Journal of Agricultural Economics ¾ Volume 53, Number 2 ¾ July 2002 ¾ Pages 361-363

Ó Agricultural Economics Society

Papers from a Symposium on CGE Modellingof Trade Policies in African Agriculture

Introduction

Scott McDonald1

Within the literature there has long been a broad consensus that trade policies inmany developing countries have disadvantaged agricultural producers; a viewthat was strongly supported by the results from partial equilibrium assessmentsof trade policies in developing countries, e.g., Krueger et al., (1988), and theeffects of trade liberalisation upon agricultural commodity prices, e.g., Tyersand Anderson (1988). It can be argued that this consensus was influential in theformulation of the agricultural components of structural adjustmentprogrammes during the last quarter of the 20th century, although it would besimplistic to ignore the extent to which these programmes were influenced byother distortions, e.g., the operations of agricultural parastatals, and argumentsthat market failures were likely to be less damaging than government failures.Despite the apparent evidence that liberalisation would offer substantial welfaregains, the outcomes from agricultural trade liberalisation have not lived up t oexpectations, especially with respect to the welfare gains anticipated for therelatively poor rural communities. Moreover, the economic impacts of tradeliberalisation upon welfare and poverty have recently been given a higherprofile by the growing emphasis upon the adoption of pro-poor economicpolicies.

This symposium consists of three contributions to this debate that were firstpresented at the annual conference of the ESRC’s Development EconomicsStudy Group in April 2000. All three papers use a general equilibrium approachto assess the impacts of various aspects of trade policy changes upon threeAfrican economies; Mozambique, Uganda and Botswana, each of which has hadvery different experiences over the last 25 years. The papers share certaincommon conclusions; specifically that the welfare gains from trade reform maybe appreciably less than often predicted, and that the implications of tradereform may be complex. Consequently these papers can be viewed as

1 Scott McDonald is Senior Lecturer in Economics, University of Sheffield, 9 Mappin Street, Sheffield, S1 4DT.E-mail: s.mcdonald@sheffield.ac.uk for correspondence.

362 Scott McDonald

contributions to a growing body of research that is indicative of the extent towhich partial equilibrium evaluations of the impacts of trade liberalisation aremisleading, because the general equilibrium effects have been ignored. Thisconclusion suggests that before trade policies are adjusted on the basis of partialequilibrium advice it is beholden on advisors to evaluate the extent to which the(implicit) assumption of an absence of general equilibrium effects isappropriate.

The first paper in the symposium, by Blake et al., quantifies the extent to whichUganda would benefit from global liberalisation of agricultural trade versusunilateral liberalisation by Uganda. This is achieved by simulations that assessthe impact of changes in export and import prices arising from the UruguayRound and unilateral reductions in Uganda’s tariff barriers. The resultant welfareeffects, reported in Table 6, are of interest on several accounts; not least therelatively low proportionate changes in welfare and the mix of positive andnegative effects. These results sustain the authors’ conclusions thatliberalisation will make a small contribution to welfare, and that, despite thelack of evidence that income inequality might decline, there is some evidencethat its effects are marginally pro-poor. Particularly appealing features of thisassessment are the efforts that have been devoted to disaggregating householdsinto groups that reflect the social structures in Uganda and complementingthese households groups with a disaggregation of labour types on the basis ofliteracy levels and source of remuneration – wage and non-wage (self andinformal employment) based.

The second paper in the symposium, by Jensen and Tarp, addresses some of thereasons why the welfare gains from liberalisation may be substantially smallerthan suggested by the partial equilibrium literature. This contribution relates t othe case of Mozambique and complements related research based on data forTanzania (Bautista et al., 2000). The analyses reported in the paper have threeparticularly interesting features: first, the results provide an indication of theextent to which the partial equilibrium results may be misleading; second, theauthors model the important macroeconomic and structural features of theeconomy of Mozambique, including the high transactions costs associated withmarketing, and third, there is a systematic analysis of the impact of differentmacroeconomic closure conditions. The results indicate that the impacts oftrade liberalisation upon prices are appreciably muted by the general equilibriumeffects, and that among these effects those associated with marketing costs andmacroeconomic closure conditions are particularly important. Consequently theresults are a contribution to the growing body of evidence that the impacts ofpolicy reforms depend heavily upon the structure of an economy and theconstraints it faces.

The final paper in the symposium, by McDonald, is concerned with the impactsof removing preferential access to a market, and is inspired by the EU’s

Trade Policies and African Agriculture 363

intention of discontinuing the commodity protocols that were part of theLomé convention. The focus in the analysis is upon the degree of structuralchange implied by the changes in preferences and the extent to which thosechanges may or may not be realisable. The analyses are conducted using a modelfor Botswana under the assumption that Botswana’s preferential access to theEU for beef exports is discontinued, which is the intention under the CotonouAgreement. The results suggest that the welfare effects will be minor providedthe economy is able to achieve the structural transformations required given thechanges in prices. However the required structural changes are appreciable andthere are reasons to question the speed with which they can be achieved; aparticular constraint is the availability of skilled labour. The impact upon ruralincomes is likely to be substantial, given the high dependence of farmers uponcattle production, and the extent to which this can be ameliorated isconstrained by the limited scope for diversification in a drought prone region.

Finally, it should be noted that these papers share another common feature.They all use databases that have contributed to the development of the GlobalTrade Analysis Project’s dissagregation of southern African regions in version 5of the GTAP database (see Hertel, 1997, for details on the GTAP model anddatabase). This development of the GTAP database provides agricultural anddevelopment economists with both a challenge and opportunity: anopportunity to examine more closely the implications of changes in agriculturaltrade policies on an international and national scale upon African economies,and a challenge to determine some of the ways in which policy reform maycontribute to the development of African agriculture and thence, hopefully, thealleviation of poverty in Africa.

ReferencesBautista, R. M., Robinson, S., Tarp, F. and Wobst, P. (2000). Policy Bias and

Agriculture: Partial and General Equilibrium Measures, Review of DevelopmentEconomics, Vol. 5(1): 121-37.

Hertel, T.W., (1997). Global Trade Analysis: Modeling and Applications. Cambridge:Cambridge University Press.

Krueger, A. O., Schiff, M. and Valdes, A. (1988). Agricultural Incentives in DevelopingCountries: Measuring the Effect of Sectoral and Economywide Policies. TheWorld Bank Economic Review, Vol 2 (3): 255-71.

Tyers, R. and Anderson, K., (1988). Liberalising Agricultural Policies in the UruguayRound: The Effects on Trade and Welfare, Journal of Agricultural Economics,Vol 39(2), pp 197-216.