Does Market Structure Influence Price Transmission in the Agro‐food Sector? A Meta‐analysis Perspective

There exists a large literature on price transmission in agro‐food sectors. However, a great majority of empirical studies focus on the existence of asymmetry and, by and large, do not investigate the reason for its presence or absence. This is in sharp contrast to the theoretical literature that provides a number of explanations of why we should expect (a)symmetry. In response, this paper investigates the reasons for asymmetric price transmission in the agro‐food chain, using meta‐analysis of existing studies. Our focus is on the organizational and institutional characteristics of the agro‐food supply chain. Our findings suggest that asymmetric price transmission in farm–retail relationships is more likely to occur in sectors/countries with more fragmented farm structure, higher governmental support and more restrictive regulations on price controls in the retail sector. On the other hand, more restrictive regulations on entry barriers in the retail sector and the relative importance of the sector tend to promote symmetric farm–retail price transmission. The latter is also more likely in the presence of a strong processing industry.     

New evidence regarding the effects of contract farming on agricultural labor use

Contractual agreements between smallholder farmers and agribusiness companies have gained in importance in many developing countries. While productivity and income effects of contracting in the small farm sector were analyzed in many previous studies, labor market and employment effects are not yet well understood. This is an important research gap, especially against the background of continued population growth and structural transformation. Here, we investigate the effects of two types of contractual agreements between large international processing companies and smallholder farmers on agricultural labor use, household labor allocation, and hired labor demand in Ghana's palm oil sector. We use cross‐sectional survey data and a willingness‐to‐pay approach to control for unobserved heterogeneity between farmers with and without contracts. We find that agricultural labor intensity is substantially reduced through the contracts, because contracting in Ghana is associated with the adoption of labor‐saving procedures and technologies. Simple marketing contracts lead to reallocation of the saved household labor to off‐farm employment, whereas resource‐providing contracts lead to a stronger reallocation of labor within the farming enterprise. Household labor is more affected by labor savings than hired labor.     

Role of international politics on agri‐food trade: Evidence from US–Canada bilateral relations

A well‐functioning trade relationship between Canada and the United States is crucial to the economic vitality of the Canadian agri‐food industry. However, agri‐food trade is more susceptible than other sectors to political interventions. The Trump presidency has strained Canada–US relations and his trade policy actions have significantly increased trade restrictions and trade policy uncertainty and undermined the rules‐based global trading system. We examine the pattern of agri‐food trade between the two countries and find that the upward trajectory of bilateral agri‐food trade ended in 2013. Although this flatlining predates the Trump administration, we show that Trump increased trade policy uncertainty starting in 2017 and likely impacted further expansion of trade. We examine what might change under the Biden presidency and argue that the new administration is likely to restore strong relationships with allies and work to rebuild important international institutions such as the World Trade Organization (WTO). Although protectionist forces will continue to impact bilateral agri‐food trade, we expect closer political ties between a Biden administration and the Canadian Prime Minister. This should have a positive effect on the Canadian agri‐food industry by reducing trade uncertainties, thereby increasing agri‐food trade between Canada and the United States.     

Contract theory and agricultural policy analysis: a discussion and survey of recent developments*

This paper surveys some recent developments in contract theory and illustrates how this theory might be useful for conceptualising policy issues related to vertical coordination and contracting in the agro‐food industry. The article begins by surveying contract theory to identify key economic distortions that can potentially justify government involvement. Next, the general ingredients of agricultural contracts that are most likely to create inefficiencies are discussed. Finally, controversial aspects of real‐world agricultural contracts are highlighted and lessons from the theory are used to determine whether government intervention is justified. Actual legislation that has been proposed in the USA is analysed where appropriate and topics that await further research are also discussed.     

A CGE analysis of trade costs in the Russian agrofood sector

Ten years after the end of central planning, enormous interregional price differences indicate that Russian food markets are not well integrated spatially. Trade potentials are thus not exploited, most probably because of high trade costs. Besides transport costs, transaction costs seem to play an important role as an impediment to interregional arbitrage. These transaction costs can be very high in transition countries due to underdeveloped market structures and weak public institutions. After subtracting transport costs from interregional price differences, large differences remain, particularly in the case of high‐value products. It is assumed that these residual price differences constitute the transaction cost component of total trade costs. The regional economic impact of different trade cost components is quantified using a bi‐regional computable general equilibrium (CGE) model. Simulations show that the results are quite different between the two stylized regions (East and West), depending on which trade cost component is reduced. While the welfare effects of varying customs tariffs and transport margins are rather limited, lower transaction costs of trade seem to be a promising way to achieve a better functioning food market in Russia.     

