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close this bookBriefs for Food, Agriculture, and the Environment - 2020 Vision : Brief 1 - 64 (IFPRI)
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View the document2020 BRIEF 1 - AUGUST 1994: ECONOMIC GROWTH AND DEVELOPMENT
View the document2020 BRIEF 2 - AUGUST 1994: WORLD SUPPLY AND DEMAND PROJECTIONS FOR CEREALS, 2020
View the document2020 BRIEF 3 - AUGUST 1994: WORLD PRODUCTION OF CEREALS, 1966-90
View the document2020 BRIEF 4 - AUGUST 1994: SUSTAINABLE FARMING: A POLITICAL GEOGRAPHY
View the document2020 BRIEF 5 - OCTOBER 1994: WORLD POPULATION PROJECTIONS, 2020
View the document2020 BRIEF 6 - OCTOBER 1994: MALNUTRITION AND FOOD INSECURITY PROJECTIONS, 2020
View the document2020 BRIEF 7 - OCTOBER 1994: AGRICULTURAL GROWTH AS A KEY TO POVERTY ALLEVIATION
View the document2020 BRIEF 8 - OCTOBER 1994: CONSERVATION AND ENHANCEMENT OF NATURAL RESOURCES
View the document2020 BRIEF 9 - FEBRUARY 1995: THE ROLE OF AGRICULTURE IN SAVING THE RAIN FOREST
View the document2020 BRIEF 10 - FEBRUARY 1995: A TIME OF PLENTY, A WORLD OF NEED: THE ROLE OF FOOD AID IN 2020
View the document2020 BRIEF 11 - FEBRUARY 1995: MANAGING AGRICULTURAL INTENSIFICATION
View the document2020 BRIEF 12 - FEBRUARY 1995: TRADE LIBERALIZATION AND REGIONAL INTEGRATION: IMPLICATIONS FOR 2020
View the document2020 BRIEF 13 - APRIL 1995: THE POTENTIAL OF TECHNOLOGY TO MEET WORLD FOOD NEEDS IN 2020
View the document2020 BRIEF 14 - APRIL 1995: AN ECOREGIONAL PERSPECTIVE ON MALNUTRITION
View the document2020 BRIEF 15 - APRIL 1995: AGRICULTURAL GROWTH IS THE KEY TO POVERTY ALLEVIATION IN LOW-INCOME DEVELOPING COUNTRIES
View the document2020 BRIEF 16 - APRIL 1995: DECLINING ASSISTANCE TO DEVELOPING-COUNTRY AGRICULTURE: CHANGE OF PARADIGM?
View the document2020 BRIEF 17 - MAY 1995: GENERATING FOOD SECURITY IN THE YEAR 2020: WOMEN AS PRODUCERS, GATEKEEPERS, AND SHOCK ABSORBERS
View the document2020 BRIEF 18 - MAY 1995: BIOPHYSICAL LIMITS TO GLOBAL FOOD PRODUCTION
View the document2020 BRIEF 19 - MAY 1995: CAUSES OF HUNGER
View the document2020 BRIEF 20 - MAY 1995: CHINA AND THE FUTURE GLOBAL FOOD SITUATION
View the document2020 BRIEF 21 - JUNE 1995: DEALING WITH WATER SCARCITY IN THE NEXT CENTURY
View the document2020 BRIEF 22 - JUNE 1995: THE RIGHT TO FOOD: WIDELY ACKNOWLEDGED AND POORLY PROTECTED
View the document2020 BRIEF 23 - JUNE 1995: CEREALS PROSPECTS IN INDIA TO 2020: IMPLICATIONS FOR POLICY
View the document2020 BRIEF 24 - JUNE 1995: REVAMPING AGRICULTURAL R&D
View the document2020 BRIEF 25 - AUGUST 1995: MORE THAN FOOD IS NEEDED TO ACHIEVE GOOD NUTRITION BY 2020
View the document2020 BRIEF 26 - AUGUST 1995: PERSPECTIVES ON EUROPEAN AGRICULTURE IN 2020
View the document2020 BRIEF 27 - AUGUST 1995: NONDEGRADING LAND USE STRATEGIES FOR TROPICAL HILLSIDES
View the document2020 BRIEF 28 - AUGUST 1995: EMPLOYMENT PROGRAMS FOR FOOD SECURITY IN SUB-SAHARAN AFRICA
View the document2020 BRIEF 29 - AUGUST 1995: POVERTY, FOOD SECURITY, AND THE ENVIRONMENT
View the document2020 BRIEF 30 - JANUARY 1996: RISING FOOD PRICES AND FALLING GRAIN STOCKS: SHORT-RUN BLIPS OR NEW TRENDS?
View the document2020 BRIEF 31 - APRIL 1996: MIDDLE EAST WATER CONFLICTS AND DIRECTIONS FOR CONFLICT RESOLUTION
View the document2020 BRIEF 32 - APRIL 1996: THE TRANSITION IN THE CONTRIBUTION OF LIVING AQUATIC RESOURCES TO FOOD SECURITY
View the document2020 BRIEF 33 - JUNE 1996: MANAGING RESOURCES FOR SUSTAINABLE AGRICULTURE IN SOUTH ASIA
View the document2020 BRIEF 34 - JUNE 1996: IMPLEMENTING THE URUGUAY ROUND: INCREASED FOOD PRICE STABILITY BY 2020?
