Analysis of International Trade Distortions Arising from Agricultural Policies: The Case of Wheat

With the prospect of greater uncertainty in world markets, additional progress will be required to minimize the adverse effects of domestic support policies on international trade; otherwise, turbulent global economic conditions will generate even greater uncertainty and instability in world commodity markets. To obtain greater rattonalization of agricultural production and trade, improved empirical measures of the impacts of alternative domestic support programmes on international trade in farm products are required. Previous studies based on rates of protection have not adequately identified the effects of protection. An alternative concept-the "rate of distortmn" of world market prices-is developed in this paper to provide an improved measure of the impact of agricultural policy measures and to provide a more meaningful basis for future trade negotiations. The case example of wheat 1s used to Illustrate the potential benefits of such a new concept. In order to identify a balanced reduction in the effects of protection on international markets, evaluating rates of distortion is preferable to analyzing the impacts of a proportional change in rates of protection undertaken by all countries.