AGRICULTURAL PROTECTION OF EAST ASIA IN INTERNATIONAL PERSPECTIVE

AGRICULTURAL PROTECTION OF EAST ASIA IN INTERNATIONAL PERSPECTIVE*

Masayoshi Honma Oraru University of Commerce

and Yujiro Hayami Aoyama University

Trade restrictions on agricultural commodities have been a major source of international economic friction between Japan and major agricultural exporters such as Australia and the United States, especially since the late 1960s when balance of payments trade surpluses became a secular feature of the Japanese economy. However, agricultural protectionism is not unique to Japan but pervasive among advanced industrial countries, whereas the policies t o exploit agriculture are commonly practiced in developing countries [Schultz 19781. In addition, the newly industrializing countries (NICs) in East Asia - Korea and Taiwan - have been increasing the protection of their agriculture at very rapid rates since the mid-1960s when they began to follow Japan's industrial development pattern [Anderson 19831.

The major question addressed in this paper is how high the levels of agricultural protection in Japan, Korea and Taiwan are relative to industrial countries in Western Europe and Nor'th America and whether East Asia's protection levels are unique o r can be explained by factors common t o the advanced industrial countries.

COMPARISON O F AGRICULTURAL PROTECTION LEVELS

The firs task of this study is to compare the levels of agricultural protection in Japan, Korea and Taiwan with those of the advanced industrial countries during the period 1955 to 1980. The countries to be compared include Denmark, France, West Germany, Italy, Netherlands, U.K., U.S.A. , Sweden and Switzerland. The measure used for comparison is the nominal rate o f protection (NRP).'

*This is a part of a larger study conducted jointly by the Australia-Japan Research Centre a t the Australian National University and the Faculty of Economics at the Tokyo Metropolitan University, which will be published in a book form.

AGRICULTURAL PROTECTION 49

Since the pioneering study b y Nash [1955] and McCrone [ 19621, there has been a number of studies which estimate the levels of agricultural protection in industrial countries in terms of the difference between domestic and international prices [Japan Economic Planning Agency 1969; Kruer and Bernston 1969; Gulbrandsen and Lindbeck 1973; Sanderson 1978; Magiera 1982; Saxon and Anderson 1982; UNCTAD 19831. These studies do not provide a comparable set of data, however, because they differ in their coverage of countries, years and commodities, and in their choice of prices. This study tries to estimate the nominal rates of agricultural protection of twelve industrial countries for every fifth year from 1955 to 1980 with the same commodity coverage and the same data definitions.

Data Commodities covered in the NRP calculation include six grains

(wheat, rye, barley, oats, maize and rice), five livestock products (beef, pork, chicken, eggs and milk) and two other commodities (sugar beets or sugar cane and potatoes). These commodities cover about fifty to seventy per cent of total agricultural output value for the countries included in this study.

International prices of those commodities are measured by average import cif prices (unit values) for imported commodities and by average fob prices for exported commodities.

Domestic prices are measured by the prices received by farm producers, including producer subsidies or deficiency payments. In terms of comparability with import cif (or export fob) prices it would be better t o measure domestic prices a t the wholesale rather than the farm-gate level. However, the wholesale prices d o not include government subsidies such as deficiency payments and budget deficits arising from the direct support of producer prices above market prices. In order to compare the levels of agricultural protection by means not only of trade restrictions but also of direct government support programs, the producer prices are used for t h s analysis.

This use of producer prices in the calculation of NRP leads to an underestimation of agricultural protection to the extent that there are costs of marketing from the farm-gate to a point in the marketing chain equivalent t o that of the internationally traded product. However. in so far as this underestimation bias is similar across

50 ASIAN ECONOMIC JOURNAL MARCH 1987

countries, it does not present a serious problem for the present purpose of making broad international comparisons.

Domestic prices at the farm gate are usually recorded in terms of raw material forms such as milk and sugar beets, whereas international trade statistics are recorded in processed forms such as butter and sugar. To make them comparable, the international prices of processed products were converted to the prices of raw materials b y assuming certain standard conversion factors and processing costs. Original data were collected from the publications of international organizations and of various governments. For the data sources and adjustment procedures, see Appendix A.

Comparison of Protection Levels The estimated NRPs are reported in Table 1 . In 1980, which was

the most recent year covered by this study, the NRPs of Japan, Korea and Taiwan were 83, 1 16 and 5 1 per cent, respectively. T h s level was substantially higher than the EEC average of 35 per cent. The protection levels of Japan and Korea were almost as high as that of Switzerland which is known for its exceptionally hgh level of agricultural protection for the purposes of national security and environmental conservation for Alpine tourism.

It is noteworthy that the NRP of Japan in 1955 was only 17 per cent which was considerably lower than the average of the countries that later formed the EEC. It rose rapidly, reaching the EEC level in 1960 and the Swiss level in 1965. Similar but more dramatic changes occured in Korea and Taiwan from 1965 to 1980. Until 1965, the NRPs of Korea and Taiwan had been negative, reflecting agricultural exploitation policies that are typical of economies in the early stage of economic development, During the subsequent decade and a half their agricultural protect ion levels rose sharply, surpassing the EEC level and reaching a level comparable with Japan and Switzerland by 1980.

