Nottingham University Economics Department: agricultural economics tutorial. Sample containing about 5226 words speech recorded in educational context

4 speakers recorded by respondent number C452

PS3K9 Ag2 m (Tim, age 30, lecturer) unspecified
HYNPS000 X u (No name, age unknown) unspecified
HYNPSUNK (respondent W0000) X u (Unknown speaker, age unknown) other
HYNPSUGP (respondent W000M) X u (Group of unknown speakers, age unknown) other

1 recordings

  1. Tape 108601 recorded on 1993-12-06. LocationNottinghamshire: Nottingham ( classroom ) Activity: agricultural economics tutorial

Undivided text

Tim (PS3K9) [1] Testing, testing.
[2] Okay right, so what we've been looking at this week is trade in agricultural commodities, and er, possibly a little bit of GATT as well.
[3] And I believe Bob has asked you to er, I think, collect some data erm, on trade in wheat and cotton erm, as an example.
[4] We'll come on to that a bit later on.
[5] But can you just give me, sort of, a brief overview of what's happened to the composition of world trade right, say over the last hundred years or so.
[6] What have been the main features?
Unknown speaker (HYNPSUNK) [7] Well the er, proportion agricultural trade has decreased.
Tim (PS3K9) [8] Right, correct, okay, erm what absolute, the absolute values of trade.
[9] So the relative share of agricultural trade has declined, the relative share of manufacturing trade has increased.
[10] How about in absolute terms?
Unknown speaker (HYNPSUNK) [11] It's increased.
Tim (PS3K9) [12] Yes, that's right.
[13] All trade has increased.
[14] Why, why has trade in all commodities, agricultural or non-agricultural increased?
Unknown speaker (HYNPSUNK) [15] Better transport links.
Tim (PS3K9) [16] Okay, how does that affect trade?
Unknown speaker (HYNPSUNK) [17] Well it's easier to transport things overseas or wherever.
[18] Also storage is easier, improving [...]
Tim (PS3K9) [19] Right, super, anything else?
Unknown speaker (HYNPSUNK) [20] Population growth.
Tim (PS3K9) [21] Yes, populations have, have increased.
Unknown speaker (HYNPSUNK) [22] Technology.
Tim (PS3K9) [23] Yep, I mean that might in a sense [...] [laugh]
Unknown speaker (HYNPSUNK) [24] Yes, we're gonna get [laugh]
Tim (PS3K9) [25] Transport technology has er, certainly er, certainly improved.
[26] Right, okay, so, in ge in general, we can say that world trade has risen over time due to essentially, well, is that, is there anything else that?
Unknown speaker (HYNPSUNK) [27] [...] more countries have er, a big surplus, and more countries having a big deficit in food supply
Tim (PS3K9) [28] Yes
Unknown speaker (HYNPSUNK) [29] so therefore [...]
Tim (PS3K9) [30] so that says something about specialization of production possibly, that countries are now more highly specialized than they once were.
[31] Yep, I mean, that in a way is a function of, leagues with which international trade can be conducted.
[32] You know, if you, if international trade is very difficult as it was, say two hundred years ago, then you've got to be self sufficient.
[33] Whereas, erm, you can now exploit individual countries comparative advantage of this trade erm, is, is rel is relatively er, is relatively easy.
[34] Are there any other factors, that might have increased, for an incre might have led to an increase in world trade?
[35] Rising population, improving transport and technologies.
Unknown speaker (HYNPSUNK) [36] I know this might sound obscure, but erm, I read somewhere when [...] that erm, if you actually bring in protectionism, it sounds like it could actually increase trade.
Tim (PS3K9) [37] If you bring in protectionism?
Unknown speaker (HYNPSUNK) [38] Don't know how it worked, as in [...]
Tim (PS3K9) [39] As of, liberalize, or if you increase
Unknown speaker (HYNPSUNK) [40] No, if you actually, you know, if you have a little protectionism, it does actually lead to an increase in trade, but I don't know how that works.
Tim (PS3K9) [41] Neither do I.
Unknown speaker (HYNPSUNK) [laugh]
Unknown speaker (HYNPSUNK) [42] No it doesn't, you know it doesn't.
