Global Agricultural Policy & Macro Economy

• Agricultural policy is closely linked to the macro economy.
• The macro economy is affected by the world economy's openness to trade and non-economic activities.
• Global issues in production, consumption, and trade affect both developing and developed countries' agricultural sectors.

Major Issues and Problems at Three Levels

• The international/world/global economy is characterized by the interconnected economic activities of most countries.
• Interconnected economies give rise to a global economy.

Forms of Economic Linkages

• International trade flows involve selling goods and services across borders.
• International income flows are movements of capital incomes, labor incomes, or transfer payments.
• International transactions in assets involve trading financial assets or investments in real foreign assets.
• International flows of people consist of temporary or permanent migration.
• International flows of technological knowledge include cultural products and other intangibles.
• International sharing of common environmental resources occurs in deep-sea fisheries and the global climate pattern.
• The institutional environment includes international monetary institutions, trade agreements, military and aid arrangements, banks, corporations, and other entities operating internationally.

Globalization

• Globalization is the integration of national economies into the international economy through various linkages.
• Trade liberalization trends result from trade agreements:
  • World Trade Organization (WTO)
  • Association of Southeast Asian Nations (ASEAN)
  • Asian Free Trade Area (AFTA)
  • Asia-Pacific Economic Cooperation (APEC)
  • China-Asean Free Trade Area (CAFTA)
• Trade is enhanced by eliminating trade barriers and fostering technical and economic cooperation.

Globalization Issues Addressed by Policy

• Large importation of agricultural products can make locally produced products uncompetitive.
• Disease can spread across national borders, which affects local plant and animal production if unregulated.
• The inflow of foreign investment impacts production and marketing systems, especially for small farmers.
• Greater market access of foreign products can lead to overexploitation of a country's natural resources.
• Technological breakthroughs can expose developing countries to risk if adopted without safeguards.
• Climate change affects agricultural yield, production, and farming populations.

Macro Economy

• The macro economy consists of the industrial, services, and agricultural sectors.
• Depending on the economic development level, the contributions to national output, income, and employment vary across countries.
• In less-developed countries, the agricultural sector is the largest share of the economy.
• In developed countries, agriculture is the smallest sector.

Common Problems in Less Developed Countries

• Slow economic growth is measured by changes in the amount and value of goods and services produced, based on real GDP/GNP changes between two periods.
  • Gross National Product (GNP) estimates the total value of all final products and services produced by a country's residents.
  • Gross Domestic Product (GDP) takes into account all output produced within a country's borders, regardless of who owns the means of production.
• Unemployment is related to sluggish economic performance and high population growth.
  • The Philippine unemployment rate hit a record 3.8% in 2024.
• Inflation measures how quickly the prices of goods and services are rising.
  • It is measured by changes in the consumer price index between periods.
• A budget deficit occurs when government expenses exceed revenue, affecting the national debt and economy.
• Hunger and malnutrition are due to inadequate food intake from limited purchasing power.
  • Persistent hunger causes severe malnutrition problems.
• Local political disturbances and civil strife disrupt production, destroy infrastructure, increase military expenditures, and limit the output and income potentials of a country.

The Agricultural Sector

• Agriculture is most important during the early stages of economic development.
• Most resources are concentrated in this sector.
• More than 50% of the population are employed in agriculture-related activities.
• With an expanding population, agriculture provides food and nonfood needs, capital for developing other sectors, direct increases in rural welfare, and raw materials for industries.
• Agriculture provides raw materials for industries and releases labor and capital for developing other sectors.

Key Problems in Agriculture Affecting Developing Countries

• Poor farm productivity/low yields are measured by output per unit area planted or harvested.
  • It can be caused by poor soils, pests and diseases, adverse weather, and limited technology adoption.
• Limited marketable surplus is due to low yield and small farm sizes.
  • Low volume for sale and limited marketing options contribute to poor bargaining position for producers.
• Low farm income is caused by low marketable surplus, unfavorable prices, or high production costs.
  • Income is lower than the threshold for meeting basic needs, causing households to fall below the poverty line.
• Lack of capital for farming and marketing operations limits the use of recommended input levels for efficient operations and contributes to low yields.
• Dependence on middlemen for capital and marketing occurs.
• Tenancy and insecure property rights contribute to low farm productivity and income.
  • Tenants lack decision-making rights and are not entitled to the benefits of farming operations.
  • The Agrarian problem in the Philippines is associated with inequitable land and asset distribution.
• Lack of infrastructure, such as irrigation, post-harvest, and transport facilities, limits cropping intensity and farm output.
  • Poor postharvest facilities cause high postharvest and product losses, including low productivity.
  • Inadequate transport and marketing facilities limit market access and increase costs, leading to an inefficient marketing and distribution system.
• Inadequate attention to food safety and health risk issues.
  • Food safety and health risks have yet to receive ample attention from the government.
  • There is a lack of investment in physical facilities and regulatory measures to ensure food reaches consumers according to health and safety standards.
• Environmental problems, including climate change, cause yield variability and increase production risks.

Addressing the Problems and Issues

• Economic problems call for prudent actions at different levels (local, national, and international).
• Government (local and national) is at the forefront of solving problems.
• International initiatives are undertaken by calling for global cooperation among nations.

Economic Rationale for Government Intervention

• Government measures address problems through public policies, programs, and projects.
• The rationale of government interventions includes efficiency and equity objectives.
• Economic efficiency involves the most productive allocation and use of resources for economic growth and prosperity.
  • Markets that do not work perfectly fail.
  • Market failures occur when the market will not result in efficient allocation and use of resources.
• Equity relates to the fair distribution of wealth, income, and opportunities.
  • Markets may be working properly, but the outcomes are unacceptable because some sectors are disadvantaged.
  • The government intervenes to provide "welfare" measures for education, food, staples, unemployment insurance, and medical/health care.

Global Initiatives

• Global initiatives involve various forms of assistance or aid to support the implementation of national and local policies and programs.
• By source, foreign aid can take two forms:
  • Bilateral aid is given by one country to a recipient country through a governmental aid agency (USAID, SIDA, CIDA, JICA, AusAID).
  • Multilateral aid is given by the government of one country through an international agency (World Bank, IMF).
• In agriculture and rural development, research is undertaken through the Consultative Group on International Agricultural Research (CGIAR).

National and Local Initiatives

• The Medium-Term Development Plan integrates the government's efforts to address development problems and issues.
  • It is prepared by each administration consistent with the 6-year term of the president.
  • The national plan spells out the strategic policy directions of the country relative to its goals and objectives and involves many sectors of the economy.

The Role of Public and Private Sectors

• The public sector includes executive departments of the government.
• The private sector includes business groups, foundations, NGOs, people's organizations (POs), and civil society as a whole.
  • Private sectors facilitate the delivery of support services, provide private funds for developmental work, and assist in monitoring and evaluation.