How Much Do Agricultural Policies Restrict Trade? Comparing Trade Restrictiveness Indexes

Recently the Bank has provided new indicators for monitoring the extent to which agricultural policies restrict international trade in farm goods. They come from two studies with differing methodologies and data sources, and each provides less-than-perfect estimates. This note shows how and explains why the two indexes differ for some countries.agriculture, trade, farm goods, policies, trade restrictiveness, tariffs, imports, exports, quotas, World Bank

New Indicators of How Much Agricultural Policies Restrict Global Trade

Despite recent reforms, world agricultural markets remain highly distorted by government policies. Traditional indicators of agricultural and food price distortions such as producer and consumer support estimates (PSEs and CSEs) can be poor guides to the policiesÂ’ trade effects. Two recent studies provide much better indicators of trade- (and welfare-)reducing effects of farm price and trade policies, but they provide somewhat differing numbers. This paper explains why those estimates differ and how they might be improved for use in on-going annual monitoring of the trade restrictiveness of agricultural policies in both high-incmoe and developing countries.Agricultural policies, trade restrictiveness indexes, food price distortions

Changing Ccontributions of Different Agricultural Policy Instruments to Global Reductions in Trade and Welfare

Trade negotiators and policy advisors are keen to know the relative contribution of different farm policy instruments to international trade and economic welfare. Nominal rates of assistance or producer support estimates are incomplete indicators, especially when (especially in developing countries) some commodities are taxed and others are subsidized in which case positive contributions can offset negative contributions. This paper develops and estimates a new set of more-satisfactory indicators to examine the relative contribution of different farm policy instruments to reductions in agricultural trade and welfare, drawing on recent literature on trade restrictiveness indexes and a recently compiled database on distortions to agricultural prices for 75 developing and high-income countries over the period 1960 to 2004. Results confirm earlier findings that border taxes are the dominant instrument affecting global trade and welfare, but they also suggest declines in export taxes contributed nearly as much as cuts in import protection to global welfare gains from agricultural policy reforms since the 1980s.Distorted incentives, agricultural price and trade policies, trade restrictiveness index

Changing contributions of different agricultural policy instruments to global reductions in trade and welfare

Trade negotiators and policy advisors are keen to know the relative contribution of different farm policy instruments to international trade and economic welfare. Nominal rates of assistance or producer support estimates are incomplete indicators, especially when (especially in developing countries) some commodities are taxed and others are subsidized, in which case positive contributions can offset negative contributions. This paper develops and estimates a new set of more-satisfactory indicators to examine the relative contribution of different farm policy instruments to reductions in agricultural trade and welfare, drawing on recent literature on trade restrictiveness indexes and a recently compiled database on distortions to agricultural prices for 75 developing and high-income countries over the period 1960 to 2004. Results confirm earlier findings that border taxes are the dominant instrument affecting global trade and welfare, but they also suggest declines in export taxes contributed nearly as much as cuts in import protection to global welfare gains from agricultural policy reforms since the 1980s.Economic Theory&Research,Emerging Markets,Taxation&Subsidies,Trade Policy,Markets and Market Access

Distribution of Agricultural NRAs across Countries and Products, 1955-84 and 1985-2007

The global database developed as an integral part of the World Bank's research project on Distortions to Agricultural Incentives, which is publicly available at www.worldbank.org/agdistortions, provides around 30,000 estimates of nominal rates of assistance to agricultural industries (NRAs) and associated consumer tax equivalents for 75 countries that together account for between 90 and 95 percent of the world’s population, farmers, agricultural output and total GDP. They also account for more than 85 percent of farm production and employment in each of Africa, Asia, Latin America and the transition economies of Europe and Central Asia as well as all OECD countries. More than 70 products are included (an average of 11 per country), which represents around 70 percent of the gross value of agricultural production in each of the focus countries, and just under two-thirds of global farm production valued at undistorted prices over the period covered. Not all countries had data for all of the entire 1955-2007 period, but the average number of years covered is 41 per country. This paper provides details of the coverage of the database. It also summarizes the distributions of the NRAs by showing two sets of Box plots for 1955-84 and 1985-2007, one set for various regions of the world, the other for all the covered products for each focus country.Distorted incentives, agricultural and trade policy reforms, national agricultural development, Agricultural price and trade policies, nominal rates of assistance, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18, F59, H20, N50, O13,

Novel Indicators of the Trade and Welfare Effects of Agricultural Distortions in OECD Countries.

