Efforts to achieve the Millennium Development Goals occur against a backdrop of globalization and trade liberalization which affects, directly or indirectly, a major proportion of farmers in developing countries. However, whilst a considerable number of studies of national impacts of globalization are available, policy makers have little information on the impacts of globalization on the agricultural and rural sector. Increased availability of data on the impact of globalization on rural populations, ideally disaggregated by type of farming system and level of market access, would improve the analysis of national and agricultural sector policy options.
The diversity of the impacts of globalization is well illustrated by the results of village studies in rural Ghana, Mali, the United Republic of Tanzania and Uganda reported in Chapter 2. The extent of transmission of international market prices to farmers varies significantly across commodities, locations and countries, depending, inter alia, on the structure and performance of the relevant market institutions. Cash crop farmers, particularly in areas with good market access, often respond strongly to the price changes resulting from trade liberalization; a commonly observed change in the study areas was diversification towards horticultural production.
The response of farmers was not solely based on price effects, as their adjustment possibilities were determined by a large number of complementary factors including infrastructure and transport costs (especially in landlocked countries), lack of rural finance (especially in remote areas), lack of complementary inputs (such as animal traction or tractors), information on diversification opportunities and asset fixity. At community level, effects included increased monetization (for example, the substitution of hired labour for family labour), and increased off-farm income from petty trade and local business. For villages with better market access where farmers have diversified into new export crops, inter-sectoral linkages were generally strong, notwithstanding institutional and policy weaknesses which inhibited the growth of such linkages. The availability of information and working capital are important determinants of whether smallholders can take full advantage of the opportunities arising from globalization.
The assessment of local impacts of globalization should be framed within a feasible set of the policy options, whilst recognizing the complex and diverse nature of policy impact pathways and impacts. For instance, the functioning of local markets and other institutions in terms of relative farm gate price changes and the availability of production inputs and support services is important. Farm and household characteristics influence their response, including location and infrastructure, resource endowments and enterprise pattern. Although a majority of the farm population consists of smallholders, the linkages to successful medium and larger farms and to non-agricultural sectors are important determinants of how smallholders are impacted by globalization. In addition, sectoral or trade policies that impact national markets may not impact farmers who produce non-tradables since the prices of these products largely depend on local market conditions.
The prevailing agricultural policy debates in Africa include the balance of food versus cash enterprises, the subsidies for external inputs (especially fertilizer and improved seeds), the priorities for Government support services to agriculture and the role of off-farm income in agricultural intensification. Specific policy options vary by country (as indicated in Chapter 2), but include aspects of regional economic integration, tax policies, protection of selected agricultural commodities, land tenure, access to finance and agricultural inputs and agricultural research and extension. In general terms, policy instruments related to the impact of globalization fall into three broad groups: policies supporting the enabling environment, policies supporting access to productive resources and policies related to taking advantage of new opportunities for smallholders. The assessment of policy options can benefit from a comparative perspective across countries, particularly for locations with similar farming systems and market access. Policy debates in one country can be informed by the lessons from effective farmer responses to trade policy change in another country.
The assessment of policy options can be supported by local economy-wide models and household models. As indicated in Chapter 6 (Dyer and Taylor), village economy modelling methods have advanced rapidly during the past decade. These models are powerful in providing insight on how farmers are affected by policy changes at the local level which is useful to develop policies that can reach poor farmers and smallholders that have little access to national markets. A useful approach is the development of village CGE models based on village SAMs, which in principle can incorporate salient aspects of household production and consumption in an economy-wide framework at the village level, making it possible to capture policy impacts at the local level which are not observed in aggregate national economy-wide models. This was observed in the household-village modelling of the University of California in Mexico (see Chapter 6), although there are not many country studies along these lines.
The development of Excel based input and output routines by IFPRI facilitate the application of these methods. While incorporating integrated producer/consumer behaviour in CGE models is feasible, household models can incorporate this dimension with greater detail and ease. In so far as the data in household MP models represent an important part of the data in a village SAM, the construction of a household model facilitates rapid data validation and the subsequent balancing of the SAM. Furthermore, it creates the possibility of subsequent experiments with the household model on questions raised by the village economy modelling. One conclusion of this set of Chapters is the critical importance of understanding household decision making and the functioning of village economies for the construction of village models. There are, of course, some limitations of modelling for policy analysis; for instance, the complementary institutional as well as economic appraisal of value-addition along the supply chains beyond the village level needs to be considered in the assessment of policy options.
In practice, the policy experiments relating to the above grouping will model farm and household impacts by changes in relative prices, changes in input-output coefficients (e.g. due to technology development research), availability of productive inputs, changes in transactions costs, etc. For instance, the relevance of successes in one case study area to other case study locations could be investigated through the modelling; in addition, the local impact of policy instruments which could alleviate specific constraints in a particular area could be assessed. Policy experiments are likely to include changes in relative prices, promotion of specific commodities, shifts of technology and related changes in labour markets and migrations, shifts in saving/investment flows, changes in the distribution of endowments and increased access to resources by poor households, shifts in preference patterns due to increased external cultural influences. It is important to take into consideration the full range of climatic and farming systems determinants of smallholder response to market opportunities.
In conclusion, a better understanding of the direct and indirect impacts pathways through which smallholders are impacted, and of how these pathways function in different settings for different categories of smallholders, can contribute to the assessment of policy options to increase smallholder benefits from globalization provided this is placed in the broader institutional context of the agricultural and rural sector. Such assessments can benefit from local level appraisals of the impact of globalization on smallholders and villages across similar farming systems in different countries.
