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Impact of Trade Liberalization on Agriculture: Evidence of Bangladesh

Jahangir Alam
Member-Director
Agricultural Economics and Rural Sociology Division, Bangladesh Agricultural Research Council, Farmgate, Dhaka, Bangladesh.

Abstract/ Executive Summary:

Bangladesh has liberalized its economy through reduction of tariff rates and withdrawal of agricultural subsidies although the country, as a least developed one, was exempted from reduction commitments. The un-weighted average tariff rate for all agricultural products declined to 15 percent in 2002-03 from 55 percent in 1991-92. Subsidies on irrigation and fertilizer declined from 2.53 percent of the value of unassisted output in 1988-89 to 0.45 percent in 2002-03. Moreover, there is a very low rate of subsidies on agricultural exports. However, the impact of trade liberalization policies was not favourable on the agricultural economy of Bangladesh. Total agricultural export increased by about 2 percent and agricultural import increased by 9 percent per year over the 1990s. Import of maize and pulses increased significantly over that period. Besides commercial import of food grains increased and the magnitude of food and dropped over the same period. It revealed that Bangladesh had to face more loss than it enjoyed gains from eventualities of recent trade liberalization. In view of the above circumstances, more investment on yield increasing technology generation and adoption is necessary to meet the current deficit in food items and accelerate the speed of diversity in agriculture.

Keywords: Agricultural Economics, Bangladesh, Trade liberalization, Subsidies, Agricultural export, Agricultural import.

Location: The secondary data were collected GOB, BBS, Bangladesh Bank, World Bank and FAO.

Start Date: 01-01-2002

End Date: 30-06-2003

Program Area: Socio-economic and Policy

Non-commodity: Performance

Objectives:

To establish a fair and market oriented agricultural trading system and initiate a reform process through the negotiation of commitments on support and protection;
To make an assessment of Bangladesh’s progress in the process of trade liberalization;
To analyze its impact on agricultural trade and production in the country.

Methodology:

This study was based on secondary data collected from published and unpublished sources of various national and international agencies. The main sources of data were various publications of the government of Bangladesh (GOB), Bangladesh Bureau of Statistics (BBS), Bangladesh Bank, World Bank and Agricultural Organization of the United Nations (FAO). Some of the specific documents consulted were Bangladesh Economic Review (various issues), Handbook of Agricultural Statistics, Economic Trends, Statistical Yearbook of Bangladesh, National Accounts Statistics of Bangladesh and the Legal Text of the Uruguay Round of Multilateral Trade Negotiations. In addition, various unpublished documents of the Export Promotion Bureau, National Board of Revenue, Ministry of Food, Ministry of Finance and Ministry of Commerce were intensively used for obtaining data for this study. The impact of trade liberalization and reform was also analyzed on macro-economic performance of the country. Finally, the magnitude of current food deficit was determined by comparing recent dietary pattern with that of an expected pattern to reflect on policy issues for development of the agricultural sector in Bangladesh.

Source of Information: SAARC JOURNAL OF AGRICULTURE, Vol. 2, 2004, Page. 39-59, ISSN 1682-8348, SAARC Agricultural Information Centre.

Article Link (Online Journal):

Funding Source:

1. Government

Budget:

Total Budget (Tk.) :

Achievement/Findings:

Results of the study show that Bangladesh has liberalized her economy very quickly over 1990s through reduction of tariff rates and withdrawal of agricultural subsidies. However, there was hardly any positive impact of the liberalization efforts on the agricultural sector of Bangladesh. In fact, the growth rate of agricultural imports has much superseded the growth rate of agricultural exports and the country became more dependent on commercial imports of food grains and other agricultural commodities. Thus it appears that the country should now pursue a policy of protecting her agricultural sector and increase support and subsides on yield increasing technology generation and adoption to meet the current food deficit and accelerate the speed of agricultural diversification.

Knowledge Management: Journal