The Political Economy Of Agricultural Trade Protectionism

One of the striking phenomena in today's world trade is the high protection level in agricultural trade amidst the ongoing of overall world trade liberalization, being fourfold as much as for industrial products. The strong support and high protection to agricultural products exercised mainly by the US, EU and other developed countries has being seriously distorted world agricultural production and trade, not only resulting in the misallocation of natural resources, but also producing adverse effects on the agricultural development of the developing countries, threatening their food safety and social stability. On the other side, the nine-year-lasting Doha trade negotiation so far is still on the negotiating table, producing adverse effect on the confidence of world people on the liberalization of world agricultural trade and the recovery of the depressing world economy. In these circumstances, it is significant both theoretically and practically to explore the nature, its determinants and mechanism of agricultural trade protection, and to foresee the possible outcome of world agricultural trade liberalization, helping us in our strategical adjustment of agricultural development policies and the standpoints in the Doha trade negotiation.Theoretically, this dissertation tends to use political economics theory to analyze the system of world agricultural trade protection. In the study of trade issue, pure trade theory used to analyze the cause of trade with the method of economics, on the contrast, political economics tend to use the same method to analyze the political process of the formation and cause of a trade policy. Nevertheless, none of them is perfect in the explanation of how and why trade protection is produced and put into practice. Therefore, an improvement to the political economics analyzing model is needed to include more basic determinant so as to enable the model to explain trade policy more complete and more persuadable.The researching methods used in this dissertation include normative analysis and positive analysis, combined with historical analysis, statistical analysis, logical induction and deduction methods. Specifically, when constructing the theoretically analyzing model, normative analysis and logical induction method is used to induce and format the three-dimension analyzing frame from the formation of WTO agricultural trade regime and that of the typical democratic political systems. When analyzing the agricultural trade protection system in the USA, EU and WTO, positive analysis method is used, including historical, case study, comparative, statistical with logical deduction, to justify the rationality and effectiveness of the improved three-dimension political economics model. Finally, to use the general theoretical analyzing frame to logically deduct the possible development of world agricultural trade protection system.The general roadmap of this dissertation is as follows:to use political economics and institutional economics as theoretical tool, accompanying with classical and neo-classical trade theory, firstly to improve the existing two-dimension "interest group-state" political economics model to a three-dimension model, in which international trade regime is endogenously included, to form a "interest group-state-international trade regime" analyzing frame; with this model, secondly the research focuses on these three determinants' political practice in respect of a trade policy decision, analyzing the mechanism of how agricultural trade protection is formed. Based on this and together with the overview of the history of agricultural trade protection, the general regularity of the development of agricultural trade protection is revealed. Finally, to make a basic forecast of the possible development of the protection system of agricultural trade in main developed countries in the future, hence, that of WTO, based on which, some strategical proposal of agricultural development policy and multilateral trade negotiation for China is put forward.This dissertation is logically assembled with three parts. The first part is about the theoretical construction (including chapter 1 and 2), among which the first chapter is about the collection of relative studies by researchers besides the introduction of the research background and significance of this dissertation.In chapter two, the relative free trade and trade protection theories are firstly overviewed, which the author of this dissertation consider to be important theoretical tools for the research of this dissertation. The author then put emphasis on the review of existing political economics theories concerning trade policy decision, after which the shortcomings of the existing two-dimension "interest group-state" model is pointed out. With this work, the determinant of "international trade regime" is introduced into the existing model, thus an improved three-dimension trade policy analysis model is formed. Based on this expanded model, the author put forward the following assumptions:1. Any foreign trade policies in any open economies are the mixture of free trade and protective trade, agricultural trade policies are of no exception. They are determined jointly by factors of political, economic and external institutions. Being a general law of international trade policies, this is the starting point of our study in this regards.2. The free or protective nature of agricultural trade policies is radically determined by the comparative advantage in the agricultural products that traded. Countries with more comparative advantage and stronger competitiveness will appeal for trade liberalization whereas those with less comparative advantage and weak competitiveness will do the contrary.3. Generally