[43] I really didn't expect
Tim (PS3K9) [44] Right, okay, let's say that's a new one on me.
[45] Okay.
[46] Well, we'll come onto protectionism in er, in a minute.
[47] What other factors, there's a big, this fact that we're missing, alright, rising population, improvements in transport and technology, what else has happened over the last hundred years?
(HYNPS000) [48] Increased consumption.
Tim (PS3K9) [49] Yes, that's right, or right
Unknown speaker (HYNPSUNK) [50] Income.
Tim (PS3K9) [51] Yes, income, that's right, incomes have risen, er, and as a result we're consuming more goods, consuming more goods ... it, it followed, well not automatically, but there's a likelihood that trade will also, will also rise.
[52] Okay, so, that's, they're the reasons to account for the rise in absolute values of er, trade in all commodities, what about erm, why has the er, trade in manufactures er, increased as a proportion of total trade?
[53] ... I mean, it's not divorced from the things that we've just been talking about
Unknown speaker (HYNPSUNK) [54] Well, cos incomes have risen so, there's more consumption
Tim (PS3K9) [55] Okay.
Unknown speaker (HYNPSUNK) [56] Specialization as well, er
Tim (PS3K9) [57] Good ... right okay, I mean, what income elasticities of demand for
Unknown speaker (HYNPSUNK) [58] Higher for manufactured goods, or high relative to agricultural goods
Tim (PS3K9) [59] Okay, so, because income elasticities of demand are generally high for manufactured goods as the world economy gets richer, it will want to consume proportionately more of those.
[60] Right, now, we could all become self sufficient, alright.
[61] But why don't we be become more self sufficient?
[62] You know, we can produc we could consume a lot more manufactured goods, but that doesn't necessarily mean that trade will rise.
[63] It's likely that trade will rise, but it doesn't automatically follow.
[64] What's also happened to trade in manufactures?
Unknown speaker (HYNPSUNK) [65] It's specialized
Tim (PS3K9) [66] That's right, okay.
Unknown speaker (HYNPSUNK) [67] to, well, produce constant
Tim (PS3K9) [68] Yes, that's right, you've got [clears throat] because the, the market for er, any one say manufactured goods, in theory could be a, a world market now because there are relatively cheap methods of transporting this er, this particular good.
[69] What's happened is because the potential market has risen, firms have specialized.
[70] Alright, and this is why we get, erm, cars are an excellent example of this erm.
[71] You know, Toyota, Toyota's plant down the road in Derby, massive investment, erm, a huge production capacity.
[72] That makes all the Toyota Corollas, or whatever, not only for the U K, or for Europe, but for all, all, all sales of car throughout, of that particular type of car, throughout the world.
[73] You know, and even in erm, Japan, they're importing the, the products that are made, made over in Derby.
[74] Why're they doing that?
[75] It's because manufacturing production erm, or this great scope in manufacturing production for economies of scale.
[76] Alright, this is why countries have specialized more, because countries specialize more and consumers want to demand, [clears throat] want to consume erm, higher quantities of er, manufactured goods.
[77] Alright.
[78] Trade automatically follows therefore.
[79] Right, we need the specialization and er, the sort of demand elasticity erm, in that argument to suggest that world tra to explain why world trade has risen.
[80] What else, before we come on to agricultural products, [clears throat] what, are there any other notable features of trade in manufactures?
[81] Alright, it has risen, right, risen very dramatically erm ... well, let's try and rephrase this, erm, what's another major reason for the growth of manufacturing trade?
[82] ... Manufacturing trade is, seems to have grown very rapidly, not only because we're producing erm, or con consuming more of a, a particular commodity, but also because consumers like
Unknown speaker (HYNPSUNK) [83] Opportunities in taste.
Tim (PS3K9) [84] Changes in taste, yes consumers like
Unknown speaker (HYNPSUNK) [85] Consumers like to have variety.
Tim (PS3K9) [86] yes, consumers want more, more variety, as well as just more, more consumption, and this is why, you know, although we produce cars just about in, in the U K, we still import a lot of cars to the U K.
[87] What's that, what's the process of erm, simultaneous import and export of the same commodity, what's that called?
