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Food and Agriculture Policy: A Positive Reform Agenda

OECD. OCDE. ORGANISATION DE COOPÉRATION ET DE DEVELOPMENT ÉCONOMIQUES. Food and Agriculture Policy: A Positive Reform Agenda. ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT. Ken Ash Deputy Director, Food, Agriculture and Fisheries. California, 19-20 January 2003.

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Food and Agriculture Policy: A Positive Reform Agenda

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  1. OECD OCDE ORGANISATION DE COOPÉRATION ET DE DEVELOPMENT ÉCONOMIQUES Food and Agriculture Policy: A Positive Reform Agenda ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT Ken Ash Deputy Director, Food, Agriculture and Fisheries California, 19-20 January 2003

  2. Agriculture Policies in Canada, Japan, the EU and US • instruments and impacts • recent and on-going developments • alternative policy approaches

  3. Producer Support Estimate (% PSE) % PSE Japan EU Canada US

  4. Canada: Composition of PSE

  5. Japan: Composition of PSE

  6. EU: Composition of PSE*(simulated CAP Reform)

  7. US: Composition of PSE

  8. Composition of PSE

  9. 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 Production linked support is…

  10. Evolution of PSE Support * % Japan EU US 1986-88 Canada 2002 %PSE

  11. 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 Alternative Policy Approaches

  12. 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) Farm Household Income:Which Policies?

  13. 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) Rural Communities -Which Policies?

  14. 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) Environmental Sustainability -Which Policies?

  15. 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 How Important is Capitalisation?

  16. 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) Conclusion

  17. 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? Conclusion (cont.)

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