Sustainable Rural Development in the Conditions of Trade Integration: From Challenges to Opportunities

Sustainable Rural Development in the Conditions of Trade Integration: From Challenges to Opportunities

Anna Ivolga (Stavropol State Agrarian University, Russia)
DOI: 10.4018/978-1-5225-0451-1.ch013
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Abstract

The chapter aims at overview of the main approaches to agricultural policies in developed and developing countries and investigation of perspective ways to ensure sustainable rural development in the conditions of liberalization of trade in agricultural commodities and food. The issues of sustainable rural development and main influences of trade liberalization are considered in the light of food security, alternative income opportunities in rural areas, and support of local identities. When analyzing the economic potential of rural areas, the following indicators are studied: natural conditions; assets; general characteristics of labor resources. Some of the indicators, used to be considered as secondary for economic results of agricultural activity, are also considered: living conditions in rural areas; demographic situation; rural social, cultural and leisure infrastructure; access of rural people to modern services of communication, transport, education, medicine, consumer services and other benefits, accustomed for urban citizens.
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Background

Globalization has created unprecedented growth in global markets. Various researches demonstrate clear links between globalization, trade liberalization, and economic growth. Andersen and Babula (2008) discovered positive relationship between international trade and economic growth. As of Manni and Ibne Afzal (2012), liberalization policy improves export of a country, which leads to the higher economic growth. Parikh and Stirbu (2004) also conclude, that trade liberalization may promote growth from a supply (export) side through a more efficient allocation of resources while it may constrain growth from a demand (import) side.

However, the effects of trade liberalization and integration are different for developed and developing economies. There are two major reasons why liberalization of foreign trade activities and integration are beneficial for developing countries (Krugman, 1990). First reason is a narrow domestic market, since the demand growth in developing countries is usually constrained by low per capita incomes. In such a situation, a liberalized trade regime allows domestic producers to increase exports and expand their outlet area. While the first reason deals with increasing export opportunities, the second one is related to market access. It is an increase in welfare derived from an improved allocation of domestic resources (Manni & Ibne Afzal, 2012, p. 38). Removal of import restrictions through trade liberalization encourages a shift of resources from production of import substitutes to production of export-oriented goods. This, in turn, generates growth as a country adjusts to a new allocation of resources more in keeping with its comparative advantage (McCulloch, Winters, & Cirera, 2001).

While some of the researchers conclude that developing countries and economies in transition could benefit from liberalization, others find the opposite. Open trade regimes force greater reliance on the international market, which is not always good for “weaker” and less competitive developing countries and economies in transition. Many developing countries currently rely on export-oriented production as a mean of generating foreign exchange earnings with which to purchase manufactured goods and food products (Gonzalez, 2004, p. 423). As of Erokhin, Ivolga, and Heijman (2014), developing countries are to a far greater degree concerned that the major part of benefits of trade liberalization goes to the developed states. Kneller, Morgan, and Kanchanahatakij (2008) agree that there is a positive but small impact of trade liberalization on growth.

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