Unknown speaker (HYNPSUNK) [88] Erm, intra, intra-industry trade.
Tim (PS3K9) [89] Yes, intra-industry trade.
[90] And that's the simultaneous import and export of essentially similar products.
[91] Alright, now, they're not exactly the same products, but they are very similar.
[92] You know, erm, as far as the statistics might go, you know, a car is a car is a car.
[93] So you lump them all together, but we know as consumers, that, the Skoda is inherently different to the Lamborghini or something, alright.
[94] [phone rings] Excuse me.
[95] [phonecall starts] Hello, Tim speaking.
[96] Hello Marina.
[97] Very well thanks, and yourself?
[98] ... Right ... Mhm ... essentially yeah, use it as a, erm, as a motivation for the, for the tutorial erm,partic particularly the, the first part of it, talking about GATT, sort of erm, the er, sort of characteristics of trade, how it's changed, indication of protectionism.
[99] ... No, no they don't.
[100] ... Well, yes it should, it should be, and there's some good figures in there that you may want to tell the students about, and then what I would do is recommend that they have a look at it because the current issue.
[101] That came out of the Current Issues in Agricultural Economics book.
[102] Alright, if you tell them erm, that's where it came from, there are copies in the library, it might be a good idea that they have a look at it.
[103] Alright?
[104] ... That's it, that's o that's okay, I don't think there's anything else, okay, yes, okay, cheerio, then Marina, bye [phonecall ends] .
[105] Right, [clears throat] erm, yes, so,inder intra-industry trade is growing very, very rapidly ... and that, and this is, sort of the main, one of the main reasons why trade in manufactures has grown rapidly, rapidly.
[106] Why's intra-indu intra, intra-industry trade grown?
[107] Well, as consumers, we like to er, consume differentiated products, right.
[108] Manufactured goods are easily differentiated, right, you've only got to bung power steering on a car, or a few go, go faster stripes and you have you know, sort of, to the consumer, a different product.
[109] Right, although it is still a car, it's, it has different attributes.
[110] Alright, so there's plenty of scope for differentiation, product differentiation.
[111] And also, erm, there's great scope for economies of scale er, in manufactured goods, therefore consumers can benefit, right from er, exploiting the comparative advantage in particular, in particular countries.
[112] Production tends to be [clears throat] focused on very large plants, erm, and each plant will produce erm, a particular good for the whole world market and so therefore trade must, must increase.
[113] So, perhaps those explanations might account for declining er, relative share in agriculture as well as the increasing share of manufactured goods, because the other side of that coin is, well, income elasticities of demand for agricultural goods is less than unity [clears throat] so there's a de declining sector aspect there, erm, is it easy to differentiate agricultural products?
Unknown speaker (HYNPSUNK) [114] Very difficult.
Tim (PS3K9) [115] Right, it's not impossible because what tends to happen is that you can erm, you can change the product mix of what the consumer receives.
[116] Instead of him just buying purely the raw commodity, you can er, change the, the degree of processing erm, the quality of, of the product, erm, so there is some scope for different product differentiation, but certainly not the same scope that there is in manufactures.
Unknown speaker (HYNPSUNK) [117] Do you think the scope has increased because of erm, packaging or whatever?
Tim (PS3K9) [118] Mm, I mean that's, it's, you know, a potato is a potato is a potato, in, you know in commodity terms, but you know, you can change the way the, the product by attaching lots of services to that raw food product, and that's where the scope for differentiation comes from, it's the, the combination of attributes in er, agricultural goods so you've T V dinners and all the rest of it.
[119] Erm, how about economies of scale, you said that was important [...] the increase in manufacturing trade, you know, implies that products will be produced at a lower unit value, and therefore benefit consumers and er, therefore increase his trade cos consumers will buy the cheapest product if that comes from abroad, so be it.
[120] So what about economies of scale in agriculture?
[121] Do you think there are economies of scale to the same extent?
Unknown speaker (HYNPSUNK) [122] No.
Tim (PS3K9) [123] Why, why not?
(HYNPS000) [124] It's more perfectly competitive, isn't it, I mean it's produced say, the scope for it is less because it's on a smaller scale in general.
