OECD Domestic Support and Developing Countries

Abstract

This paper aims to shed light on the potential interests of developing countries in reforms to domestic support for agriculture in the OECD economies. In order to accomplish this goal, we begin by reviewing the literature on the impacts of domestic support on key variables, including farm income, in the OECD economies themselves.We then proceed to revise the standard GTAP model of global trade, based on recent work at the OECD, in order to better capture these impacts. This work at OECD and analytical results derived by Hertel (1989) suggest the possibility of policy reinstrumentation, whereby farm income is stabilized in the face of cuts to overall support levels by shifting the mix of subsidies away from the more trade-distorting instruments which also tend to be ineffective tools for boosting farm incomes.We conclude that developing countries will be well advised to focus their efforts on improved market access to the OECD economies, while permitting these wealthy economies to continue -indeed even increase -direct support payments. Provided these increased payments are not linked to output or variable inputs, the trade-distorting effects are likely to be small, and they can be a rather effective way of offsetting the potential losses that would otherwise be sustained by OECD farmers. This type of policy reinstrumentation will increase the probability that such reforms will be deemed politically acceptable in the OECD member economies, while simultaneously increasing the likelihood that such reforms will also be beneficial to the developing economies.

Quantifying the Trade Effect of Sanitary and Phytosanitary Regulations of OECD Countries on South African Food Exports

“…As stabilising farm income is the key U Un ni iv ve er rs si it ty y o of f P Pr re et to or ri ia a e et td d --G Ge eb br re eh hi iw we et t, , Y Y F F ( (2 20 00 04 4) ) objective of the agricultural policy in OECD countries (OECD, 2002b), the PEM result suggests that payment support based on land and historical entitlement will offer large efficiency in income transfer and yield minimum trade distortions. Based on these findings and using GTAB 5 version that captures the disaggregated domestic support, Dimaranan, Hertel, and Keeney (2003) simulated three different scenarios to analyse the impact of a cut in domestic support by OECD countries on the welfare of developing countries.…”

“…Since the policy reinstitution (changing the composition of domestic support) is likely to be accepted politically in OECD countries (as farm income is maintained), Dimaranan et al, (2003) concluded that developing countries' main focus should be improving market access (reduction of tariff barriers). Moreover, they recommend that as long as domestic support measures remains decoupled, developing countries should permit the OECD countries to augment domestic support.…”

Reforming agricultural trade among developing countries

“…Dimaranan et al (2003) work out the average trade specialization indices for several countries and regions over the course of three decades (1965-1975, 1976-1985, and 1986-1998). Tropical products are predominantly produced in DCs, while temperate products are produced in developed countries as well.…”

A Development‐friendly Prioritisation of Doha Round Proposals

“…Developed countries' share of world trade in manufactures has fallen from 90 per cent in 1970 to 72 per cent in 2000 (World Bank, 2002). 4 Estimates of the downward impact on world prices caused by OECD domestic support are between 3.5 and 5 per cent for many agricultural commodities including wheat & other coarse grains and oilseeds (Dimaranan et al, 2003). 5 According to their estimates, Latin America and the Caribbean lose about US$8.3 billion in annual income from agriculture, Asia loses some US$6.6 billion, and sub-Saharan Africa close to US$2 billion.…”