These groups bring together their expertise, tools, and infrastructure in a research program supported by the NSF to create and translate to practice precision agriculture technologies and systems. The Center activities are positioned to deliver outputs in agricultural-specific IoT sensor, robotics, energy, communication, and data science technologies and their integrated systems, that are responsive to the scale, environment, and socioeconomics of farming. The research program outcomes are structured to build needed fundamental knowledge, technologies, and systems with increasing complexity and scale over time and to establish trusted relationships between researchers and stakeholders to realize precision agriculture systems that contribute to a food, energy, and water secure future. The impacts of market liberalization on welfare in rural areas of less developed countries have received increasing attention from both researchers and policy makers as relatively poor countries become integrated into world markets and trade pacts. Overwhelmingly, the view of researchers and policy makers alike has been that, in less developed countries , urban residents win but rural populations lose from the elimination of own-import tariffs on agricultural commodities. The urban gain results from lower consumption costs, while the rural loss is the consequence of increased competition with imported agricultural and livestock goods, depressing both profits and wages in a sector in which LDCs presumably have a comparative advantage. This raises serious welfare concerns, because many of the world’s poor live in rural areas. An interesting corollary to this argument is that agricultural support policies in developed countries adversely affect welfare in rural LDC households by depressing world prices for farm goods . In this paper we use a disaggregated rural economy-wide modeling approach to explore the rural welfare impacts of own-country agricultural tariff reforms called for in the Central American Free Trade Agreement in four Central American countries: El Salvador, Guatemala, Honduras, and Nicaragua .
Our rural economy-wide model for each country consists of a series of interacting micro agricultural household models. Inasmuch as an agricultural household model can be viewed as a computable general equilibrium model for an individual rural household group , the disaggregated rural economy-wide model is really a nested CGEM. To facilitate comparison,dutch buckets for sale we model the same rural household groups in each of the four countries . We use the nested rural CGEMs to simulate the impacts of country-specific agricultural provisions in CAFTA on the income of each rural household group. We also perform a welfare analysis in which the economy-wide model is used to estimate the transfers that would be required to maintain all rural household groups at their pre-CAFTA welfare levels. This transfer differs from a conventional compensating variation by taking into account rural economy-wide impacts of the trade policy shock on household resource allocations, rural wages and subsistence production.Two considerations have tended to reinforce the view that agricultural trade reforms negatively affect rural welfare in LDCs. First, many rural households produce grain, for which high-income countries have a comparative advantage in production. Removing protection on grain imports thus leaves the rural economy vulnerable to competition from foreign grain producers. The combination of generous support programs for grain farmers in high-income countries with LDC tariff reform, from this perspective, inflicts damage on the LDC rural economy. Second, the effects of agricultural reforms in high-income countries are likely to be muted because in many cases LDCs already have preferential access to developed country markets for their agricultural exports. LDCs are net exporters of tropical products, for which competition with developed countries generally is not an issue. Preferential treatment covers a large share of developing country exports to the European Union and the United States, reaching over 90% of all agricultural exports to these regions for some LDCs .
The most notable preferential agreements include those between the E.U. and its members’ former colonies in Africa, the Caribbean and the Pacific, and the Everything but Arms agreement; and between the United States and Africa and Latin America via the Africa Growth and Opportunity Act and the Caribbean Basin Initiative. Because of this, the argument goes, LDCs stand to gain less than they lose from the liberalization of agricultural trade. In fact, some LDCs may lose from trade liberalization as a result of preference erosion . These considerations have been salient in the contentious debates over agricultural policy that characterized the Uruguay Round in the late 1980s and 1990s and currently plague multilateral trade negotiations under the Doha Development Agenda . Some evidence from aggregate economy-wide models suggests that the impact of agricultural trade reforms in LDCs would be positive; however, the reasons lie mostly in the effects that such reforms would have on the non-agricultural sector. Tangermann reports the finding from a GTAP model that full agricultural liberalization by high-income countries would enhance the non-agricultural terms of trade for developing countries, thus leading to income gains. However, Anderson and Valenzuela , using a GTAP model, find negative effects of own-country agricultural trade reforms on agricultural value-added in all the developing countries they considered. The implication of these findings would seem to be that the more narrowly one focuses on the LDC rural economy and on own-country tariff reforms, the greater the likelihood of finding negative welfare impacts of agricultural trade liberalization. Micro agricultural household theory suggests that the impacts of agricultural market liberalization on LDC rural welfare are not clear cut, even if LDC producers do not acquire greater access to high-income markets for their agricultural output. As producers or suppliers of factors to farms, rural household lose when the price of goods they produce decreases. However, rural households also are consumers, and it is not uncommon to find that most producers of protected goods in LDCs are not net sellers of these goods prior to reforms. Like urban households, they stand to benefit as consumers. Whether the negative production or positive consumption effect dominates is an empirical question, and the answer is likely to be different for different rural household groups. Even on the production side, a decrease in price may benefit households that are engaged in other crop activities if factor prices decrease. Even the impacts of agricultural trade reforms on factor prices are ambiguous; they depend on the relative factor intensities of the directly and indirectly affected activities.
