Isaac, G. CrossRef Google Scholar. Jia, H. Kalaitzandonakes, N, December McCluskey, J. Grimsrud, H. Ouchi, and T. Miller, H. The Frankenfood Myth. Westport, CT: Praeger Publishers. Muth, M. Mancini, and C. Noussair, C, S. Robin, and B. Pew Initiative on Food and Biotechnology. Pray, C, J. Huang, R. Hu, and S. Reuters Factbox. August 14, www. GMO Policy Debates. August 15, www.
Government of Canada. Ottawa, Canada. International Regulation of Products of Biotechnology. Estey Centre, Saskatoon, Canada. Research Areas Areas of Agricultural Innovation 1. Primary Competitiveness 2. Innovation Systems B. Regulatory Systems C. Industry Coordination D. Impact Analysis. E-mail: Grant Isaac Web-page: www. Books Isaac, G. Chapters in Books Isaac, G. Conference Presentations Isaac, G. Most potential FTAA members have low levels in both categories of subsidies, but the United States has been increasing its domestic support in recent years, a trend expected to continue with the approval of the Farm Bill the Farm Security and Rural Investment Act of Western Hemisphere countries have traditionally had very low levels of export subsidies and would easily be able to eliminate such subsidies in the near future.
However, other similar measures—such as officially supported export credits on agriculture, abuse of international food aid programs, the presence of state trading enterprises, and export restrictions—have been used in the region and could be relevant in multilateral and regional trade negotiations. Comparing Data on Domestic Support The discipline on domestic support commitments proved to be the least binding for many countries, which have kept current total AMS below commitment levels.
Expenditures on An analysis by product is also provided to help identify the most sensitive sectors. Note: Amber box includes de minimis level. For the rest of the world, the amber box for is incomplete for most countries. Source: WTO notifications. However, the actual impact of this reduction has been limited mainly because the agreed reductions only apply to the AMS and exclude blue and green box measures, as well as the trade-distorting subsidies that affect less than 5 percent of the. Figures 1—17 and 1—18 compare the evolution of domestic subsidies in the European Union and the United States according to three sources—WTO notifica-.
There are several reasons why the AMS is a poor indicator of production and trade distortions. This gives countries the opportunity to reduce support on some products and leave support for other products unchanged or even greater.
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Second, the market price support component of the AMS is based on the domestic administered support price and a fixed-base-period world reference price — The domestic administered support price is a poor proxy for measuring the domestic market price because, in many important cases, it is not representative of actual internal supported prices, while the fixed external reference support price does not represent the actual border price. Third, the exclusion of price support in cases where no administered price exists provides wide flexibility to governments in choosing policy instruments.
Fourth, the AMS only includes support provided through domestic measures and does not capture distortions arising from trade measures that are excluded from the AMS provisions for example, tariffs and export subsidies. For more details, see Diakosavvas and Blandford Note: Amber box includes de minimis. Values for —01 are forecasts. Contrary to the downward trend shown by the AMS indicator, the producer support estimate PSE and official government figures increased between and , in both the European Union and the United States.
Two versions of the PSE indicator are presented. In the second one, the market price support MPS component has been removed to facilitate comparisons with government payments see Box 1—1. In both cases, the gap between commitments and current expenditures has been narrowing over this period. Furthermore, according to Hart and Babcock , U. Whether the United States amber box expenditures will continue exceeding commitments after the approval of the Farm Bill will depend on factors that can-. Values for — are forecasts. The European Union is still spending more than twice the amount of U.
A similar trend can also be observed by comparing, in global terms, the share of domestic support in the value of production Figures 1—19 and 1— Values for are forecasts.
Agricultural policy monitoring and evaluation - OECD
Congress adopted four large emergency packages between and , and dramatically increased the level of U. The package had the following objectives: reduced trade barriers for agricultural products, greater equity in world agriculture, and expanded growth opportunities for international trade in agricultural products.
