Introduction
Global trade strives to integrate national economies with those of the rest of the globe. Increased free and open international trade, foreign investment, technological exchange, and so on are all essential components of a globalized world. Global trade had a tremendous positive impact on agriculture.
The impact of Global trade
Economic impact
Global trade increased access to agricultural technological developments such as high yield varieties, genetically modified crops (GM crops), and micro-irrigation techniques. Farmers have benefited from foreign investment in agriculture, including contract farming, cold storage, and food processing. Access to overseas markets has significantly increased India’s agricultural exports.
Social impact
Global trade increased food output and production while also transforming rural agrarian societies. It has given farmers the ability to understand, reach out to, and compete in global marketplaces. New technology, particularly in irrigation, aided in resolving rural water scarcity and maintaining agricultural viability. It has also aided in changing agricultural society’s attitudes towards new farming methods.
Using global trading opportunities to improve food security
Increased incomes of the poor are a critical component in ensuring food security. The poor have a high marginal proclivity to spend on food. Increased employment is the major way for low-income people to raise their incomes and thus their food security.
Agriculture’s impact on poverty reduction is contingent on growth rates that are significantly larger than population growth rates. The latter are indirect, affecting demand for rural non-tradables, which employ a large proportion of the overall labour force and feed the majority of the impoverished.
Agricultural demand has high growth multipliers because the rural non-farm sector spends a lot of money on itself. This sector’s supply is highly elastic, as one would anticipate from a labor-intensive sector in a low-wage country. Rural non-tradables supply is highly elastic, owing to the fact that labour is the principal input, and labour supply is elastic as long as incomes are low or underemployment is widespread. The sector’s growth is constrained by demand, which is driven by high agricultural growth rates.
The pressing needs for low-income countries to profit from Global trade are outlined below.
Making the economy more open to commerce and market forces
The benefits of Global trade are derived via commerce. Exports necessitate imports, but trade barriers tend to raise the cost of exports by increasing the cost of critical inputs and technology. Each component of a supply chain, not simply the final product, must have a comparative advantage.
Customs inefficiencies and corruption, as well as a plethora of other bureaucratic restraints, are just as suffocating as tariffs and must be addressed. However, opening up to global market forces is useless unless costs are consistently decreased. In other words, no amount of market access will help if local investment and policy interact with global dynamics to leave comparative advantage with subsistence production.
Investing in agricultural research and development
Low-income countries must invest substantially more in agricultural research and technology dissemination than they already do. Opening markets will accomplish little for agriculture, and thus for poverty reduction and food security, unless such investments are made. It is also critical to identify supportive mechanisms, such as research and training, to reduce the exclusion of small resource-poor farmers from value chains.
Rural infrastructure investment
Massive expenditures are required due to the poor status of rural infrastructure in low-income countries. Investment in other economic risk-reduction services, such as insurance, irrigation, and storage, is also probable. Lack of such investment eventually shifts comparative advantage back to subsistence agriculture at very low income levels, with minimal multiplier effect on the rural non-farm sector.
The transaction costs of trade with remote villages are often so high that grain mills may find it cheaper to buy from distant commercial growers than from small farmers in the region. Improved infrastructure, on the other hand, lowers the final cost of imports in producing areas.
Increasing private-sector activities
The role that the public sector plays in collaboration with the private sector, particularly in exports, is all too often overlooked in these days of reducing public sector restraints. It is not enough to just remove bureaucratic barriers. Private sector investors in low-income nations frequently seek quick returns, particularly in commerce.
Initially, governments must assist the private sector by participating in market analysis costs, assisting in the development of trade associations capable of diagnosing needs, developing and enforcing grades and standards, meeting health regulations of high-income importers, diagnosing special niche markets, and conducting constraints analysis.
In the majority of low-income nations, such initiatives are occasionally funded by foreign aid programmes, which act as the public sector. Such measures must enable private sector action, and low-income nations must eventually assume that role themselves rather than relying on foreign help.