Exports and governance: the role of private voluntary agrifood standards

The empirical evidence that institutional differences across countries affect bilateral trade is robust. The crucial question remains how countries can enhance trade amid these differences. In this article, we measure the degree to which governance and institutions differ between countries as “governance distance.” Using a sample of EU/EFTA imports, we examine how adopting private agrifood safety standards modify the effect of governance distance on exports of fruits and vegetables, in particular apples, bananas, and grapes, within a structural gravity framework. Our results show that while increasing governance distance hinders bilateral trade, the interaction of standards and the governance distance is positively associated with exports, hence partially offsetting the direct trade‐inhibiting effects of the latter. GlobalGAP certified countries see the trade‐inhibiting effects of governance distance on their exports reduced by about 50%, ceteris paribus.     

Agricultural Trade Liberalisation in the 21st Century: Has It Done the Business?

Based on a novel, detailed, time‐consistent tariff database taking account of import protection developments in the agricultural sector since 2001, we propose a statistical decomposition of the changes in the various types of tariffs. The results show that the multilateral system has played a limited role in trade liberalisation over the period. Many countries have continued to apply much lower tariffs on agricultural products than their WTO ceilings. Moreover, there has been substantial unilateral dismantling of tariffs over the period, so that much of the liberalisation took place outside WTO and regional agreements. The number of regional trade agreements has surged, but their impact on applied agricultural tariffs has been limited. Finally, we investigate the tariffs, trade and production implications for food and agricultural products of two extreme scenarios in the future development of trade negotiations: an ambitious surge of regional agreements and a trade war within the WTO context.     

R&D and Innovation in Food Processing Firms in Transition Countries

We examine the implications of the liberalised economic conditions associated with the economic transformations in the transition countries of Central and Eastern Europe (CEE) and Commonwealth of Independent States (CIS) for R&D and innovation in the food processing sector. We use a dataset derived from the World Bank's Business Environment and Enterprise Performance Surveys (BEEPS) database to examine the relationships between R&D/innovation activities in food processing firms in transition countries and (i) privatisation, (ii) foreign direct investment, (iii) trade activities, (iv) market competition pressure, and (v) economies of scale. The empirical analysis is implemented through: (i) a double‐hurdle model for R&D participation and expenditures, and (ii) a bivariate probit model for product and process innovation. We find that these economic transformations generally promote R&D/innovation activities in the food processing sector. Our results suggest that broadened and deepened economic liberalisation policies would improve the innovation performance of the food processing sector in transition countries, and would enhance competitiveness in domestic and foreign markets. They also indicate that innovation policies may need to be tailored to market and industrial characteristics of different transition regions.     

Trade Creation and Diversion Effects of Preferential Trade Associations on Agricultural and Food Trade

Agricultural market distortions remain a major focus of contention in world trade negotiations. Estimates of the effects of liberalising current agricultural trade restrictions indicate an approximately $385 billion increase in global welfare, with the disproportionate share of the benefit being enjoyed by developing countries. In response to difficulties in adopting agricultural trade reforms, individual groups of countries have formed multiple bilateral and regional preferential trade agreements (PTA) to enhance trade among members. Few sectoral analyses exist of the effects on agricultural and food product trade of PTAs. This research uses a gravity model to isolate the effects of various PTAs on both intra‐ and extra‐bloc agricultural and food product trade for three time periods: 1995, 2000 and 2004. Findings strongly support PTA benefits in terms of increased intra‐bloc trade in both sectors. The findings also generally support trade creation in agricultural products. PTA membership was also associated with food trade creation in most cases, although diversion was observed for several associations composed primarily of developing countries.     

Capturing zero‐trade values in gravity equations of trade: an analysis of protectionism in agro‐food sectors

With significant improvements in its theoretical underpinnings, the gravity model has gained renewed interest in the agro‐food trade literature. Notwithstanding, there is a dearth of literature examining the relative trade restrictiveness of tariff barriers across a broad range of agro‐food sectors. This represents an important research gap, which this study sets out to fill. Furthermore, this research reconciles the application of zero‐inflated models with a sectorally disaggregated analysis. More specifically, employing a fully specified gravity equation, a Poisson estimator and variants of the Poisson model (Negative Binomial, Zero‐Inflated Poisson, and Zero‐Inflated Negative Binomial) provide statistically significant and theoretically consistent estimates, while allowing for the inclusion of zero‐trade values. A panel data model with fixed effects is also employed to improve the estimation of the parameters of interest. Estimation results reveal that in the vast majority of sectors examined, import tariffs are found to be statistically significant, whereas export refunds exhibit a statistically smaller role due to the nonsystematic nature of their application in world food markets. Model simulations of tariff barrier eliminations reveal limited trade gains, although there is encouraging evidence of “low” and “lower middle” per capita income country trade gains in wheat, red meat, dairy, sugar, and (particularly) rice markets.     

