Kym Anderson, University of Adelaide, World Bank and CEPR 14th October 2008, International Food Policy Research Institute, Washington D.C.

1. Fifty Years of Distortions in
fy f
World Food Markets
Kym Anderson
University of Adelaide, World Bank and CEPR
IFPRI Seminar, Washington DC, 14 October 2008
Financial assistance from the World Bank Trust Funds, particularly from DfID, BNPP and the Rockefeller Foundation’s Bellagio Center , plus in-knd
support from IFPRI, 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, nor IFPRI. Project details are at
www.worldbank.org/agdistortions

2. Background
In 1958 the Haberler Report on Trends in International
Trade warned the GATT Contracting parties of the
threat of agricultural protection growth in rich countries
D. Gale Johnson, in his 1973 book on World Agriculture
in Disarray, despaired at the persistence of:
high agricultural protection in OECD countries,
anti-agric and anti-trade policies of developing countries, and
the tendency for both sets of countries to insulate their domestic
y
food market from international price fluctuations, thereby
exacerbating price volatility for the rest of the world
Disarray worsened for another dozen years, with agric
protection growth in Europe North America and Japan
Europe,
peaking in 1986, thanks to an agric export subsidy war
Meanwhile, some middle-income economies ‘overshot’,
going from taxing their farmers to protecting them from
import competition (e.g. Korea, Taiwan)
Raising concerns that other emerging economies may follow suit

3. Background (cont.)
However, since the mid-1980s some high-
income and developing countries (HICs and
DCs) have reformed somewhat
Mainly il t ll b t l
M i l unilaterally, but also partly in response to
tl i t
international pressures:
• the Uruguay Round,
g y ,
• WTO accession conditions,
• structural adjustment loan conditionality by IFIs
Has this i
H thi improved prospects for poorer
d t f
agrarian countries to export their way out of
poverty?

4. Three questions being addressed by
a World Bank research project
To what extent have developing economies moved
away from taxing agric. relative to other tradable
agric
sectors as they’ve grown?
and within the agric sector, what is happening to agric
protection from import competition in DCs, as compared with
DCs
HICs? And to agric support globally?
How has that affected global agric markets, economic
welfare and net farm incomes:
retrospectively (since the early 1980s)?
prospectively (ie, if remaining distortionary policies were
removed)?
What of the future, given the evolving domestic
politics, the Doha round struggles, and in view of the
recent hike in world food prices?

5. Analyses and elements of explanation
f policy t d up t th mid-1980s
for li trends to the id 1980
Anderson and Hayami (1986) on agric protection
growth in NE Asia compared with that in WE and US
Krueger, Schiff and Valdes (1988, 1991) on anti-agric
and anti-trade policies of 18 developing countries
Tyers and Anderson (1986, 1992) on the econ effects of
distortions to world food markets
Suggested the OECD countries’ agric policies depressed real
international food prices in early 1980s by 20%, but that
developing countries’ food policies almost fully offset that
(reducing the int l price depressing effect to just 1%)
int’l price-depressing
Together the domestic-market-insulating nature of those
anti-trade agric policies made international food prices >3 times
more volatile than they otherwise would have been in early ‘80s
y y

6. So empirical indicators need to show
what has happened in DCs and HICs to:
Anti- (or pro-)agricultural policy bias
intersectorally
Anti-trade bias within the agric sector
Import protection vs export taxation (or subsidies)
Dispersion of distortion rates across industries
within the agric sector
since welfare cost increases with dispersion
Insulation of the domestic market from
l f h d k f
volatility in the int’l agric marketplace
s ce the atte s exacerbated
since t e latter is e ace bated by t e former
the o e

7. Outline: 2 main courses plus dessert
What did the World Bank project learn from its
NRA/CTE estimates and other indicators?
What global effects have reforms had since the
ea y 980s
early 1980s? What more cou d be co t buted
at o e could contributed?
retrospective and prospective global CGE modeling
What prospect is there for further reform?
p p