As can be seen in Figure 1—20, the U. Although many questioned the real U. First, the 5 percent rule would harmonize the level of support that is permitted among WTO members. Second, a strict commitment at the multilateral level would be a way to pin down U. Finally, it would force the European Union to significantly curb its use of subsidies and, as a result, deeply reform the Common Agricultural Policy. Domestically, resistance comes from sectors that could lose with trade liberalization, such as dairy, sugar, and orange juice.
At the international level, the European Union and the other protectionist countries group both object, arguing that this proposition is much more demanding for the Europeans than for the United States. Figure 1—19 shows the extent to which the European Union would have to cut its domestic measures of support if the U. Compared with the reduction the United States should make, the difference is striking a reduction of 72 percent for the European Union versus 49 percent for the United States, based on data.
Domestic Support Granted per Hectare and per Farmer Using other criteria, the imbalance in cost that the European Union and the United States would have to bear is not as clear.
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Figures 1—21 and 1—22 show the amount of domestic subsidies per hectare. It is worth noting that the quantity of support per hectare increased between and , while the amount of land used for agricultural purposes decreased. Although the difference in the level of domestic support per hectare granted on both sides of the Atlantic is impressive, we need to keep in mind that domestic subsidies in the United States are highly concentrated in a small basket of products.
In fact, the United States heavily supports the grain and cotton sectors while it does not subsidize the production of beef, poultry, or pork. As a consequence, if pastures were removed from the land area used for agriculture, the amount of domestic support per hectare in the United States would be much higher. Furthermore, comparing the level of domestic support granted per farmer in the European Union and the United States, as shown in Figures 1—23 and 1—24, American producers receive more support than the Europeans—a situation that presents a different picture regarding the efforts that would need to be made if the 5 percent rule were enforced.
The main reason for these results is that the United States has one-third the number of farmers in the European Union, and therefore U. Figures 1—25 to 1—27 present the distribution of domestic support by product in the European Union, the United States, and other protectionist countries. Generally speaking, the figures based on PSE without MPS data and government payments should be similar since both methodologies show the real government outlays intended for producers.
Some payments, such as compensatory and loan deficiency payments, are direct payments to producers, while others are indirect payments, such as export programs and export promotion measures. With respect to the figures that display amber and blue box data on one side and PSE data on the other side, differences in the obtained results can be attributed to the fact that the former excludes green box programs while the latter measures the overall level of domestic support.
In addition, the two methodologies use different definitions to calculate MPS for more details, see Box 1—1. These weaknesses have enabled some countries to use loopholes to maintain or increase their agricultural protection. European Union. The level of support for dairy and poultry and pork is larger in PSE than in amber plus blue box, whereas the opposite occurs with cereals.
These differences are due to the divergence in methodology when measuring support for prices. PSE measures not only government subsidies, but also trade barriers, such as tariffs and tariff rate quotas that substantially increase domestic prices at the farm gate level compared with world prices. As a result, if cuts in amber plus blue box are made in dairy, the reduction in the overall level of support for this sector would be less than expected because a large share of the internal market prices for this sector is managed through border measures.
Therefore, for products that benefit from border protection, a real reduction in the level of domestic support could only occur if market access for these goods were enhanced at the same time as subsidies were cut. This relation between trade policy and domestic support explains why reduction commitments are easier to reach for some products than others. In the European Union, this component reached 60 percent29 by the year , revealing that consumers, rather than governments, bear the largest cost of agricultural protection. United States. For instance, the absence of government payments for the meat sectors beef, poultry, and pork contrasts with the data provided by the PSE without MPS indicator.
The point is that in the PSE, support for these sectors is concentrated in payments based on input use interest concessions, fuel tax reductions, and subsidies for grazing and irrigation and to a lesser extent in payments based on overall farming income that are not necessarily prod-. For more details on the relationship between domestic support and trade policies, see de Gorter This is according to the OECD definition of market price support. When comparing amber plus blue box and PSE, impressive differences arise not only with respect to products, but also in the overall level of support.
