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Agricultural Trade and Protection

Various perspectives on the liberalisation of trade in agriculture have come forward after the Uruguay round of negotiations at the World Trade Organisation. This article critiques the rationale for liberalising agricultural trade in the light of recent literature in trade theory. It also explores the need for "strategic" interventions by developing countries and deals with how these mediations differ from protectionist policies.

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Agricultural Tradeand Protection

Various perspectives on the liberalisation of trade in agriculture have come forward after the Uruguay round of negotiations at the World Trade Organisation. This article critiques the rationale for liberalising agricultural trade in the light of recent literature in trade theory. It also explores the need for “strategic” interventions by developing countries and deals with how these mediations differ from protectionist policies.

BISWAJIT DHAR

E
ver since the World Trade Organisation’s (WTO) Uruguay round negotiating mandate sought “greater liberalisation of trade in agriculture”,1 the global comity of nations has been locked in an intense debate on the nature and extent of trade liberalisation in agriculture. Various perspectives on agricultural trade liberalisation have come to the fore in this debate. While the proponents of the trade liberalisation agenda have argued aggressively in favour of dismantling the tariff walls, for this, in their view, would bring significant global welfare gains, there have been contra voices that have emphasised that there are significant non-trade concerns, which would have to be given precedence over the trade agenda. This policy brief would try to take a close look at the abovementioned perspectives on agricultural trade liberalisation.

Rationale for Liberalisation

The case for liberalising agricultural trade has been built on an esoteric set of studies, the origins of which can be traced back to the pure theory of international trade. According to these studies, trade liberalisation provides the “optimal solution” but only under “ideal” market conditions. Some of the key assumptions that are made in this regard are the following:

(i) markets are assumed to be perfectly competitive; (ii) producers minimise costs subject to constant returns to scale; (iii) consumers maximise their utility; and

(iv) all markets, including the labour market, are cleared with flexible prices.

While the earlier studies enumerated the welfare implications of adoption or otherwise of free trade policies in largely conceptual terms, more recent studies have provided precise estimates of the welfare gains that would result from the liberalisation of agricultural trade. Among the more influential of these studies are those that have used general equilibrium models.

In a series of papers published during the past few years, World Bank economists have provided detailed projections by simulating the possible outcomes of the WTO’s Doha round negotiations.2

The first major set of results that is reported in the papers pertains to the effect of the ongoing trade liberalisation efforts on real income up to the year 2015. These estimates have been made against a benchmark, which assumes a complete freeing of merchandise trade over the period 2005

10. It has been reported that real income gains by 2015, for the global economy as a whole, would be $ 287.3 billion per year (in 2001 dollars). Of this increase, the developed countries’ would have a share of $ 201.6 billion while for developing countries gains would be $ 85.7 billion. In other words, the share of developing countries in the total gains would be a third of the total global gains. More importantly, real income gains reported for developing countries would be 0.8 per cent of the baseline income in 2015, which is marginally higher than the corresponding figure for developed countries (0.6 per cent). Among developing countries, while the relatively prosperous Latin American region is expected to register real income, which would be 1.0 per cent of the baseline income in 2015, for the south Asian region the corresponding figure is only 0.4 per cent.

These broad results lend themselves to two varying interpretations. The first, one which has been provided in the papers, is that the results are significantly favourable for developing countries since their expected real income gains are considerably larger than their existing share in global production. Thus, while developing countries as a whole account for a quarter of global production at present, they would be able to enjoy a third of global gains in real income that are expected annually until the year 2015. An alternate view would be that what the results are pointing to is the increasing gulf between the relatively prosperous and poorer regions and countries. In overall terms, it can be said that the disproportionately large gains for developed countries that the papers under discussion have predicted would reinforce the status of the lesser players in the global economy as “developing” even after the so-called “development round” has been implemented. What is more, the results point to an increasing differentiation between developing countries as the more prosperous regions are slated to record relatively larger increases in real income.

