Agricultural exports and economic growth in less developed countries

This article examines the contribution of agricultural exports to economic growth in less developed countries (LDCs). A sources‐of‐growth equation is developed from a dual economy model where agricultural and nonagricultural sectors are both divided into export and nonexport subsectors. This is then estimated using panel data for 62 LDCs for 1974–1995. Results provide evidence that there are significant structural differences in economic growth between low, lower‐middle, and upper‐income LDCs. Investment in the agricultural export subsector has a statistically identical impact on economic growth as investment in the nonagricultural export subsector. The marginal productivities in nonexport subsectors are over 30% lower than those in respective export subsectors. From a policy perspective, the results suggest that export‐promotion policies should be balanced.     

Lomé to Cotonou conventions: trade policy alternatives for the Senegalese groundnut sector

The signing of the Cotonou Convention in June 2000 established a new trading relationship between the European Union and African, Caribbean, and Pacific States. Negotiations to establish new trading arrangements have already commenced and will lead to the establishment of economic partnership agreements or other viable alternatives. In this study, the economic impact on the Senegalese groundnut sector is assessed for the case in which Senegal enters into an economic partnership agreement with the European Union, or into an enhanced form of the Generalized System of Preferences. The preferred choice depends on whether Senegal's economic status classifies it as a least developed country (LDC) or not, as well as on other external trading arrangements. Findings indicate that as a non‐LDC, the best option for Senegal would be to enter into an economic partnership agreement. As a LDC, the best option would be to move to the enhanced generalized system of preferences, thereby allowing Senegal to retain Lomé‐style trade preferences. Furthermore, increased development funding under the Cotonou Convention could help shield the Senegalese groundnut sector from adverse economic impacts arising from either trading option.     

Applying cointegration and error correction to measure trade linkages: maize prices in the United States and Mexico

The impact of U.S.‐grown maize on Mexican markets is a subject of heated debate, and is complicated by limited substitution between white and yellow maize as well as regional price differences within Mexico. This article improves on previous analyses using a detailed data set of white maize prices reported weekly in 11 states across Mexico from 1998 through 2005. Using cointegration analysis and the error‐correction model, we find that prices between the United States and Mexico do not share a common long‐run relationship. Within Mexico, prices in Michoacán and Oaxaca are only weakly related with prices in neighboring states, whereas prices in Sinaloa and Jalisco exert considerable influence on prices elsewhere in Mexico. We conclude that, despite North American Free Trade Agreement (NAFTA), white maize prices in Mexico are determined by local conditions including particularly the degree of integration to other regions within Mexico.     

Modeling weekly Canary tomato exports

The European tomato market is characterized by a constant process of dynamic adjustment towards equilibrium. Furthermore, Canary Island tomato exports cause a high seasonal impact on market prices in the winter period. In these circumstances, an adequate distribution of weekly shipments throughout the year could contribute to maximize producers' profits. Moreover, Canary export levels show some degree of instability, clearly related to the changes in the EU trade rules and there is a long period, in the summer, without exports. The aim of this article is to analyze the long‐term movements and, particularly, the seasonal pattern of Canary Island tomato exports throughout the last two decades. To observe more clearly the exporter's decisions, weekly data have been used. The instabilities in the long‐term behavior of the series and the specific nature of the seasonal pattern should be taken into account, to capture the performance of exports accurately. Thus, this analysis is carried out using the structural approach to time series analysis, and the usefulness of spline functions as a tool capable of modeling seasonal variations for which the period does not remain the same over time is shown.     

Competition between farmed and wild salmon: the Japanese salmon market

This article examines the Japanese market for salmon. This market is of interest, since it is the largest and most diversified salmon market in the world with wild and farmed species, from Europe and South and North America, competing in the same market. In contrast to the European Union (EU)‐ and U.S.‐markets, there have been neither trade conflicts nor trade restrictions. The Japanese market can hence provide information about the impact of bringing substantial quantities of a new product into a market, and the effect of large‐scale aquaculture on traditional fisheries. In this article, market integration between wild and farmed salmon on the Japanese market is examined, using both bivariate and multivariate cointegration analysis. Tests for the Law of One Price are also conducted. The results indicate that the species are close substitutes on the market, and that the expansion of farmed salmon has resulted in price decreases for all salmon species.     

