Impact of Agricultural Trade Liberalization on poorness: A Quantitative Appraisal for Bangladesh

Problem Statement

Bangladesh’s economic system remains chiefly agricultural with 52 % of the entire employment ( BES 2007 ) . Thus agribusiness is a cardinal sector for poorness analysis. Liberalisation, de-collectivization in agribusiness has a immense impact on agricultural families and consumers since the beginning of 1990s. The immense policy development of Bangladesh’s import and export would take important alterations in the monetary values of tradable trade goods. Doha ministerial declearation 2001 indicated that international trade can play a major function in the publicity of economic development and the relief of poorness.

The state poorness measured by income degree and numbering the figure of individuals devouring less than 2,122 Calories per twenty-four hours is particularly high in Bangladesh. Income poorness in 1991-92 observed about 59 per centum ( BES, 2007 ) and most estimations from 1983–84 through 1991–92 indicated that about 50 per centum of the overall population could non afford a diet meeting the caloric norm ( Ahmedet.al, 2000 ) . Recent estimations showed that the mean incidence of poorness in both ways have declined to about 40 per centum, between 1991 and 2005 ( BES, 2007 ) . Most analysts agree that the great bulk of the hapless unrecorded in rural countries and that more than half the rural population live below the poorness line, compared with about tierce of urban inhabitants ( Ahmed and Karim, 2006 ) .

In Bangladesh, where agricultural production contributes to a great extent to national income and poorness is overpoweringly rural, the success or failure of any policy reform crucially depend on the intervention of agribusiness and the rural sector. Agricultural policy reforms carried out by Bangladesh through input market related reforms, and end product market related reforms. Import and export of foodgrain policies reformed with liberalized universe economic system through decrease in duty rates and remotion of quantitative limitations. Bangladesh has well simplified and rationalized its duty construction, and reduced the figure of duty rate. Entire figure of restricted points has been reduced from 20 in 1991/92 to 13 in 2000/01 and maximal duty rates have been reduced from 100 per centum to 37.5 per centum ( CPD, 2006 ) . With the alteration of duty construction the imported merchandise monetary value degree has been changed.

Aims

To analyze the deductions of WTO commissariats on Bangladesh agribusiness

To analyse the impact of agricultural trade liberalisation on rural families and poorness and

To quantify public assistance addition and losingss due to liberalisation of agricultural trade.

Literature Review

The relationship between trade liberalization and poorness has attracted a batch of attending in development economic sciences. Winters ( 2000 ) developed a theoretical model that attempts to associate trade liberalisation to poorness. He suggests that in order to acquire a better apprehension of this relationship, one demand to place the channels through which trade policy might be transmitted. The transmittal channel identified for inactive trade policy effects were endeavors, distribution channels, authoritiess and families. The paper concludes that trade affects poverty in the long tally through economic growing and that the transmittal channel for inactive effects of trade dazes on families is chiefly through merchandise and factor markets. The other channel through which trade indirectly impacts on families is through financial policy results via disbursement on societal services.

Glewweet Al( 2000 ) attempted to look into whether certain families fared better under the impressive growing public presentation in Vietnam in the 1990s, utilizing the same family informations set that Niimiet Al( 2003 ) used, i.e, the two moving ridges of the Vietnam Living Standards Survey, VLSS ( i.e. , 1992/93 and 1997/98 ) . The writers concluded that the additions of the strong growing public presentation had so been good distributed. Simple decomposition analyses and polynomial logit theoretical accounts were used in the paper.

Winterset Al( 2002 ) explore the impact of trade liberalization and related dazes on poorness. They examine the empirical grounds of this relationship in the context of four channels which are identified in the conceptual model developed by Winters ( 2000 ) . A cardinal decision reached by the writers is that no simple generalizations can be made about the relationship between trade liberalization and poorness. In other words the empirical grounds based on the conceptual model was inconclusive. Niimiet Al, 2003, makes an of import part to the empirical literature that tries to set up a nexus between trade liberalization and utmost poorness. They set up an analytical model that links trade and poverty The Vietnam Living Standards Survey was used by the Niimiet Al( 2003 ) survey.

Ocranet Al( 2006 ) conducted a survey to place the trade liberalisation impact on poorness in Ghana. The research attack is adopted from the Winters ( 2000 ) model of analyzing the nexus between trade liberalisation and poorness. They applied a limited dependant variable calculator in gauging the chances of families get awaying or being trapped into poorness following trade liberalization utilizing the econometric theoretical account that Niimi et Al ( 2003 ) used. A comparing of the trade augmented theoretical accounts of 1992 and 1999 severally appear to propose that trade liberalisation have really enhanced the odds of families get awaying poorness. Quite clearly the survey indicated that nutrient harvest husbandmans have so been made worse off by trade liberalization policies in Ghana.

Raihan Selim and Abdur Razzaque ( 2007 ) analysed the planetary liberalization of agricultural trade on Bangladesh economic system utilizing CGE patterning model of GTAP. They conclude that a full planetary agricultural liberalization will take to a high public assistance loss and a important rise in poorness indices. They besides mentioned, the Hong Kong ministerial will bring forth negative impact on the public assistance and will ensue in some additions in poorness. They argued that the accomplishments in poorness decrease in Bangladesh during the 1990s could come under menace if important planetary liberalization of agribusiness takes topographic point.

