The inefficiency of international and domestic markets is traditionally viewed as a key policy constraint faced by the developing world. While there is a widespread consensus that trade liberalization generates gains for all trading partners in the aggregate, its impacts on poverty continues to be a subject of considerable debates, among academics and policymakers, because of the potential adverse effects liberalization can have on rural and urban poverty, employment, and income distribution. These outcomes can have different magnitudes under various types of liberalization, such as multilateral, reciprocal and regional agreements, and preferential schemes and various types of distortions, such as coupled or decoupled domestic support instruments, import tariffs, and policies aimed at supporting the development of biofuels production.

Economic growth, which alleviates poverty, can be bolstered by trade liberalization. However, this process is inhibited by market failures and public interventions in most South Asian and Sub-Saharan Africa countries. These market failures and public interventions can dampen agricultural supply responses and consumers’ growing preferences for quality products.

Given the predominant role of agriculture in the livelihoods of most people in developing countries, especially in South Asia and Sub-Saharan Africa, any strategy for reducing poverty and hunger must include rapid growth in the agricultural sector. However, increased agricultural productivity can depress commodity prices and farmers’ incomes if they are not linked to market opportunities, or if high market transaction costs exist. Poorly functioning markets, weak domestic consumer demand, and lack of export possibilities are major constraints to agricultural growth prospects for many developing countries. The development of biofuels sectors may have adverse consequences on poverty in developing countries. It might have an expansionary effect on the demand for agricultural feedstock needed in the production of biofuels, benefiting the poor in rural areas, but could simultaneously exert an increasing pressure on world agricultural prices at the detrimental of urban poor in net food importing countries.

Goals and Objectives

The overall objective of this research project is to support the adoption of policies for more efficient functioning of the global food, nutrition, and agricultural system so as to support the inclusion of low-income countries and improve food and the nutrition security of poor people. The program emphasizes issues of global agricultural trade negotiations, regional trade, and trade preferences; linkages between domestic policies and globalization; distributional impact of trade liberalization; the impact of developed-country policies on developing-country food security, and pro-poor policies along the entire food chain given the growing importance of consumers and retail industries as food system drivers; the development of a biofuel sectors and its potential implications on developing countries. Policy changes supported by this research are expected to accelerate income growth through increased access to both domestic markets and international trade.