56133

                     Five Decades of Distortions to
                            Agricultural Incentives




                                          Kym Anderson



                                        School of Economics
                                       University of Adelaide
                                     Adelaide, SA 5005, Australia
                                       Phone +61 8 8303 4712
                                    kym.anderson@adelaide.edu.au




Agricultural Distortions Working Paper 76, revised March 2009

This is a product of a research project on Distortions to Agricultural Incentives, under the leadership of Kym
Anderson of the World Bank's Development Research Group (www.worldbank.org/agdistortions). The author
acknowledges the invaluable help with data management by Ernesto Valenzuela and with data compilation by
Johanna Croser, Esteban Jara, Marianne Kurzweil, Signe Nelgen, Francesca de Nicola and Damiano Sandri,
helpful comments from workshop participants, and funding from World Bank Trust Funds provided by the
governments of Ireland, Japan, the Netherlands (BNPP) and the United Kingdom (DfID) as well as the
Rockefeller Foundation for use of the Bellagio Conference Center. This paper without the Appendix will appear
as Ch. 1 in Distortions to Agricultural Incentives: A Global Perspective, 1955 to 2007, edited by K. Anderson,
London: Palgrave Macmillan and Washington DC: World Bank (forthcoming 2009).

This is part of a Working Paper series (see www.worldbank.org/agdistortions) that is designed to promptly
disseminate the findings of work in progress for comment before they are finalized. The views expressed are the
authors' alone and not necessarily those of the World Bank and its Executive Directors, nor the countries they
represent, nor of the institutions providing funds for this research project.
                                                2




                  Five Decades of Distortions to
                         Agricultural Incentives

                                       Kym Anderson


"When you can measure what you are speaking about, and express it in numbers, you know
something about it; but when you cannot measure it, when you cannot express it in numbers,
your knowledge is of a meagre and unsatisfactory kind; it may be the beginning of
knowledge, but you have scarcely, in your thoughts, advanced to the stage of science."
  -- Sir William Thompson (1889, pp.73-74).




Every decade or two, food becomes newsworthy globally. Mostly it is about a price spike,
either upwards (hurting consumers, as in 1973 and 2008) or downwards (hurting farmers in
open economies, as in 1986). And most such price spikes are a consequence of major policy
shifts, since local weather-induced supply shocks in a many-country trading world tend to
offset each other. In 1986, for example, it was the food export subsidy war between Western
Europe and North America that drove real international food prices to their lowest level since
1930. The price hikes of 1973 and 2008, by contrast, were partly a consequence of a
unilateral policy decisions by a single large player. In 1973, the Soviet Union departed from
its policy of self-reliance and entered the international grain market in a significant way to
offset a domestic shortfall. In 2008 the United States and European Union decided to
subsidize biofuel production and set mandates/targets for its use domestically. On both
occasions, other governments imposed export restrictions to insulate somewhat their
consumers from the price rise, which pushed international prices even higher and drove more
exporting countries to follow suit. Policy thus contributes to market volatility. That is
undesirable because volatility around the long-run trend terms of trade slows economic
growth (Williamson 2008). Yet trade policy measures are very blunt instruments for dealing
                                                       3


with volatility (especially in the modern era of myriad financial instruments for risk
management), and their beggar-thy-neighbor feature diminishes the international public good
contribution of trade openness.
         Less newsworthy to the mass media, but probably far more important in its effect on
the long-run growth and distribution of global welfare, are gradual policy developments in
individual countries and their combined effect on other countries via the trend terms of trade
in international markets. 1 This study is about one such set of trade-related policy
developments that, over the past half century, has had dramatic effects ­ in some ways
negative, in others positive ­ on distortions to agricultural incentives and thus also consumer
prices for food. Given the importance of farm and food prices for the world's poor, those
policy-imposed distortions not only affect economic growth but also income inequality and
poverty.
         The benefits from specialization in production and exchange have been recognized for
millennia, yet governments have chosen to restrict international trade, including in
agricultural goods. Sometimes it would be via export taxes, to raise government revenue or to
lower the price of food for domestic consumers. An early example was the tax on wine
exports from Greece in the first century BC and from France and Germany in the dark ages
(Johnson 1989). More commonly it took the form of import duties or bans, often as part of a
broader foreign policy, as with Britain's imports of wine from France versus Portugal and
Spain in the 1700s and 1800s (Nye 2007). The practice was so striking that wine was used as
the example of British imports in the first treatise on the theory of comparative advantage
(Ricardo 1817).
         For advanced economies the most common reason for farm trade restrictions in the
past two centuries has been to protect domestic producers from import competition as they
come under competitive pressure to shed labor in the course of economic development. But
in the process those protective measures hurt not only domestic consumers and exporters of
other products but also foreign producers and traders of farm products, and they reduce
national and global economic welfare. For decades agricultural protection and subsidies in
high-income (and some middle-income) countries have been depressing international prices
of farm products, which lowers the earnings of farmers and associated rural businesses in
developing countries. The Haberler (1958) report to GATT Contracting Parties forewarned

1
  Some of the more transformational policy developments happen quite promptly, such as the end of
colonization around 1960; the creation of the Common Agricultural Policy in Europe in 1962; the floating of
exchange rates and associated liberalization, deregualtion, privatization and democratization in the mid-1980s;
the opening of China from 1979; and the demise of the Soviet Union in 1991
                                                       4


that such distortions might worsen, and indeed they did between the 1950s and the early
1980s (Anderson, Hayami and Others 1986), thereby adding to global inequality and poverty
because three-quarters of the world's poorest people depend directly or indirectly on
agriculture for their main income (World Bank 2007). 2
        But in addition to this external policy influence on rural poverty, the governments of
many developing countries have directly taxed their farmers over the past half-century. A
well-known example is the taxing of exports of plantation crops in post-colonial Africa
(Bates 1981). At the same time, many developing countries chose also to pursue an import-
substituting industrialization strategy, predominantly by restricting imports of manufactures,
and to overvalue their currency. Together those measures indirectly taxed producers of other
tradable products in developing economies, by far the most numerous of them being farmers
(Krueger, Schiff and Valdés 1988, 1991). Thus the price incentives facing farmers in many
developing countries have been depressed by both own-country and other countries'
agricultural price and international trade policies.
        This disarray in world agriculture, as D. Gale Johnson (1991) described it in the title
of his seminal book, means there has been over-production of farm products in high-income
countries and under-production in more-needy developing countries. It also means there has
been less international trade in farm products than would be the case under free trade, thereby
thinning markets for these weather-dependent products and thus making them more volatile.
Using a stochastic model of world food markets, Tyers and Anderson (1992, Table 6.14)
found that instability of international food prices in the early 1980s was three times greater
than it would have been under free trade in those products.
        During the past quarter century, however, numerous countries have begun to reform
their agricultural price and trade policies. That has raised the extent to which farm products
are traded internationally (see Appendix Table 1.A), but not nearly as fast as globalization
has proceeded in the non-farm sectors of the world's economies. 3 A key purpose of the
present study is to examine empirically the extent to which those reforms have reversed the
above-mentioned policy developments of the previous three decades. True, empirical


2
  According to the FAOSTAT (www.fao.org), currently less than 15 million relatively wealthy farmers in
developed countries, with an average of almost 80 hectares per worker, are being helped at the expense of not
only consumers and taxpayers in those rich countries but also the majority of the 1.3 billion relatively
impoverished farmers and their large families in developing countries who, on average, have to earn a living
from just 2.5 hectares per worker.
3
  In the two decades to 2000-04, the value of global exports as a share of GDP rose from 19 to 26 percent, even
though most of GDP is nontradable governmental and other services (World Bank 2007, as summarized in
Sandri, Valenzuela and Anderson 2007).
                                                        5


indicators of farm sector support (called Producer Support Estimates or PSEs) have been
provided in a consistent way for 20 years by the Secretariat of the OECD (2008a) for its 30
member countries. However, there are no comprehensive time series rates of assistance to
producers of nonagricultural goods to compare with the PSEs, nor do they tell us what
happened in those advanced economies in earlier decades ­ which are of more immediate
relevance if we are to see how the two groups of countries' policies developed during similar
stages of development. As for developing countries, almost no comparable time series
estimates have been generated since the Krueger, Schiff and Valdes (1988) study, which
covered the 1960-1985 period for just 17 developing countries. 4 An exception is a new set of
estimates of nominal rates of protection for key farm products in China, India, Indonesia and
Vietnam since 1985 (Orden et al. 2007). The OECD (2006) also has released PSEs for Brazil,
China and South Africa as well as several more East European countries. The present study
complements and extends those two institutions' efforts and the seminal Krueger, Schiff and
Valdés (1988) study. It builds on them by providing similar estimates for other significant
(including many low-income) developing economies, by developing and estimating new,
more comprehensive policy indicators, and by employing the calculated price wedges in a
global economy wide model to estimate the effects of recent and prospective policy
developments.
         These estimates can be helpful, and are in numerous chapters below, in addressing
such questions as the following: Where is there still a policy bias against agricultural
production? To what extent has there been overshooting in the sense that some developing-
country food producers are now being protected from import competition along the lines of
the examples of earlier-industrializing Europe and Japan? What are the political economy
forces behind the more-successful reformers, and how do they compare with those in less-
successful countries where major distortions in agricultural incentives remain? Over the past
two decades, how important have domestic political forces been in bringing about reform
relative to international forces (such as loan conditionality, rounds of multilateral trade
negotiations within the General Agreement on Tariffs and Trade, regional integration
agreements, accession to the World Trade Organization, and the globalization of
supermarkets and other firms along the value chain) and compared with forces operating in

4
  A nine-year update for the Latin American countries in the Krueger, Schiff and Valdés sample by the same
country authors, and a comparable study of seven central and eastern European countries, contain estimates at
least of direct agricultural distortions (see Valdés 1996, 2000). The Krueger, Schiff and Valdés (1991) chapters
on Ghana and Sri Lanka have protection estimates back to 1955, as does the study by Anderson, Hayami and
Others (1986) for Korea and Taiwan (and Japan, and much earlier in the case of rice).
                                                      6


earlier decades? What explains the pattern of distortions across industries and the choice of
support or tax instruments within the agricultural sector of each country? What policy lessons
and market implications may be drawn from these differing experiences with a view to
ensuring better growth-enhancing and poverty-reducing outcomes--including less
overshooting that results in protectionist regimes--in still-distorted economies during their
reforms in the future?
        The study is timely for at least three reasons. One is because the World Trade
Organization (WTO) is in the midst of the Doha round of multilateral trade negotiations, and
agricultural policy reform is one of the most contentious issues in those talks. Indeed
economy-wide modeling has suggested that as much as two-thirds of the global welfare gains
from removing all merchandise trade restrictions and agricultural subsidies would come from
reform of agricultural policies, even though agriculture accounts for less than 8 percent of
world GDP and exports (Anderson, Martin and van der Mensbrugghe 2006). Second, poorer
countries and their development partners are striving to achieve their United Nations­
encouraged Millennium Development Goals by 2015, the prime ones being the alleviation of
hunger and poverty. And third, the outputs of the study are timely also because world food
prices have spiked in 2008 at very high levels and governments in some developing
countries, in their panic to deal with the inevitable protests from consumers, have reacted in
far from optimal ways. Such spikes have occurred in the past, most notably in 1973-74, and
lessons as to what policy responses work better than others can be drawn from such past
experiences.
        The present study includes 75 countries that together account for 92 percent of the
world's population and agricultural GDP and 95 percent of total GDP. The sample countries
also account for more than 85 percent of farm production and employment in each of Africa,
Asia, Latin America and the transition economies of Europe and Central Asia, and their
spectrum of per capita incomes ranges from the poorest (Zimbabwe and Ethiopia) to among
the richest (Norway). 5 Nominal rates of assistance and consumer tax equivalents (NRAs and
CTEs) are estimated for more than 70 different products, with an average of almost a dozen
per country. In aggregate the coverage represents around 70 percent of the gross value of
agricultural production in the focus countries, and just under two-thirds of global farm
production valued at undistorted prices over the period covered. Not all countries had data for


5
 See Appendix B. The only countries not well represented in the sample are those in the Middle East and the
many small ones, but in total the omitted countries account for less than 5 percent of the global economy.
                                                      7


the entire 1955-2007 period, but the average number of years covered is 41 per country. 6 Of
the world's 30 most valuable agricultural products, the NRAs cover 77 percent of global
output, ranging from two-thirds for livestock, three-quarters for oilseeds and tropical crops,
and five-sixths for grains and tubers. Those products represent an even higher share (85
percent) of global agricultural exports (see Appendix B for details).
        Having such a comprehensive coverage of countries, products and years offers the
prospect of obtaining a reliable picture of both long-term trends in policies, and annual
fluctuations around those trends, for individual countries and commodities as well as for
country groups, regions, and the world as a whole. The results can also serve as inputs into
explanations of why government policies evolved as they did, and can thereby contribute to
policy dialogues because, as Stigler (1975, p. ix) wrote, "Until we understand why our society
adopts its policies, we will be poorly equipped to give useful advice on how to change those
policies".
        This chapter begins with a brief summary of the long history of national distortions to
agricultural markets. It then outlines the methodology used to generate annual indicators of
the extent of government interventions in markets, details of which are provided in Anderson
et al. (2008a,b) and Appendix A. A description of the economies under study and their
economic growth and structural changes over recent decades is then briefly presented as a
preface to the main section of the chapter, in which the NRA and CTE estimates are
summarized across regions and over the decades since the 1950s. These estimates are
discussed in far more detail in the regional chapters that follow. A summary is also provided
of an additional set of indicators of agricultural price distortions presented in Chapter 11 that
are based on the trade restrictiveness index first developed by Anderson and Neary (2005). In
Chapter 12 the focus shifts from countries to commodities, and all the various distortion
indicators are used to provide a sense of how distorted are each of the key farm commodity
markets globally. Then chapter 13 uses the study's NRA and CTE estimates to provide a new
set of results from a global economy-wide model that attempts to quantify the impacts on
global markets, net farm incomes and welfare of the reforms since the early 1980s and of the
policies still in place as of 2004. The chapter concludes by drawing on the lessons learned to
speculate on the prospects for further reducing the disarray in world agricultural markets.