The period from 1955 to 1965 in Japan and from 1965 to 1980 in Korea and Taiwan were characterised by exceptionally high rates o f industrial growth. During those periods, labor productivity in the manufacturing sector of Japan, Korea and Taiwan increased almost twice as rapidly as that of the agricultural sector in real terms, while labor productivity in agriculture in the United States and many European countries increased faster than that of the manufacturing sector. Thus, the comparative advantage of agriculture in Japan,

AGRICULTURAL PROTECTION

TABLE 1

51

Estimates o f Nominal Rates o f Agricultural Protection in 12 Industrializing Countries, 19-55 to I 9 8 p

(per cent)

East Asia : Japan Kcrea Taiwan

Sweden Switzerland

France Germany, FR Italy Netherlands Denmark United Kingdom

Non-alliant Europe :

EEC:

AVERAGE^ United States

1955

18 -46 - 17

31 53

31 28 43 12

5 35

31

2

1960

41 -15

-3

40 55

23 41 47 19 3

34

33

1

1965

68 -4 -1

46 65

28 47 60 31

5 19

40

8

1970

73 29

2

61 84

44 44 64 34 16 25

47

1 1

1975

74 30 20

41 87

28 36 36 29 18 6

27

4

1980

84 117 51

56 113

30 42 54 25 24 32

36

0

a Defined as the percentage by which the producer price exceeds the border price, except in the case of livestock products where the producer price is inflated by 10 per cent t o account for costs of processing. The estimates shown are the weighted averages for 13 commodities, using production valued at border prices as weights. The 13 commodities include wheat, barley, corn, rice, oats, rye, beef, pork, chicken, eggs, milk, sugar and potatoes. Meat protection rates are underestimated because, in estimating the unit import value, it is assumed that all imports are bone-in, whereas a proportion (varying across countries and over time) is actually boneless.

bWeighted average for all six countries shown for 1975 and 1980, but excluding Denmark and the United Kingdom for earlier years.


Korea and Taiwan declined considerably relative to that of other industrial Countries.

If adjustments in intersectoral resource allocations corresponding to the rapid shift in comparative advantage from agriculture t o industry had been left to the market, rural-urban income disparity and labor migration may have increased to an extent that would have been socially and politically intolerable. It appears that Japan, Korea and Taiwan preferred to pay the cost of agricultural protection in lieu of the sharply rising cost of intersectoral resource adjustments.

The NW increased from 1955 to 1970 not only in Japan but also in industrial countries in general. This was the period when the international terms of trade turned against agriculture under the pressure of accumulated surpluses of agricultural commodities in the United States and other major exporting countries. On the other hand, precipitous drops in the NRPs of industrial countries were experienced from 1970 to 1975, corresponding t o the sharp increases in agricultural prices relative to manufacturing commodity prices during the “World Food Crisis”. The inverse correlation between NRP and the terms of trade of agriculture implies that industrial countries tried to insulate their domestic market from fluctuations in agricultural commodity prices in international markets. Tlus had the effect of ensuring domestic price stability, but at the expense of international instability [D.G. Johnson 19731. However, even during the World Food Crisis period, Japan, Korea and Taiwan continued t o increase their agricultural protection level, together with Switzerland.

It should also be noted that after joining, member countries of the EEC tended to increase their N W s . Sharp increases in the NRP of the Netherlands from 1960 to 1970 and of Denmark from 1970 to 1980 confirm the common belief that the EEC acted as a regional block t o protect agricultural producers in its member countries against outside competition.

DETERMINANTS OF AGRICULTURAL PROTECTION

The estimates presented in the previous section show that the agricultural protection levels of East Asia increased rapidly in the process of rapid industrial development and now are at levels among the highest in the world. An important question is whether such high rates of agricultural protection are attributable to factors unique to East Asia or can be explained by factors common to industrial


countries. For t h s purpose, a multiple regression analysis is conducted by pooling intercountry crosssection and time-series data. The regression analysis tries to relate the measured level of agncultural protection to a set of explanatory variables representing political as well as economic factors.

Explanatory Variables Both intercountry cross-section and time-series comparisons of

the NRPs in Table 1 suggest that the decline in agriculture’s comparative advantage was a basic factor underlying the increase in agricultural protectionism. In terms of the theory of political market [Buchanan and Tullock 1962; Breton 1974; Anderson and Baldwin 1981 J , the rising social cost shouldered by rural population in the process of intersectoral resource adjustments corresponding to the decline in agriculture’s comparative advantage, such as rural-urban income disparity and depopulation in rural communities, is considered t o create a demand by farm producers for agricultural protection.

