Agricultural Trade Policies: Scope and Prospects for Multilateral Trade Reform

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Agricultural Trade PoliciesScope and Prospects
for Multilateral Trade Reform

• Dr. Simon J. Evenett
• World Trade Institute
• Bern, Switzerland
• simon.evenett_at_wti.org and www.wti.org

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Agenda

• How large is the agricultural sector today?
• Agricultural trade policy instruments
• Type
• Scope
• The Uruguay Agreement on Agriculture and
  subsequent developments
• US Farm Bill
• EC enlargement
• Concluding remarks, including the prospects for
  reform

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Sources

• Data World Development Indicators Online
  (available at the WTI)
• Messerlin paper (in reader)
• Writings of Timothy Josling
• IMFs World Economic Outlook 2002 (section of
  chapter on effects of OECD nations agricultural
  trade policies on developing economies)

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How large is the agricultural sector? Source WDI
online
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Agricultural trade policy instruments

• Stated motivations for policy intervention
• Maintain current lifestyle in rural areas
• Provide preferential access to national markets
• Self sufficiency
• Preferential overseas access
• Environmental concerns
• Expand access to agricultural markets abroad
• Concerns about agricultural competitiveness

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Agricultural trade policy instruments

• Trade related instruments
• Import measures (tariffs, quotas, tariff quotas,
  bans)
• Export subsidies
• Domestic price support
• Domestic production subsidies
• Domestic income support, including area support
• The mix of these instruments used varies a lot
  across countries

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Measures of policy intervention, by country.
Source Messerlin (2003)
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Measures of policy intervention, by agricultural
product Source Messerlin (2003)
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Total value of agricultural support Source
Messerlin (2003)
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..but how much of the support ends up in farmers
wallets? Source Messerlin (2003)
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So what have we learned about the types of
agricultural policies?

• There are many different types of agricultural
  policy interventions
• Most support is in the form of transfers to
  farmers (not to consumers)
• Amount of support varies markedly across
  different products
• Only a small fraction of the government support
  to farmers ends up increasing farmers
  incomeshighly inefficient

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The Uruguay Round Agreement on Agriculture

• Was not intended to seriously reduce the amount
  of protection in agricultural trade
• Goal was to codify existing measures and
  encourage their tariffication
• Theory was that tariffication would reveal just
  how high protection was in agriculture and would
  increase support for subsequent attempts to
  reduce such protection
• Transparency as an impetus to reform
• In fact, process of tariffication was not quite
  as clean as hoped

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USA Farm Bill 2002

• Updates the 1996 Farm Bill
• Important to distinguish between ex-ante farm
  support and ex-post farm support
• What is the difference between low levels with
  safeguards versus high levels and no safeguards?
• 2002 Farm Bill
• Essentially codifies ex-post levels of farm
  support
• Expands number of products benefiting from
  support
• Effects Will depress prices on world markets
  unless negotiated away in Doha Round
• But are commitments to lower levels of support
  credible?

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EC CAP reform and enlargement

• CAP reform
• Mid-Term Review of 1999 Berlin Council
• Chirac-Schroeder agreement in 2002
• Chirac declaration on export subsidies to Africa
• Commission proposals this summer
• EC enlargement
• Most acceding countries have larger agricultural
  sectors but only Poland is thought to have a
  comparative advantage in agricultural products
• Adjustments in Eastern Europe
• Fiscal strain in the EU

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Doha Round Estimates of gains from agricultural
liberalisation. Source IMF World Economic
Outlook 2002
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Concluding remarks

• How not to think about agricultural trade reform
• All agricultural products are protected in the
  same amounts and in the same way
• Agricultural protection is an efficient way to
  support farmers livelihoods
• Agricultural trade reforms in a Doha Round will
  generate widespread benefits in the
  industrialised and developing world
• Most of the harm done to developing countries
  agricultural sectors is by trade policies in
  industrialised countries

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Some parting questions

• As a quantitative matter, just how important is
  agricultural trade reform?
• Are we over-emphasizing the importance of the
  need for substantial agricultural trade reform in
  a development friendly trade round?
• Numbers and facts matter slogans can be very
  misleading
• What are the more efficient ways to implement
  support for farmers (assuming that this remains a
  goal of policymakers)?