Agricultural development, structural transformation, and East Asian trade

Abstract

Trends in regional trade in agricultural products are reviewed. The chapter includes discussion of the theory of the modern drivers of the evolution of agricultural comparative advantage as economies grow. It asks: to what extent are the actual trade patterns in East Asia consistent with that theory? The actual trade patterns are somewhat inconsistent with the theory, which is because trade-related policies have restricted agricultural trade of East Asian economies in various ways. In particular, several countries have restricted their exports of key farm products while their incomes were low, which implies the imposition of a tax on agriculture. Other countries have gradually raised barriers to agricultural imports as the international competitiveness of their farmers declined in the course of economic growth and industrialisation. A ‘tradition’ of gradually moving away from taxing and toward protecting farmers relative to producers in non-farm sectors is identified. But this process should not be taken as given. Some richer countries are reducing their agricultural protection, following the agricultural reforms of West European countries. Also there are new and cheaper means of achieving the policy objectives of agricultural policies, even in the region’s poorer countries, which allow countries to move away from less-efficient price- and trade-distorting policy instruments to more efficient ones for redistributing the benefits of economic growth and integration. While switching to these new measures is not a trivial task, doing so would help integrate regional trade in these products and provide better options for responding to supply shocks such as the COVID-19 epidemic and local events associated with climate change. Show more