On the other hand, the contraction of agriculture, either absolutely or relatively, in the process of industrial development is considered t o increase the supply of protection. According to the theory of collective action by Olson [ 19651, as the number of farmers decreases, it would become easier for them to organize themselves for political lobbying. Concurrently, the relative expansion of the non-agricultural sector and the rise in percapita income would reduce the burden of agricultural protection per capita on the non-agricultural population, thereby reducing resistance against agricultural protectionism. The social preference for preserving a balanced distribution of economic activities, which is assumed by H.G. Johnson [ 1965 I to exist often in both developing and deveoped countries, may further reduce t h s resistance in the process of industrial expansion. The reduction in resistance lowers the marginal cost t o political entrepreneurs or leaders of providing protection, leading to increased levels of agricultural protection.

In order to measure the effects of these demand and supply factors o n the level of agricultural protection, the index of agriculture’s comparative advantage and the weight of the agricultural sector in the total economy are included as two major explanatory variables in the regression analysis. Two other variables, t o represent the international terms of trade between agricultural and

54 ASIAN ECONOMIC J O U R N A L MARCH 1987

manufactured commodities and the effect of EEC membership, are also included.

In addition, a dummy variable to represent the effect of non- military alliance is included in order t o test the hypothesis that the high levels of agricultural protection in Sweden and Switzerland might be partly explained by a preference in these countries for maintaining food self-sufficiency at a high level for national security reasons, given their desires to be self-reliant and neutral militarily.

Finally, a dummy variable for East Asia is included for testing whether East Asia’s protection levels are significantly higher than levels that can be explained by factors common t o other industrial countries.

Data The dependent variable used in the regression analysis is the

average nominal protection coefficient (NPC), which is the ratio of the value of total agricultural output in domestic prices to its value in international prices (NPC minus one equals NRP). NPC is used instead of NRP because equations with variables transformed into logarithms are used in this analysis and the logarithmic transformation of NPC represents a rate of difference between the outputs valued in domestic and international prices.

Two alternative variables to represent the comparative advantage of agriculture are: the “productivity ratio” and the “factor ratio”. The productivity ratio used is the ratio of labor productivity in agriculture to labor productivity in industry, both in real terms. Intercountry cross-section data of labor productivity in agriculture in real terms, as measured by total agriculture output (net of seeds and feed) per male worker, are available from Hayami and Ruttan [ 1971 ard 19851. However, comparable data for the industrial sector are not available, because of the lack of an appropriate price index to deflate the international cross-section data of sectoral GDP in national account statistics. As a substitute for labor productivity in industry, average GDP per male worker for the whole economy is used (measured at 1975 constant prices and converted into U.S. dollars using purchasing power parity exchange rates). It s e e m reasonable to assume that labor productivity in the industrial sector and labor productivity in the total economy are closely correlated in industrial countries. The productivity ratio thus calculated is expressed as an index with the U S . value in 1975 set at 100 (Appendix B).


The factor ratio which is used a s an alternative index of comparative advantage is intended to be the ratio of agricultural land area per farm worker t o average capital endowment per worker. This ratio is supposed to represent comparative advantage according t o the theory of sector-specific factors to determine comparative advantage [ Haberler 1936; Jones 197 1 ; Krueger 1977; Anderson 19801. Data of agricultural land area per farm worker are available from Hayami and Ruttan [1971 and 19851. As a proxy of average capital endowment per worker, average per capita GDP is used (valued at 1975 constant prices and again converted into U.S. dollars using purchasing power parity exchange rates). It seems reasonable to asume that average national income per capita is determined by the average per capita endowment of “comprehensive capital”, including both physical and human capital. The factor ratio is also expressed as an index with the U.S. value in 1975 set at 100 (Appendix B).

Two alternative variables used for representing the relative share of agriculture in the national economy are: agriculture’s share in the labor force and agriculture’s share in total GDP at 1975 constant prices, calculated from ILO and OECD statistics. Considering the possibility that the level of agricultural protection and the share of agriculture are not linearly related, the squares of the variables representing agriculture’s share (in logarithms) are also included in the regression analysis.

The international terms of trade are specified as the ratio of the F A 0 index of world export unit value of total agricultural products t o the UN index of export unit value of manufactured goods in market economies, with the 1975 value at equal 100.

Three dummy variables are designed to take care o f the effects o f EEC membership, non-military alliance and a factor specific to East Asia. The EEC dummy for its member countries is specified as one since 1965 for the original members and since 1975 for Denmark and U.K.; otherwise it is zero. The non-alliance dummy is one for Sweden and Switzerland and zero for other countries. The East Asia dummy is one for Japan, Korea and Taiwan and zero for other countries.

Regression Results Using the data specified above, multiple regression equations are

estimated by the ordinary-least-square method. Seventy-two

MARCH 1987 56 ASIAN ECONOMIC JOURNAL

observations are included b y pooling in twelve countries’ data for six years (every fifth year from 1955 to 1980 inclusive). The results of estimating regression equations for different combinations of explanatory variables are summarized in Table 2.2

Regressions (1) through (4) report the results of the analysis including all the possible variables which might have influenced the level of agricultural protection. The coefficients of determination adjusted for the degree of freedom R2 indicate that about 70 per cent of variations in NPC among countries and over time are explained by the regressions. The coefficients of the productivity ratio, the share of agriculture (either in the labor force or in GDP) and the international terms of trade of agricultural t o manufactured commodities are highly significant statistically. The results are consistent with the hypothesis that the level of agricultural protection rises as the comparative advantage shifts away from agriculture, as t he share of agriculture in the total economy declines, and as the international terms o f bade turn against agricultural commodities. The negative coefficients of the squared terms of agriculture’s share indicate that the non-agricultural population’s resistance t o agricultural protection decreases a t a slower rate as the agricultural sector declines, implying that there exists a threshold value in the share of agriculture beyond which the farm sector’s political influence declines.

