Trade & development: Why many developing countries seem, contrary to what the traditional theories suggest, not benefiting from international trade November 27, 2014
Posted by OromianEconomist in Africa, Africa and debt, Africa Rising, African Poor, Agriculture, Aid to Africa, Colonizing Structure, Corruption in Africa, Economics, Economics: Development Theory and Policy applications, Ethiopia the least competitive in the Global Competitiveness Index, Theory of Development, Trade and Development, Uncategorized.Tags: Africa, African Studies, Comparative Advantage, Developing country, Development, Development and Change, economics, Trade and Development
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” The benefits of trade have been well documented throughout history. The economic case is quite straightforward. Opening up to trade allows countries to shift their patterns of production, exporting goods that they are relatively efficient at producing and importing goods at a lower price that they can’t produce resourcefully at home. This lets resources to be allocated more efficiently allowing a nation’s economy to grow. Fruits of trade can be seen in many countries. In the last 30 years, trade has grown around 7% per year on average (WTO, 2013). During this time period, developing nations have seen their share in world export increase from 34% to 47% (WTO, 2013) which at first glance seem incredible. However if we dig a little deeper, it is quickly apparent that China is the key reason for the majority of the growth and that a bulk of these developing countries aren’t benefiting fully from international trade. Why is this? Many developing countries depend on the export of a few primary products and in some cases a single primary commodity for the majority of their export earnings. In fact, 95 of the 141 developing countries rely of the export of commodities for at least 50% of their export income (Brown, 2008). This is where the problem starts. Prices in the primary good’s market tend to be highly volatile sometimes varying up to 50% in a single year (South Centre, 2005). Often, the fluctuation of these products are out of the hands of the developing countries as they individually have only a small portion of the world supply which is not enough to affect world prices. At the same time, some shocks (ie. Weather) are unpredictable. The unstable commodity price brings uncertainty, instability and often negative economic consequences for the developing countries. This also affects the policymaking in the country as it is hard to implement a sustainable development scheme or a fiscal expansionary policy with uncertain revenue. Positive shocks do increase income in the short run however a study by Dehn (2000) found that there are no permanent effect on the increase on income in the long run. Furthermore, there is often very little scope to growth through primary products as it is very hard to increase volumes of sale. This is due to the demand being inelastic. The over dependence on the export of primary products also causes another problem – a risk of a large trade deficit. Several studies (Olukoshi, 1989, Mundell, 1989) have shown that primary commodity prices are the main cause for the debt problems in many developing countries. In an empirical research done by Swaray (2005), he shows the main reason behind this is the deteriorating terms of trade, developing countries face. Terms of Trade is equal to the value of export over the value of import. Over time there has been a general trend of primary products falling in value. 41 of 46 leading commodities fell in real value over the last 30 years with an average decline of 47% in real prices, according to the World Bank (cited in CFC, 2005). This has occurs due to inelastic demand for commodities and lack of differentiation among producers hence making it a competitive market. The creation of synthetic substitutes has also suppressed prices. At the same time, manufacturing products (which generally developing countries tend to import) see a general rise in prices. Put these trends together, over time, developing countries have seen their terms of trade worsen. A study by CFC (2005), shows that the terms of trade have declined as much as 20% since the 1980s. This, alongside the difficulty to increase volumes of sales has meant many developing countries have a trade deficit. According Bhagwati (1958), it is possible that this decline in the terms of trade could result in diminished welfare. In other words, growth from trade can be negative rather than positive. ”
The benefits of trade have been well documented throughout history. The economic case is quite straightforward. Opening up to trade allows countries to shift their patterns of production, exporting goods that they are relatively efficient at producing and importing goods at a lower price that they can’t produce resourcefully at home. This lets resources to be allocated more efficiently allowing a nation’s economy to grow. Fruits of trade can be seen in many countries. In the last 30 years, trade has grown around 7% per year on average (WTO, 2013). During this time period, developing nations have seen their share in world export increase from 34% to 47% (WTO, 2013) which at first glance seem incredible. However if we dig a little deeper, it is quickly apparent that China is the key reason for the majority of the growth and that a bulk of these developing countries aren’t benefiting fully…
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SMALL WORKS BETTER: THE CASE OF FAMILY FARMING November 27, 2014
Posted by OromianEconomist in Africa, Africa Rising, African Poor, Agriculture, Ethiopia's Colonizing Structure and the Development Problems of People of Oromia, Afar, Ogaden, Sidama, Southern Ethiopia and the Omo Valley, Land Grabs in Africa, Land Grabs in Oromia.Tags: Africa, African Studies, Family farming, Land grabs in Africa, Land Grabs in Oromia
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The paradox, however, and one of the reasons why despite having so little land, small producers are feeding the planet, is that small farms are often more productive than large ones. If the yields achieved by Kenya’s small farmers were matched by the country’s large-scale operations, the country’s agricultural output would double. In Central America, the region’s food production would triple. If Russia’s big farms were as productive as its small ones, output would increase by a factor of six. Another reason why small farms are the feeding the planet is because they prioritise food production. They tend to focus on local and national markets and their own families. In fact, much of what they produce doesn’t enter into trade statistics – but it does reach those who need it most: the rural and urban poor. If the current processes of land concentration continue, then no matter how hard-working, efficient and productive they are, small farmers will simply not be able to carry on. The data show that the concentration of farmland in fewer and fewer hands is directly related to the increasing number of people going hungry every day. – http://www.grain.org/article/entries/5072-telling-family-farming-fairy-tales
Telling family farming fairly tales
An opinion piece by GRAIN published by Reuters.
