Who would gain from agricultural free trade?

…the reality is that liberalizing agricultural trade would largely benefit the consumers and taxpayers of the wealthy nations.  Why? Because agricultural subsidies serve first and foremost to transfer resources from consumers and taxpayers to farmers within the same country…Other countries are affected only insofar as world prices rise.  But the big, clear gainers from such price increases would be countries that are large net exporters of agricultural products — rich countries, such as the United States, and middle-income countries, such as Argentina, Brazil, and Thailand.

What about the poorer countries?  For one thing, many poor countries are actually net importers of agricultural products, and so they benefit from low world prices.  An increase in prices may help the rural poor, who sell the agricultural goods, but it would make the urban poor — the consumers — worse off.  Net poverty could still be reduced, but to what extent depends in complicated fashion on the working condition of roads and the markets for fertilizer and other inputs…

Regardless of whether agricultural liberalization increases or decreases poverty, the impact would not be significant.  Most studies predict that the effect of such liberalization on world prices would be small…

Furthermore a general reduction of trade barriers in rich countries could leave some of the world’s poorest countries worse off.  A substantial part of least-developed countries’ exports enjoy favorable conditions of access to the markets of rich countries under various preferential trade arrangements…

That is Nancy Birdsall, Dani Rodrik, and Arvind Subramaniam, in the July/August issue of Foreign Affairs.

My take: A few caveats are needed.  First, the dynamic gains are higher than the above words would indicate.  Free trade may encourage many nations to raise their agricultural productivity.  Second, agricultural free trade will lead to lower prices for many commodities, especially in the longer run.  That all being said, don’t be surprised if China, the U.S. and Mercosur come out as the big winners, not Africa.

Addendum: Here is a useful link, thanks to Asif for the pointer.


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