Trade Policy, Food Price Variability, and the Vulnerability of Low-Income Households (original) (raw)

A survey of findings on the poverty impacts of agricultural trade liberalization

The purpose of this survey is to review the available empirical evidence on the impacts of agricultural trade liberalization on poverty-considering both the impact of domestic and international liberalization. Since trade liberalization is generally an economywide phenomenon, with tariff cuts occurring across a wide range of commodities, we do not restrict ourselves to episodes where only agricultural trade was liberalized, although emphasis in this survey is given to agricultural trade policies. Furthermore, given the difficulty of isolating the effects of trade policies alone, we will also consider the impact of other types of external shocks which have the effect of changing the relative prices of tradeable and non-tradeable goods. By examining the way in which households adjust to such external shocks, we can learn a great deal about how they would respond to sharp reductions in tariffs, or significant changes in a country's international terms of trade engendered by multilateral trade liberalization.

Poverty Vulnerability and Trade Policy: Are the Likely Impacts Discernable?

2006

Trade policy reform prospects have generated debate about the impacts on poverty. Some critics assert that price changes induced by trade reform are minimal and may not be distinguishable from price fluctuations induced by other shocks to the global economy. This paper addresses this issue by developing an approach to assess whether poverty changes induced by trade reform can be statistically discernable, based on a comparison in the grains sector. Fluctuations in grains markets are implemented by incorporating stochastic simulations into a CGE model of the global economy. The resulting price distributions are inputted to a micro-simulation based on national household surveys. The conclusions are based on the comparison of the resulting poverty distributions from the weather-induced variability only, versus the combined effect of the latter and trade reform. Results indicate that, in this conservative approach of evaluating only the global grains markets, the short-run impacts on po...

Trade policies and food security: Essays from IFPRI's 2002-2003 Annual Report

2003

Globalization could and should benefit developing countries. But unlike a rising tide that lifts all boats, large and small, globalization is unequal. It has fallen far short of its much-ballyhooed potential to help the world's poorest people out of poverty. Instead, a combination of policies in both rich and poor countries creates conditions for the rich to prosper and many

Distributional effects of WTO agricultural reforms in rich and poor countries

Economic Policy, 2007

SUMMARYWTO agricultural reformsRich countries' agricultural trade policies are the battleground on which the future of the WTO's troubled Doha Round will be determined. Subject to widespread criticism, they nonetheless appear to be almost immune to serious reform, and one of their most common defences is that they protect poor farmers. Our findings reject this claim. The analysis conducted here uses detailed data on farm incomes to show that major commodity programmes are highly regressive in the US, and that the only serious losses under trade reform are among large, wealthy farmers in a few heavily protected sub-sectors. In contrast, analysis using household data from 15 developing countries indicates that reforming rich countries’ agricultural trade policies would lift large numbers of developing country farm households out of poverty. In the majority of cases these gains are not outweighed by the poverty-increasing effects of higher food prices among other households. Agricultural reforms that appear feasible, even under an ambitious Doha Round, achieve only a fraction of the benefits for developing countries that full liberalization promises, but protect the wealthiest US farms from most of the rigors of adjustment. Finally, the analysis conducted here indicates that maximal trade-led poverty reductions occur when developing countries participate more fully in agricultural trade liberalization.— Thomas W. Hertel, Roman Keeney, Maros Ivanic and L. Alan WintersRich countries' agricultural trade policies are the battleground on which the future of the WTO's troubled Doha Round will be determined. Subject to widespread criticism, they nonetheless appear to be almost immune to serious reform, and one of their most common defences is that they protect poor farmers. Our findings reject this claim. The analysis conducted here uses detailed data on farm incomes to show that major commodity programmes are highly regressive in the US, and that the only serious losses under trade reform are among large, wealthy farmers in a few heavily protected sub-sectors. In contrast, analysis using household data from 15 developing countries indicates that reforming rich countries’ agricultural trade policies would lift large numbers of developing country farm households out of poverty. In the majority of cases these gains are not outweighed by the poverty-increasing effects of higher food prices among other households. Agricultural reforms that appear feasible, even under an ambitious Doha Round, achieve only a fraction of the benefits for developing countries that full liberalization promises, but protect the wealthiest US farms from most of the rigors of adjustment. Finally, the analysis conducted here indicates that maximal trade-led poverty reductions occur when developing countries participate more fully in agricultural trade liberalization.— Thomas W. Hertel, Roman Keeney, Maros Ivanic and L. Alan Winters

Household Impacts of Tariffs: Data and Results from Agricultural Trade Protection

Policy Research Working Papers

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Free Trade in Agriculture and Global Poverty

2011

This paper assesses the potential impacts of the removal of agriculture trade distortions using a newly developed data set and methodological approach for evaluating the global poverty and inequality effects of policy reforms. It finds that liberalisation of agriculture and food could increase global extreme poverty by 0.2 per cent and lower moderate poverty by 0.3 per cent. Beneath these small aggregate changes, most countries witness a substantial reduction in poverty, while South Asia – where half of the world’s poor reside – experiences an increase in extreme poverty incidence owing to high rates of protection afforded to unskilled-intensive agricultural sectors. The distributional changes are likely to be mild but exhibit a strong regional pattern. Inequality is likely to fall in regions such as Latin America, which are characterised by high initial inequality, and rise in regions like South Asia, characterised by low initial inequality.

Trade reforms and poverty: Are the impacts discernable?

The impacts of trade policy reform on poverty have been a subject of heated debate. Some have argued that multilateral trade reform could make substantial inroads into global poverty, while others assert that the price changes associated with global trade reform are minimal and may not be distinguishable from price fluctuations induced by annual shocks to the global economy. This paper formally addresses the issue by developing an approach to assess whether poverty changes induced by trade reform are statistically discernable from the average annual random fluctuations in poverty due to inherent commodity market volatility. We focus specifically on the staple grains sector. Volatility in the grains markets is implemented via stochastic supply shocks introduced into a CGE model of the global economy. The resulting price distributions are inputted into a micro-simulation model built upon national household surveys in order to evaluate the likely poverty impacts. Conclusions are drawn based on comparison of the resulting poverty distributions from the weather-induced variability only, versus the combined effect of the latter with trade reform as well. Hypothesis tests permit us to determine whether the two distributions are statistically distinct. Results indicate that, when only grains markets are considered, the short-run impacts on poverty of trade liberalization can not be distinguished from market volatility in six of the fifteen focus countries.

The impact of rising food prices on the poor

Unpublished …, 2008

This paper analyzes the household level impact of an increase in price of major tradable staple foods in a cross section of developing countries, using nationally representative household surveys. We find that, in the short term, poorer households and households with limited asset endowments and access to agricultural inputs will be hit the hardest by the price shock. Given the ample degree of heterogeneity among households and among the poor, the analysis emphasizes the importance of meaningful policy research to go beyond average impacts to look at how access to assets and inputs, livelihood strategies and other key household characteristics drive the magnitude and distribution of the effects of the price increases.