The United Nations declared 2014 as the International Year of Family Farming. As part of the celebrations, the U.N. Food and Agriculture Organisation (FAO) released its annual “State of Food and Agriculture”, which this year is dedicated to family farming. Family farmers, FAO say, manage 70-80 percent of the world’s farmland and produce 80 percent of the world’s food.
But on the ground – whether in Kenya, Brazil, China or Spain – rural people are being marginalised and threatened, displaced, beaten and even killed by a variety of powerful actors who want their land.
A recent comprehensive survey by GRAIN, examining data from around the world, finds that while small farmers feed the world, they are doing so with just 24 percent of the world’s farmland – or 17 percent if you leave out China and India. GRAIN’s report also shows that this meagre share is shrinking fast.How, then, can FAO claim that family farms occupy 70 to 80 percent of the world’s farmland? In the same report, FAO claims that only 1 percent of all farms in the world are larger than 50 hectares, and that these few farms control 65 percent of the world’s farmland, a figure much more in line with GRAIN’s findings.
The confusion stems from the way FAO deal with the concept of family farming, which they roughly define as any farm managed by an individual or a household. (They admit there is no precise definition. Various countries, like Mali, have their own.)
Thus, a huge industrial soya bean farm in rural Argentina, whose family owners live in Buenos Aires, is included in FAO’s count of “family farms”. What about sprawling Hacienda Luisita, owned by the powerful Cojuanco family in the Philippines and epicentre of the country’s battle for agrarian reform since decades. Is that a family farm?
Looking at ownership to determine what is and is not a family farm masks all the inequities, injustices and struggles that peasants and other small scale food producers across the world are mired in.
It allows FAO to paint a rosy picture and conveniently ignore perhaps the most crucial factor affecting the capacity of small farmers to produce food: lack of access to land. Instead, the FAO focuses its message on how family farmers should innovate and be more productive.
Small food producers’ access to land is shrinking due a range of forces. One is that because of population pressure, farms are getting divided up amongst family members. Another is the vertiginous expansion of monoculture plantations.
In the last 50 years, a staggering 140 million hectares – the size of almost all the farmland in India — has been taken over by four industrial crops: soya bean, oil palm, rapeseed and sugar cane. And this trend is accelerating.
In the next few decades, experts predict that the global area planted to oil palm willdouble, while the soybean area will grow by a third.These crops don’t feed people. They are grown to feed the agroindustrial complex.
Other pressures pushing small food producers off their land include the runaway plague of large-scale land grabs by corporate interests. In the last few years alone, according to the World Bank, some 60 million hectares of fertile farmland have been leased, on a long-term basis, to foreign investors and local elites, mostly in the global South.
While some of this is for energy production, a big part of it is to produce food commodities for the global market, instead of family farming.
SMALL WORKS BETTER
The paradox, however, and one of the reasons why despite having so little land, small producers are feeding the planet, is that small farms are often more productive than large ones.
If the yields achieved by Kenya’s small farmers were matched by the country’s large-scale operations, the country’s agricultural output would double. In Central America, the region’s food production would triple. If Russia’s big farms were as productive as its small ones, output would increase by a factor of six.
Another reason why small farms are the feeding the planet is because they prioritise food production. They tend to focus on local and national markets and their own families. In fact, much of what they produce doesn’t enter into trade statistics – but it does reach those who need it most: the rural and urban poor.
If the current processes of land concentration continue, then no matter how hard-working, efficient and productive they are, small farmers will simply not be able to carry on. The data show that the concentration of farmland in fewer and fewer hands is directly related to the increasing number of people going hungry every day.
According to one U.N. study, active policies supporting small producers and agro-ecological farming methods could double global food production in a decade and enable small farmers to continue to produce and utilise biodiversity, maintain ecosystems and local economies, while multiplying and strengthening meaningful work opportunities and social cohesion in rural areas.
Agrarian reforms can and should be the springboard to moving in this direction.
Experts and development agencies are constantly saying that we need to double food production in the coming decades. To achieve that, they usually recommend a combination of trade and investment liberalisation plus new technologies.
But this will only empower corporate interests and create more inequality. The real solution is to turn control and resources over to small producers themselves and enact agricultural policies to support them.
The message is clear. We need to urgently put land back in the hands of small farmers and make the struggle for genuine and comprehensive agrarian reform central to the fight for better food systems worldwide.
FAO’s lip service to family farming just confuses the matter and avoids putting the real issues on the table.
Read more @ http://www.grain.org/article/entries/5072-telling-family-farming-fairy-tales
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