Tim (PS3K9) [125] Mm, that's right, I mean the fact that agriculture tends to be perfectly com right, why there tends to be a lot of independent small producers is because there are no economies of scale, you know, apart from beyond, you know, a certain size of farm, you know,stud studies in the U K show that once you get, get beyond about two thousand hectares there are, there are significant dis-economies of scale, and although there are economies of scale up to that point, and that's only in the case of very specialist types of production, by and large once you've got a farm in excess of five hundred hectares, erm, you start to run into dis-economy, and mostly managerial dis-economies of scale.
[126] [clears throat] That's not the same er, well that's not the case with erm, with things like car man car manufacturing.
[127] I mean we can ... Toyota can produce, you know, sufficient Corollas or whatever it is that they make at Derby erm, to sat to satisfy the whole of the world market for that particular car, just from one plant.
[128] And that one plant occupies about [clears throat] sort of, one hundred and fifty hectares or something like that.
[129] If you wanted to erm, er, satisfy the demand for a particular food commodity you'd need erm, an area equivalent to ... the six biggest states in America.
[130] Clearly, [clears throat] that's not feasible.
[131] There's a geographical dimension involved in agricultural production, that leads to dis-economies of scale.
[132] Alright, and er, essentially land is the constraining, the constraining factor.
[133] Right, because we need land to produce food, more so than we need land to produce cars or tape recorders or whatever ... that sort of militates against economies of scale, and that's why we have erm, a large number of relatively small producers in this country and throughout the world.
[134] Erm, it's because you need land, and er, the bigger the area of land you've got, the more time it takes to get your combine harvester from one side to the other er, and so on and so forth.
[135] So, the optimal size of plant in agriculture is very, very small compared to the optimal size of plant in manufacturing.
[136] ... Okay, and that could be another reason why international trade, erm, has, had declined relatively in agriculture.
[137] Now ... anything else that may have accounted for the erm, decline of agricultural trade, and the increase in manufacturing trade?
(HYNPS000) [138] Because of erm, protection policies,
Tim (PS3K9) [139] Mm
(HYNPS000) [140] Like erm, the C A P in France.
Tim (PS3K9) [141] That's right, I mean protectionism in agricultural goods has risen, particularly since er, in the last fifty years.
[142] Risen dramatically, whereas in the same period, protectionism on manufactured goods has generally er, fallen, alright.
[143] So protectionism is probably quite important erm, reason.
[144] Why, why erm, does protectionism reduce trade?
Unknown speaker (HYNPSUNK) [145] Reduces the erm, extra erm, revenue you can get from exporting or, or it intro increases the cost of importing [...]
Tim (PS3K9) [146] Okay, yes, that's, that's one reason, yes.
Unknown speaker (HYNPSUNK) [147] Reduced through retaliation.
Tim (PS3K9) [148] Okay, yes, leads to retaliation, anything else? ...
Unknown speaker (HYNPSUNK) [149] Leads to loss of market.
Tim (PS3K9) [150] Mm, yes, leads to loss of market, you know.
[151] If we're self sufficient due to a policy that subsidizes our farmers, we're not going to want to import anything.
[152] ... So those are all reasons why [clears throat] trade in agricultural goods may have fallen, is protectionism in ari agriculture is second to none.
[153] There's no industry that's erm, as heavily protected as er, as agriculture on a world scale.
[154] Okay, so what, so what other effects does protectionism have?
[155] It reduces er, trade in agricultural goods, anything else?
Unknown speaker (HYNPSUNK) [156] What about prices of agricultural goods.
Unknown speaker (HYNPSUNK) [157] They go up.
Tim (PS3K9) [158] Sorry, sorry what?
[159] ... Prices of, on the world market.
[160] Right they'd certainly go up in the domestic
Unknown speaker (HYNPSUNK) [161] Yes
Tim (PS3K9) [162] erm, domestic country, or the country where the protectionism is in place.
Unknown speaker (HYNPSUNK) [163] Well, that must reduce trade as well, cos if, if prices are high in the domestic market, they're not going to want to sell them in another market are they?
Tim (PS3K9) [164] No, yes, that's very, very true, and that's the effect of protectionism, is to increase self sufficiency.
[165] Alright, however, if you want to sell.