8. First
Fi t main course
i
New estimates of
changes in distortions
over the past 50 years

9. Structure of the World Bank’s
current research project
Stage 1 (2006-08): [to be summarized today]
Country case studies, to provide time series of the extent of
agric price distortions and an analytical narrative explaining the
i i di t ti d l ti l ti l i i th
evolution of agric price and trade policies since mid-1950s
• leading to 4 regional volumes (on Africa, Asia, Latin America and
Europe’s transition economies), plus a global overview book
p ), p g
(including the high-income countries), plus public global database
• 75 countries covered (India and Ethiopia by IFPRI staff)
Stage 2 (2008-09): [to be p
g ( ) [ presented at IATRC in Dec.]
]
More-intensive empirical analysis across countries and over
time of causes, and of effects on inequality and poverty, of
chosen vs. alternative policies
• Leading to 2 more edited volumes in 2009, with IFPRI contributing
d d d l h b

10. Indicators estimated as part of the
World Bank research
We began with nominal rates of assistance
(NRAs) for major crop and livestock products
covering 70% of gross value of agric production at
undistorted prices in each of 75 focus countries
Also included are ‘guesstimates’ of NRAs for the
other 30%, plus non-product-specific assistance
We l
W also calculate the g oss subsidy
l l t th gross s bsid
equivalent (GSE) of assistance to agric, in
total and per farmer (in constant 2000 US$)
And counterpart food consumer tax equivalents

11. Project’s focus countries: number and
2000-04
2000 04 shares (%) of global economy
No. of Pop’n AgGDP GDP
countries share share share
Africa 21 11 7 1
Asia 12 51 37 11
Latin America 8 7 8 5
European TEs 14 7 7 3
High-income 20 14 33 75
WORLD TOTAL 75 90% 92% 95%

12. Product coverage of nominal rate of
assistance (NRA) estimates
(% of national agric prod’n of focus countries)
1980-84 1990-94 2000-04
1980 84 1990 94 2000 04
Africa
Af i 71
1 71
1 72
2
Asia 75 73 66
Latin America 65 69 70
SUB-TOTAL, focus DCs 73 72 67
European transition econs 62 61 60
High income
High-income countries 70 70 70
TOTAL, focus countries 71 70 68

13. Global coverage of NRA estimates
for 30 major agric products
Share (%) Share (%)
of global ag of global ag
production exports
Grains and tubers (10) 85 90
Oilseeds (6 products) 78 85
Tropical crops (7) 74 71
Livestock
Li t k products (7)
d t 72 88
SUM OF ABOVE (30)
( ) 77 85

14. NRAag: high-income and developing
countries, 1955-2004 (%, wted averages)
1955 2004
70
60
50
40
30
percent
20
p
10
0
1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
-10
10
-20
-30
30
HIC & ECA HIC & ECA, incl. decoupled payments Developing countries

15. NRA by region (%), 1980-84 vs 2000-04
140 1980-84
120 2000 04
2000-04
100
80
60
40
20
0
-20
-40
a
ia
E
Z
n
C
A
ica
ri c
pa
AN
As
W
LA
EC
Af
er
Ja
Am
r th
No

16. GSE (constant US$b), 1980-84 vs 2000-04
130
90
50
10
-30
-70
-110
110
Africa ANZ LAC ECA North Japan WE Asia
America
1980-84 2000-04

17. Global subsidy equiv. for all ag., 1955-07:
it continues to grow (constant 2000 US$b )
300
200
100
0
-100
-200
200
1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 2005-07
Developing countries (no averages for periods 1955-59 and 2005-07)
1955 59 2005 07)
High-income countries and Europe's transition economies
Net, global (decoupled payments are included in the higher, dashed line)