The coefficients of the EEC dummy variable are not significant at a conventional level except in regression (2), representing insufficient evidence in support of the hypothesis that the EEC acts as a regional block t o protect agricultural producers in its member countries against outside competition. The positive coefficients of the non-alliance dummy indicate that Sweden and Switzerland which are trying to maintain non-alliance are willing to shoulder the high cost of agricultural protection in order t o increase food self- sufficiency as a part of national security, even though its coefficient in regression (1) is not significant at a conventional level.

An important finding from regression regression ( 1 ) t o (4) is that, in none of the four regression equations is the coefficient of the East Asia dummy significantly different from zero even at a very low level of statistical significance. The results are the same in regression ( 5 ) t o (8) which are estimated after deleting the EEC and the non-alliance dummies. Such results are consistent with the hypothesis that East Asia’s agricultural protectionism may not be extreme. In other words, the high rates of agricultural protection

AGRICULTURAL PROTECTION

TABLE 2

Estimates o f Regression Equations for Explaining Variations in the Nominal Protection Coefficient (NPC) for Agriculture among

Twelve Industrialized and Industrializing Countries in 195.8, 1960, 196.8, 1970, 1975 and 1980

Regression Number (1) (3- ( 3 ) (4

Regression Coefficients:

Productivity Ratio Comparative Advantage :

Factor ratio

Share of Agriculture: in labor force (SQ)

in GDP (Sy)

Terms of Trade

Dummy Variables: EEC

Non-alliance

East Asia

Intercept

Coef. of Det. (adj.)

S.E. ofes t .

-0.266*** -0.279*** -

(-5.12) (-6.47) -0.129*** -0 .107***

(-4.33) (-3.78)

0.752*** ( 6.99)

0.849** * ( 7.55)

-0.139*** (-5.55)

-0.126*** (-5.75)

0.602*** ( 4.87)

0.667 * * * ( 4.44)

-0.1 12*** (-3.85)

-0.103*** (-3 .52)

-0.643*** -0.674*** -0.524** -0.559*** (-3.28) (-3.84) (-2.56) (-2.76)

0.037 0.070* 0.032 0.01 1 (0.90) (1.86) (-0.66) (0.23)

0.079 0.1 12** 0. I % * * 0.18 1 * ** (1.41) (2.28) (2.33) (3.27)

0.024 0.056 -0.053 0.006 (0.38) (0.99) (-0.65) (0.07)

-0.962 - 1.436 -0.790 -1.076

0.675 0.735 0.645 0.642

0.128 0.1 16 0.134 0.135


TABLE 2 (Cont’d)

Estimates of Regression Equations for Explaining Variations in the Nominal Protection Coefficient (NPCI for Agriculture among Twelve Industrialized and Industrializing Countries in 1955, 1960

1965, 1970.1975and 1980

Regression Number

Regression Coefficients :

Productivity Ratio Comparative Advantage

Factor ratio

Share of Agriculture: in labor force (Sp)

in GDP (Sy)

Terms of Trade

Dummy Variables: EEC Non-alliance East Asia

Intercept

Coef. of Det. (adj.)

S.E. of est.

(7)

-0.304 * * * -0.3 2 5 * * * (-7.05) (-8.68)

-0.144* ** -0.138* * * (-5.29) (-5.30)

0.759*** ( 7.07)

0.831*** ( 7.19)

-0.137*** (-5.5 1 )

-0.119*** (-5.36)

-0.689* ** -0.772*** (-3.62) (-4.44)

0.595*** ( 4.55)

0.574* * * ( 3.65)

-0.107* ** (-3.50)

-0.082* * (-2.69)

(-2.10) (-2.48) -0.447 * * -0.5 30* *

-0.02 1 -0.016 -0.083 -0.083 (-0.38) (-0.3 1) (-1.17) ( -1 .1s)

-0.992 - 1.437 -0.8 14 -1.016

0.674 0.718 0.599 0.576

0.128 0.120 0.143 0.146

Note: Equations with variables transformed into logarithms are estimated by the ordinary least-square method. The student-t values are in parentheses. *** Significant at 1% level ** Significant a t 5% level * Significant at 10% level


in East Asia may not have resulted from some factors unique t o East Asia such as agricultural fundamentalism; rather, they can be explained by factors common t o all industrial countries such as the high social cost of intersectoral adjustment arising from the decline in agriculture’s comparative advantage and the decrease in resistance o f the non-agricultural population against agricultural protectionism in the process of industrial development.

