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Implications of agricultural trade liberalization for the developing countries

  • Salazar P. Brandao, Antonio
  • Martin, Will

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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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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  1. Ian Goldin & Dominique van der Mensbrugghe, 1992. "Trade Liberalisation: What's at Stake?," OECD Development Centre Policy Briefs 5, OECD Publishing.
  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. Vald├ęs, 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).
  4. Fulginiti, Lilyan E. & Perrin, Richard K., 1992. "Prices and Productivity in Agriculture," Staff General Research Papers 543, Iowa State University, Department of Economics.
  5. 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.
  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. 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.
  8. 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.
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