18. Subsidy equivalent per farmer
constant (2000) US$ per year
1980-84 1990-94 2000-04
DCs -140 -10 50
HICs 8,170 11,330 9,920
HICs (incl.
(incl 9,140
9 140 12,890
12 890 13,530
13 530
decoupled)

19. Consumer tax equivalent per capita
constant (2000) US$ per year
1980-84 1990-94 2000-04
DCs -22 -1 8
HICs 195 175 95

20. In DCs: NRA ag export taxation disappearing,
but ag import-competing NRA is >0 & g
g p p g growingg
50
40
30
20
10
percent
0
-10 1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
20
-20
-30
-40
-50
-60
Covered import-competing agricultural products
C di t ti i lt l d t
Covered exportable agricultural products

21. In HICs: export support >0 but now falling
90
70
50
30
10
-10 1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
-30
-50
50 Import competing
Import-competing Exportables Total

22. Long-run trend in NRA import-competing ag. goods:
growing as fast in DCs as in HICs (hence the need
for market access disciplines via Doha commitments)
80
70
60
50
p e rc e n t
40
30
20
10
0
1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
1955 59 1960 64 1965 69 1970 74 1975 79 1980 84 1985 89 1990 94 1995 99 2000 04
High-income countries Developing countries

23. What about relative rates of assistance,
for farmers vs non-ag producers?
non ag
Assistance to non-ag tradable sectors
non ag
(NRAnonagt) can be as important for farmers
as direct agric policies, in terms of encouraging
(or di
( discouraging) resource use in agric
i ) i i
Lerner’s (1936) Symmetry Theorem
Simple criterion for anti-agricultural bias in
policy: Is RRA < 0, where
RRA = (1+NRAagt)/(1+NRAnonagt) – 1
( g )/( g

24. For HICs, RRA is similar to NRA…
NRA agriculture
100
NRA non-agriculture
i lt
80 RRA
60
40
20
0
1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
-20
-40
-60

25. -50
0
50
100
150
200
1 9 5 5 -5 9
1 9 6 0 -6 4 US
EU
Canada
1 9 6 5 -6 9
Non-EU WE
Japan/ Korea
1 9 7 0 -7 4
1 9 7 5 -7 9
Australia/ New Zealand
1 9 8 0 -8 4
1 9 8 5 -8 9
1 9 9 0 -9 4
1 9 9 5 -9 9
2 0 0 0 -0 4
2 0 0 5 -0 7
… although much variation within HIC group

26. Evolution from negative to positive average
relative rate of assistance for DCs …
80
60
40
20
p ercen t
0
1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
-20
-40
-60
RRA NRA non-ag tradables NRA ag tradables

27. RRA rise is greatest for Asia, least for Africa
10
0
1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
-10
20
-20
p e rc e n t
-30
-40
-50
-60
-70
Asia Africa LAC

28. …especially in China & India: >half due to
cuts in non ag protection, which is now very low
non-ag
INDIA CHINA

29. Contribution of exchange rate distortion
to China’s RRA (p
(percent)
)
1981-84 1985-89 1990-94 1995-99
RRA, incl. -61 -50 -31 -3
exchange rate
h t
distortion
RRA,
RRA excl. l -52
52 -41
41 -27
27 -3
3
exchange rate
distortion

30. China’s RRA trend helps explain two
apparent paradoxes:
China has remained close to self sufficient in
farm products over the past three decades
… yet was expected to experience rising import
dependence in food and fibre given its relatively
fibre,
low endowment of agric land per capita and rapid
industrialization
China’s commitments under WTO to cut agric
tariffs was expected to reduce agric self
sufficiency and add to farm household poverty
That hasn’t happened either. Instead, farm
household incomes have been rising in all deciles
and in all regions of that country

31. All agric and processed food: 100(X-M)/(X+M)
(
(includes cotton, whose net imports g
p grew with end of MFA)
f )
1980-84 1985-89 1990-94 1995-99 2000-04
percent
C
China
a 9 7 19
9 1 -16
6
South 8 3 10 1 -6
Asia

