The Uruguay Round and Welfare in Some Distorted Agricultural Economies

Abstract

There is widespread concern about the effect of the Uruguay Round policy changes on world agricultural prices and consequently upon the welfare of developing countries. Assessing welfare changes with the standard terms of trade effect calculation can be misleading for distorted economies, since the distortion effect operates in addition or in opposition to the terms of trade effect. This study reveals distortion effects which are many times larger than terms of trade effects in a study of the Uruguay Round's impact on 9 agricultural economies. In 3 of 9 cases, the distortion effect reverses the impact of the terms of trade effect. In 2 other cases the distortion effect raises a trivial terms of trade effect up to around 1% of national income.