Some surveies have addressed trade and poorness relationships within the context of partial equilibrium models ( see for case Goldberg and Pavcnik, 2005 ) . Others have besides used general equilibrium theoretical accounts ( Porto, 2004 ; Chen and Ravillion, 2004b ) . Balat and Porto ( 2005 ) investigates the connexion between globalization and poorness in Zambia during the 1990s. A basic premiss in their survey is that economic reform impacted families as both consumers and income earners.

Conceptual model

The Uruguay Round Agreement on Agriculture ( URAA ) established new regulations for universe trade in agricultural trade goods, initiated modest decreases in protection and support in the dialogue of trade liberalisation understandings. The effort of this survey is to construct up a relation between agricultural trade liberalization and rural poorness. Winters ( 2000 ) , McCulloch, Winters and Cirera ( 2001 ) and Winters ( 2002a ) developed a model to analyze trade liberalisation issue by analyzing the links between trade liberalization programmes and family poorness. They explore how the effects of trade reforms trickle down to families via their direct effects on merchandise and labor ( and other factors ) markets and, indirectly, through alterations in labour gross and public disbursement on societal sectors. Using this model this survey will be conducted to happen out the possible impact on family income and rural poorness.

The consequence of trade liberalization on family poorness through the merchandise markets operates by agencies of alterations in monetary values, which affect nominal and existent incomes of families in their capacity as manufacturers or consumers of the merchandise ( Winters, 2002a ) . The lowering of duty barriers is likely to cut down the monetary value of imported goods in the domestic market. Consequently, the family existent income will increase and they can more for ingestion. In other manus the local manufacturer will be looser due to the decreased market monetary value of the same merchandise but it will be minimized by the take downing the input monetary value due to the duty decrease.

Trade liberalization policies can besides impact family poorness due to the alterations in rewards and employment occurred in the labor markets and through alterations in authorities grosss and societal disbursement. If there is a autumn in authorities gross following the decrease of duty barriers, the authorities might cut societal outgo on instruction, wellness and societal security, thereby adversely impacting hapless families ( Winters, 2002a ) .

Methodology

To measure whether the discernible dimensions of liberalization have influenced family results and contributed to poverty relief utilizing the formal analysis of family informations, a Multinomial Logit Model will be used. The theoretical account is analytically advanced and we can research whether the policy alterations have helped or hindered poverty decrease. Glewweet Al2000 and Niimiet Al2003 surveies considered the multiple pick result as a consequence of trade liberalization utilizing a panel family informations. Ocran M.Ket acubic decimeter 2006 adopted a Logit theoretical account to analyze in the instance of Ghana though different family were sampled in each of the moving ridges. For this survey Logit theoretical account will be adjusted like Ocran M. Ket Al2006 with non-panel informations.

Two latest moving ridges of the Household Income and Expenditure Survey ( HIES ) , 2000 and 2005 will be used in the survey of the linkage between trade liberalization and poorness in Bangladesh between 2000 and 2005. The field work of HIES were conducted in both rural and urban numbering countries across the state and the figure of families covered in those study was 7440 and 10080 severally. The surveyed sample is representative for the state research.

Research Plan: Execution to the hereafter

Trade liberalization in Bangladesh is a broad ranging issue and this survey attmpt to cover with one of the major facets which will assist to cognize the altering poorness scenrio due to merchandise liberalization. In policy degree the findings will assist to use farther schemes to do the state of affairs better off. However, other countries which need to be examined for a through apprehension of the kineticss of trade liberalization in Bangladesh. The issue of many-sided trade liberalization such as WTO understandings is really important for Bangladesh economic system and therefore necessitate to be examined decently.

Mentions

• Ahmed R. and Z. Karim. 2006. Bangladesh: Uncertain Prospect.Agricultural Research and Development in the Developing universe.International Food Policy Research Institute. Washington D.C. Chapter 6.
• Bangladesh Economic Review. 2007. Finance Department, Ministry of Finance, Bangladesh.
• CPD. 2006.Impact of Agricultural Trade Liberalization on Cropping Pattern in Bangladesh. Centre for Policy Dialogue ( CPD ) , Dialogue Report, No. 82, Dhaka, Bangladesh.
• Glewwe, P. , Gragnolati and Zaman. 2000.Who Gained from Vietnam.s Boom in the 1990s? An Analysis of Poverty Trends and Inequality Trends.The World Bank, Washington.
• Hossain M. 2004.Poverty Alleviation through Agriculture and Rural Development in Bangladesh, Centre for Policy Dialogue ( CPD ) , Paper 39, Dhaka, Bangladesh.
• Justino, P and Litchfield, J ( 2002b )“Poverty Dynamicss in Vietnam: Winners and Losers during Reform” ,PRUS, Working Paper No.10.
• Niimi, Y. , P. Vasudetta-Dutta and A. Winters. 2003.Trade Liberalisation and Poverty Dynamics in Vietnam.Poverty Research Unit at Sussex, PRUS Working Paper No. 17.
• Raihan S. and A. Razzaque. 2007. Global agricultural trade liberalisation: Deductions for the Bangladesh Economy.WTO and regional trade dialogue results: Quantitative appraisal of possible Deductions on Bangladesh.Pathak Shamabesh Book. 27 Aziz Market, Dhaka, Bangladesh.
• Winters, A. L. 2000. .Trade and Poverty Is there a connexion?. In Ben David D. , Nordstrom H. and Winters L. A ( eds. ) . Trade, Income Disparity and Poverty, Geneva: WTO.
• Winters, L.A. ( 2002b )“Trade Liberalisation and Economic Performance: An Overview”, Roneo, University of Sussex.