32. How
H much global policy reform progress since
h l b l li f i
the early 1980s? A two-dimensional summary:
Reductions in the anti-ag sectoral bias in DCs,
and the pro-agric sectoral bias in HICs, would
p g ,
mean the RRA is approaching zero, where
relative rate of assistance to farmers vs
producers of other tradables is
RRA = (1+NRAagt)/(1+NRAnonagt) – 1
Reductions in the anti-trade bias within agric
would mean the trade bias index is approaching
zero, where T d Bi I d
h Trade Bias Index f all agric is
for ll i i
TBI = (1+NRAagx)/(1+NRAagm) – 1

33. RRA and trade bias index: 1980-84 vs 2000-04
150
Japan
Relativ Rate of Assistance (%)
e
100
Japan
WE
50
WE
Asia NA
ves
ECA LAC NA ANZ
0
Africa ANZ
Africa
LAC
Asia
50
-5
-0.6 -0.5 -.4 -0.3 -0.2 -0.1 0
Trade Bias Index
RRA
Triangle: 1980-84, Circle: 2000-04

34. However, dispersion in NRAs (in addition
to that due to anti-trade bias) is still high
) g
Across countries and sub regions
sub-regions
And across commodities within each
country
Which
Whi h means resources in agric
i i
continue to be inefficiently allocated
both between, and within countries
between within,

35. -50
0
50
100
150
Zimba eabw
C ote d 'iivoire
Za m bia
Tanz zania
Arge ntina
Eth iopia
U k raine
Sen negal
N ig
geria
E
Egypt
N icara agua
S udan
A
South Africa
C am e roon
Tha iland
M adaga ascar
U gaanda
Aus tralia
Pak istan
Mala aysia
D om inican R ep
Banglad desh
N ew Zea aland
Bulg garia
G hana
B
Brazil
C hile
C hina
Pooland
K
Kenya
Sri L anka
Ecu uador
M exico
n
Indo nesia
India
R ussia
u
US
Est tonia
Vie tnam
p
Philip pines
Tuurkey
C a nada
C olo m bia
h
C zech R ep
M ozam bique
b
Slov vakia
Lith uania
u
S
Spain
H unngary
Por rtugal
Italy
L
Latvia
D en m ark
Frrance
Germ any
m
Finnland
UK
Sw eden
e
Auustria
N etherla ands
R om ania
m
Ta iw an
eland
Ire
Slov venia
K
Korea
Sw itze rland
o
N orw ay
Cross-country dispersion in NRAagric, 2000-04

36. NRAs by product: DCs versus HICs
387
Sugar Rice
Milk Sugar
Rice Milk
Poultry Beef
Wheat Poultry
Maize Cotton
Pigmeat Pigmeat
Coffee Soybean
Soybean 2000-04 Maize 2000-04
1980-84 1980-84
Beef Wheat
Coconut Barley
Cotton Rapeseed
-150 -50 50 -150 -50 50 150 250

37. Also insulation of food markets persists
Also, persists,
so volatility of int’l food prices continues
Fluctuations around trend NRAag from
year to year remain common, esp. for food
staples such as rice
This reluctance to import instability from int’l
food market, and tendency to export
, y p
instability from domestic food market,
imposes an international public ‘bad’ on the
rest of the world
Beggar-thy-neighbour behavior: requires more
WTO discipline, including on export policy?