[166] Yes, it increases self sufficiency, what about the prices of agricultural goods on the world market?
[167] The size of the world market in agricultural erm, goods and the volatility of prices on the world market?
(HYNPS000) [168] Aren't agricultural prices subsidized twice, they're subsidized to the farmers, so the farmer gets X for growing it which increases the price automatically on the market, but aren't they subsidized so they can be sold abroad?
Tim (PS3K9) [169] Yes, that's, that's true.
[170] So that's [clears throat] well, before we can go in, launch into this, I mean it's often said that erm, er, well, one of the major reasons why agricultural commodity trade hasn't been included in GATT, like virtually every other er, product has been, is because governments are saying, look this is a domestic policy, it's got nothing to do with international trade, we're supporting our farmers, it's a domestic policy.
[171] It doesn't, you know, it doesn't have anything to do with trade.
[172] Now, clearly that's a very naive way of looking at er, protectionism.
[173] But that's the main argument why agricultural policies have been allowed to increase in their severity, rather than erm, fall.
Unknown speaker (HYNPSUNK) [174] That makes no sense, because they're selling that product abroad, the farm product, many of them are.
Tim (PS3K9) [175] They might be, they might be, yes.
Unknown speaker (HYNPSUNK) [176] If they are selling it abroad, it's international though.
Tim (PS3K9) [177] Mm, ah yes, you can't, any domestic policy has international ramifications, if it affects er, resource allocation and, and demand and agricultural protectionism, like any protectionism will, will er, will reallocate resources, not according to comparative advantage, but according to some erm, some priority, we want to support our agriculture, therefore we'll erm, give agricultural producers a lot of money.
[178] Now, clearly that's going to dis distort trade because, if we're increasing domestic production [door knock] ... Come in, ah, hi Mervin.
Unknown speaker (HYNPSUNK) [179] Sorry, you alright for tomorrow?
Tim (PS3K9) [180] Yes, I can go to the lecture, but I'm teaching at eleven like yourself.
[181] I'll er, I'll see you if Win's free at, at eleven.
Unknown speaker (HYNPSUNK) [182] Yes, yes, I've been to se I've a couple of people up to sort of promise a hand [...]
Tim (PS3K9) [183] Yes, is, is, is Tony, is Tony er, busy as well?
Unknown speaker (HYNPSUNK) [184] Tony's got a le meeting at ten thirty.
Tim (PS3K9) [185] Ah, which won't finish
Unknown speaker (HYNPSUNK) [186] Fortunately I wasn't expecting to be lecturing, but er,
Tim (PS3K9) [187] Right
Unknown speaker (HYNPSUNK) [188] I've had to lecture for Paul
Tim (PS3K9) [189] right, well we'll sort, we'll sort something out, but I'll see if Winnie's, I'll see if Winnie's available.
Unknown speaker (HYNPSUNK) [190] Yes, yes, I'm sorry about that, yes, yes, okay.
Tim (PS3K9) [191] I mean if the worst comes to the worst, we'll sort of, cancel a lecture, or something [laugh]
Unknown speaker (HYNPSUNK) [192] Ah, well, it's only a matter of giving them a cup of coffee afterwards.
Tim (PS3K9) [193] Right, okay, I'm sure we can go, we can look after, we can get Robert in or something
Unknown speaker (HYNPSUNK) [194] Yes, that's right we just get, just grab a couple of people.
[195] Sorry to disrupt your class.
Tim (PS3K9) [196] That's okay, I'll, I'll sort it out anyway, later this afternoon, yes, yes that's right, yes that's it
Unknown speaker (HYNPSUNK) [197] Okay, ten o'clock, eight thirty nine.
[198] Do you want me to introduce us?
Tim (PS3K9) [199] Yes, if, if you want to, just to let the students know
Unknown speaker (HYNPSUNK) [200] Sure, yes
Tim (PS3K9) [201] who he is, and why he's there.
[202] That's, that's grand, thanks, Melvin, cheers.
Unknown speaker (HYNPSUNK) [203] yes, yes, okay, thanks for everything. ...
Tim (PS3K9) [204] Erm, right, where was I?
[205] ... Yes, so domestic policies, you know, can not be viewed at in isolation, right.
