SWP-724 Agricultural Trade and Food Policy The Experience of Five Developing Countries Malcolm D. Bale WORLD BANK STAFF WORKING PAPERS Number 724 PUB t HGV 3881.5 l .W57 W67 no.724 WORLD BANK STAFF WORKING PAPERS Number 724 Agricultural Trade and Food Policy The Experience of Five Developing Countries Malcolm D. Bale The World Bank Washington, D.C., U.S.A. Copyright (C) 1985 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing March 1985 This is a working document published informally by the World Bank. To present the results of research with the least possible delay, the typescript has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. The publication is supplied at a token charge to defray part of the cost of manufacture and distribution. The World Bank does not accept responsibility for the views expressed herein, which are those of the authors and should not be attributed to the World Bank or to its affiliated organizations. The findings, interpretations, and conclusions are the results of research supported by the Bank; they do not necessarily represent official policy of the Bank. The designations employed, the presentation of material, and any maps used in this document are solely for the convenience of the reader and do not imply the expression of any opinion whatsoever on the part of the World Bank or its affiliates concerning the legal status of any country, territory, city, area, or of its authorities, or conceming the delimitation of its boundaries, or national affiliation. The full range of World Bank publications, both free and for sale, is described in the Catalog of Publications; the continuing research program is outlined in Abstracts of Current Studies. Both booklets are updated annually; the most recent edition of each is available without charge from the Publications Sales Unit, Department T, The World Bank, 1818 H Street, N.W, Washington, D.C. 20433, U.S.A., or from the European Office of the Bank, 66 avenue d'Iena, 75116 Paris, France. Malcolm D. Bale is a senior economist in the Country Policy Department of the World Bank. Library of Congress Cataloging in Publication Data Bale, Malcolm D. Agricultural trade and f'ood policy. (World Bank staff working papers ; no. 724) Bibliography: p. 1. Agriculture and state--Developing countries--Case studies. 2. Produce trade---Government policy--Developing countries--Case studies. 3. Food supply--Government policy--Developing countries--Case studies. I. Title. II. Series. HD1417.B33 1985 338.,119'1724 85-3248 ISBN 0-8213-0516-6 ABSTRACT This essay reviews and generalizes recent World Bank studies on agricultural pricing and trade policy in developing countries. The experi- ences of five archetypical countries--Colombia, Jamaica, Nigeria, Pakistan and the Philippines--are profiled. The motivation for each study was to gain an understanding of the incentives or disincentives provided in the political economy in which agriculture operates. Four questions were addressed, namely: -- Is the incentive system so structured as to promote or retard agricultural output? -- How do governmental trade and price interventions affect output, farm income, consumer income, and government revenue? -- How does agricultural policy synchronize with industrial policy and with the more general macroeconomic policies of the country? -- What is the relationship between domestic prices in agriculture and the border prices of similar goods? The paper begins by summarizing the techniques used to analyze trade and pricing policies, then continues by identifying and describing in some detail common sources of disincentives in agriculture. The findings are that direct government intervention in the production, pricing, and distribution of foods on a massive scale is common. There is a profound distrust of the ability of the market to value and allocate resources. When legitimate policy goals require interventions, little thought is given to the type of instrument selected to achieve those goals. As a result, government intervention gives rise to price distortions in the domestic economy that have serious allocative and efficiency effects. In order to defend domestic controls, it becomes necessary for governments also to control border trade. This type of policymaking, thus, has a lock-step nature to it where the implementation of certain policies necessarily requires further controls on other parts of the economy. In addition to direct controls, indirect forms of government intervention possibly merit greater attention. There is little appreciation by most government policymakers of the interrelationship between the food sector and other sectors. Features of industrial policy, such as the protection of domestic manufacturing, are thought to have little effect on agricultural production. This is not the case. Likewise, maintaining an overvalued exchange rate as part of industrial protection is a large, often major, disincentive to agriculture. Problems in the policymaking process, pan-pricing, and stockholding are also identified as serious constraints to the growth of the agriculture sector. CONDENSE Ce document passe en revue des etudes men6es recemment par la Banque mondiale sur la politique des 6changes et des prix agricoles dans des pays en developpement et en tire des conclusions gen6rales. I1 resume l'experience dans ce domaine de cinq pays types : la Colombie, la Jamaique, le Nigeria, le Pakistan, et les Philippines. Chacune de ces etudes devait permettre de mieux comprendre dans quelle mesure le systeme d'incitations ou de desincitations resultant de la politique 6conomique du gouvernement encourageait ou defavorisait l'agriculture. Quatre questions ont ete abordees - le systeme d'avantages, par sa structure, encourage-t-il ou au contraire freine-lt-il la production agricole? -- quels sont les effets des interventions de l'Etat dans le domaine des 6changes et des prix sur la production, les revenus des exploitants agricoles et des consommateurs, et les recettes publiques? -- comment la politique agricole s'articule-t-elle avec la politique industrielle et, sur un plan plus g6neral, avec la politique macro-economique du pays? -- quelle est la relation entre les prix interieurs des produits agricoles et les prix franco frontiere de biens similaires? Le document commence par resumer les techniques utilis6es pour analyser la politique des echanges et des prix, puis identifie et decrit de fagon assez detaillee des facteurs qui freinent souvent le developpement de l'agriculture. IJn fait essentiel s'en degage : les gouvernements appliquent souvent tine politique r6solument interven- tionniste dans le domaine de la production, de la distribution, et des prix des produits alimentaires car ils n'ont aucune confiance dans le march6 pour 6valuer et repartir les ressources. Lorsque, pour atteindre les objectifs legitimes fixes dans le cadre de leur politique generale, il leur faut intervenir, le type d'iinstrument choisi a cette fin ne fait pas l'objet de toute l'attention voulue et les mesures prises se traduiront dans l'6conomie int6rieure par des distorsions des prix qui ont des conse- quences graves sur l'efficacite et la repartition. En outre, les con- troles interieurs supposent une serveillance du commerce aux frontieres. On se trouve alors dans un cercle vicieux et les controles gagnent de proche en proche. En plus des contr6les directs, il faudrait peut-etre accorder davan- tage d'attention aux formes indirectes d'intervention de l'Etat. La plu- part des dirigeants ne semblent pas tres conscients des relations qui existent entre le secteur alimentaire et d'autres secteurs. Les mesures appliquees dans le cadre de la politique industrielle, par exemple pour proteger les industries manufacturieres locales, devraient, pensent-ils, avoir peu d'effet sur la production agricole. Or, ce n'est pas le cas. De meme, la sur6valuation d6lib6r6e du taux de change, favorable a l'industrie, a des effets tres souvent dommageables sur l'agriculture. L'approche adoptee par les responsables de la politique gen6rale, la fixation de prix uniformes et les pratiques en matiere de constitution de stocks sont-elles aussi denonc6es comme de graves obstacles a la croissance du secteur agricole. EXTRACTO En este trabajo se examinan y generalizan estudios recientes del Banco Mundial sobre la determinaci6n de precios agricolas y la politica comercial en los paises en desarrollo. Se describen las experiencias de cinco paises arquetipicos --Colomibia, Filipinas, Jamaica, Nigeria y Pakistan. Los estudios se realizaron procurando comprender los incentivos o desincentivos que ofrece la economia politica en la que funciona la agricultura. Se examinaron cuatro interrogantes, a saber: -- ZEsta estructurado el sistema de incentivos de modo de promover o de retardar la producci6n agricola? -- fiC6mo afectan las intervenciones del gobierno en el comercio y los precios a la producci6n, el ingreso agricola, el ingreso de los consumidores y la renta del gobierno? -- .iC6mo se sincroniza la politica agricola con la industrial y con las politicas macroecon6micas mas generales del pais? LCuAl es la relaci6n entre los precios internos de la agricul- tura y los precios en frontera de productos similares? En el informe se resumen primeramente las t6cnicas utilizadas para analizar las politicas comerciales y de determinaci6n de precios, luego se identifican y describen con cierto detalle algunas fuentes comunes de desincentivos en la agricultura. Se ha determinado que es frecuente una intervenci6n directa y generalizada del gobierno en la producci6n, la determinaci6n de los precios y la distribuci6n de los alimentos. Hay tambien una profunda desconfianza en la capacidad de mercado para valorar y distribuir los recursos. Cuando las metas politicas legitimas exigen la intervenci6n, se reflexiona poco acerca del tipo de instrumento seleccio- nado para alcanzarlas. En consecuencia, la intervenci6n del gobierno produce distorsiones de los precios en la economia nacional que tienen graves efectos en materia de asignaci6n y eficiencia. Para defender los controles nacionales, es necesario que los gobiernos controlen tambien el comercio en la frontera. Este tipo de formulaci6n de politica requiere entonces medidas concomitantes porque la implantaci6n de ciertas politicas exige mas controles en otras parties de la economia. Ademas de los controles directos, las formas indirectas de interven- ci6n gubernamental merecen probablemente mas atenci6n. La mayoria de los encargados de las politicas del gobierno valoran poco la interrelacion que existe entre el sector alimentario y los demas sectores. Se cree que las caracteristicas de la politica industrial, tales como la protecci6n de las manufacturas nacionales, tienen poco efecto en la producci6n agricola, pero no es asi. De igual modo, el mantenimiento de un tipo de cambio sobrevaluado comc parte de la protecci6n industrial es un desincentivo importante, con frecuencia primordial, para la agricultura. Los problemas de formulaci6n de politicas, de fijaci6n de precios uniformes y de acopios se identifican tambien como restricciones graves para el crecimiento del sector agricola. Table of Contents Country Coverage and Issues ................................ ..... .*.. .*.2 Method of Analysis ................................ .................. 6 Direct Government Intervention ............................... . ... . 10 Indirect Government Intervention ................................ 22 The Policymaking Process ......... ....... . ... .25 Pan-Pricing .............................. . .34 Cnertilizer Policy ................................ 35 Conclusions ................................. .............. 36 Bibliography. .. .. .... *....... ... . ................ t .....*- -*@@*-*-@@s-@* v * @@ 39 List of Tables Table 1: Characteristics of Development in Selected Countries ...........3 Table 2: Border Price and Domestic Price in Four Major Commodities of the Study Countries :in 1980-82 .............................18 Table 3: Output and Monetary Effects of Agricultural Pricing Policies ... *.... ....... ........ ....o...... o... ....................20 Table 4: Philippines: Estimated Contribution of the Exchange Rates as a Disincentive to Agriculture ........................ 26 Table 5: Philippines: Effective Protection Rates for Major Agricultural Products, Agroprocessing and Manufacturing ....... 27 Table 6: Philippines: Domestic Resource Costs for Major Agricultural Products, Agroprocessing, and Manufacturing ...... 28 Acknowledgment The author thanks Yukon Huang, Ulrich Koester, Kathie Krumm, Mateen Thobani, and members of the international economics workshop at North Carolina State University for constructive comments on the paper, and Sharon Blinco for editorial assistance. The opinions and interpretations expressed here are those of the author and not necessarily those of the World Bank or its affiliates. The paper was first presented at the IVth European Congress of Agricultural Economists, Kiel, Federal Republic of Germany, September 3-7, 1984. Since the "world food crisis" of 1973 and the 1974 World Food Conference, there has been a heightened concern in developing countries about agricultural production, food availability, and what might be termed food policy. 1/ Also, with the two subsequent "oil shocks" and the recent deep recession in industrial countries, the past ten years of economic upheaval for many developing countries have induced them to attempt to restructure their manufacturing and agriculture sectors to accommodate the more stressful global environment. Yet, while considerable change and policy reform have taken place, it is disputable whether, in many cases, agriculture as a sector has performed as well as it could. Certainly, the agriculture sector across countries has performed below the expectations of those who formulate the development plans of individual countries. Food systems (production, processing, distribution) evolve at different rates under alternative policy environments. The purpose of this essay is to examine why agricultural performance differs among countries and to identify common policy-induced causes of the inhibited development of food systems in developing countries. The work draws upon the past few years' 1/ The term "food policy" is intended to be broader than agricultural policy since it includes marketing and consumer interests, as well as producer interests. -2- experience of the World Bank in agriculture sector studies that emphasize policy-related and institutional aspects of development in several countries. The essay begins by describing the method of analysis used in the studies, then illustrates, by example, problem areas in agricultural policy that are common across the countries examined. A number of aspects emerge as common constraints to the efficient organization of the food sector. These constraints will usually be found in one form or another, to a greater or lesser degree, in most developing countries, although the severity of their impact varies from country to country., Further, the constraints are inter- related. The decision to implement a certain public policy towards agriculture virtually guarantees that other seemingly unrelated public poli- cies must be adopted. This essay portrays the lock-step nature of certain policy decisions. Country Coverage and Issues The countries chosen are Colombia (Thobani, October 1983), Jamaica (Bale, May 1983), Nigeria (Robertson, 1983), Pakistan (Thobani, March 1983), and the Philippines (Bale, December 1983), because, as archetypes, they represent the economic characteristics and stages of development of most developing countries. Table 1 provides data on some basic economic indicators of these countries. Nigeria, a low-income oil exporter, typifies the problems of a developing country where petroleum earnings have vastly changed its economic environment. A greatly overvalued exchange rate penalizes agricultural exports and makes food imports cheaper than domestic substitutes. Bottlenecks in the distribution of farm inputs cause rationing and prices in excess of administered prices. Agricultural performance has suffered. Table 1: CHARACTERISTICS OF DEVELOPMENT IN SELECTED COUNTRIES Index of Growth of Food GNP Agricultural Agricultural Agricultural Production 'abor Population GNP Growth Rate Inflation Resource GDP (US# Share of GDP Per Capita Force in (millions Area Per Capita (annual %, (annual %, Balance /a million, GDP (annual X, 1980-82 Agriculture 1982 (000 km 2) (US$, 1982) 1960-82) 1970-82) (%, 1982) 1982) (1982) 1970-82) (1969-71=100) (X, 1980) Colombia 27.0 1,139 1,460 3.1 22.7 -4 9,092 26 4.5 124 26 Jamaica 2.2 11 1,330 0.7 16.2 -12 1,145 36 -0.2 90 35 Nigeria 90.6 924 860 3.3 14.4 -9 7,889 11 -0.6 92 54 Pakistan 87.1 804 380 2.8 12.7 -12 7,645 31 2.7 105 57 Philippines 50.7 300 820 2.8 12.8 -8 11,158 28 4.8 124 46 a/ The resource balance is the difference between exports and imports of goods and nonfactor services, expressed as a percent of the value of exports. Source: World Development Report, 1984. New York, Oxford University Press, for The World Bank, 1984. - 4 - In Pakistan, a low-income developing country, the agricultural issues revolve around guaranteed support prices for its four major agricultural crops--wheat, rice, cotton, and sugarcane--and how those prices should be set in relation to international prices in order to achieve certain domestic goals. Wheat and sugar are purchased by the government at fixed prices and sold at a subsidy to rationshops. In addition, there is a parallel open market (domestic) for both commodities. Rice and cotton are consumed domestically and are also major exports. The government reserves for itself the rights to export all four commoclities. The government's goal is to withdraw somewhat from its many agricultural subsidies and to introduce a more market-related method of determining farm prices. The Philippines, a lower-middle income oil-importing nation, is representative of countries in transition from being large importers of basic foodstuffs to being agriculturally self-sufficient or, even, minor exporters of cereals. Its agricultural issues center on the uneven treatment of export agriculture compared to import-replacement agriculture, the overall tendency of industrial and macroeconomic policies to draw resources out of the agriculture sector, and national policies towards agricultural inputs. Jamaica, a middle-income developing country, is a food importer (mainly cereals) and a food exporter (mainly tropical products). During the 1970s and early 1980s, production of all its major export crops declined--as much as 9.4% per year over a 12-year period for bananas--while production of crops for domestic consumption--mainly root crops and vegetables--grew at about 6% per year. This decline in agricultural exports occurred despite the fact that Jamaica has gained premium prices for its exports either by devel- oping a degree of product different-Lation or negotiating preferential access - 5 - agreements for them. The movement of intra-sectoral prices in favor of domestic agriculture and the monopsonization of exports through marketing boards appear to be primary factors causing the overall decline in agriculture. Now, the difficult task of restructuring incentives to stimulate agriculture is underway. Finally, Colombia, also a middle-income country, represents an economy attempting to diversify its agricultural base with respect to exports in order to stabilize export earnings and farm income. Coffee, sugar, cotton, bananas, flowers, and tobacco are the important agricultural export crops, with coffee dominating. Agricultural imports are small. Growth in Colombian agriculture has declined from the level of more than 4% per year during the 1970s to 1.5% per year in the 1980s, partly because of both external condi- tions and domestic policies. Issues concerning the government are the optimal mix of exports (implying diversification), commodity price stabilization, and the efficient administration of agricultural prices. The motivation for the studies was to gain an understanding of each country's incentive/disincentive structure and process of formulating agricultural pricing policies, in order to advise the governments on policy changes that might enhance agricultural growth and productivity. A common set of questions was used in the analyses: -- Is the incentive system so structured as to favor or retard agricultural output? -- How do government trade and price interventions affect output, farm income, consumer income and government revenue? -- How does agricultural policy synchronize with industrial policy and with the more general macroeconomic policies of the country? -- What relationship do price controls on agriculture bear to the border prices of similar goods? -6- Method of Analysis In order to measure and evaluate the effects of government interven- tion through the pricing mechanism., it is necessary to have a reference point. A commonly accepted reference point is the price regime that would prevail in the absence of any government intervention. In the absence of government interventions, prices of traded or tradeable goods in the economy would equal the price of the same goods on international markets adjusted for locational and quality differences. This is referred to as the border price of the goods, and it represents the opportunity cost to the country of the commodity whether imported or exported or whether it is a potential import or export. Once a set of border prices and domestic prices for each commodity at the same point in the marketing chain is assembled, it is possible to construct three measures of the degree to which domestic and border prices diverge. The first measure is the nominal protection rate (NPR). It is simply the difference between the dlomestic and border price of each commodity expressed as a proportion of the border price, where the border price is converted into domestic currency al: the official exchange rate. That is, NPR = d- b x100 Pb where Pd = domestic price Pb = border price NPRs may be positive (when the domestic price is higher than the border price) indicating that the commodity is protected or they may be negative (when the domestic price is lower than the border price) indicating that the commodity is "taxed" or "negatively protected." Alternatively, an NPR equal or close to - 7 - zero indicates that the commodity is neither directly protected nor taxed. Because of the relative ease with which NPRs can be calculated, they are calculated over a number of years to demonstrate how agricultural protection has changed over time. However, since international commodity prices vary greatly from year to year, NPRs tend to be very unstable, in addition to other shortcomings. Other methods, while entailing more work to calculate, provide a more accurate assessment of the degree of protection. The second measure of protection is the effective protection rate (EPR). This measure takes account of the fact that intermediate inputs in the production process may be overvalued or undervalued by government inter- ventions and thus may distort the level of protection calculated using NPRs. Vd - V EPR = dV x 100 Where Vd = value added evaluated at domestic prices Vb = value added evaluated at border prices Value added is defined as the value of output at any point in the production process, less the value of the purchased inputs, with prices expressed in domestic currency using the official exchange rate for imported inputs. It now becomes apparent how NPR and EPR differ. The EPR measure allows for the fact that the domestic price of inputs may differ from their border prices and therefore affect the margin (value added) of the production process. Like NPRs, EPRs can be positive, negative, or zero. A high positive level of effective protection encourages expansion of the commodity, while a negative one discourages production. An effective protection rate of approximately zero has a neutral effect on output. EPRs are useful in policy analysis, because they provide a good comparison across commodities of the net effect of - 8 - various price interventions in the product and input markets. A comparison of EPRs will provide an indication of the direction of resource flows both within the agriculture sector and between agriculture and other sectors of the economy. The third measure of protection used is the net effective rate of protection (NEPR), which is the EPR corrected for the estimated misvaluation of the exchange rate resulting from the trade regime. 