Influencing GVCs through Agro-Food Policy and Reform

Abstract

Global value chains (GVCs) in agriculture and food sectors contribute to sector growth and development. However, agricultural trade is subject to significant distortions that limit trade which in turn impacts on its competitiveness world-wide. Using the OECD Metro model, this study analyses the impact of trade and domestic support policies on participation in agro-food GVCs and the benefits that flow from them. The results show that current market access barriers and distorting forms of domestic support have a negative effect not only on welfare, but also on the possible benefits from participation in agro-food GVCs. If barriers, i.e. tariffs and quotas, were removed this would offer the potential to increase welfare, increase exports of agro-food domestic value added from all countries, and promote trade by furthering GVC links through value added. This study also shows that regional trade agreements have the potential to deepen GVC linkages amongst members.