The Limited Promise of Agricultural Trade Liberalization

Abstract: 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 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 very 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 suffer the negative effects of rising imports, as they reduce their own tariffs and farm supports. Meanwhile, farm prices do not remain high for long after liberalization, as supplies, fed by rising yields and new land under cultivation, catches 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. Keywords: agriculture, trade, commodities, rural development, liberalization.