6
 By way of comparison, the seminal multi-country study of agricultural pricing policy by Krueger, Schiff and
Valdes (1991) covered an average of 23 years to the mid-1980s for its 18 focus countries that accounted for 5-6
percent of the global agricultural output; and the producer and consumer support estimates of the OECD (2008a)
cover 22 years for its 30 countries that account for just over one-quarter of the world's agricultural output
valued at undistorted prices.
                                               8




National Distortions to Farmer Incentives: The Long History, Briefly




While much government intervention in agricultural trade over the centuries has been aimed
at stabilizing domestic food prices and supplies, there has been a general tendency for poor
agrarian economies to tax agriculture relative to other sectors. Then as nations industrialized,
their policy regimes have tended to gradually change from negatively to positively assisting
farmers relative to other producers (and from subsidizing to taxing food consumers).

       Consider Britain, the first country to have an industrial revolution. Prior to that
revolution ­ from the late 1100s to the 1660s ­ Britain used export taxes and licenses to
prevent domestic food prices from rising excessively. But during 1660-90 a series of Acts
gradually raised food import duties (making imports prohibitive under most circumstances)
and reduced export restrictions on grain. These provisions that were made even more
protective of British farmers by the Corn Laws of 1815. The famous repeal of the Corn Laws
in the mid-1840s is often said to have heralded a period of relatively unrestricted food trade
for Britain, although even then protection was retained for another generation for breweries
and distilleries ­ and hence grain producers ­ via restrictions on imports of wine and spirits.
According to Nye (2007), it was only after the passage of the 1860 Anglo-French Treaty of
Commerce that Britain moved closer to freer trade than France, and that other European
countries began to open up. But then agricultural protection returned in the 1930s and
steadily increased over the next five decades. Indeed on the Continent the period of freer
trade in the 19th century was quite short for some countries, and agricultural protection levels
in those countries throughout the 20th century were somewhat higher on average than in
Britain.
       Kindleberger (1975) describes how the nineteenth century free trade movements in
Europe reflected the national economic, political and sociological conditions of the time.
Agricultural trade reform was less difficult for countries such as Britain with overseas
territories that could provide the metropole with a ready supply of farm products. The fall in
the price of grain imports from America in the 1870s and 1880s provided a challenge for all,
however. Denmark coped well by moving more into livestock production to take advantage
of cheaper grain. Italians coped by sending many of their relatives to the New World.
                                                 9


Farmers in France and Germany successfully sought protection from imports, however, and
so began the post-industrial-revolution growth of agricultural protectionism in densely
populated countries. Meanwhile, tariffs on West European imports of manufactures were
progressively reduced after the GATT came into force in the late 1940s, thereby adding to the
encouragement of agricultural relative to manufacturing production. (Lindert 1991; Anderson
1995).
         Japan provides an even more striking example of the tendency to switch from taxing
to increasingly assisting agriculture relative to other industries. Its industrialization began
later than in Europe, after the opening up of the economy following the Meiji Restoration in
1868. By 1900 Japan had switched from being a small net exporter of food to becoming
increasingly dependent on imports of rice (its main staple food and responsible for more than
half the value of domestic food production). This was followed by calls from farmers and
their supporters for rice import controls. Their calls were matched by equally vigorous calls
from manufacturing and commercial groups for unrestricted food trade, since the price of rice
at that time was a major determinant of real wages in the nonfarm sector. The heated debates
were not unlike those that led to the repeal of the Corn Laws in Britain six decades earlier. In
Japan, however, the forces of protection triumphed, and a tariff was imposed on rice imports
from 1904. That tariff then gradually rose over time, raising the domestic price of rice to
more than 30 per cent above the import price during World War I. Even when there were
food riots because of shortages and high rice prices just after that war, the Japanese
government's response was not to reduce protection but instead to extend it to its colonies and
to shift from a national to an imperial rice self-sufficiency policy. That involved accelerated
investments in agricultural development in the colonies of Korea and Taiwan behind an ever-
higher external tariff wall that by the latter 1930s had driven imperial rice prices to more than
60 per cent above those in international markets (Anderson and Tyers 1992). After the Pacific
War ended and Japan lost its colonies, its agricultural protection growth resumed and spread
from rice to an ever-wider range of farm products.
         The other high-income countries were settled by Europeans relatively recently and are
far less-densely populated. They therefore have had a strong comparative advantage in farm
products for most of their history following Caucasian settlement, and so have felt less need
to protect their farmers than Europe or Northeast Asia. Indeed Australia and New Zealand
until the present decade have tended ­ like developing countries ­ to have adopted policies
that discriminated against their farmers (Anderson, Lloyd and MacLaren 2007).
                                               10


       In South Korea and Taiwan in the 1950s, as in many newly independent developing
countries, an import-substituting industrialization strategy was initially adopted, which
harmed agriculture. But in those two economies ­ unlike in most other developing countries ­
that policy was replaced in the early 1960s with a more-neutral trade policy that resulted in
their very rapid export-oriented industrialization. That development strategy in those densely
populated economies imposed competitive pressure on the farm sector which, just as in Japan
in earlier decades, prompted farmers to lobby (successfully, as it happened) for ever-higher
levels of protection from import protection (Anderson, Hayami and Others 1986, Ch. 2).
       Many less-advanced and less-rapidly growing developing countries not only adopted
import-substituting industrialization strategies in the late 1950s/early 1960s (Little Scitovsky
and Scott 1970; Balassa and Associates 1971) but also imposed direct taxes on their exports
of farm products. It was common in the 1950s and 1960s and in some cases through to the
1980s also to use dual or multiple exchange rates so as to indirectly tax both exporters and
importers (Bhagwati 1978, Krueger 1978). This added to the anti-trade bias of developing
countries' trade policies. Certainly within the agricultural sector of each country, import-
competing industries tended to enjoy more government support than those that were more
competitive internationally (Krueger, Schiff and Valdés 1988; Herrmann et al. 1992; Thiele
2004). The Krueger et al. study also reveals that, at least up to the mid-1980s, direct
disincentives for farmers such as agricultural export taxes were less important than indirect
disincentives in the form of import protection for the manufacturing sector or overvalued
exchange rates, both of which attracted resources away from agricultural industries producing
tradable products.
       In short, historically countries have tended to gradually change from taxing to
subsidizing agriculture increasingly relative to other sectors in the course of their economic
development although less so, and at a later stage of development, the stronger a country's
comparative advantage in agriculture (Anderson, Hayami and Others 1986; Lindert 1991).
Hence at any point in time farmers in poor countries tended to face depressed terms of trade
relative to product prices in international markets, while the opposite was true for farmers in
rich countries (Anderson 1995). Again the exceptions were rich countries with an extreme
comparative advantage in agriculture (Australia, New Zealand).
       While that policy history of developing countries is now well known, and has been
documented extensively in previous surveys, less well-known is the extent to which many
emerging economies have belatedly followed the example of South Korea and Taiwan in
abandoning import-substitution and opening their economies. Some (e.g., Chile) started in the
                                                      11


1970s while others (e.g., India) did not do so in a sustained way until the 1990s. Some have
adopted a very gradual pace of reform, with occasional reversals, while others have moved
rapidly to open markets. And some have adopted the rhetoric of reform but in practice have
done little to free up their economies. To get a clear sense of the overall impact of these
reform attempts, there is no substitute for empirical analysis that quantifies over time the
nature and degree of market intervention by governments.




Methodology for Measuring Price Distortions 7




The main focus of the present study's methodology is on government-imposed distortions
that create a gap between domestic prices and what they would be under free markets. Since
it is not possible to understand the characteristics of agricultural development with a sectoral
view alone, the project not only estimates the effects of direct agricultural policy measures
(including distortions in the foreign exchange market), but it also generates estimates of
distortions in non-agricultural sectors for comparative evaluation.
        Specifically, we compute the Nominal Rate of Assistance (NRA) for each farm
product as the percentage by which government policies have raised gross returns to farmers
above what they would be without the government's intervention (or lowered them, if
NRA<0). We include any product-specific input subsidies in that NRA. A weighted average
NRA for all covered products is derived using the value of production at undistorted prices as
weights (unlike the producer and consumer support estimates (PSEs and CSEs) computed by
OECD (2008a) which are expressed as a percentage of the distorted price). To that NRA for
covered products is added a `guesstimate' of the NRA for non-covered products (on average
around 30 pecent of the total) and an estimate of the NRA from non-product-specific forms
of assistance or taxation. Since the 1980s some high-income governments have also provided
so-called `decoupled' assistance to farmers but, because that support in principle does not
distort resource allocation, its NRA has been computed separately and is not included for
direct comparison with the NRAs for other sectors or for developing countries.8 Each farm

7
  Only a brief summary of the methodology is provided here. For details see Anderson et al. (2008a,b) or
Appendix A.
8
  The extent to which a payment is production-neutral (the degree of decoupling) differs depending on the way it
is administered and the expectations of the recipient (Thompson, Dewbre and Martini 2007). No attempt here is
made to evaluate the extent of the distortion that might still be present as policies are decoupled from output
                                                      12


industry is classified either as import-competing, or a producer of exportables, or as
producing a nontradable (with its status sometimes changing over the years), so as to generate
for each year the weighted average NRAs for the two different groups of covered tradable
farm products. We also generate a production-weighted average NRA for nonagricultural
tradables, for comparison with that for agricultural tradables via the calculation of a
percentage Relative Rate of Assistance (RRA), defined as:
        RRA = 100*[(100+NRAagt)/(100+NRAnonagt)-1]
where NRAagt and NRAnonagt are the percentage NRAs for the tradables parts of the
agricultural (including non-covered) and non-agricultural sectors, respectively. 9 Since the
NRA cannot be less than -100 percent if producers are to earn anything, neither can the RRA
(since the weighted average NRAnonagt is non-negative in all our country case studies). And
if both of those sectors are equally assisted, the RRA is zero. This measure is useful in that if
it is below (above) zero, it provides an internationally comparable indication of the extent to
which a country's sectoral policy regime has an anti- (pro-)agricultural bias.
        This approach is not well suited to analysis of the policies of Europe's or Asia's
former socialist economies prior to their reform era, because prices then played only an
accounting function and currency exchange rates were enormously distorted. During their
reform era, however, the price comparison approach provides as valuable a set of indicators
for them as for other market economies of distortions to incentives for farm production,
consumption and trade, and of the income transfers associated with interventions. 10
        In addition to the mean NRA, a measure of the dispersion or variability of the NRA
estimates across the covered farm products also is generated for each economy. The cost of
government policy distortions to incentives in terms of resource misallocation tend to be
greater the greater the degree of substitution in production. In the case of agriculture which
involves the use of farm land that is sector-specific but transferable among farm activities, the

price and quantity produced. Rather, we include as `decoupled' the value the OECD estimates under certain
categories of support. For the years 1979-85 there was just one category, called `direct payments'; from 1986,
those payments are specified to comprise the OECD's items C (payments based on area planted/animal
numbers), D (payments based on historical entitlements), F (payments based on input constraints) and G
(payments based on overall farming income); and for 2005-07, those items replaced by similar but newly
defined items C to E. This categorization for economic purposes (and that for `non-product-specific' assistance)
should not be confused with the legal allocation of domestic support measures into the WTO colored "boxes" in
the context of international commitments.
9
  Farmers are affected not just by prices of their own products but also by the incentives nonagricultural
producers face. That is, it is relative prices and hence relative rates of government assistance that affect
producer incentives. More than seventy years ago Lerner (1936) provided his Symmetry Theorem that proved
that in a two-sector economy, an import tax has the same effect as an export tax. This carries over to a model
that also includes a third sector producing only nontradables.
10
   Data availability also affects the year from which NRAs can be computed. For Europe's transition economies
that starting date is 1992, for Vietnam it is 1986 and for China it is 1981.
                                                     13


greater the variation of NRAs across industries within the sector then the higher will be the
welfare cost of those market interventions. A simple indicator of dispersion is the standard
deviation of the covered industries' NRAs.
        While most of the focus is on agricultural producers, we also consider the extent to
which consumers are taxed or subsidized. To do so, we calculate a Consumer Tax Equivalent
(CTE) by comparing the price that consumers pay for their food and the international price of
each food product at the border. Differences between the NRA and the CTE arise from
distortions in the domestic economy that are caused by transfer policies and taxes/subsidies
that cause the prices paid by consumers (adjusted to the farmgate level) to differ from those
received by producers. In the absence of any other information, the CTE for each tradable
farm product is assumed to be the same as the NRA from border distortions and the CTE for
nontradable farm products is assumed to be zero.
        To obtain dollar values of farmer assistance and consumer taxation, we have taken the
country authors' NRA estimates and multiplied them by the gross value of production at
undistorted prices to obtain an estimate in US dollars of the direct gross subsidy equivalent of
assistance to farmers (GSE). These GSE values are calculated in constant dollars, and are also
expressed on per-farm-worker basis. Likewise a value of the consumer transfer is derived
from the CTE, by assuming consumption value is the gross value of production at undistorted
prices divided by the self-sufficiency ratio for each product (production divided by
consumption, derived from national volume data or the FAO's commodity balance sheets).
These transfer values can be added up across products for a country, and across countries for
any or all products, to get regional aggregate transfer estimates for the studied economies.
        Needless to say, there are numerous challenges in applying the above methodology,
especially in less developed economies with poor-quality data. Ways to deal with the
standard challenges are detailed in the second section of Appendix A, while country specific
issues are discussed in the relevant chapters below.
        We turn now to summarizing the estimates that have emerged from aggregating the
NRA and related estimates provided by the project's country case studies,11 prefacing that
with a brief review of the relative size, economic growth and structural changes that have
taken place in the key regions of the world over recent decades. After the national country
11
  While the nest section summarizes the findings in subsequent chapters, readers should be aware that the
emerging economy chapters in Part III of this book are themselves summaries of the findings in a large number
of developing country case studies that are detailed in one of four companion volumes covering Africa
(Anderson and Masters 2009), East and South Asia (Anderson and Martin 2009a), Latin America and the
Caribbean (Anderson and Valdés 2008) and European and Central Asian transition economies (Anderson and
Swinnen 2008).
                                                     14


studies were completed and the global database of NRA and CTE estimates was assembled
(see Anderson and Valenzuela 2008), it was possible to estimate partial equilibrium country
and global commodity indexes of the trade and welfare restrictiveness of agricultural policies.
Since those estimates are not part of the country studies reported in Part II of the book, the
methodology for them is not laid out until chapter 11, following which is a summary of those
index estimates.




