Publication Date

2002

Comments

Working Paper 71

Abstract

This paper aims to provide a descriptive and analytical account of the extent to which agriculture in the developing economies has become integrated with external markets. For most developing economies (DEs), the 1980s were a time of crisis when liberal reforms, including domestic and external liberalization of agriculture, were also initiated. This was followed by the coming into force of the Agreement on Agriculture under WTO aegis. The evidence on trade flows does indicate increased agricultural globalization in developing economies (DEs) following these regime shifts. But increased trade flows have not been accompanied by relative price convergence as between the DEs and the advanced economies (AEs) suggesting both that the policy shifts have been asymmetric and that significant parts of agricultural trade between North and South remain complementary rather than, as is often assumed, competitive. Moreover, the “fallacy of composition”, implicit in any global imposition of trade liberalization and not confined to primary products as such, also seems to have been at work for most of the period. At the same time, the threat of higher consumer prices (especially for the poor and vulnerable in both importing and exporting DEs) looms large. Its impact will be felt as and when production and export subsidies in the AEs are dismantled. Meanwhile, the regime shifts seem to have induced, on the one hand, excessive faith in the efficacy of agricultural prices to produce agricultural supply response and, on the other, reduced fiscal and organizational capacities to provide public agricultural inputs and services. These conclusions are consonant with a structuralist understanding of global trade and production possibilities that DEs confront.

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