The Changing Structure of Domestic Support and Its Implications for Trade
01 Feb 2013-
TL;DR: In the absence of a new agreement, constraints on distortionary agricultural domestic support remain lax as mentioned in this paper, while support for agriculture has increased in key emerging economies such as Brazil, Russia, India and China.
Abstract: Movement toward the objective of undistorted world agricultural markets has been set back by the lapse since 2008 of the WTO Doha Round negotiations. In the absence of a new agreement, constraints on distortionary agricultural domestic support remain lax. One might have expected policies of subsidizing farmers to have faded in the high-price environment since 2008. But that is not the case. In both the US and EU, agricultural support policy is under review and new options are being devised. Likewise, support for agriculture has increased in key emerging economies. In the US, in particular, the next farm bill likely will contain support measures that would have been harder to enact if a Doha Round agreement were coming into effect. This paper reviews these developments and their implications for trade and future trade negotiations. The WTO commitments of the BRIC countries (Brazil, Russia, India and China) and their levels of agricultural support are examined, including the domestic support commitments of Russia under its accession to the WTO in 2012.
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TL;DR: In this paper, a model of transition agriculture is used to evaluate the performance of Russian agriculture during transition, and an outlook for the future is provided, with a focus on the future.
Abstract: In the 2000s, Russia emerged as a major player in world agricultural markets, on both the supply (mainly grain) and demand side. This article examines Russia's agricultural transition experience, which has resulted in a complex system of diverse producers and institutions, as well as uneven performance. Using a model of transition agriculture, the article explores how key reform policies drove systemic change and commodity restructuring, and how the ensuing changes in the production, consumption, and trade of goods have affected world markets. The article also assesses the performance of Russian agriculture during transition, and provides an outlook for the future.
73 citations
13 Nov 2017
TL;DR: The authors surveys 20 years (1995-2014) of trends in world agricultural trade and summarizes key policy issues that will confront decision makers and shape agricultural trade in the coming years, including sanitary and phytosanitary barriers and other technical barriers.
Abstract: Global agricultural trade, about $1 trillion in 2014, has been rising about 3.6 percent per year for the last two decades, facilitated by technological change and productivity gains, as well as trade liberalization. In addition, trade patterns have shifted and trade policy has evolved. The largest importers and exporters of agricultural products are largely unchanged over the last 20 years, but five countries—Brazil, Russia, India, Indonesia, and China—account for much of the increase in trade. The landscape of policies affecting trade is increasingly complex, and agricultural trade is facing obstacles that may restrict future growth. Despite trade rules such as in the World Trade Organization, countries impose trade barriers. High tariffs are permitted for many products in many countries. Rising domestic support in some countries could undermine a level playing field for agricultural trade. Moreover, sanitary and phytosanitary barriers and other technical barriers to trade are growing, with disagreements about the scientific basis for rejecting products becoming particularly contentious. This report surveys 20 years (1995-2014) of trends in world agricultural trade (1995-2016 for some measures of U.S. agricultural trade) and summarizes key policy issues that will confront decision makers and shape agricultural trade in the coming years.
22 citations
Posted Content•
TL;DR: The authors summarizes indicators of trends and fluctuations in farm trade barriers before examining unilateral or multilateral trade arrangements, together with complementary domestic measures, that could lead to better global food security outcomes.
Abstract: Historically, earnings from farming in many developing countries have been depressed by a pro-urban bias in own-country policies, as well as by governments of richer countries favouring their farmers with import barriers and subsidies. Both sets of policies reduced global economic welfare and agricultural trade, and added to global inequality and poverty. Over the past three decades, much progress has been made in reducing agricultural protection in high-income countries and agricultural disincentives in developing countries. However, plenty of price distortions remain. As well, the propensity of governments to insulate their domestic food market from fluctuations in international prices has not waned. Such insulation contributes to the amplification of international food price fluctuations, yet it does little to advance national food security when food-importing and food-exporting countries equally engage in insulating behaviour. Thus there is still much scope to improve global economic welfare via multilateral agreement not only to remove remaining trade distortions but also to desist from varying trade barriers when international food prices gyrate. This paper summarizes indicators of trends and fluctuations in farm trade barriers before examining unilateral or multilateral trade arrangements, together with complementary domestic measures, that could lead to better global food security outcomes.
7 citations
References
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Book•
01 Jan 1994
352 citations
TL;DR: The authors provide an overview of the evolution of distortions to agricultural incentives caused by price, trade, and exchange rate policies in a large sample of countries spanning the world, including the United States.