According to am-. Payments based on input use include explicit and implicit payments affecting specific variable input costs; the cost of on-farm technical, sanitary, and phytosanitary services; or payments affecting specific fixed-input costs, including investment costs. Payments based on overall farming income do not depend on the production of specific commodities or on the use of specific fixed or variable inputs OECD Note: For amber plus blue box, values for — are forecasts. The PSE levels for meats beef, poultry, and pork , dairy, and cereals are significantly higher than the support reported in amber plus blue box, probably due to the fact that these products benefit from border protections that are included in the PSE measure but are absent from the amber plus blue box calculations.
The de minimis and not product-specific category deserves special attention. Since , the United States has been using this category intensively, and it is exempted from reduction commitments. According to Hart and Babcock , as a result of the. In fact, higher international prices would raise production values and, as a consequence, the de minimis exemption limits.
Contrary to the European Union, the U. For instance, in consumers paid 85 percent and 80 percent, respectively, of the support granted to the dairy and sugar industries, two of the largest subsidized sectors in the United States. Other protectionist countries. As illustrated in Figure 1—27, the cost of supporting agriculture in other protectionist countries is almost exclusively borne by consumers. Japan had traditionally supported this sector through the management of an administered price that maintains domestic prices five or six times higher than world prices.
In , Japan notified the WTO that the government had stopped intervening in the price of rice, reducing its AMS in this sector to zero. However, according to the OECD, internal prices for rice in Japan in were more than five times import parity. In fact, prices for rice were not affected by the change in government policy because the rice industry in Japan is heavily protected by border measures. This example illustrates one of the weaknesses in the measurement of the price support element of the AMS that enables some countries to reduce their AMS substantially, although their actual level of market-distorting price support remains high.
The simultaneous use of several protectionist instruments, such as high tariffs combined with official administration of prices, as was the case in Japan, can lead to double counting the level of protection benefiting a product. Nonetheless, countries should not be allowed to determine their AMS commitments based on a level of support that is double counted for some products.
The support granted by the United States to the dairy sector is another illustrative case. So, the notified AMS really overstates protection. According to ABARE , actual milk prices in the United States are supported through a combination of restrictions on imports through tariff quotas, export subsi-. Producer support estimate without market price support Other Sugar Oilseeds Cereals Dairy 90 90 Poultry, pork 80 80 Beef 70 If the administered support price were abolished, it would not alter internal supported prices for milk, but it could provide a potential for the United States to claim that it had no price support, and also virtually no AMS in milk.
Such a change could be used to increase the available level of amber box support for other products and measures by about 20 percent without altering the actual levels of support for milk. First, there are several simultaneous barriers to agricultural trade because countries use various trade-distorting instruments in agriculture.
Tariffs are the most commonly used, but other protection mechanisms—such as technical barriers to trade and sanitary restrictions, domestic support, and export subsidies—may also distort trade and are difficult to evaluate. Even tariff barriers are difficult to measure because specific and mixed tariffs and TRQs are widely used by some Western Hemisphere countries. On the one hand, the highest overall level of agricultural tariffs has been observed on small Caribbean islands. This represents a high tax on poor local consumers.
On the other hand, developed countries are characterized by the application of high tariffs to a small group of politically sensitive products, while the rest of their tariffs are kept at low levels. These sensitive products are further protected through specific and mixed tariffs, TRQs, and other nontariff barriers, such as sanitary and phytosanitary measures and technical barriers to trade.
Second, in the majority of the Western Hemisphere countries, agricultural exports are highly concentrated in a small basket of specific products. For 10 countries, coffee, bananas, and sugar represent more than 50 percent of agricultural exports. As a result, potential deadlocks in the negotiations will probably concern a reduced group of products, such as dairy, meats, sugar, tobacco, grains, and fruits.
Third, we identified several key issues in regional and multilateral agricultural trade negotiations. Agriculture is an area that encompasses systemic and nonsystemic issues. Topics such as subsidies are systemic issues because a reduction in their use by one country will benefit all countries with which it trades, and could have potential spillover effects on world prices and market shares.
Market access issues, such as tariffs, TRQs, and some nontariff barriers, are nonsystemic because they can be negotiated on a country-by-country basis without benefiting other trading partners. Market access is much better addressed in a bilateral or regional framework because negotiations between a reduced number of countries allow for deeper trade liberalization, normally starting with applied tariffs.
