Eugenio Diaz-Bonilla

That was then but this is now: multifunctionality in industry and agriculture.

Current agricultural negotiations in the World Trade Organization are grappling on how to fully integrate agriculture within the general rules for trade in goods. The notion of multifunctionality of agriculture has been suggested as a reason to justify special treatment for that sector, including the continuation of its protection and subsidization. Many developing countries are still analyzing whether the idea has something to offer them in terms of their negotiating positions and policy framework. While multifunctionality has been invoked for supporting agriculture in developed countries, a similar idea, although not called so at the time, was clearly behind support for industry in developing countries. Again in this case, the policy implication was that government intervention was required (through trade protection, subsidies, and other special policies) to develop an industrial base that contributed to society more than what market valuations alone would suggest. The debate on industrialization in developing countries was part of a broader discussion regarding nation-building, economic development, and social modernization. The current arguments around multifunctionality are similarly embedded in a larger economic, political and social matrix. This paper, although it does not present a full account of either debate, discusses some of the intriguing parallelisms in their theoretical frameworks, policy implications and economic and social impacts. The main objective is to clarify current policy issues for the agricultural sector in developing countries, highlighting possible consequences for the negotiating position of developing countries in the WTO process. * Eugenio Diaz-Bonilla is a Senior Research Fellow at the Trade and Macroeconomic Division, IFPRI. Jonathan Tin was a Research Assistant at IFPRI. The authors thank very helpful comments by Channing Arndt, Sherman Robinson, and Marcelle Thomas, who of course are not responsible for remaining errors.

Macroeconomics, Macrosectoral Policies, and Agriculture in Developing Countries

This handbook devotes most of its chapters to reviewing sectoral policies related to agriculture. This chapter moves to a macroeconomic and macrosectoral view of the policy framework and its possible interaction with the agricultural sector. A previous handbook (Gordon Rausser and Bruce Gardner, eds., 2002) devoted a whole section with several chapters to economywide policies.1 Since then, there have been nontrivial changes in macroeconomic trends and policy debates, not only regarding domestic aspects but also, and perhaps more relevant for developing countries, at the level of the global economy. In the spirit of Schuh (1986) this chapter attempts to review and update some of the world macroeconomic issues relevant for agriculture, while at the same time covering domestic macroeconomic development affecting the sector, in both cases taking mostly the perspective of developing countries. The rest of this chapter is organized as follows. In Section 1, we define the main macroeconomic topics that we will cover and their links to agriculture. Section 2 presents a brief characterization of differentiated structural issues in developing countries economy in general and the agricultural sector in particular as a background for a more detailed analysis of world macroeconomic conditions and trends (Section 3) and of domestic macroeconomic policies (Section 4). Section 5 concludes by trying to weave a narrative with the performance of the agricultural sector in developing countries during the last half-century in light of world and domestic macroeconomic issues analyzed in the previous two sections and to present some speculative thoughts about the future evolution of the sector in those countries.

Volatile Volatility: Conceptual and Measurement Issues Related to Price Trends and Volatility

In the 1990s, policy debates focused on global price levels and whether they were too low. Two recent food price spikes, in 2008 and 2011, have led to renewed concerns about the impact of high prices and shifted the focus back to food price volatility. The effects of changes in price trends on food production and food consumption (a discussion about price levels) are different from the effects of volatility changes around those trends (cycles and extreme events), but the two issues are related. This paper argues that analysis of these developments may benefit from differentiating between trends, cycles, and shorter-term events, including spikes and busts. After expanding on several methodological and data issues related to how these concepts are defined and measured, the paper concludes that although the price shocks of 2008 and 2011 focused the attention of the public and policymakers on price volatility, the decomposition of trends, cycles, and shorter-term volatility also suggests the need to find out whether price variations are responding to cyclical and shorter-term movements, or whether they are the result of a changing trend reflecting adjustments in long-term fundamentals that need to be properly understood.

Lost in Translation: The Fractured Conversation about Trade and Food Security

There is a heated debate among policy makers, civil society, and analysts about the impact of trade and trade policies on food security. While there have been several empirical reviews on these issues the controversy has not abated. This paper surveys possible reasons why the polemic continues and why it may be difficult to settle it unequivocally. The reasons are related to the different notions of trade, food and nutrition security, the variety of possible indicators for those concepts, the multiplicity of channels through which trade and food and nutrition security notions interact, the diversity of analytical and quantitative approaches utilized, and differences in values and conceptual priors about the operation of the world economy. The paper concludes with some reflections about what can be reasonably said about the potential impacts of trade on food security.

