Post on 20-Jan-2016
Tackling the political problem of farm subsidiesPrepared for:University of CaliforniaSilverado Symposium on Agricultural Policy ReformSilverado Resort, Napa Valley, California19-20 January 2004
Prepared by:Dr Andrew Stoeckel, Executive DirectorCentre for International Economics, Canberra, Australia
2
The agricultural trade problem
No reform for fifty years
Political problem
Farmers are a well organised political group
Things have not got much better
But, in general, not worse either
3
Agricultural PSEs for OECD, the United States, Japan and the European Union
0
10
20
30
40
50
60
70
1986 1988 1990 1992 1994 1996 1998 2000
Pro
duce
r su
ppor
t est
imat
e (%
)
United States
Japan
OECD
European Union
4
The mix of highly distorting and less distorting agricultural subsidies in OECD countries
0
10
20
30
40
50
60
70
Austra
lia
Canad
a
Czech EU
Hungr
y
Icelan
d
Japa
n
Korea
Mex
ico NZ
Norway
Poland
Slovak
ia
Swiss
Turke
yUSA
OECDPro
duce
r su
ppor
t es
timat
e (%
)
.
Less distortingHighly distorting
5
6
Forces for and against reform
Forces for reformForces against reform
Farmers
7
CBO projections of total US fiscal surplus/deficit
-600
-400
-200
0
200
400
600
800
1000
2000 2002 2004 2006 2008 2010 2012
US$
billio
ns
CBO projections, August 2003
CBO projections, January 2001
8
Forces for liberalisation
Taxpayers GreensExportersDeveloping
countriesConsumers
Those facingbarriers
Generally
Doha Round onlyempowers this group
9
Doha Round
Based on reciprocal ‘concessions’
May have worked in the past
No longer working
Success in other areas (nothing left to ‘give’ away)
Flawed logic
10
A quick quiz of Indonesian journalists
EXPORTS are: 19
BADGOOD
IMPORTS are: 0
0
19
11
Forces for liberalisation
Taxpayers GreensExportersDeveloping
countriesConsumers
Those facingbarriers
Generally
Doha Round onlyempowers this group
Australia’sliberalisation led by this group
12
13
How to engage other groups
Economy-wide analysis Look beyond the direct to the indirect or secondary
effects
Important in Australian liberalisation Also for New Zealand
Requires a special process Open, independent, transparent
Changes the politics of protection
14
Forces for liberalisation (continued)
For reform
Greens
Against reform
Farmers
15
Good and bad subsidies
Positive economic
Negative economic
x
Positive environmental
Negative environmental
x
x
x xx
80%
16
Benefits of New Zealand reform
0
10
20
30
40
50
60
70
80
90
1984 1986 1988 1990 1992 1994 1996 1998 2000
She
ep n
umbe
rs (
mill
ion
head
)
0
200
400
600
800
1000
1200
1400
1600
1800
Priv
ate
fore
st a
rea
(000
ha)
Number of sheep
Area of private forests
17
Forces for liberalisation (continued)
For reformDeveloping countries
Against reform
Farmers
18
Welfare gains from trade liberalisation in the Philippines
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
0
2
4
6
8
10
Full WTO liberalisation
Own liberalisation
19
Preferences and developing countries
Mauritius has preferential access to EU’s sugar market
Benefit: Mauritian sugar (roughly)
0.6 mt x $500 per tonne = $300 million
BUT Resources used to produce sugar 93 per cent arable land devoted to sugar Tourism has limited access to land ‘Guestworkers’ imported to fill labour gaps
20
Preferences and developing countries (continued)
Measuring all secondary effects shows Mauritius worse-off
Same story with bananas
Preferences ‘kiss-of-death’
21
22
Forces for and against reform
Forces for reformForces against reform
Farmers
23
Price differentiation, domestic Wagyu beef production: Japan
0
50
100
150
200
250
300
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
tonnes
BSEscare
Market liberalisation
24
Summary
Farm trade liberalisation a political problem
To see reform, have to change the politics
Doha round on its own unlikely to do this
In fact, makes going harder
Sends wrong ‘exports good, imports bad’ message
Need several groups to join forces as a counterweight against those blocking change
Combination of economy-wide analysis and open, independent, transparent process changes the politics of protection