Agricultural Trade Reform after the Asian Recession: A Bridge too Far?

Abstract

The collapse of the heretofore most rapidly growing Asian developing economies, combined with the long recession in Japan, caused northern agriculture to endure the combined effects of declining commodity prices and rising domestic costs associated with real appreciations against major Asian trading partners. The redistribution of global investment associated with the Asian recession is likely to be long lasting. In this paper global general equilibrium analysis is employed to quantify the effects of this redistribution. Although the economies of the north prove to be net gainers, northern farmers lose by more than any other non-Asian group. Rising protection has insulated some groups of northern farmers but this has exacerbated the burden of adjustment on others. These losses are substantial compared with those that would be incurred by currently protected farmers were the millennial negotiations to achieve a reduction of existing distortions by half. The political costs of achieving an agricultural trading system more liberal than that of the mid-1990s must therefore be higher following the Asian recession.