11 discouraged production of exportables. At the same time it created an artificial shortage of foreign currency so that potential importers bid up its purchase price, which had the same effect as an import tax and thus encouraged import-competing production (Dervis, de Melo and Robinson). The size of these effective if implicit trade taxes depends on the extent to which the government purchase price differs from what would be the free-market equilibrium price, the price elasticities of demand for and supply of foreign currency, and the retention rate (the extent of the requirement to sell a portion to the government). In some countries there were more-complex multiple exchange rates, whereby traders of some products were subject to more favorable treatment than others. In estimating NRAs in developing countries, participants in the Agricultural Distortions project endeavored to include the effects of these implicit trade taxes, and to show how much impact they had on the NRAs and RRA. The practice was rife in newly independent developing countries in the 1960s and 1970s, but was gradually phased out over the 1980s and early 1990s as part of overall macroeconomic policy reform initiatives.<sup>13</sup> Anderson and Neary also show that it is possible to develop a single index that captures the extent to which import protection reduces the volume of trade. Once NRAs and CTEs have been calculated, Lloyd, Croser and Anderson show how they can be used to generate a more-general Trade Reduction Index (TRI) that allows for the trade effects also of domestic price-distorting policies, and regardless of whether they (or the trade measures) are positive or negative. Such a measure is the percentage agricultural trade tax (or uniform NRA and CTE) which, if applied equally to all agricultural tradables, would generate the same reduction in sectoral trade volume as the actual intra-sectoral structure of distortions to domestic prices of tradable farm goods. They show also that, if the domestic price elasticities of supply (demand) are equal across farm commodities, then the only information needed to estimate the TRI, in addition to the NRAs and CTEs, is the share of each commodity in the domestic value of farm production (consumption) at undistorted prices.

> 13 There were many other reasons for exchange rate movements which affected the international competitiveness of farmers, but they also affected producers of other tradable products. Where they are due to the actions of international borrowers and lenders (as in the 1990s in Latin America – see Quiros and Opazo), they cannot be interpreted as price distortions in the same way as captured in NRA estimation. Where misalignment arises because of government macroeconomic policy, such as a delay in the adjustment of a fixed exchange rate when the government increases its borrowing from abroad, symmetric treatment of any such “overvaluation” during a heavy borrowing period would require taking into account exchange rate “undervaluation” during periods of low foreign borrowing or repayment of foreign debt. For these reasons, we do not follow K/S/V in including deviations of real exchange rates from benchmark values unless these deviations arise from direct distortions as with dual or multiple exchange rates.