Optimal supplier testing and tolerance strategies for genetically modified (GM) wheat

A stochastic optimization model was developed to determine optimal testing strategies, costs, and risks for dual marketing of genetically modified (GM) and non‐GM wheat in an export supply chain. The optimal testing strategy is derived that minimizes disutility of additional system costs due to testing and quality loss. Cost components were estimated including those related to testing, quality loss, and a risk premium to induce shippers to undertake dual marketing as opposed to handling only non‐GM crops. Uncertainties were incorporated for adventitious presence and commingling, variety declaration, and test accuracy. Sensitivities were performed for effects of variety risks and declaration, penalty differentials, buyer tolerances, risk aversion, and GM adoption. Results indicate testing and segregation can be performed at a relatively low cost and risk to buyers.     

Diet,trade and land use: a socio-ecological analysis of the transformation of the olive oil system

Within only two decades olive oil developed from a niche product which could hardly be found in food stores outside the producing regions towards an integrated component in the diets of industrial countries. This paper discusses the impacts of the promotion of the “healthy Mediterranean diet” on land use and agro-ecosystems in the producing countries. It examines the dynamics of olive oil production, trade and consumption in the EU15 in the period 1972–2003 and the links between dietary patterns, trade and land use. It analyses the underlying socio-economic driving forces behind the increasing spatial disconnect between production and consumption of olive oil in the EU15 and in particular in Spain, the world largest producer during the last three decades.     

Balancing productivity and trade objectives in a competing environment: should India commercialize GM rice with or without China?

India is considering approving genetically modified (GM) rice, but it fears losing rice exports to sensitive countries with import regulations on GM food, and may wait for China to lead the way. Using a multiregion, computable general equilibrium (CGE) model, we simulate the economic effects of introducing GM rice in India with or without China in the presence of labeling and import approval regulations of GM food in GM sensitive importing countries. We find that the welfare gains with GM rice in India would largely exceed any potential export loss, and that the segregation of non-GM rice could help reduce these minor losses. We also find no significant first mover advantage for India or China on GM rice. The opportunity cost of segregation of non-GM rice is much larger for sensitive importers than for India, which suggests that these importers would have the incentive to pay for the cost of segregation.     

Welfare impacts of import controls on Botswana's horticulture

Botswana has, for the past two decades, used import controls (permits) to regulate horticultural imports, and thereby promote economic diversification through import substitution. This article estimates import demand equations to capture the impact of import controls on horticultural imports (oranges, potatoes, and onions) into Botswana, using data for 1974 to 2001. Parameter estimates are used to compute nominal protection rates (NPRs) and welfare effects. Model‐generated NPRs are estimated at 191%, 75%, and 109% for oranges, potatoes, and onions, respectively. Imports of oranges, potatoes, and onions declined by 32%, 29%, and 35%, respectively, due to the implementation of import controls. Over time consumer losses and quota rents rose while producer gains declined. Net social losses also increased, implying that import controls became increasingly burdensome. It is argued that import controls have not been very effective in promoting import substitution. The study is important for the trade liberalization debate in the Southern African Customs Union (SACU) and within the Southern African Development Community (SADC), where import permits and other nontariff barriers are pervasive, have proliferated, and are a major hindrance to intraregional trade.     

A model of optimal import phytosanitary inspection under capacity constraint

Growth and liberalization of world trade have increased the risks of introduction of quarantine plant pests into importing countries. Import inspection of incoming commodities is a major tool for prevention of pest introductions related to world trade, but inspection capacities are limited. This article develops a theoretical and an empirical model for the optimal allocation of inspection effort for phytosanitary inspection of imported commodities when the inspecting agency has a limited capacity. It is shown that the optimal allocation of inspection effort equalizes marginal costs of pest introduction across risky commodity pathways. The numerical illustration finds the optimal allocation of inspection effort of chrysanthemum cuttings imported in the Netherlands. The numerical results suggest that ceteris paribus , greater inspection effort should be allocated to pathways whose inspection yields a greater reduction in the expected costs of pest introduction. The numerical results also suggest that import inspection has a high marginal benefit. In particular, we found that each additional euro of the inspection capacity decreases the expected costs of pest introduction from 18 to 49 euros, depending on the initial inspection capacity.     

Assessing agricultural trade policies options with the European Union: a Brazilian perspective

Brazil has shown interest in agricultural trade negotiations at bilateral, regional, and multilateral levels. This study addresses several important negotiations, using the agricultural sector model CAPRI (Common Agricultural Policy Regional Impact Analysis), to analyze liberalization scenarios between the European Union and the Mercosur countries focusing particularly on their impacts in Brazil. Four possible agreements between Europe and Mercosur are simulated, including a broader multilateral agreement proposed in the G20. The results suggest that a bilateral scenario involving larger tariff rate quota increase, as called for by Mercosur, generates larger gains than accepting the European Union proposal of 2004 or further multilateral trade liberalization based on the G20 proposal. However, much larger increases in tariff rate quotas for all products are not necessarily justified in all cases. Moreover, Brazil's production and export potential is limited by factors other than trade restrictions.     

