WTO agreement on agriculture and its impact on employment in South Asia

As almost all the South Asian countries posses comparative advantage in the areas of agriculture, textiles and services; policymakers of these countries expected that increased market access would allow for an open and export led development policy. This paper analyzes whether and how globalization and WTO has affected the employment scenario in South Asia. It provides information about the following:

• how agricultural trade liberalization can affect employment scenario in the South Asia
• the WTO Agreement on Agriculture (AoA)
• how the implementation of AoA has helped the agricultural sector in the South Asian countries
• whether the WTO Agreement on Agriculture has helped promote employment in South Asia

The author argues that a growing agricultural sector may improve rural employment through the following channels in South Asia:

• since agriculture is a very labour intensive process, any significant increase in agricultural production should generally result in an increase in rural labour demand and rural real wages
• an increase in rural income generates higher demand for locally produced goods and services, which generally have high income-elasticity of demand and employment content
• buoyant agricultural sector can generate higher employment through its strong backward linkages and forward linkages
• the construction of the infrastructural support for agriculture is highly labour intensive in nature and generates rural demand for consumer goods and services which are likely to be labour intensive in nature

However, the author finds that the initial expectation that AoA would induce higher production of agricultural goods in developing countries and thereby, would promote rural development and employment, has not materialized in practice because:

• high subsidies given by developed countries to their agricultural sector continue to distort global agricultural trade
• existence of high tariff and non-tariff barriers in agricultural sectors of most developed countries have not allowed the developing countries to reap the full benefit of agricultural trade liberalization
• a shift to a tariff only regime and opening up of the agricultural sector has made the small and medium farmers of South Asian countries vulnerable to external shocks

Moreover, with these problems, the author believes it is unrealistic to expect that agricultural employment will benefit much from AoA. However, the author recommends increasing the public and private expenditure on rural infrastructure because it can not only boost rural employment in the short run, but it also contributes to make the agricultural sector more internationally competitive in the medium to long run.