Implications of the US Farm Bill of 2002 for agricultural trade and trade negotiations

The US Farm Bill of 2002 is the latest in a 7-decade history of farm subsidy laws that transfer funds to farmers and regulate and subsidize production of selected commodities. Fruit, tree nut, ornamental and vegetable crops, hay and meats remain outside scope of main subsidy programs. The new law continues many innovations of the 1996 Act, such as removal of authority for annual land idling and crop price floors accompanied by government stockholding. Government payments remain the primary focus of commodity programs. The total amount of these payments are likely to remain similar to the amount paid in the period 1999–2001, but with some changes in the form of the programs. For example, allowing owners to update acreage and yield payment bases creates additional incentives for farmers to link current planting decisions to anticipated farm subsidies. Similarly, the new program that ties "counter-cyclical" payments to the price of a specific crop also has production stimulus. A new program, estimated to add about 5–10 per cent to marginal milk revenue for smaller farms, makes 'deficiency' payments to dairy farms when milk prices are low. Despite the new programs with added links to stimulating production, new USA programs stimulate production only marginally more than the subsidies of the 1999–2001 period, which were replaced. Furthermore, the USA has flexibility to avoid explicitly violating its WTO commitments. Nonetheless, this US Farm Bill of 2002 has curtailed the previous trends toward lower farm subsidies and smaller production stimuli, and the negative publicity surrounding it has made negotiating reductions of farm trade distortions more difficult.     

International trade and agricultural development in developing countries: Significance of the Uruguay Round of GATT negotiations

Liberalization of world trade in agricultural products ranks high on the agenda of the Uruguay Round. After a period of more than six years, however, the negotiations have not been concluded. Nevertheless, an outcome seems to be in sight. The agreement will most likely not result in a move to freer trade. It seems that domestic policies will become even more regulative than in the past in an attempt to cut exportable surpluses and to ease trade tensions among the main exporting nations. This paper explores possible impacts of the GATT Round on agricultural development in developing countries. Agricultural development is more than only growth in agricultural production or productivity. However, it is argued in the paper that other variables which also indicate agricultural development are often closely correlated with growth in production and productivity. Trade in agricultural products is not always an engine for agricultural development. If internal divergences are not accounted for by appropriate domestic policies, trade may be even harmful to agricultural development. Hence, empirical research based on cross-country analysis does not provide a clear answer about the role of trade for development. Past policies in industrialized countries have most likely had a negative effect on developing countries as a group; however, the effects differ widely across countries. Liberalization policies in industrialized countries would not just reverse these negative effects for developing countries. Price reduction in industrialized countries may not result in the often-cited production decline in the short term. Present X-inefficiency in agriculture will be reduced by liberalization, leading to an outward shift of the supply curve. Hence, liberalization may not lead to higher world market prices for temperate-zone products in the short and medium term. Apart from this, empirical models differ widely in the price effects they predict. The expected outcome of the Uruguay Round – increased regulation of domestic policies – is likely both more negative for developing countries than past protectionist policies and worse than an overall liberalization. World market prices will increase, uncertainty and instability can be expected to grow, and food aid may become less available. There will be a need to react to these challenges with measures on the international and national level. Initiatives to deal with food crises in developing countries and to stimulate liberalization in developing countries should be considered. Finally, developing countries should be made aware that their own domestic policies have a much greater economic impact than policies in other countries, even if the latter are as protectionist as current agricultural policies in the industrialized world.     

Growth in horticultural trade: Japan's market for developing countries

This paper explores possibilities and opportunities of expansion of horticultural exports from developing countries through an investigation on a rapidly growing market, Japan, as an example among major promising markets. In this paper six horticultural commodities are selected to analyze, emphasizing on exports from developing countries. Observations on Japan's horticultural imports make us presume that consumers differentiate products by place of production. Therefore, import behavior is considered in a two-stage budgeting procedure. The second-stage demands for imports from different sources are specified in an almost ideal demand system (AIDS) model and estimated statistically as well as the first-stage import demand equations. The estimated second-stage AIDS equations show that the magnitude of own-price coefficients varies with the source of imports and so does that of expenditure coefficients. Therefore, the characteristics of import demand on a commodity basis, which are captured by the estimates of the first-stage import demand equations, are not equally transmitted to the demand for imports by source in each commodity. The estimated coefficients of the first-stage import demand and the second-stage AIDS equations were combined to obtain the total effects of price and income changes on imports by source. The calculated own-price elasticities are greater than one in absolute value in ten of the 15 cases and so are the calculated income elasticities in twelve cases. The large elasticities promise suppliers that they benefit from Japan's income growth and that they increase their earnings if they can reduce the price by lowering their costs. However, factors in non-price competition also play import roles in the import growth. In this paper, the importance of sales promotions by exporters and preshipment inspections was indicated in the cases of mangoes and cut flowers. Other factors such as market structure and public infrastructure for post-harvest activities were also discussed.     

