates alongside the standard terms of trade effect. I report here distortion effects which are many times larger" than terms of trade effects in an analysis of the Uruguay Round's impact on 9 agricultural economies. I deploy a simple Computable General Equilibrium model. The 9 developing economies are distorted by domestic agricultural distortions in 15 markets, along with hundreds of 4 digit nonagricultural tariffs and quotas. In 3 of 9 countries, the distortion effect reverses the impact of the terms of trade effect. In 2 other countries the distortion effect raises a trivial terms of trade effect up to around 1% of national income.

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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 56 (1998)
Issue (Month): 2 (August)
Pages: 393-410

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Handle: RePEc:eee:deveco:v:56:y:1998:i:2:p:393-410
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  1. Anderson, James E & Bannister, Geoffrey J & Neary, J Peter, 1995. "Domestic Distortions and International Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(1), pages 139-57, February.
  2. 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.
  3. Anderson, James E & Neary, J Peter, 1992. "A New Approach to Evaluating Trade Policy," CEPR Discussion Papers 683, C.E.P.R. Discussion Papers.
  4. K. Anderson & R. Tyers, 1993. "More On Welfare Gains To Developing Countries From Liberalizing World Food Trade," Journal of Agricultural Economics, Wiley Blackwell, vol. 44(2), pages 189-204.
  5. Anderson, James E, 1998. "Trade Restrictiveness Benchmarks," Economic Journal, Royal Economic Society, vol. 108(449), pages 1111-25, July.
  6. Alston, Julian M & Martin, Will, 1995. "Border Price Changes and Domestic Welfare in the Presence of Distortions: A Comment," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 79-82, January.
  7. J Anderson & J.P. Neary, 1994. "Measuring the Restrictiveness of Trade Policy," CEP Discussion Papers dp0186, Centre for Economic Performance, LSE.
  8. J. P. Neary (ed.), 1995. "International Trade," Books, Edward Elgar, volume 0, number 575, July.
  9. Lopez, Ramon & Panagariya, Arvind, 1992. "On the Theory of Piecemeal Tariff Reform: The Case of Pure Imported Intermediate Inputs," American Economic Review, American Economic Association, vol. 82(3), pages 615-25, June.
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