Understanding the determinants of structural change in world food markets

In addition to these fundamental demand and supply-side forces, there are other factors that have played important roles in the changing structure of world food trade. For example, transport costs for bulk and nonbulk agricultural commodities have been differentially affected by the shift to containerized shipping technology. The shift in the composition of food and agricultural trade is also related to changes in trade and domestic policies that support or regulate agriculture and food consumption in various countries. Historically, agriculture has been protected in many of the more developed economies, and the degree of protection for grains has been larger than that for other food products. This may partially explain the relatively slow growth of world grain import demand in recent years. In addition, bilateral agreements with East Asia, NAFTA, and the evolution of the CAP have all had important impacts on the structure of world food and agricultural trade. The objective of this article is to assess the relative role of each of the major forces-consumer demand, factor accumulation, transport costs, and policy change-in driving changes in the composition of world food trade from 1980 to 1995. To do so, we employ a modified version of the Global Trade Analysis Project (GTAP) model of world trade that permits us to isolate the contribution of each of these related factors to the changing composition of world food trade in a general equilibrium context. We evaluate the relative role of each of these factors by simulating the model backward in time from 1995 to 1980 under different assumptions. This general approach, termed 'backcasting' (i.e., backward forecasting), takes as exogenous the basic drivers of change and attempts to explain the resulting change in food trade composition. The model-produced changes in the composition of agricultural and food trade are compared with historical trade data to determine the relative importance of each factor in determining the changing composition of food trade. Given limited space, our focus will be on explaining the changes in the global composition of food and agriculture trade. A natural follow-on effort would target specific markets in more detail.