WTO negotiations and agricultural trade liberalization: the effect of developed countries' policies on developing countries.

* Overview, E Diaz-Bonilla, Inter-American Development Bank, USA, S E Frandsen, Food and Resource Economic Institute, Denmark, and S Robinson, University of Sussex Falmer, UK * Review of the EU Common Agricultural Policy, S E Frandsen and A Walter-Jorgensen, Food and Resource Economic Institute, Denmark * The Common Agricultural Policy in an Enlarged Europe: Bright or Bleak Prospects for Africa, B Gersfelt and H G Jensen, Food and Resource Economic Institute, Denmark * U.S. Agricultural Policy: The 2002 Farm Bill and WTO Doha Round Proposals, D Orden, International Food Policy Research Institute, USA * The Effects of Domestic Agricultural Reforms and Market Access on Trade and Production in Less Developed Countries, S Robinson and K Thierfelder, US Naval Academy, USA * Potential Coalitions and Convergence in the Doha Round, K M Lind, Food and Resource Economic Institute, Denmark, and C Bjornskov, Aarhus School of Business, Denmark * Assessing the Harbinson Draft on Modalities in the WTO Agriculture Negotiations, S E Frandsen, H G Jensen, K M Lind, P P Melgaard, and W Yu, Food and Resource Economic Institute, Denmark * Food Security and the World Trade Organization: A Typology of Countries, E Diaz-Bonilla, M Thomas, International Food Policy Research Institute, USA, S Robinson and A Cattaneo, Economic Research Service, USDA, USA * A Proposal for Combating Acute Food Shortages Based on Sub-Saharan Africa Needs, K M Lind * Thinking Inside the Boxes: Protection in the Development and Food Security Boxes Versus Investments in the Green Box, E Diaz-Bonilla, Z Diao, International Food Policy Research Institute, USA and S Robinson * That was then but this is now: Multifunctionality in Industry and Agriculture, E Diaz-Bonilla and J Tin, Washington, USA * Trade in Genetically Modified Food: Promises and Pitfalls for the Poor, C P Nielsen, Food and Resource Economic Institute, Denmark and K Theirfelder * Is the Everything But Arms Initiative the way to go for Least Developed Countries in the WTO Negotiations, W Yu, and T V Jensen, Ministry of Food, Agriculture and Fisheries, Denmark * New Regionalism in the Aftermath of Cancun: To the Benefit or Detriment of Developing Countries, C P Nielsen.

A Dialogue: Trade Liberalization in Agriculture

O of the accomplishments that makes the international community most proud is its progress in developing free trade around the world. The establishment of the General Agreement on Tariffs and Trade (GATT) after World War II began the liberalization trend by relaxing barriers on goods. As negotiating sessions proceeded, trade in goods loosened further and other areas also began to open, such as services, intellectual property, and investment measures. Yet, despite all the progress made in breaking down barriers in these areas, those in agricultural markets remained stubbornly high. Why has protection in the agricultural sector persisted? The SAIS Review invited five experts from around the world to participate in a dialogue on agricultural trade liberalization. The participants, Bruce Gardner, Eugenio Díaz-Bonilla, Antônio Salazar P. Brandão, Devinder Sharma, and Alan Swinbank, received an initial statement posing a series of questions about trade in agricultural goods. Each participant then had the opportunity to read and respond to each other’s initial statements.

Macroeconomic Policies and Food Security

Abstract Purpose This chapter places the discussion of trade and food security in a more general macroeconomic context. Methodology/approach This chapter uses historical analysis to briefly trace the debate on economy-wide policies, starting with the 1943 United Nations (UN) Conference on Food and Agriculture that led to the creation of the Food and Agriculture Organization of the United Nations in 1945. A general economic framework is used to organize the different channels through which macroeconomic policies may affect food and nutrition security. Research implications Examples of monetary, financial, fiscal, and exchange rate policies are presented, along with their implications for food and nutrition security. Practical implications The current debates about trade and food security must be placed in the context of the overall macroeconomic framework: a single trade policy may have different impacts depending on its interactions with other macroeconomic policies and structural factors.