CONCLUSION

Japan’s level of agricultural protection, as measured by the nominal rate of protection was much lower than the EEC level in 1955, when the Japanese economy was still at a developing-country stage, but it rose rapidly in the process of rapid industrial development. During the 1960s it surpassed the EEC and reached the level of Switzerland that was the highest among the twelve industrial countries compared. More dramatic was the experience of Korea and Taiwan whose nominal protection rates were negative before the spurt o f industrial development that began in the mid-1960s. Since then their protection rates have increased rapidly as if to catch up Japan, both in industrial development and agricultural protection. Their experience clearly shows a shift from the agncultural exploitation policy common in developing countries t o the agricultural protection policy common in developed countries.

The results o f 3 multiple regression analysis using the international cross-section and time-series data indicate that the agricultural protection of East Asia was raised to the hghest level in the world not because countries in East Asia had a unique bias for preserving domestic agriculture but because their comparative advantage shifted from agriculture to industry at such a rapid rate that social and political difficulties involved in intersectoral resource adjustments may have become unbearably large in the absence of protection growth. This suggests that East Asia’s experience may be duplicated in other industrialising countries in future, t o the extent that they follow Japan in their economic development. In particular, this experience might soon be followed by other developing countries such as ASEAN, unless international collaborative efforts are intensified t o prevent the diffusion of agricultural protectionism.


APPENDIX A

DATA FOR CALCULATING NOMINAL RATES O F PROTECTION

Data of domestic prices, international prices and quantities of domestic production used for the calculation of the nominal rates of agricultural protection in twelve industrial countries in 1955, 1960, 1965, 1970, 1975 and 1980 are as follows:

Domestic Prices Domestic prices are measured by average unit prices received by

farmers, including government subsidies paid for the support of specific commodities, such as deficiency payments, but excluding indirect taxes such as the value-added tax. Data for Japan are collected from Japan Ministry o f Agriculture, Forestry and Fisheries, Noson Bukka Chingin Tokei [Statistics of Agricultural Prices and Farm Wages in Rural Area] and Shokuryo Kanri Tokei Nenpo [Statistical Yearbook of Food Control] . Data for Korea are collected from Korea Ministry of Agriculture and Forestry, Yearbook of Agriculture and Forestry Statistics, and National Agricultural Cooperatives Federation, Agricultural Cooperatives Yearbook. Data for Taiwan are based on Department of Agriculture and Forestry, Taiwan Agricultural Yearbook, and Bureau of Accounting and Statistics, Monthly Sfatisfics on Price Received and Price Paid by Farmer in Taiwan. Data for the United States and European countries are mainly based o n FAO, Production Yearbook and ECE/FAO, Prices o f Agricultural Products and Selected Inputs in 'Europe and North America, and supplemented by EUROSTAT, Agricultural Price Statistics, OECD, Agricultural Statistics 1955-1 968, and USDA, Agricultural Statistics. The producer prices of rice recorded in brown or milled rice term are converted to paddy term, and the producer prices of livestock products recorded in live-weight terms are converted to carcass-weight terms, using the conversion factors in Table A-1. For the calculation of the nominal rates of agricultural protection, those domestic prices are converted t o U.S. dollar terms by the average exchange rate for each year taken from IMF, International Financial Statistics. and Council for Economic Planning and Development, Taiwan Statistical Data Book, for Taiwan, except the exchange rates in 1955 and 1960 for Korea and Taiwan, for which the purchasing power parity exchange rates


by Frank, Kim and Westphal [ I9751 and the summary values by . Scott [ 19791 are respectively used because of the over-valued

exchange rates in Korea and multiple exchange rates in Taiwan in those years.

International Prices International prices are measured, in principle, by average import

cif prices (unit values) calculated for Japan, Korea, Taiwan, U.S.A. , and Western Europe separately, with the following exceptions: For Japan, the average import prices of rice for 1970, 1975 and 1980 when no rice import was recorded are estimated by multiplying the average world import prices by 1.18 which is the ratio of average Japanese import price to average world import price for 1955, 1960 and 1965; and average world import prices are used for the international prices of eggs. For Korea, average Taiwan export fob prices are used for rice prior t o 1970; average Japan import prices for other grains in 1955; average Japan import prices for beef; average Hong Kong import prices for pork, chicken and eggs. For Taiwan, average export fob prices are used for rice, except in 1975 for which average Korean import price is used because of no export of rice; average export prices for sugar; average Japan import prices for beef; average Hong Kong import prices for pork, chcken and eggs. For U.S.A. , average export fob prices are used for ga ins and chicken; producer prices in Denmark for pork; average world import prices for milk; and domestic producer prices in U.S.A. for eggs. For France, average export fob prices are used for wheat. For all European countries, producer prices in Denmark are used for pork; average world prices for rice and chicken. In the calculation of average import prices for European countries, trades within EEC are excluded. For all countries, domestic producer prices are used for the international prices of Irish potatoes, assuming no protection. For 1975, the average prices of 1975 and 1976 are used for grains and sugar.

