Policy Linkages Through Trade

The previous chapter has presented a brief picture of world agriculture from an international perspective. Decisions on policy are taken generally at a national level, but nations are cennected internationally by trade. This both constrains and enlarges the scope for national action. In this chapter we begin to develop an analytical framework for looking at intercountry interdependence. The focus is on trade relations where world prices are the links between nations. Thus, an analysis of price transmission between international and national markets is of crucial importance. We begin looking at international markets by constructing a simple model using excess supply and demand functions for a single-commodity, two-country world. The model is static and assumes initially no government intervention. The next step is to introduce policy intervention at the national level, looking at some examples of single-commodity policy intervention, and to illustrate the impact on world markets. We then introduce storage policies as a further element in policy interaction through world markets. The question of cross-commodity linkages is deferred to Chapter 3.