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Trade and Structural Adjustment

Embracing Globalisation

image of Trade and Structural Adjustment

Trade and Structural Adjustment: Embracing Globalisation identifies the requirements for successful reallocation of labour and capital to more efficient uses in response to the emergence of new sources of competition, technological change and shifting consumer preferences.  At the same time, it focuses on limiting adjustment costs for individuals, communities and society as a whole.  Based on specific sectoral case studies, this volume includes analysis of the adjustment challenge and policy framework in both developed and developing countries, together with practical recommendations for good practice.

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Sectoral Case Studies

This chapter examines cases of trade and structural adjustment in agriculture. Starting with a cross-country case study analysing potential changes in relative prices and factor returns that might accompany widespread reductions in agriculture and non-agriculture trade protection, it surveys examples of agricultural products in specific countries: trade in avocados in Mexico and the United States, the dairy industry in Australia, the agrofood sector in Chile, the cut flower industry in Kenya, and agricultural reform in New Zealand. Some general conclusions emerge although it is essential to differentiate countries according to their level of development. In several of the case studies, the policy reform package reduced the direct role of government in the production, acquisition, marketing and pricing of farm commodities. However, all the studies show that governments made important contributions by providing an enabling environment for successful adjustment. That environment included both economy-wide policies and some sector-specific nurturing. Stable macroeconomic policy, especially exchange rate policy, was seen as essential to successful adjustment in the agricultural economies of New Zealand and Chile. In contrast, in the cases of avocados in Mexico and cut flowers in Kenya, the government played a key role by fostering the development of a private and sector-specific marketing infrastructure. Agricultural trade policy rarely exists in isolation. Implementing reforms to trade-distorting policies typically requires much more than simply adjusting trade and domestic support policy instruments. In some cases, structural adjustment can be facilitated by using instruments of general social policy: unemployment insurance, education and training for displaced workers and relocation assistance.

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