The impact of CAFTA on poverty, distribution, and growth in El Salvador:

"In this paper we develop a dynamic CGE model to examine the impact of CAFTA on production, employment and poverty in El Salvador. We model four aspects of the agreement: tariff reductions, quotas, changes in the rules of origin for maquila and more generous treatment of foreign investment. The model shows that CAFTA has a small positive effect on growth, employment and poverty. Tariff reduction under CAFTA adds about .2% to the growth rate of output up to 2020. Liberalizing the rules of origin for maquila has a bigger positive effect on growth and poverty mainly because it raises the demand for exportables produced by unskilled labor. We model the foreign investment effect by assuming that capital inflows go directly to capital formation. This raises the growth rate of output by over 1% per year and lowers poverty incidence in 2020 by over 25% relative to what it would be in the baseline scenario. These simulations say something important about the growth process in a country like El Salvador in which it seems reasonable to assume that there is idle unskilled labor willing and able to work at a fixed real wage. In such an economy, growth can be increased in one of three ways. First, already employed resources can be moved to sectors where they are more productive. That is what the tariff reductions under CAFTA do, and the result is positive but small. Second, the structure of demand can be changed in such a way as to increase the demand for previously unemployed unskilled labor. That is what the maquila simulation does, because maquila uses a lot of unskilled labor relative to skilled labor and capital. Finally the supply of capital can be increased by increasing the rate of capital formation. That is what happens in the FDI simulation." from Authors' AbstractCAFTA, Trade agreements, Growth, Poverty, CGE model,

The impact of CAFTA on employment, production, and poverty in Honduras:

"In this paper we develop a dynamic CGE model to examine the impact of CAFTA on production, employment and poverty in Honduras. We model four aspects of the agreement: tariff reductions, quotas, changes in the rules of origin for maquila and more generous treatment of foreign investment. We first show that trade liberalization under CAFTA has a positive effect on growth, employment and poverty but the effect is small. What really matters for Honduras is the assembly (maquila) industry. CAFTA liberalized the rules of origin for imports into this industry. That raises the growth rate of output by 1.4% and reduces poverty by 11% in 2020 relative to what it would otherwise have been. Increasing capital formation through an increase in foreign investment in response to CAFTA has an even larger impact on growth, employment and poverty. These simulations say something important about the growth process in a country like Honduras in which it seems reasonable to assume that there is underemployed, unskilled labor willing and able to work more at a fixed real wage. In such an economy changing the structure of demand in favor of sectors that use a lot of unskilled labor will have a big impact on growth. That is what the maquila simulation does, because maquila uses a lot of unskilled labor relative to skilled labor and capital. Alternatively the supply of capital can be increased by increasing the rate of capital formation. Either of these two has a far larger impact on growth and poverty than tariff reductions alone." from Authors' AbstractCAFTA, Growth, Poverty, CGE model,

The impact of trade and policy liberalization on Argentina's agricultural sector: technology adoption in a dynamic model

This dissertation analyzes the effect of policies associated with increased openness of the economy on the development of the agricultural sector, with a focus on adoption of technology. It investigates with the help of econometric tools the determinants of the adoption of technology in Argentina. In addition, it analyzes the possible growth paths that result with the implementation of policies using a recursive dynamic Computable General Equilibrium (CGE) model. During the last 20 years Argentina experienced extraordinary changes in its agricultural production. Both production and productivity increased very significantly as well as exports. One of the main drivers of these changes was the massive incorporation of technological change such as improved seeds, greater use of agrochemicals and machinery and agronomic technologies such as zero tillage. This study analyzes the impact of the economic environment on the adoption of technology. The results confirm the argument that the stability of the economy and liberalization motivates producers to adopt new technology. This motivation can be the consequence of the need to adopt new technology because otherwise producers lose competitiveness in the world market and/or because the stability and transparency of the economy makes producers more comfortable with the idea of innovation. The second major element of the research is the analysis of the impacts that the possible trade agreements that the Argentine government is involved right now, one representing free trade world wide (WTO) and the other a Western hemisphere free trade bloc (FTAA), could have on agriculture. The results leave us with the idea that for the agricultural sector it is worth pushing for the full implementation of free trade in the world rather than trying to only go forward with a regional free trade agreement. However, this is only true if there is a significant progress in reducing trade barriers and producers subsidies in developed countries. Otherwise the idea of only eliminating trade barriers between the FTAA bloc sounds very appealing with the gains that Argentina can take by better access to a larger market and the increase in bargaining power with outsiders of the bloc

El Mercosur agropecuario: lo importante no es el comercio intraregional

Non-PRIFPRI4TM

Are export promotion and trade liberalization good for Latin America's poor?:a comparative macro-micro CGE analysis