Data for the import and export prices are collected mainly from FAO, Trade Yearbook, and supplemented by FAO, The State of Food and Agriculture and UN, Commodity Trade Statistics. Data for the trades within EEC are based on OECD, Statistics of Foreign Trade:Series C and UN, Commodity Trade Statistics. The prices of milled rice, raw sugar, butter and dried skim milk recorded in the trade statistics are converted to those of paddy, sugar beets o r sugar

6 2 ASIAN ECONOMIC JOURNAL MARCH 1987

cane, raw milk by the factors in Table A-1 for the calculation of the nominal rates of protection.

Quantities of Domestic Production Data for t h e quantities of domestic production used for

aggregating the nominal rates of protection of individual commodities are collected from FAO, Production Yearbook, and Department of Agriculture and Forestry, Taiwan Agricultural Yearbook, for Taiwan.

TABLE A-1

Conversion Factors Used in the Calculation of the Nominal Rates of Protection

Conversion Rate (%) Commodity Variablea Note

U.S.A. Europe East Asia

Rice Q 122 143 130 Brown rice to paddy

PW 65 6 0 70 Milled rice to paddy

PWJ(1970-80) - - 118 World import price to Japanese import price

Sugar Beets PWb 7 7 7 Raw sugar to sugar beets

Sugar Cane pwb - - 5 Raw sugar to sugar cane

Beef PDb 186 212 200 Live cattle to carcass

Pork PDb 175 149 169 Live pig to carcass

PW(1980) - - 70 Block meat to carcass

Chicken Q - - 1,300 Grams of dressed weight per head

PDb 153 153 167 Live chicken to carcass

Q - 57 53 Grams per egg Eggs

Milk PWbC 4. I 4.0 3.6 Butter to raw milk

7.8 7.8 10.4 Dried skim milk to raw milk

a Q = quantity of domestic production, PD = domestic price, PW = international price, PWJ = import price of Japan.

Including processing costs as percentage of price

multiplied by the conversion factors. ‘The price of milk per kg. is calculated by adding the values of butter and skim milk per kg.


APPENDIX B

DATA FOR THE INDEXES OF THE COMPARATIVE ADVANTAGE O F AGRICULTURE

Two alternative indexes to represent the comparative advantage of agriculture are the productivity ratio and the factor ratio. The productivity ratio is defined as the ratio of labor productivity in agriculture to labor productivity in total economy, both in real terms. The factor ratio is defined as the ratio of agricultural land area per farm worker to real GDP per capita. Data used to construct these indexes are as follows:

Labor Productivity in Agriculture Intercountry cross-section data of labor productivity in real

terms, as measured by total agricultural output (net of seeds and feed) per male farm worker, are taken from Hayami and Ruttan [ 1971 ; 19851. For Korea, whose data are not available from Hayami and Ruttan, the ratio of Korean agricultural ou tput to Japanese agricultural output for 1970, estimated by Yamada [ 19751, is multiplied by Japan’s output for 1970 in Hayami and Ruttan, and it is extrapolated to obtain the data for other years using agricultural production index b y National Bureau of Statistics, Korea Statistical Yearbook; data of male farm workers to divide agricultural output of Korea are based on ILO, Yearbook of Labour Statistics.

Labor Productivity in Total Economy Labor productivity in total economy is measured as average GDP

per male worker for the whole economy at 1975 constant prices converted into U.S. dollars by purchasing power panties. Data of GDP at 1975 constant prices and purchasing power parities for GDP are available from OECD, National Accounts of OECD Countries. Data of GDP at 1975 constant prices for Korea and Taiwan are based on National Bureau of Statistics, Korea Statistical Yearbook and Council for Economic Planning and Development, Taiwan Statistical Data Book. Purchasing power parity for Korea and exchange rate discrepancy rates for Asia and Europe, which are used t o obtain purchasing power parties for Taiwan and Sweden and Switzerland, respectively, are taken from Kravis, Heston and Summers [ 19821.


To be consistent with the data of labor productivity in agriculture, CDP data are averaged for years according to Hayami and Ruttan as follows: 1952 to 1956 for 1955, 1957 to 1962 for 1960, 1962 to 1966 for 1965, 1967 t o 1972 for 1970, 1972 t o 1976 for 1975, and 1977 to 1981 for 1980. Data of male workers for the whole economy are based on ILO, Labour Force Estimates and Projections 1950-2000, and Yearbook of Labour Statistics, and Republic of China, Yearbook of Labour Statistics.

Agricultural Land Per Farm Worker Data of agricultural land per farm worker, as measured by the

sum of arable land, land under permanent crops, and permanent meadows and pastures per male farm worker, are available from Hayami and Ruttan [ 1971; 19851. Data for Korea are based on FAO, Production Yearbook, and ILO, Yearbook o f Labour Statistics,

Real GDP Per Capita Data of average GDP at 1975 constant prices converted into U.S.

dollars by purchasing power parties, which are collected for labor productivity in total economy, are used for the data of real GDP. The real GDP are divided by population which are available from UN, Demographic Yearbook.