1/ The basic premise for making calculations of NPRs and EPRs is that, in the presence of distor- tions and government interventions, the prices of goods and resources do not reflect their true social costs and benefits, that is, "social prices." The exchange rate is the price of domestic currency in terms of another currency, and that price also can differ from its "social price," commonly called the "shadow exchange rate." The latter is the rate of exchange calculated to prevail in the absence of trade interventions or under an "optimal" trade regime. In the calculation of NEPR, the shadow exchange rate rather than the official exchange rate is used in the valuation of traded inputs and outputs. The unique contribution of the exchange rate as an incentive or disincentive to production can be measured by comparing the difference in protection offered to a product or a.n industry when calculated using the EPR and the NEPR. Thus, both calculations are made where possible. The analysis of the effects of intervention on product prices is extended in some of the studies by rmeasuring the effects of price changes on production and consumption and by calculating (using the Marshallian economic surplus framework) the reallocations of income that result from interven- 1/ The studies do not deal with the management of the official exchange rate from the viewpoint of its appropriateness for maintaining viability in the current account. - 9 - tion. 1/ By making such calculations, it is possible to identify those groups who gain and those groups who lose from intervention and to measure the extent of the gains and losses. While it is necessary to exercise caution in inter- preting the numbers produced by this analysis, the numbers do provide a good indication of the redistribution of income, the losses of foreign revenue, and the deadweight (efficiency) loss of a given policy. As such, they can have a profound influence on policymakers. Finally, to investigate the relative efficiency of various agricul- tural activities and industries and to judge their international competitive- ness, the concept of "domestic resource cost" (DRC) is used in some of the studies under scrutiny. An industry's DRC represents the cost of domestic resources used per unit of foreign exchange earned or saved when domestic resources are valued at their true value in the economy, which may differ from their current market value. If there is a disparity among DRCs across economic activities, a reallocation of domestic resources to the lower DRC (more efficient activities) would generally result in higher total output and, therefore, higher national income. Thus, the DRC calculation shows an activity's "internal foreign exchange rate." Activities with "internal exchange rates" lower than the country's shadow exchange rate should be encouraged, since they can earn foreign exchange at a cost better than the national average (represented by the shadow exchange rate). As a measure of the efficiency of resource allocation and the international competitiveness of various industries DRCs are particularly useful in addressing two issues frequently raised in policy dialogue with developing country decision-makers. First, it is often asserted that, in the 1/ The method is well known for both its usefulness and limitations. Details are not presented here but are given in Bale and Lutz. -I 10 - real world, policymakers have no choice but to promote individual, high- priority industries by differential incentives. The economic policy analyst then must question whether those specifically favored industries deserve special incentives: Are they using domestic resources efficiently or is there a better use for those resources elsewhere in the economy? Second, industries receiving special treatment often claim that removal of the incentives, protection, or subsidy would result in their industry being overwhelmed by internaLtional competition. The DRC measure provides an indication of the robustness of the industry vis-a-vis similar industries in the rest of the world, and is, therefore, a very useful tool of analysis in formulating policy advice. 1/ In each of the countries studied, the analyst made two visits to the country to collect data, analyze the issues, and discuss the findings with the government. While there is considerable loss of detail when attempting to generalize in this synopsis, it is hoped that the common characteristics identified among the countries herein will provide a useful starting point for other similar studies. The common characteristics are discussed below. Direct Government Intervention Massive intervention by government in the production, pricing, and distribution of food exists in all tlae countries studied. Aspects of govern- ment intervention give rise to internal price distortions for domestic products and between domestic and international prices of the same product, which have serious allocative and efficiency implications on for economy. The policies of intervention are rooted in a model of development where it is 1/ The methods outlined here, their empirical difficulties and their theoretical limitations are well documented in the literature and are compactly treated in Scandizzo and Bruce. - 11 - thought desirable, in the interests of growth and development, to skim excess resources from agriculture and direct them toward industrialization; the assumption being that such a diversion of agricultural surplus does not reduce agricultural output. A further objective of public intervention is to improve the supply of food to consumers. Only recently have the self-defeating nature of these interventions, in the longer run, and the extent of their generally negative effect on agricultural output been fully understood. Although the bankrupt nature of such policies is now widely accepted by economists (see, for example, Bale and Lutz, Lutz and Scandizzo, Peterson, and Schultz), policymakers continue to lack confidence in the market's ability to value and allocate output. As a result, governments readily intervene in the market mechanism in various ways, especially by administering prices. Many price interventions are undertaken without consideration of the consequences for agricultural output, the optimal product mix in the sector, efficiency, or inter-sectoral resource flows. There are several motivations behind many agricultural price interventions. First, by domestic price controls or by export taxes on food commodities, food prices can be kept artifically low in order to benefit politically powerful urban populations; the so-called "urban bias" in policymaking. Second, by government procurement and resale of staple foods, mainly to the poorer segments of a population, an element of social policy (income distribution) can be accomplished. Third, in some cases, intervention is justified on the grounds of market failure or externalities, although a perceived externality is often misidentified or the solution to the externality is suboptimal, such being the case, for example, if a government takes over the function of commodity storage rather than allowing private stockholding to be undertaken. Fourth, in the case where export taxes are levied, the government secures an important source of revenue. - 12 - This final motivation warrants further comment. In the long run, government expenditure must be financed by government revenues generated by taxation. In the interests of equity and efficiency, usually all sources of income, that is, all sectors of the economy, bear a portion of the total tax burden. If revenue can be raised t:hrough direct taxation and if the tax incidence is equal across sectors, then it is an optimal and non-distortionary method of financing government expenditure. 1/ However, it is not adminis- tratively nor politically possible to tax directly agricultural income in most developing countries, so as a practical matter, governments levy indirect forms of taxation on the agriculture sector, usually by manipulating prices in order to alter the terms of agricu:Ltural trade. 2/ Yet there are many prices that: can be manipulated by government in order to indirectly tax agriculture, each choice having different distributional and efficiency implications for the economy. If the first best method of taxing income is not feasible then the choice of indirect taxation or implicit taxation must be carefully chosen t:o assure that it is the second best method with known and acceptable side effects, and not a third or fourth best method. The massive intervention at almost every level of the food complex by governments indicates that the revenue-generating aspect of intervention is not the dominant motivation for government action. Instead, the extent of government intrusion implicitly conveys the message that the production, distribution, and pricing of food are too important to be left to farmers, middlemen, and food retailers, and, that in the absence of government inter- 1/ The tax is non-distortionary in the sense that it is neutral vis-a-vis intersectoral resource flows. It may, of course, affect the labor- leisure choice. 2/ This argument is developed by Chhibber. - 13 - vention, markets would fail to provide a secure flow of food at relatively stable prices for consumers. Given such an underlying agenda, it is tempting, if not inevitable, for governments to intervene. In many, if not most, developing countries, farm level and retail food prices are administered. In Pakistan, for example, the government sets a "support price" at which it will buy wheat. Farmers may sell to government agents or private traders. The government buyers resell to ration shops at a fixed low price, which essentially sets the upper limit of the open market price. Private middlemen typically pay producers less than the government support price, because they provide extra services such as credit or transportation to growers. Wheat procured by the government is milled and sold by privately owned ration shops to ration card holders at the same price at which the government sells the flour to them. The ration shops cover costs and profits by selling the gunny bags in which flour is delivered. Until 1981, the "support price" of wheat was as much as 60% below the border price. In recent years, the margin has narrowed to around 30 percent below the border price and in the past two years, it has approximated the border price, as world prices fell and the support price was raised. Thus, during the 1970s, Pakistani wheat producers were implicitly taxed and Pakistani consumers were implicitly subsidized by the government's wheat pricing policy, although the government neither collects the tax nor distributes revenues from it. Nonetheless, just as is the case of an explicit tax, a redistribution of income from one group to another occurs. As anticipated, as farm prices for wheat in Pakistan moved toward border prices, production increased and imports declined to the extent that Pakistan now exports a small surplus. Likewise, Pakistan sets "support prices" for paddy and milled rice. Milled rice can only be sold to government or authorized dealers, and - 14 - the government is the sole exporter of rice. Because of the government's pricing policy and monopoly positions, the price of Pakistani rice between 1973 and 1983 averaged 35 percent below the border price. Again, rice producers are "taxed" in order to keep consumer prices of rice at lower levels. With increasing domestic prices and decreasing world prices for rice, the margin has narrowed over the past decade and should approximate zero by the mid-1980s. The government of Pakistan has been committed to a price setting policy for major crops for many years. The advantages of fixed prices are argued along two