The impact of domestic and global trade liberalisation on five Southern African countries

We compare the impact of alternative domestic and global trade liberalisation scenarios on five economies in Southern Africa. The study applies a computable general equilibrium model that employs standardised 12-sector social accounting matrices for Malawi, Mozambique, Tanzania, Zambia and Zimbabwe. The approach incorporates stylised features, such as own-household consumption and marketing margins, that are of particular importance when a majority of agricultural producers are not sufficiently integrated into formal markets and thus rely on own production to meet their daily diets. Hence, improved infrastructure implies lower marketing costs and better market integration, which translates to increased production opportunities. The comparison of the results across all five countries reveals that common policy measures have different impacts depending on the underlying economic structures.     

INTRODUCTION: GREENING THE COUNTRYSIDE? CHANGING FRAMEWORKS OF EU AGRICULTURAL POLICY

In response to wide‐ranging criticism of agricultural policy, especially within Western industrialized countries, new frameworks of justification are emerging and new hybrid policy fields have been established to tackle some of the ‘externalities’ of agricultural support. However, institutional frameworks are proving slower to change, partly because this would require coordinated action across different levels of governance. Nevertheless, previously marginalized environmental concerns have successfully gained entrance to agricultural policy networks, while the intersection of trade liberalization and rural diversification have undermined the dominance of the productivist mindset in government. This gives rise to a plurality of policy actors and actions which defy the conventional categories of analysis of agricultural policy, calling for changing frameworks on the polity of agriculture too.     

WTO agricultural trade battles and food aid

Recent agricultural trade battles at the WTO between the US and the EU have important implications for the Global South, in particular with respect to food aid. The current Doha round of trade talks hinges closely on agreement in the area of agriculture, and a key issue of disagreement between the US and the EU is the question of whether the WTO should impose disciplines on food aid and agricultural export credits. The US has also challenged the EU at the WTO over trade in genetically modified organisms (GMOs). The outcome of this dispute will affect food aid, as many countries have in recent years rejected GM food aid from the US on the grounds that it would harm their export markets in Europe. Decisions on both of these battles should be forthcoming within the next year or two, and the outcomes will affect food aid policies.     

Savings,investment and foreign capital flows: Have capital markets become more integrated?

How mobile is capital across countries? Does the expansion of world financial markets in the 1970s and 1980s reflect a tendency towards one integrated world capital market, accessible for both industrialised and developing countries? Or, alternatively, are savings and investment rates for each economy closely tied because of international capital market imperfections? This article critically assesses recent studies that have tested these hypotheses empirically for industrialised countries, presents new evidence and expands data analysis to include the group of developing countries. Contrary to recent studies it is concluded that across industrialised countries domestic investment and savings are now much less closely linked than in the 1960s. But the larger capital market integration does not extend to the group of developing countries despite their increased use of funds from international financial markets to finance domestic investment. The exploratory nature of the data analysis only permits to draw some suggestive, though important, conclusions for economic theory and policy.     

Economic orthodoxy and the East Asian crisis

It is increasingly apparent that the Asian economic crisis has also led to a serious ideological crisis in the West. Before the collapse there was broad agreement among Western orthodox economists that developing countries should pursue a set of economic policies, often referred to as the 'Washington consensus', which included financial sector liberalisation, privatisation of state-owned enterprises, fiscal discipline and trade, exchange rate and foreign investment deregulation. Since the collapse, however, this consensus has broken down. This paper examines the emergence of the new so-called post-Washington consensus, with its emphasis on governance and social capital. The lexicon of the new policy paradigm underlying this new consensus includes civil society, safety nets, and, especially, governance, to be added to the conventional Washington terminology of open markets, deregulation, liberalisation and structural adjustment. Our central thesis is that this new post-Washington consensus is an attempt to place more emphasis on the political and institutional foundations for programmes of structural reform. However, it is also a kind of politics of antipolitics that attempts to insulate economic institutions from the process of political bargaining.     

HORMONES, HEIFERS AND HIGH POLITICS – BIOTECHNOLOGY AND THE COMMON AGRICULTURAL POLICY

The recent ec ban on imports of hormone-treated beef and the central place of agricultural régime liberalization in the Uruguay round of GATT (General Agreement on Trade and Tariffs) negotiations have combined to make agricultural reform a matter of 'high politics' in international trade. But debates on medium-term reform of the Common Agricultural Policy fail to consider the impact of future developments in biotechnology, which threaten to overwhelm the ec 's ability to cope with agricultural surplus. Meanwhile, the ec has begun to accelerate its efforts to promote Europe's competitiveness in global biotechnology markets through new collaborative research programmes. The clash of interests between the ec 's agricultural and technology policy communities has produced contradictory policies and new obstacles toward the critical goal of reforming the cap . The ec 's efforts to promote biotechnology must be reconciled with biotechnology's future impacts on European agriculture through more rigorous technology assessment and reform of agricultural policy-making mechanisms.     

