Groundnut policies, global trade dynamics, and the impact of trade liberalisation

Using a new partial-equilibrium, multi-market, international model, the study analyses the impact of removing major policy distortions on world prices, trade flows, and welfare for major producing and trading countries involved in the groundnut market.

Findings of the study include:

• trade liberalisation in groundnut markets has a strong South-South dimension with policies in India, and to a lesser extent China, heavily depressing the world prices of groundnuts at the expense of smaller developing countries mainly located in Africa
• under free trade, African exporters would gain because they are net sellers of groundnut products
• in India, consumers would be better off with lower consumer prices resulting from the removal of prohibitive tariffs and large imports of groundnut products
• the cost of adjustment would fall on Indian farmers and crushers
• in China, crush margins would improve because of the large terms of trade effects in the oil market relative to the seed market
• China's groundnut product exports would expand dramatically
• net buyers of groundnut products in OECD countries would be worse off.

[adapted from aouthor]