The disaggregated results provided for a small set of countries broadly reinforce the above-mentioned conclusions. India is expected to register a real income gain of only $ 3.4 billion a year, which is 0.4 per cent of the baseline income in 2015. In the case of China, the corresponding figures are $ 5.6 billion and 0.2 per cent respectively. On the other hand, countries like Thailand are expected to gain $ 7.7 billion, while for Argentina, the real income gain could be nearly $ 5.0 billion.

Although the proponents of trade liberalisation have made significant claims about the gains that would arise from dropping tariff walls, the empirical evidence provided by stylised models fail to provide clinching evidence which suggests that the lesser players in the global economy would have much to gain from

Economic and Political Weekly July 14, 2007

the process. An important issue that arises in this context is whether the models have made the right predictions given that they represent a vastly simplified image of the real world. Most significantly, the theoretical basis of these models, viz, the distortion-free perfectly competitive world, needs to be reassessed.3

Indeed, most of trade theory, through the many decades it has been developing, has been at pains to evolve a credible conceptual framework, which can capture crossborder transactions between countries. One of the major challenges that trade theory has been confronted with is to provide a sound basis for the “appropriate set” of policy interventions that can accommodate the plethora of distortions that rule the real world. The use of trade protection measures has been an anathema for the economists credited with developing the so-called “pure theory” of trade. In fact, much of the debate on trade theory in the decades prior to the advent of strategic trade theory, which boldly announces the use of government interventions for realising of national policy objectives given the reality of imperfectly competitive markets, has tried to provide narrowly defined exceptions for the use of interventions. The following section provides an account of how trade theory has dealt with the issue of use of interventionist policy.

Trade Theory and Useof Interventions

The free trade world, as several generations of economists have reminded us, provides Pareto optimal outcomes. Equilibrium is reached as the marginal rate of transformation in domestic production and the marginal rate of substitution in consumption and foreign trade, are equalised. Furthermore, under assumptions of free trade, domestic prices are equalised with landed, foreign prices – and domestic prices are equated with the marginal rate of transformation in production and marginal rate of substitution in consumption. Argued in a somewhat different framework, proponents of the free trade ideal put forth the notion that the opening up of trade, from an erstwhile situation of trade restrictions, would result in global welfare maximisation in the long run. The gains would accrue as trade creates conditions for securing benefits through comparative advantage [Bhagwati 1969, p 11].

The fundamental proposition that a protagonist of free trade would make is that adjustment costs do not arise in the long-term perspective. The process through which this happens was well summarised by F W Taussig thus: “The free trader argues that if the duties were given up and the protected industries pushed out of the field by foreign competitors, the workmen engaged in them would find no less wellpaid employment elsewhere” [quoted by Stolper and Samuelson 1941]. Gottfried Haberler put the same idea indifferent words: “We may conclude that in the long run, the working class as a whole has nothing to fear from international trade, since, in the long run, labour is the least specific of all factors. It will gain by the general increase in productivity due to the international division of labour, and is not likely to seriously, lose at all by a change in the functional distribution of national income” (ibid).

Conceptualised in the terms of the twofactor framework, the meaning of the above-mentioned conclusions arrived at by Taussig and Haberler are fairly obvious. Unemployment of resources would be ruled out in a free trade world since the lowering of protection would automatically trigger an adjustment process that would result in a market clearing outcome.

These virtues of free trade notwithstanding, it was argued that use of protectionist measures could be justified under specific circumstances. In view of Haberler (1950) and subsequently Johnson (1965), one such situation would be when there was immobility of the factors of production or when factor prices suffered from rigidities.

It may be pointed out that a situation of factor immobility in relative terms, in particular involving the labour force engaged in the rural sector, is the stark reality that faces many developing countries. In these countries, although the relative importance of agriculture has declined quite significantly in recent years, which is apparent from the declining share of the sector in GDP, the share of the rural population has not declined in any meaningful manner. Table 1 captures this reality for some developing countries, including India and China.

