3 exports of plantation crops in post-colonial Africa (Bates 1981). Many developing countries have also chosen to overvalue their currency and to pursue an import-substituting industrialization strategy by restricting imports of manufactures. Together, these measures have indirectly taxed producers of other tradable products in developing economies, most of whom have been farmers (Krueger, Schiff, and Valdés 1988; 1991). In other words, policies in developing countries have not been motivated by a desire to alleviate poverty in their rural areas (where most of the world’s poor reside) any more than have been the policies of developed countries. The resulting disarray in world agriculture, as D. Gale Johnson (1973) described it in the title of his seminal book, has manifested itself in overproduction of agricultural products in high-income countries and underproduction in low-income countries. This disarray also means that there has been less international trade in such products than would have been the case under free trade. The end result is thinner and thus more volatile markets for these weather-dependent products.<sup>2</sup> In developed countries, agricultural policy remains disproportionately important compared to the relatively small shares of the upstream agriculture component in GDP and employment. For example, the Common Agricultural Policy (CAP) continues to absorb 40 percent of the entire EU budget. Agricultural and farm employment and output in developed countries has declined markedly, yet agriculture and agricultural policy are still such a priority in these countries’ trade negotiations that they appear willing to let the current round of WTO negotiations—on which the future growth of global income and the trade of all goods and services depend—collapse over disputes on agricultural-policy reforms. To be sure, symptoms of widespread policy and international governance failures can be found in both developing and developed countries. Although economists have argued against agricultural subsidies and trade barriers for decades (e.g., Irwin 2002), vested interests’ political forces continue to dominate domestic agricultural policy in both rich and poor countries.

The objective of this paper is to review and synthesize the literature that investigates trends and fluctuations in agricultural- and food-policy distortions as well as the politicaleconomic theories that have been advanced to explain such distortions. We identify hypotheses that have been explored in the literature concerning the extent of price distortions and the potential for the adoption of sustainable unilateral and multilateral policy reforms in developed, developing, and transition economies. We emphasize that although many countries have recently begun to adjust their agricultural and trade policies, these reforms have not kept up with the effects of globalization in the non-agricultural sectors of the world economy. We examine the extent to which these more-recent agricultural-policy reforms have succeeded in reversing the prior era’s policy distortions, and we explore the sustainability of these reforms.

Throughout our assessment, we emphasize the potential empirical insights that are embedded in a global five-decade database of evidence recently compiled by the World Bank. This database updates and dramatically expands our understanding of the distortions to market incentives across the globe. The recently improved political-economic conceptual lenses, combined with the new global database, allow the empirical testing of a rich menu of hypotheses about patterns across countries, commodities, and policy instruments.

Recent political-economic frameworks have focused on issues beyond the structural economic factors on which most earlier research concentrated.<sup>3</sup> These conceptual frameworks

> 2 Using a stochastic model of world food markets, Tyers and Anderson (1992) found that instability of international food prices in the early 1980s was three times greater than it would have been under free trade in food products.

> 3 Our paper is a successor to the paper published by _JEL_ by Binswanger and Deininger (1997). It makes three additional contributions. First, we cover the full spectrum of countries (not only developing countries). Our empirical evidence covers countries that account for 92 percent of the world’s population and agricultural production and 96 percent of global GDP. Second, our paper covers agricultural price- and trade-distorting