The role of institutional quality on the performance in the export of coconut products

The literature that addresses the role of institutions in bilateral trade is extensive. However, research that links institutional quality to specific products and their different levels of value addition is lacking. In this study, we look into institutional quality, based on three indicators from the World Bank's world governance indicators, and its indicator-specific effects on bilateral coconut trade. In particular, we study coconut products with varying degrees of value addition. We use structural gravity models to measure how institutions affect the trade performance of the top 26 coconut producing countries to the top 15 importing economies over the years 1996–2016. Our results suggest that increased government effectiveness enhances trade of high-value products, whereas better voice and accountability scores decrease trade of coconut products with both levels of value addition. No clear trade effect is observed when two countries are more similar in each of the three indicators. We conclude that each indicator has different trade effects on each of the coconut product categories. We end by giving recommendations that will help to improve the coconut export performance in their respective countries and for future research.     

Food price increases and net food importing countries: lessons from the recent past

Recent increases in food and other commodity prices have highlighted concerns that many poor countries are net food importers and higher food prices would worsen their trade balances. In this article, we analyze the changes in food trade balances associated with the 32% increase in food prices from 2000/2001 to 2004/2005. We find a small deterioration in food trade balances of low‐income countries and an improvement in middle‐income countries. The deterioration is most severe for countries in conflict and small island states, so attention should be placed first on these countries and on a few very‐low‐income countries that are also vulnerable. Because low‐income countries as a group had much lower agricultural GDP growth rates than middle‐income countries, the answers to food vulnerability in low‐income countries should probably be addressed within the context of incentives for agricultural production.     

The Heterogeneous Effects of Standards on Agricultural Trade Flows

This article uses a theory‐based translog gravity model to investigate the heterogeneous effects of food standards on aggregate agricultural trade. We revisit the ‘standards‐as‐barriers‐to‐trade’ debate with a distinctive twist. In contrast to existing works, we show that standards reduce trade but even more so for countries that trade smaller volumes. Our identification strategy exploits the within‐country variation in specific trade concerns. We confirm that stricter importer standards are indeed trade‐restrictive. However, the estimated trade cost elasticity varies depending on how intensively two countries trade. Specifically, it decreases in magnitude with an increasing import share of the exporter in the importing country's total imports. The reason is simple but intuitive; bigger trading partners find it more profitable to invest in meeting the costs of importer‐specific standards. This work is novel in showing that the standards–trade debate misses out on an important heterogeneity driven by existing import shares. Liberalising non‐tariff measures will favour smaller trading partners more than well‐established ones.     

Harmonization of food trade standards and regulations in ASEAN: the case of Malaysia's food imports

Regulatory heterogeneity continues to be identified as a challenge for food trade in the Association of Southeast Asian Nations (ASEAN) as the progress of harmonization of food standards among member states remains slow. Using a new and comprehensive database on nontariff measures (NTMs), this article examines the coverage, frequency, and diversity of NTMs for the food sector in Malaysia, and then estimates their impact on food imports from ASEAN. The food sector in Malaysia is found to be highly regulated, dominated by technical measures, namely, labeling for sanitary and phytosanitary and technical barriers to trade reasons, product quality, and restricted substances. The empirical results subsequently verify that, overall, technical measures are import restrictive. This article therefore contends that harmonization of food standards and regulations at the regional level is important for enhancing trade. However, building common ground for food safety regulations should be NTM‐ and sector‐specific, to realize progress in terms of regulatory convergence. This is particularly true for the food sector, since complete harmonization is not practical and not politically feasible.     

Poisoned,Dispossessed and Excluded: A Critique of the Neoliberal Soy Regime in Paraguay

This paper challenges the recent hailing of agricultural biotechnology as a panacea for food insecurity and rural poverty in countries of the global South. Based on an empirical investigation of the neoliberal soy regime in Paraguay, I document how the profound transformation of this country's agricultural mode of production over the past two decades, spurred by the neoliberal restructuring of agriculture and the biorevolution, has jeopardized rural livelihoods. In particular, I demonstrate how the transgenic soyization of Paraguay's agriculture has led to an increased concentration of landholdings, as well as the displacement and disempowerment of peasants and rural labourers who have been rendered surplus to the requirements of agribusiness capital. At the same time, the consolidation of this new agro‐industrial model has fostered a growing dependence on agrochemicals that compromise environmental quality and human health. Thus, I argue, a development policy based on industrial monocropping of genetically modified (GM) soy is inappropriate, unsustainable and unethical.     