lines. First, under quite restrictive assumptions on the shape of the supply and demand curves, the net welfare of producers and consumers is greater at the midpoint of two different prices. Second, risk- averse farmers operating in an environment of uncertain future prices, have no future markets to insure against uncertainty. Thus, price stabilization schemes are a second-best mechanism to provide some certainty in the absence of future markets. But compared to their costs, the gains from stabilization are typically small and there are often better alternatives to achieve stabilization objectives. Thus, the automatic reliance on price-fixing precludes consideration of other, possibly more efficient, ways of reducing uncertainty (Newbery and Stiglitz, pp. 33-46). In the Philippines, a parastatal organization is the sole buyer and seller of sugar. Due to its pricing policy over the period 1974-82, it has been estimated that producers received only 77 percent of the world price of sugar, while consumers paid only 69 percent of the world price. Through its pricing policy, Philippine sugar producers have been subsidizing sugar consumers. Likewise, a parastatal administers the coconut industry and controls a large proportion of the milling. Its various levies and taxes and 15 - a recent embargo on copra exports, equivalent to an export tax of 22 percent, are implicitly and explicitly taxing producers, while consumers are subsidized and coconut processing is protected. The Philippines has, in recent years, moved from being a rice importer to being self-reliant and a small-scale exporter of rice, because of a significant supply response by producers to, among other things, farm prices being higher than border prices. As produc- tion responded, the National Food Authority lowered rice prices so that they now approximate the world price. In the case of yellow corn, which is used as an animal feed, farm prices in the Philippines still exceed import prices, thus protecting the infant corn industry. In Nigeria, because of the licensing of groundnut exports and an export ban on rice, domestic prices for both have been held approximately 20 percent below border prices in recent years. Likewise, cotton growers are forced to sell their entire output to the government at a price consistently fixed about 20% less than the border price. In Jamaica, where statutory marketing boards control exports and thus prices, it has been shown that, on average between 1970 and 1979, the implicit tax on producers was 17 percent for sugar, 28 percent for cocoa, 36 percent for coffee, and 42 percent for bananas. The effects of policies that impose "tax" burdens on export agricul- ture to the extent mentioned here, are numerous and serious. Since farmers are price sensitive, they respond to producer prices that are lower than the international opportunity cost by producing less, and consequently, farm income is lowered. Policies that hold down farm prices affect the rate of adoption of new technology, the level of usage of modern inputs, and the growth of agriculture. Farm labor declines, aggravating rural to urban migration problems. Further, because of reduced farm output, disadvantageous - 16 - pricing policies also limit the quantities of agricultural products available for export and hence stifle foreign exchange earnings. The underpricing of a commodity increases domestic consumption of the good. Clearly, consumers are better off, but at the expense of pro- ducers. Again, export receipts are reduced, because increased consumption leaves a smaller residual for exporting than in the case of neutral economic policies with respect to the opportunity cost of food. Also, there is a deadweight (efficiency) loss resulting from the misallocation of resources caused by the price intervention. While it is commonly the! case that export crops are taxed and, therefore, underpriced domestically, it is often the case that food imports are also taxed by tariffs, quotas, or parastatal monopoly import rights and are thereby overpriced (in terms of their border price or opportunity cost) on the domestic market. The motivations behind these actions typically are to raise government revenue (via duties), to conserve foreign exchange, and to stimulate import-replacement production activities. The effects on efficiency, resource allocation, and government revenue are the same as in the case of taxing domestic agriculture. The difference is that in the case of import controls on food, domestic consumers are taxed while domestic producers of the product or of its substitutes are implicitly subsidized in that they receive a price for the product in excess of its international opportunity cost. For example, in Colombia a parastatal sets farm prices for the importable commodities of wheat, corn, soybeans, and beans, based primarily on production costs. These prices exceeded border prices by an average of 76 percent during 1980-82. The disparity is maintained by both tariffs and quantitative restrictions on the importation of food items which the - 17 - parastatal supports. In Nigeria, likewise, tariffs, import licensing, or import bans on maize, rice, wheat, and sorghum resulted in those products being overpriced by an average of 88 percent between 1979 and 1983. As is obvious from the numbers cited here, when governments intervene in the pricing mechanism it usually is not a marginal intervention but a very large one that has serious efficiency implications. The general pattern--that prices of export crops are held down by various types of interventions while import- substitute crops are paid premiums--is illustrated in Table 2. The cost to countries in terms of lost output, lost export revenues, and inefficiency, and the redistribution caused by the policy are given for selected countries and commodities in Table 3. Often, in the face of stagnating agricultural performance possibly due to discriminatory pricing policies, government policymakers attempt to stimulate agriculture via subsidies for agricultural inputs. In Nigeria, for example, banks are required to devote 8 percent of their loans to the agriculture sector at interest rates of approximately half of the going commercial rate. And government subsidies on fertilizer and farm chemicals of 85 percent are given. In Jamaica, during the 1970s, the interest rate of farm loans by a parastatal development bank were less than one-half the commercial bank rate, and fertilizer subsidies of 33% were given to producers of sugar and domestically produced food crops. In the Philippines, as in most countries, the government subsidizes irrigation water by charging below its marginal cost; the 1980-81 implicit subsidy for water in the Philippines was about 90 percent. - 18 - Table 2: BORDER PRICE AND DOMESTIC PRICE IN FOUR MAJOR COMMODITIES OF THE STUDY COUNTRIES IN 1980-82 Colombia 1977 1978 1979 Wheat Market price (pesos/.LOOkg) 1,439 1,717 1,978 Border price 1,058 1,184 1,036 Corn Market price 1,364 1,527 2,015 Border price 730 915 1,126 Sorghum Market price 1,183 1,372 1,728 Border price 7,085 874 823 Soybeans Market price 2,015 2,568 3,280 Border price 1,471 1,759 1,773 Jamaica Sugar Farmgate Price ($J/ton) 197 188 190 Export price (adjusted 234 330 396 to farmgate) Bananas Farmgate Price 132 132 145 Export price 323 732 763 Cocoa Farmgate Price 1,202 2,002 2,404 Export price 1,693 5,268 5,226 Coffee Farmgate Price 380 666 812 Export price 603 900 1,249 Nigetria Maize Farmgate Price (Naira/ton) 226 320 411 Border price (adjusted to 131 126 134 farmgate) Rice Farmgate price 307 361 426 Border price 336 334 283 Groundnuts Farmgate price 342 264 389 Border price 330 280 316 Cotton Gazetted price 400 465 510 Equivalent border price 645 563 597 Sorghum Farmgate price 212 334 374 Border price 120 109 119 - 19 - Table 2 continued. Pakistan 1980 1981 1982 Wheat Procurement price (Rs/100 kg) 125 145 145 Import price 167 153 159 Rice Procurement price 131 158 181 Export price 249 327 315 Basmati rice Procurement price 295 343 375 Export price 707 701 747 Cotton Procurement price 1,026 1,107 1,122 Export price 1,326 1,597 1,267 Sugar Ration shop sale price 460 597 697 World price 626 370 266 Philippines Yellow corn Wholesale price (pesos/lOOkg) 14 16 16 Import price 13 15 12 Rice Wholesale price 23 26 29 Border price 29 35 20 Copra Wholesale price 17 18 18 Export price 22 25 23 Sugar Wholesale price 174 225 261 Export price 273 266 266 Note: All prices are rounded to the nearest whole number and are adjusted for quality and location so that the two prices for each commodity are comparable. Table 3: OUTPUT AND MONETARY EFFECTS OF AGRICULTURAL PRICING POLICIES IN SELECTED COUNTRIES Colombia, 1982 Jamaica, 1980 Nigeria, 1979-81 Average Philippines, 1979-81 Average Wheat Sugar Bananas Cocoa Rice Maize Groundnuts Cotton Coffee Rice Copra Sugar Production 71 301 69 3.5 309 757 460 80 6.9 5,000 2,200 2,300 ('000 metric tons) Exports (Imports) (467) 132 33.1 1.2 (565) (83) 0 (78) 1.8 175 1,710 1,602 ('000 metric tons) Production without distortions 57 319 77.2 4.1 287 674 434 90 8.5 5,358 3,356 3,176 ('000 metric tons) Exports (Imports) without distortions (524) 140 37.1 1.4 (635) (291) (62) (42) 2.2 1,012 3,012 2,514 0 ('000 metric tons) Change in Production (%) -19.7 5.9 11.3 16.9 -7.1 -11.0 -5.6 12.5 23.5 7.2 52.5 38.1 Change in Exports (Imports) (x) (12.2) 6.0 12.0 17.0 (12.4) (250) - (-46.1) 23.0 478 76.1 56.9 Change in Farm Income -6.1 5.8 1.5 1.4 -48.8 -121.2 -56.0 32.2 1.0 238.2 378.0 209.9 (USS million) Change in Farm Income (2) -28.8 6.9 16.4 21.2 -29.1 -38.1 -21.3 58.3 31.7 33.3 82.6 48.4 Change in Foreign Exchange -9.3 3.3 1.9 0.8 -53.7 -33.1 -30.4 69.3 2.1 207.4 380.9 196.9 (US$ million) Change in Foreign Exchange (Z) 13.3 5.9 12.2 17.2 -19.8 -250 - 44.9 23.8 591 41.5 51.8 Deadweight (efficiency) loss 2.75 8.8 0.2 0.8 24.4 23.0 7.9 13.7 0.9 19.9 89.5 10.0 (US$ million) - 21 - While these subsidies are often costly in terms of their financial burden on an economy, they are even more costly in terms of tying up scarce human resources in the administration of such programs, most of which have the further disadvantage of being proven ineffective in stimulating agriculture. When there is forced allocation of subsidized credit, banks tend to lend to their largest, most creditworthy client farmers or to agroprocessing or marketing organizations with readily available collateral. The resulting paradox is that the availability of agricultural credit may actually decline, as happened in the Philippines, as nonadministered interest rates rise to clear the "free" portion of the credit market and as the informal credit market contracts. (An additional paradox in the credit market is that no attention is given to the alternative of increasing capital available to the farming sector by mobilizing farm savings and the informal credit market.) Likewise, fertilizer subsidies have been very ineffective. Because of the general fungibility of fertilizer, targeted subsidies, such as those used in Jamaica, fail. In Nigeria, because of the excess demand for fertilizer at the subsidized price, rationing results and a secondary market, either internal or external (through smuggling) or both, flourishes. Finally, the selected inputs that are subsidized constitute a small proportion of the total cost of production. Lowering them by even quite large amounts has a rather minor effect on the net returns to the farmer. A consequence of intervention in the product market is that restrictions must be placed on international products and their substitutes in order to defend the domestic pricing policy. If domestic food prices are held below prices obtainable on international markets, domestic producers clearly prefer to export. If domestic prices artificially exceed world prices, then imports dominate the domestic market. Thus, once the decision is made to - 22 - establish domestic prices at levels at variance from border prices, govern- ments must simultaneously control and regulate trade of those products and their substitutes. Often, rather than placing tariffs or export taxes on products, parastatal