Agriculture in the Age of Globalization

This paper aims at analyzing the asymmetries in the process of globalization and its differentiated outcomes on (i) developed and less developed countries, and (ii) on LDC agriculture. The consequences of these asymmetries are reflected in the dramatic changes in world agricultural trade – an unprecedented growth of agricultural trade in real terms and a dramatic change in its composition which is increasingly moving away from bulk commodities towards high-value, processed consumer-ready agricultural goods. The impacts of these changes on LDC agriculture have been quite differentiated, with most countries experiencing a worsening of their agricultural trade balance. This change of the LDC trade position is counterintuitive if we still think of agricultural trade as a comparative-advantage-based trade, i.e. based on cost competition. It seems instead that the change in the composition of agricultural trade is the epiphenomenon of a fundamental change in the rules of the game, which are increasingly based on the reputation of agricultural products and imply a quality-based competition. Unfortunately, the implications for LDC agriculture do not seem encouraging. The intrinsic poverty of these economies, with the implied burden in terms of missing assets to compete under the new rules of the game and some adverse globalization-induced changes in LDCs macro fundamentals are crucial handicaps that work against the development of LDC agriculture. Furthermore, the underlying forces driving globalization (increasing returns to scale, research, development of new products, etc.) undermine the traditional role of agriculture as engine of growth. The analysis carried out in this paper represents one more piece of evidence that the effects of globalization are asymmetric and that development success requires selective and phased integration with world markets. Without the required investments in terms of infrastructure, institutions, human and social capital, LDC agriculture will hardly be able to claim the expected benefits of globalization.