Empirical Estimates of National Distortions to Farmer Incentives




For the purposes of the present study, the world economy is divided into high-income
countries (Western Europe, the United States/Canada, Japan, and Australia/New Zealand), 12
three developing country regions (Africa, Asia and Latin America), and Europe's economies
that were in transition from socialism in the 1990s plus Turkey. (Turkey is included in this
last group because it is in the same geographic region and, like others in that region, has been
seeking European Union accession which necessarily has influenced the evolution of its
agricultural price and trade policies.)
        North America and Europe (including the newly acceded eastern members of the EU)
each account for almost one-third of the global economy, and the remaining one-third is
shared almost equally by developing countries and the other high-income countries. When
the focus turns to just agriculture, however, developing countries are responsible for slightly
over half the value added globally, with Asia accounting for two-thirds of that lion's share.
The developing countries' majority becomes stronger still in terms of global population and
even more so in terms of farmers, almost three-quarters of whom are in Asian developing
countries. Hence the vast range of per capita incomes and agricultural land per capita, and
thus agricultural comparative advantages, across the country groups in table 1.1, and the
strong concentration of poor people in Asia. The number of poor in Asia has diminished
dramatically over the past quarter century though, and even more as a percentage of Asia's
population (unlike in Africa), but 60 percent of the world's population living on less than $1
a day still lived in Asia in 2005 (down from 87 percent in 1981 and 76 percent in 1993 ­ see
table 1.2). The decline in Asian poverty was associated with its much faster economic growth

12
  Korea and Taiwan are are categorized here as `developing' rather than high-income because at the beginning
of the 50-year period under study they were among the poorest economies in the world.
                                                       15


and export-led industrialization than the rest of the world's: since 1980, Asia's per capita
GDP has grown at four times, and exports nearly two times, the global averages (table 1.3).
The share of Asia's GDP that is exported is now one-third above that for the rest of the world
and for Latin America (as summarized from the World Bank (2007) by Sandri, Valenzuela
and Anderson (2007)).
         By 2000-04 just 12 percent of Asia's GDP came from agriculture on average. That
contrasts with Africa where the share for our focus countries ranges from 20 to 40 percent,
and with Latin America and Europe's transition economies where it is down to 6 percent (and
to just 2 percent on average in high-income countries). The share of employment in
agriculture remains very high in Asia though, at just under 60 percent ­ which is the same as
in Africa and three times the share in Latin America and Eastern Europe, although more
farmers work part-time on their farms in Asia than in other developing countries. By contrast,
less than 4 percent of workers in high-income countries are still engaged in agriculture.
Hence the much greater importance to developing country welfare, inequality and poverty of
own-country and rest-of-world distortions to agricultural incentives.


Nominal rates of assistance and gross subsidy equivalent to agriculture


Perhaps the simplest measure for capturing the aggregate extent of distortions to agricultural
prices globally is to examine the trend in the gross subsidy equivalent of assistance (GSE,
positive or negative) to farmers. Figure 1.1(a) shows the GSE for 5-yearly periods since 1960
for the world as a whole, for developing countries, and for high-income plus Europe's
transition economies. The dark line suggests that, apart from the dip during the period of high
world food prices in 1973-74, the GSE has been steadily rising over the past half century,
especially when the decoupled assistance to farmers in high-income countries is included. 13
         The decomposition of those global transfers by country group in figure 1.1(a) reveals
two distinct pairs of trends, each kinked part-way through the period. On the one hand,
aggregate support for farmers in high-income countries rose steadily throughout the period
from the 1950s to the early 1990s before declining slightly over the most recent 15 years and
somewhat more at the end of the period when world food prices shot up. On the other hand,
the price and trade policies of developing countries increasingly taxed their farmers in


13
  The GSE estimates for 1955-59 are smaller for high-income countries but less negative for developing
countries, so the aggregate effect is an empirical issue. Unfortunately our sample of developing countries for
that period is too small to provide a reliable estimate of the net effect.
                                               16


aggregate from the early 1960s to the late 1970s/early 1980s before gradually reducing that
taxation and, by the mid-1990s switching to positive assistance to them in aggregate. Thus
the contributions of the two groups to the global trend are additive in the 1980s but then
offsetting from the early 1990s to 2004. In the 2005-07 period when food prices in
international markets rose steeply (and spiked even more in 2008), transfers to farmers in
high-income countries fell back considerably (similar to what happened in 1973-74). We do
not have enough estimates to show the change for developing countries, but their
governments too have responded by reducing/suspending import tariffs and temporarily
restricting export of food in 2007-08, so they may have contributed to, rather than offset, the
high-income country downward trend in those most recent years.
       In figure 1.1(b) those contributions are further subdivided into four high-income
regions and four other regions, from which is clear that Japan and Western Europe are the
biggest contributors among the high-income countries and that Asia is the biggest contributor
by far to the developing country trends ­ and in both sub-periods. As we will see, the latter
result is very largely driven by China and India, although protection growth in Korea added
to the assistance increase.
       The GSE, while it takes care of inflation by being expressed in constant dollar terms,
does not take into account the fact that the agricultural sector is growing and at different rates
across countries. That downside is avoided by using the nominal rate of assistance, which is
the extent of policy induced price support expressed as a percentage of the value of
agricultural output at undistorted prices. Figure 1.2 and Table 1.4, which show the same 8
country groups as Figure 1.1(b), reveal much more similarity among the regions' NRAs than
the GSEs for the very different-sized developing country groups. They also reveal that Japan
is now proportionately far more protective of its farmers than Western Europe. The bottom
row of table 1.4 provides a similar trend to the GSE trend line: the global average NRA was
close to zero up to the early 1980s, but it then jumped up as developing countries began to
phase out export taxation and it has since averaged in the 15-18 percent range.
       Both of these figures are based not only on estimates of assistance to covered products
but also non-product-specific assistance and guesstimates of assistance to the roughly 30
percent of the value of farm products that have not been included in the study's explicit price
comparison exercise. Figure 1.3 summarizes just the most-robust NRA estimates, for covered
farm products. Those products have been categorized each year as either exportable, import-
competing or nontradable. The weighted average trends across those covered products are
                                                17


very similar to the GSE trends both for high-income countries and, in slightly more muted
fashion, for developing countries.
       What is more striking about figure 1.3 is the marked difference in the levels of
support to import-competing versus exportable covered products. Exportables in high-income
countries have received relatively little support other than during the export subsidy `war' of
the mid-1980s, while in developing countries they were increasingly taxed from the late
1950s until the 1980s and then that taxation was gradually phased out over the past two
decades (although a little remained in 2004, for example in Argentina, and considerably more
was added by various developing countries in 2008 in response to concerns about the spike in
international food prices). Importables, by contrast, have been assisted throughout the past
five decades, and the long-run fitted trend line has almost the same slope for both sets of
countries (but a lower intercept for developing countries). Two lessons can be drawn from
this: first, there is a strong anti-trade bias for agricultural goods in high-income and
developing countries that has not diminished much over the past half century (and it got a lot
worse in the 1980s); and second, growth in agricultural import protection appears to have
accompanied global economic growth through to the 1990s at least, and has only slowed
slightly since then. These lessons hold even when we disaggregate to our 8 regions, as shown
in table 1.5, which also reports estimates of a trade bias index for each region. That index
confirms the broad global conclusion, although it does indicate a sizable decline in the anti-
trade bias in developing countries since the 1980s, especially in Asia.
       That anti-trade bias means that the rates of assistance are not uniform across
commodities, which indicates that the resources that are being used within the farm sector are
not being put to their best use. The extent of that extra inefficiency, over and above that due
to too many or too few resources in aggregate in the sector, is crudely indicated by the
standard deviation of NRAs among covered products in each focus country. This dispersion
index, summarized for our 8 regions in table 1.6, has fluctuated across time and varied
between regions, but the global average has remained around 70 percent throughout the
period, with no discernable trend.
       The NRAs for different covered products are not random, because their weighted
averages across developing or high-income countries cover a wide spectrum. Figure 1.4
shows that rice, sugar and milk (the rice pudding ingredients) are by far the most assisted
farm industries in both sets of countries, with beef and poultry meat next. Cotton has the next
highest NRA in the high-income figure, but it has the lowest (most negative) NRA in
developing countries.
                                                      18


         When the country authors' best guesstimates of the NRAs for the various non-covered
farm products are aggregated across countries, their weighted average tends to be less than
half that for covered products. This is not surprising since many of them are nontraded staples
or fruits and vegetables that receive little or no government attention ­ and that is partly why
they were not covered by authors in the first place. Their inclusion in the weighted average
across all products therefore dampens the positive or negative NRA average for a region's
covered products. Non-product-specific (NPS) and `decoupled' assistance to farmers added
only a little to the NRA for most developing countries, but NPS added 2 or 3 percentage
points until the early 1980s and has contributed about 5 points since then for high-income
countries. If `decoupled' payments were included, the NRA for high-income farmers would
rise another 5 percentage points for the 1980s and early 1990s and as many as 10 points by
during the present decade (table 1.7).


Assistance to non-farm sectors and relative rates of assistance


The anti-agricultural policy biases of the past were due not just to agricultural policies. Also
important in developing countries, according to Krueger, Schiff and Valdés (1988), has been
border protection to the manufacturing sector (which has been the dominant intervention in
the tradables part of non-agricultural sectors). Unfortunately it has not been possible with the
resources available for this study to quantifying the distortions to non-farm tradable sectors as
carefully as for agriculture. Authors typically have had to rely on applied trade taxes (for
exports as well as imports) rather than being able to undertake price comparisons, and hence
they usually do not capture the quantitative restrictions on trade which were important in
earlier decades but decreasingly so through recent times. Nor do they capture distortions in
the services sectors, some of which now produce tradables (or would do in the absence of
interventions preventing their emergence). As a result, the estimated NRAs for non-farm
importables are smaller and decline less rapidly than in fact was the case ­ and likewise for
non-farm exportables, except their NRAs in some cases would have been negative. Of those
two elements of under-estimation, the former bias certainly dominates, so the authors'
estimate of the overall NRA for non-agricultural tradables should be considered as lower-
bound estimates, and more so in the past so that its decline is less rapid than it should be. 14


14
  As a reality check, compare this project's regional NRAs for non-agricultural tradables for the 1960s with the
spot-year national NRAs from manufacturing import protection (in brackets) for the eight countries reported in
Little, Scitovsky and Scott (1970) and Balassa and Associates (1971): South Asia 120 percent (Pakistan 96
                                                      19


        Despite these methodological limitations, the estimated NRAs for non-farm tradables
are very sizeable prior to the 1990s. For developing countries as a whole, the average NRA
value has steadily declined throughout the past four or five decades, from around 45 percent
in the 1960s to around 30 percent in the 1970s, 16 pecent in the 1980s and less than 10
percent since the mid-1990s as policy reforms have spread (second last row of table 1.7).
This has therefore contributed to a decline in the estimated negative relative rate of assistance
for farmers: the weighted average RRA was worse than -50 percent up to the mid-1970s but
improved to an average of -38 percent in the 1980s, -12 percent in the 1990s and just above
zero (1 percent) in 2000-04. The trend in RRAs and their two component NRAs for
developing countries is starkly illustrated in figure 1.5, where it is clear that the falling
positive NRAs for non-farm producers has contributed even more to the rise of the RRA than
has the gradual disappearance of the negative NRAs for farmers. When decomposed by
region, it is clear that Asia has been the major contributor to this dramatic reform (figure 1.6
and table 1.8). And within Asia, it is China and India that contributed most to that outcome
(Anderson and Martin 2009b).
        The average changes in those indicators for high-income countries look minor by
comparison with those for developing countries, although those weighted averages hide
major differences across the high-income countries. Even figure 1.7 doesn't do justice to the
the striking examples of Australia and New Zealand where the phasing out of high
manufacturing tariffs provided nearly as large a boost to farmer incentives as was enjoyed in
the developing country group. There are two difference between those two farm-exporting
countries and the average developing country, though. One is that much of the cut in
Australia's manufacturing protection occurred in the decade before 1955-59, when the RRA
was far more negative (not shown in figure 1.7 but see Anderson et al. 2009); the other is that
Australian and New Zealand farmers enjoyed considerable direct assistance for much of the
time manufacturing was protected, and that farm assistance was cut at the same time as was
manufacturing protection, which kept the RRA from rising greatly from the 1970s (table 1.8).
        Despite the very considerable policy reforms of the past quarter century, there is still a
long way to go before differences in rates of assistance across countries are removed. The
spread of NRAs and RRAs for all our focus countries is shown in figure 1.8 for 2000-04. As
economic growth proceeds there are fewer countries below the zero lines in those ladders,
reflecting the apparently on-going tendency for political economy forces to transform

percent), East Asia 40 percent (Malaysia 8 percent, Philippines 29-46 percent, Taiwan 30 percent), and Latin
America 30 percent (Argentina 141 percent, Brazil 89-99 percent, Chlie 89 percent, Mexico 20-22 percent).
                                                      20


countries from taxing to subsidizing their farmers relative to producers of non-farm goods as
per capita incomes grow. For the whole panel dataset, that tendency over the 50-year period
examined appears to be almost exactly the same for developing as for high-income countries,
the only difference being the average RRA starting point (see the country fixed effects
regression lines in figure 1.9). 15
        A final way of summarizing two of the reform indicators used above ­ the RRA and
the trade bias index, by which we are able to assess changes in the anti- or pro- agricultural
production and trade biases in policy regimes ­ is to map them in two-dimensional space.
Figure 1.10 shows agriculture's trade bias index on the horizontal axis and the RRA on the
vertical axis. An economy with no anti- or pro-agricultural bias (RRA = 0) and no anti- or
pro-trade bias within the farm sector (TBI = 0) would be located at the intersection of the two
axes in figure 1.10. Africa, Asia and Latin America (shown there as LAC) were all well to the
southwest of that neutral point as of 1980-84, but by 2000-04 all had moved to become much
closer to the vertical axis (meaning they had reduced their anti-trade bias in agriculture), and
all but Africa had become closer to the horizontal axis ­ although Asia is now above rather
than below that axis, which means those developing countries are assisting farmers relative to
producers of other tradable products. While that can lead to just as much waste of resources
as the earlier, anti-agricultural, policy bias, it is only in Korea and Taiwan that the 2000-04
RRA is well above zero (being just 1 percent for China and 4 percent for Southeast Asia).


