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A highly restrictive policy regime insulated India’seconomy from global markets. The Indian governmentheavily regulated food grains and related products,banned maize exports in the 1960s and 1970s, and inthe 1980s allowed maize imports only through theFood Corporation of India. Later, when the demandfor poultry feed began to grow, the feed industry wasallowed to import maize without license, and maizeexports were allowed under a ceiling. In 1999, a TRQfor maize of 15% in-quota and 60% out-of-quota wasset (Table 2.6). Trade liberalization remains slow,however, and any move toward liberalizing externaltrade policy is usually accompanied by measuresdesigned to counter the effects of such a move.In China, food self-sufficiency goals led policymakersto restrain imports of land-intensive grains. Nearly20 years of policy reforms gradually changed China’sforeign trade regime from a highly centralized,planned, and import substitution-oriented regime toa more decentralized, market-oriented, and exportpromotingone. Trade and other policy reformssignificantly altered China’s trade composition infavor of products for which China has a comparativeadvantage. China’s maize trade liberalization,however, was fairly minimal prior to WTO accession(Huang and Rozelle 2005). Maize imports were limitedto those who had licenses and import quotas, and thecurrent maize trading system results in considerabledistortions and inefficiency.China’s WTO accession commitments includedecreasing overall agricultural import tariffs fromabout 21% in 2001 to 17% by 2004; a maize in-quotatariff of only 1%, and decreasing the maize out-ofquotatariff to 65%; increasing maize TRQ volumesfrom 5.7 Mt in 2002 to 7.2 Mt in 2004; and phasingout all maize export subsidies (on average, 34% ofthe export price) (Huang and Rozelle 2005). Afterthe removal of maize export subsidies, maize pricesinitially fell by 20%, but exports continued duringChina’s first year as a WTO member.Thailand’s self-sufficiency objective restricted maizeexports during 1961-81, but increasing domestic feedmaize demand led to re-instituting export quotasfrom 1992 to date. Following the 1995 WTO minimumaccess requirements, Thailand implemented TRQs formaize, which actually represented a step backwardfrom liberalization in the early 1990s. The tariff rateis now 20% and 76-80% for in-quota and over-quotamaize, respectively (Table 2.6); in-quota rates can beannounced on a year-by-year basis.After opening up its economy considerably sincethe late 1980s, when it was nearly closed, Vietnam’sstate agencies still control imports and exports, andtariffs on maize are high. Prior to 2000, quantitativerestrictions and licensing requirements controlledmaize imports. Under the ASEAN Free TradeAgreement (AFTA), however, Vietnam has committedto reducing tariffs to 20% by 2003 and 5% by 2006.Indonesia too is reducing its tariffs on a number ofagricultural products, including maize, to a maximumof 5% under an agreement with the IMF. The WTOagreements on maize in the Philippines meanwhilerequire that out-of-quota tariffs be reduced to 50%by 2004. The in-quota tariffs are, however, stillrelatively high at 35%. In Nepal, maize trade isrelatively unimportant; hence there are no qualitativerestrictions on agricultural trade, and no customsduty is applied to imports from India, Nepal’sdominant trading partner (Paudyal 2005).2.2.3 Macroeconomic policieson exchange rateExchange rate policies. Macroeconomic policiescan significantly influence overall incentives toagricultural producers. In fact, agriculture may bemore sensitive than other sectors to macroeconomicpolicies (Bautista and Valdes 1993). One of the mostimportant factors influencing maize incentives is thenation’s exchange rate policy (Beghin and Fang 2002).Overvalued exchange rates depress incentives todomestic producers of tradable goods, and increaseincentives for imports. The real depreciation ofdomestic currency raises the local currency pricesof tradable relative to non-tradable goods, and thuscontributes to the price-competitiveness of domesticexports.The seven Asian governments fixed their exchangerates in the early 1980s, as did most developingcountries. There was also a general bias againstagriculture, with overvalued exchange rates andhigher import controls on industrial products. Sincethen, there has been a general movement towardfloating exchange rates, although applied rates inthese countries are, to some degree, still overvalued.China highly regulated its foreign exchange marketthrough the mid-1990s, and maintained a two-tieredforeign exchange rate system before 1994. Whilepolicy determined the official exchange rate, tradingat a swap center determined the other rate. In 1994,liberalization united the two exchange rates to createa single managed exchange rate system, resultingin an official devaluation of the yuan of over 50%.This rate has stayed remarkably constant since then,although it has depreciated slightly in recent years.It is widely believed, however, that the domesticcurrency has gradually become overvalued since1994, and as such has provided a disincentive to thetradable agricultural sector.9