The Limited Promise of Agricultural Trade Liberalization

It has become an article of faith in international trade negotiations that farmers in developing countries have much to gain from agricultural trade liberalization. This paper, written as a framework analysis for the recently published report, The Promise and the Perils of Agricultural Trade Liberalization: Lessons from Latin America, assesses the evidence for such claims. It concludes that the promise of agricultural trade liberalization is overstated, while the costs to small-scale farmers in developing countries are often high.
Relying on World Bank data and analyses, United Nations trade data, and other economic modeling carried out to inform the current round of World Trade Organization negotiations, this paper shows that:

• Rich countries are the main beneficiaries of agricultural trade liberalization, gaining markets in both the global North and South.
• Only a limited number of developing countries – for example, Argentina and Brazil – can compete effectively in global markets.
• Most developing countries are left out of the export boom but their small-scale farmers suffer the negative effects of rising imports, as tariffs and farm supports are removed.
• Farm prices do not remain high for long after liberalization, as supplies, fed by rising yields and new land under cultivation, catch up to rising demand.
• While the current commodity boom, fueled in part by the demand for agro-fuels, may keep prices high for a few years, it is unlikely to fundamentally alter the structure of global agriculture and the long-term trends toward lower prices.
  

The paper, along with other background papers for the report, is available at:
http://ase.tufts.edu/gdae/WorkingGroupAgric.htm#papers

The full report, in English with separate executive summaries in Spanish and Portuguese, is available at:
http://ase.tufts.edu/gdae/WorkingGroupAgric.htm

Other reports from the Working Group on Development and Environment in the Americas:

• Globalization and the Environment: Lessons from the Americas, July 2004:
• http://ase.tufts.edu/gdae/WorkingGroup.htm
• Foreign Investment and Sustainable Development: Lessons from the Americas, May 2008:
• http://ase.tufts.edu/gdae/WorkingGroup_FDI.htm
  

For more on GDAE’s Globalization and Sustainable Development Program:
http://www.ase.tufts.edu/gdae/policy_research/globalization.html

Thanks Rania!