Gains from agriculture trade liberalization

Appetites for estimates of the impact of agricultural trade liberalization are probably sated, but the need for reform remains great because the benefits of more appropriate policies for the world’s poorest—and the world’s richest—countries are huge. “This paper”:http://www.gtap.agecon.purdue.edu/resources/res_display.asp?RecordID=1277 by Antoine Bouet et. al. was first published six months ago, before the Cancún debacle. But it remains relevant and well worth skimming. bq. Special emphasis is put on measuring properly protection and domestic support. Protection data, from the MAcMaps database, describes applied tariffs, taking preferential agreements exhaustively into account. Domestic support data is updated to 2001 for the EU and the US, and accounts for the Agenda 2000 reform and the New Farm Bill. The results provide a contrasted picture of the benefits developing countries may draw from agricultural liberalization. The MAcMaps database is a unique resource compiled by some very clever statisticians at the “International Trade Center”:http://www.intracen.org/mas/mac.htm. It is the only source of global data on trade flows that integrates up-to-date official information on tariffs (including anti-dumping and CVD duties), and multilatera, regional and bilateral trade preferences at low levels of product aggregation (HS6 and finer). As Bouet and his co-authors point out: when you are trying to accurately estimated the impact of trade liberalization on agricultural importing and exporting countries, the initial conditions of trade (level of protection) make a great deal of difference to the estimates.

*Gains from implementation of ‘Harbinson’ proposals* (rev. 1)
_percent change from 2001 baseline_ |Region|EU_25|US|DA|ACP|RoW|China|Cairns|O_Eur|FSU|World|
|Welfare|1.34|0.11|0.59|-0.27|-0.10|-0.49|2.07|3.46|-0.31|0.74|
|GDP|0.88|0.08|0.41|-0.07|-0.02|-0.15|0.71|2.38|-0.21| | DA = Developed Asia (Japan, Korea, Taiwan); ACP = Africa, Carribbean & Pacific developing countries;
O_EUR = Non-EU Europe; FSU = Former Soviet Union

The EU and Japan/Korea/Taiwan have higher incomes because they reduce costly protection for agriculture, while the Cairns Group members and the world as a whole gain from bigger market access. The ACP group suffers a terms of trade reversal which accounts for their ‘welfare’ (= ‘consumer buying power&#8217)falling slightly although their national income hardly changes.

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