GATT, Preferential/Regional Trading Blocs and Agricultural Trade*

Abstract

Agricultural trade impasses have again frustrated the GATT process. Interest in preferential/regional trading blocs is increasing. the paper probes the theoretical and empirical consequences of preferential arrangements instead of multilateral liberalization. It concludes that in a second‐best world preferential arrangements could either improve or decrease global welfare. For agricultural trade, previous experience suggests that in regional groupings such as the EC trade diversion exceeded trade creation. This results from trade distorting domestic policies. Prospects for liberalization of agricultural trade under either GATT or preferential arrangements are limited. the consequences for small agricultural exporters are not positive.

Agricultural Trade Liberalization: The Ever‐Elusive Grail

“…It is about moving from one set of interventions (distortions) to another. As such it is a second best world where theory has very little to say about which second best situation is better (McCalla 1992). The answer about "who is better off, who is worse off, and by how much?"…”

“…But it is also possible that bilateral and regional trading agreements (e.g. NAFfA) will increase in prominence to such an extent that future global negotiations in GATT on agriculture could be irrelevant (McCalla 1992). At the end of this analysis one feels somewhat empty.…”

“…Twenty-five years ago I wrote a paper on "Protectionism in International Agricultural Trade, 1850-1968" (McCalla 1969. I chose as a beginning point 1850, because it coincided with the throwing off by the United Kingdom of the last vestiges of mercantilism.…”