38. Rice NRA for South Asia is
inversely correlated with int’l price
int l
600 30
20
500
10
0
400
-10
NRA %
US D
300 -20
30
-30
200
-40
-50
100
-60
- -70
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
00
02
04
197
197
197
197
197
198
198
198
198
198
199
199
199
199
199
200
200
200
Pw S Asia

39. What have we learned?
Inter-sectoral anti-agricultural bias has declined
greatly,
greatly and their intra-agric sector anti-trade bias also
intra agric anti trade
has declined somewhat on average in DCs since 1980s
And pro-agric bias in HICs also has declined somewhat
But some reforming DCs have ‘overshot’, in the sense of
overshot
moving from RRA<0 to RRA>0 as their incomes rose
But, within agric, the dispersion across product NRAs is
still high in many countries, as it is across countries
countries
much resource misallocation within and between countries still
Also, trade measures continue to contribute to int’l food
price volatility b attempting t stabilize d
i l tilit by tt ti to t bili domestic f d
ti food
markets
So, how far have these reforms reduced the disarray in
y
world agricultural markets?

40. Second main course
S d i
New estimates of
global effects of
2004 policies

41. Global CGE results
New global, economy wide modeling
results (from Linkage Model) on effects
of national price distortions, drawing on
WB project’s NRA estimates as of 2004
project s
and comparing their effects with:
What 1980-84 distortions’ effects were and
1980 84 were,
What the world would be like with fully
liberalized goods markets

42. New agric distortions we insert in
global model for 2004 (%)
Agric Agric Agric Non-ag
domestic export import import
support subsidy tariff tariff
HICs 3 7 22 1
ETEs 1 -0 22 8
DCs:
Africa -1 0 20 11
Asia 2 1 30 8
L Amer -0
0 -1
1 8 6
WORLD 2 3 22 3

43. Sources of cost of policies t
S f t f li i to
the global economy (%, 2004)
Agric & Other ALL
Due to food merch. GOODS
policies in: policies tariffs SECTORS
High income
High-income 36 6 42
countries
Developing 24 34 58
countries
WORLD 60 40 100

44. Sources of costs of policies to
developing economies (%, 2004)
Agric & Other ALL
Due to food merch. GOODS
policies in: policies tariffs SECTORS
High income
High-income 53 12 65
countries
Developing 30 5 35
countries
WORLD 83 17 100

45. Reform effects: retrospectively since
1980 84,
1980-84 and prospectively as of 2004
Reform from Move to
1980-84 t
1980 84 to free t d
f trade
2004 as of 2004
Global econ welfare $b (%)
welfare, $233 (0 8%) $168b (0.6%)
(0.8%) (0 6%)
DCs’ econ welfare, $b (%) $73b (1.0%) $65b (0.9%)
% global ag output exported 9% 8% 8% 13%
DC share of global ag output
g g p 58% 62% 62% 65%
DC share of global ag exports 43% 55% 55% 64%
% rise in int’l ag &food prices 13% <1%
% rise in DC ag (nonag) VA 4.9%(0.4%) 5.6%(1.9%)

46. What do these CGE results imply?
Economic welfare cost to world (to DCs) of global
distortions to goods markets has fallen by 58% (46%)
since early 1980s
and DCs gained disproportionately from reforms since early
1980s, and would again from completing the process (0.9% vs
0.6% for HICs)
Of that prospective gain to DCs, 5/6ths would be due to
agric policy reform, of which 2/3rds would come from
HIC policies
means DCs have a much bigger stake in WTO’s Doha round,
and esp. its agric negotiations, than previous analyses using
GTAP protection database suggest
• Why are DCs so reluctant to engage in DDA and commit?
DC farmers have gained since early 1980s, and would
be main gainers from completing the reform (5.6%
boost to ag value added vs 1.9% for nonag VA)

47. Dessert
D t
Future policy trends
p y
and prospects for
more reform

48. Will DCs stop RRA at zero, or follow HICs with
positive and rising RRAs as their incomes grow?
400
%)
ssistance (%
300
00
20
Relative Rate of As
100
0
-100
-1 0 1 2 3
Ln real GDP per capita
HIC RRA obs HIC fitted values
DC RRA obs DC fitted values

49. 50 200
150
0 0
100
RRA (%)
-50 Korea and Taiwan followed Japan …
7 8 9 10
Ln real GDP per capita
Japan Korea Taiwan