Implications of World Trade Organisation accession for China's agricultural trade patterns

This paper examines the composition of China's international trade from 1980 to 1997, with a focus on agriculture and a view towards understanding agriculture's changing trade structure relative to other sectors. We analyse the time series behaviour of individually traded goods at the Standard Industrial Trade Classification three-digit level, categorised into three groups: agricultural commodities, 'other' primary commodities and manufactures. We find that China's agricultural trade has expanded along comparative advantage lines in only a very modest way, suggesting that World Trade Organization membership will have a large impact on China's agricultural trade patterns.     

Will developing country debt forgiveness increase agricultural trade?

Latin American countries are important customers in international agricultural trade. However, between 1981 and 1987, U.S. agricultural exports to these countries declined by almost 50%. One explanation for the above decrease is the change in financial conditions facing many countries in this region. Outstanding debt in the Latin American countries continued to rise through the 1980's, reaching over $120 billion for Brazil and Mexico by 1987. In this paper, we develop an import model which considers the effect of the debt crisis on the ability of developing countries to purchase agricultural commodities in world markets. We estimate the model for four countries: Mexico, Brazil, Chile, and Venezuela. The estimated results are used in a simulation model to obtain the effects of a 50% debt forgiveness scenario. Results indicate only a modest improvement in agricultural imports of the four Latin American countries considered in this study. These four countries would expand agricultural imports by $400 million per annum given the debt reduction.     

US—Mexico fresh vegetable trade: the effects of trade liberalization and economic growth

Studies of US‐Mexico vegetable trade have generally emphasized the importance of US tariffs in determining the competitive advantage of US producers. Even so, research has identified at least four factors related primarily to the different levels of economic development in the US and Mexico that also have important effects on US‐Mexico agricultural trade in general and fresh vegetable trade in particular. These include the differential growth rates of US and Mexican real wages, production technology (yields), and per capita income as well as cyclical movements in the real Mexican Peso/US Dollar exchange rate. This study examines the relative contribution of NAFTA and the development‐related factors to likely future changes in US fresh vegetable imports from Mexico. The analysis employs an econometric simulation model of US and Mexican markets for five fresh vegetables (tomatoes, cucumbers, squash, bell peppers, and onions) accounting for 80% of US fresh vegetable imports. The results suggest that the 1994–1995 Peso devaluation rather than NAFTA was primarily responsible for the sharp increase in US imports of Mexican vegetables observed in the first years following the implementation of NAFTA. Over time, however, the results suggest that differences in the growth rates of US and Mexican production yields and, to a lesser extent, of US and Mexican real incomes and/or real wage rates could plausibly contribute more to the future growth of US tomato, squash, and onion imports from Mexico than the trade liberalizing effects of NAFTA.     

水产品贸易自由化对中国渔业的影响

１水产品贸易自由化的进程研究（１）贸易自由化在本文中的定义范围。“贸易自由化”这一术语主要有两种含义。第一,亚太经济合作论坛提出的最终取消ＡＰＥＣ成员国之间的商品和服务的关税障碍这一贸易自由化计划。逐步实现ＡＰＥＣ各成员之间的贸易自由化,是多届ＡＰＥＣ论坛首脑会议的一个主题。ＡＰＥＣ成员约占世界ＧＤＰ总值的５５%,全球贸易总额的４０%。中国与ＡＰＥＣ其他成员的贸易占中国总出口、总进口的比重都超过２／３。第二,中国１９９６、１９９７年自主进行的关税削减。本文所指的贸易自由化主要指消除可贸易品的关税障碍,…     

Conceptualising multifunctional agriculture from a global perspective: Implications for governing agricultural trade in the post-Doha Round era