The productivity ratio is obtained by taking the ratio of labor productivity in agnculture to labor productivity in total economy, and expressing it as an index with the U.S. value in 1975 set equal 100. The indexes of the productivity ratio are shown in Appendix Table B-1. In the same manner, the factor ratio is obtained by taking the ratio of agricultural land per farm worker to real GDP per capita, and expressing it as an index with the U.S. value in 1975 set equal 100. The indexes of the factor ratio are shown in Appendix Table B-2.


TABLE B-1 Estimates o f the Indexes of Labor Productivity Ratio (Ratio of

Labor Productivity in Agriculture to Labor Productivity in Total Economy) in Twelve Industrialized and Industrializing

Countries (USA in 1975 = 100)

1955

U.S.A. 51.7 ( 1OO)a

EEC: France 37.2

(72)

Germany Fed. Rep. 41.3

(80)

Italy 22.3 (43)

Netherlands 39.2 (76)

Denmark 47.2 (91)

Non-alliant : Sweden 31.0

(60)

Switzerland 17.6 (34)

East Asia: Japan 23.3

(45)

I960 1965 1970 1975 1980

65.2 69.7 80.2 100.0 128.7 (100) (100) (100) (100) (100)

38.0 42.3 44.9 47.4 55.6 (58) (61) (56) (47) (43)

40.7 (62)

22.6 (35)

45.5 (70)

51.6 (79)

44.4 (64)

27.4 (39)

44.7 (64)

64.0 (92)

54.1 (67)

26.5 (33)

45.3 ( 5 6 )

72.0 (90)

54.2 (54)

28.2 (28)

( 5 3 )

75.2 (7.5)

53.0

62.6 (49)

33.2 (26)

65.1 (51)

84.0 ( 6 5 )

30.8 34.1 4 l . 3 51.2 49.7 (47) (49) (51) (51) (39)

19.2 19.1 23.2 27.5 37.8 (29) (27) (29) (28) (29)

22.5 20.4 18.2 18.3 18.2 (35) (29) (23) (18) (14)

MARCH 1987 66 ASIAN ECONOMIC JOURNAL

TABLE B-1 (Cont’d)

Korea 10.4 13.1 15.6 14.1 12.3 13.5 (20) (20) (22) (18) (12) (10)

(81) (61) (54) (38) (26) (17) Taiwan 41.7 39.8 37.9 30.7 26.3 21.8

a Inside of parentheses are percentages with U.S. values in respective years set equal t o 100.

Source: For labor productivity in agriculture, Hayami and Ruttan, Agricultural Development : A n International Perspective, Baltimore, Johns Hopkins University Press, 197 1 , and its new edition, 1985; for labour productivity in total economy, OECD, National Accounts of OECE Countries, Republic o f Korea, Economic Planning Board, Korea Statistical Yearbook, Republic of China, Directorate- General of Budgets, Accounting and Statistics, Statistical Yearbook o f the Republic of China, ILO, Yearbook of Labour Statistics.

6 1 AGRICULTURAL PROTECTION

TABLE B-2

Estimates of the Indexes o f Factor Ratio (Ratio of Average Agricultural Land Area Per Farm Wroker to Average GDP Per Capita) in Twelve Industralized and Industrializing

Countries (USA in I975 = 100)

1955 1960 1965 1970 1975 1980

U.S.A. 69.2 85.2 85.6 89.5 100.0 110.3 (100)a (100) (100) (100) (100) (100)

EEC: France 16.1 15.3 14.9 13.5 13.4 14.0

(23) (18) (17) (15) (13) (13)

Germany, Fed. Rep.

Italy

Netherlands

U. K.

Denmark

Non-alliant : Sweden

Switzerland

East Asia: Japan

6.7 6.3 7.1 6.4 6.5 7.0 (10) (7) (8 1 ( 7 ) (7) (6)

6.3 6.4 5.8 4.8 4.4 4.5 (9) (8 1 (7) (5 1 (4) (4)

(32) (29) (30) (29) (25) (23)

10.7 10.0 10.4 11.7 12.6 13.1 (15) (12) (12) (13) (13) (12 )

22.3 24.3 25.4 26.2 25.3 24.9

6 8 ASIAN ECONOMIC JOURNAL

TABLE B-2 (Cont’d)

MARCH 1987

a Inside of parentheses are percentages with U S . values in respective years set equal to 100.

Sources; For average agricultural land area per farni worker, Hayarni and Ruttan (see Table B-1); for average GDP per capita. OECD, Republic of Korea, Economic Planning Board, Republic of China, Directorate-General of Budgets, Accounting and Statistics (see Table B-l), and UN, Demographic Yearbook.

NOTES

1 . NRP is not an accurate measure of the effective rate of protection (ERP). However, it is difficult to prepare consistent estimates of ERP for so many countries and so many years. It is expected that NRP and ERP are fairly well correlated across countries, if not so well correlated across commodities. Thus, for the present purpose of making broad international comparisons it is sufficient to estimate simply the average NRP.

2. It must be cautioned that some of the explanatory variables used in this analysis are not really independent of the dependent variable. For example, i f agricultural protection is raised, inefficiency in agricultural production would be preserved and possible improvement in agriculture’s comparative advantage would be blocked. Likewise, protection prevents the share of agriculture in the total economy from declining. Considering the possibility of bias due to such simultaneity, the estimated regression parameters must be interpreted with caution.

