Distortions to global ag & nonag markets: what … to global ag & nonag markets: what needs...
Transcript of Distortions to global ag & nonag markets: what … to global ag & nonag markets: what needs...
Distortions to global ag & nonag markets: what needs explaining?
Kym AndersonUniversity of Adelaide and CEPR
13th Annual Conference on Global Economic AnalysisPenang, Malaysia, 9-11 June 2010
Financial assistance from the World Bank Trust Funds, particularly from DfID and BNPP, plus the ARC, are gratefully acknowledged, as are the contributions of the country case study authors and the Washington- and Adelaide-based teams. Views expressed are the authors’ alone and not necessarily those of the World Bank or its Executive Directors. Project details are at www.worldbank.org/agdistortions
OutlineEvidence: trends and fluctuations in agric trade-related policies pre- and post-1980s
Based on recent price distortions database at
What next, in terms of:Further research on political economy of distortions to agric vs nonag incentives Implications for sectoral and economy-wide baseline model projections: what are prospective trade and agric price policy trends?
New evidence: what needs explaining (1)
Traditionally, HICs have supported, and DCs taxed, agric relative to manufNominal and relative rates of assistance to farmers, in both HICs and DCs, have grown with econ devt
But some reform evident for HICs since 1980s
Cross-country dispersion in RRA, 2000-04
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-10
40
90
140
Zim
babw
eC
ote
d 'iv
oire
Tanz
ania
Nig
eria
Zam
bia
Eth
iopi
aA
rgen
tina
Sen
egal
Ban
glad
esh
Ukr
aine
Egy
ptP
akis
tan
Sri
Lank
aN
icar
agua
Mad
agas
car
Thai
land
Cam
eroo
nS
outh
Afri
caB
ulga
riaN
ew Z
eala
ndA
ustra
liaD
omin
ican
Bra
zil
Uga
nda
Vie
tnam
Mal
aysi
aC
hina
Chi
leS
udan
Ecu
ador
Pol
and
Mex
ico
Ken
yaG
hana
Indo
nesi
aR
ussi
aS
lova
kia
US
Can
ada
Indi
aM
ozam
biqu
eP
hilip
pine
sE
ston
iaTu
rkey
Col
ombi
aC
zech
Rep
Hun
gary
Spa
inFr
ance
Lith
uani
aP
ortu
gal
Italy
Den
mar
kLa
tvia
Ger
man
yFi
nlan
dS
wed
en UK
Aus
tria
Net
herla
nds
Rom
ania
Irela
ndTa
iwan
Slo
veni
aJa
pan
Nor
way
Sw
itzer
land
Kor
ea
NRAagric for HICs and DCs, 1955-2004
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0
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70
1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
perc
ent
HIC & ECA HIC & ECA, incl. decoupled payments Developing countries
Evolution of average RRA for all DCs, 1965-2004: from very negative to slightly positive
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0
20
40
60
80
100
1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
percen
t
NRA non-ag tradables NRA ag tradables RRA
New evidence: what needs explaining (2)
Relative assistance to farmers:Is convergence towards zero (or small +ve) intersectoral distortions permanent, or just an abberation?
Will DCs move, like HICs did, to protecting agric as their incomes rise?
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010
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0R
elat
ive
Rat
e of
Ass
ista
nce
(%)
-1 0 1 2 3Ln real GDP per capita
HIC RRA obs HIC fitted valuesDC RRA obs DC fitted values
New evidence: what needs explaining (3)
Reforms since 1980s: decoupling of some HIC agric support, removal of DC agric taxation
Halving of global welfare & trade effects• according to global CGE, and partial TRI measures
Agric policies’ trade reduction indexes: DCs, HICs and ETEs, 1960-64 to 2005-07, %
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10
30
50
70
1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 2005-07
Developing countries Europe’s transition econs. High-income countries
Agric policies’ welfare reduction indexes: DCs, HICs and ETEs, 1960-64 to 2005-07, %
0
20
40
60
80
100
1960 -64 1965 -69 1970 -74 1975 -79 1980 -84 1985 -89 1990 -94 1995 -99 2000 -04 2005 -07
Developing countries Europe’s transition econs.