The notion of multifunctional agriculture has been researched from diverse disciplines including economics, sociology, political economy, and geography since the URAA. In particular, the economics approach represents an attempt to tailor the concept of multifunctional agriculture to market- oriented WTO trade regime. The approach has been fundamentally troubled by the lack of concord among WTO member countries on the question of what constitutes multifunctional agriculture. This article redefines multifunctional agriculture as a concept encompassing six components that are extremely heterogeneous in their nature of external benefits. Upon examining different positions taken by the US, the EU, the Cairns group, LDCs, and the G10, this article develops a conceptual model explaining why the notion of multifunctional agriculture is conceived so differently across countries. The model posits that institutions, natural resources endowment, ecological conditions, farm policies, and culture/history unique to each country would determine the state of economic development and agricultural competitiveness in a country, which in turn shape the pattern of social demand for various components of multifunctional agriculture. The theorizing undertakes to overcome the Euro- centrism that has dictated the discourse of multifunctional agriculture since the URAA. Implications are discussed for the governance of agricultural trade in the post-Doha Round era.     

Impacts of trade liberalization in Canada's supply managed dairy industry

Trade is an integral part of the Canadian economy. The main institutional drivers governing trade are bilateral and multilateral agreements outlining permissible trade distorting measures. Since its inception in 1972, Canada's supply management system has remained protected throughout trade negotiations. The system appears, by any economic measure, to be having an increasingly disproportional influence in recent trade negotiations. However, trade agreements serve not only to maximize social surplus, but also to maximize some measure of political welfare. Canada has recently negotiated three prominent trade agreements: the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) came into effect in the latter part of 2017; the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) came into effect at the end of 2018; and the Canada-United States-Mexico Agreement (CUSMA) could come into effect in 2020. Collectively, these agreements have guaranteed increased market access for fresh and processed dairy products. We build a spatial partial equilibrium model of the Canadian dairy industry consisting of three regions and 10 commodities to assess the individual and cumulative effect of these trade agreements. We pay particular attention to the institutional drivers within today's dairy sector: milk protein isolates; component pricing, including Class 7; and differential demand growth. We find that the aggregate impacts are: (a) a 1.4% decrease in the marginal retail price; (b) a 4.8% decrease in the blended producer price; and (c) an overall increase in social welfare of 7.8%. Worth noting, the decrease in producer surplus varies from 0.7% in the western region to 1.5% in Ontario. Our results may be relevant to future negotiations as well as the publicly promised compensation package for dairy producers.     

A proposal for the reduction of domestic price variability during the phase-in period of trade liberalization

Countries replacing existing trade barriers with a fixed tariff may find that domestic price variability rises to politically unacceptable levels. This paper shows how the tariff-reduction formula can be modified to delay the transmission of world price variability. The importance of this modification is demonstrated by a simple two-country, one-commodity simulation model. The simulation results show that tariffication of existing EC variable levies/export subsidies would dramatically increase price variability within the European Community and that the transmission of this variability can be delayed by slightly altering the ***adjustment formula.     

Agricultural trade liberalization and economic development: the role of downstream market power

A model is developed to characterize the vertically linked and concentrated nature of developed‐country food markets. This model is then parameterized and used to simulate the effects of varying food market structures on the benefits to developing‐country exporters of agricultural commodities from trade liberalization by developed countries. Results demonstrate that even relatively modest departures from perfect competition can cause much of the benefits from trade liberalization to flow to marketing firms instead of producers in the developing country. The distributional effects under downstream market power differ significantly from the perfectly competitive case and may result, somewhat paradoxically, in developing countries receiving a lower share of the total value added within the food chain as trade reform occurs.     

Developing country debt: implications for agricultural trade

There has been a sharp decline in the rate of economic growth in many developing countries in the 1980s compared with the 1970s. Reduced availability of external finance following the international debt crisis has been identified as one of the most important factors responsible for this decline. At the same time there has been a slowdown in the rate of growth of food imports to these countries, particularly to the highly indepted ones. The focus in the paper is on the implications for international agricultural commodity markets of a dept write-off in developing countries. To analyse these implications a world agricultural trade model is used. Specifically, the analysis covers the effect of existing debt on the permanent incomes of developing debtor countries and developed creditor countries, and hence the effect on agricultural commodity markets. The results indicate that, if the debts of the developing countries were written off, prices would improve in consequence of the resulting rise in their permanent incomes. If the debt write-off also led to growth in developing countries returning to the levels prevalent before the debt crisis, the improvements in world prices would be likely to be much larger.     

