Magazine article Amber Waves

Japan, Vietnam, and the Asian Model of Agricultural Development and Trade

Magazine article Amber Waves

Japan, Vietnam, and the Asian Model of Agricultural Development and Trade

Article excerpt

Japan and Vietnam represent two stages of agricultural development in Asia. Japan is relatively wealthy and agriculture has become a protected and subsidized niche in its economy. Vietnam is relatively poor, and agriculture remains a significant source of exports and a large part of Vietnam's economy.

Both societies were long centered on rice agriculture, with its characteristic small farms. Both nations have non-agricultural sectors growing faster than agriculture. Since agriculture dominates land use and employs millions of people-even in today's Japan-both countries intervene to support farm household incomes.

Asian economic development has followed a process of dynamic comparative advantage whereby countries sequentially climb up the industrialization ladder (from unskilled labor-intensive sectors to more skill-based capital sectors). Japan, which industrialized earliest, is commonly viewed as a regional economic leader. Once a principal source of textile products that relied on imported cotton, Japan's industries have evolved to include steel, machinery, and electronics. Unskilled sectors transferred to the newly industrialized South Korea, Taiwan, Hong Kong, and Singapore. As labor costs increased in these countries, they in turn passed down the unskilled sectors to China and Southeast Asian countries, including Vietnam.

Industrialization in agriculture is difficult if farms are small, as in Asia. Workers leave agriculture for industrial or service-sector jobs, often migrating to cities. Farms throughout East Asia have tended to accommodate the reduced work force by simplifying and reducing farm activities, often concentrating on one crop (usually rice), livestock, or horticulture specialization. However, household incomes in small farms, especially rice farms, trail those of non-agricultural households. Governments then intervene to shore up agricultural household income. In countries where large farms have evolved, such as the United States, farm household incomes often approach or surpass nonfarm incomes. In trade liberalization talks, reconciling the protective policies in East and Southeast Asia with the exportoriented policies of countries with commercial farms can be hard.

Japan, the first Asian country to industrialize, has about 6 million people living on 1.6 million commercial farms. About 1.8 million of the farm residents spend over 50 percent of their time on farming. Although commercial farms average less than 5 acres, the households on these small farms still manage to have incomes close to that of nonfarm households. Some ofthat income comes from nonfarming pursuits; however, Japanese farms also benefit from output prices that are very high by global standards. These high prices are maintained by barriers to imports for key commodities produced in modem Japan: rice, beef, dairy products, and sweetener feedstocks such as beets and cane. Government subsidies also bolster farm income. Over half of Japanese farm income stems from government interventions. Some sectors, such as vegetables and fruits, require less government assistance because local production is fresher and closely attuned to the tastes of Japanese consumers-and therefore difficult for imports to replace.

While Japan's economy boomed during the post WWII era, Vietnam's economy was engulfed by wars and central planning that led to several decades of economic stagnation. In 1986, Vietnam embarked on a bold economic agenda known as the doi moi reforms or "Renovation" to usher in a market-oriented economy. The strategy was gradual in nature, with the state-owned enterprises and political structure left largely intact. Farm households were allowed to produce and market goods individually, rather than collectively. Farmers were granted long-term leases, which allowed for the exchange, transfer, further leasing, inheritance, and mortgaging of land-use rights. In conjunction with the doi moi reforms, Vietnam applied a growth strategy that promoted industrialized exports. …

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