Producer assistance and consumer taxation in value terms


To conclude this survey, we return to the dollar values mentioned at the outset. Table 1.9
shows their full time series, in aggregate but also per person engaged in agriculture. Two
points are worth stressing from the latter estimates. One is that for high-income countries,
when decoupled payments are included, the assistance per farmer has continued to rise over
time even when expressed in constant (2000) US dollars. By 2000-04 the annual transfer was
double what it was in 1975-79, and that in turn is more than double the transfer in 1965-69.
At $13,400 per farmer that is a very large transfer to a group whose household incomes are
not grossly below those of non-farm workers when adjusted for differences between urban




15
  The R2 values improve (to 0.16 and 0.26, respectively) and the slope of each line steepens (coefficients
become 0.36 and 0.32, respectively) if the years from 1990 for HICs and before 1985 for DCs are ignored.
                                                     21


and rural costs of living. 16 The second point to note from table 1.9(b) is that for half this
period, farmers in developing countries were effectively taxed between 30 and 50 US cents a
day by price-distorting policies, at a time when many hundreds of millions of them were
struggling to survive on less than $1 a day per household member. Thankfully most of the
export taxation that drove those transfers was dismantled, although some has been resurrected
in response to the high international food prices of 2008. The move from negative to positive
transfers to developing country farmers since the mid-1990s is not necessarily a good thing,
however, even if society believes farmers should be compensated for the cost of adjusting to
the structural changes that accompany rapid economic growth ­ there are almost always more
efficient ways to raise welfare of poor people than via price and trade policies.
        Since it is mostly border (trade) policies rather than domestic measures that are
responsible for the nominal assistance provided to farmers, those border measures also confer
a tax on consumers of farm products. The extent of those consumer tax equivalents, shown in
table 1.10 for all covered farm products, differ from NRAs also because consumption weights
are not the same as production weights for tradable products. But in percentage terms their
orders of magnitude are similar to the NRAs. Again two points are noteworthy. One is that
developing countries' price-distorting policies prior to the 1990s had been providing up to 30
cents per capita per year to consumers, directly at the expense of farmers who on average are
far poorer than urban dwellers. The other is that the cost to consumers in high-income
countries of farm support policies is miniscule relative to their incomes, amounting even at its
peak in the most protected countries other than Japan to well under $1 a day. It is thus not
surprising that domestic opposition to these policies is weak.




Additional Indicators of Agricultural Price Distortions




The indicators used above to summarize trends in the extent of distortions within the
agricultural sector of a country include the unweighted or weighted mean NRA of covered
products, the standard deviation of covered product NRAs, the weighted mean NRA for
exportable versus import-competing covered products, and the trade bias index of the
agricultural sectors' covered plus non-covered tradable products. The reason for reporting

16
  The drop to $6,000 per farmer in 2005-07 may well prove to be only temporary if international food prices
return to trend levels soon.
                                               22


these various indicators of dispersion of NRAs in addition to the means ­ apart from them
being informative in their own right ­ is that theory suggests the national economic welfare
cost of government policy distortions to incentives in terms of resource misallocation tends to
be greater the greater the degree of substitution in production in response to price changes. In
the case of agriculture which involves the use of farm land that is sector-specific but
substitutable among farm activities, the greater the variation of NRAs across industries within
the sector then the higher will be the welfare cost of those market interventions.
       While those various indicators of dispersion are useful, it would also be helpful to
have a single indicator to capture the overall welfare or trade effect of each country's regime
of agricultural price distortions in place at any time, and to trace its path over time and make
cross-country comparisons. To that end, Chapter 11 draws on a theoretical literature that has
developed in recent years to provide such indicators for national price and trade policies that
are well grounded in theory. They belong to the family of indexes first developed by
Anderson and Neary (2005) under the catch-all name of trade restrictiveness indexes.
       Specifically, to capture distortions imposed by each country's border and domestic
policies on its economic welfare and its trade volume, Lloyd, Croser and Anderson (2009a)
define a Welfare Reduction Index (WRI) and a Trade Reduction Index (TRI) and estimate
them for the project's focus countries since 1960, taking into account that for some covered
products the NRA and CTE differ (because there are domestic measures in place in addition
to or instead of trade measures). As their names suggest, these two new indexes respectively
capture in a single indicator the (partial equilibrium) welfare- or trade-reducing effects of
distortions to consumer and producer prices of covered farm products from all agricultural
and food policy measures in place (while ignoring non-covered farm products and indirect
effects of sectoral and trade policy measures directed at non-agricultural sectors). The WRI
measure reflects the welfare cost of agricultural price-distorting policies better than the NRA
or CTE because it recognizes that the welfare cost of a government-imposed price distortion
is related to the square of the price wedge. It thus captures the disproportionately higher
welfare costs of peak levels of assistance or taxation, and is larger than the mean and is
positive regardless of whether the government's agricultural policy is favoring or hurting
farmers. Also, the WRI and TRI measures have the advantage of providing a theoretically
sound indicator of the welfare (or trade) effect in a single sectoral measure that is comparable
across time and place. In this way the WRI and TRI go somewhat closer to what a
computable general equilibrium (CGE) can provide in the way of estimates of the trade and
welfare (and other) effects of the price distortions captured by the product NRA and CTE
                                                     23


estimates, while having the advantage of providing an annual time series. The time series
derived for this project, available as Anderson and Croser (2009), is made use of in Chapters
11 and 12.
        The WRI five-year results in Figure 1.11 indicate a fairly constant tendency for
covered products' policies to reduce welfare from the 1960s to the mid-1980s, but
thereafter some decline in the 1990s. This pattern is generated by different policy regimes
in the different country groups though: in high-income countries, covered products were
assisted throughout the period, although less so after the 1980s, whereas covered products
in developing countries were disprotected until the most recent years. That is, the WRI has
the desirable property of correctly identifying the welfare consequences that result from
both positive and negative assistance regimes, because it captures the dispersion of NRAs
among covered products: the larger the variance in assistance levels, the greater the
potential for resources to be used in activities which do not maximize economic welfare.
One consequence is that the WRI values are much higher than the NRAs for high-income
countries. Another consequence is that the WRI for Africa spikes in the mid-1980s in
contrast to the NRA which moves close to zero. The reason is that while Africa was still
taxing exportables it had moved (temporarily) from low to very high positive levels of
protection for import-competing farm products (table 1.4). At the aggregate level African
farmers received almost no government assistance then (NRA close to zero), but the
welfare cost of its mixture of agricultural policies as a whole was at its highest according to
the WRI. A third consequence is that for developing countries its average WRI in the years
1995 to 2004 is around 20 percent even though its average NRA for covered products in
those years is close to zero (see figure 1.3), again reflecting the high dispersion across
product NRAs ­ particularly between exportables and import-competing goods ­ in each
country. 17
        For developing countries as a group, the trade restrictiveness of agricultural policy
was roughly constant until the early 1990s and thereafter it declined, especially for Asia
and Latin America, according to the TRI estimates. For high-income countries the TRI time
path was similar but the decline began a few years later. The aggregate results for
developing countries are being driven by the exportables sub-sector which is being taxed

17
  National WRIs are aggregated across countries using as weights an average of the value of consumption and
production at undistorted prices; and TRIs use the absolute difference between the values of production and
consumption at undistorted prices as weights. This is unlike NRAs and RRAs (or CTEs), which use as weights
just the value at undistorted prices of production (or consumption). Like NRAs, RRAs and CTEs, national and
regional WRIs and TRIs for the 5-year periods are unweighted averages of the annual indexes.
                                                24


and the import-competing sub-sector which is being protected (albeit by less than in high-
income countries). For high-income countries, policies have supported both exporting and
import-competing agricultural products and, even though they favor the latter much more
heavily, the assistance to exporters has offset somewhat the anti-trade bias from the
protection of import-competing producers in terms of their impacts on those countries'
aggregate volume of trade in farm products. Thus up to the early 1990s the TRI for high-
income countries was below that for developing countries; and, to use again the example of
Africa, in 1985-89 when the NRA was closest to zero the TRI peaked, correctly identifying
the trade-reducing effect of positive protection to the import-competing farmers and
disprotection to producers of exportables (Figure 11.6 and Table 11.4 of Lloyd, Croser and
Anderson 2009a).
       Chapter 12 differs from the preceding chapters in that it focuses on commodities
rather than countries, to show by to what extent global markets for some farm commodities
are distorted relative to others. It also shows that the basic food staples of the poor in low-
income countries are reasonably well covered in our database for African countries where
they matter most, and that their non-coverage in other regions does not bias the aggregate
NRA estimates for covered products. That chapter also reports new partial equilibrium
estimates of global commodity TRIs and WRIs, to parallel the country-based ones reported
in chapter 11. A summary of both of them for 28 key farm commodities is provided in
figure 1.12 (from Lloyd, Croser and Anderson 2009b). It shows that the most distorted of
all those commodities in 2000-04, in terms of both their global welfare cost and their trade
restrictiveness, are rice, sugar, milk and beef ­ although cocoa trade is just as restricted as
beef, because export restrictions are still prevalent in major supplying countries such as
Cote d'Ivoire.




Economy-Wide Effects of Past Reforms and Remaining Policies




It is clear from the above that there has been a great deal of change over the past quarter of a
century in policy distortions to agricultural incentives throughout the world: the anti-
agricultural and anti-trade biases of policies of many developing countries have been
reduced, export subsidies of high-income countries have been cut, and some re-
instrumentation toward less inefficient and less trade-distorting forms of support, particularly
                                               25


in Western Europe, has begun. However, protection from agricultural import competition has
continued to be on an upward trend in both rich and poor countries, notwithstanding the
Uruguay Round Agreement on Agriculture that aimed to bind and reduce farm tariffs.
       What, then, have been the net economic effects of agricultural price and trade policy
changes around the world since the early 1980s? And how do those effects on global markets,
farm incomes and economic welfare compare with the effects of price distortions still in place
as of 2004? The final chapter by Valenzuela, van der Mensbrugghe and Anderson (2009)
uses a global economy-wide model to provide a combined retrospective and prospective
analysis that seeks to assess how far the world has come, and how far it still has to go, in
removing the disarray in world agriculture. It quantifies the impacts both of past reforms and
current policies by comparing the effects of the project's NRA and CTE distortion estimates
for the period 1980-84 with those of 2004.
       Several key findings from that economy-wide modeling study are worth emphasizing.
First, the policy reforms from the ealy-1980s to the mid-2000s improved global economic
welfare by $233 billion per year, and removing the distortions remaining as of 2004 would
add another $168 billion per year. This suggests that in a global welfare sense the world had
moved three-fifths of the way towards global free trade in goods over that quarter century.
       Second, developing economies benefited proportionately more than high-income
economies (1.0 percent compared with 0.7 percent of national income) from those past policy
reforms, and would gain nearly twice as much as high-income countries by completing that
reform process (an average increase of 0.9 percent compared with 0.5 percent for high-
income countries. Of those prospective welfare gains from global liberalization, 60 percent
would come from agriculture and food policy reform. This is a striking result given that the
shares of agriculture and food in global GDP and global merchandise trade are only 3 and 6
percent, respectively. The contribution of farm and food policy reform to the prospective
welfare gain for just developing countries is even greater, at 83 percent.
                                               26


       Third, the share of global farm production exported (excluding intra-EU trade) in
2004 was slightly smaller as a result of those reforms since 1980-84, because of less farm
export subsidies. Agriculture's 8 percent share in 2004 contrasts with the 31 percent share for
other primary products and the 25 percent for all other goods ­ a `thinness' that is an
important contributor to the volatility of international prices for weather-dependent farm
products. If the policies distorting goods trade in 2004 were removed, the share of global
production of farm products that is exported would rise from 8 to 13 percent, thereby
reducing instability of prices and quantities of those products traded.
       Fourth, the developing countries' share of the world's primary agricultural exports
rose from 43 to 55 percent, and its farm output share from 58 to 62 percent, because of those
reforms, with rises in nearly all agricultural industries except rice and sugar. Removing
remaining goods market distortions would boost their export and output shares to 64 and 65
percent, respectively.
       Fifth, the average real price in international markets for agricultural and food products
would have been 13 percent lower had policies not changed over the past quarter century.
Evidently the impact of the RRA fall in high-income countries (including the cuts in farm
export subsidies) in raising international food prices more than offset the opposite impact of
the RRA rise (including the cuts in agricultural export taxes) in developing countries over
that period. By contrast, removing remaining distortions as of 2004 is projected to raise the
international price of agricultural and food products by less than 1 percent on average. This is
contrary to earlier modeling results based on the GTAP protections database (e.g. Anderson,
Martin and van der Mensbrugghe (2006) which estimated they would rise by 3.1 percent, or
for just primary agriculture, by 5.5 percent). The lesser impact in these new results is because
export taxes in developing countries based on the above NRA estimates are included in the
new database (most notably for Argentina) whose removal would offset the international
price-raising effect of eliminating import protection and farm subsidies elsewhere.
       Sixth, for developing countries as a group, net farm income (value added in
agriculture) is estimated to be 4.9 percent higher than it would have been without the reforms
of the past quarter century, which is more than ten times the proportional gain for non-
agriculture. If policies remaining in 2004 were removed, net farm incomes in developing
countries would rise a further 5.6 percent, compared with just 1.9 percent for non-agricultural
value added. As well, returns to unskilled workers in developing countries ­ the majority of
whom work on farms ­ would rise more than returns to other productive factors from that
liberalization. Together, these findings suggest both inequality and poverty could be
                                               27


alleviated by such reform, given that three-quarters of the world's poor are in farm
households in developing countries (Chen and Ravallion 2007).
       Finally, removal of agricultural price-supporting policies in high-income countries
would undoubtedly lead to painful reductions in income and wealth for farmers there if they
were not compensated ­ although it should be kept in mind that the majority of farm
household income in high-income countries comes from off-farm sources (OECD 2008b).
But the gainers in the rest of their societies could readily afford to compensate the losers from
the benefits of freeing trade.