[206] All domestic policies will have international implications okay, and it's something that er, governments tend to erm, sort of over overlook when they're arguing the agriculturalists case in, in GATT.
Unknown speaker (HYNPSUNK) [207] Then don't you think given that case, we should set up a whole inter international thing, which oversees all the governments?
Tim (PS3K9) [208] Well that's what GATT is really.
[209] That's what, you know, that's why agriculture is trying to be, sort of er, subsumed within the GATT.
Unknown speaker (HYNPSUNK) [210] Yes, but it's failed.
Tim (PS3K9) [211] Well, it's, it's failed at the moment, but as, you know, if you've seen on television, or read a paper lately, you know, you've got ten days to go
Unknown speaker (HYNPSUNK) [...]
Tim (PS3K9) [212] before erm, you know, if we're going to get a GATT agreement, you've got ten days to, to negotiate it in.
Unknown speaker (HYNPSUNK) [213] Ten days to [...]
Tim (PS3K9) [214] Er, yes, yes, that's right.
[215] There's a lot of brinkmanship going on at the moment, a lot of er, horse-trading I dare say, going on as well.
[216] Erm, but er, okay.
[217] Erm ... er, okey-doke, domestic policies will affect world, world market.
[218] It's likely, will world market prices fall?
[219] Or rise as a result of protectionism?
Unknown speaker (HYNPSUNK) [220] Rise.
Tim (PS3K9) [221] Why might, why might they rise?
Unknown speaker (HYNPSUNK) [222] Because they cost more.
Tim (PS3K9) [223] What costs more?
Unknown speaker (HYNPSUNK) [224] Erm ... panic
Unknown speaker (HYNPSUNK) [laugh]
Unknown speaker (HYNPSUNK) [225] It may not do
Tim (PS3K9) [226] You know what tends to happen, is that world prices fall, alright, in the presence of protectionism.
[227] Alright, because what you're doing, is that you're increasing domestic production.
[228] Right now it serves its purpose, and increasing domestic production is going to increase world production, if there's more supply, prices will fall, if everything else stays the same.
[229] So what tends to happen is that world, world agricultural prices fall, right, and that trend has been observed erm, er, it's an im empiric empirically, agricultural product prices tend to have fallen in general sort of, over the last sort of, eighteen hundred years.
[230] Yes.
Unknown speaker (HYNPSUNK) [231] So that, erm, the fact that you're increasing erm, protection, protectionism against it, isn't it likely to upset the producers who are exporting it, and who say it's no point exporting it there cos we're going to get erm, huge thing put on our things and we're not going to sell that much, it might be better just sell in our own country, isn't that reduce world tr
Tim (PS3K9) [232] No, no eventually, protectionism will, will lead to a cessation of production in the most efficient er regions of the world which by and large, are the, are the regions that sell onto the world market.
[233] It's only the inefficient producers that support their agricultures, because it's those inefficient producers that need support, erm, so, in the, in the long run, world supply, world supply will contract, but in the short run, you know, farmers in these er, efficient countries of the world may well erm, continue in production because they may, may be able to cut their average variable costs, it's only when in, in the long run, you know, providing farmers can cover their average variable costs, they'll continue in production in the short run.
[234] Right, in the long run, they've got to cover all their costs, right, they will be driven out of business, but that may take some time.
[235] Alright, so in, in the short run, because more is being produced, alright, and demand has been increased very much, or in world terms, then market prices will fall.
[236] All market prices will fall.
[237] And world market prices also tend to fall because these erm ... sort of protectionist programmes are often too successful, so not only do we reach self sufficiency, but you reach the status of net exporter.
[238] Now, for net exporting, for a net exporter, so our production exceeds our own consumption, how the hell do we er, how the hell do we get rid of it?
[239] Do we just burn it?
[240] Or do we dump it?
[241] What tends to happen is that domestic agricultural production has already been subsidized, alright, it's subsidized again, only to, to be sold on the world market.
[242] The world market becomes a residual, a residual market as a result, erm, you know, because we're dumping cheap products, you know, and the, the only way we can sell European grain right is to, is to undercut the world market.
