|Foreign Assistance to Agriculture: A Win-Win Proposition - Food Policy Report (IFPRI, 1995, 24 p.)|
An increase in agricultural imports by one country is, of course, an increase in agricultural exports by another. These exports result in more jobs in the exporting country. Developing countries are a significant force behind the expansion in world trade, and exports to them are becoming increasingly important to developed-country economies. The share of world exports going to developing countries increased from 13 percent in 1970/71 to more than 26 percent in 1992/93, with the share growing at an average annual rate of about 3 percent (Figure 6). While developed-country imports have been falling at the rate of 1 percent a year in real terms during the 1990s, imports by developing countries have been increasing by more than 5 percent annually.
Source: International Monetary Fund Direction of Trade Statistics, various years.
Note: All values are averages of two years.
These exports provide significant employment in the developed-country economies. In the United States, every US$1 billion of exports creates 20,000 jobs.27 With annual exports to developing countries of US$197 billion, the United States has almost 4 million jobs that depend on sales to developing countries. Exports from all developed-country economies in 1993 to developing countries totaled more than US$728 billion, which, if the U.S. figure holds for other developed countries, would have created more than 14 million jobs in those countries.28
Although in an agriculturally based economy, an agriculturally oriented strategy is often the best way to generate widespread economic growth, international aid agencies sometimes hesitate to direct resources to agriculture for fear of antagonizing producer associations in donor countries. In the United States in the 1980s, for example, political support for assistance to agriculture weakened during the 1980s as a result of a decline in U.S. agricultural exports. Some producer associations attributed this decline to foreign assistance given to agriculture in developing countries.29
Little evidence exists to support this view. During the 1970s, low support prices for export commodities combined with a devalued dollar to make U.S. exports very attractive in the world market. The United States also had idle productive capacity, which allowed it to respond quickly to increased demand at little cost. As a result, U.S. producers captured virtually all the 10 million tons of annual growth in world grain trade.30
In 1981 the U.S. Federal Reserve, the countrys central bank, implemented a restrictive monetary policy that increased the value of the dollar on the world market. International prices of U.S. grain increased, and within five years world demand for U.S. agricultural exports fell by 40 percent, resulting in billions of dollars of losses for U.S. farmers.31
Some argued that the decline in exports was due to technology transfers funded by the United States that allowed producers, such as Brazilian soybean growers, to increase production and take away U.S. market share. In reality, the total amount of U.S. assistance specifically targeted to Brazilian soybeans was less than $1 million, and at the time of the decline no new soybean varieties developed under U.S.-Brazilian cooperation were being used commercially.32
The decline in U.S. agricultural exports to developing countries was principally a U.S. phenomenon, and was not caused by foreign assistance. Although U.S. agricultural exports to developing countries declined in the early 1980s, worldwide agricultural exports to developing countries increased. The declining world market share of U.S. products was not due to lower overall agricultural imports by developing countries. Today, exports to developing countries are actually an increasing share of total U.S. exports.33