Farm level effects of trade liberalization between Central Asia countries under climate change

There are several regional trade agreements made amongst Central Asian countries during the transition period. However, the implementation of these agreements remains very restricted which causes limited exchange and flow of agricultural commodities between the countries. The market imperfections caused by state policies, poor market infrastructure and trade restrictions remain as the main challenge for small scale producers in Central Asia. This study analyses input and output price differentiations between the countries and main factors causing those prices. Furthermore, the paper examines the impact of easing those trade barriers on farm level welfare, especially under different climate change scenarios. Therefore, the paper aims at filling in the gap of knowledge about effects of trade barriers on farm gate prices and farmers’ welfare in Central Asia. The farm level prices, production and consumption patterns are analyzed using the data obtained from farm surveys conducted in Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan. Changes in income and expenditure under trade liberalization at country, region (Central Asia and CIS) and world market level is estimated. Per capita income and expenditure changes are estimated for alternative market conditions. The impact of climate change on farm utilities is analyzed using integrated modeling tool which incorporates the climate change module and crop growth simulation model in the expected utility framework. The results show significant difference of farm gate prices of many agricultural commodities except wheat. Salient differences also found between the energy and fertilizer prices among these countries. Political disputes between some Central Asian countries are explained to be the main challenge for restricted trade between the countries. Liberalization of trade may create favorable economic conditions for many regions in Central Asian countries. However, potential gains from market integration are very region and country specific. The integrated model results show that easing commodity exchange between the countries may improve the adaptive capacity of the small scale producers especially in Uzbekistan, Tajikistan and Kyrgyzstan under different climate change scenario.