Comparing heterogeneous consumption in U.S. and Japanese meat and fish demand

This article uses national, quarterly data to conduct an empirical analysis of pre‐committed meat and fish demand by U.S. and Japanese households using the generalized almost ideal demand system (GAIDS). Pre‐committed demand represents the component of demand that is insensitive to both income and price adjustments. U.S. consumers are found to hold significant positive pre‐committed demand for beef and pork, while Japanese consumers appear to possess significant, positive pre‐committed demand for beef and fish. This provides evidence to partially explain observed differences in Japanese and U.S. consumer reactions to nonprice and nonincome effects in beef, pork, poultry, and fish. In addition, based on in‐ and out‐of‐sample performance, the more general GAIDS is preferred to the almost ideal demand system (AIDS) for both the U.S. and Japanese demand systems. Results lend to improved demand modeling efforts and more complete understanding of true market forces at hand in meat and fish markets for these culturally diverse consumer groups.     

Finance Constraints and Firm Transition in the Informal Sector: Evidence from Indian Manufacturing

This paper focuses on the role of finance constraints in determining the lack of transition of firms in India from very small family firms, which are the predominant type of firms in the informal sector, into larger informal firms that employ non-family labour. Using a rich firm-level data-set drawn from nationally representative surveys of the Indian informal manufacturing sector, this paper tests for the role played by finance constraints in firm transition in the informal sector at the firm and district level. There is evidence that the difficulty that firms face in accessing external finance acts as a significant constraint to small firm growth in the informal sector. Looking at data from India's districts, it is found that the financial development in a given district increases the likelihood that firms in the district will make the transition from household enterprises into non-household enterprises.     

The effect of barge and ocean freight price volatility in international grain markets

Short‐run responses of export and domestic shares of total agricultural output to changes in stocks of domestic savings (SAV), development assistance (ODA), private foreign commercial capital (PFX) and other variables is investigated. A profit function approach is used. Time series data for 19 sub‐Saharan African countries are pooled into three panels using similarities in changes in economic policy regime. Statistical evidence suggests that for the panel of countries that were undertaking liberalized economic reforms, the slope coefficients of some of the variables in the models have changed significantly between 1970–1980 and 1981–1993. For the 1981–1993 period, the impacts of ODA, PFX and SAV on export and domestic shares were different for this panel. The effect of increases in agricultural labor was different across the three panels. There is also evidence that productivity growth in the export agriculture sub‐sector is negative in all the groups. It is recommended that to halt the decline in export share of agricultural output in the group of countries that have undertaken substantial improvements in economic policy environment, efforts must be made to reduce the negative impact of domestic savings and agricultural labor, while at the same time working to reduce the bias of development assistance against food security.     

Regional trade agreements and trade in agri-food products: evidence for the European Union from gravity modeling using disaggregated data

The proliferation of regional trade agreements in recent years has intensified the debate on the desirability of these agreements in themselves and their coexistence with multilateral free trade under the WTO. This study contributes to this debate by analyzing trade creation and trade diversion effects of the European Union on trade flows of six major agri‐food products from 1985 to 2000. An extended gravity model is estimated employing pooled data and generalized least squares methods. The results show that the developments in the EU since the mid‐1980s have served to boost agri‐food trade significantly among the members. Some of the growth in intra‐EU trade in agri‐food products came at the expense of nonmembers as the EU reduced the degree of relative openness to trade with nonmembers during this period and diverted trade from the rest of the world into the intra‐EU channels.     

Post–Uruguay Round price linkages between developed and developing countries: the case of rice and wheat markets

The Uruguay Round Agreement on agriculture attempted to lower distortions in global agricultural markets. However, the significant fall in commodity prices in the late 1990s may have reduced the incentives for both developed and developing countries to better integrate into world markets. This study analyzes price linkages and adjustment between developed and developing countries during the post–Uruguay Round period. Prices of two key commodities, long‐grain rice and medium‐hard wheat, are assembled for major exporters and producers. Results of multivariate cointegration analysis suggest partial market integration between developed and developing countries in the post–Uruguay Round period. Developed countries are found to be price leaders in these two markets, and in most cases, changes in their prices have relatively large impacts on those of the developing countries. Developing countries (e.g., Vietnam and Argentina) have faced considerable price adjustment due to changes in the developed countries' prices.