THE EXPERIENCE WITH LIBERALIZATION POLICIES - THE CASE OF THE AGRICULTURAL SECTOR

Agriculture is one of the most protected sectors in most industrialized countries. The economic costs of protecting agriculture have increased over the last 20 years and there is certainly a growing need to liberalize, at least from an economist's point of view. However, policy makers have rejected liberalization policies so far in most countries. Farmers have fought for protection more successfully than other interest groups because of sectoral factors which bias the political market in their favor. Protection rates are widely used to measure protectionism. However, protection rates are not always meaningful indicators of the results of liberalization policies if world market prices change over time. A decline in protection rates does not necessarily reflect a government's decision to support farm income less. Hence, a reasonable indicator of a liberalization policy should inform whether a government has accepted a decline in agricultural income and an increase in pressure to adjust. Determinants of liberalization policies are discussed and some cross-country empirical evidence is provided. Actual liberalization of agricultural policies in industrialized countries has only been instituted in exceptional cases (New Zealand, and most recently Sweden). The experience gained in New Zealand is compared with expectations based on economic models. The Common Agricultural Policy of the EC has undergone some liberalization over the last 5 years. Effects are discussed in the paper. The paper ends with a section on 'unilateral versus multilateral liberalization policies'. © 1991.