The imbalance between the decline in agriculture’s share in GDP and the decline in the rural population is most significant in both China and India. The situation looks particularly difficult for India,which has seen a halving of agriculture’s share in GDP over the past three decades but the share of its rural population has declined by a mere 10 per cent.

This situation has emerged in many developing countries because of a structural bias against agriculture in the socalled development policies that these countries have adopted over the past several decades. One of the manifestations of the bias against agriculture was reflected in the form of distortions in the labour market. Johnson (1965) tells us that there are two reasons for such a distortion that are commonly advanced in literature on economic development, both of which pertain to distortions in the labour market. First, earnings of labour in agriculture exceed the marginal productivity of labour there, so that the industrial wage must exceed the alternative opportunity cost of labour. And two, industrial wages exceed wages in agriculture by a margin greater than can be accounted for by the disutility or higher cost of urban life.

It may be argued that most developing countries introduced the distortions in the

Table 1: Changing Importance of Agriculture and Rural Sectorin Select Developing Countries

(Per cent )

China India Indonesia Low Income Countries

Year Agriculture, Rural Agriculture, Rural Agriculture, Rural Agriculture, Rural Value Population Value Population Value Population Value Population Added (Per Cent Added (Per Cent Added (Per Cent Added (Per Cent (Per Cent of Total) (Per Cent of Total) (Per Cent of Total) (Per Cent of Total) of GDP) of GDP) of GDP) of GDP)

1970 35.2 82.6 46.1 80.1 44.9 82.5 43.6 81.3 1975 32.4 82.6 41.3 78.8 30.2 80.5 39.7 79.7 1980 30.1 80.4 38.9 77.0 24.0 78.4 36.6 77.4 1985 28.4 77.0 33.7 75.7 23.2 73.6 34.3 76.1 1990 27.0 72.3 31.3 74.5 19.4 69.7 32.4 74.7 1995 19.8 68.9 28.2 73.4 17.1 64.2 29.9 73.2 2000 14.8 64.4 23.7 72.1 15.6 58.3 26.8 71.6 Change between 1970 and 2000 (Per cent) 57.9 22.1 48.6 10.0 65.3 29.4 38.6 11.9

Source:World Development Indicators, 2006.

Economic and Political Weekly July 14, 2007 labour market by adopting policies that have provided excessive protection to industry. In many cases, agriculture was also taxed, in the sense that the imperatives such as attainment of food security and in particular, providing the population with basic food items at affordable prices was responsible for the fact that agricultural producers were unable to realise efficiency prices for the products.

The policy bias against agriculture in developing countries was reflected in the tardy deployment of the relatively scare resource, viz, capital. India stands out as a case in point. In the early 1980s, the share of agriculture in the gross capital formation in the country was close to 20 per cent, which by the turn of the century had declined to a mere 6 per cent. Quite clearly, thus, agriculture in India has been affected by domestic distortion, caused largely by the policy bias. Such circumstances, trade theorists may require interaction in the form of tariffs or subsidies or both.

Bhagwati and Ramaswami (1963) had provided a conceptual framework for the use of tariffs and subsidies in the presence of domestic distortions. Given the objective of realising an optimum solution that is characterised by the quality of the foreign rate of transformation (FRT), the domestic rate of transformation in production (DRT) and the domestic rate of substitution (DRS), Bhagwati and Ramaswami postulate that a policy permitting the attainment of maximum welfare involves a tax-cum-subsidy on domestic production. In their view, a tariff alone policy, which equates DRT and FRT would destroy the equality between DRS and FRT. By the same token, a subsidy-alone intervention would tend to establish parity between DRT and FRT but would destroy equality between DRS and DRT.