Prospects for Further Reform




It is not obvious how future policies might develop. A quick glance at the policy indicators
could lead one to view developments from the early 1960s to the mid-1980s as an aberrant
period of welfare-reducing policy divergence (negative and declining RRAs in low-income
countries, positive and rising RRAs in most high-income countries) that has given way to
welfare-improving and poverty-reducing reforms during which the two country groups'
RRAs are converging. But on inspection of the NRAs for exporting and import-competing
sub-sectors of agriculture (figure 1.3), it is clear that the convergence of NRAs to near zero is
mainly with respect to the exporting sub-sector, while NRAs for import-competing farmers
are positive and trending upwards over time at the same rate in both developing and high-
income countries ­ notwithstanding the Uruguay Round Agreement on Agriculture which
was aimed at tariffying and reducing import protection. True, applied tariffs have been
lowered or suspended as a way of dealing with the international food price spike in 2008, but
this, and the food export taxes or quantitative restrictions imposed that year by numerous
food-exporting developing countries, may be in place only until international prices return to
trend (as happened after the price hike of 1973-74 and the price dip of 1986-87).
       The indications are very mixed as to why some countries appear to have reformed
their price-distorting agricultural and trade policies more than others in recent decades, and
why some have stubbornly resisted reform. Some reforming countries have acted unilaterally,
apparently having become convinced that it is in their own national interest to do so. China is
but the most dramatic and significant example of the past three decades among developing
countries, while among the high-income countries only Australia and New Zealand categories
                                                      28


are in that category. Others may have done so partly to secure bigger and better loans from
international financial institutions and then, having taken that first step, they have continued
the process, even if somewhat intermittently. India is one example, but there are numerous
examples also in Africa and Latin America. Few have gone backwards in terms of increasing
their anti-agricultural bias, but Zimbabwe and perhaps Argentina qualify during the present
decade ­ and numerous others have joined them in 2008, at least temporarily, in response to
the sudden upward spike in international food price. And some have reduced their
agricultural subsidies and import barriers at least partly in response to the GATT's
multilateral Uruguay Round Agreement on Agriculture, the European Union being the most
important example (helped by its desire also for preferential trade agreements, including its
recent expansion eastwards).
        The EU reforms suggest agricultural protection growth can be slowed and even
reversed if accompanied by re-instrumentation away from price supports to decoupled
measures or more direct forms of farm income support. The starker examples of Australia
and New Zealand show that one-off buyouts can bring faster and even complete reform. 18
But in the developing countries where levels of agricultural protection are generally below
high-income levels, there are fewer signs of a slowdown of the upward trend in agricultural
protection from import competition over the time period studied.
        Indeed, there are numerous signs that developing country governments want to keep
open their options to raise agricultural NRAs in the future, particularly via import restrictions.
One indicator is the high tariff bindings developing countries committed themselves to
following the Uruguay Round: as of 2001, actual applied tariffs on agricultural products
averaged less than half the corresponding bound tariffs for developing countries of 48
percent, and less than one-sixth in the case of least-developed countries (Anderson and
Martin 2006, Table 1.2).
        Another indicator of agricultural trade reform reluctance is the unwillingness of many
developing countries to agree to major cuts in bound agricultural tariffs in the WTO's on-
going Doha round of multilateral trade negotiations. Indeed, many of them believe high-
income countries should commit to reducing their remaining farm tariffs and subsidies before
developing countries should offer further reform commitments of their own. Yet modeling
results reported in Valenzuela, van der Mensbrugghe and Anderson (2009) suggest that if


18
  For a detailed analysis of the buyout option versus the slower and less complete cashout option (moving to
direct payments), as well as the uncompensated gradual squeeze-out or sudden cutout options, see Orden and
Diaz-Bonilla (2006).
                                                       29


high-income countries alone were to liberalize their agricultural markets, such a sub-global
reform would provide less than two-thirds of the potential gains to developing countries that
could come from global agricultural policy reform.
         More than that, the current negotiations have brought to prominence a new proposal
for agricultural protectionism in developing countries. This is based on the notion that
agricultural protection is helpful and needed for food security, livelihood security and rural
development. This view has succeeded in bringing "Special Products" and a "Special
Safeguard Mechanism" into the multilateral trading system's agricultural negotiations,
despite the fact that such policies, which would raise domestic food prices in developing
countries, may worsen poverty and the food security of the poor (Ivanic and Martin 2008).

         To wait for high-income country reform before liberalizing the farm trade of
developing countries is unwise as a poverty alleviating strategy, not least because the past
history revealed in the NRAs summarized above suggests such reform will be at best slow in
coming. In the US, for example, the most recent two five-year farm bills were a step
backwards from the previous regime which at least sought to re-instrument protection
towards less trade-distorting measures (Gardner 2009). Nor have the world's large number of
new regional integration agreements of recent years been very successful in reducing farm
protection. Furthermore, for developing countries to postpone their own reform would be to
forego a major opportunity to boost theirs and (given the size and growth in South-South
trade of late) their neighbors' economies. It would be doubly wasteful if, by being willing to
commit to reform in that way, they would be able to convince high-income countries to
reciprocate by signing on to a more-ambitious Doha agreement, the potential global benefits
from which are very considerable. 19
         Developing countries that continue to free up domestic markets and practice good
macroeconomic governance will keep growing, and typically the growth will be more rapid
in manufacturing and service activities than in agriculture, especially in the more densely
populated countries where agricultural comparative advantage is likely to decline. Whether
such economies become more dependent on imports of farm products depends, however, on
what happens to their RRA. The first wave of Asian industrializers (Japan, and then Korea
and Taiwan) chose to slow the growth of food import dependence by raising their NRA for


19
  On the size of those potential net benefits compared with those from other opportunities that could address the
world's most important challenges as conceived by the Copenhagen Consensus project (whose expert panel
ranked trade reform as having the second highest payoff among those dozens of opportunities), see
www.copenhagenconsensus.org including the trade paper by Anderson and Winters (2008).
                                               30


agriculture even as they were bringing down their NRA for non-farm tradables, such that
their RRA became increasingly above the neutral zero level. A key question is: will later
industrializers follow suit, given the past close association of RRAs with rising per capita
income and falling agricultural comparative advantage? Figure 1.9 suggests developing
countries' RRA trends of the past three decades have been on the same trajectory as the high-
income countries prior to the 1990s, so unless new forces affect their polities the
governments of later industrializing economies may well follow suit.
       One new force is disciplines on farm subsidies and protection policies of WTO
member countries following the Uruguay Round. Earlier industrializers were not bound under
GATT to keep down their agricultural protection. Had there been strict discipline on farm
trade measures at the time Japan and Korea joined GATT in 1955 and 1967, respectively,
their NRAs may have been halted at less than 20 percent (figure 1.13). At the time of China's
accession to WTO in December 2001, its NRA was less than 5 percent according to this
present study, or 7.3 percent for just import-competing agriculture. Its average bound import
tariff commitment was about twice that (16 percent in 2005), but what matters most is
China's out-of-quota bindings on the items whose imports are restricted by tariff rate quotas.
The latter tariff bindings as of 2005 were 65 percent for grains, 50 percent for sugar and 40
percent for cotton (Anderson, Martin and Valenzuela 2008). Clearly the legal commitments
even China made on acceding to WTO are a long way from current levels of support for its
farmers, and so are unlikely to constrain the government very much in the next decade or so.
And the legal constraints on developing countries that joined the WTO earlier are even less
constraining. For India, Pakistan and Bangladesh, for example, their estimated NRAs for
agricultural importables in 2000-04 are 34, 4 and 6 percent, respectively, whereas the average
bound tariffs on their agricultural imports are 114, 96 and 189 percent, respectively (WTO,
ITC and UNCTAD 2007). Also, like other developing countries, they have high bindings on
product-specific domestic supports of 10 percent and another 10 percent for non-product
specific assistance, a total of 20 more percentage points of NRA (17 percent in China's case)
that legally could come from domestic support measures ­ compared with currently 10
percent in India and less than 3 percent in the rest of South Asia.
       Hopefully developing countries will choose not to make use of the legal wiggle room
they have allowed themselves in their WTO bindings to follow Japan, Korea and Taiwan into
high agricultural protection. A much more efficient and equitable strategy would be to instead
treat agriculture in the same way they have been treating non-farm tradable sectors. That
would involve opening the sector to international competition, and relying on more-efficient
                                                31


domestic policy measures for raising government revenue (e.g., income and consumption or
value-added taxes) and for assisting farm families ­ including younger members seeking off-
farm employment ­ via public investment in rural education and health, rural infrastructure,
and agricultural research (Otsuka and Yamano 2006; Otsuka, Estudillo and Sawada 2009).
Historically developing countries' expenditure on public agricultural research has amounted
to the equivalent of less than 1 percent of the gross value of farm production (table 1.11), so it
would not be difficult to double that level of investment with a diversion of just a small
amount of the price support currently provided to farmers in those developing countries that
provide farm import protection or input subsidies.

       As for high-income countries, the above distortion estimates show that they have all
lowered the price supports for their farmers since the 1980s. In some countries that has been
partly replaced by assistance that is at least somewhat decoupled from production. If that
trend continues at the pace of the past quarter century, and if there is no growth of
agricultural protection in developing countries, then before the middle of this century we may
have removed most of the disarray in world food markets. However, if the WTO's Doha
Development Agenda collapses, and governments thereby find it more difficult to ward off
agricultural protection lobbies, it is all the more likely that developing countries will follow
the same agricultural protection path this century as that which was taken by high-income
countries last century. One way to encourage developing countries to follow a more liberal
policy path could be to extend the Integrated Framework's Diagnostic Trade Integration
Study (DTIS) process to a broader range of low-income countries. That process, which
provides action plans for policy and institutional reform and lists investment and technical
assistance needs, could be expanded to include the `aid for trade reform' proposal that has
been discussed in the context of the Doha round (Hoekman 2005) ­ regardless of the fate of
the that round.




Areas for Further Research




The fact that the indications are mixed as to why some countries appear to have reformed
more than others and some continue to resist reform, and that it is therefore unclear as to how
                                                32


policies might develop in the future, should not be surprising. After all, the long history of
globalization is full of episodes of sensible policy reforms that for all sorts of reasons get
reversed (Findlay and O'Rourke 2007, North, Wallis and Weingast 2006). To better
understand what might happen in the context of continuing economic growth and terms of
trade volatility, more in-depth analysis of the political economy of past policy behavior is
warranted. That is now possible thanks to the new panel set of distortion estimates reported
here, and some early findings from such analyses will appear in Anderson (2010). That
collection includes a broad range of theoretical and econometric analyses aimed at better
understanding the political economy forces that generated the evolving pattern of inter- and
intra-sectoral distortions to farmer and food consumer incentives over recent decades.
       To contribute further to policy debate, a second area requiring further research
economy-wide modeling of the impacts on agricultural markets, national economic welfare
and income distribution of alternative policies. That is now easier to do well following the
recent development of micro-simulation add-ons to such CGE models. How the reform of
current policies ­ both own-country and rest-of world's ­ impact on the extent of poverty and
inequality are explored in a series of new country case studies in Anderson, Cockburn and
Martin (2010), using global and national economy-wide models that are enhanced with
detailed earning and spending information of numerous types of urban and rural households.
The rest-of-world's policy impact on each country's terms of trade is informed by the
project's agricultural distortions database and generated using the same model as in this
book's final chapter (Valenzuela, van der Mensbrugghe and Anderson 2009). Hopefully other
analysts will make use of the project's agricultural distortions database to explore other
policy scenarios, including a continuation of past agricultural protection growth for import-
competing farmers as an alternative counterfactual to further freeing of trade.
       And a third area for further research is in growth diagnostics. How much of the long-
term divergence in per capita incomes between current high-income countries on the one
hand and developing and transition economies on the other can be explained by the long-term
growth of agricultural NRAs and RRAs in the former? How much can be explained by the
domestic market-insulating fluctuations in NRAs around those long-term assistance trends,
which have contribute to the volatility of the terms of trade for agricultural-exporting
countries? The recent work of Williamson (2008) offers one suggestion as to how such
research might proceed. Finally, how much of the growth since the early 1980s in individual
countries can be attributed to the reduction in distortions to agricultural incentives? Ravallion
and Chen (2007) show that the decline in the anti-agricultural bias in farm price policies has
                                              33


contributed significantly to China's poverty reduction. Rural growth has been shown to be a
key contributor to the reduction in poverty in India too (Ravallion and Datt 1996). These
types of studies can now be revisited using the more comprehensive set of measures of the
extent of changes in distortions to agricultural incentives summarized above.