View the document2020 BRIEF 35 - JULY 1996: SOCIOPOLITICAL EFFECTS OF NEW BIOTECHNOLOGIES IN DEVELOPING COUNTRIES
View the document2020 BRIEF 36 - OCTOBER 1996: RUSSIA'S FOOD ECONOMY IN TRANSITION: WHAT DO REFORMS MEAN FOR THE LONG-TERM OUTLOOK?
View the document2020 BRIEF 37 - OCTOBER 1996: UNCOMMON OPPORTUNITIES FOR ACHIEVING SUSTAINABLE FOOD AND NUTRITION SECURITY - An Agenda for Science and Public Policy
View the document2020 BRIEF 38 - OCTOBER 1996: WORLD TRENDS IN FERTILIZER USE AND PROJECTIONS TO 2020
View the document2020 BRIEF 39 - OCTOBER 1996: REDUCING POVERTY AND PROTECTING THE ENVIRONMENT: THE OVERLOOKED POTENTIAL OF LESS-FAVORED LANDS
View the document2020 BRIEF 40 - OCTOBER 1996: POLICIES TO PROMOTE ENVIRONMENTALLY SUSTAINABLE FERTILIZER USE AND SUPPLY TO 2020
View the document2020 BRIEF 41 - DECEMBER 1996: STRUCTURAL CHANGES IN THE DEMAND FOR FOOD IN ASIA
View the document2020 BRIEF 42 - MARCH 1997: AFRICA'S CHANGING AGRICULTURAL DEVELOPMENT STRATEGIES
View the document2020 BRIEF 43 - JUNE 1997: THE POTENTIAL IMPACT OF AIDS ON POPULATION AND ECONOMIC GROWTH RATES
View the document2020 BRIEF 44 - JUNE 1997: LAND DEGRADATION IN THE DEVELOPING WORLD: ISSUES AND POLICY OPTIONS FOR 2020
View the document2020 BRIEF 45 - JUNE 1997: AGRICULTURE, TECHNOLOGICAL CHANGE, AND THE ENVIRONMENT IN LATIN AMERICA: A 2020 PERSPECTIVE
View the document2020 BRIEF 46 - JUNE 1997: AGRICULTURE, TRADE, AND REGIONALISM IN SOUTH ASIA
View the document2020 BRIEF 47 - AUGUST 1997: THE NONFARM SECTOR AND RURAL DEVELOPMENT: REVIEW OF ISSUES AND EVIDENCE
View the document2020 BRIEF 48 - FEBRUARY 1998: CHALLENGES TO THE 2020 VISION FOR LATIN AMERICA: FOOD AND AGRICULTURE SINCE 1970
View the document2020 BRIEF 49 - APRIL 1998: NUTRITION SECURITY IN URBAN AREAS OF LATIN AMERICA
View the document2020 BRIEF 50 - JUNE 1998: FOOD FROM PEACE: BREAKING THE LINKS BETWEEN CONFLICT AND HUNGER
View the document2020 BRIEF 51 - JULY 1998: TECHNOLOGICAL OPPORTUNITIES FOR SUSTAINING WHEAT PRODUCTIVITY GROWTH TOWARD 2020
View the document2020 BRIEF 52 - SEPTEMBER 1998: PEST MANAGEMENT AND FOOD PRODUCTION: LOOKING TO THE FUTURE
View the document2020 BRIEF 53 - OCTOBER 1998: POPULATION GROWTH AND POLICY OPTIONS IN THE DEVELOPING WORLD
View the document2020 BRIEF 54 - OCTOBER 1998: FOSTERING GLOBAL WELL-BEING: A NEW PARADIGM TO REVITALIZE AGRICULTURAL AND RURAL DEVELOPMENT
View the document2020 BRIEF 55 - OCTOBER 1998: THE POTENTIAL OF AGROECOLOGY TO COMBAT HUNGER IN THE DEVELOPING WORLD
View the document2020 RESUMEN No. 56 - OCTUBRE DE 1998: AYUDA A LA AGRICULTURA EN LOS PAÍSES EN DESARROLLO: INVERSIONES EN LA REDUCCIÓN DE LA POBREZA Y NUEVAS OPORTUNIDADES DE EXPORTACIÓN
View the document2020 BRIEF 57 - OCTOBER 1998: ECONOMIC CRISIS IN ASIA: A FUTURE OF DIMINISHING GROWTH AND INCREASING POVERTY?
View the document2020 BRIEF 58 - FEBRUARY 1999: SOIL DEGRADATION: A THREAT TO DEVELOPING-COUNTRY FOOD SECURITY BY 20207
View the document2020 BRIEF 59 - MARCH 1999: AGRICULTURAL GROWTH, POVERTY ALLEVIATION, AND ENVIRONMENTAL SUSTAINABILITY: HAVING IT ALL
View the document2020 BRIEF 60 - MAY 1999: CRITICAL CHOICES FOR CHINA'S AGRICULTURAL POLICY
View the document2020 BRIEF 61 - MAY 1999: LIVESTOCK TO 2020: THE NEXT FOOD REVOLUTION
View the document2020 BRIEF 62 - OCTOBER 1999: NUTRIENT DEPLETION IN THE AGRICULTURAL SOILS OF AFRICA
View the document2020 BRIEF 63 - NOVEMBER 1999: PROSPECTS FOR INDIA'S CEREAL SUPPLY AND DEMAND TO 2020
View the document2020 BRIEF 64 - FEBRUARY 2000: OVERCOMING CHILD MALNUTRITION IN DEVELOPING COUNTRIES: PAST ACHIEVEMENTS AND FUTURE CHOICES
View the document2020 BRIEF 65 - MARCH 2000: COMBINING INTERNAL AND EXTERNAL INPUTS FOR SUSTAINABLE INTENSIFICATION