Energy security and Russia’s gas strategy: The symbiotic relationship between the state and firms

The way how Russia ignores the EU’s quest for liberalization and sustains a control over markets and supplies is directly related to her use of gas as leverage. Russia’s strategy affects many European and non-European countries during all stages: demand, supply and transit. It is not, however, possible to generalize a common statement that the EU’s position is based on a policy of market liberalization while Russia pursues an opposing strategy of increased state control. Russian energy strategy leads markets in Europe; sets tone for energy supplies at homeland and abroad, benefiting from a variety of means. This article shows how a symbiotic relationship between the Russian state and Russian energy companies emerge from a structure in which trade, markets and international politics have been embedded within the state interests and firm behavior. It identifies the economic and geopolitical trends with regard to recent developments of Russia’s strategy.     

The Impact of Trade Liberalisation on Household Welfare in a Developing Country with Imperfect Labour Markets

Abstract

I develop an empirical methodology to assess the distributional impact of trade-induced price shocks when labour markets are imperfect. The proposed methodology relates exogenous variations in prices to changes in household welfare using a separable agricultural household model that flexibly allows the data to determine the degree of labour market imperfections. Applying this approach to Vietnam, I investigate the impact of agriculture trade liberalisation between 1993 and 1998 on overall household welfare, measured using per capita household expenditure. I find that accounting for labour market imperfections results in welfare gains that are nearly four times larger than those found when assuming complete labour markets.     

Vertical Specialisation and its Determinants

Vertical specialisation (VS) and outsourcing have gained prominence in international trade recently and could represent an entry point for developing countries into world markets as well as a channel for technology transfer. However, entry into international supply chains often requires just-in-time delivery and close to zero fault rates, making market entry via VS difficult. This paper analyses the importance of infrastructure and quality of institutions for VS, for total trade and with a focus on the clothing and electronics sectors. It is found that good governance and an open trade policy is strongly related to VS in electronics. Infrastructure, particularly ports, is strongly related to VS in the clothing sector.     

The Southern African customs union,cereal price policy in South Africa,and food security in Botswana

It is elaborated in this article that external factors may affect food security in developing countries even if these countries are not exposed to price instability in world food markets. This is the case in the Southern African Customs Union where the agricultural price policy in South Africa affects food security in Botswana, Lesotho and Swasiland. It is analysed quantitatively how cereal price policy in South Africa influenced the cereal import sector of Botswana in the period 1969–84. Cereal import prices increased due to Botswana's membership of the customs union, and cereal imports declined. The price increase was accompanied by a price‐stabilising impact.     

Changing development models in small economies: The case of Jamaica from the 1950s to the 1990s

By examining in detail the successes and failures of different development models in one developing country over a four-decade period, this article sketches a development model for small economies in the 1990s as an alternative to the neoliberal model pushed by the International Monetary Fund. It reviews the experience of Jamaica with various development models from the 1950s to the 1990s, with special attention focused on the experience of the Seaga government of the 1980s. It also draws lessons from the successful development experience of small European countries and of the East Asian Newly Industrialized countries. In normative terms, the alternative development model attempts to combine growth with equity and democracy. In analytical terms, it takes account of the constellation of domestic forces and appropriate political strategies, as well as of international economic and political conditions. The main features are a strong role for the state in economic interactions with transnational corporations, in identification of export markets and promotion of export production, in selective protection of domestic industry with an export potential, in promotion of agriculture linked to industrial development, in improvement of human resources and promotion of regional economic integration. Within these parameters, a crucial role is assigned to the domestic private sector and a complementary one to foreign investment. Distribution is to be addressed primarily through distribution of productive assets and access to health care and education. Evelyne Huber is professor of political science at the University of North Carolina, Chapel Hill. She is a coauthor ofDemocratic Socialism in Jamaica andCapitalist Development and Democracy. She is currently involved in research on the changing role of the state in Latin America and on comparative social policy. John D. Stephens is professor of political science and sociology at the University of North Carolina, Chapel Hill. He is a coauthor ofDemocratic Socialism in Jamaica andCapitalist Development and Democracy. His current research focuses on options for social democracy and comparative social policy.     

