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"Many Midwestern producers question why this current round of
negotiations is focused so strongly on development," said Robert
L. Thompson, Gardner professor of agricultural policy in the
Department of Agricultural and Consumer Economics. "The reality
is that trade liberalization is the key to faster economic
growth in the only places where there is market growth potential
for their products. That opportunity is in the presently
low-income countries." Thompson feels that too much effort is
being expended in the negotiations to increase market access in
high-income markets that have no growth potential.
"It is projected that Europe will have 10 percent fewer
people in the middle of this century than it has today and that
Japan's and Russia's populations will fall by 21 and 23 percent,
respectively, in the same period," said Thompson. "These are the
markets of the past, not the markets of the future."
World population growth is projected to be overwhelmingly in
countries that presently have low incomes.
"But population growth alone creates need, not market demand
for agricultural products," he noted. "Only when low-income
people gain purchasing power can their needs be translated into
effective market demand."
Of 6.3 billion people living today, 1.25 billion live on less
than $1 per day. Three-quarters of these cannot even afford to
obtain enough calories per day, and they suffer undernutrition
during at least part of the year, Thompson said.
"Broad-based economic growth gives poor people the
wherewithal to consume a more balanced diet, including fruits,
vegetables, milk, eggs, meat and edible oils," he said. "With
broad-based economic growth, world demand for agricultural
products could easily double in the first half of the 21st
century."
Many low-income countries, particularly those in Asia, have a
much larger faction of the world's population than of its arable
land.
"Growth in their food demand quickly outpaces their
agricultural production capacity, and they become larger
importers of farm products," he said. "Since World War II, this
pattern has been repeated over and over again, first in Japan,
South Korea and Taiwan, and more recently in Southeast Asia and
the coastal region of China.
"As these countries have demonstrated, economic growth is all
about reducing poverty -- that is, bidding up the wages of the
low-income people to give them more purchasing power, not
dragging wages in high-income countries down to their level."
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Thompson said that international trade is a powerful engine of
economic growth -- more powerful than foreign aid.
"However, the presently low-income countries confront the
greatest barriers to their exports in exactly those products in
which they have the greatest comparative advantage: labor-intensive
manufactures and certain agricultural products that thrive in the
tropics, such as sugar, rice and cotton," he said. "The latter
agricultural products are particularly important since 70 percent of
the people who live on less than $1 per day live in rural areas, and
most of them are farmers.
"The economic growth that is necessary to reduce poverty in
low-income countries is impeded when they cannot sell abroad the
products in which they have a comparative advantage. Without poverty
reduction, the large potential markets for products in which the
United States has a comparative advantage, such as feed grains and
soybeans, will remain just that -- potential markets."
Thompson emphasized, however, that trade liberalization alone
will not solve all the problems of poverty in presently low-income
countries.
"But if they cannot sell overseas the products in which they have
a comparative advantage, no amount of investment in these areas will
solve their poverty problems," he said.
Midwestern producers have a great deal to gain from trade
liberalization because demand in low-income countries for products
in which they have a comparative advantage, particularly corn and
soybeans, outstrips those countries' own productive capacity.
"U.S. farm exports can grow either by increasing our market share
or by growing the total size of the market," said Thompson. "The
former has severe limits and requires dog-eat-dog competition for
shrinking markets.
"Growing the total size of the market has much more potential to
increase demand for Midwestern farm products as presently low-income
people gain the wherewithal to upgrade their diets."
[News release from the
University of Illinois College
of Agricultural, Consumer and Environmental Sciences] |