Impact and implications of price policy and land degradation on agricultural growth in developing countries

In many developing countries, a high proportion of the population resides and works in rural areas. Agriculture is the dominant sector in rural areas and has the greatest concentration of poverty: landless workers, small tenant farmers, and small farm owners. Thus, any development strategy that is directed towards increasing employment and alleviating a country's hunger must concentrate on sustainable agricultural growth. Historically, economic development in most countries has been based on exploitation of natural resources, particularly land resources. Soil erosion and land degradation have been serious worldwide. Due to reasons such as high population pressure on land and limited fossil energy supplies, land degradation is generally more serious in the developing world. Empirical studies show that soil erosion and degradation of agricultural land not only decrease the land productivity but they can also result in major downstream or off-site damage which may be several times that of on-site damage. In promoting industrialization, governments of many developing countries adopt a package of price and other policies that reduce agricultural production incentives and encourage a flow of resources out of agriculture. Increasing evidence shows that these policies cause a substantial efficiency or social welfare loss, and a great loss in foreign exchange earnings. In addition, a World Bank study on the effect of price distortions on economic growth rates concluded that neither rich resource endowments, nor a high stage of economic development, nor privatization are able to make up the adverse effects caused by high price distortions. This analysis is primarily concerned with identifying the factors that determine the agricultural production growth rate and in testing the effects these factors have on agricultural growth in developing countries. Specifically, this study involves statistical estimation of an aggregate agricultural growth function based on cross-country data for 28 developing countries. Special attention is devoted to land degradation and agricultural pricing policy, and to the policy implications resulting from the effects these variables have on agricultural and food production growth. The overall results of this study show that price distortions in the economy and land degradation had statistically significant negative impacts while the change in arable and permanent land was positively related to the growth of agricultural production and food production in 28 developing countries from 1971 to 1980. These results emphasize the importance of ‘getting prices right’ and implementation of sustainable land and water management practices if future growth in food and agricultural output is to be realized and sustained in developing countries.     

Maritime connectivity and agricultural trade

Seaborne shipping is the dominant mode of transport in international trade in agricultural products, and an increasing part of seaborne agricultural trade is carried in containers. Furthermore, the majority of world containers are moved through liner shipping services, that is, regular transport services provided by global shipping companies which comprise a dense network connecting ports and countries around the world. Using a theoretically consistent gravity equation and a novel identification strategy based on the use of intra-national trade flows, this paper investigates the effect of liner shipping connectivity on international trade in agricultural products. The results show that liner shipping connectivity has a positive and statistically significative effect on agricultural trade. Moreover, this positive effect can be observed for the majority of the agricultural products analysed and is also identified for countries at different stages of development. These findings appear especially relevant in terms of the objective of increasing less developed countries' participation in global agricultural trade.     

Developing a holistic approach to the analysis of farmer decision-making: Implications for adaptation policy and practice in developing countries

Smallholder farmers operate within a risky and uncertain context. In addition to climate variability and climate change, social, environmental, institutional, and market-related dynamics affect their agricultural decisions and ability to cope and adapt. In this paper, we develop and apply a set of framing questions to investigate the factors shaping farmer decision-making and how these are situated in pathways of response. Drawing on a literature review of decision-making for risk management, five questions are posed to frame enquiry: what livelihood decisions are undertaken by households, who makes what decisions, when do households make decisions and why do they make them, and how do decision making processes evolve and response pathways arise. This approach conceptualises and explores household decision-making in a holistic manner, moving beyond previous studies that examine smallholder decisions through disciplinary boundaries (e.g. psychology, economics, risk management) or particular theoretical approaches (e.g. bounded rationality, theory of planned behaviour). The framing questions together with key insights from literature are used to design and interpret empirical evidence from Pratapgarh, a tribal-dominated rainfed district in southeast Rajasthan, India. The findings suggest that while resource ownership and access are the main drivers of decision-making, socio-cognitive factors such as perceived adaptive capacity and perceived efficacy to carry out adaptive actions are equally important factors mediating farmer responses. We also find that the holistic approach helps explain how personal motivations and individual perceptions of adaptive capacity interact with socioeconomic, climatic, and agro-ecological dynamics at local and regional scales to mediate risk perception and inform response behaviour. A typology of response pathways demonstrates how different households’ trajectories are determined. Making a case for mixed methods to investigate farmer decision-making holistically, this paper provides an approach that reflects the complex and iterative nature of real farmer decision-making and can be used by researchers, policymakers, and practitioners to better understand and describe decision making and to develop informed policies and interventions.