Capacity Building Program in Agricultural Trade Policy
Professor of Economics
Federal Urdu University of Arts, Science and Technology
Near Point Zero
Department of Agricultural and Applied Economics
Blacksburg, VA 2406, USA
Agriculture comprising crops, livestock, fishing and forestry sub sectors is the largest sector of Pakistan's economy; with 23 percent contribution in GDP, employing 18.18 million workers of the total labor force of 45.76 million. The crop sector contributes roughly half of the agriculture's share in GDP. The most important crops in terms of their area/production in Pakistan are: wheat, cotton, rice and sugarcane, respectively, accounting for 65 percent of the total cropped area reported at 22.9 million hectares. These are also the crops which have been subject to major policy interventions in the domestic and international trade. In addition to intervening directly in commodity markets, the government also regulates their trade and export/import prices through trade policy instruments. These interventions have also influenced the domestic prices. How these interventions have impacted producer prices and incentives and farm incomes have implications for efforts aimed at poverty alleviation.
In the wake of structural adjustment reforms, economic liberalization and trade policy reforms under the auspices of WTO it would be helpful to analyze and compare the movements in the domestic and international commodity markets. The comparison of domestic and international prices need to be performed at least at two levels: prices relevant at farm gate for the growers and for prices relevant for the processors and or consumers. This will help not only compare the prices but also examine how the incentives change for the producers and processors and what are their implications for the commodity in the overall context. It will also be useful to compare the prices during the harvesting season and the annual average of these prices.
The methodology proposed to be used in the study is principally the one used in the calculating the producer subsidy estimates to the extent of calculating the export/import parity prices of the commodities covered in the analysis encompassing the period of 1994-95 to 2004-05. In the initial phase, nominal and real domestic producer prices will be estimated along with the calculations of nominal protection coefficients. In the next phase, analysis will be extended to the estimation of effective protection coefficients and domestic resource costs using the Policy Analysis Matrix. Based on the analysis of the individual crops, the collective PSE for these commodities would also be estimated.
The study will help in ascertaining the comparative advantage and competitiveness of the commodities and changes thereof over time and provide an input in policy planning. It will also generate information about inter-sector resource transfers for the period under reference.
Distortions in Incentives for Production of Major Crops in Pakistan: Recent Trends and Emerging Challenges. Abdul Salam. 2010.