growth in agriculture trade

agriculture trade

growth in agriculture trade

The data suggest that the growth in agriculture trade is chiefly

about trade in processed products, where profits are highest. A

tonne of pasta can be sold for much more than the cereal that is

used to make it. The growth rate for this sector (almost 9% a year)

is comparable to the growth rate of non-agricultural products, and

as a result this group of commodities has steadily increased its

share of agriculture trade. Trade in bulk products, on the other

hand, is growing at the lowest rate among the agricultural sectors

(2.6% a year). At the same time, their share in agricultural trade is

declining, even though some bulk products (including grains and

soya beans) are still among the most traded agricultural goods.

The value of world trade in agricultural products depends on

whether or not trade among the 27 European Union countries is

counted. The EU has a single internal market within which trade

flows freely and it applies common measures at its borders. The

EU negotiates as a single block on trade policy matters. Excluding

intra-EU trade lowers world agricultural export figures by a third

for 2004. The EU members trade chiefly among each other. Trade

among the EU-15 alone (the 15 countries that were members of

the EU before May 2004) accounted for 36% of world agricultural

exports from the mid-1980s to the mid-2000s. The share was even

bigger in the exports of horticultural and processed products, with

intra-EU trade accounting for 43% of the world’s total exports.

Comparative advantage in agricultural products reflects the

relative availability of farmland in relation to other factors of

production. For example, Japan has some farmland but it has a

great deal more capital equipment. Accordingly, Japan tends to

have a comparative disadvantage in many agricultural products.

Kenya and many developing countries are in the reverse position,

with plenty of land and workers, and a comparative advantage

in land and labour-intensive agriculture. In other cases, countries

that have a huge endowment of mineral resources like oil or iron

ore struggle to develop comparative advantage in other products.