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Abstract
Liberalization of world trade in agricultural products ranks high on the agenda of the
Uruguay Round. After a period of more than six years, however, the negotiations have not
been concluded. Nevertheless, an outcome seems to be in sight. The agreement will most
likely not result in a move to freer trade. It seems that domestic policies will become even
more regulative than in the past in an attempt to cut exportable surpluses and to ease trade
tensions among the main exporting nations. This paper explores possible impacts of the
GATT Round on agricultural development in developing countries. Agricultural development
is more than only growth in agricultural production or productivity. However, it is
argued in the paper that other variables which also indicate agricultural development are
often closely correlated with growth in production and productivity. Trade in agricultural
products is not always an engine for agricultural development. If internal divergences are
not accounted for by appropriate domestic policies, trade may be even harmful to agricultural
development. Hence, empirical research based on cross-country analysis does not
provide a clear answer about the role of trade for development.
Past policies in industrialized countries have most likely had a negative effect on
developing countries as a group; however, the effects differ widely across countries.
Liberalization policies in industrialized countries would not just reverse these negative
effects for developing countries. Price reduction in industrialized countries may not result in
the often-cited production decline in the short term. Present X-inefficiency in agriculture
will be reduced by liberalization, leading to an outward shift of the supply curve. Hence,
liberalization may not lead to higher world market prices for temperate-zone products in
the short and medium term. Apart from this, empirical models differ widely in the price
effects they predict. The expected outcome of the Uruguay Round - increased regulation of domestic
policies - is likely both more negative for developing countries than past protectionist
policies and worse than an overall liberalization. World market prices will increase,
uncertainty and instability can be expected to grow, and food aid may become less available.
There will be a need to react to these challenges with measures on the international and
national level. Initiatives to deal with food crises in developing countries and to stimulate
liberalization in developing countries should be considered. Finally, developing countries
should be made aware that their own domestic policies have a much greater economic
impact than policies in other countries, even if the latter are as protectionist as current
agricultural policies in the industrialized world.