So if Western Hemisphere countries continue to invest political and human capital in the FTAA process, the launch of the WTO Development Agenda will be beneficial for hemispheric agricultural integration. The new round will allow for the separation of the two most sensitive issues— market access and subsidies—with market access being discussed primarily at the regional level and subsidies at the multilateral level.
However, it is legitimate for countries that are competitive in agriculture to try to ensure that other systemic issues such as environment disciplines or intellectual property rights are addressed through multilateral negotiations. The best solution for trade liberalization in the Western Hemisphere would be to implement zero tariffs for all products without exceptions.
Furthermore, they can use these indexes to detect potentially difficult sectors for future negotiations. Fifth, we identified main gains and trade-offs in market access in the Western Hemisphere. The Central American countries, which face, on average, higher protection than they impose, would have the highest relative net gains in terms of overall market access, after a simultaneous lowering of agricultural tariff barriers in North America and industrial tariffs in South America. However, agricultural sector liberalization will encompass trade-offs in the Mercosur countries.
They would definitely gain from agricultural liberalization, but they would also need to become net liberalizers of the industrial sector. The opposite is true for NAFTA countries, which will need to make trade-offs in terms of offering broad agricultural access in order to secure access for industrial products. Sixth, the URAA provides too many ways to avoid reductions in domestic and export subsidies, and there is a need to avoid exceptions.
Some of the current loopholes are blue box encompassing payments that are only partially decoupled from production and still produce distorting effects, the presence of trade-distorting programs in the green box, the absence of disciplines on export credit guarantees, and the abuse of food aid programs. In addition, some countries take advantage of the de minimis exemption and subsidies that are not product specific to increase their level of domestic support without exceeding their WTO commitments.
In our opinion, de minimis exemptions should be eliminated, and reductions in commitments should be established on a product-byproduct basis. These countries are not applying trade-distorting subsidies, and there is no reason to keep or create boxes that will not be used. If countries are really keen to eliminate all trade and production-distorting subsidies, in the long run they should avoid any kind of exceptions.
Seventh, negotiators should target the full decoupling of government payments to producers as the best way to prevent distortion of production and trade. In other words, payments should be fully decoupled from volume of production, planted area, and animal units. Eighth, market access should be enhanced at the same time that subsidies are cut.
Reductions in subsidies are very much related to market access enhancement and vice versa. In fact, both subsidies through MPS and border measures tariffs, TRQs, and nontariff barriers contribute simultaneously to the fact that producer prices are set at higher levels compared with world prices. The way MPS is calculated depending on whether government administered prices are used is particularly important because it has serious consequences in terms of which subsidies should be phased out for each product to really liberalize trade.
For instance, Japan claimed to have eliminated amber box support for rice after it abolished the government administered price for this product. However, actual prices paid to producers remained unchanged for this sector because they are still supported through border measures. This example illustrates that a real reduction in the.
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Comprehensive results can only be achieved if market access and subsidies are addressed at the same time. In the case that they are addressed in parallel regional and multilateral negotiations, policymakers should try to build a single global undertaking provision between these processes. Antigua and Barbuda Trinidad and Tobago St.
Mexico October 2. Agricultural Market Access Database. Release 2. Becker, G. Washington, D. Blandford, D. Are Disciplines Required on Domestic Support? La mesure des protections commerciales nationales. Mimouni, and F. Burfisher, M. Economic Research Service, U. Department of Agriculture, Washington, D. Diakosavvas, D. World Bank, Washington, D. Diao, X. Scenarios for Free Trade in the Americas. TMD Discussion Paper no. Gehlhar, M. Gibson, P. Wainio, D. Whitley, and M. Profiles of Tariffs in Global Agricultural Markets.
Agricultural Economic Report no. Hart, C. Hemispheric Database of the Americas. Version 1. Hemispheric Trade and Tariff Database. Version IDB, Washington, D. Commissioned Paper no. Direction of Trade Statistics. Josling, T. Korves, R. American Farm Bureau. Olarreaga, M. The World Bank Economic Review 12 2 : — Discussion Paper. OECD, Paris. Multifunctionality: Towards an Analytical Framework.
