This study looks into the implications of reducing agricultural trade protection and trade distorting domestic support, with a focus on the level and distribution of income across nations and within countries. The findings corroborate those obtained in many previous studies, showing that such policy reform would improve both global economic welfare and the welfare of the countries implementing such reforms.
Governments of most countries, developed and developing alike, impose tariffs on imports of agricultural goods in order to boost the prices their farmers receive on the domestic market. Some governments, especially those in richer OECD countries, either directly subsidize or by other means encourage exports and provide additional financial help to farmers through direct budgetary payments, concessions on taxes, subsidized credit, fuel and fertilizer.
Extent and Composition of Agricultural Support and Trade Protection
A starting point for examining the effects of reform is to consider the existing level and types of support given farmers. The OECD monitors and evaluates trends in both the overall level and the composition of agricultural support in its member countries using the Producer Support Estimate, the PSE, and various subsidiary indicators.
Global Market, National and Sectoral Impacts
A large number of recent studies examine the economic and market effects of global agricultural policy reform. See for recent examples and extensive references see Bouet et al (2004) and Anderson et al (2005).
Household Level Impacts
The country case studies for Brazil, Italy, Malawi, Mexico and the United States, each measure the distributional effects of agricultural and trade policy reforms undertaken at the national and multilateral level. The overall objective of these studies is to learn more about the ways in which policy reforms affect different types of household in a diverse group of developed and developing countries.
Conclusions and Policy Inferences
Trade protection and direct budgetary payments increase significantly what OECD farmers would otherwise earn from selling their output at world market prices. In both developed and developing countries (though not nearly so much) trade and domestic agricultural policy tends to favour farmers over other economic agents in society.
Overview of the GTAPEM Model
GTAPEM is a version of the basic GTAP model most of whose equations, parameters and base data are identical to those in the parent model. GTAP includes equations representing demand for goods for: final consumption, intermediate use and government consumption; demands for factor inputs, supplies of factors and goods, and international trade in goods and services. In the model, a representative regional household allocates regional income across three categories of final demand: private consumption, government expenditure, and savings. Private consumption is represented using a Constant Difference of Elasticities (CDE) functional form.
Concern over the distributional impacts of agricultural and trade policy reforms in Brazil stems from a number of factors. In the first place, Brazil has a large and diversified agriculture with a commercial export-oriented sector co-existing with an underdeveloped family farm sector. The latter is relatively more specialised in import-competing products.
This study explores the distributional implications for farm, rural and urban households of two policy reform scenarios. This summary is based on a more comprehensive analysis reported in Magnani and Perali (2005). Potential price, quantity and welfare effects were estimated using a general equilibrium model of the Italian economy described in detail in Finizia, Magnani and Perali (2004).
Malawi is one of the poorest countries in the world, with much of its population dependent on agriculture, either directly or indirectly. This application seeks to examine the impact that agricultural policy changes will have on different types of household within Malawi, and how different households will respond to those changes.
This study examines the effects of policy and market reforms on Mexico’s agricultural and rural economy. Its purpose is to provide insights into how major policy reforms affect a diversified rural economy such as Mexico’s, and to suggest a framework for exploring distributional and adjustment questions in Mexico and elsewhere.
Global agricultural trade policy reform will lead to changing market opportunities for U.S. agriculture — stimulating demand for some commodities, but reducing demand for other U.S. products. Policy makers are often concerned about the process of adjustment, in which producers reallocate their resources in response to changing economic conditions.
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