50. … so will China and India too, to avoid social
200
150
100
0
unrest from widening urban-rural income gap?
f g g p
RRA (%)
50 0
-50
7 8 9 10
Ln real GDP per capita
China Japan Korea Taiwan India

51. Are WTO bindings helping to prevent agric
protection growth in developing countries?
Most DCs have very high binding overhang in
agric (gap between WTO-bound and applied
tariff or domestic subsidy), following the Uruguay
Round Agreement on Agriculture
g g
China has little overhang on tariffs on average,
but plenty where it matters, and also lots of
p y
overhang in bindings of domestic farm subsidies

52. China’s
Chi ’ WTO commitments allow considerable
it t ll id bl
scope for agric protection growth
Out-of-quota tariffs are high (currently
prohibitive):
65% for grains
50% for sugar
g
40% for cotton
And China is allowed up to 8.5% product-
specific domestic support, plus another 8.5%
non-product-specific assistance (or more if
‘decoupled’ somewhat f
‘d l d’ h t from production)
d ti )

53. Bindings matter: What if agric protection in Japan
and Korea had been bound when they joined GATT?
yj
200
Japan China
(1955 = 16.6%) (2001 = 4.5%)
( )
150 Korea
(1967 = 7.4%)
100
N R A (% )
50
0
1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-05
-50
-100
Japan Korea China

54. If Chi chooses t k
China h to keep it RRA near
its
zero, will it push up int’l food prices?
China’s impact on int’l prices of food has
been less than for minerals and energy
because of low income elasticities of demand for
food and rising RRA over the past 3 decades
Now with China’s RAA close to zero, its
future agric import growth could accelerate
if it chooses not to follow Ja/Ko/Ta in
raising its NRAag continually over time

56. Implications for WTO negotiations
Need large cuts to bound tariffs and subsidies so as to
reduce prospect of:
trend NRAag and RRA rising with incomes
continuing fluctuations around trend for product NRAs via
variable trade restrictions
Need to not only ban agric export subsidies but also
discipline agric export restrictions at WTO?
As a quid pro quo, abandon proposed ‘Special Products’
and ‘Special Safeguard Mechanism’ (which will add to ag
p g ( g
protection growth and to int’l food price volatility)?
and instead encourage DCs to pour more of their ag support into
ag R&D, rural education and infrastructure (via aid-for-trade?)
• C
Currently agric R&D is equiv. to just 0.3% NRA in DCs (1% in HICs)
tl i i i t j t 0 3% i DC i HIC )

57. References
Anderson, K., M. Kurzweil, W. Martin, D. Sandri and
E. Valenzuela, “Measuring Distortions to Agricultural
Incentives Revisited”, World Trade Review 7(4):
Incentives, Revisited
675–704, October 2008
Valenzuela, E., D. van der Mensbrugghe and K.
Anderson, “General Equilibrium Effects of Price
General
Distortions on Global Markets, Farm Incomes and
Welfare”, Ch. 13 in Anderson, K. and Associates,
Distortions to Agricultural Incentives: A Global
g
Perspective, 1955 to 2007, forthcoming 2009
For all project working papers and (by end-October
2008) the global agric distortions database, see
www.worldbank.org/agdistortions
ldb k / di t ti

58. Thanks!
www.worldbank.org/agdistortions
ldb k / di t ti
kym.anderson@adelaide.edu.au
y @

59. Trade Restrictiveness Index: a way of incorporating
mean and dispersion in a single policy indicator
p g p y
The more NRAs vary across products within an agric
sector, the more the sectoral average NRA
understates th welfare cost of th
d t t the lf t f those di t ti
distortions
especially if some NRAs are <0 and others >0, as is often
the case in DCs
What
Wh common ad valorem NRA or CTE (or trade tax)
d l ( d )
would have the same effect on national econ welfare
(or on trade volume) as the observed structure of
NRAs and CTEs across the product range?
dC h d ?
Taking into account that the welfare cost of a distortion is
proportional to the square of its NRA or CTE

