EWFIS-38
Impact Analysis of International Food Trade on
Domestic Food Market and Price *
Naser Farid1
Dr. M. Sayedur Rahman2
________________________________________________________________
1Project Director
2Agricultural Statistics Specialist
Early Warning and Food Information System Project
Ministry of Food
August 2002
*
The views expressed in this report are those of the authors and do not necessarily reflect the official position of the
Government of Bangladesh.
Executive Summary
Bangladesh is developing country and balance of import and export trade plays a vital role in
achieving rapid economic development. The trade balance is unfavorable because each year
Bangladesh has to spend more for importing capital goods and raw materials for capital goods as
well as industrial raw materials. The current gap in visible trade of Bangladesh is significant and
volatile and seems to be widening. Government is trying to boost exports by providing various
forms of incentives to the private sector exporters. In recent years some non-traditional items have
entered in the list of exportable commodities. Holding of expo fairs at fairs at home and abroad is a
part of export promotion effort. Trade may be the vehicle for the changes in the factor endowments.
Imports might allow new markets to be identified and developed, so that risks of entering these
markets are reduced for domestic producers. The potential for copying the imports themselves or the
technology through which they were produced, might be large. Tastes change frequently, leading to
changes in trading patterns.
Trade in good, services and factor payments is just part of the interconnectedness of the
world economy. Also virtually important is the movement of capital from one nation to another. The
bank loans and the international sale of corporate and government securities are enormous. Statistics
are not so easy to gather on capital movements, but those available show substantial amounts. The
extent of the integration of the world economy has profound significance not only for individuals,
but also for policy makers and economic institutions. Simultaneously national governments, which
control currencies, manage the microeconomic environment and determine macroeconomic policies,
have grown strong and have played an increasing role in shaping their national economics.
Trade in agricultural products has not kept pace with the garments sector, however. The two
main traditional exports of Bangladesh, jute and tea, have stagnated over the past few decades due in
part to weak demand in international markets. Efforts are underway to expand trade in other
agricultural products. As will be discussed below, efforts to expand agricultural export trade have so
far been mainly concentrated in the Middle East and Europe. A large part of agricultural imports, in
contrast, come from India, Bangladesh’s neighbor to the west, north and east. This paper explores
the current state of Bangladesh trade, trade policies and programs, which are currently being
implemented, implications of WTO arrangements, and constraints and other issues on agricultural
trade. The paper concludes with several recommendations on promotion of agricultural trade with
Asian countries.
Trade liberalizations in Bangladesh during the late 1980s and early 1990s greatly increased
market access for agricultural and other products. As a result, private sector trade has increased
rapidly, and imports of foodgrain have played a major role in stabilizing domestic markets in years
of production shortfalls. However, Bangladesh agricultural products do not enjoy the same market
access in other countries, thus greatly hampering exports of agricultural products from Bangladesh.
Some export sectors have flourished, however, including frozen fish and shrimp. Horticultural
exports have only recently begun, though there appears to significant potential for rapid increases in
trade. Further gains in trade in agricultural products between Bangladesh and other Asian countries
could be attained through improved access for horticultural products and foodgrains, joint
cooperation in developing marketing standards, and sharing of market data on prices and trade
volumes of foodgrains and other products. Such measures could help promote expansion of both
Bangladesh exports to Asian countries and Asian exports to Bangladesh, to the mutual benefit of all.
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Contents
Executive Summary
Lists of Contents
Lists of Tables
Lists of Figures
1.
Introduction
2.
System of Trade
2.1 Special System
2.1.1 Imports
2.1.2 Exports
2.2 General System
2.2.1
Imports
2.2.2 Exports
3.
The Sources of Comparative Advantages
4.
Trade in the Name of Poverty Reduction
4.1 Trade is not a Charity: It is a Tool for Creating Wealth
5.
Role of Capital and Its Impact on the Poverty of a Country
5.1 The Sources of National Differences
5.2 Balance of Trade
5.2.1 Bangladesh Export Trade
5.2.2 Bangladesh Import Trade
5.3 Government Saving and Trade Deficits
5.4 Trade Imbalances as Problems and Symptoms
6.
Export Availability and Import Requirements
6.1 Natural Protection and Location Theory
6.2 Factors underlying the Import Schedule
6.2.1 Income – Sensitive Consumer Good
6.2.2 Fuels and Raw Materials
6.2.3 Export and Import Schedules
6.3 Cereals
6.4 Horticulture
6.5 Livestock
6.6 Fish
6.7 Jute and Jute Goods
6.8 Tea
7.
Development of the Domestic Food Marketing System and
Improving Export Capacity
7.1 The Current Marketing System in Bangladesh for
Non-Traditional Exports
7.2 Fruits and Vegetables
7.3 Fish and Shrimp Marketing
8.
Agricultural Trade Policy and Its Impact on Economy
8.1 Role of State Trading
8.2 Implications of the WTO for Bangladesh Agriculture
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8.3 Importance of Tariff and Its Measurement
8.4 Nominal and Effective Tariffs
8.4.1 Market Access
8.4.2 Domestic Support Measures
8.4.3 Export Support
9.
Constraints, Problems and Issues of Agricultural Trade
9.1 Unrecorded Trade
9.2 Barriers to Trade
10. Conclusions and Recommendations
References
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List of Table
Table 1: Extent of Gap Between Imports and Exports of Bangladesh
Table 1.1: Major Exports of Bangladesh 1997/98
Table 1.2: Agricultural Exports from Bangladesh: Country by 2 digit HS
Commodity Code, 1997/98
Table 2.1: Major Imports into Bangladesh 1997/98
Table 2.2: Agricultural Imports into Bangladesh: Country by 2 digit HS
Commodity Code, 1997/98
Table 3: Area, Production and Yield of Agricultural Crops in Bangladesh
(1996/97 - 1998/99)
Table 4.1: Equilibrium Exchange Rates in Bangladesh
Table 4.2: Share of State Trading Agencies in Agricultural Trade
Table 5.1: Removal of Quantitative Restrictions
Table 5.2: Effective Rate of Protection for Agricultural Commodities Under AoA
Table 5.3 :‘Green Box’ Support to Bangladesh Agriculture
Table 5.4: Nominal Protection Rates in Bangladesh from 1991-92 to 1998-99.
Table 6.1: Bangladesh Total Imports from India, 1997/98
Table 6.2:Value of Top 10 Illegal Imports by Bangladesh by Disaggregate
Product Type, 1994
Table 6.3: Estimates of Bangladesh Legal and Illegal Trade, 1993/94
Table 6.4: Unit Price Index of Selected Exported and Imported Commodities
1995-96 to 1998-99
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List of Figure
Fig.1: Location of Production and Transport Cost (Hoover, 1963)
Fig.2: Imports and Exports on an Injections and Leakage Diagram
Figure 2.1: Bangladesh Exports by Country, 1997/98
Figure 2.2: Bangladesh Exports to ASIAN Countries, 1997/98
Figure 2.3: Composition of Bangladesh Exports to ASIAN Countries
Figure 2.4: Bangladesh Imports by Country, 1997/98
Figure 2.5: Bangladesh Imports from ASIAN Countries, 1997/98
Figure 2.6: Composition of Bangladesh Imports to ASIAN Countries
Figure 2.7: Composition of Bangladesh's Exports in Real Terms
Figure 2.8: Composition of Bangladesh's Export in Real Terms
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