WTO AND PAKISTANS AGRICULTURE: A PRICE INTEGRATION AND WELFARE ANALYSIS FOR WHEAT

This study evaluates the impacts of the Uruguay Round Agreement onAgriculture (URAoA) on wheat using a partial equilibrium model. Weapply cointegration method for Pakistan in order to examine whetherthere exists a stable long run relationship between farm gate price andwholesale price and between wholesale price and world price of wheat.Further Granger causality test is applied to discover the direction ofinfluence between the prices. Price integration analysis shows that thereis a stable long run relationship between farm gate price and wholesaleprice and between wholesale price and world price of wheat. Directionof influence is from world price to wholesale price and from wholesaleprice to farm gate price. The welfare analysis has been conducted byestimating the domestic demand and supply functions and by using theconcepts of consumer and producer surpluses. It is found that loss inconsumer surplus exceeds gain in producer surplus and the nation willhave to face net welfare loss in case of wheat under trade liberalization.