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Agricultural price distortions: trends and volatility, past, and prospective

Authors

  • Kym Anderson

    Corresponding author
    1. School of Economics, University of Adelaide, Adelaide, SA 5005; CEPR; and Arndt-Corden Department of Economics, Australian National University, Canberra, Australia
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  • Revision of a Plenary Paper presented at the International Association of Agricultural Economists (IAAE) Triennial Conference, Foz do Iguaçu, Brazil, 18–24 August 2012.

Abstract

Historically, earnings from farming in many developing countries have been depressed by a pro-urban bias in own-country policies, as well as by governments of richer countries favoring their farmers with import barriers and subsidies. Both sets of policies reduced global economic welfare and agricultural trade, and added to global inequality and poverty. Over the past three decades, much progress has been made in reducing agricultural protection in high-income countries and agricultural disincentives in developing countries. However, plenty of price distortions remain. As well, the propensity of governments to insulate their domestic food market from fluctuations in international prices has not waned. Such insulation contributes to the amplification of international food price fluctuations, yet it does little to advance national food security when food-importing and food-exporting countries equally engage in insulating behavior. Thus there is still much scope to improve global economic welfare via multilateral agreement not only to remove remaining trade distortions but also to desist from varying trade barriers when international food prices gyrate. This article summarizes indicators of trends and fluctuations in farm trade barriers before examining unilateral or multilateral trade arrangements, together with complementary domestic measures, that could lead to better global food security outcomes.

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