Globalization has undoubtedly opened up new opportunities. One of the results has been new farmer initiatives that rely on web-based marketing to bring products directly from the farm to consumers (Clark, Stokes & Mugabe 793). Globalization has also created challenges for traditional traders. For example, in the U. S. and other developed countries, consumer taste has shifted from mass-produced coffee to specialty beans and from processed to fresh vegetables. These changes have to some extent fragmented the market, favoring smaller, more flexible suppliers (Johnson & Turner 143).
In general, agriculture is a mature industry that can expect slow to moderate growth for its products. Thus, markets for most agricultural products are established and grow slowly. Slow growth means that the world market for agricultural products is characterized by competition among producers for shares of a relatively static market (Harrington et al. 63). The competition occurs through government interventions and through producer adjustments that increase efficiency. As trade liberalization in agriculture takes effect, producer adjustments may become more important.
U. S. commercial-size farms, emerging from difficult times in the 1980s, have pared production costs by adopting new technologies, substituting machinery for labor, and operating more acres or animal units per farm (Lyson, Geisler & Schlough 192). As it was discussed above, agriculture is losing some of its uniqueness. As agricultural production becomes more concentrated among fewer and larger farms, it takes on more characteristics of other commercial sectors (Harrington et al. 39). It is obvious that the U. S. entered into the WTO agreements anticipating improved access to international markets and increased effective demand for U. S. agricultural products.
Recent trade growth shows that the envisioned expansion is likely. World trade in agricultural commodities and processed foods increased many-fold last decade. Processed foods now account for two-thirds of total agricultural trade and represent the largest industrial sectors of most national economies. Now the food trade in agricultural commodities and processed products is big business, nearly indistinguishable from other industrial and commercial sectors (Harrington et al. 64).
The WTO agreements, including the Agreement on Agriculture, are premised on the assumption that increased international trade is a good thing. Logically it seems very important for the U. S. as the largest U. S. food corporations do as much as 25% to 50% of their business in other countries (Lyson, Geisler & Schlough 193). Nevertheless, members of the WTO are restricted in the measures, such as tariffs, they can use to keep out imports and are obliged to treat all producers, domestic and foreign, the same. That is why many people reject the assumption that more trade is inherently good.
Instead, critics propose other ways to regulate the flow of agricultural goods and services – ways they think better protect and promote social, environmental, and even economic concerns (Michelmann et al. 317). More fundamentally, many people around the world – farmers, environmentalists, consumers, and some governments – are concerned that the emphasis on trade at the WTO has undermined the pursuit of more important goals, including food security, sustainable agricultural systems, and secure livelihoods for the most vulnerable people in the world (Johnson & Turner 68).
According to the WTO Agreement on Agriculture, tariff barriers have been resulted in a 64 per cent reduction in tariffs on the value of imports. Developed states cut their average tariff on imports from all sources by 40 per cent (Trebilcock & Howse 135). Among the main achievements of the Uruguay Round was the establishment of constraints on import barriers and export and domestic subsidies for farm and food products.
The agriculture agreement within the Uruguay Round set out to make the sector more market-oriented with the aim of improving predictability and security for both importing and exporting states. The new rules and commitments applied to market access, domestic support, export subsidies and other methods that make exports artificially attractive (Johnson & Turner 151). A by-product of this approach was to reduce incentives for farmers to maximize production through intensive use of pesticides and fertilizers, thereby reducing the negative impact of agricultural trade on the environment (Johnson & Turner 155).
However, some rural issues, such as food safety and animal welfare, are unlikely to be handled adequately within the WTO. There is not enough agreement or trust between the members, in particular among the major players such as the European Union and the U. S. , and between the developed and developing world, to reach consensus on these topics (Roberts 183). Against this background, the implications of the WTO Agreement on Agriculture for agriculture in the U. S. seem to be a mix of positive and negative ones.