marketing organizations are established and given broad regulatory authority and monopoly power in the purchase, resale, import and export of their products. Proceeding as instruments of policy, they often become powerful policymaking authorities. The record in developing countries is clear that parastatals are usually much more concerned with their own well- being and, to a lesser extent, the welfare of domestic consumers than with the interests of farmers or the rural sector (FAO, Lele, Kriesel). Indirect Government Intervention Not only do governments intervene directly in the determination of levels of food output, consumption, and prices, but they also intervene indirectly in ways that may be even more deleterious to agricultural production. Rarely do policymakers appreciate the interrelationship between the food sector and other sectors of an economy. Macroeconomic policy and sector- specific policies that directly affect agriculture are often not recognized as influencing agriculture. Of particular concern is the set of commercial policies designed to promote industrialization in developing countries through protection of domestic manufacturing. By protecting the manufacturing sector, agriculture is disadvantaged in several ways. To the extent that agricultural inputs are domestically produced under a protective umbrella, the cost of agricultural inputs increases, lowering farm returns and making agricultural exports less competitive on the intearnational market. The dynamic effects of reduced investment and slower adoption of new technology on growth clearly compound the static effects and, over time, dominate them. Further, to the - 23 - extent that resources such as labor and capital are bid away from agriculture by protected domestic manufacturing, so agriculture either must pay more for or lose resources previously available to it. Unanticipated side effects of protection of the manufacturing sector also occur. In the Philippines, for example, protection provided for domestic manufacturers of small tractors (two-wheeled power tillers) and small water pumps for farm irrigation had the unintended effect of increasing their price relative to larger imported equipment. This change has favored the suboptimal use of larger imported tractors and pumps which are more labor-displacing than smaller equipment. A further side effect of protection of the manufacturing sector is that the set of tariffs and quotas on imported manufactures defends an overvalued exchange rate. In a distortion-ridden economy, trade deficits held in check by protecting domestic industry allow the value of the domestic currency vis-a-vis its trading partners' currencies to be maintained at a level higher than would prevail under a freer commercial regime. Exporters, when converting their foreign earnings into domestic currency, receive less domestic currency than they would if the currency were devalued. Likewise, importers of duty-free goods receive goods at a domestic price that is lower than what would prevail if the exchange rate were at a distortion-free level. Thus, both exports and duty-free imports are undervalued. This situation often places agriculture in developing countries in double jeopardy, since the agriculture sector is a major source of export revenue, yet sizeable quantities of food products are also imported. For example, the Philippines exports copra and sugar, while it imports wheat and feedgrains. Jamaica exports bananas and sugar, while it imports rice and wheat. Colombia exports coffee and sugar, while it imports wheat and coarsegrains, and Nigeria exports groundnuts and cocoa, while it imports maize and rice. When export products - 24 - and import-competing products are undervalued, then the effect on production, consumption, and growth is identicial to the case where exports are taxed and imports are subsidized: There is underproduction and overconsumption of the goods. The extent to which currencies are misaligned in most developing countries is not widely recognized, and certainly its effect on output is not generally appreciated by their policymakers. For example, in the Philippines during most of the 1970s, the exchange rate was overvalued by an estimated 25- 30 percent; in Jamaica during the early 1980s by 35 percent; in Colombia in the early 1980s by about 25 percent; and in Nigeria during the past five years by 44 percent. When margins of less than 5 percent determine the outcome of a sale or a profit, the effect of implicit taxes of these dimensions on domestic agriculture can be devastating. The results of these World Bank studies show that misaligned exchange rates have played the prime role in inhibiting agricultural performance. While industrialization has been stimulated by exchange rate policies, industrial growth is occurring atop a narrow and unsustainable base. Agriculture, on the other hand, has responded to these policy-induced disincentives by growing at a reduced rate, with the result that many countries are importing more food and/or reducing their agricultural exports. While development policy has now gone beyond models that emphasize industrialization to the neglect of agriculture, policy practice in developing countries has yet to catch up. To demonstrate the impact of misaligned currency values, Table 4, using conventional welfare measures, presents the unique effects of the exchange rate on selected agricultural products in the Philippines. In addition, Table 5 illustrates the protective bias against agriculture in the - 25 - Philippines by showing the extent of implicit taxation on agricultural production relative to the high rates of protection for agroprocessing and manufacturing. The effect of the overvalued currency as a protective device can also be seen by comparing the effective protection rates and the net effective protection rates. Agriculture is heavily taxed, while agroprocessing and manufacturing generally remain highly protected. The irony of this system of protection is that many of the protected activities would remain competitive in the absence of protection. In Table 6 domestic resource cost calculations are presented for the same set of production activities. With a few obvious exceptions, such as the processing of dairy products and flour milling, many of the products or processes are shown to be close to or below the shadow exchange rate and would therefore be competitive under a more open trading regime. In summary, in examining the extent and types of price intervention in agriculture in developing countries, one cannot help but be struck by their limited successes, the unconvincing reasons given for their introduction, and the neglect of viable market alternatives. In reviewing the state of the agricultural economy in developing countries, the conclusion is inescapable that while market failures are sometimes discernable, governmental (or para- statal) failure is pervasive, massive, and universal. The Policymaking Process There are several institutional problems in the policymaking process that are common across the developing countries studied here. First, in formulating policy, undue emphasis is given to short-run problems and policies, and insufficient or no attention is given to policies that would enhance the long-term performance of the food sector. Within ministries of agriculture, few, if any, resources are devoted to devising a cogent and Table 4: PHILIPPINES: ESTIMATED CONTRIBUTION OF THE EXCHANGE RATE AS A DISINCENTIVE TO AGRICULTURE (ANNUAL AVERAGE 1979-81) Change in Change in Change in Change in Exports Foreign Welfare Welfare production consumption (imports) Exchange Gain of Gain of Net Deadweight (000 metric (000 metric (000 metric Earnings Producers Consumers Efficiency Loss Commodity tons) tons) (tons) (000 t) (000 t) (000 t) (000 t) Rice -394.4 484.4 -877.8 -1,650,321 1,850,443 1,552,668 149,467 Copra -373.3 47.3 -420.3 -1,061,579 -993,787 82,149 278,437 Sugar -702.4 36 -738.4 -1,622,061 -1,501,120 171,877 416,101 Yellow corn -177.4 535.7 -493.5 -430,038 -575,943 667,177 171,048 Total -1,647.5 1,103.4 -2,530.0 -4,763,999 -1,220,407 2,473,871 672,957 Note: US$1=47.74 Source: Bale, December 1983, p. 37. - 27 - Table 5: PHILIPPINES: EFFECTIVE PROTECTION RATES FOR MAJOR AGRICULTURAL PRODUCTS, AGROPROCESSING, AND MANUFACTURING Sector EPR NEPR Agriculture Rice -0.4 -19 Rainfed -4.7 -24 Irrigated 3.6 -15 Copra -27 -47 Sugar a/ -16 -36 Cotton -12 -32 Logs -10 -32 Agroprocessing Slaughtering and poultry dressing 128 73 Meat products (uncanned) 68 27 Dairy products 52 15 Canned fruits and vegetables 80 36 Rice milling -49 -60 Flour milling 1,148 845 Sugar milling and refining -12 -33 Manufacturing Textile mill products 78 35 Other textiles 36 3 Footwear 18 -11 Paper products and containers 193 118 Tanning and leather finishing 145 86 Tires and innertubes 323 220 Insecticides and agricultural chemicals 17 -11 Petroleum refineries 21 -8 Average for all manufactures 44 15 Note: The reference years are 1973-79, except for cotton, when they are 1975-81. a/ Nominal protection coefficient. - 28 - Table 6: PHILIPPINES: DOMESTIC RESOURCE COSTS FOR MAJOR AGRICULTURAL PRODUCTS, AGROPROCESSING, AND MANUFACTURING Sector DRC Agriculture a/ Rice 6.3 - 6.9 Copra 5.9 - 6.2 Cotton 7.2 Logs 3.4 - 5.5 Agroprocessing Meat products (uncanned) 9.4 Dairy products 18.1 Canned fruits and vegetables 10.3 Rice milling 9.9 Flour milling 26.0 Sugar milling and refining 6.4 Manufacturing Textile mill product:s 12.2 Other textiles 8.2 Footwear 6.5 Paper products and containers 11.3 Tanning and leather finishing 9.6 Tires and innertubes 9.9 Insecticides and agricultural chemicals 5.2 Petroleum refineries 9.0 Average for all manufactures 8.9 a/ For agriculture, DRCs are calculated from 1975 to 1982 when the shadow exchange rate is estimated to have fluctuated from r8.9 to r9.1 = US$1.00. b/ For agroprocessing and manufacturing, DRCs are calculated for 1974 when the shadow exchange rate was r8.9 = US$1.00. - 29 - coherent plan for the future direction of agriculture. By a long-term plan, it is not intended to imply that detailed plans for the agriculture sector should be made, but rather that broad objectives should be enunciated and a consistent set of policies responsive to those objectives should be followed. Too often, public decision-making in agriculture can be more accurately characterized as "crisis management" than as "forward planning." The result is that, in the name of public policy, a series of ad hoc and internally inconsistent decisions are implemented in response to transitory problems. While the problems may quickly subside, the policies tend to remain and self-perpetuate, despite the demise of their original rationale. Thus, a chain of ad hoc policies obscures any notion of the long-term direction of agriculture. A plethora of unnecessary and counterproductive controls results. To be fair, there is a genuine tension in public policy between short-term questions of food availability and security and the implementation of incentives for the solution to these problems in the long run. But agri- cultural policymakers must contend with the inevitable trade-offs. It is widely held that both time and an appropriate policy environment are required to sustain increases in productivity. Reconciling these requirements with the demands of urban populations for stable and often low food prices has proved difficult, if not elusive, for most developing country policymakers. In response to criticism of policies biased in favor of the short term, agricultural policymakers claim that concern with the everyday well- being of their sector and, in some cases, its survival is their first priority and that in such contexts future planning is a luxury they cannot afford. But this argument misses the point, inasmuch as the future performance of agricul- ture and the need for quick ad hoc solutions to emerging crises in agriculture is largely a function of policies now being put in place. Thus, in order to - 30 - minimize the need for "crisis management" in the future, it is important to create a policy environment now that fosters a healthy and structurally sound agricultural complex in the future. Another frequent obstacle to the long-term formulation of agricultural policy is the absence of mid-level ministerial personnel capable of providing the supporting analysis or policy overview. Although expensive, it may be worthwhile for ministries of agriculture to engage expatriate personnel until such a void can be filled locally. This course of action is showing promise in some countries, such as the Philippines. It is also usually the case that public decision-making in the food sector is decentralized among several ministries or agencies which act inde- pendently of each other. As a result, planning for the agriculture sector is discontinuous rather than unified, t'he spillover effects of an agency's policy decisions on others' policies are not considered, and unintended side effects within the sector are not identified. In Jamaica, for example, t'here are more than 100 public entities dealing with agriculture, ranging from numerous divisions of the Ministry of Agriculture, through the parastatal mnarketing organizations, to the National Water Authority. No fewer then six ministries have responsibility for various parts of the agricultural complex. 