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With the advent of the WTO’s Doha Development Agenda, as well as the Millennium Development Goals aiming to reduce poverty by 50 percent by 2015, poverty impacts of trade reforms have attracted increasing attention. This has been particularly true of agricultural trade reform due to the importance of food in the diets of the poor, relatively higher protection in agriculture, as well as the heavy concentration of global poverty in rural areas where agriculture is the main source of income. Yet some in this debate have argued that, given the extreme volatility in agricultural commodity markets, the additional price and poverty impacts due to trade liberalization might well be undetectable. This paper formally tests this “invisibility hypothesis” via stochastic simulation of a computable general equilibrium framework. The hypothesis test is based on the comparison of two sets of price and poverty distributions. The first originates solely from the inherent variability in global staple grains markets, while the second combines the effects of this inherent variability and trade reform. Results indicate that the short-run impacts of trade liberalization on poverty are not distinguishable from market volatility in majority of the fifteen focus countries – suggesting that the poverty impacts of agricultural trade liberalization may indeed be invisible.

Reforms in recent decades have sharply reduced the distortions affecting agriculture in developing countries, particularly by cuts to agricultural export taxes and by some reductions in government assistance to agriculture in high-income countries, but international trade in farm products continues to be far more distorted than trade in nonfarm goods. This paper summarizes a series of empirical studies that focus on the effects of the remaining distortions to world merchandise trade for poverty and inequality, especially in developing countries. To obtain different insights into the various impacts, two global studies are undertaken using the World Bank's Linkage model, one multi-country study uses the Global Trade Analysis Project (GTAP) model, and ten country case studies are also included, each using a national economy-wide model. The Linkage model results suggest that liberalization will reduce international inequality, largely by boosting farm incomes and raising real wages for unskilled workers in developing countries, and will reduce the number of poor people worldwide by 3 percent. The analysis based on the GTAP model for a sample of 15 countries, and the ten stand-alone national case studies, all point to larger reductions in poverty, especially if only the non-poor are subjected to increased income taxation to compensate for the loss of trade tax revenue.

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.

This paper empirically investigates the impact of agricultural trade reform in South Africa. Using UNCTAD’s Agricultural Trade Policy Simulation Model (ATPSM), the study investigates two specific scenarios that capture the magnitude of (i) the economic impact of global agricultural trade reform in South Africa and (ii) the economic impact if the reform in South Africa is coupled with agricultural reforms in the European Union (EU). Trade reform focuses on substantial tariff reduction; although in the case of the EU, scenarios also include reduction in domestic support and export subsidies. The results show that a unilateral tariff reduction in a selected number of agricultural products amounts to welfare gains of US$21 million. These gains are three times higher when accompanied by extensive reforms in the EU.