The flip side of fashion: Used clothing exports to the third world

Since the early 1970s, western countries have increasingly recycled their second‐hand clothes by exporting to the Third World. In response, some LDC governments have banned used clothing imports to protect their domestic textile industries. This article, after reviewing the structure and evolution of world used clothing trade, examines the consequences for Africa's largest importer, Rwanda. In this low‐income country, with its small domestic textile industry, displacement is minimal and imported used clothing offers a modest but rare policy lever for directly increasing national income as well as incomes of the rural poor.     

Differentiation within reciprocity: the European Union approach to preferential trade agreements

Recent statements on European Union (EU) trade policy towards developing countries (DCs) have stressed the need for differentiation between trading partners depending on their level of development. But what does this mean in practice? This article assesses the substance of EU trade policy towards a number of partners at different levels of development on the basis of the texts of recent preferential trade agreements (PTAs). It argues that EU PTA policy exhibits differentiation within a general shift towards reciprocity vis-à-vis DCs and that this needs to be assessed at the level of specific policy areas as much as partner country. It also suggests that the factors shaping EU policy vary from case to case with commercial competition and sector interests relatively more important in PTAs with emerging markets and high-income DCs and norms and institutional factors relatively more important in shaping those with least developed or low-income DCs.     

‘Subsistence’ Readings: World Bank and State Approaches to Commercialising Agriculture in Post-Communist Eurasia

This article explores the World Bank’s project of ‘returning agriculture to the market’ through land titling reforms. It describes how World Bank and national government strategy papers distinguish between a ‘commercial’ or ‘entrepreneurial’ sector of farming and a ‘subsistence’ agricultural sector in post-communist Eurasia. The extension and growth of the former represents the desired goal of policies since the 1990s, while the latter’s numerical prominence in many countries constitutes a source of concern for authorities. The article argues that ‘subsistence’ represents a misreading of the rural population that confounds self-sufficiency with the size of farms, and casts millions of smallholders as non-economic and alien to markets. It focuses on two post-communist countries (Romania and Ukraine, extremes in terms of the introduction of property rights over agricultural land) to argue that efforts to reduce ‘subsistence’ translate into measures that increase the households’ monetary needs and are therefore going to be resisted. The article relies on analyses of World Bank and national government’s strategy papers as well as ethnographic data collected in 2013–2017 in the Ukrainian-Romanian border region.     

The Structure of Government Intervention in African Agriculture

This article examines the determinants of various rates of agricultural subsidies (output, input, exchange rate distortions, and aggregate) using commodity-level data from eight African countries in the 1980s. Econometric results indicate that structural adjustment policies were more effective in reforming exchange rate distortions than in liberalising commodity markets. Output policies are determined within the national context while input subsidies are more responsive to commodity-specific conditions. Further-more, agricultural subsidies were strongly influenced by the degree of urbanisation and by the number of people per unit of arable land in a manner consistent with cheap food policy strategies.     

Does Market Access Mitigate the Impact of Seasonality on Child Growth? Panel Data Evidence from Northern Ethiopia

Seasonality in agricultural production continues to shape intra-annual food availability in low-income countries. Using high-frequency panel data from northern Ethiopia, this study attempts to quantify seasonal fluctuations in children’s weights. Consistent with earlier studies, we document considerable seasonality in children’s age and height adjusted weights. While children located closer to local food markets are better nourished compared to their counterparts residing farther away, their weights are also subject to considerable seasonality. Further analysis shows that children located closer to food markets consume more diverse diets than those located farther away but the content of the diet varies across seasons. This leads us to conclude that households located near these food markets are not able to insulate their children from seasonal weight fluctuations. We discuss some policy options with potential to address this threat to child wellbeing.     