'Likewise in the Philippines, public decision-making in agriculture is divided among five ministries and an equal number of parastatal marketing agencies. The decentralized decision-making apparatus is not a problem as long as the areas of jurisdiction are independent, but that is not the case. Decisions made by one agency have implications that affect, directly or indirectly, aspects of agriculture beyond the obvious ones. Thus, the irrigation authority's decisions on the pricing of water affect the demand fDr fertilizer, the marketing policies that - 31 - affect farmers' net returns influence the demand for farm inputs, and the policies providing incentives to nonagricultural sectors affect agriculture by increasing the competition for common inputs. In brief, policymakers usually do not think in terms of a general equilibrium framework. It is, therefore, important that a mechanism be established so that ministries affecting agricultural performance--such as agriculture, finance, industry, natural resources, trade, and marketing, etc.--collectively participate in the agricultural policy-formation process. The lack of defined objectives of agricultural policy and food policy is related to the ad hoc nature of agricultural policymaking. Too often, governments cling to ambiguous or operationally unworkable goals that are based on fashionable catch phrases. Responses to concepts, such as "food self-sufficiency" or "food security," have probably engendered more misguided effort in policy-formation than beneficial results. In an operational context, what does "food self-sufficiency" mean? Every country can be self- sufficient in food merely by fiat. More to the point, what is the value of self-sufficiency in food? At what cost is it worthwhile to achieve self- sufficiency? Is it useful or sensible to be self-sufficient in food when a country is dependent on imported inputs to produce its food? Too many of these questions are left unanswered in the policy debate of developing countries. In the Philippines, for example, great efforts were made over the last decade to ensure "self-sufficiency" in rice. Initially, domestic prices were above world levels, but recently have been almost on par with world prices. Production did expand to such an extent that small quantities are now exported and often large levels of stocks are held. While it may now be cheaper for the Philippines to lower stocks by exporting more at one period - 32 - and importing at another, authorities in the Philippines maintain that such a sense of national prestige has bee!n created over being "self-sufficient" that importing rice, regardless of its economic wisdom, would be viewed as a "failure." Similarly, support prices that are above border prices for cereals in Colombia are being justified on grounds that the country should have some measure of self-sufficiency in basic food items. The term "food security" has also defied operational definition and when used as a policy objective, leaves too much room for operational interpretation. Often it is interpreted as meaning the holding of physical stocks of food. However, possibly better alternatives, such as earmarked foreign reserves or improved transportation and distribution networks in a country's hinterlands, that would provide the same level of food security at possibly lower cost are not considered. As a result of the overemphasis on food security and on domestic food price stabilization, very large food stocks are held by official agencies of many developing countries. Two questions need to be asked in this context: First, why is it necessary for a government agency to hold food stocks? That is, how or why has the private market failed? Second, what is the optimal level of stocks that should be held for "prudent food security" reasons? The answer to the first question is that private stockholding has not failed, but is usually deemed inadequate by those who bear responsibility for food availability. The incentive for private stockholding is the expecta- tion of higher future prices. If governments fix prices at one level through- out the year, there is no incentive for private stockholding. If, when prices rise, there is political pressure placed on stockholders who are denounced as - 33 - "hoarders, profiteers, and speculators," then the incentive to operate a private stock scheme is eroded. The answer to the second question is that agencies tend to "over- stock" food supplies in the sense that stored quantities, often based on conservative "rules of thumb" such as "60 days' supply of rice," are larger than economic considerations, based on calculated acquisition and release prices, the cost of holding stocks, and the probability of a crop shortfall, would imply. The conservative stock management strategy stems from an asymmetry of consequences: If stocks are too high, there is a relatively small cost (often hidden) in terms of forgone investment opportunities, physical storage costs and wastage. But, if stocks are too low, governments may fall. A somewhat different variation on the theme of overstocking exists for coffee in Colombia. Coffee production is the major agricultural activity in Colombia, 1/ accounting for 31 percent of the value of agricultural output and 45 percent of total legal agricultural exports. As an export-control device, coffee exporters must deposit a certain share of their exports with the National Coffee Fund. The share, which can vary several times a year, has ranged from 15-62 percent since 1979. As a member of the International Coffee Organization, Colombia complies with a two-part export quota: a fixed component is decided by negotiation and a smaller variable component is based on the share of Colombia coffee stocks to world stocks. Colombian coffee stocks have now accumulated to the equivalent of one year's exports. Such levels cannot be justified on the grounds of efficiency or of meeting produc- 1/ The value of the large but illegal exports of marijuana and cocaine are excluded. - 34 - tion shortfalls. Nor can they be justified as a means to increase Colombia's coffee quota. Thobani (October 1983) shows that current stock levels are approximately three times as large as the optimal level, given the need to hold stocks for production shortfalls. The probable reason for Colombia's holding such large stocks is that for negotiating purposes, they constitute a more credible threat in the case of withdrawal from the association. The common practice in many middle-income, developing countries of holding apparently excessive levels of food stocks is costly. At best, policies should allow more active participation of the private sector. At second best, governments should more carefully calculate optimal levels of public food stocks by establishing decision rules for accumulation and release of stocks. They should also investigate alternatives to the physical storage of stocks. Pan-Pricing Insistence on pan-seasonal and pan-territorial pricing of commodi- ties is usually associated with administered prices for agricultural products. The practice of maintaining identical prices across time and place distorts production patterns, eliminates any incentive for private stock- holding, and guarantees that the government bears the cost of storage. If the nominal value of a sack of rice at harvest time is the same six months later, then farmers correctly want to sell all their marketable surplus at harvest. Pan-seasonal pricing thus places a financial, administrative, and physical burden on the parastatal responsible for the product. If prices are to be controlled, they should increase from harvest to the onset of the next harvest at a rate incrementally determined by the cost of storage. Similarly, pan- territorial pricing--the setting of constant acquisition prices of farm products throughout the entire country by a government or parastatal--removes - 35 - the locational comparative advantage of farms close to market. By so doing, the distribution, location, and intensity of production are suboptimal, and an efficiency loss is incurred by the economy. Fertilizer Policy Government intervention in fertilizer markets has consistently led to misallocation of resources. Many countries have mismanaged fertilizer policy so that their attempts to be "self-sufficient" in this critical input have resulted in farmers paying above-world prices for it. While it has long been the case that imports of fertilizer were taxed in order to foster domestic fertilizer manufacturing and compounding industries, it is only since the oil price boom of 1973 that more restrictive and detrimental policies have been put in place. In the Philippines, for example, the fertilizer marketing system is regulated by the Fertilizer and Pesticide Authority (FPA), created in 1973. Initially, fertilizer prices were held down by allowing tax-free imports of finished fertilizer and raw materials and by cash subsidies for losses incurred by domestic producers due to price controls. But over time the implicit subsidies to domestic producers were not removed. The FPA permits the importation of fertilizer by five firms in order to supplement domestic production and satisfy domestic demand at official prices. Three of the five firms also produce fertilizer. Because of administered fertilizer imports and domestic prices, in recent years, farmers paid about a 10 percent premium over the border price (David and Balisacan, 1982). Still, the implicit tax is not uniform across all types of fertilizer. In 1982, for example, mixed fertilizer received a small subsidy, urea was priced slightly above world price, ammonium sulphate was 27% higher than world price, and muriate of potash (used on sugar and other export crops) was 86% higher than the world price. The domestic fertilizer industry in the Philippines has - 36 - received protection averaging 80% over the past decade as a result of its duty-free privilege to import fertilizer and its raw ingredients in an environment of controlled prices for finished fertilizer. Obviously, there is little incentive to modernize and upgrade the three fertilizer plants built more than 20 years ago and saddled with now-dated technology. Conclusions While some issues of agricultural policy remain sharply debated, in the past decade, a strong convergence of opinion has occurred with regard to several important aspects of agricultural trade and development, including the major role played by public policy, both domestic and international. In this essay, several common shortcomings in agricultural policy are made apparent and robust policy choices can be suggested. First, the predominance and pervasiveness of market interventions by government is striking. There appears to be a deep distrust in, or lack of tolerance for, market mechanisms. The free market is seen as a dangerous Gulliver that must be tied down by numerous threads of