If in the earlier decades, trade theorists were addressing issues relating to distortions as exceptional cases to the free trade ideal that they stood by, in the more recent decades, the advent of strategic trade theory has changed all of that. Strategic trade theory takes on board the reality of imperfect competition that characterises the markets in which trade takes place. Based on this understanding, the strategic trade theorists have analysed various situations in which government intervention can be justified.

The original idea of strategic trade theory was propounded by Brander and Spencer (1984)4 who showed that government intervention can raise national welfare by shifting oligopoly rents from the foreign to domestic firms. Brander and Spencer argued that the grant of export subsidy would have the effect of a deterrent on foreign exports as a result of which profits of the home firm would rise more than the amount of subsidy. This would result in a rise in home income.

Over the past two decades, a large body of literature has emerged based on the foundations laid by strategic trade theory. The major contribution of these studies has been the amount of analytical insights that they have provided into the functioning of the various sectors (largely in the context of the US) in which interventions of the kind that this variant of trade theory has tried to conceptualise.5 These studies have assessed the potential gains from using strategic trade policies and have reached a consensus that carefully designed tariffs or subsidies can improve upon free

Competition Commission of India B-Wing, HUDCO VISHALA, 14 Bhikaji Cama Place, New Delhi - 110066 Soliciting Research Proposals Competition Commission of India invites research proposals from reputed research institutions on competition related issues. Details, including the research areas, Standard Research Project Agreement, Terms of Reference and ‘Check list of issues/questions for researcher’, are available on the website of the Commission (www.competitioncommission.gov.in.) Adviser (Economic) New Delhi Dated: 14.07.2007

Economic and Political Weekly July 14, 2007

Figure: Yearwise Ending Stocks of Major Cereals

2006-07 2005-06 2004-05 2003-04 2002-02 2001-02 2000-01 1999-2000 1998-99 1997-98 1996-97 1995-96 1994-95 1993-94 1992-93 1991-92 1990-91

00 50.0 100.0 150.0

(million tonnes)

200.0 250.0

Rice

Wheat

Maize • Coarse Grains

Years

Source: USDA, Production, Supply and Distribution Online (http://www.fas.usda.gov/psdonline/

psdHome.aspx)

trade in certain markets. But at the same time, the authors have emphasised the point that their findings should in no way be interpreted as a general support for prointerventionist policies.

While it is industry that has been the focus of analytical studies using strategic trade theory, there have been some attempts to look at “strategic trade” issues in agriculture [Reimer and Stiegert 2006]. Hamilton and Stiegert (2002) and Dong, Marsh and Stiegert (2006) have examined the case of the Canadian Wheat Board (CWB) in the international durum wheat market, the latter examined the CWB and Australian Barley Board (ABB) in the malting barley market[cited in Reimer and Stiegert 2006]. These studies have argued that state trading enterprises (STEs) like the CWB or ABB fit the requirements associated with strategic trade theory in at least three major ways. First, the markets for both durum wheat and malting barley are characterised by imperfect competition. While the CWB was found to be controlling 40-60 per cent of the global durum wheat market, the malting barley market was effectively controlled by the CWB and ABB. Secondly, the respective governments had made unilateral prior commitments to both the CWB and ABB. Finally, the STEs maintained legal and executive control over the instruments of strategic trade and quantity traded. This, according to the studies, gave the CWB and ABB advantage over independent firms, which may also have strategic delegation issues and asymmetric information problems.

Although available studies have indicated that the use of strategic trade theory is more of an exception, the reality seems to be at considerable variance with this point of view. Over the past several decades, governments in the developed world, in particular the US and EU have de facto used strategic trade theory to maintain their domination over global markets for major agricultural commodities.6 The instrumentalities for using strategic trade theory were provided by the farm policies that both the US and EU members countries have adopting without being subjected to multilateral discipline, since the 1950s.7 For instance, farm policy instruments are aimed at managing output in markets that have often suffered because supplies have far exceeded what markets can carry.