[243] Now, because we're a major player in, in grain markets and most other markets, the European Community, increasing its supply on the world market will have a non-trivial effect on price.
[244] Prices will come down, right.
[245] Erm ... that's what we observe, is that protectionism leads to a lowering of world, world prices.
[246] What about the volatility?
[247] Does protectionism have an affect on volatility do you think?
[248] ... Right, think of it like this, if, if all countries of the world, right, engage in free trade, there is no protection.
[249] Alright.
[250] [clears throat] Then, the world market, alright, is, is the, is the world, is the world market.
[251] Everybody trades through this, through this world, world market.
[252] As a result, if there's a say, bad weather in the northern hemisphere affecting supply, right, that may well be offset by good weather, or average weather in the southern hemisphere, right.
[253] As a result, erm, prices won't be quite as volatile as they are in the opposite case, alright, when the world market, and virtually nobody, let's assume that virtually nobody uses the world market to trade in, they've all got their own agricultural policies, right, just a few countries trade in the world market, it only takes erm, a, a sort of poor harvest, or a very good harvest in any one of these erm, er, sort of protected countries, in order to get rid of this output, they'll put it on the world market.
[254] Because the world market is very, very tiny now, because nobody uses it, that will have a massive effect on, on world prices.
[255] So what you tend to observe is that when protectionism, when everybody protects, or when a lot of people protects, the world market erm, becomes a sink right, for any excess production.
[256] Right, it becomes a residual market, right.
[257] You know, if you can't sell it at home, you know, you get rid of it on the world market.
[258] Now, if the world market is very small, then [...] The term world market is a bit of a misnomer when er, when most countries protect.
[259] The world market becomes very, very volatile and er, so protectionism tends to lead to erm, to price volatility and this is one reason why agricultural markets are so volatile.
[260] Right, it's, it's because world markets are residual markets because there's so much agricultural protectionism.
[261] Okay.
[262] Right, [clears throat] erm, why bother, why bother about agricultural trade?
[263] Marlon, why're we all het up about, about agricultural protectionism?
Unknown speaker (HYNPSUNK) [264] What are we going to live on?
Tim (PS3K9) [265] Sorry?
Unknown speaker (HYNPSUNK) [266] If we don't live off agricultural trade, what are we going to live on?
[267] We have to keep the track all turned on.
[268] I mean, vital to life
Tim (PS3K9) [269] Well ... yes, but it only represents two percent of G D P in this country it's, it's insignificant.
Unknown speaker (HYNPSUNK) [270] Ah, that's the thing, it's not insignificant.
[271] Because if you stop agricultural production, you're going to be in big trouble.
Tim (PS3K9) [272] Right, okay.
[273] Why might we, we be in big trouble if it's a problem?
Unknown speaker (HYNPSUNK) [274] What, what you going to eat?
Tim (PS3K9) [275] Well, could we not import?
Unknown speaker (HYNPSUNK) [276] Exactly, and then if the world broke, world war breaks out?
Tim (PS3K9) [277] Okay, so there, there is this strategic argument.
[278] Okay, but why do we get the, the main thrust of erm, to the economic argument seems to be that we ought to be liberalizing, we ought to be facing that erm, that problem.
[279] You know, that problem isn't the most important one.
[280] Why, why do we want to liberalize world trade?
Unknown speaker (HYNPSUNK) [281] So we can reduce the prices that we have to pay for everything.
[282] You know, beef and things that we have to import from the E C at the moment, we could import from like, New Zealand.
[283] It's far away but it's a lot cheaper to produce.
Tim (PS3K9) [284] Okay, so consumers would benefit erm, from liberalization.
[285] Presumably, also tax payers would erm, tax payer cost of er, the Common Agricultural Policies is substantial, and most the support comes from er, most of the support under the Common Agricultural Policy is given er, in terms of higher food prices that consumers pay.
[286] There is a different n there is also however, a tax payer burden in that some of our taxes that we pay to go erm, into agricultural support, I mean V A T for example.
[287] Virtually all of V A T goes to [...] , you know.
[288] You know, you pay V A T on everything, er, so consumers would benefit, alright, in er, protecting countries, tax payers should benefit in protected countries.
[289] Any other beneficiaries?