control. This approach gives rise to dirigistic solutions that are cumbersome to administer and costly to the nation (in terms of both pecuniary costs and efficiency losses). The common practice of political price setting (or administered prices) implies a redistribution of wealth. Typically, the direction of the redistribution is from rural producers to more politically powerful urban consumers. But given the starting position of many developing countries, the important economic issue is improving producer incentives while perhaps targeting programs at particularly low income households. In this policy dilemma, there is a need to reconcile the interests of producers and con- sumers. Often, consumer interests are too heavily weighted. Policymakers are well advised to bear in mind that the social costs of today's below-market - 37 - food prices are reflected in dependency on food imports and lethargic agricultural performance tomorrow. Among planners there is increasing agreement that if prices are to be administered, they should be related to the international opportunity cost of the product. That is, international prices should provide the standard against which domestic prices are set. This does not necessarily imply that prices should change daily, but that, over time, there should be a cor- respondence between domestic and international prices. A clear requirement for a vigorous agriculture sector is an appro- priate pricing policy for inputs. With the increasing use of off-farm inputs as agriculture develops, the need for an appropriate pricing policy for those inputs increases. This not only means pricing fertilizer, farm chemicals, and tractors at their international opportunity cost, but also means abstaining from protecting, via trade barriers, domestic industries that may never become competitive, yet bid inputs away from agriculture. With the increasing adop- tion of new agricultural technology, especially high-yielding seed varieties, the use of complementary inputs becomes more essential. To deny or restrict their optimal usage by a discriminatory pricing policy has a proportionately larger negative effect on agricultural output than when traditional seed varieties were grown. In order to optimize resource allocation across sectors, it is also apparent that different sectors need to be treated more equitably. Implicit taxation of agriculture and implicit or explicit subsidies for manufacturing and agro-processing need to be minimized, if not eliminated. A realistic exchange rate policy must also be in force. The implicit taxation of agriculture through an overvalued exchange rate appears to be the single most powerful disincentive to agriculture in the five developing countries - 38 - examined. Farmers need incentives to adopt new technology and to expand production. Pricing policies that reflect international opportunity costs provide the best guide to resource allocation and investment decisions. In short, more outward looking and open policies are required. Establishing such an environment on the basis of the status quo requires a strong national commitment and broad agreement on common goals. In most cases, the compartmentalized policymaking structure within various ministries is inappropriate to the solution of such complex and interlocking problems. A strong centralized office capable of orchestrating the coordination of policies and achieving the cooperation of competing ministries is needed. The timing of major policy realignments is now particularly appropriate, for the countries surveyed confront fiscal crises and have little choice but to undertake reforms. The most should be made of such opportunities. - 39 - BIBLIOGRAPHY Bale, Malcolm. "Jamaica: Agricultural Prices and Trade Policy," Country Policy Department Discussion Paper No. 1983-6. Washington, D.C.: The World Bank, May 1983. . "Philippines: Agricultural Trade Policies, Resource Flows, and the Competitiveness of Agriculture." Country Policy Department Discussion Paper No. 1983-19. The World Bank, December 1983. and Ernst Lutz. "Price Distortions in Agriculture and their Effects: An International Comparison." American Journal of Agricultural Economics 63 (1981):8-22. Also, World Bank Reprint Series No. 173. Balisacan, David, C. and A. M. "An Analysis of Fertilizer Policies in the Philippines." Philippine Institute of Development Studies. Staff Paper No. 82-1. Manila: May 1982. Chhibber, Ajay. "Financing Public Goods Expenditure in Agriculture: The Case for an Indirect Tax." The World Bank, Resource Mobilization Division, Country Policy Department (Processed), August 1984. Food and Agriculture Organization. Profiles of Major Ministry of AgriculLural Parastatals. Dar Es Salaam: FAO/MD, 1974. Kriesel, Herbert et al. Agricultural Marketing in Tanzania, East Lansing, Michigan: Michigan State University, 1970. Lele, Uma. The Design of Rural Development: Lessons from Africa. Baltimore, Maryland: Johns Hopkins Press, 1975. Lutz, E. and P.L. Scandizzo. "Price Distortions in Developing Countries: A Bias against Agriculture." Europ. Rev. Agr. Econ. 7(1980):5-27. Newbery, David and Joseph Stiglitz. The Theory of Commodity Price - 40 - Stabilization. Oxford: Clarendon Press, 1981. Peterson, W.L. "International Farm Prices and the Social Cost of Cheap Food Policies." Amer. J. Agr. Econ. 61(1979):12-21. Robertson, James. "An Analysis of Agricultural Trade and Subsidy Policies in Nigeria." Country Policy Department Discussion Paper No. 1983-11. Washington, D.C.: The World Bank, October 1983. Scandizzo, Pasquale and Colin Bruce. "Methodologies for Measuring Agricultural Price Intervention Effects." World Bank Staff Working Paper No. 394, June 1980. Schultz, T.W. "Constraints on Agricultural Production." Distortions of Agricultural Incentives, ed. T.W. Schultz. Bloomington: Indiana University Press, 1978. Thobani, Mateen. "Colombia: An jknalysis of Agricultural Pricing and Trade Policy." Country Policy Department Discussion Paper 1983-12. Washington, D.C.: The World Bank, October 1983. _ "Pakistan: An Analysis of Agricultural Pricing Policy." Country Policy Department Discussion Paper No. 1983-3. Washington, D.C.: The World Bank, March 1983. The World Bank. World Development: Report, 1984. New York: Oxford University Press, 1984. World Bank The Developing Countries and Export Promotion Policies Publications International Shipping Barend A. de Vries ftblications ~~~~~Harald Hansen Staff Working Paper No. 313. 1979. 80 of Related Staff Working Paper No. 502. 1981. 151 pages. pages (including 12 annexes, 38 tables, Stock No. WP 0313. $3. Interest bibliography). Stock No. WP 0502. $5. NEW Exports of Capital Goods and NEW Related Services from the Republic of Korea Economics and the Politics of Larry E. Westphal, Yung W. Rhee, Protection: Some Case Studies Linsu Kim, Alice Amsden Adjustment to Extemal Shocks of Industries Exarnines Korea's spectacular export in Developing Economies Vincent Cable growth-from $50 million of goods in Bela Balassa Looks at factors which effect an indus- 1962 to $25 billion in 1982. Five kinds Staff Working Paper No. 472. 1981. 31 try's attitude toward protection by of project-related exports are character- pages (including appendix). analyzing four of Great Britain's indus- ized (overseas construction, plant ex- Stock No. WP 0472. $3. tries: footwear, knitwear, cutlery, and ports, direct investments, consulting consumer electronics. Case studies ex- services, licensing and technical agree- Adjustment Policies and ~amine import competition from devel- ments). Discusses the role of theseex Adjustment Policies and oping countries and adjustment op- ports in Korea's strategy for develop- Problems in Developed Countries tions exercised within each industry. ment. Shows how these strategies Martin Wolf Study includes some explanatons for conform to the country's dynamic Staff Working Paper No. 349. 1979. 236 protectionist behavior among indus- comparative advantage by enlarging its pages (including references). tries and a discussion of the politics of industrial base. Stock No. WP 0349. $10. decisionmaking in regard to trade pol- Staff Working Paper No. 629. 1983. 80 icy. pages. Staff Working Paper No. 569. 1983. 80 ISBN 0-8213-0310-4.Stock No. WP 0629. Britain's Pattern of pages. $3. Specialization in Manufactured ISBN 0-8213-0199-3. Stock No. WP 0569. On Exports and Economic Goods with Developing $3. Growth Countries and Trade Protection Gershon Feder Vincent Cable and Ivonia Rebelo Effects of Non-Tariff Barriers Staff Working Paper No. 508. 1982. 24 Staff Working Paper No. 425. 1980. 61 to Trade on Prices, pages (including appendix, references). pages (including 3 appendixes). Employment, and Imports: The Stock No. WP 0508. $3. Stock No. WP 0425. $3. Case of the Swedish Textile and Clothing Industry India's Exports Carl Hamilton Martin Wolf NEW Staff Working Paper No. 429. 1980. 63 Despite improved performance, the pages (including appendix, bibliography). growth of India's exports continues to Bureaucracies and the Political Stock No. WP 0429. $3. lag behind need, potential, and the Economy of Protection: achievements of several of its competi- tors. This study examines India's over- Reflections of a Continental Energy, International Trade, all export performance in the 1960s European and Economic Growth and 1970s, with emphasis on the cen- Patrick Messerlin Alan S. Manne and Sehun Kim tral role of incentives. The major prob- Analyzes three factors that influence Staff Working Paper No. 474. 1981. 30 lems and policies are discussed, as the "bureaus" (bureaucrats) in their pages (including 2 appendixes, references). well as current strategic options. decisions affecting protectionism in Stock No. WP 0474. S3. Oxford University Press. 1982. 224 pages France. (including index). Staff Working Paper No. 568. 1983. 64 LC 82-6309. ISBN 0-19-520211-2. Stock pages. No. OX 520211, $22.50 hardcover. (A ISBN 0-8213-0198-5. Stock No. WP 0568. European Community specially priced edition is available in India $3. Protection against from Oxford University Press branches.) Manufactured Imports from Capital-Importing Oil Developing Countries: A Case Industrial Country Policy and Exporters: Adjustment Issues Study in the Political Economy Adjustment to Imports from and Policy Choices of Protection Developing Countries Alan H. Gelb E. Verreydt and J. Waelbroeck J. M. Finger Staff Working Paper No. 475. 1981. 38 Staff Working Paper No. 432. 1980. 25 Staff Working Paper No. 470. 1981. 22 pages (including 9 tables). pages. pages (including references). Stock No. WP 0475. $3. Stock No. WP 0432. $3. Stock No. WP 0470. $3. Italian Commercial Policies in in the EEC' markets but have less effect NEW the 1970s in keeping out non-EEC imports. Enzo R. Grilli Staff Worki:ng Paper No. 567. 1983. 48 Real Wages and Exchange Staff Working Paper No. 428. 1980. 47 pages. Rates in the Philippines, 1956- pages. ISBN 0-8213-0197-7. Stock No. WP 0567 78: An Application of the Stock No. WP 0428. $3. Stolper-Samuelson-Rybczynski Output aLnd Employment Model of Trade Changes in a "Trade Sensitive" Deepak Lal NEW Sector: Adjustment in the U.S. Explains the movements of real wages Footwealr Industry in the Philippines in terms of a simple Korea's Competitive Edge: John H. Mutti and Malcolm D. regression model. Examines the coun- Managing Entry into World Bale try'S pstwar eeonotatmiveconclusions Markets Staff Working Paper No. 430. 1980. 21 for economic policy. Whee Rhee, Bruce Ross- pages (including footnotes, references). Stfforkeooing PpeNol.60.18.0 YungLa ee and Bruce Stock No. WP 0430. $3. Staff Working Paper No. 604. 1983. 60 Larson, and Garry Pursell pages. How did Korea manage to expand its Patterns of Barriers to Trade in ISBN 0-8213-0213-2. Stock No. WP 0604. exports from less than $100 milhon a S $3. year in the early 1960s to more than Sweden: A Study m the $20 billion a year in the early 1980s? Theory of Protection Shadow Prices for Trade To find out about the underpinnings Lars Lundiberg Strategy and Investment of Korea's competitive edge, the au- Staff Working Paper No. 494. 1981. 