REFERENCES

Anderson, K., “Changing Agricultural Comparative Advantage in the Pacific Basin”. in K . Anderson and A. George (eds.), Australian Agriculture 4nd Newly Industrializing Asia: fssues for Research. Canberra. Australia-Japan Research Cenue, 1980, pp. 7-36.

Anderson, K. , “Growth of Agricultural Protection in East Asia”, Food Policy, Vol. 8, No. 4, November, 1983, pp. 327-36.

Anderson, K. and R.E. Baldwin, “The Political Market for Protection in Industrial Countries: Empirical Evidence”. World Bank Staff Working Paper No. 492, Washington D.C., World Bank, 1981.

Breton, A., The Economic Theory of Represeritative Government. Chicago, Aldine, 1974, Ruchanan, J . and G. Tullock, The Calculus of Consent. Ann Arbor, University of Michigan

Press, 1962.


Frank, C.R., Kim, K.S. and L. Westphal, Foreign Trade Regimes and Economic Develop-

Gulbrandsen, 0. and A. Lindbeck, The Economics of the Agricultural Sector, Stockholm,

Hsberler. G., The Theory of International Trade, translated into English by A. Stonier and

Hayami, Y. and M. Honma. Kokusai Hikaku kara mita Nihon NODO IIO Hog0 Suilun,

ment: Sourh Korea, New York, Columbia University Press, 1975.

Almqvist and Wicksell, 1973.

F. Benham. London, William Hodge, 1936.

(The Agricultural Protection Level of Japan in an International Comparative Perspective), Tokyo, The Forum for Policy Innovation, Mimeo.. 1983.

Baltimore, Johns Hopkins University Press, 1971.

0 New Edition. Baltimore, John Hopkins University Press, 1985

Hayami Y. and V.W. Ruttan, Agricultural Development: A n International Perspective,

Hayami, Y. and V.W. Ruttan, Agricultural Development: A n International Perspective -

Hemmi, K., Nogyo (Agriculture), Tokyo, Chikuma Shobo, 1970. Japan Economic Planning Agency, Price Policy Section, Shokuryo no Kakaku Antei t o

Yunyu no Ankara (On the Price Stability and Imports of Foodstuff). Tokyo, mimeo., 1969.

Johnson, D.G., World Agn’culture in Disurrcy. London: Trade Policy Research Centre, 1973.

Johnson, H.G., “An Economic Theory of Protectionism, Tariff Bargaining and the Formation of Customs Union”, Journal of Political Economy. Vol. 73, N o . 3, June

Jones, R.W., “A Three-factor Model in Theory, Trade and History”, in J . Bhagwati e t al., (eds.), Trade, Balance of Payments and Growths, Amsterdam, North Holland, 1971,

Kravis, I.B., Heston A. and R. Summers, World Product and Income. International Comparisons o f Real GDP. Baltimore, Johns Hopkins University Press, 1982.

Krueger, A,, Growth, Distortions and Patterns o f Trade Among Many Countries. Princeton, International Finance Section, 1977.

Kruer G.R. and G. Bernston, “Cost of the Common Agricultural Policy of the European Economic Community”, Foreign Agricultural Trade of the United States. Washington D.C., U.S. Department of Agriculture, October 1969, pp. 6-12.

Magiera, S.L., Cost of the CAP and EC Consumers, Washington D.C.. U.S. Department of Agriculture ERS/IED, mimeo., 1982.

McCrone. G., The Economics of Subsidising Agriculture, London, George Allen and Unwin. 1962.

Nash, E.F., “The Competitive Position of British Agriculture”, Journal of Agricultural Economics, Vol. 11, No. 3, June 1955.

Olson, M.. The Logic of Collective Action, Cambridge, Harvard University Press, 1965. Sanderson, F.H., JapanS Food Prospects and Policies. Washington D.C., Brookings

Institution, 1978. Saxon, E. and K. Anderson, “Japanese Agricultural Protection in Historical Perspective”,

Pacific Economic Papers No. 92, Canberra, Australia-Japan Research Centre, 1982. Schultz, T.W., “On Economics and Politics of Agriculture”, in T.W. Schultz (ed.),

Distortions of Agricultural Incentives, Bloomington, Indiana University Press, 1978,

Scott, M., “Foreign Trade”. Chapter 5 in W. Galenson (ed.), Economic Growth and Structural Changes in Taiwan. Ithaca, Cornell University Press, 1979.

UNCTAD Secretariat, “Protectionism and Structural Adjustment in Agriculture”, Paper for the 26th Session of the Trade and Development Broad, Geneva, United Nations Conference on Trade and Development, mimeo., 1983.

Yamada, S., A Comparative Analysis of Asian Agricultural Producdvities and Growth Parterns, Tokyo, Asian Productivity Organization, 1975.

1965, pp. 256-83.

pp. 3-21.

pp. 3-23.

Documents

AGRICULTURAL PROTECTION OF EAST ASIA IN INTERNATIONAL PERSPECTIVE