Impact of the EC's Rebalancing Strategy on Developing Countries: The Case of Feed

This paper analyses the effects of a rebalancing policy for the EC feed sector on the less developed countries. The theoretical part of the study reveals that evaluation of changing world market prices from the developing countries' perspective depends on the trade position of the LDCs in the relevant markets, on home-made distortions in the poor countries, as well as an the degree of insulation of domestic markets from the world market. These findings are supported by the empirical results presented in the paper. Using the sequential approach based on the Hicksian compensated curves of the new welfare economics, the efficiency effects due to a rebalancing policy in the EC feed sector are calculated for 16 developing countries/regions. These countries/regions cover about 98 percent of the developing world. The results show that, depending on the assumed world price transmission elasticity as well as on the application or absence of national agricultural policies in the countries considered, the developing world as a group would have to bear new welfare losses of between US$519 million and US$789 million. These welfare effects would not be spread evenly over the countries under consideration. While most developing countries and regions would experience a substantial decrease in their net economic welfare, some countries would enjoy considerable welfare gains.