35 Planning in Egypt thors asked more than 100 major Ko- pages (including 3 appendixes). Joh Page, Jr. rean exporters what had been impor- Stock No. WP 0494. $3. tant for them in institutional support, Staff Working Paper No. 521. 1982. 212 in technological development, and in The Political Economy of pages. marketing overseas. The findings Protecticin in Belgium ISBN 0-8213-0009-1. Stock No. WP 0521. show that there is a strong interaction P.K.M. Bel m $10. between exporting and the effective- Tharakan ness of a country's economic institu- Staff Working Paper No. 431. 1980. 22 Structural Change in Trade in tions, both public and private. Without pages (including statistical appendix, refer- Manufactured Goods between effective institutions, a country may ences). Industrial and Developing not be able to implement effective pol- Stock No. WP 0431. $3. Countries icies for export promotion. Conversely, successful exporting appears to give The Political Market for Bela Balassa economic institutions more vitality and Protection in Industrial Staff Working Paper No. 396. 1980. 46 effectiveness. The findings also show Countries: Empirical Evidence pages. how Korea's selectivity-in the acqui- Kym Ancderson and Robert E. Stock No. WP 0396. $3. sition of technology and in the market- Baldwin ing of products overseas-has been an Staff Working Paper No. 492. 1981. 28 NEW important part of Korea's success in pages (incldng references). The Structure of International the world marketplace. Stock No. IVP 0492. $3. ComeStiutiveness InthemFederal The Johns Hopkins University Press. June Competitiveness in the Federal 1984. About 204 pages. On Protectionism in the Republic of Germany: An ISBN 0-8018-3266-7. $19.95. Netherlands Appraisal K.A. Koekkoek, J. Kol, and L.B.M. Frank D. Weiss On the Political Economy of Mennes Probes the comparative trade advan- Protection in Germany Staff Working Paper No. 493. 1981. 70 tage of the Federal Republic of Ger- H. H. Glismann and F. D. Weiss pages (including 3 annexes, references). many in the 1980s with surprising con- Staff Working Paper No. 427. 1980. 30 Stock No. WP 0493. $3. clusions: developing countries are competitive with the Federal Republic pages (including bibliography). of Germany in a far wider range of Stock No. WP 0427. $3. NEW products than had been previously Public Assitac tthought. Suggests probable trends, es- Public Assistance to Industries pecially toward developing countries. NEW and Traide Policy in France Concludes that the faster income in Bernard IBobe developing countries grows, the faster The Political Economy of Describes the institutional structure these countries will become compefi- Protection in Italy: Some through which trade police is deter- tive in an even wider range of goods. Empirical Evidence mined. Facuses on the evolution of Innovation, though a key factor, can- Empi ric al dMuoaNc France's in-temnational commerce in the not determine comparative advantage, Enzo Grilli and Mauro La Noce 1970s and assesses probable trends for because innovations spread rapidly This analysis is based on a model that the future. through the world economy. specifies the demand side of the mar- ket. Examines 35 industrial subsectors Staff Working Paper No. 570. 1983. 64 Staff Working Paper No. 571. 1983. 84 in terms of EEC tariff protection and pages. pages. Italy's domestic subsidy assistance. ISBN 0-8213-0200-0. Stock No. WP 0570. ISBN 0-8213-0201-9. Stock No. WP 0571. Finds that tariffs protect Italian exports $3. $3. The Structure of Protection in Trade and Employment Why the Emperor's New Developing Countries Policies for Industrial Clothes Are Not Made in Bela Balassa and others Development Colombia: A Case Study in The Johns Hopkins University Press, 1971, Keith Marsden Latin American and East Asian 394 pages (including 5 appendixes, index). In the last decade, the developing Manufactured Exports LC 77-147366. ISBN 0-8018-1257-7, Stock countries have proved that they can David Morawetz No. JH 1257. $25 hardcover. compete intemationally in exporting Focuses on the exports of a particular manufactured goods, as well as pn- commodity (clothing) from a particular mary products and services. This pa- Latin American country (Colombia) in per examines three sets of issues: (a) an attempt to understand why Latin Testing for Direction of whether good export performance is America has been so much less suc- Exports: India's Exports of attributable to special characteristics of cessful at exporting manufactured Manufactures in the 1970s the most successful countries or goods to date than East Asia. It is the Ashok Khanna whether their success can be readily first study to go into great detail in ex- replicated in other countries; (b) amining the price, and especially the Tests the hypothesis that the exports whether the penetration of the mar- nonpnce, determinants of export suc- of a developing country with an ad- kets of industrial countries has ce rx t vanced manufacturing sector will differ reached, or will soon reach, a limit; Oxford University Press, 1981. 208 pages among destinations: the capital inten- and (c) whether trade in manufactures (including appendixes, bibliography). sity of exports will be greater to the among the developing countries can more labor abundant destinations, and expand further. Concludes with a dis- LC 81-9547. ISBN 0-19-520283-X, Stock the labor intensity of export will be cussion of the contribution of small No. OX 520283, $22 hardcover. greater to the more capital abundant enterprises to the creation of employ- Worker Adjustment to destinations. India's exports of manu- ment and the alleviation of poverty. Liberalized Trade: Costs and factures for 1973 and 1978 are used for 1982. 70 pages (including annex). Assistance Policies the analysis. ISBN 0-8213-0017-2. Stock No. BK 0017. Graham Glenday, Glenn P. Staff Working Paper No. 538. 1983. 41 $5. Jenkins, and John C. Evans pages. ISBN 0-8213-0132-2. Stock No. WP 0538. Staff Working Paper No. 426. 1980. 87 $3. Trade in Non-Factor Services: pages (including 2 appendixes, bibliog- Past Trends and Current Issues raphy). Andre Sapir and Ernst Lutz Stock No. WP 0426. $3. Staff Working Paper No. 410. 1980. 140 World Trade and Output of The Tokyo Round: Results and pages (including 4 annexes). Manufactures: Structural Implications for Developing Stock No. WP 0410. $5. Trends and Developing Countries Countries' Exports Ria Kemper Trade in Services: Economic Donald B. Keesing Staff Working Paper No. 372. 1980. 38 Determinants and Staff Working Paper No. 316. 1979. pages (including annex). Issues 74 pages (including statistical annex). Stock No. WP 0372, $3. Development-Related Issut Stock No. WP 0316. $3. Stock Andre Sapir and Ernst Lutz ~Trends in Intemnational Trade Staff Working Paper No. 480. 1981. 38 in Manufactured Goods and pages (including appendix, references). Structural Change in the Trade Adjustment Policies and Stock No. WP 0480. $3. Industrial Countries Income Distribution in Three Bela Balassa with the assistance of Archetype Developing Trade Policy for Developing Kenneth Meyers Economies Countries Examines recent trends in trade in Jaime de Melo and Sherman Donald B. Keesing manufactured goods between the in- Robinson World Bank Staff Working Paper No. 353, dustrial and the developing countries. Staff Working Paper No. 442. 1980. 91 August 1979, vii + 264 pages (including Analyzes (a) the implications of these pages (including appendixes, references). references). trends for structural change in the in- Stock No. WP 0442. $3. Stock No. WP-0353. $10. dustrial countries and (b) changes over time in the current dollar value and the commodity composition of trade in - Trade Policy Issues for the manufactured goods. Recommends Trade among Developing Countries in the ~~policy changes aimed at promoting in- Trade among Developing Developing Countries in the ternational trade and structural Countries: Theory, Policy 1980s change. Issues, and Principal Trends Isaiah Frank Staff Working Paper No. 611. 1983. 44 Staff Working Paper No. 479. 1981. 116 World Bank Staff Working Paper No. 478. pages. pages (including 2 appendixes, references). August 1981. 52 pages. ISBN 0-8213-0251-5.Stock No. WP 0611. Stock No. WP 0479. $5. Stock No. WP-0478. $3. $3. E TThe wrld Banik Publications Order Form SEND TO: YOUR LOCAL DISTRIBUTOR OR TO WORLD BANK PUBLICATIONS (see the other sit of this form.) P.O. BOX 37525 WASHINGTON, D.C. 20013 U.S.A. Date Name Ship to: (Enter if different from purchaserl Title Name Firm Title Address Firm City State . Postal Code_ Address Country 'iblephone ( City State_ Postal Code Purchaser Reference No. Country 'lLlephone Check your method of payment. Enclosed is my O Check O International Money Order G Unesco Coupons O International Postal Coupon. Make payable to World Bank Publications for U S. dollars unless you are ordering from your local distributor. Charge my O VISA 0 MasterCard 0 American Express 0 Choice. (Credit cards accepted only for orders addressed to World Bank Publications.) Credit Card Account Number Expiration Date Signature OInvoice me and please reference my Purchase Order No. Please ship me the items listed below. Customer laterna Stock Number Authi./ Title Routing Code Quantity Unit Price Total Amount S All prices subject to change. Prices may vary by country. Allow 6-8 weeks for delivery. Subtotal Cost S- Ibtal copies Air mail surcharge if desired (52.00 eachj $ Postage and handling for more than two complimentary items (52.00 each) S 'Tbtal S_ s611ua Thank you for your order. Distributors of World Attn: Mr. Giancarlo Bigazzi Attn: Mr. J.M. Hemandez Distibutors P of World Via Lamarmora 45 Castello 37 Bankk Publications 50121 Madrnid - ARGENTINA Florence SRI_LANKA AND THE MALDIVES Carlos Hirsch, SRL. JAPAN - Lake House Bookshop Attn: Ms. Monica Bustos Eastern Book Service Attn: Mr. Victor Walatara Florida 165 41 piso Attn: Mr. Terumasa Hirano 41 Wad Ramanavake Mawatha Caleria Guemes 37-3, Hongc 3-Chome. Bunkvo-ku 113 Colombo 2 Buenos Aires 1307 Tokyo SWEDEN AUSTRALIA, PAPUA NEW GUINEA, KENYA ABCE Fritzes Kungl, Hovbokhandel FII, SOLOMON ISLANDS, Africa Book Services (E.A.) Ltd. Attn: Mr. Eide Segerback WESTERN SAMOA, AND Attn: Mr. MB. Dar Regerinnsgatan 12 Box 16356 VANUATU P.O. Box 45245 S-103 2i Stockholm The Australian Finandial Review Nairobi SWITZERLAND Information Service (AFRIS) KOREA, REPUBLIC OF Librairie Pavot Attn: Mr. David Jamieson Pan Korea Book Corporation Attn: Mr. Henri de Perrot 235-243 Jones Street Attn: Mr. Yoon-Sun Kim 6, rue Grenus Broadway P.O. Box 101, Kwanghwamun 1211 Geneva Sydney, NSW 20001 Seoul TANZANIA BELGIUM MALAYSIA Oxford University Press Publications des Nations Unies University of Malaya Cooperative Attn: Mr. Anthony Theobold Attn: Mr. Jean de Lannov Bookshop Ltd. Maktaba Road, P.O. Box 5299 av. du Roi 202 Attn: Mr. Mohammed Fahim Htj Dar es Salaam 1060 Brussels Yacob THAILAND CANADA P.O. Box 11.27. Jalan Pantai Baru Central Department Store, Head Office Le Diffuseur Kuala Lumpur Attn: Mrs. Ratna Attn: Mrs. Suzanne Vermette MEXICO 306 Silom Road C.P. 85, Boucherville J4B 5E6 lNFOTEC Bangkok Quebec Attn: Mr. Jorge Ce da Thailand Management Association COSTA RICA San Lorenzo 153- ICol. del Valle, Attn: Mrs. Sunan LibrenIa Deleg Benito Juarez 308 Silom Road Attn: Mr. Hugo Chamberlain 031 Mexico D.F. Bangkok Calle 11-13, Av. Fernandez Guell MIDDLE EAST TUNISIA San Jose Middle East Marketing Research Societi Tunisienne de Diffusion DENMARK Bureau Attn: Mr. Slaheddine Ben Hamida Sanfundslitteratur Attn Mr. George Vassilou 5 Avenue de Carthage Attn: Mr. Wilfried Roloff Mlitsis Bldg. 3Tui Attn: r. Wilried Rloff Makarios fIl Avenue Tn' Rosendems Alle 11 Nicosia TURKEY DK-1970 Copenhagen V. Cyprus Haset KitaEvi AS. EGYPT, Arab Republic of (branch offices in Bahrain, Greece, Attn: Mr. kzet Izerel Al Ahram Morocco, Kuwait, United Arab 469. Istiklal Caddesi Al Galaa Street Emirates. Jcrdan) Bevoglu-lstanbul Cairo NETHERLANDS UNITED KINGDOM AND MBE BV . NORTHERN IRELAND FINLAND Attn: Mr. Gerhard van Bussell Microinfo Ltd. Akateeminen Kirjakauppa Noorderwal 38, Attn: Mr. Roy Selwyn Attn: Mr. Kari Litmanen 7241 BL Lo