Agricultural markets in OECD countries have long been highly distorted by government policies. Traditional weighted average aggregates of the price distortions they involve, such as producer and consumer support estimates (PSEs and CSEs), can be poor indicators of the trade restrictiveness and economic welfare losses associated with them, especially if a countryÂ’s support estimates vary a lot across the product range. Supplementing those measures with estimates of trade and welfare effects of price supports requires the use of a sectoral or economy wide model and price elasticity data. This paper shows that, in the absence of such a model, and a willingness to make simple assumptions about elasticities, it is possible to generate more satisfactory indicators than PSEs and CSEs using no more than the price and quantity data used to generate them. These new indexes provide an attractive supplement to the current policy monitoring regime developed by the OECD Secretariat.Distorted incentives, agricultural price and trade policies, trade restrictiveness index

Agricultural Distortions in Sub-Saharan Africa: Trade and Welfare Indicators, 1961 to 2004.

For decades, agricultural price and trade policies in Sub-Saharan Africa hampered farmersÂ’ contributions to economic growth and poverty reduction. While there has been much policy reform over the past two decades, the injections of agricultural development funding, together with on-going regional and global trade negotiations, have brought distortionary policies under the spotlight once again. A key question asked of those policies is: how much are they still reducing national economic welfare and trade? Economy-wide models are able to address that question, but they are not available for many poor countries. Even where they are, typically they apply to just one particular previous year and so are unable to provide trends in effects over time. This paper provides a partial-equilibrium alternative to economy-wide modelling, by drawing on a modification of so-called trade restrictiveness indexes to provide theoretically precise indicators of the trade and welfare effects of agricultural policy distortions to producer and consumer prices over the past half-century. We generate time series of country level indices, as well as Africa-wide aggregates. We also provide annual commodity market indices for the region, and we provide a sense of the relative importance of the key policy instruments used.Distorted incentives; agricultural price and trade policies; trade restrictiveness index

Novel indicators of the trade and welfare effects of agricultural distortions in OECD countries

Agricultural markets in OECD countries have long been highly distorted by government policies. Traditional weighted average aggregates of the price distortions involved, such as producer and consumer support estimates can be poor indicators of the trade restrictiveness and economic welfare losses associated with them, especially if a country's support estimates vary a lot across the product range. Certainly estimates of trade and welfare effects of price supports can be obtained from sector or economy-wide models using price elasticity estimates, but the results can be contentiousif there is no consensus on what model specification and elasticity parameters to use. This paper shows that, if there is a willingness to accept simple assumptions about elasticities, it is possible to generate indicators of the welfare and trade restrictiveness of agricultural policies using no more than the price and quantity data needed to generate producer and consumer support estimates. These new indexes thus provide an attractive supplement to the current policy monitoring regime developed by the OECD Secretariat.Economic Theory&Research,Markets and Market Access,Emerging Markets,Crops&Crop Management Systems,Free Trade

Agricultural distortions in Sub-Saharan Africa : trade and welfare indicators, 1961 to 2004

For decades, agricultural price and trade policies in Sub-Saharan Africa have hampered farmers’ contributions to economic growth and poverty reduction. Although there has been much policy reform over the past two decades, the injections of agricultural development funding, together with ongoing regional and global trade negotiations, have brought distortionary policies under the spotlight once again. A key question asked of those policies is: How much are they still reducing national economic welfare and trade? Economy-wide models are able to address that question, but they are not available for many poor countries. Even where they are, typically they apply to just one particular previous year and so are unable to provide trends in effects over time. This paper provides a partial-equilibrium alternative to economy-wide modeling, by drawing on a modification of so-called trade restrictiveness indexes to provide theoretically precise indicators of the trade and welfare effects of agricultural policy distortions to producer and consumer prices over the past half-century. The authors generate time series of country level indexes, as well as Africa-wide aggregates. They also provide annual commodity market indexes for the region, and a sense of the relative importance of the key policy instruments used.Economic Theory&Research,Markets and Market Access,Emerging Markets,Trade Policy,Free Trade

Agricultural Distortions in Sub-Saharan Africa: Trade and Welfare Indicators, 1961 to 2004

For decades, agricultural price and trade policies in Sub-Saharan Africa hampered farmers’ contributions to economic growth and poverty reduction. While there has been much policy reform over the past two decades, the injections of agricultural development funding, together with on-going regional and global trade negotiations, have brought distortionary policies under the spotlight once again. A key question asked of those policies is: how much are they still reducing national economic welfare and trade? Economy-wide models are able to address that question, but they are not available for many poor countries. Even where they are, typically they apply to just one particular previous year and so are unable to provide trends in effects over time. This paper provides a partial-equilibrium alternative to economy-wide modelling, by drawing on a modification of so-called trade restrictiveness indexes to provide theoretically precise indicators of the trade and welfare effects of agricultural policy distortions to producer and consumer prices over the past half-century. We generate time series of country level indices, as well as Africa-wide aggregates. We also provide annual commodity market indices for the region, and we provide a sense of the relative importance of the key policy instruments used.Distorted incentives, agricultural price and trade policies, trade restrictiveness index, International Development,