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                                                             39


             Figure 1.1: Gross subsidy equivalents of assistance to farmers, over time and by
             region,a 1955 to 2007
                                            (constant 2000 US$ billions)
   (a) over time


    300

    200

    100

         0

   -100

   -200
               1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 2005-07


                        Developing countries (no averages for periods 1955-59 and 2005-07)
                        High-income countries and Europe's transition economies
                        Net, global (decoupled payments are included in the higher, dashed line)



   (b) by region

  130


   90


   50


   10


   -30


   -70


  -110
               Africa        ANZ           LAC          ECA            North         Japan         WE   Asia
                                                                      America


                                                            1980-84        2000-04

Source: Anderson and Valenzuela (2008), based on estimates reported in the project's
national country studies.
                                             40


Figure 1.2: Nominal rates of assistance to agriculture,a by regions, 1980-84 and 2000-04a

                                          (percent)

       140                                                           1980-84
       120                                                           2000-04
       100
        80
        60
        40
        20
         0
       -20
       -40




Source: Anderson and Valenzuela (2008), based on estimates reported in the project's
national country studies.

a. Includes non-covered products and non-product-specific (but not decoupled) assistance.
                                                               41


Figure 1.3: Nominal rates of assistance to exportable, import-competing and all covered
agricultural products,a high-income and developing countries, 1955 to 2004

                                                            (percent)

   (a) Developing countries

   90
   70
   50
   30
   10
  -10    1965-69    1970-74      1975-79      1980-84       1985-89     1990-94       1995-99     2000-04

  -30
  -50

                        Import-competing                     Exportables                Total


        (b) High-income countries plus Europe's transition economies
            90

            70

            50

            30

            10

           -10     1955-59    1960-64   1965-69   1970-74    1975-79   1980-84    1985-89   1990-94    1995-99   2000-04


           -30

           -50
                                   Import-competing                     Exportables                   Total

Source: Anderson and Valenzuela (2008), based on estimates reported in the project's
national country studies.
a. Covered products only. The total also includes nontradables.
                                            42


Figure 1.4: Nominal rates of assistance, key covered products, high-income and developing
countries, 1980-84 and 2000-04

                                         (percent)

   (a) Developing countries                (b) High-income countries

                                                                              387
           Sugar                               Rice

             Milk                            Sugar

            Rice                                 Milk

          Poultry                              Beef

           Wheat                            Poultry

           Maize                             Cotton

         Pigmeat                           Pigmeat

           Coffee                          Soybean

         Soybean           2000-04           Maize                  2000-04
                           1980-84                                  1980-84
            Beef                             Wheat

         Coconut                             Barley

           Cotton                         Rapeseed

  -150          -50           50            -150        -50   50    150     250




Source: Anderson and Valenzuela (2008), based on estimates reported in the project's
national country studies.
                                                                     43


Figure 1.5: Nominal rates of assistance to agricultural and non-agricultural tradable products
and relative rate of assistance,a all focus countries, 1955 to 2004

                                                                (percent)

   (a) Developing countriesb



                        100
                        80
                        60
                        40
              percent




                        20
                         0
                                1965-69        1970-74     1975-79        1980-84         1985-89       1990-94     1995-99      2000-04
                        -20
                        -40
                        -60
                                              NRA non-ag tradables                     NRA ag tradables                 RRA




              (b) High-income countries [not including ECA]

              100
               80
               60
               40
    percent




               20
                   0
                          1955-59   1960-64      1965-69   1970-74    1975-79       1980-84   1985-89     1990-94   1995-99   2000-04
              -20
              -40
              -60
                                      NRA non-ag tradables                      NRA ag tradables                    RRA
                                              44



Source: Anderson and Valenzuela (2008), based on estimates reported in the project's
national country studies.
a. The RRA is defined as 100*[(100+NRAagt)/(100+NRAnonagt)-1], where NRAagt and
NRAnonagt are the percentage NRAs for the tradables parts of the agricultural and non-
agricultural sectors, respectively.
b. Estimates for China pre-1981 and India pre-1965 are based on the assumption that the
nominal rate of assistance to agriculture in those years was the same as the average NRA
estimates for those countries for 1981-84 and 1965-69, respectively, and that the gross value
of production in those missing years is that which gives the same average share of value of
production in total world production in 1981-84 and 1965-69, respectively.
                                               45


Figure 1.6: Relative rates of assistance to tradables,a Asia, Africa and Latin America, 1965 to
2004

                                            (percent)



                   20

                   10

                    0
                         1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04
                   -10
         percent




                   -20

                   -30

                   -40

                   -50

                   -60

                                               Asia         Africa        LAC



Source: Anderson and Valenzuela (2008), based on estimates reported in the project's
national country studies.
a. 5-year weighted averages with value of production at undistorted prices as weights. In
Asia, estimates for China pre-1981 are based on the assumption that the nominal rate of
assistance to agriculture and non-agricultural tadables and hence the RRA in those earlier
years were the same as the average NRA estimates for China in 1981-89.
                                                               46


Figure 1.7: Relative rates of assistance to agriculture,a high-income countries 1955 to 2007
                                             (percent)



   200                  Japan/ Korea
                        Non-EU WE
                        EU
                        Canada
   150                  US
                        Australia/ New Zealand
   100

    50

      0
             1955-59

                       1960-64

                                 1965-69

                                           1970-74

                                                     1975-79

                                                                1980-84

                                                                          1985-89

                                                                                    1990-94

                                                                                              1995-99

                                                                                                        2000-04

                                                                                                                  2005-07
   -50



Source: Anderson and Valenzuela (2008), based on estimates reported in the project's
national country studies.
a. The RRA is defined as 100*[(100+NRAagt)/(100+NRAnonagt)-1], where NRAagt and
NRAnonagt are the percentage NRAs for the tradables parts of the agricultural and non-
agricultural sectors, respectively
                                                            47


Figure 1.8: Cross-country dispersion of NRA (all agriculture products, incl. NPS) and
RRA. 2000-04
                                      (percent)

              (a) NRA                                                            (b) RRA
                Norway
           Switzerland
                Iceland                                                        Korea
                  Korea                                                      Norway
                  Japan                                                 Switzerland
              Slovenia                                                       Iceland
                Taiwan                                                         Japan
              Romania                                                        Taiwan
                  Latvia                                                   Slovenia
                   EU1 5                                                   Romania
              Lithuania                                                    Lithuania
               Hungary
              Slovakia                                                         Latvia
             Colombia                                                           EU1 5
            Czech Rep                                                     Colombia
                Canada                                                      Hungary
                 Turkey                                                      Canada
            Philippines                                                      Estonia
               Vietnam                                                   Czech Rep
                Estonia                                                       Turkey
                   India                                                 Philippines
                     US                                                           US
                Russia                                                          India
          Mozambique                                                       Slovakia
             Indonesia                                                       Poland
                Mexico                                                    Indonesia
               Ecuador                                                       Mexico
                Poland                                                       Russia
              Sri Lanka                                                Mozambique
                  Kenya                                                     Ecuador
                  China                                                        Kenya
                   Chile                                                        Chile
                  Brazil
               Bulgaria                                                        China
           Bangladesh                                                      Malaysia
    Dominican Republic                                                      Vietnam
          New Zealand                                                          Brazil
              Malaysia                                                 New Zealand
              Pakistan                                           Dominican Republic
          Madagascar                                                       Australia
              Australia                                                         RSA
                Uganda                                                      Bulgaria
                    Mali                                                     Nigeria
                   RSA                                                      Thailand
                   Chad                                                       Ghana
         Burkina Faso                                                    Nicaragua
            Cameroon                                                       Sri Lanka
               Thailand                                                 Kazakhstan
                  Benin                                                Madagascar
                  Togo                                                     Pakistan
                 Ghana                                                   Cameroon
            Nicaragua
                                                                             Ukraine
           Kazakhstan                                                   Bangladesh
                Nigeria
                  Egypt                                                       Sudan
               Senegal                                                       Uganda
               Ethiopia                                                   Argentina
                Ukraine                                                     Senegal
                 Sudan                                                         Egypt
              Tanzania                                                     Tanzania
             Argentina                                                      Ethiopia
          Cote d'Ivoire                                                Cote d'Ivoire
                Zambia                                                       Zambia
            Zimbabwe                                                     Zimbabwe
                           -50   0   50   100   150   200                             00
                                                                                    -1 -50   0       00 50
                                                                                                 50 1 1 200


Source: Anderson and Valenzuela (2008), based on estimates reported in the project's
national country studies.
                                                              48


Figure 1.9: Relationships between real GDP per capita and RRA,a all focus countries,
1955 to 2007

                                    400
  Relative Rate of Assistance (%)
                                    300
                                    200
                                    100
                                    0
                                    -100




                                           -1   0              1                2                  3
                                                       Ln real GDP per capita

                                                HIC RRA obs             HIC fitted values
                                                DC RRA obs              DC fitted values




                                                Coefficient        Standard error            R2
                                    DCs            0.26                0.02                 0.17
                                    HICs           0.28                0.03                 0.14

Source: Author's derivation with country fixed effects, using data in Anderson and
Valenzuela (2008) that are based on RRA estimates reported in the project's national
country studies.
                                                                                49


                   Figure 1.10: Relationship between RRA and the trade bias index for agriculture, focus
                   regions, 1980-84 and 2000­04
                                     150




                                                  Japan
  Relatives Rate of Assistance (%)
                                     100




                                                             Japan
                                                                                          WE
                                     50




                                                                                     WE

                                                                                                  Asia           NA
                                                                                      ECA LAC               NA         ANZ
                                     0




                                                                      Africa                                          ANZ
                                                                                                   Africa
                                                                               LAC
                                                              Asia
                                     -50




                                           -0.6       -0.5      -.4         -0.3       -0.2              -0.1               0
                                                                      Trade Bias Index

                                                                          RRA
                                                             Triangle: 1980-84, Circle: 2000-04




Source: Author's derivation using data in Anderson and Valenzuela (2008) that are based on
NRA and RRA estimates reported in the project's national country studies
                                                                  50


Figure 1.11: Welfare Reduction Indexes for covered tradable farm products, by region, 1960
to 2007
                                         (percent)

(a) Africa, Asia and Latin America

   80

   60


   40

   20

    0
             1960-64       1965-69      1970-74      1975-79      1980-84       1985-89         1990-94     1995-99        2000-04


                 Africa                           Asia                        Latin America




(b) Developing countries, high-income countries and Europe's transition economies


        80


        60


        40


        20


        0
               1960-64      1965-69    1970-74    1975-79   1980-84     1985-89       1990-94    1995-99    2000-04   2005-07



                         Developing countries            Europe's transition econs.               High-income countriesb



Source: Authors' calculations based on NRAs and CTEs in Anderson and Valenzuela (2008).
                                                                     51



Figure 1.12: Trade and Welfare Reduction Indexes for 28 major agricultural products, 2000-04
                                                                 (percent)




Source: Lloyd, Croser and Anderson (2009b).
                                                                   52


Figure 1.13: NRAs for Japan, Korea and China and date of accession to GATT or WTO, 1955 to 2005

                                                                (percent)


                    200
                                 Japan                                                                China
                             (1955 = 16.6% )                                                      (2001 = 4.5% )
                    150                            Korea
                                               (1967 = 7.4% )

                    100
          NRA (%)




                     50


                      0
                           1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-05

                     -50


                    -100
                                                     Japan          Korea         China


Source: Based on estimates in Anderson and Valenzuela (2008)
                                                                          53


Table 1.1: Key economic and trade indicators of focus countries, by region, 2000­04
                                             Share (%) of world:                        National relative to world (world=100)            Agric trade
                                                                                                                                       special-ization
                                    Pop'n   Total GDP     Agric GDP         Agric           GDP         Ag land             RCA,a               indexb
                                                                           worker      per capita      per capita     agric & food
Africa                                                                                                                                             na
                                    11.71        1.67              6.04        12.87          14             148                  na
Asia
                                    50.76       10.37          36.65           72.46          20              34                  80            -0.03
Latin America                                                                                                                                      na
                                     8.33        5.33              7.73         3.20          64             171                 na
Europe and Central Asia                                                                                                                            na
                                     7.43        3.60              6.39         3.30          48             178                 na
Western Europe
                                     6.31       28.66          15.43            0.56         454              46                 106            -0.03
United States and Canada
                                     5.14       32.67          10.82            0.25         636             186                 119             0.08
Australia and New Zealand
                                     0.38        1.54              1.57         0.05         405            2454                 354             0.62
Japan
                                     2.05       12.51              4.94         0.19         610                5                12             -0.84

All focus countries
                                    87.83       94.94          89.57           89.75
                                                                                              na               na                 na               na
Other (non-focus) developing
 and transition economies           12.17        5.06          10.43           10.25
                                                                                              na               na                 na               na
Source: Sandri, Valenzuela and Anderson (2007), compiled mainly from World Bank's World Development Indicators.
a. Revealed comparative advantage index is the share of agriculture and processed food in national exports as a ratio of that sector's share of
global exports.
b. Primary agricultural trade specialization index is net exports as a ratio of the sum of exports and imports of agricultural and processed food
products (world average =0.0).
                                            54



Table 1.2: Poverty in Africa, Asia, Latin America and Europe's transition economies, 1981 to
2005
                                     (on less than $1/day)

                                    1981       1993         2005       Share of
                                                                      poor (%)
                                                                       who are
                                                                    rural, 2002
No. of people (million):
Sub-Saharan Africa                   157        247          299             69
East Asia and Pacific                948        600          180             85
  of which China                     730        444          106             90
South Asia                           387        341          350             75
  of which India                     296        280          267             74
Latin America and Caribbean           27         34           28             34
European transition economies          3         10           16             50
WORLD                               1528       1237          879             74
Asia's share of world                 87         76           60

% of population
Sub-Saharan Africa                    40         44           39
East Asia and Pacific                 69         36           10
  of which China                      74         38            8
South Asia                            42         29           24
  of which India                      42         31           24
Latin America and Caribbean            7          7            5
European transition economies          1          2            3
WORLD                                 42         27           16

Source: Chen and Ravallion (2008) and, for rural share, Ravallion, Chen and Sangraula
(2007).
                                                 55


Table 1.3: Growth of real GDP and exports, focus countries, 1980 to 2004

                      (at constant 2000 prices, percent per year, trend-based)

                       Agriculture   Industry   Services     Total   GDP per      Export
                                                             GDP       capita    volume
Africa                          na         na          na      na         na          na
Asia                           3.1        8.6         7.5     7.1        5.5        11.2
Latin America                   na         na          na     5.4        3.6         7.2
Europe and Central
Asia                            na         na          na       na         na         na
Western Europe                 0.8        1.4         2.6      2.3        2.0        5.5
United States and
                              2.7         2.6         3.4      3.2        2.0        6.7
Canada
Australia and New
                              2.8         2.5         3.6      3.3        2.0        6.5
Zealand
Japan                         -1.7        2.0         3.0      2.5        2.1        4.0
All focus countries
World                         2.0         2.5         3.2      3.0        1.4        6.1

