An Overview of Aggregate Studies on Agricultural Trade Liberalization

1、an overview of aggregate studies on agricultural trade liberalizationxavier maretan overview of aggregate studies on agricultural trade liberalizationintroductiondifficulties in getting an agreement on a further liberalization of agricultural trade have prevented progress in the latest round of mult

2、ilateral trade negotiations of the world trade organization (wto). existing agricultural policies have been a major obstacle to trade liberalization over the past four decades. yet, agriculture and agricultural trade are important sources of activity and income around the world, both in developing a

3、nd developed countries, and agricultural markets are among the most distorted in the world, reflecting much government intervention. the consequences of these distortions in terms of economic efficiency and potential, social equity and fairness, and environmental sustainability are far reaching. eco

4、nomic activities and trade in agricultural products are affected not only by explicit trade interventions (such as tariffs, quotas, export subsidies), nontariff barriers, and state trading, but also by domestic policies, either specific, such as those dealing with producer subsidies and pricing, or

5、more general, such as those regarding regulatory frameworks, property rights, and even macroeconomic management. government interventions in agriculture have aimed at addressing legitimate national concerns, such as food security, protection of rural income, and promotion of rural employment opportu

6、nities, but the political economy of agricultural policies suggests that vested interests have interfered with the policy intent and strongly influenced the decision process. reforms of the agricultural sector and its greater integration in world trade are difficult but necessary, particularly if is

7、sues of development, food security, undernourishment, poverty and environmental sustainability have to be addressed. current agricultural policies in the developed world have been increasingly incompatible with other policy objectives such as the millennium development goals (mdgs). the issue of pol

8、icy incoherence has been, in particular, raised in the context of policies supporting cotton in oecd countries (baffes 2003). moreover, the world population is targeted to reach about 8.0 billion individuals by 2030, with two-thirds living in urban areas. the resulting demand for food is likely to b

9、e boosted by rising incomes, and supply would have to increase by about 60 percent to meet world demand. developing countries will have to provide nearly all of this increase in production, mainly through intensification of agriculture and technological progress, that is, more yield per unit of time

10、 and per unit of area. these scenarios highlight the need for more efficient uses of all natural resources and fertilizers, but liberalization of agricultural trade, and the resulting gains in economic efficiency, will be another important factor in achieving the necessary transformation of the worl

11、d food system. agricultural trade liberalization should not, however, be expected to address by itself all social and environmental problems facing developed and developing countries. the promotion of trade globalization is not sufficient to ensure growth and poverty reduction, not to mention enviro

12、nmental quality. there has been a recent recognition that “behind-the-border” reforms should accompany trade liberalization for an effective contribution to these broader goals (hoekman, matto, and english 2002a). these reforms include, in particular, development of an environment that is friendly t

13、o the private sector and investment while promoting competition, and sound financial and macroeconomic policies that support stable prices and allow competitive real exchange rates.“behind-the-border” reforms appear even more necessary in the context of agricultural trade liberalization with a view

14、to contributing to a more coherent policy framework and “win-win” outcomes. in addition to the reforms advocated in the context of global trade liberalization, the specificity of agriculture, and particularly its direct relation to natural resources and the environment, calls for additional adjustme

15、nt policies. one key issue is thus to identify such complementary policies and to avoid focusing only on the negotiations of new trade rules. in this context, careful analyses of the socio-economic, political and environmental consequences of trade reforms are necessary to evaluate possible policy t

16、radeoffs and prevent undesirable, possibly irreversible, outcomes.the purpose of this paper is to elicit a discussion of issues facing agricultural reforms and provide a summary review of the recent literature on the aggregate impacts of trade liberalization. section i presents some background on ag

17、riculture and its relevance to trade, poverty, food security, and the environment; section ii provides a description of levels and trends in agricultural protection; section iii reviews recent analyses of trade liberalization in the literature; and section iv attempts to draw conclusions and define

18、areas of future investigations.backgroundthe economic dimension of agricultureagriculture accounts for about 4 percent of world gdp and 9 percent of global merchandise exports. although there is a notable diversity among countries, agriculture is significant everywhere in terms of economic activity,

19、 employment, or trade. it plays a particularly important economic role in developing countries, where it generates about 12 percent of gdp, more than 50 percent of total employment, and 13percent of merchandise exports (table 1). in addition, developing countries provided about 61percent of the agri

20、cultural value added in the world and 45 percent of the world trade in food and agricultural raw materialsestimated at us$403 billion in 2001, excluding trade within the european union (eu)(tables 2a2d). in south asia, which accounts for 22 percent of world population, nearly three quarters of the p