Food Security and Agricultural Protection in South Korea

South Korea has been pursuing food self-sufficiency using high tariffs and high administrative prices in key agricultural and food markets. Using a dual approach to trade and trade restrictiveness indices, we analyze the impact of these market distortions on welfare and trade volume. Then, we compute second-best distortions, which minimize the welfare cost of meeting observed levels of self-sufficiency and production. We rationalize these second-best distortions to what could be claimed as legitimate protection under a "food security" (FS) box in World Trade Organization (WTO) negotiations. FS-box protection is sensitive to changes in the definition and the extent of the FS objectives. We show that FS via production targets and reliance on imports would be more palatable to consumers and trade partners, while preserving income transfer to the farm sector.     

Productive Restructuring and ‘Standardization’ in Mexican Horticulture: Consequences for Labour

In this paper we discuss how the establishment of strict quality and food safety norms for horticulture to satisfy the current consumer demands has forced enterprises to invest in modifying their productive processes. In the light of the unavoidable trend in favour of consumers, we analyze the precarious situation of farm workers, a situation that is not in tune with the concept of decent work promoted by the International Labour Organization or with the Social Accountability Standard promoted by the United Nations. We conclude that the enterprises have achieved major progress in productive restructuring to comply with quality standards, but at the expense of their workers' salaries and living and working conditions. This contradiction between the well‐being of the consumer and the misery of the worker is a fundamental characteristic explaining the current success of globalized agro‐food systems.     

Contract farming,contract design and smallholder livelihoods*

Contract farming has gained in importance in many developing countries. Previous studies analysed effects of contracts on smallholder farmers’ welfare, yet mostly without considering that different types of contractual relationships exist. Here, we examine associations between contract farming and farm household income in the oil palm sector of Ghana, explicitly differentiating between two types of contracts, namely simple marketing contracts and more comprehensive resource-providing contracts. Moreover, we look at different income sources to better understand how both contracts are linked to farmers’ livelihood strategies. We use cross-sectional survey data and regression models. Issues of endogeneity are addressed through measuring farmers' willingness-to-participate in contracts and using this indicator as an additional covariate. Farmers with both types of contracts have significantly higher household incomes than farmers without a contract, yet with notable differences in terms of the income sources. Farmers with a marketing contract allocate more household labour to off-farm activities and thus have higher off-farm income. In contrast, farmers with a resource-providing contract have larger oil palm plantations and thus higher farm incomes. The findings suggest that the two contract types are associated with different livelihood strategies and that disaggregated analysis of different income sources is important to better understand possible underlying mechanisms.     

United States–Cuba Agricultural Relations and Agrarian Questions

In the wake of Cuba's far‐reaching, halting economic reforms, geopolitical rapprochement and trade openings with the United States (US) offer opportunities and risks for Cuban small‐scale farmers and agrarian cooperatives: pressures, paradoxes and potential abound. Meanwhile, on the margins, agro‐ecologically oriented tours bring admiring US students, farmers and agrarian advocates. Cubans concur that the country must solve key problems in its agricultural sector to overcome the contradictions of its agri‐food model, and that this entails more exchange with the US – but in what capacity and on what terms? The current crossroads begs the classic agrarian question, even as it updates it. Having experienced and survived the promises and disasters of both capitalist and communist agricultural economies, Cuban farmers expand the original ‘peasant’ protagonist. As they navigate new non‐state markets and recent re‐entrenchment of state control of prices, Cuban farmers and cooperatives struggle to avoid monopolizing tendencies of unfettered capitalist as well as communist agricultural economies – both of which have historically been ecologically damaging. US agribusiness courts Cuba, but not as mere unidirectional capture: Cubans are inviting and leveraging trade to end the embargo, which is increasingly being modified altogether. Key Cuban agrarian principles of resilience and cooperativismo have persisted through capitalist and communist crises: could they influence prospects for agro‐industrial hegemony from the North?      

Contract farming and smallholder incentives to produce high quality: experimental evidence from the Vietnamese dairy sector

In emerging markets for high‐value food products in developing countries, processing companies search for efficient ways to source raw material of high quality. One widely embraced approach is contract farming. But relatively little is known about the appropriate design of financial incentives in a small farm context. We use the example of the Vietnamese dairy sector to analyze the effectiveness of existing contracts between a processor and smallholder farmers in terms of incentivizing the production of high quality milk. A framed field experiment is conducted to evaluate the impact of two incentive instruments, a price penalty for low quality and a bonus for consistent high quality milk, on farmers’ investment in quality‐improving inputs. Statistical analysis suggests that the penalty drives farmers into higher input use, resulting in better output quality. The bonus payment generates even higher quality milk. We also find that input choice levels depend on farmers’ socio‐economic characteristics such as wealth, while individual risk preferences seem to be less important. Implications for the design of contracts with smallholders are discussed.