The use of policy instruments by the US and EU to improve their advantage in the global agricultural markets has resulted in an interesting debate in the context of the re-shaping of global agricultural policies that the WTO is currently engaged in. Initiated by developing countries, this debate makes the point that the persistence of distortions in global agricultural markets requires “strategic” interventions on their part. These interventions, they have argued, are necessary to meet key concerns relating to food security, as well as for safeguarding the livelihoods of the multitude of marginal farmers that dot the agricultural landscape in their countries. The following section looks at this developing country dimension in some detail.

Case for ‘Strategic’ Interventions

The debate on agricultural trade liberalisation that the WTO negotiations had sparked off two decades ago, have brought to the fore a range of issues that have posed serious challenges to making trade policies. Particularly significant in this context are the articulations made by developing countries that development concerns stemming from the imperatives of meeting the objectives of food security and livelihoods have to form an integral part of the new trade disciplines. In other words, what these countries have been emphasising is that the objective function of the trade policy must change from exclusive reliance on the realisation of the free trade ideal, as has been the case hitherto, to one that builds in development concerns in the process of fostering trade.

The cornerstone of this changed focus of trade policymaking, in our view, should be the proposal of developing countries to adopt instruments like the special products (SPs) and special safeguard mechanisms (SSM) that can address concerns of food security, livelihoods and rural development. By suggesting the adoption of these instruments, developing countries have emphasised the need for “strategic” interventions like the use of tariff protection to realisethe development objectives mentioned above.

Inadequacies of the understanding of concerns raised by developing countries using the traditional trade theory framework has been aptly demonstrated by Ivanic and Martin (2006) in which the authors have critically commented on the proposal to introduce SPs that developing countries have made. The authors comment that increased protection from the use of SPs “effect poverty through three broad channels”. The first is the effect of commodity prices and wages on incomes in the short

Table 2: Share of Global Exports to Production in Major Cereals

(Per cent)

Global Exports to Production 1995 1998 2000 2002 2003 2004
Rice 6 8 6 7 8 7
Wheat 23 22 24 26 25 23
Maize 17 14 15 16 15 13

Source:FAO.

Economic and Political Weekly July 14, 2007 run. The second is through the efficiency of resource allocation, and hence aggregate real national income – as resources are diverted away from the activities that yield the highest social returns into those that generate the highest market returns at distorted prices. The third is through changes in productivity – as resources are diverted away from exportoriented activities towards import replacement, productivity tends to fall.

In respect of the first point, it needs to be stated that while the authors are concerned about the detrimental effect of commodity price rise on urban consumers, most developing counties would like to use SPs to influence commodity prices and wages to benefit farm households. It may be argued that the main reason for using the instrument of SPs is to ensure a reversal of the secular decline in commodity prices, in particular, prices of commodities that are critical for providing livelihood security to farm households. In the past decades, low commodity prices have reduced farmers in developing countries to a marginalised existence and this situation can become far worse if subsidised commodities are allowed to enter developing country markets for “promoting” trade.

According to Ivanic and Martin, the second adverse effect of protecting SPs would be that resources would be “diverted away from activities that yield the highest social returns into those that generate the highest market returns at distorted prices”. We would argue that the purpose of SPs is precisely to divert resources into the agriculture, since this would yield the highest social return in the medium to long term. As indicated earlier, the policy bias against agriculture had militated against the flow of resources into the sector that supports an overwhelming majority of workforce in many developing countries, including India. This policy bias can be set right by providing adequate protection to the products that are sensitive in nature by using the mechanism of SPs.

The third concern of the authors is that SPs would result in diverting resources away from “export-oriented activities towards import replacement”, causing productivity to fall, again exposes their limited understanding of economic realities. Contrary to their understanding that SPs are to be viewed from the trade perspective, developing countries have argued that this instrument would ensure the realisation of food security and protection of livelihoods, which stand out among the major objectives of development policy. These countries have frequently argued that the twin objectives of food security and livelihood protection should be viewed as non-trade concerns.

