Impact of WTO’s Trade Liberalisation on Selected Food Crops in Pakistan

Abstract

WTO has major implications for almost all the sectors of economy but agriculture sector is the one which is more prone to the implementation of its agreements, particularly the Agreement on Agriculture (AoA). The study intended to evaluate the impact of WTO on domestic ma rket and farm-level prices, production and consumption of major food commodities like wheat and rice and ultimately their impact on the producer’s and consumer’s surpluses. The farm level impact was also evaluated to chalk out the eventual position at farm level with the purpose to identify necessary policies and actions to cope with the new world situation. The study tries to provide a useful guide to the likely impacts of agricultural trade liberalisation. It was found that openness of the economy would affect the domestic demand, supply and consumption along with affecting the producer and consumer surpluses. It was estimated that increased prices would have increased production of wheat which would have generated a gain of producer’s surplus of Rs 10,682 million. On the other hand due to increased wholesale price of wheat, the domestic demand of wheat would have declined and caused a loss to consumer surplus of Rs 12,557 million. Similarly, the increased production of rice would have generated a gain of producer’s surplus of Rs 3,708 million. However, due to increase in the wholesale price of rice, its domestic demand would have declined thus causing a loss to consumers’ surplus. Overall the impact of the increase in the international price of wheat would have resulted in a net loss to Pakistan of Rs 1,875 million during 2004-05 while in case of rice it would have resulted in a gain of Rs 1,215 million in 2004-05.Trade Liberalisation, Food Crops, Export, Consumer Surplus, Comparative Advantage, Free Trade.