2020 BRIEF 46 - JUNE 1997: AGRICULTURE, TRADE, AND REGIONALISM IN SOUTH ASIA

Dean A. DeRosa and Kumaresan Govindan

Dean A. DeRosa is principal economist at ADR International, Ltd., an international trade policy consulting firm in Falls Church, Virginia, U.S.A. Kumaresan Govindan is a research analyst in the Markets and Structural Studies Division of the International Food Policy Research Institute.

An important debate is under way among the countries of the world about the relative merits of pursuing regionalism through preferential trading arrangements versus more outward-oriented approaches to expanding trade. This debate has significant implications not only for food security but also for other dimensions of economic welfare and poverty alleviation in developing countries.

Under the aegis of the General Agreement on Tariffs and Trade (GATT) and the new World Trade Organization (WTO), most countries have been moving toward general liberalization of trade policies and practices in recent years. At the same time, regional trading blocs - most prominently the "single market" of the European Union and the North American Free Trade Agreement among Canada, Mexico, and the United States - have also grown in importance. These blocs pose a possible challenge to the WTO's objective of global free trade.

The countries of South Asia (Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka) have established a formal body for economic cooperation known as the South Asian Association for Regional Cooperation (SAARC) and have agreed to create an area wide trading bloc to be known as the SAARC Preferential Trading Arrangement (SAPTA).

For policymakers in South Asia, it is important to consider whether the proposed regional trading bloc, which would align the South Asian economies more closely with one another, will provide greater benefits than trade liberalization on a most-favored-nation basis, which forms the cornerstone of the GATT and WTO and which would align the South Asian economies more closely not only with one another but also with the economies of the greater Asia-Pacific region and the world at large.

CURRENT REGIONAL TRADE PATTERNS

Although primary commodities are particularly significant exports of Pakistan and Sri Lanka, the export base of the four major South Asian countries (Bangladesh, India, Pakistan, and Sri Lanka) is more diversified than that of many low-income countries. Bangladesh and India are often classified as predominantly exporters of manufactured goods, particularly labor-intensive and light manufactured goods.

Imports of food commodities are substantial. They account for 10 percent of total imports for India, 15 to 20 percent for Pakistan and Sri Lanka, and 30 percent for Bangladesh. The manufactured imports of the four countries are concentrated mainly in light manufactures and capital-intensive machinery and equipment.

The South Asian countries exchange goods principally with countries outside the region. Their largest trading partners, accounting for more than 50 percent of their total trade, are the major industrial countries in the European Union, along with the United States and Japan. A substantial portion (40 percent) of the region's trade is with countries in the Asia-Pacific region, including China, the Southeast Asian countries, Australia, New Zealand, and the high-income East Asian countries (Hong Kong, Japan, Korea, Singapore, and Taiwan).

