Factor Mobility, Agriculture, Environment and Quantitative Studies
Edited by Miroslav N. Jovanović
Chapter 11: Agricultural Policy as a Barrier to Global Economic Integration
Kym Anderson and Ernesto Valenzuela* 1 INTRODUCTION While the benefits from specialisation in production and international exchange have been recognised for millennia, most governments restrict international trade to some extent, especially in agricultural goods. Sometimes it would be via export taxes, to raise government revenue or to lower the price of food for domestic consumers. More commonly it takes the form of import duties or bans. While food security concerns are sometimes mentioned as a reason for intervention in both sets of countries, for advanced economies the most likely reason for farm trade restrictions in the past century or more has been to protect domestic producers from import competition as they come under competitive pressure to shed labour in the course of economic development. In the process those protective measures hurt not only domestic consumers and exporters of other products but also foreign producers and traders of farm products, and they reduce national and global economic welfare. For many decades agricultural protection and subsidies in high-income (and some middle-income) countries have been depressing international prices of farm products, which lowers the earnings of farmers and associated rural businesses in developing countries. That worsened between the 1950s and the early 1980s (Anderson and Hayami, 1986), thereby adding to global inequality and poverty because three-quarters of the world’s poorest people depend directly or indirectly on agriculture for their main income (World Bank, 2008). In addition to this external policy influence on rural poverty, the governments of many developing countries have directly taxed...
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