Understanding the impacts of agricultural trade reforms on LDC rural economies thus requires an economy-wide modeling approach that embeds within it a micro-economic focus capturing both the heterogeneity of rural households and the diversity of activities in which these households participate. GTAP and other economy-wide models are useful to explore aggregate impacts of trade policy reforms; however, their high level of aggregation precludes a rural micro focus.CAFTA represents an ideal case for studying the potential impacts of agricultural trade reforms on rural welfare. In EGHN,hydroponic net pots the majority of farm households cultivate food grains. All benefit from preferential access to U.S. markets for their agricultural exports, and all are net importers of grain. Prevailing tariffs on grain imports range from 15% to 40% in El Salvador, from 20% to 35% in Guatemala, from 15% to 45% in Honduras, and from 10% to as high as 62% in Nicaragua. Tariffs on livestock products in the four countries range from 15% to 164% . With the exception of white corn, all of these tariffs would be phased out, either immediately or gradually, under CAFTA. 1 The stakes are high from a rural welfare point of view. Rural poverty ranges from 62% of all rural residents in El Salvador to 86% in Honduras. CAFTA would be implemented in a context of generally deteriorating agricultural trade balances. Between 1990 and 2003, both Guatemala and Honduras experienced a decrease in their positive agricultural trade balances while in El Salvador a surplus gave way to a steep deficit . Only in Nicaragua did a positive surplus increase, due primarily to increases in bean and meat exports. In all four countries, maize and rice imports and fruit and vegetable exports increased sharply. Sugar exports increased, but in two out of the four countries , traditional agricultural exports as a whole contracted.Maize production decreased in Guatemala and Honduras, increased slightly in El Salvador, and rose sharply in Nicaragua. Rice production contracted in El Salvador, Guatemala and Honduras while rising in Nicaragua. Beef output stagnated in El Salvador and Guatemala, fell in Honduras, and rose in Nicaragua; beef imports increased as did imports of poultry . Milk production rose in all four countries, and except in Nicaragua, milk imports increased, as well. Changes in land use mirror these trends . Between 1978 and 2001, the land area cultivated in basic grains decreased in Honduras, did not change significantly in El Salvador and Guatemala, and increased in Nicaragua. In contrast, land in other crops, including non-traditional fruits and vegetables, increased in all four countries. Only in Nicaragua did the number of cattle increase. CAFTA would be implemented in a context of demographic transformation, as migration shifts rural population internally, to cities, and internationally, mostly to the United States. Nevertheless, rural population shares remain high by international standards. In 2003, the rural share of the economically active population was 56% in Guatemala, 46% in Honduras, 42% in Nicaragua and 38% in El Salvador.
The shares of population living in rural areas ranged from 43% in El Salvador to 60% in Guatemala. According to the U.S. Census of Population, the number of EGHN-born persons living in the United States nearly doubled from 1990 to 2000, from 771,600 to 1,342,000. The rural migration response potentially has an important influence on how agricultural trade policy reforms affect rural poverty. Two other considerations are critical when modeling rural welfare effects of trade policy shocks: the heterogeneity of rural households and the diversification of these households’ activities and income sources.Tables 3a-3d present the classification of rural household groups that we use to capture the heterogeneity of the rural population in each Central American country, the criteria used to create the household categories, and the number of households in each country and in the data bases used to estimate the models. Landless households represent the largest number of rural households in all but Guatemala, where more than half of all rural households are subsistence producers. In all four countries, rural households without land depend primarily on salaries, both agricultural and non-agricultural, and remittances from internal and international migrants. Subsistence households produce basic grains on small holdings, principally for home consumption. Because they do not participate in markets, the implicit value of their grain output is given by shadow prices that are endogenously determined for each subsistence household group. In our DREMs as in the micro agricultural household models of Strauss and De Janvry, Fafchamps, and Sadoulet , these households are modeled as autarkic; basic grain production is equal to demand. A novelty of the DREM is its ability to represent differences in market articulation as well as in demands, production technologies, and activity mixes among different rural household groups. Production decisions in commercial households, which produce primarily for markets, are guided by market rather than shadow prices. Marketed surplus from these households is simply the difference between output and demand, as in the staple agricultural household model described by Singh, Squire, and Strauss . All household groups participate in markets for other agricultural and non-agricultural commodities and for factors, either as buyers or sellers . They differ with respect to incomes, activity mixes, demand patterns, and technologies. Average per-capita incomes, human capital and landholdings vary widely across countries as well as rural household groups. Landless households have an average annual income of US$347 per capita in Honduras and $877 in El Salvador, where we were unable to disaggregate landless households by schooling. Landless low-education households had an average per-capita income of $502 in Nicaragua and $576 in Guatemala. Average incomes of subsistence producer households range from $359 to $510 , and those of small commercial producers, from $409 to $479 . The highest incomes are found in large commercial households in El Salvador $1,909 and Nicaragua . With the exception of high-skilled landless households, rural household heads in all four countries have low levels of completed schooling, ranging from 1.3 years to 3.5 years .