Unknown speaker (HYNPSUNK) [290] Developing countries may now find a market.
Tim (PS3K9) [291] That's right, so implications there for developing countries, who are typically very dependent on agricultural exports as a source of export earnings.
[292] It's through foreign exchange earnings that they can develop.
[293] Right, if you're cutting off their, their lifeline to development, you're probably sowing the seeds of er, of disaster further down the line.
[294] It's not only the developing countries that are dependent upon agricultural exports, New Zealand, Australia, Argentina, other what you might not call developing countries, are also erm, reliant upon, is reliant upon agricultural trade.
[295] So, who, who are the beneficiaries, are there, are there any beneficiaries at the moment of liberalization?
[296] Clearly farmers in protecting countries benefit,any anybody else that benefits?
Unknown speaker (HYNPSUNK) [297] From protectionism?
Tim (PS3K9) [298] Mm ... say if you're on the world, if you, if you're a net importer, right, erm, and you're buying your food commodities from the world market, you must have been rubbing your hands over the last fifty years cos you're getting [...] , you're buying, you're buying a food commodities will lower, lower prices than you would have done in the presence of free trade, cos there's all this dumping and European surpluses, you know [door knock] ... Come in
Unknown speaker (HYNPSUNK) [299] Yes he is here
Tim (PS3K9) [300] Win
Unknown speaker (HYNPSUNK) [301] Yes, erm, Sue's after you, if you going, she wants to know, can you go to lunch in ten minutes?
Tim (PS3K9) [302] When,
Unknown speaker (HYNPSUNK) [303] One o'clock
Tim (PS3K9) [304] No I can't come, I'm dining with er, Charles and a post-grad.
[305] So [laugh] Gerard's his name, erm, remind me to see about, are you free tomorrow at eleven?
Unknown speaker (HYNPSUNK) [306] Yes, Tony's just dropped that on me
Tim (PS3K9) [307] Oh
Unknown speaker (HYNPSUNK) [308] from a great height.
Tim (PS3K9) [309] No I'll, I'll speak to you, I'll speak to you later.
[310] Erm, er, clearly if you're a, a net importer of agriculture, you have benefited from other people's protectionism.
[311] Okay, and you will suffer as a result of liberalization, and by and large those costs, or those benefits that er, reaped at the moment by those countries are very, very small in comparison to the, er, the costs of protectionism to the rest of the world.
[312] Right okay.
[313] Tell you what we'll do is er, leave it there now.
[314] I would recommend you do is look in this book, there's a coup a couple of copies of which is, I mean er, is in the library, right.
[315] Current Issues in Agricultural Economics er, edited by your lord and master, Professor Rayner and also a chap called David Coleman ... okay so, Current Issues in Agricultural Economics by A Rayner and D Coleman.
[316] But if you look at chapter four in that book, we have the title, Agricultural Trade and the GATT.
[317] Alright, now the first part of this chapter spells out erm, er, developments in agricultural trade, why it's, why it's fallen in relative terms right.
[318] It then goes on to look at the costs of protectionism so they're, they're looking at erm, the numerical estimates as to how much erm, protectionism costs, [clears throat] not only for domestic producers and consumers and tax payers, but also for third countries.
[319] It then goes on to look at erm, why agriculture hasn't been included in the GATT up until now, and prospects for a solution within the GATT.
[320] This er, although it's not on your reading list, erm, the reading list that Bob gave to you, er, it, it should be.
[321] It's essential to erm, to what you've been going through in the last, in the last few lectures.
[322] Readable, full of erm, empirical evidence about costs of agricultural protection, and what's happened to agricultural prices and I re I do recommend that you have a look at it if you, it's an invaluable ... if you look at anything, look at, look at this one article.
[323] ... And there should be a couple of er, issues of this book in, in the library, okay, right, well thanks very much.
[324] Have a very good holiday and er, [phone rings] tomorrow there won't be a normal agri-econ lecture, there'll be a special lecture, but it'll be in the same place, same time.
[325] [phonecall starts] Hello, Tim speaking, I was on my way Charles.
[326] Okay, I'll see you in a minute.
[327] Bye [phonecall ends] .
[328] Right, that's it.
[329] Right.