60. Variants of the Trade Restrictiveness Index
J. Anderson and P. Neary focused mostly on tariff equivalents
and import restrictiveness
As has the World Bank’s global monitoring report to date
Measured it from the viewpoints of welfare and trade reductions
(using estimated import demand elasticities for each product)
But an early Anderson/Bannister (1992) paper, and a chapter of
the Anderson/Neary 2005 book, look at PSEs and CSEs for
Mexican agric
algebra is complex, and requires domestic demand and supply
elasticities for each product
Lloyd (2008) simplifies the algebra, in part by being willing to
make assumptions about domestic demand and supply
elasticities
Enables the calculation of separate producer distortion index
and consumer distortion index for covered agric products (PDI
and CDI), and their combination (a welfare-reduction index,
WRI), all of which are >0
),
Also enables the calculation of a trade-reduction index (TRI)

61. Assumptions to make index calculations
possible with just NRAs and CTEs
For PDI (or CDI), assume price elasticities of domestic supply
(demand) are the same for each product, and cross-price
elasticities of supply (demand) are zero
l ti iti f l (d d)
For WRI and TRI, assume also that aggregate sectoral domestic
supply and demand elasticities (ignoring sign) are equal
All that s then needed are NRA and CTE estimates, and
that’s
production (consumption) valued at undistorted prices to serve
as weights to aggregate across parts of or the whole product
range
And,
And for TRI need to nominate the trade status of each industry
TRI,
While these elasticity assumptions are limiting, this at least takes
us some way towards what a formal PE or CGE model can do in
terms of capturing the welfare effect of a dispersed structure of
NRAs within the agricultural sector

62. Welfare reduction index: DCs, HICs and ETEs
(percent)
80
60
40
20
0
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 countriesb

63. NRAag, DCs, HICs and ETEs, 1955-2004
(percent)
60
40
20
0
1955-59 1965-69 1975-79 1985-89 1995-99 2005-07
-20
High-income countries
High-income countries (incl. Europe's transition economies)
Developing countries

64. Welfare reduction index: Africa, Asia, LAm
(percent)
80
60
40
20
0
1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
Africa Asia Latin America

65. Points to note from WRI/NRA comparison
Africa’s NRA is zero in 1985-89, but
that s
that’s when its WRI is at its highest
(because large increase in NRAm meant it
offset NRAx but added to WRI) )
This is also why Africa’s TRI spikes in the
1985-89 period (next slide)
p ( )
Notice also on next slide the rapid TRI
decline for Asia (whereas it turns up again
slightly for Africa & LA after 1990s)
li htl f Af i ft 1990 )

66. Trade reduction index: Africa, Asia, LAm
(percent)
60
40
20
0
1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
Africa
Af i Asia
Ai Latin A i
L ti America

67. Trade reduction index: DCs, ETEs and HICs
(percent)
60
40
20
0
1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 2005-07
-20
0
Developing countries Europe’s transition econs. High-income countriesb

68. What have we learned?
K/S/V’s inter-sectoral anti-agricultural bias has declined
greatly, and their intra-agric sector anti-trade bias also has
declined somewhat on average in DC since 1980s
some hat a e age
But some reforming DCs have ‘overshot’, in the sense of moving
from RRA<0 to RRA>0 as their incomes rose, rather than stopping
at neutral policies (RRA=0)
p ( )
Because on import side, agric protection growth continues
Domestic market insulation continues
Legally possible because of import tariff and export subsidy binding
overhang at WTO, and no discipline on export restrictions
WTO
Within agric, there is still much dispersion across product NRAs
in many countries
reflected in PDIs (and CDIs) being much higher than NRAs (and CTEs)
Next question: How far have these reforms reduced
the disarray in world agricultural markets?