High - income countries
New evidence: what needs explaining (4)
Assistance within a sector varies a lot across industries
Which is why TRI and WRI (in previous two slides) are still a long way from zero
Assistance within agric sector has astrong anti-trade bias
NRAs by product: DCs versus HICs
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Cotton
Coconut
Beef
Soybean
Coffee
Pigmeat
Maize
Wheat
Poultry
Rice
Milk
Sugar
2000-04
1980-84
-150 -50 50 150 250
Rapeseed
Barley
Wheat
Maize
Soybean
Pigmeat
Cotton
Poultry
Beef
Milk
Sugar
Rice
2000-04
1980-84
387
Global WRI and TRI, by product, 2000-04
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0
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160R
ice
Suga
rM
ilkB
eef
Poul
tryC
otto
nG
roun
dnut
Sorg
hum
Sesa
me
Coc
oaB
arle
yM
illet
Shee
pmea
tO
atTe
aPi
gmea
tEg
gR
apes
eed
Soyb
ean
Mai
zeW
heat
Sunf
low
erC
offe
ePa
lmoi
lC
ocon
utR
ubbe
rC
assa
vaW
ool
GWRI GTRI
Anti-trade bias in DCs: NRA agric export taxation disappearing, but NRA ag import-competing is >0 & growing
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10
30
50
1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
import-competing exportables total
In HICs: export support >0, but fallen after 1980s
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10
30
50
70
90
1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
Import-competing Exportables Total
Long-run trend in NRA ag import-competing goods is growing as fast in DCs as in HICs: a worry for WTO
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10
20
30
40
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1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
perc
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High-income countries Developing countries
New evidence: what needs explaining (5)
Trade measures are used, even though main purpose seems to be to achieve non-trade objectives
regardless of stage of econ devt, at least until the recent decoupling of some agric support in HICs
Border measures still the most impt. instruments for global WRI
0
10
20
30
40
50
60
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80
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1960‐64 1970‐74 1980‐84 1990‐94 2000‐04
Border measures Consumption tax Consumption subsidyProduction tax Production subsidy Input subsidies
New evidence: what needs explaining (6)
Relative importance of different trade measures alters during spikes up or down in international food prices
Reflected in WRI, and also in negative correlation between NRA and int’l food price
Suggests govts. support the group who would be hurt most at such times
Freund and Ozden, “Trade Policy and Loss Aversion”, Amer Econ Review , Sept 2008
Earlier importance of export taxes for DCs: WRI for border measures
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30
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1960 1965 1970 1975 1980 1985 1990 1995 2000
Export tax Import tax Import subsidy Export subsidy
New evidence: what needs explaining (7)
Assistance to agric varies a lot across countries even with the same per capita income
See dispersion around trend in next figure
Suggests importance of differences in political institutions, such as constitution?
Will DCs move, like HICs did, to protecting agric as their incomes rise?
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040
0R
elat
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Rat
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Ass
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(%)
-1 0 1 2 3Ln real GDP per capita
HIC RRA obs HIC fitted valuesDC RRA obs DC fitted values
A forthcoming book begins to address such questions
The above and related facts needing explanation are laid out in Ch 2 of:
Anderson, K. (ed.), The Political Economy of Agricultural Price Distortions , New York: Cambridge University Press, Sept 2010
Rest of book covers: Recent devts in theory of pol econAnalytical narratives of ag protection growth since Corn LawsPolitical e’metrics using the NRA/RRA database
E’metics using agric NRA database:Olper and Raimondi (2010)
Transition to democracy raises NRA, but more so for:
permanent vs temporary democracyproportional vs majoritarian democracy• Exacerbated by parliamentary systems, but
dampened under presidential system
E’metics using agric RRA database: Bates and Block (2010) on SSAfrica
Negative RRAs, and NRAs for ag exporters, have moderated, but persist even though farmers comprise a political majorityThree factors matter: institutions, regional inequality, and the need to generate tax revenue. They find that:
In the absence of electoral party competition, agricultural taxation increases with the share of the population that is ruralIn the presence of party competition, the lobbying disadvantage of the rural majority turns into political advantagePrivileged cash crop regions are targets for redistributive taxation
• unless the country's president comes from a cash cropping region
Governments of resource-rich African countries, while continuing to tax export producers, tend to tax their food consumers less than in other African countries
Implications for ag trade research agenda
More analysis needed of causes of govt interventions
Political econometrics to explain differences – across countries, products and instruments – in NRA trends, fluctuations & turning points
Should modelers use insights from those analyses when generating a projection baseline (eg for climate change analysis), instead of simply assuming current policies continue into the future?
Thanks!
For all Agric Distortions Research Project working papers, regional and poverty e-books, and global distortions database, go to
Anderson, K. (ed), Distortions to Agricultural Incentives: A Global Perspective, 1955-2007 , London: Palgrave Macmillan and Washington DC: World Bank, Oct. 2009Anderson, K. (ed.), The Political Economy of Agricultural Price Distortions , New York: Cambridge University Press, forthcoming Sept 2010