Since the late 1980s, almost all Latin American countries have gone through aprocess of far-reaching economic reforms, featuring in particular trade, financial andcapital account liberalization. Contrary to expectations the reforms have failed to giveeconomic growth a major boost. At the same time, income inequality has risen in acontext where inequality was already very high to begin with. Not surprisingly, littleprogress has been made on poverty reduction since 1990. Indeed poverty has beenrising in the region as growth slowed down after 1995.An important and natural question to ask is whether the reforms are the reasonor at least a significant contributing factor in the poor performance of the region sincethe mid 1990s? Did they contribute to the growth slowdown and the rise in povertyand inequality? These are crucial questions the more so, because the countries in theregion are considering further trade integration under the flag of the Free Trade Areaof the Americas (FTAA) and the regulations of the World Trade Organization (WTO),subscribing to further trade liberalization. Key players from the region, like Brazil,were instrumental in blocking a new global trade agreement under WTO aegis in September 2003 precisely because of concerns about the developmental and equity effectsof freer world trade.In this paper we apply a rigorous comparative analysis of the impact of tradereforms on growth, employment and poverty.1 We use computable generalequilibrium (CGE) models for sixteen countries in the region, covering over 90% ofits population and of its GDP. We also develop a micro simulation model to translatethe macroeconomic, sector and labor market impacts analyzed through the CGEmodel into changes in poverty and inequality.Our short answer to the main questions posed above is that trade liberalizationand the switch to export-led growth are not the cause of the growth slowdown in theregion. Nor are they the cause of rising poverty and inequality. On the contrary formost countries their impact is mildly positive for both growth and poverty reduction.But overall, the impact of the reforms or of export growth while positive, are small.Trade reforms increase the skill-intensity in labor demand distributing the gains unevenly. Some social groups win (mostly the better-educated workers and profitearners) and some lose (often agricultural and unskilled workers) in the processproviding the explanation towards rising inequality observed in most countryexperiences. So while the trade reforms are not to blame for the region’s woes, theydo not appear – by themselves – to be the solution for them either.<br/

The future of the global agri-food trade and the WTO

In recent years, the international trade context has seen, as a consequence of political changes, social unrest and violence, increased uncertainty and instability. Two main trends, one economic and one political, have affected the economic and political environment in which the evolution of the global trading system has been taking place.Non-PRIFPRI2MTID; LA

From farm to table: Agrifood systems and trade challenges in the Southern Cone

Food production includes a complex and varied set of agricultural and nonagricultural activities, involving a growing number of sectors and actors that influence the way food is produced, processed, distributed, and consumed. Recently, and especially after the 2021 United Nation Food Systems Summit (UNFSS), it has been proposed that this conglomerate of activities and socioeconomic actors be jointly identified as food systems. National food systems, which exist in each country, are interrelated through trade and other factors with regional food systems and finally with the global food system. The concept of food systems has been adopted as a useful tool for understanding the multiple and complex interrelations between different production, distribution, and trade partners and for adjusting policy analysis and design to this complex world. The discussions and documentation prepared during the UNFSS process brought to public attention not only the utility and complexity of this concept but also some of the shortcomings of current food production practices. The summit also highlighted an urgent need to establish processes for identifying such shortcomings, their relative importance, and possible measures that would lead to the transformation of national food systems and the global food system.Non-PRIFPRI1; 1 Fostering Climate-Resilient and Sustainable Food Supply; 3 Building Inclusive and Efficient Markets, Trade Systems, and Food IndustryMarkets, Trade, and Institutions (MTI); Food and Nutrition Polic

The agricultural sector as an alternative to illegal mining in Peru: A case study of Madre de Dios

Gold mining is the main economic activity in Madre de Dios, Peru. Despite efforts, the state has not yet managed to identify a formalization process achievable for small operators. In addition, many small-scale miners are driven by poverty and need income to provide for their basic needs. Because participation in small-scale mining is largely driven by poverty, it is likely that, in the longer term, much artisanal mining activity will disappear naturally if, through economic development, more attractive work options become available. This paper reviews the importance of illegal mining in Madre de Dios and the potential for development of the agriculture sector. It also analyzes three different policy scenarios: (1) government spending to rectify the environmental damage in the region caused by illegal mining, (2) development of the agricultural sector in the region, and (3) a final scenario with both environmental restoration and agricultural development. Results show that additional government spending in Madre de Dios does not significantly affect the rest of the country and that investment in agriculture can achieve structural change in the gross domestic product of Madre de Dios. Development of the agricultural sector also slightly increases household incomes in Madre de Dios.Non-PRIFPRI1; C Improving markets and trade; D Transforming AgricultureMTI

Global food and water security, trade and market stability

The challenge to produce more food to meet the growing world demand requires a careful, integrated and global approach, to secure the efficient use of land, water and energy at the global level, aimed at increasing productivity and food supply with production systems which are environmentally friendly. Nowadays in many regions the crop production is still developed under intensive production systems, which are deteriorating the natural resources and contributing to global warming. The purpose should be to move to more environmentally friendly production systems. To support that process it is proposed to improve the measurement of sustainable practices in crop production and to monitor the production systems in different regions to provide international comparisons and track performance over time. At the same time, trade is, and will be in the future crucial to cope with a global production system environmentally friendly providing suffice food to meet food security, given that regional production and consumption imbalances associated with regional differences in resource endowments are very relevant. However, world trade of agricultural products continues seriously limited by trade policies and could be worsened by new measures implemented by some countries during or after the COVID-19 crisis. Therefore, the G20 should promote policies and measures to facilitate dialogue and information exchange on supply and demand to foster agreements between food trading partners, based on a more open trading system, aimed at reconciling both objectives: global food security and environmental sustainability.Non-PRIFPRI5; DCAMTI