21、opulation live in rural areas and agriculture accounts for 25 percent of gdp and 14 percent merchandise exports. similarly, in the east asia and pacific region, where another 30 percent of the world population lives, 30 percent of gdp and 10 percent of merchandise exports are derived from agricultur

22、al activities. sub-saharan africa has also a large rural population and relies for 17 percent of its gdp and 22 percent of its exports on agriculture. in contrast, the latin america and caribbean region has only 25percent of its population in rural areas and 7percent of its gdp from agricultural act

23、ivities, but nearly a quarter of its exports are accounted for by agricultural productswith shares of up to 35 and 45 percent of merchandise exports in chile and argentina, respectively. as many as 43 developing countries (mostly in sub-saharan africa or latin america and the caribbean) rely on a si

24、ngle agricultural commodity for more than 20 percent of export revenues and more than half of their agricultural exports. the volatility and overall decline in real prices of agricultural commodities has affected the export performance of these countries, contributing to a weaker growth performance

25、of these countries, compared with the rest of the developing countries.with 26 percent of total arable land and 7 percent of the worlds rural population, developed countries account for 39 percent of the worlds agricultural value added, while contributing 80 percent of the worlds global gdp. the wei

26、ght of agriculture in the economic activities of the developed world has steadily declined over the past decades. the sector generated, on average, nearly 2 percent of the gdp of developed economies in 2000. exports of agricultural products, evaluated at 1 percent of gdp, remain nevertheless importa

27、nt as they accounted for 8 percent of merchandise exportsthe agricultural to total merchandise export ratios were 26, 13, 10, and 10 percent for australia, canada, the eu, and the usa, respectively. developed countries also account for nearly 55 percent of world trade in agricultural products (if in

28、tra-eu trade is excluded), and they support their agricultural sector considerably through various policies, such as export subsidies. if intra-eu trade is included in world statistics, developed countries account for nearly two-thirds of world trade. with intra-eu trade included, world exports of f

29、ood and agricultural raw materials amounted to us$552 billion in 2001, equivalent to 45 percent of agricultural gdp and 9 percent of all merchandise exports (tables 3a-3b). exports of food were valued at us$442 billion in 2001, while exports of agricultural raw materials amounted to us$110 billion.

30、agricultural trade has increased in absolute terms and relative to production over the past two decades, but its importance in total trade has declined. reviews of trends in agriculture and agricultural trade are presented in aksoy (aksoy forthcoming 2004a) and diaz-bonilla (diaz-bonilla et al. 2002

31、). although developing countries have increased their share in global trade in the 1970s and 1990s, developed countries still account for about 55percent of total and agricultural exports in 2001. transnational corporations are playing an increasing role in trade and account for an estimated 40 perc

32、ent of world trade, clay (2004, pp. 33-41) presents a review of trends in the food supply chain. but export concentration indices in food, beverages, and agricultural raw materials are not higher than in other sectors (table 4). as for prices of agricultural commodities, they have fallen both in rea

33、l terms and relative to the prices of manufactured products, while being highly volatile (charts 1-4). the observed long-term deterioration of the terms of trade of primary commodities reflect a demand for these commodities that fails to keep pace with supply boosted by technological progress, risin

34、g incomes, and competition from new products (the prebisch-singer hypothesis). trade varies also considerably across commodities. for cotton, rice and sugar (tables 5-7), most of the world exports are made by a small group of countries, while the import markets do not exhibit much concentration. som

35、e countries are highly dependent on these commodities for their exports, but economic adjustment and diversification have in general reduced over time such dependencewith the notable exception of benin that has relied increasingly on cotton for export revenue (cotton represented more than 65 percent

36、 of the countrys value of exports in 2001, compared with 15 percent in 1980).the social dimension of agricultureagriculture plays a social role, not only as a provider of food but also a source of income and living, that goes beyond its economic dimension. an estimated 70 percent of the poor in deve

37、loping countries live in rural areas and are very dependent on agriculture for their living and income. the share of off-farm income in rural households tends, however, to increase with a countrys level of developmentfrom 77 percent in ethiopia and malawi to 24 percent in mexico (aksoy forthcoming 2

38、004a). this underscores the need for sustainable growth of the agricultural sector to reduce poverty, ensure food security, and slow migration flows to urban areas. the contributions of agriculture to poverty reduction have a potential to be considerable. the number of people living on less than us$

39、1 a day in developing countries declined from 1.5 billion in 1981 to 1.1billion in 2001, equivalent to a reduction by almost half of the share of poor people in the global population, from 40 to 21percent (table 8). however, performance has been uneven across regions and time. rapid economic growth

