An economy-wide treatment is important for many of the problems considered here because the shocks or policy changes under consideration are likely to affect not only producer returns and prices but also factor prices, and particularly the wage rate for unskilled labor that is very important for welfare impacts on low-income households Ivanic and Martin b. In many cases, the detail included in the large-scale models will be extremely important for capturing policy reforms, especially if appropriate approaches to aggregating these details can be used e.
In other cases, much simpler approaches will make the mechanisms under study much more transparent e. Tariffs on inputs used in processing may, for example, result in the non-existence—or the disappearance—of a processing activity that would otherwise have been highly-profitable. This may result in the export of unprocessed products where processed products would otherwise have made a greater contribution to the economy, or to the non-existence of the primary production activity for lack of a processing chain.
Value chain analysis may also have implications for nutritional outcomes see Hawkes and Ruel From the supply side, the much greater availability of survey and census data has important implications for research, as does the greater availability of geo-referenced data.
Improvements in modeling approaches that take advantage of these data also have important consequences. The availability of household data that provide information on the income sources and expenditure patterns of individual households allows researchers to better assess the impacts of reforms and exogenous shocks on household welfare see, e.
Household data may also allow investigation of the impacts of marketing costs on adoption of more profitable export commodities, rather than continuing with subsistence production Balat, Brambilla, and Porto Minten et al. The availability of geo-referenced data on agricultural production and estimates of the productivity of different crops by agroecological zone similarly allows estimates of the impacts of different shocks on the global supply and demand for agricultural products see Costinot, Donaldson, and Smith The availability of transaction-level data on sales by firms to domestic and export markets allows investigation of the Melitz type productivity gains from trade reform Olper, Curzi, and Raimondi The recent upsurge in the use of randomized control trials has had relatively little impact on research in international trade.
As noted by Goldberg and Pavcnik , the economy-wide nature of trade reforms has resulted in their being relatively few applications of this approach within trade policy analysis, although it has been used for reforms such as export promotion, where interventions are firm-specific and can be targeted.
Some innovative new work combines impact evaluation and broader models of local economies to capture the broader impacts of interventions at the household levels Taylor and Filipski Another major development in international trade is the wider use of gravity-type models, and particularly the Eaton and Kortum model, to assess the welfare impacts of trade policy and other changes Head and Mayer Tombe applies this approach to capturing the interaction between trade costs and productivity differentials between agriculture and other sectors in developing countries.
Heerman, Arita, and Munisamy use this approach to estimate agricultural trade costs in the Asia-Pacific region, and assess the implications of different regional trade initiatives in that region.
Setting the Stage: Key Concepts and Issues in: Agriculture, Price Stabilisation and Trade Rules
Costinot and Donaldson use the Eaton-Kortum model together with GAEZ data to assess the productivity gains from increased agricultural trade within the United States, finding these gains to be in the same order of magnitude as the gains from increases in farm-level productivity. It seems likely that the use of these approaches will increase in the coming years because of their ability to provide answers to many policy questions, such as the gains from improvements in infrastructure and regionally-differentiated changes in climatic conditions.
A related development is the revival of the Ricardian model or, more specifically, the development of Ricardo-Roy models that allow compact representation of agricultural production technology Costinot and Vogel These approaches were used in Costinot, Donaldson, and Smith and Gouel and Laborde to specify global agricultural production and estimate the implications of climate change at both finely-disaggregated levels of production and globally.
Much of what needs to be done to provide research that will inform the upcoming policy challenges in agricultural trade and development follows the standard pattern for applied economic research: a identify the decision makers who need to be influenced if policy improvements are to be made, b identify the key questions that need to be answered if policies are to be improved, c , identify the appropriate theoretical framework for answering those questions, d identify the key parameters and data needed to answer the question s , e estimate the needed parameters or test the underlying hypotheses that allow the question s to be answered, f present the results in a form that allows scientific verification, and g present the conclusions in a form that allows communication with the policy makers who would be in a position to implement the changes suggested by policy analysis.
For many policy questions, a key difference from the past will be a much greater need to communicate research results to policy makers in developing countries. This will be particularly the case for trade policy negotiations where the much greater importance of developing countries in world trade and the increase in their use of trade barriers mean that developing countries will be much more important in both multilateral and regional trade negotiations. By the time the Doha Agenda was launched in , it had become clear that this was no longer sufficient, but neither the proposals under discussion nor the research communication had fully adapted to this change Anderson and Martin For questions about food security and nutrition, the focus will also be strongly on developing countries.
The answers to many other questions will, however, depend on outcomes in both developed and developing countries. Assessing the impacts of climate change on agriculture, for instance, will require paying considerable attention to impacts in both poor and rich countries.
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A key difference is that climate change in poor countries is much more likely to put at risk the livelihoods of very poor people Jacoby, Rabassa, and Skoufias With many pressing questions and new tools available to address them, it seems likely that international agricultural trade will be a very active area for research in the coming years. Approaches to research that include careful field work to ensure that the questions are correctly identified and the analysis is well-founded are likely to be much more useful than approaches that simply apply off-the-shelf techniques.
Further, publication in high-quality refereed journals will continue to convey a strong quality signal, even though the peer-review system is coming under pressure because improvements in the productivity of researchers as analysts and authors are unmatched by improvements in their productivity as reviewers and readers. A key, continuing challenge will be to reach the policy makers whose decisions would benefit from the answers provided by research.
Here, the gold standard is to identify and, if possible, engage with decision makers before producing research. Not only does this help refine the questions, but it also helps to communicate the answers effectively. Where this is not possible, or the audience is not so clearly defined, then it becomes necessary to identify the questions as well as possible, and to communicate the results as effectively as possible to what are likely to be multiple audiences.
International trade and development issues are likely to be important for agricultural and applied economists in the coming years. This is because there is a set of important policy questions for which answers are likely to be required. Some of the broad questions, such as the driving forces for agricultural markets, are not new, although the specific hypotheses that need to be examined are. The trade policy agenda seems likely to be quite different, given the emergence of questions such as how the U.
But important questions will remain at national and regional levels, and key challenges such as the collective action problems associated with high and volatile trade distortions will remain. Analysts will be able to confront the policy questions in international trade and development with a new set of data and analytical tools. Greater availability of transaction-level data will allow the investigation of many key hypotheses about trade and productivity growth, while improved availability of household survey data and geospatial data and models will allow assessment of impacts at the householdand sometimes even the individual levels.
The challenges of effectively communicating research results will remain, although best-practice approaches such as engaging with decision makers before undertaking the analysis may help to better target research and to disseminate it more effectively. All remaining errors are my responsibility. Oxford University Press is a department of the University of Oxford.
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Price Stabilization on World Agricultural Markets: An Application to the World Market for Sugar
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Why is International Trade a Priority Area?
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