The South Asian countries do not trade extensively with one another. As a share of the total imports of South Asia, intraregional trade amounts to no more than 3 percent, a reflection of the particularly limited trade between India and Pakistan. Intraregional trade consists mainly of food commodities (37 percent) and agricultural raw materials (17 percent).

PROTECTION POLICIES

Since the early 1990s the South Asian countries have initiated major economic reforms designed to lower protection levels. The aim of the reforms is to reduce or eliminate state trading, price controls on imports, and import-substitution policies such as high tariffs and extensive quotas. Such reforms are badly needed in South Asia, since all the countries in the region (with the exception of Sri Lanka) have historically maintained high levels of protection. According to 1992 United Nations data, tariff rates and other charges levied on imports have averaged over 70 percent. Quantitative restrictions and other nontariff barriers have also been common.

SAPTA, the proposed regional trade agreement, would set preferential terms for all traded goods, including agricultural and other primary commodities in their semiprocessed as well as raw forms.

IS SAPTA THE BEST OPTION FOR THE REGION?

An open question is whether a regional trading arrangement founded on tariffs and other trade preferences, rather than on nondiscrimination consistent with the most-favored-nation principle, offers the greatest benefits for the region.

Modeling analysis based on a simple import demand framework raises some important questions about the SAPTA approach. The analysis considers two preferential approaches to trade liberalization. First, it looks at the effects of removing the tariffs and other charges on imports within the bloc. This approach discriminates against imports from outside the region by creating strong incentives to substitute regionally produced goods for other, possibly lower-cost, foreign goods. Second, the analysis looks at the implications of closer economic relations between South Asia and the Asia-Pacific Economic Cooperation (APEC) forum, achieved through the South Asian countries' unilateral lowering of their barriers to imports from Asia-Pacific countries. Finally, the analysis looks at the implications of reducing protection in South Asia for imports from all countries - that is, general trade liberalization on a nondiscriminatory basis. Under each of these three approaches, it is assumed that tariffs and other charges are reduced to zero and that nontariff barriers are liberalized.

The model finds that under the SAPTA approach overall trade among the South Asian nations would increase by about US$0.841 billion. Intraregional trade in manufactures would increase by US$0.2 billion, and intraregional trade in primary commodities by US$0.6 billion (of which food commodities are US$0.4 billion). However, about 75 percent of the total increase in trade (US$0.628 billion) is a result of the diversion of trade from countries outside South Asia to countries within the region. SAARC imports from all countries grow by only US$0.213 billion, or 1 percent (Figure 1).

In comparison, SAARC trade liberalization with the Asia-Pacific nations produces a total increase in South Asian imports of US$4.8 billion: US$3 billion in manufactures and US$1.8 billion in imports of primary commodities (of which US$1.3 billion are food imports). Trade diversion is estimated to account for about 55 percent of the total expansion - much less than the 75 percent estimated under SAPTA.

The liberalization of SAARC trade with the world at large would create a US$12.5 billion increase in South Asian imports, with no accompanying diversion of trade. The increase includes US$7.6 billion in manufactures and US$4.8 billion in primary commodities (of which US$1.7 billion are food imports). Such increases would add significantly not only to food security but also to the general economic welfare of the region. The model finds that economic welfare, as measured by consumer surplus, would improve by US$5.6 billion, or more than 25 times the improvement in economic welfare that would occur under SAPTA and one-and-a-half times that under SAARC-APEC liberalization (Figure 2).

Finally, intrabloc trade in South Asia would see a larger expansion under SAPTA than under the Asia-Pacific or non-discriminatory trade liberalization options. With these latter two options, however, food security in the region would improve as a result of the greater specialization of production and the expansion of SAARC exports to the world.

This analysis suggests that the SAPTA agreement could provide substantial benefits for the region, but that the South Asian nations might achieve much larger gains in trade and economic welfare by intensifying their efforts to integrate their economies with the world economy or with the fast-growing economies of the greater Asia-Pacific region. Furthermore, focusing on regional trade preferences could jeopardize the progress of more general trade liberalization in the region and its potential for promoting agriculture and food security.


Figure 1 - Changes in imports under three scenarios

a includes US$86 million in food, US$43 million in other primary commodities, and US$84 million in manufactures.


Figure 2 - Changes in economic welfare under three scenarios

Note: Economic welfare is measured by consumer surplus, a traditional measure of net benefit to consumers estimated by economists.