Sandrey, R. The Relative Tariff Ratio Index. Skully, D. Economics of Tariff-Rate Quota Administration.
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International Trade Commission. Free Trade in the Americas. Situation and Outlook Series. International Agriculture and Trade Reports. Economic Research Service. Farm and Land in Farms. National Agricultural Statistics Service. Wainio, J. FoodReview: Global Food Trade 24 3 : 29— World Trade Organization.
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Young, E. Burfisher, F. Nelson, and L. Agricultural policy reform in the Western Hemisphere has been undertaken as a twotier liberalization process: at the multilateral level and at the regional level. In the multilateral arena, the Uruguay Round Agreement on Agriculture URAA made significant progress toward less distorted agricultural trade and, for the first time, agriculture was brought under the disciplines of the General Agreement on Tariffs and Trade. Despite moving toward agricultural reform under the URAA, crucial barriers to trade remain intact or, at best, slightly improved.
Tariffs in agriculture are still very high: the global, unweighted, average bound tariff rate is 62 percent, and that of developed countries is 45 percent USDA Regarding domestic support, while some countries converted domestic support measures into less trade-distorting programs permitted under the URAA, others, especially developed countries, did not follow in the same direction and recently have even increased protection. The authors acknowledge the helpful assistance of Reuben Kline. The minimum tariff cut per product is 15 percent for developed countries and 10 percent for developing countries.
In the export subsidies, the reduction of subsidized quantities is 21 percent for developed countries and 14 percent for developing countries. Least developed countries are not required to reduce tariffs or subsidies. Refer to the WTO secretariat for more details. At the regional level, integration initiatives have proliferated in the Western Hemisphere over the past decade and a half, as renewed regionalism has gained momentum Devlin and Ffrench-Davis ; Devlin and Estevadeordal Latin America and the Caribbean have launched more than 20 free trade agreements or customs unions in the s.
In these agreements, agriculture has been progressively liberalized within each bloc. This historic event poses unprecedented challenges for all partners. The agenda of the negotiations involves longstanding but nonetheless contentious topics, including agriculture reform.
In the meantime, some Latin American and Caribbean countries are involved in trade negotiations with the European Union, their most important extra-hemispheric partner. Mercosur and the European Union agreed to initiate free trade talks at the Rio de Janeiro Summit. The talks are moving slowly, but the European Union expressed its desire to accelerate the negotiations in view of the progress of the FTAA process.
Because the sector absorbs a significant portion of the workforce, it is also politically sensitive in Latin America and the Caribbean. However, trade in agriculture is restricted by a number of barriers, including high tariffs and nontariff measures, such as tariff rate quotas, technical regulations and quantitative restrictions, domestic support, export subsidies, and sanitary and phytosanitary measures. Most of these policy measures are essentially active in both the United States and the European Union.
Given Latin American and the Caribbean global competitiveness in agriculture, the agricultural reform in the Western Hemisphere and the European Union will definitely bring about large opportunities and sizable gains to Latin America and the Caribbean. In order to prepare for the negotiations and to prepare the economy for the structural adjustment that the liberalization process will generate, Latin America and the Caribbean will greatly benefit from having an a priori estimation of the potential economic impact of such reform.
Important questions include: i What will be the impact of the agricultural reform in developed countries on Latin America, specifically on sector production, export patterns, and resource allocation? An important aspect of the Mercosur-European Union relationship is that in light of growing U. For the European Union, Mercosur is an important extra-regional trade partner: it absorbs some 50 percent of its exports to Latin America, and represents half of the total exports from Latin America to the European Union market.
Mercosur has been a traditional stronghold in the Americas, and is now an increasingly important partner for the European Union to block U. To answer these questions, we use an applied general equilibrium model that quantifies the impact of liberalizing agriculture as a result of the FTAA and the MercosurEuropean Union agreements. The model is a multiregion, multisector, computable general equilibrium CGE model. The analysis focuses on the effect on Latin America and the Caribbean of the elimination of three policy instruments distorting world prices and restricting trade flows in agriculture: tariffs ad valorem as well as ad valorem equivalent estimations , domestic support, and export subsidies.
