What Is the Role of International Trade in Agriculture?

International trade in agriculture is governed by a variety of forces that affect the location and quantity of foods produced by nations. Tariffs, trading blocs, and regulations on farm products significantly impact a country's gross domestic product (GDP), and can cause a nation to either enter the market of international trade in agriculture, or exit it and sell to domestic consumption only. These factors are more prominent in developing world nations since their economies are often largely based on the production of agricultural products, but first world nations are also continuously involved in regulatory maneuvering to promote their products abroad.

From the point of view of industrialized first world nations, studies have shown that the choice to export products of any kind by business is rare. A year 2000 report and analysis of roughly 5,500,000 US companies found that only 4% of them were engaged in the export market. Such exporters, however, were seen as more stable companies than their non-exporting counterparts, surviving longer and having higher profits for their industries that allowed them to pay higher wages to workers. This supports the supposition that engaging in exporting and overcoming tariff and regulatory barriers improves a company's productivity level overall. These trends directly impact international trade in agriculture, as it has traditionally been one of the highest regulated global markets.

By contrast, it has been estimated that, as of 2003, almost 70% of the world's population in poverty lives in nations whose GDP is almost entirely based on the production of agricultural products, where exports are critical to their economic growth. These nations, however, are often locked out of first world foreign markets where agricultural imports are heavily taxed, or subsidies on local products make those from poor developing nations more expensive. Groups like the Organization for Economic Co-operation and Development (OECD), a group of 34 first world countries including the EU nations, US, Japan, and Australia, that creates policies that penalize and restrict imports of agricultural products from developing nations.

When heavy subsidies are given to local farmers in wealthy nations, this cannot be counteracted by developing countries who lack the means to equally subsidize their products. Cotton producers in the US were given $4,000,000,000 US Dollars (USD) in subsidies in 2002. The developing nation of Benin in West Africa, relies on cotton exports for 85% of its GDP, and could not compete against such heavy subsidies, effectively locking it out of the US cotton market. These trade barriers also result in unnecessary government expenses in rich nations and encourage mass production of agricultural goods so that they can be sold at low cost, which leads to unnecessary environmental degradation.

As policies of trade liberalization open up foreign markets, the impact on local agriculture is one of the short-term problems of structural adjustment. As foreign foods become increasingly available locally, farmers must reexamine their crop choices to determine if they can grow something else that will be more profitable. This harms rural communities and farmers who have little room or financial means to adapt, but the long-term effect of trade liberalization is that it increases the flow of agricultural goods across borders.

The three main factors with interdependent effects on international trade in agriculture are local farm crop subsidies, import tariffs, and anti-dumping laws. When nations attempt to export their agricultural products to geographic neighbors who have similar climates and grow similar foods, problems often arise and anti-dumping lawsuits are filed. These claims that a nation is selling its exports below cost in an attempt to gain market share dominance in another country are used as a mechanism to block imports. Examples of this include anti-dumping allegations in 2001 by the US against Canada, and Canada against the US for tomato and timber exports. Such disputes are often resolved by the World Trade Organization (WTO) where regional agreements such as the North American Free Trade Agreement (NAFTA) fail to do so.

Globalization has facilitated the movement of goods across many borders. As the flow of goods increases, however, so does price manipulation. When garlic imports into the US from China increased by 636% in 1992 to 1993, the US Fresh Garlic Producers Association (FGPA) sought anti-dumping protection, which led to import tariffs on garlic from China to equalize prices that still existed when last reported in 2003. This continual regulatory war between advanced economies over the international trade in agriculture distorts the actual cost of goods produced, and forces small developing nations out of foreign markets.