The issue of food security has been identified as a major objective to be pursued by the global community by the Rome declaration on World Food Security and the World Food Summit Plan of Action in 1996. The summit emphasised that food security exists when “all people at all times have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life”. The Rome declaration took into consideration the multifaceted character of food security and emphasised that, “concerted national action, and effective international efforts” were needed to “supplement and reinforce national action”. The plan of action adopted by the World Food Summit proposed that “each nation must adopt a strategy consistent with its resources and capacities to achieve its individual goals and, at the same time, cooperate regionally and internationally in order to organise collective solutions to global issues of food security”. Besides emphasising the

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Economic and Political Weekly July 14, 2007

importance of national policies, the Rome declaration and the plan of action presented an interesting perspective on the role of trade in the pursuit of food security. The participating countries expressed their commitment to “strive to ensure that food, agricultural trade and overall trade policies are conducive to fostering food security for all through a fair and market oriented world trade system”. Thus, contrary to the view that imperatives of trade should be given primacy, as is the underlying theme of the received wisdom in trade policymaking, the World Food Summit emphasised that food security should be the primary concern of the global community.

The emphasis on ensuring food security by making all possible efforts at the national level to do so appear justified on at least two counts. In the first place, global trade in major commodities has not expanded during the past decade, despite the enhanced focus on trade expansion, particularly since the establishment of the WTO. Table 2 captures this fact.

As can be seen from Table 2, rice has been the least traded among major cereals and global exports as a share of production have not exceeded 10 per cent, since 1995. Even in the case of wheat, which is the most traded among major cereals, the share of global exports has not been significantly higher than a quarter of the global production. Given such a scenario, countries would indeed be risking their future if they decide to rely on the global market for their food supplies.

This point is further corroborated by the fact that the global stocks of major cereals have been declining rather sharply since the late 1990s. The figure captures this phenomenon.

It can be seen from the figure that global stocks for the major cereals have experienced steep declines since the late 1990s to reach the lowest levels since 1990, the period for which data have been presented in the table. The sharpest decline has been in case of maize – global stocks have declined by nearly 54 per cent since 1999-2000.

The point we have tried to make in the foregoing is the following: trade policymakers would have to recognise that the strategic interventions that seek to address development concerns must be an integral part of the framework that they develop. Received literature has often failed to distinguish between policy interventions of the kind suggested above and the use of protectionist measures for supporting the dominant interest groups. This discourse has had significant influence over trade policymaking in the past,and as this paper has indicated, there is an urgent need to cast this influence aside.

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Email: bisjit@gmail.com

Notes

[This paper was prepared as part of the implementation of the Asia-Pacific Research and Training Network on Trade (ARTNeT) Research Programme 2005-06 and with the aid of a grant from the International Development Research Centre (IDRC, Canada). The technical support of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) is gratefully acknowledged. An earlier version of this paper was published as ARTNeT Policy Brief No 11 and is available at www.artnetontrade.org. The views expressed are personal.]

1 The negotiating mandate provided for:

(i) improving market access through, inter alia, the reduction of import barriers; (ii) improving the competitive environment by increasing discipline on the use of all direct and indirect subsidies and other measures affecting directly or indirectly agricultural trade, including the phased reduction of their negative effects and dealing with their causes; (iii) minimising the adverse effects that sanitary and phytosanitary regulations and barriers can have on trade in agriculture, taking into account the relevant international agreements.

2 The most quoted of these papers are by Kym Anderson, Will Martin and Dominique van der Mensbrugghe. See references for details.

3 For a critique see, Dhar (2006). 4 See also Krugman (2000) 5 For a comprehensive survey see Brander (1995). 6 While the US and the members of the EU

control nearly 50 per cent of wheat exports, the US has a share in excess of 50 per cent in the exports of soybeans and maize.

