Agricultural trade has always been one of the most sensitive international trade issues. Governments around the world have long been reluctant to abandon policy instruments that give them influence over domestic prices and allow them to raise revenues. The most commonly cited justification for government intervention in agricultural trade is food security, since if domestic prices are too high, poor consumers will not be able to buy enough food, and if they are not high enough, producers will not produce enough food. The food security argument is stronger in some countries (e.g. food-insecure...

This hard-hitting research report presents a rigorous critique of the most widely used trade models based on computable general equilibrium (CGE) models. The authors present concise analytical arguments explaining the fundamental weaknesses of typical CGE models. They show that these models tend to make unrealistic assumptions about the macro-economy and do not allow an accurate estimation of the welfare gains that trade liberalization is supposed to induce.

The report appeals for honest simulation strategies showing a variety of possible outcomes, which would enable policymakers...