The effects of domestic agricultural reforms and market access on trade and production in less developed countries.

This chapter analyses the impact of OECD policies, particularly US farm programmes, on the developing countries. It separately considers: (i) the impact of OECD domestic support programmes on world markets through their impact on OECD agricultural exports; and (ii) OECD protection of agricultural markets that affect potential agricultural exports of developing countries. The analysis considers four scenarios. First, it considers the effects of unilateral reform in the USA - this eliminates all domestic agricultural support and liberalizes agricultural trade. It then considers the effects of domestic support alone by removing domestic agricultural support in OECD countries. Third, OECD countries remove domestic support for agriculture and liberalizes trade in agriculture. Finally, the analysis considers complete liberalization in agriculture - eliminating all OECD domestic support and all countries liberalize trade in agriculture. The empirical work leads to the following conclusions: (1) eliminating only domestic programmes in OECD countries, without any change in trade policies, has little impact on trade with developing countries; (2) adding agricultural trade liberalization in the OECD countries to domestic policy liberalization in agriculture has considerable effects on trade; (3) agricultural trade among developing countries faces more protection than trade between developing countries and the OECD countries, but the trade volumes are lower; and (4) unilateral agricultural policy reform by either the USA or the EU is difficult, with the non-reforming region gaining market share and with serious impacts on farm incomes in the reforming region.