speaking, the resistance of agricultural trade liberalization tends to be stronger than that in the industrial trade, because the interest group in agriculture sector can better organized to lobby stronger than do in the industry sector. For maintaining the existing benefits coming from the protection policies, they will strongly oppose agricultural trade liberalization.4. For macro factors of food security, social stability and economic structure etc., a government will tend to support and protect agriculture.5. Large agricultural trade countries and countries with large population are more sensitive to agricultural trade liberalization, therefore they will be the active participants in the multilateral agricultural negotiation and their policy tendency will determine that of the multilateral negotiation.The second part of the dissertation is of positive analysis (including chapter 3,4 and 5). In this part, countrywise or regionwise, the USA and EU are targeted for analysis with the improved political economic model. The author examined their protection history in agricultural trade, their agriculture policy decision-making institution, explored the mechanism of the formation of their agriculture policy, find out the political reason of the stubbornness and persistence of their agricultural protection policies, based on which the possible future development of their agricultural policies are estimated. Following the same route, an analysis on the WTO agricultural trade regime are carried on. The conclusion of this part are:firstly, the ability of WTO to constraint the protectionism in agricultural trade is fairly weak; secondly, the ongoing bilateral agricultural trade negotiation for liberalization will continue and will succeed to some extent; thirdly, the future agricultural trade regime of WTO will continuously contain trade protection rules, leaving rooms for members to provide support and protection to their agriculture sector. The third part (chapter 6) of this dissertation focuses on related issues of China. In this chapter, analysis on flexibility of policy enforcement under the WTO regime as well as the characteristics of China's agriculture and agricultural trade are carrying on. On this basis, the author put forward strategical proposals on how the policies for the development of agriculture should be adjusted for China and what standpoint and measure China should take in the ongoing multilateral agricultural negotiation.The main conclusion of this dissertation is as follows:1. Any trade policies are decisions of economic nature but determined politically, especially for agricultural trade policies.2. WTO's agricultural trade regime is of rules and disciplines of economic nature, whereas its formation is the result of members'game playing for the overall benefits, both economic and political.3. There are three dominant determinants of developed countries'protection institution on agriculture trade. They are (1) the status of their comparative advantage and market fluctuation, which determines farmers comparative income, the later determines how intensely they are for their appeal for the protection from their government; (2) the structure of the economy and its development level, which determines the financial ability and political cost for the government to provide protection, as well as its political organization ability.(3) the political regime and its system structure, which decides the effectiveness on their government of the agricultural interest group's lobbying.4. Following the deepening of agricultural trade liberalization under the WTO regime, the internal propulsion of members for the reform will be weakening, because some steps have touched on their fundamental interest and existing laws. Therefore, the process of agricultural trade liberalization will be slowing down increasingly, reaching to a point at which agricultural trade protection level will remain stable.5. A dramatic reduction or elimination of agriculture support and protection may be a disaster to developing countries, especially for countries with large population and net food importing countries. Therefore, these countries should seriously consider their own basic conditions to decide their standpoint in the multilateral trade negotiation. They should not easily make commitment in reduction of support and protection to agriculture and trade, and struggle for the strengthening of Special Safeguard Mechanism.6. The forthcoming continuation of Doha round negotiation will be a process of repeated struggle between the several existing state-interest groups. The final outcome will be a compromise based on the Draft Modalities raised by Ambassador Crawford Falconer, chairperson of the agriculture negotiations on 6 December,2008. This implies that the Doha agricultural trade negotiation will surely be gainful to some extent. For China, food self-sufficiency is the basic strategy to ensure the food and social security.The possiblly new ideas of this dissertation may be (1) to combine both economics and political economics to analyze more completely the real process of trade policies formation, enabling the conclusion of this study more persuadable and of more practical. The improvement made by the author to the political economic model, in which international trade regime is introduced, strengthened the accuracy of its prediction of international trade regime's development; (2) to put forward the conclusion that agricultural trade liberalization will be limited and trade protection will be existing for the long run; (3) to point out the weakness of WTO trade regime in the management of trade protectionism, therefore, developing countries should not carelessly and indifferently make commitments in trade measures reduction and elimination.