Globalization and Markets

Background

Through trade negotiations at the multilateral and regional levels there have been important changes in the international trade legal framework and institutions. Beyond the full implementation of the 1994 Uruguay Round agreements of the World Trade Organization (WTO), regional agreements and unilateral reform have continued to modify the agricultural trade policies worldwide. Regional trade agreements (RTAs), across the Americas, Europe, Africa, and Asia/Pacific, such as the EU’s Economic Partnership Agreements (EPA), and enlarged preferential schemes like the African Growth Opportunity Act (AGOA) creates new opportunities and challenges for developing countries.

Ongoing negotiations of the Doha Development Round may even lead to the more ambitious trade openness for agricultural trade ever. Developing countries will face contrasted situations: some are net food exporters other net food importers, some benefits from large preferences in OECD markets , others will gain from a multilateral liberalization. Different policy response will be needed to ensure a positive outcome for everyone. Given this moving landscape. detailed analysis of existing and future agricultural trade policies is crucial for both policy makers and private agents to make optimal decisions and grasp the opportunities of globalised markets.

Beyond traditional trade policy tools (e.g. tariffs), new instruments shape international agricultural trade. With growth in high-value agricultural trade, consumer demand and regulations related to sanitary, phytosanitary and quality issues play an increasingly important role in determining agricultural trade opportunities. The dispute settlement process of the WTO now provides a forum for various trade conflicts to be resolved. Therefore, understanding the economics of non-tariff barriers is important to design the most efficient policies. In addition, trade promoting strategies have moved from traditional preferential schemes to more ambitious Aid For Trade policies. For improving the targeting of such policies, understanding the role of infrastructure, communications and other elements that limits producers and consumers from benefiting to market openness is crucial. Finally, non-food uses for agricultural goods (biofuels) as well as climate change have changed drastically the perspective of agricultural markets. These new dimensions have been integrated in the research program.

Given the predominant role of agriculture in the livelihoods of most people in developing countries, especially in Sub-Sahara Africa and South Asia, any strategy for slashing poverty and hunger must include rapid growth in the agricultural sector. However, increased agricultural productivity can depress commodity prices and incomes of farmers if they are not linked to market opportunities, or if there exist high transaction costs. Poorly functioning markets, weak domestic consumer demand, and lack of export possibilities are major constraints on agricultural growth prospects for many developing countries.

Thus, countries own unilateral trade and domestic policy decisions are also critical determinants of their agricultural development opportunities. Trade openness may play a key role for sustained growth in developing countries, global poverty alleviation and increased food security. Moreover, the distributional and gender consequences of trade liberalization are becoming increasingly important in less developed countries. A better understanding of this is critical for further development reforms in the domestic and global trading system.