7 Although the US has been using its farm policy to provide strategic advantage to its farm sector since the 1930s, it received legal sanction to use the farm policy instruments after the GATT contracting parties agreed to grant waiver from the application of articles II and XI of the GATT [see GATT 1955]. In 1957, the Treaty of Rome (known more often as the Treaty establishing the European Economic Community) established the basis of the Common Agricultural Policy (CAP) that has directed agricultural policy of the EU member states.

References

Anderson, Kym, Will Martin and Dominique van der Mensbrugghe (2006): ‘Market and Welfare Implications of Doha Reform Scenarios’, Kym Anderson and Will Martin (eds), Agricultural Trade Reform and the Doha Development Agenda, Palgrave Macmillan London and World Bank, Washington DC (available at: http://siteresources.worldbank.org/ INTRANETTRADE/Resources/239054-1109114763805/Ch12_Anderson MartinMen sbrugghe.pdf).

Anderson, Kym, Will Martin and Dominique van der Mensbrugghe (2005): ‘Distortions to World Trade: Impacts on Agricultural Markets and Farm Incomes’, CIES Discussion Paper 0519, University of Adelaide, July.

Bhagwati, Jagdish (1969): International Trade: Selected Readings, Penguin, Middlesex.

Bhagwati, Jagdish and V K Ramaswami (1963): ‘Domestic Distortions, Tariffs and the Theory of Optimum Subsidy’, reproduced in AEA (1968), Readings in International Economics, George Allen and Unwin, London.

Brander, J A and B J Spencer (1984): ‘Tariff Protection and Imperfect Competition’ in H Kierzkowski (ed), Monopolistic Competition in International Trade, Oxford University Press, Oxford.

Dhar, Biswajit (2006): ‘Modelling the Doha Round Outcome: A Critical View’, Asia-Pacific Research and Training Network on Trade, Working Paper Series, No 6.

Dong, F, T Marsh and K Stiegert (2006): ‘State Trading Enterprises in a Differentiated Environment: The Case of Global Malting Barley Markets’, American Journal of Agricultural Economics, Vol 88, No 1, pp 90-103.

FAO, FAOSTAT (http://faostat.fao.org/site/352/ default.aspx).

GATT (1955): ‘Report of Working Party 6 on the United States Waiver’, L/339.

Haberler, Gottfried (1950): ‘Some Problems in the Pure Theory of International Trade’, Economic Journal, June, reproduced in American Economic Association, Readings in the Theory of International Trade, 1961.

Hamilton, S F and K Stiegert (2002): ‘An Empirical Test of the Rent-Shifting Hypothesis: The Case of State Trading Enterprises’, Journal of International Economics, Vol 58, No 1, pp 135-37.

Ivanic, Maros and Will Martin (2006): ‘Implications of Agricultural Special Products for Poverty in Low Income Countries’, World Bank (mimeo).

Johnson, Harry G (1965): ‘Optimal Trade Intervention in the Presence of Domestic Distortions’ in R E Caves, P B Kenen and H G Johnson (eds), Trade Growth and the Balance of Payments, North Holland.

Krugman, Paul R (2000): Rethinking International Trade, The MIT Press, London.

Reimer, Jeffery J and Kyle Stiegert (2006): ‘Imperfect Competition and Strategic Trade Theory: Evidence for International Food and Agricultural Markets’, Journal of Agricultural and Food Industrial Organisation, Vol 4, Article 6.

Stolper, Wolfgang and Paul A Samuelson (1941): ‘Protection and Real Wages’ in American Economic Association, Readings in the Theory of International Trade, 1961.

USDA, Production, Supply and Distribution Online (http://www.fas.usda.gov/psdonline/ psdHome.aspx)

van der Mensbrugghe, Dominique (2004): ‘LINKAGE Technical Reference Document: Version 6.0’, mimeo, The World Bank, Washington DC, (available at: http:// siteresources.worldbank.org/ INTPROSPECTS/Resources/3349341100792545130/LinkageTechNote.pdf)

Economic and Political Weekly July 14, 2007

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