40、in east and south asia contributed to pull 500 million people out of poverty in those two regions. dramatic progress was achieved by china alone, which increased gdp per capita five times since 1981 and reduced its number of poor by 600million to slightly more than 200 million in 2001, or from 61 to

41、 17 percent of its population. the performance of other regions was bleaker, with the proportion of poor having grown or fallen slightly in many countries of sub-saharan africa, latin america and eastern europe and central asia. moreover, the reduction in the absolute number of poor people occurred

42、mainly in the 1980s, as the reduction in the number of poor was limited to 120 million between 1990 and 2001. food security and a successful war on world hunger also depend on the performance of agriculture. the food and agriculture organization (fao) estimates that 95 percent of the 840 million peo

43、ple chronically undernourished worldwide in 1999-2001 lived in developing countries. of this number, about 170 million are children under 5 years of age (international food policy research institute 2002). yet, per food capita production has grown 16 percent faster than population since 1970, the to

44、tal production of foodstuff tends to globally surpass total consumption, and there is enough food in the world for everyone to have 3,500 calories a day (clay 2004). here again, the observed decrease of only 20 million people since 1990 owes much to china (58 million), while numbers have continued t

45、o rise in africa. in addition, the global performance has been erratic with the number of undernourished people increasing by 18 million in developing countries between 1995-97 and 1999-2001. the pace of reduction would have to reach 24 million per year, almost 10 times the performance realized sinc

46、e 1990, if the goal of the world food summit of halving the number of undernourished people by 2015. among the main factors affecting food security are hiv/aids and water. by 2020, the hiv/aids epidemic will have claimed one-fifth or more of the agricultural labor force in sub-saharan africa. as for

47、 water, drought was listed as a cause of 60 percent of food emergencies for the three most recent years for which data are available. only 17 percent of global cropland is irrigated, but it produces 40 percent of the worlds food. irrigation increases yields of most crops by 100 to 400 percent and ha

48、s been linked to lower rates of poverty and undernourishment. for countries where hunger is most prevalent, agriculture represents 30 percent of gdp and the share of agricultural products in merchandise exports and trade increase to over 20 percent. levels of hunger and poverty differ nevertheless a

49、mong countries with similar levels of agricultural trade, suggesting that the impact of trade on food security also depends on other factors, such as markets and institutions. engaging in agricultural trade is associated with less hunger and not more. more robust agricultural growth would contribute

50、 both to reduce hunger and increased integration in international trade.agriculture and the environmentthe dependence of agriculture on natural conditions and its overall reliance on land, water, and fertilizers have a direct impact on environmental quality. while these factors provide incentives fo

51、r resource stewardship that may induce farmers to protect environmental quality, the evidence is that these incentives are not strong enough in most countries, and the existing literature concludes on a need for some form of environmental regulation (lichtenberg 2002). yet, the theoretical interacti

52、ons between agricultural, natural resource, and environmental policies, such as the impact of price support programs on the environment, are complex. they do not lead to simple conclusions and require sound empirical studies as input for policy design. the liberalization of agricultural trade adds a

53、n additional dimension to these policy requirements and needs. this issue is of particular importance for developing countries, where agriculture has specific peculiarities that need special attention. these characteristics include the role of farm-households, factor-market interlocking, endogenous

54、and evolving institutions, and the dynamics of the environmental base of agriculture (lpez 2002). most developing countries are, indeed, located in tropical or sub-tropical areas where ecological conditions are more fragile than in temperate areas; in particular, soils are of a poorer quality, more

55、prone to erosion, less able to retain nutrients, and subject to threshold effects that could rapidly lead to irreversibility of soil degradation. this fragility, which relies on fallow periods for biomass regeneration and restricts the possibilities for agricultural intensification without major inv

56、estment, is often exacerbated by institutional limitations, such as access to land and common property regimes, as well as registration and enforcement of property rights.trends in agricultural land use have been towards greater land expansion and intensification (wwf 2000). land conversion has halt

57、ed in the industrialized countries but continues to take place in developing countries, where land in crop production accounts for 30percent of total land with rainfed crop potential and is expected to expand by 5 percent of the total land balanceto 850 million haover the period 1990-2010. however,

58、there is little possibility of expansion in some regions and land expansion for agricultural use will have to compete with other uses or take place in marginal areas, further stressing the environment. water use and management is another concern related to expected agricultural growth, as agricultur

59、e accounts already for about 70 percent of water consumption worldwide and water use through irrigation is likely to increase further, with a potential of creating or exacerbating water shortages in some parts of the world. as for fertilizer and pesticide use, their increasing use in developing countries may lead to further resource degradation in non-temperate climate areas. consequently, the diversity of situations in terms of agricultural development and related environmental issues favors a countr