Abstract: This book provides an overview of the evolution of distortions to agricultural incentives caused by price, trade, and exchange rate policies in a large sample of countries spanning the world. This chapter begins with a brief summary of the long history of national distortions to agricultural markets. It then outlines the methodology used to generate annual indicators of the extent of government interventions in markets, details of which are provided in Anderson et al. (2008a, 2008b) and appendix A of this volume. A description of the economies being examined and their economic growth and structural changes over recent decades is then briefly presented as a preface to the main section of the chapter, in which the nominal rate of assistance (NRA) and consumer tax equivalent (CTE) estimates are summarized across regions and over the decades since the 1950s. These estimates are discussed in far more detail in the regional studies that follow, chapters two-ten. A summary of an additional set of indicators of agricultural price distortions, presented in chapter eleven, is based on the trade restrictiveness index first developed by Anderson and Neary (2005). In chapter twelve, the focus shifts from countries to commodities, and various distortion indicators are used to provide a sense of how distorted each of the key farm commodity markets is globally. Chapter thirteen uses the study's NRA and CTE estimates to provide a new set of results from a global economy-wide model. It quantifies the impacts of reforms undertaken since the early 1980s, and of the policies still in place as of 2004, on global markets, net farm incomes, and welfare. Finally, that chapter concludes by drawing on the lessons learned to speculate on the prospects for further reducing the disarray in world agricultural markets.
305 citations
"The Changing Structure of Domestic ..." refers background or methods in this paper
...The World Bank also uses an economic approach to examine agricultural protection and support since the mid-1950s (Anderson, 2009)....
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...2 The method for calculating WTO MPS is 1 Anderson (2009, 2012) shows that developing countries as a group from the 1950s onwards effectively taxed agriculture: the nominal rate of assistance was negative albeit rising....
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TL;DR: This paper found that farmers who rent the land they cultivate capture 75 percent of the subsidy, leaving just 25 percent for landowners, which is contrary to the prediction from neoclassical models.
Abstract: Who benefits from agricultural subsidies is an open question. Economic theory predicts that the entire subsidy incidence should be on the farmland owners. Using a complementary set of policy quasi experiments, I find that farmers who rent the land they cultivate capture 75 percent of the subsidy, leaving just 25 percent for landowners. This finding contradicts the prediction from neoclassical models. The standard prediction may not hold because of less than perfect competition in the farmland rental market; the share captured by landowners increases with local measures of competitiveness in the farmland rental market.
245 citations
224 citations
"The Changing Structure of Domestic ..." refers background or methods in this paper
...The World Bank also uses an economic approach to examine agricultural protection and support since the mid-1950s (Anderson, 2009)....
[...]
...1 Anderson (2009, 2012) shows that developing countries as a group from the 1950s onwards effectively taxed agriculture: the nominal rate of assistance was negative albeit rising. By the late 1990s the nominal rate of assistance for agriculture in developing countries as a group had turned positive and it remained positive in 2000-04 and 200510. 2 The use of administered prices in the WTO MPS results from designing it to account only for domestic measures, to the exclusion of border measures, such as tariffs. It was also designed as an indicator whose size could be entirely controlled through policy decisions, meeting some governments’ concern about taking commitments on a variable outside their control. This led to the use of fixed reference prices and eligible production, as distinct from current reference prices and total production, which are beyond government control. Recognizing that the WTO MPS does not, despite its name, measure market price support in an economic sense, economic analysts exercise caution when introducing the WTO MPS in their work. The OECD, in contrast to the WTO, uses an economic measurement of market price support in the Producer Support Estimate (PSE); see, for example, OECD (2011). The World Bank also uses an economic approach to examine agricultural protection and support since the mid-1950s (Anderson, 2009)....
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...2 The method for calculating WTO MPS is 1 Anderson (2009, 2012) shows that developing countries as a group from the 1950s onwards effectively taxed agriculture: the nominal rate of assistance was negative albeit rising....
[...]
TL;DR: Wang et al. as discussed by the authors examined the effect of China's subsidy policy on household behavior and found no evidence that grain subsidies are distorting producer decisions in terms of grain area or input use decisions.
Abstract: Concerned about national grain self-sufficiency and rural household incomes, in 2004 China announced that it was planning to reverse its longstanding policy of taxing farm households and instead began to provide them with subsidies. Over the past five years, annual announcements have trumpeted rises in subsidies. Surprisingly, despite the historic turnaround of policy and the likely implication of this subsidy policy to China's grain economy, there has been no household-level survey-based research that has sought to understand the effect of China's subsidy programme on household behaviour. Using data from a national survey of more than 1000 households, we examine in detail a number of different dimensions of the subsidy programme. According to the survey-based findings, we have shown that although agricultural subsidies per farm are low, on per unit of cultivated area basis or total amount of budget, the subsidies are high. Almost all producers are receiving them. Subsidies are mostly being given to the land contractor, not the tiller. Most importantly, the subsidies appear to be nondistorting. No matter if we look at descriptive statistics in tables, scatter plots or regression analyses, there is no evidence that grain subsidies are distorting producer decisions in terms of grain area or input use decisions.
153 citations