Chapter 4


Table 4.14 shows a highly differentiated picture, especially as far as direct protection of
staple food commodities and importables are concerned. In some countries (e.g. Ghana, C6te
d'Ivoire), staples and importables have been highly protected, with direct protection rates
even outweighing the implicit taxation resulting from an exchange rate overvaluation. In
other countries, direct protection of staples and importables was moderate to negative, with
Zambia and Egypt representing the extreme cases of high negative values of direct protection
rates for staples, pushing total nominal (dis-)protection for staples down to a value of below -
40 percent.

If, due to trade liberalisation, the degree of protection/taxation is reduced, the agricultural
sector as a whole is likely to gain. Since direct as well as indirect (dis-)protection has been
strongest in export crop production, this sector will gain most. As far as food crops are
concerned, the effects depend highly on the country-specific situation, as table 4.14 shows.
In general, the effects are likely to be less distinct than in the case of exportables.

The overall impact of trade liberalisation on food production, supply and demand as well as
on the labour market and on household food security are quite similar to, and likely to
reinforce, the effects of a currency devaluation (see sections 3.3 and 3.4 of this chapter).
These are:

* the producers of export crops gain most (important question: to what extent are these
 large land-holders or small-holders?),

 export crop production is likely to increase with positive effects on wage-labour
 employment and income in areas devoted to export crop production,

 food production will become less competitive in comparison to export crops and is likely
 to drop (except in the extreme cases where food products have been subject to similar
 rates of protection as exportables, or in areas where no export crops are produced),

 although a reduced rate of protection of importables should reduce food prices in some
 cases, with a positive real income effect for the mainly urban consumers who depend on
 the market for their food supplies, this effect may be off-set by an upward pressure on
 prices resulting from a currency devaluation.

 As in the case of a currency devaluation, additional foreign exchange earnings resulting from
 an expansion of export crop production and export volumes can, in principle, be used to pay
 for increased food imports that would compensate for the drop in production and could,
 depending on comparative advantage, even lead to an overall increase in food supplies,
 hence decrease a supply deficit. This economic text-book solution may, however, be
 constrained by the debt service obligations of the country and by possible depressing effects
 of "collective adjustment" on the world market prices of export crops.

 The reform of the capital market can have positive effects on production, employment and
 income, hence on food demand and household food entitlement, if it attracts additional direct
 foreign investment. This, however, depends on a number of other factors too, such as a stable
 socio-political environment, taxation, the real wage levels, the skills of the workforce,


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