Search

Because agriculture is the economic backbone of most countries in Sub-Saharan Africa, including Ethiopia, any meaningful sustainable development program in the continent must therefore be anchored in the sector. The concept for this study on agribusiness indicators was based on the vital role that agribusiness plays in agricultural development. The study focuses on agribusiness indicators (ABI) to identify and isolate the determining factors that lead private investors and other stakeholders to participate in agribusiness and to engage in discourse regarding its development. A more thorough empirical understanding of these determinants in turn can usefully inform the types of policy reforms that can promote agribusiness in Africa. In Ethiopia, the ABI team focused on the following success factors: a) access to critical factors of production of certified hybrid seeds, fertilizer, and mechanical input; b) enabling environment in terms of access of credit and transportation; and c) government expenditures on agriculture, and trade and regulatory policies that currently influence the agribusiness environment. The factors and indicators that the research team has included in this study are not exhaustive but rather are intended to serve as a pilot that could be scaled up to include more variables and countries. The findings of the study revealed the dominant role of the government in the seed and fertilizer markets. In the seed sub-sector, perennial shortages of both basic and certified seeds have greatly limited agricultural productivity in Ethiopia.

This paper analyzes the economic effects of agricultural price and merchandise trade policies around the world as of 2004 on global markets, net farm incomes, and national and regional economic welfare and poverty, using the global economy wide Linkage model, new estimates of agricultural price distortions for developing countries, and poverty elasticity's approach. It addresses two questions: to what extent are policies as of 2004 still reducing rewards from farming in developing countries and thereby adding to inequality across countries in farm household incomes? Are they depressing value added more in primary agriculture than in the rest of the economy of developing countries, and earnings of unskilled workers more than of owners of other factors of production, thereby potentially contributing to inequality and poverty within developing countries (given that farm incomes are well below non-farm incomes in most developing countries and that agriculture there is intensive in the use of unskilled labor)? Results are presented for the key countries and regions of the world and for the world as a whole. They reveal that, by moving to free markets, income inequality between countries will be reduced at least slightly, all but one-sixth of the gains to developing countries will come from agricultural policy reform, unskilled workers in developing countries the majority of whom work on farms will benefit most from reform, net farm incomes in developing countries will rise by 6 percent compared with 2 percent for non-agricultural value added, and the number of people surviving on less than US$1 a day will drop 3 percent globally.

Although Mozambique has considerable agricultural potential, rural poverty remains extremely high. This paper examines the extent to which global and domestic price distortions affect agricultural production and national poverty. The author develops a computable general equilibrium (CGE) and micro-simulation model of Mozambique that is linked to the results of a global model. This framework is used to examine the effects of eliminating global and national price distortions. Model results indicate that agriculture is adversely affected by current trade distortions due to policies in the rest of the world. While a removal of all merchandise trade distortions will reduce import prices, it will also raise agricultural production and reduce poverty. By contrast, removing only agricultural price distortions abroad will have little effect on Mozambique's agricultural sector. Model results indicate that Mozambique's own distortions are also biased against agriculture, with producers of processed agricultural products enjoying high protection levels. Removing these distortions causes a significant expansion of agricultural Gross Domestic Product (GDP) and a reduction in both poverty and inequality. The findings therefore suggest that removing own-country and rest-of-world distortions will have positive implications for agriculture and for the overall economy in Mozambique, and in particular it will reduce its poverty and inequality.

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 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 nominal rates of assistance and consumer tax equivalents (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 eleven that are based on the trade restrictiveness index first developed by Anderson and Neary (2005). In chapter twelve 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 thirteen 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.

Despite reforms over the past quarter-century, world agricultural markets remain highly distorted by government policies. Traditional indicators of those price distortions such as the nominal rate of assistance and consumer tax equivalent provide measures of the degree of intervention, but they can be misleading as indicators of the true effects of those policies. By drawing on recent theoretical literature that provides indicators of the trade- and welfare-reducing effects of price and trade policies, this paper develops more-satisfactory indexes for capturing distortions to agricultural incentives. It then exploits the agricultural distortion database recently compiled by the World Bank to generate estimates of them for both developing and high-income countries over the past half century, based on a sample of 75 countries that together account for all but one-tenth of the world's population, gross domestic product (GDP) and agricultural production. While they are still only partial equilibrium measures, they provide a much better approximation of the true trade and welfare effects of sectoral policies without needing a formal model of global markets or even price elasticity estimates.

Earnings from farming in many developing countries have been depressed by a pro-urban bias in own-country policies as well as by governments of richer countries favoring their farmers with import barriers and subsidies. Both sets of policies, which reduce national and global economic welfare and contribute to global inequality and poverty, have been undergoing reform since the 1980s. Using the linkage model of the global economy and modifications to the pre-release of version 7 of the Global Trade Analysis Project (GTAP) protection database for 2004, this paper seeks to compare the effect of those reforms to date with those that would come from removing remaining agricultural and trade policies. Two sets of results are thus presented: one showing the effects of policy reforms between 1980-84 and 2004, the other showing what the removal of remaining distortions as of 2004 could be. Both sets of results indicate improvements in the real value of agricultural output and exports, the real returns to farm land and unskilled labor, and real net farm incomes in most developing country regions despite the adverse effect on the international terms of trade for some developing countries that are net food importers or are enjoying preferential access to agricultural markets of high-income countries. Landowners in those high-income countries still offering their farmers price supports could readily afford to compensate them from the benefits of removing remaining agricultural protectionism.