Varieties of population mobility in relation to development in China

China, in its efforts to effect economic modernization, has come to recognize the need for labor mobility to promote the development of small towns, to develop frontier agriculture, and to provide a tertiary sector in the cities and towns. Of China's 1 billion people (3rd census, 1982), 206 million or 20% of the population lived in 236 cities and 2664 towns. 50% of the urban dwellers were concentrated in the 3 metropolises of Shanghai, Beijing, and Tianjin. On the other hand 30% lived in the 2664 towns, which China wishes to develop. In the past large numbers of people have migrated to the large cities because there they were assured the life-long security of employment in state-owned industries -- the "iron rice bowl." However, China's present policy is to limit the size of big cities, develop medium-sized cities (between 200,000 and 500,000 people), and encourage the growth of small cities. China's 7th Five-Year Plan (1986-1990) calls for a massive movement of the agricultural labor force, not to the cities, but to the towns. To control population movement China instituted the Household Registration System in accordance with which a household must obtain permission to move permanently beyond the local area. Migration from the populous East Coast areas to the underdeveloped Northwest and to the rural impoverished areas of Gansu, Ningxia, and Qinghai is encouraged. But controlled migration has become more difficult since the decentralization which has accompanied the new economic policies, and the urban population has grown except for the 3 major cities. Moreover, as a result of the new "economic responsibility system" introduced in 1979, many surplus agricultural workers have been absorbed into nonagricultural activities in villages and townships. By the end of 1985, 67 million workers had moved from agriculture to industries, and peasants may now be granted temporary residence permits in towns. The total number of towns increased to 7280 by 1985; however, the new towns are concentrated in the more productive agricultural areas, which can support them. In addition to these more or less permanent migrants, large numbers of temporary migrants have come to the cities as representatives of local businesses, as construction workers, to operate urban outlets for agricultural and industrial products, to provide various services including domestic service, and as itinerant workers. 1986 statistics indicated that 3.21 million people were living as temporary residents of China's top 10 cities. The new economic policy has encouraged the resurgence of private plots and free markets and hence has stimulated the increased movement of peasants to rural markets and to free markets in cities.     

Technical change and dualism within agriculture in India

The dichotomy between subsistence and market‐oriented farmers in many developing countries is a well‐recognized fact. There have been empirical studies in India of the differences between subsistence and market‐oriented or ‘commercial’ farmers; and interest is now developing in the impact of the new agricultural policy on dualism within agriculture. While the theoretical literature deals extensively with dualism between a traditional agricultural sector and an advanced industrial sector, dualism within the agricultural sector itself is less discussed.¹

However, this dualism has become of increasing practical importance in India with the introduction of the ‘New Strategy for Agricultural Development’ in 1966–67.² This policy concentrates on raising output per acre very sharply, especially for the food crops, by the use of new high‐yielding varieties of seeds and complementary inputs. In the beginning, at least, these measures are to be confined to a small part of the total acreage under food grains. Critics have also alleged that they have been confined to the larger farmers, thus accentuating the existing inequality of agricultural incomes, and that this inequality must have several undesirable social, economic and political consequences. But these consequences have not been elaborated, partly for lack of data, but partly also because the theoretical implications of technical change for a dualist development of agriculture have not been adequately discussed. The first object of this paper is to examine the changes in income distribution within agriculture when technical progress is confined to the commercial sector. Thereafter we show that if dualism cannot be directly attacked by such measures as land reform, the second‐best policy from the point of view of maximizing output may in fact be to encourage the use of ‘new’ inputs, such as fertilizers, in the commercial sector.     

Openness and the International allocation of foreign direct investment

This paper develops an ordinal index to measure the openness of FDI policy regimes for individual countries. There has been a generalised increase in the index between 1990 and 2002. The most important determinants of variations in FDI flows across countries and over time are country size, the level of educational achievement, and growth. The openness index is positively associated with FDI flows, but its explanatory power is low. Liberalising approval procedures and lifting requirements that foreign companies enter into joint ventures with domestic firms encourage FDI. We conclude that the openness of the FDI regime operates as a factor enabling FDI, but that location advantages are paramount in determining the international allocation of FDI. We also turn the question around and ask what countries are more likely to impose restrictions on FDI. We find that lower levels of education and larger domestic markets are associated with greater restrictions on FDI. In addition, there is some evidence that better institutions are associated with lower FDI restrictions.     

Market cycles,power politics and the latest North – South energy trade conflict

Energy trade periodically aligns Northern importing – consuming countries against predominantly Southern producing – exporting countries. Conflict appears to follow a cyclical pattern, whereby Northern firms invest in developing Third World hydrocarbon resources to meet consumer demand until market conditions enable unilateral efforts by host sovereigns to augment fiscal take and ownership share and to impose output restrictions, thereby elevating prices and revenues. Although markets eventually correct themselves, major consuming-country governments, to the extent that seller's markets attributable to exporter actions harm short-term consumer welfare and alternative options for restoring buyer's markets are lacking, have varying incentives to support military intervention. Shifting market conditions and power balances suggest six ideal-typical energy trade conflict strategies. Finally, to the extent that exporting states succeed in converting higher hydrocarbon revenues into energy-intensive economic growth, co-operative phases within this conflict pattern could yield to increasingly zero-sum inter-consumer rivalry.