Source: Sandri, Valenzuela and Anderson (2007), compiled from World Bank's World
Development Indicators.
                                                                                     56



Table 1.4: Nominal rates of assistance to agriculture,a focus countries, 1955 to 2007c
                                                                      (percent)
                                       1955-59   1960-64   1965-69   1970-74   1975-79   1980-84   1985-89   1990-94   1995-99   2000-04   2005-07

Africa                                    -14        -8       -11       -15       -13        -8        -1        -9        -6        -7        na
Asia                                      -27       -27       -25       -25       -24       -21        -9        -2         8        12        na
Latin America                             -11        -8        -7       -21       -18       -13       -11         4         6         5        na
Europe and Central Asiab                   na        na        na        na        na        na        na        10        18        18        25
Western Europe                             44        57        68        46        56        74        82        64        44        37        18
United States and Canada                   13        11        11         7         7        13        19        16        11        17        11
Australia and New Zealand                   6         7        10         8         8        11         9         4         3         1         2
Japan                                      39        46        50        47        67        72       119       116       120       120        81

Developing countries                      -26       -23       -22       -24       -22       -18        -8        -2         6         9        na
High-income countries                                                                                                                          17
                                           22        29        35        25        32        41        53        46        35        32
All focus countries (wted. average):        3         5         6         0         2         5        17        18        17        18        na

Source: Anderson and Valenzuela (2008), based on estimates reported in the project's national country studies.
a. Weighted average for each country, including non-product specific assistance as well as authors' guesstimates for non-covered farm products
(but not decoupled assistance), with weights based on gross value of agricultural production at undistorted prices. Estimates for China pre-1981
and India pre-1965 are based on the assumption that the nominal rate of assistance to agriculture in those years was the same as the average
NRA estimates for those countries for 1981-84 and 1965-69, respectively, and that the gross value of production in those missing years is that
which gives the same average share of value of production in total world production in 1981-84 and 1965-69, respectively.
Developing country and world aggregates are computed accordingly.
b
  ECA countries are not included in the high-income or developing country aggregates.
                                                57


Table 1.5: Nominal rates of assistance to agricultural exportables, import-competing
products, and the trade bias index,a focus regions, 1955 to 2007
                                        (percent)
                             1955-   1960-   1965-   1970-   1975-   1980-   1985-   1990-   1995-   2000-   2005-
                                59      64      69      74      79      84      89      94      99      04      07
Africa
NRA agric. exportables         na    -30.1   -38.4   -42.6   -42.6   -35.0   -36.7   -35.8   -26.1   -24.6     na
NRA agric. imp-comp            na     18.6    11.8     1.9    14.5    13.2    58.3     5.2     9.8     1.6     na
Trade Bias Index               na    -0.41   -0.45   -0.44   -0.50   -0.43   -0.60   -0.39   -0.33   -0.26     na
Latin America
NRA agric. exportables         na    -20.4   -12.8   -27.0   -25.2   -27.1   -25.0   -10.5    -3.5    -4.6     na
NRA agric. imp-comp            na     26.3     8.7    -2.8     1.1    13.6     5.1    19.4    12.5    20.6     na
Trade Bias Index               na    -0.37   -0.20   -0.25   -0.26   -0.36   -0.29   -0.25   -0.14   -0.21     na
South Asiac
NRA agric. exportables         na    -37.5   -37.2   -30.0   -36.1   -27.9   -20.6   -15.8   -12.0    -6.2     na
NRA agric. imp-comp            na     39.2    41.2    39.4    45.1    37.9    63.3    25.1    14.5    26.5     na
Trade Bias Index               na    -0.55   -0.56   -0.50   -0.56   -0.48   -0.51   -0.33   -0.23   -0.26     na
China and Southeast Asiac
NRA agric. exportables         na    -55.5   -55.1   -51.8   -50.1   -50.0   -41.0   -20.8    -2.2     0.1     na
NRA agric. imp-comp            na    -10.3    -8.9    -9.4    -2.6     0.5    15.1     3.3    13.3    12.3     na
Trade Bias Index               na    -0.50   -0.51   -0.47   -0.49   -0.50   -0.49   -0.23   -0.14   -0.11     na
Japan, Korea and Taiwan
NRA agric. exp               -18.1     5.7     4.3    15.4    10.3    25.1    48.9    57.1    57.0    70.3      na
NRA agric. imp-comp           35.6    43.3    52.8    54.1    76.6    83.7   124.9   127.4   127.0   134.6   122.6
Trade Bias Index             -0.40   -0.26   -0.32   -0.25   -0.38   -0.32   -0.34   -0.31   -0.31   -0.27      na
European transition econs.
NRA agric. exportables         na      na      na      na      na      na      na     -3.2    -1.0    -1.0    15.2
NRA agric. imp-comp            na      na      na      na      na      na      na     32.5    35.4    35.7    32.3
Trade Bias Index               na      na      na      na      na      na      na    -0.27   -0.27   -0.27   -0.13
Western Europe
NRA agric. exp                 9.3    17.4    31.7    22.5    33.3    31.1    50.1    38.0    15.0     8.1     1.7
NRA agric. imp-comp           59.4    77.2    82.9    55.7    61.7    79.5    87.6    67.2    52.8    50.5    28.9
Trade Bias Index             -0.31   -0.34   -0.28   -0.21   -0.18   -0.27   -0.20   -0.17   -0.25   -0.28   -0.21
North America
NRA agric. exportables         2.7     2.8     6.1     5.1     2.9     5.4    10.5     6.0     5.4     7.6     4.1
NRA agric. imp-comp            8.6     9.3     8.8     6.7    10.5    19.7    23.6    18.6    11.3    16.8    11.0
Trade Bias Index             -0.05   -0.06   -0.02   -0.01   -0.07   -0.11   -0.10   -0.10   -0.05   -0.08   -0.06
ANZ
NRA agric. exportables         3.8     4.7     6.6     5.8     5.5     7.6     6.5     3.6     2.2     0.2     0.2
NRA agric. imp-comp            7.9     8.3     9.3    11.7     8.7     8.4     6.5     3.8     2.0     2.0     1.5
Trade Bias Index             -0.04   -0.03   -0.02   -0.05   -0.03   -0.01    0.00    0.00    0.00   -0.02   -0.01
Developing countriesc
NRA agric. exportables         na    -46.5   -44.6   -45.4   -43.9   -41.4   -35.8   -18.7    -5.5    -3.0     na
NRA agric. imp-comp            na     12.7    13.5     7.8    12.8    16.5    37.7    22.6    22.0    23.0     na
Trade Bias Index               na    -0.53   -0.51   -0.49   -0.50   -0.50   -0.53   -0.34   -0.23   -0.21     na
High-income countries
NRA agric. exportables         4.2     7.4    13.5    10.3    11.3    12.1    22.3    15.9     8.1     6.9     2.9
NRA agric. imp-comp           31.2    45.9    50.2    36.5    47.4    58.1    71.4    62.4    53.9    50.7    30.8
Trade Bias Index             -0.21   -0.26   -0.24   -0.19   -0.24   -0.29   -0.29   -0.29   -0.30   -0.29   -0.21
World c
NRA agric. exportables         na      -23     -20     -23     -25     -24     -17      -7      -1       0     na
NRA agric. imp-comp            na       35      37      27      34      38      57      43      38      36     na
Trade Bias Index               na    -0.43   -0.42   -0.39   -0.44   -0.45   -0.47   -0.35   -0.28   -0.26     na
Source: Anderson and Valenzuela (2008), based on estimates reported in the project's
national country studies.
a. NRAs for non-covered products are included here (unlike in Figure 1.3).
b. Trade Bias Index, TBI = (1+NRAagx/100)/(1+NRAagm/100) ­ 1, where NRAagx
and NRAagm are the weighted average percentage NRAs for the exportable and
import-competing parts of the agricultural sector, with weights based on production
                                          58


valued at undistorted prices. TBIs shown here are calculated using the regional 5-year
averages of NRAagx and NRAagm.

c. Estimates for China pre-1981 and India pre-1965 are based on the assumption that
the nominal rate of assistance to agriculture in those years was the same as the
average NRA estimates for those countries for 1981-84 and 1965-69, respectively,
and that the gross value of production in those missing years is that which gives the
same average share of value of production in total world production in 1981-84 and
1965-69, respectively. The developing country and world averages are computed
accordingly.
                                                                              59



Table 1.6: Dispersion of nominal rates of assistance across covered agricultural products,a focus regions, 1965 to 2007
                                                                    (percent)
                                      1965-69   1970-74   1975-79   1980-84        1985-89   1990-94   1995-99   2000-04   2005-07
Africa                                    31        30        37        36             36        31        25        25        na
Asia                                      56        42        49        53             66        56        57        64        na
Latin America                             49        44        52        52             44        42        32        40        na
Europe and Central Asia                   34        33        41        26             39        56        39        45        44
Western Europe                           119        85       112        98            122        86        69        74        64
United States and Canada                  29        15        31        62             71        39        31        37        28
Australia and New Zealand                 40        45        26        17             20        14        12         7         5
Japan                                     69        82       156       143            175       162       136       143       116
All focus countries (wted. average)       54        45        55        51             59        53        43        48        na
Product coverage b                        68        70        71        73             73        72        71        68        70
Source: Anderson and Valenzuela (2008), based on estimates reported in the project's national country studies.
a. Dispersion for each region is a simple average of the country-level annual standard deviations around a weighted mean of NRAs per country
across covered products each year.
b. Share of gross value of total agricultural production at undistorted prices accounted for by covered products.
                                                        60


Table 1.7: Nominal rates of assistance to agricultural relative to non-agricultural
industries, 1955 to 2007
                             (percent, weighted averages)
                          e
 (a) Developing countries
                           1955-59    1960-64   1965-69      1970-74        1975-79       1980-84        1985-89       1990-94    1995-99   2000-04
                   a
 Covered products            -33.4      -29.6     -28.8        -30.2          -27.6            -23.3         -13.2        -4.9        3.8       6.7
 Non-covered products          -9.0      -7.9      -7.6         -9.8           -9.8             -7.1           0.3         0.1        3.9       6.3
 All agricultural
 productsa                   -27.1      -24.0     -23.1        -24.9          -23.1            -19.1          -9.8        -3.5        3.9       6.6
 Total agricultural
 NRA (incl. NPS)b            -25.8      -22.7     -21.8        -23.7          -22.0            -17.8          -8.3        -1.8        5.7       8.7
 Decoupled assistance           0.0       0.0       0.0             0.0           0.0           0.0           0.0          0.2        0.2       0.3
 Total agric. NRA
 (incl. NPS + decoup)        -25.8      -22.7     -21.8        -23.7          -22.0            -17.8          -8.3        -1.6        5.9       9.0
 Assistance to just tradables:
    All ag tradablesb        -27.9      -25.4     -25.3        -28.2          -25.7            -20.9         -10.3       -2.2         6.2       8.9
    Non-ag tradables          56.9       43.1      45.0         30.6           27.3             18.8          14.0       12.7         9.0       5.7
 Relative rate of
 assistance, RRAd            -54.1      -47.7     -48.4        -44.9          -41.6            -32.9         -21.2       -13.1       -2.5       3.1


    (b) High-income countries [incl. ECA]
                             1955-    1960-     1965-     1970-           1975-     1980-         1985-        1990-      1995-     2000-     2005-
                                59       64        69        74              79        84            89           94         99        04        07
 Covered productsa           22.0      30.9     37.0         27.2         34.2          38.9       55.6         43.2       32.0      28.7     16.6
 Non-covered products        10.0      14.6     14.9         11.5         14.1          13.7       21.1         17.0       17.0      16.7     91.9
 All agricultural
 productsa                   18.5      26.2     30.7         22.8         28.6          31.8       45.6         35.6       27.5      25.0     12.6
 Total agricultural
 NRA (incl. NPS)b            22.3      28.8     32.4         23.7         30.2          36.3       49.6         40.0       31.3      29.4     16.5
 Decoupled assistance          0.0      0.0      0.0          0.0          0.6           4.7           5.8       5.5        8.1       9.6       9.9
 Total agric. NRA
 (incl. NPS + decoup)        22.3      28.8     32.4         23.7         30.8          41.0       55.4         45.5       39.4      39.0     26.4
 Assistance to just tradables:
    All ag tradablesb        23.0      30.2     34.2         25.0         32.2          37.9       52.0         41.7       32.5      30.1     17.0
    Non-ag tradables           7.5      8.7      9.1          6.3          4.5           3.8        3.7          2.5        2.1       1.8     -0.2
 Relative rate of
 assistance, RRAd            14.3      19.7     23.0         17.6         26.5          32.8       46.6         38.2       29.8      27.8     17.2
Source: Anderson and Valenzuela (2008), based on estimates reported in the project's
national country studies.
b. NRAs including non-product-specific (NPS) assistance, that is, the assistance to all primary
factors and intermediate inputs as a percentage of the total primary agricultural production
valued at undistorted prices.
c. Trade Bias Index is TBI = (1+NRAagx/100)/(1+NRAagm/100) ­ 1, where NRAagm and
NRAagx are the average percentage NRAs for the import-competing and exportable parts of
the agricultural sector. The regional average TBI is calculated from the regional averages of
the NRAs for exportable and import-competing parts of the agricultural sector.
d. RRA is defined as 100*[(100+NRAagt)/(100+NRAnonagt)-1], where NRAagt and
NRAnonagt are the percentage NRAs for the tradables parts of the agricultural and non-
agricultural sectors, respectively.
e. Estimates for the NRA and RRA for China pre-1981 and India pre-1965 are based on the
assumption that the agricultural NRAs in those years were the same as the average NRA
estimates for those countries for 1981-84 and 1965-69, respectively, and that the value of
production in those missing years is that which gives the same average share of value of
                                            61

production in total world production in 1981-84 and 1965-69, respectively. Developing
country and world aggregates are computed accordingly.
                                                62


