Wayne Jones and David Blandford

The growing globalization of the world economy -- based upon trade
liberalization, foreign direct investment, integrated financial markets --
and the resulting increase in competition has significant implications for
the structure and performance of the food processing industry. Product
mix, scale of operation, vertical coordination, industry concentration,
geographic location, and ownership are just some of the characteristics
being rapidly transformed by globalization.

At the same time, continued technological advance in the agrofood
sector is contributing to its closer integration into the rest of the economy
in most countries, as well as strengthened linkages between primary
production and downstream industries. Changes in primary production
can be significant for processors because they may induce changes in the
price, quality, stability, and source of supply of agricultural raw materials.

One of the principal factors influencing the pace and direction of
adjustment is the evolving policy environment within which the industry
operates. Agricultural policies, involving market price supports, supply
controls, border measures, export subsidies, and other policy instruments
distort market signals and inhibit adjustment to varying degrees and
affect industry structure and performance in terms of product prices,
resource allocation, regional distribution, scale of activity, balance of
market power, and industry adaptability. Trade policies also have impor-
tant effects. For the first time, agriculture has been brought under interna-
tional disciplines through the Uruguay Round Agreement on Agriculture
(URAA) with well-defined constraints on import barriers, export subsi-
dies, and domestic support. Most regional trade agreements include
agriculture, albeit often in a less comprehensive way than other sectors,

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