In order to evaluate the effect of agricultural reform, the simulations assume that only the agricultural sector is completely liberalized; trade barriers in nonagricultural sectors remain unchanged. For the two trade agreements considered, we estimate the impact of each policy reform variable individually, as well as the effect of moving toward liberalization simultaneously in the three areas.
It may seem unlikely that regional trade agreement negotiations will go beyond tariff elimination to include domestic support and export subsidies, since it has been argued that these nontariff issues should be addressed at the multilateral level. However, many Latin American and Caribbean countries are pushing for the inclusion of these topics in the regional negotiations. No matter what the final result of the negotiations may be, to assess the cost for Latin America and the Caribbean of protectionism in the developed world is a relevant economic and policy question.
The model is benchmarked in and given that many countries have reduced trade barriers since then—although less than agreed under the URAA—the analysis may overestimate the potential impact of agricultural liberalization. However, because countries also have nontariff barriers in place not covered in the model, such as sanitary and phytosanitary measures, and a handful of countries including the United States have recently raised trade protection, the results may underestimate the impact of a comprehensive agricultural reform.
The results also show that the United States will benefit from opening up its agricultural market, as its agricultural exports expand by 12 percent. For Mercosur countries, the impact of the agreement with the European Union is quite different from that of the hemispheric agreement and generates larger positive effects and more heterogeneous impacts across sectors.
For the European Union, agricultural reform reduces agricultural exports by around 3 percent. This is a hypothetical situation since trade negotiations include both the agricultural and nonagricultural sectors. Thus, Latin America and the Caribbean will benefit from agricultural reform in developed countries, since the elimination of tariffs is the main factor behind the trade gains.
This is due largely to the more extensive use of tariffs across countries compared with domestic support and export subsidies, and to the discriminatory nature of tariffs compared with the nondiscriminatory effects across countries of the other two policy instruments. This fact is reflected in the gains that third parties outside the agreements experience due to the elimination of domestic and export support. The model is highly nonlinear and simulates a decentralized market economy.
It deals with the real side of the economy, and does not consider financial or monetary markets. All regions are fully endogenized and linked through trade. Since the chapter focuses on agricultural reform, we incorporate 16 agriculture-related sectors, including processed food industries. The base year of the model is Table 2—1 summarizes the main features and assumptions underlying the model. The model extends beyond standard, static CGE models in three areas. First, it incorporates trade-linked externalities that lead to efficiency gains in the production process as a result of increased trade.
Several studies show that developing countries can boost domestic productivity through technological spillovers by importing a variety of intermediate and capital goods that embody foreign knowledge Coe and Helpman ; Coe, Helpman, and Hoffmaister This is an extremely important element in Latin America and the Caribbean, where trade, especially exporting, has become a key policy variable as a source of growth and foreign currency earnings.
In order to capture some of these dynamic effects, the model includes three types of trade-productivity links. GTAP is a consortium of international and national agencies and academic institutes. The introduction of externalities in our model follows Hinojosa-Ojeda, Lewis, and Robinson , All regions produce 26 goods using primary inputs and intermediate goods with a constant elasticity of substitution production technology.
The 26 sectors in the rest of the world are fully endogenized. Manufacturing industries have an increasing returns to scale technology, while the other sectors have a constant returns to scale technology. Manufacturing industries face a contestable market structure, while the other sectors face a perfectly competitive market structure. Intermediate demand is determined by the fixed input-output coefficients. Exports are specified by a constant elasticity of transformation function and differentiated by market of destination.
Imports are modeled with a constant elasticity of substitution specification and differentiated by market of origin. Factors are mobile across sectors, but immobile internationally. Total supply in each country or region is fixed. Trade-linked externalities i Sectoral export externality ii Import externality of intermediate inputs and capital goods iii Aggregate export externality. Major assumptions i Saving-investment identity: Current savings are fully utilized for investment.
In other words, the initial balance of trade in goods and services remains constant. The second externality is an import externality associated with imports of intermediate inputs and capital goods, with the degree of efficiency gains depending on the import share of intermediate products and capital goods in production.