Food and Agriculture Policy: A Positive Reform Agenda

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Food and Agriculture Policy A Positive Reform
Agenda
ORGANISATION DE COOPÉRATION ET DE DEVELOPMENT
ÉCONOMIQUES
ORGANISATION FOR ECONOMIC CO-OPERATION AND
DEVELOPMENT

• Ken Ash
• Deputy Director, Food, Agriculture and Fisheries

California, 19-20 January 2003
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Agriculture Policies in Canada, Japan, the EU and
US

• instruments and impacts
• recent and on-going developments
• alternative policy approaches

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Producer Support Estimate ( PSE)
PSE
Japan
EU
Canada
US
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Canada Composition of PSE
5

Japan Composition of PSE
6
EU Composition of PSE(simulated CAP Reform)
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US Composition of PSE
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Composition of PSE
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Production linked support is

• inefficient 25 goes to farm income
• ineffective capitalisation increases costs and
  reduces profitability can harm the environment
• inequitable wealthiest farms receive most
  support
• trade distorting relies on import protection
  and/or export subsidy, imposing a burden on other
  countries

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Evolution of PSE Support

Japan
EU
US
1986-88
Canada
2002
PSE
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Alternative Policy Approaches

• Food and Agriculture Policy
• reduce border protection
• eliminate export subsidies, and
• pursue domestic objectives with
• decoupled support
• targeted measures
• tailored support
• Non-Sectoral Policies
• economic, social, environmental

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Farm Household IncomeWhich Policies?

• avoid broad, output-based measures
• target uncontrollable income risks(commodity
  markets, income insurance)
• target on-farm performance (skills, technologies)
  and/or diversify income sources (rural
  development )
• target systemic low incomes (social safety nets)

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Rural Communities -Which Policies?

• agriculture policy is not rural policy
• target the root causes of economic disadvantages
  (local, multi-sectoral initiatives)
• target systemic policy bias against rural and
  remote areas (infrastructure, public services)

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Environmental Sustainability -Which Policies?

• avoid production-linked incentives
• target the source of negative impacts of farm
  production (polluter-pays taxes, regulations)
• target the provision of desired, positive impacts
  of farm production (direct payments)
• integrate policy approaches (link to broader
  environmental policy)

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How Important is Capitalisation?

• much of existing support has been capitalised
  into asset values (perhaps 15-20 of land
  values, production quotas)
• the short-term economic adjustment is
  considerable
• the long-term offers benefits, but the
  transition period must be managed

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Conclusion

• international and domestic benefits of reform are
  generally accepted (?)
• the overall approach is widely understood (?)
• decouple support from farm production
• target clear objectives and beneficiaries
• reduce amount and scope of support
• limit duration of intervention
• avoid unintended impacts (review and revise
  policies)

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Conclusion (cont.)

• sustainable reform requires a viable adjustment
  and compensation strategy (?)
• adjustment within the sector (competitive
  suppliers, diversified income sources)
• transition out of the sector (into more viable
  employment opportunities)
• compensation for policy change and any
  associated losses (limited duration)
• what else is required?