Table 1.8: Nominal rates of assistance to agricultural and nonagricultural tradables,
and the RRA,a by region, 1955 to 2007
                                       (percent)
                             1955-   1960-   1965-   1970-   1975-   1980-   1985-   1990-   1995-   2000-   2005-
                                59      64      69      74      79      84      89      94      99      04      07
Africa
NRA agric.                     na    -13.3   -19.6   -25.0   -22.1   -13.5    -0.3   -15.4    -8.7   -12.0     na
NRA non-agric.                 na      3.7     2.7     1.5     5.7     1.6     9.2     2.7     2.0     7.3     na
RRA                            na    -15.2   -21.4   -26.0   -25.9   -13.1    -8.3   -17.1   -10.4   -18.0     na
Latin America
NRA agric.                     na    -11.4    -9.3   -23.0   -19.0   -12.9   -11.2     4.4     5.5     4.9     na
NRA non-agric.                 na     26.9    31.3    27.8    23.3    18.5    16.8     7.3     6.6     5.4     na
RRA                            na    -30.2   -30.9   -39.8   -34.2   -26.6   -24.0    -2.7    -1.0    -0.5     na
South Asiab
NRA agric.                     na      4.1     4.4     9.7    -7.7     1.8    47.1     0.2    -2.4    12.7     na
NRA non-agric.                 na    114.4   117.8    81.7    57.8    54.6    39.9    18.6    15.0    10.1     na
RRA                            na    -51.5   -51.9   -39.8   -41.6   -33.3     5.1   -15.5   -14.9     3.4     na
China and Southeast Asiab
NRA agric.                     na    -43.6   -42.6   -40.1   -35.7   -34.5   -27.8   -12.0     4.9     7.1     na
NRA non-agric.                 na     36.5    36.5    33.7    30.8    20.6    23.3    19.8     9.6     5.5     na
RRA                            na    -58.7   -58.0   -55.2   -50.8   -43.4   -41.6   -26.4    -4.2     1.5     na
Japan, Korea and Taiwan
NRA agric.                   30.1     39.9    48.8   51.3    75.5    78.8    124.3   129.9   130.5   138.1   126.1
NRA non-agric.                8.6      8.3     6.1    4.2     3.5     2.4      2.5     1.4     1.1     0.6     1.0
RRA                          19.7     29.1    40.2   44.9    69.6    74.6    118.7   126.7   128.1   136.7   123.7
European transition econs.
NRA agric.                     na      na      na      na      na      na      na     10.0    18.3    16.1    17.0
NRA non-agric.                 na      na      na      na      na      na      na      9.8     5.5     4.6     2.7
RRA                            na      na      na      na      na      na      na      0.1    12.2    11.0    13.9
Western Europe
NRA agric.                   43.8     57.0    67.5   45.7    56.3    74.4     82.0    63.4    43.6    36.8    18.5
NRA non-agric.                8.0      7.2     5.7    3.8     2.5     1.5      1.7     1.3     1.5     1.4     1.2
RRA                          33.1     46.5    58.6   40.4    52.6    71.9     79.0    61.3    41.5    34.9    17.1
North America
NRA agric.                   12.5     10.5    10.9    7.5     7.6    13.8     20.2    16.1    11.4    17.3    11.2
NRA non-agric.                6.1      7.4     7.4    5.5     4.1     3.8      3.7     3.3     2.1     1.5     1.3
RRA                           6.0      2.9     3.3    1.8     3.4     9.7     15.8    12.4     9.1    15.5     9.7
ANZ
NRA agric.                     5.5     6.6     8.3    7.9     7.3    10.6      8.7     4.3     2.9     1.0     0.6
NRA non-agric.                20.0    21.5    24.0   19.7    14.3    13.5     10.3     6.4     3.4     2.4     2.4
RRA                          -12.1   -12.2   -12.6   -9.9    -6.1    -2.6     -1.5    -2.0    -0.5    -1.4    -1.8
Developing countriesb
NRA agric.                     na    -24.0   -27.3   -31.9   -25.5   -21.0   -15.6    -3.9     4.0     7.4     na
NRA non-agric.                 na     58.3    60.0    45.8    37.3    34.6    27.0    16.7     9.8     6.3     na
RRA                            na    -52.0   -54.5   -53.3   -45.8   -41.3   -33.6   -17.6    -5.3     1.1     na
High-income countries
NRA agric.                   23.0     30.9    36.8   26.5    34.7    43.0     55.5    48.2    36.6    33.9    18.3
NRA non-agric.                7.5      8.5     7.7    5.4     3.6     3.4      3.2     2.5     1.7     1.3    -0.7
RRA                          14.3     20.6    27.1   19.9    30.1    38.3     50.6    44.6    34.3    32.1    19.2
Worldb
NRA agric.                     na      5.6     7.6     0.8    2.6     5.7     18.7    19.7    18.4    18.6     na
NRA non-agric.                 na     19.0    20.5    16.1   13.7    10.0      9.8     7.6     6.0     4.0     na
RRA                            na    -11.3   -10.7   -13.2   -9.8    -3.6      8.1    11.3    11.8    14.0     na
Source: Anderson and Valenzuela (2008), based on estimates reported in the project's
national country studies.
a. The RRA is defined as 100*[(100+NRAagt)/(100+NRAnonagt)-1], where NRAagt and
NRAnonagt are the percentage NRAs for the tradables parts of the agricultural and non-
agricultural sectors, respectively.
                                          63


b. Estimates for the RRA for China pre-1981 and India pre-1965 are based on the
assumption that the agricultural NRAs in those years were the same as the average
NRA estimates for those countries for 1981-84 and 1965-69, respectively, and that the
value of production in those missing years is that which gives the same average share
of value of production in total world production in 1981-84 and 1965-69, respectively.
Developing and world country aggregates are computed accordingly.
                                                                       64



Table 1.9: Gross subsidy equivalents of assistance to farmers, total and per farm worker, by region, 1965 to 2007

    (a) Total (constant 2000 US$ billion per year)
                                     1965-69   1970-74      1975-79      1980-84     1985-89      1990-94     1995-99     2000-04   2005-07
Africa                                   -5        -9          -11            -6         -1           -7             -5       -6        na
Asia                                    -69      -110         -126          -106        -38           -8             38       57        na
Latin America                            -2       -13          -13           -14        -10            4              5        4        na
Europe and Central Asia a                -3        -1           -2           -10          1            4             19       19        26
Western Europe                           89        76          124           133        123          117             76       55        34
United States and Canada                 19        16           19            31         36           30             20       30        32
Australia and New Zealand                 1         1            1             1          1            1              0        0         0
Japan                                    16        18           37            33         53           59             53       42        22
All focus countries                      46       -21           30            64        165          201            208      202        na
   Developing countries                 -79      -133         -152          -136        -48           -6             58       75        na
   High-income countries (HICs)         125       112          182           199        214          207            150      127        80
   HICs including decoupled (HIC)b                                                      238
                                        125          112       186          223                      235            193      173       130
WORLD (scaled)c                          51          -24        34           70         192          225            233      223        na
                                                                         65



Table 1.9 (continued): Gross subsidy equivalents of assistance to farmers, total and per farm worker, by region, 1965 to 2007

    (b) Per person engaged in agriculture (constant 2000 US$ per year)

                                    1965-69      1970-74      1975-79     1980-84      1985-89      1990-94      1995-99      2000-04      2005-07
Africa                                -77         -137         -142          -81          -10         -69          -44          -46           na
Asia                                 -114         -166         -174         -136          -45          -9           41           60           na
Latin America                         -79         -410         -408         -407         -305         132          177          143           na
Europe and Central Asia              -123          -54         -101         -443           45         141          541          569          888
Western Europe                       4259         4433         8163        10097        10889       12397         9617         8427         5141
United States and Canada             3733         3436         4189         6730         8220        7478         5582         9182         8763
Australia and New Zealand            3504         3452         3492         4744         3226        1613         1221          442         1061
Japan                                1301         1845         4830         5432        10234       13957        16234        16933        12469
All focus countries                    59          -27           34           66          164         185          181          172           na
   Developing countries              -116         -177         -185         -154          -51          -6           53           67           na
   High-income countries (HICs)      3261         3491         6483         8166         9972       11325         9745         9871         7180
   HICs including decoupleda         3261         3491         6625         9151        11091       12857        12539        13447        11681

Source: Anderson and Valenzuela (2008), based on estimates reported in the project's national country studies.
a. ECA data are only Turkey until 1991. Farmer numbers are from FAOSTAT which may differ from national statistics. Estimates for the NRA
and RRA for China pre-1981 and India pre-1965 are based on the assumption that the agricultural NRAs in those years were the same as the
average NRA estimates for those countries for 1981-84 and 1965-69, respectively, and that the value of production in those missing years is that
which gives the same average share of value of production in total world production in 1981-84 and 1965-69, respectively. Developing country
and world aggregates are computed accordingly.
b. Decoupled payments to farmers are excluded from all rows except the final two.
c. Assumes the NRA in non-focus countries is the same as the average for the focus countries in each region (including decoupled payments in
the case of other high-income countries), and that their share of the value of regional agricultural production at undistorted prices is the same as
their average share of the region's agricultural GDP at distorted prices during 1990-2004. For the countries of North Africa (other than Egypt)
and the Middle East, their NRAs are assumed to be the same as Turkey's.
                                                     66


Table 1.10: Consumer tax equivalents of policies assisting producers of covered farm
products, percent and per capita, by region, 1965 to 2007

     (a)Percent

                      1965-69   1970-74   1975-79   1980-84    1985-89   1990-94   1995-99   2000-04   2005-07
Africa                   -12       -16        -9        -6         16        -8         0        -3        na
Asia                     -12       -15        -2       -15        -14        -3         5        10        na
Latin America             -7       -18       -13       -12        -10        13         6         8        na
Europe and Central
Asiab                    -17        -6        -7       -28          1        -2         9        17        12
Western Europe            74        49        59        70         65        49        37        32        17
United States and
Canada                     8         6         7          13       10         2        -5        -2         2
Australia and New
Zealand                   15        11        10          10       10         8         4         2         1
Japan                     67        68        93          99      135       119       116       107        81

Developing
countries                -12       -16        -5       -14        -10         0         5         8        na
High-income
countries                 42        30        40          45       50        41        32        27        16
All focus countries       23        14        21          10       15        16        15        16        na

    (b)Per capita (constant 2000 US$ per year)

                      1965-69   1970-74   1975-79   1980-84    1985-89   1990-94   1995-99   2000-04   2005-07
Africa                   -15       -27       -16       -12         21       -10         0        -3        na
Asia                      -6       -13        -2       -22        -18        -4         6        10        na
Latin America             -4       -24       -22       -31        -16        34        11        12        na
Europe and Central
Asiab                    -20        -9        -9       -41          1       -13        15        30        20
Western Europe           240       202       306       276        247       207       138       103        50
United States and
Canada                    40        35        43          67       42         8       -18        -9        11
Australia and New
Zealand                  112        87        80        68         56        49        22        12         8
Japan                    130       157       287       258        435       498       443       344       221

Developing
countries                 -7       -15        -5       -22        -13        -1         6         8        na
High-income
countries                153       136       207       195        199       176       124        94        59
All focus countries       30        18        39        23         27        29        26        23        na

Source: Anderson and Valenzuela (2008), based on estimates reported in the project's
national country studies.
a. ECA data are only for Turkey until 1991.
                                             67


Table 1.11: Intensity of public agricultural R&D investment, high-income and developing
       country regions, 1971 to 2004

       (expenditure as percent of gross value of agric production at undistorted prices)


                                     1970s           1980s           1990s          2000-04
All high-income countries              2.2             2.2            1.9             1.6
All developing countries               0.4             0.6            0.75            0.9
   Asia                                0.3             0.6            0.7             0.9
   Latin America                       0.2             0.4            0.45            0.6
   Sub-Saharan Africa                  1.2             1.1            1.2             1.1




Source: Anderson and Valenzuela (2008), based on R&D data from the CGIAR's Agricultural
       Science and Technology Indicators website at www.asti.cgiar.org
                                               68


Appendix Table 1.A: Export orientation, import dependence and self-sufficiency in primary
agricultural production, focus countriesa, 1961 to 2004

                                (percent at undistorted prices)

(a) Exports as share of production

                              1961-64     1970-74     1980-84     1990-94     2000-04
Africa                             19          17          12           7           8
Asia                                5           4           4           6           5
Latin America                      24          27          16          16          27
Western Europe                     13          16          27          37          43
United States and Canada           14          14          20          20          21
Australia and New Zealand          41          35          44          43          48
Japan                               1           2           1           0           1
All focus countries                11          11          13          16          16
Developing countries                8           8           7           8           8
High-income countries              14          15          22          26          29

(b) Imports as share of apparent consumption

                              1961-64     1970-74     1980-84     1990-94     2000-04
Africa                              2           2           5           4           4
Asia                                4           4           8          16          14
Latin America                       2           4           7          10          17
Western Europe                     32          28          34          41          46
United States and Canada            4           4           5           9          12
Australia and New Zealand           3           2           3           5           6
Japan                              23          24          24          26          27
All focus countries                11          10          12          19          18
Developing countries                3           4           8          14          13
High-income countries              18          16          20          25          27

(c) Self-sufficiency ratio

                              1961-64     1970-74     1980-84     1990-94     2000-04
Africa                            120         117         107         104         105
Asia                              102         100          96          89          91
Latin America                     129         132         110         107         114
Western Europe                     78          85          90          94          94
United States and Canada          111         112         119         114         111
Australia and New Zealand         165         151         174         170         183
Japan                              78          78          77          74          74
All focus countries               100         101         101          96          98
Developing countries              105         104          99          93          95
High-income countries              96          98         103         101         102

Source: Compiled using the project's estimates of total agricultural production valued at
undistorted prices and the FAO's total agricultural trade value data, in Anderson and
Valenzuela (2008).
a
 Includes intra-EU trade. Not included are Iceland, ECA, Benin, Burkina Faso, Chad, Mali,
Togo.