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AGRICULTURAL POLICY REFORM IN THE WTO

AGRICULTURAL POLICY REFORM IN THE WTO. The Road Ahead. PROJECT GOALS. Calculate the costs of global agricultural policies and the potential gains from their elimination Evaluate broad options for reforming tariffs, TRQ’s, domestic support and export subsidies. Major Findings.

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AGRICULTURAL POLICY REFORM IN THE WTO

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  1. AGRICULTURAL POLICY REFORM IN THE WTO The Road Ahead

  2. PROJECT GOALS • Calculate the costs of global agricultural policies and the potential gains from their elimination • Evaluate broad options for reforming tariffs, TRQ’s, domestic support and export subsidies

  3. Major Findings • Eliminating global ag. policy distortions would: • raise world welfare $56 billion annually • raise world agricultural prices 12 percent • Roles of policies in reducing world prices: • Tariffs (52%) • Domestic subsidies (31%) • Export subsidies (13%) • Developing countries can benefit from further WTO reforms

  4. Ag. Policy Distortions Cause World Prices to be 12% Lower Than They Otherwise Would be

  5. Estimated annual gain in purchasing power = $56 billion

  6. OPTIONS FOR REFORM • Market Access: Approaches to reducing global tariffs and liberalizing TRQs • Domestic Support: Reducing aggregate AMS versus leveling AMS across countries and commodities • Export Subsidies: Effects of eliminating EU subsidies

  7. OPTIONS FOR MARKET ACCESS REFORM • Linear vs. harmonization formula formulas are needed to address the very high tariffs in global markets • Harmonization formulas benefit U.S. ag. US profile: large number of low tariffs (12 percent average) Top U.S. ag. exports face tariffs of 50-100 percent • TRQ’s: no one-size-fits-all rule for reform

  8. TWO OPTIONS FOR REFORMING DOMESTIC SUPPORT: • Continue the UR reforms: lower the AMS ceilings for OECD countries an additional 20% • Level the playing field for OECD countries - support for each commodity must be at or below 30% of the value of production

  9. 1/ 1997. Source: ERS calculations

  10. U.S. AMS Approaches WTO Ceiling

  11. AMS Support (1997)

  12. Conclusions on export subsidies • Effects on aggregate world agricultural prices and trade relatively small • Export subsidies remain important because: effects in specific markets can be large they are linked to domestic support they can slow progress on market access

  13. Developing Country Issues • For middle income DCs - improved market access for ag. exports trade linked productivity gains • For lower income DCs - erosion of preferences lower food aid needs • Developing countries increasingly critical of directions in domestic support in developed countries

  14. Food Aid Needs Decline

  15. Tariffs faced by US ag. exports

  16. Percent Reduction Needed to Keep Commodity-Specific Support Less than 30% of Value of Production

  17. Effects of AMS Reform on U.S. Trade

  18. For more information….www.ers.usda.gov

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