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Executive Summary There has been little change in the level of producer support since the late 1990s for the OECD as a whole. It has fallen from 37% of farm receipts in 1986-88 to 30% in 2002-04, but this level of support was first reached seven years ago in 1995-97. Annual fluctuations in the level of support mainly reflect policy measures limiting the transmission of international trade price developments to domestic markets.
Main Policy Developments in 2003 and 2004 This chapter highlights the major changes and new initiatives in agricultural policy in OECD countries in 2003 and 2004. These changes are described in detail in the country chapters of Part II. The enlargement of the European Union (EU) to include ten new countries was a very significant development for agricultural policy in all the countries concerned. For the new member states, most of their existing agricultural polices will be replaced by the Common Agricultural Policy (CAP), though EU payments will be phased in gradually over a ten year period. Food safety, environmental quality, and the multifunctional nature of agriculture continue to gain prominence, along with farm income, as goals of agricultural policy.
Evaluation of Support Policy Developments This chapter focuses on agricultural support in OECD countries, evaluating changes both in the short-term (2004 compared with 2003) and over the longer term (the 2002-04 average compared with the 1986-88 base period). It first discusses the level of support provided to producers at the OECD total level and how this varies between OECD countries. Changes in the composition of support are then considered. This is important because the effects of support on production, trade, income and the environment are related to the way in which it is provided to producers. The spread in support levels between commodities is then examined because this is also a potential source of distortion. Estimates are also provided on the level and composition of support to general agricultural services and the total value of support that results from agricultural policies. Finally, some conclusions are drawn about agricultural policy reform progress being made in OECD countries in terms of lowering the level of support, shifting its composition to less productionlinked policy measures, and reducing differences in the level of support between commodities.
Enlargement of the European Union On 1 May 2004, ten new member states (NMS) joined the European Union (EU), thereby increasing the size and diversity of the EU agricultural sector. The agricultural sectors of these new countries are very diverse. Poland has by far the largest agricultural sector in terms of land, employment and output. The implementation of the Common Agricultural Policy (CAP) in the NMS is likely to have a significant impact on their agricultural sectors. This chapter provides quantitative and qualitative information on changes in the size and characteristics of EU agriculture resulting from enlargement, on market developments, on CAP implementation, and on resulting support levels.
Australia Key policy developments in 2004 included: further deregulation of the dairy industry; an increase in support to reform and restructure the sugar industry under the Sugar Industry Reform Program; extension of water reform policies under the National Water Initiative; starting work towards reform of drought policy; and the creation of Biosecurity Australia as a separate agency to oversee a science based quarantine, sanitary and phytosanitary policy.
Canada The main development in 2004 was the full implementation of the Agriculture Policy Framework and related reforms to major agricultural support programs, notably the introduction of the Canadian Agriculture Income Stabilisation (CAIS) program. The Transitional Industry Support Program (TISP) was also put in place in part to address financial losses related to the discovery of a case of BSE in Canada and the subsequent loss of beef export markets.
European Union The Common Agricultural Policy (CAP) started to apply in new member states at the date of accession in May 2004. The implementation of the 2003 CAP reform began in 2004, and the single payment scheme will replace most of the previous area and headage payments as of 2005 to 2007, depending on the country. The hop, tobacco and olive oil sectors were reformed in 2004, all along the same line of incorporating payments into the single payment.
Iceland The abolition of the administered price for milk at wholesale level which had been scheduled for 2004 was postponed indefinitely, with legislation providing for the possible abolition of administered prices at any time by decision of the competent authorities. A new agreement on a framework for government support to dairy production was signed between the government and the farmers’ union in May 2004 which will continue the current system till 2012.
Japan In 2004 discussion about a new Basic Plan for Food, Agriculture and Rural Areas got underway. One of the main features of the new Plan will be a shift away from a support system based on individual commodities to a multi-commodity system in which support will be concentrated on the largest and most efficient and stable farms. Rice policy reforms are continuing, including the abolition of the orderly marketing system and changes to the production adjustment system.
Korea Policy is increasingly focused on rural development, and new legislation and payments were introduced. A new livestock agri-environmental payment began and regulations for livestock facilities tightened. The crop insurance scheme became nationally available and a pilot traceability scheme introduced in the beef sector. Negotiations concluded with major rice exporting countries that further delayed rice tariffication but increased the annual level of rice imports out to 2014.
Mexico In 2004 the measures announced in the 2003 National Agreement on Agriculture were fully implemented. These include payments based on crop output, direct payments per head of cattle with cross-compliance conditions (PROGAN programme) and a higher subsidy to electricity and diesel for agricultural use. Mexico signed free trade agreements with Japan and Uruguay.
New Zealand The main policy developments in 2004 include the establishment of a single biosecurity authority, the merging of the Meat and Wool Boards’ industry good functions, and programmes to assist farmers and rural communities in response to severe storm damage. A climate change research strategy was finalised, and new policy measures to address water quality and water use issues are being developed. Reviews of both domestic and imported food regimes are also underway.
Norway The major policy development in 2004 was the establishment of a national environmental programme, setting out national goals and a greater role for regional authorities including local specific payments. The quantity of milk quota able to be sold directly between farmers was increased, as were the maximum size limits on dairy, pig and poultry farms. A two year Action Plan to increase the involvement of consumers in food policy was established.
Switzerland The main policy development in 2004 was the implementation of the new agricultural policy reform package (AP 2007) for the period 2004-07. Its key aspects entail the progressive abolition of the milk quota system, changes in the administration of import tariff quotas for livestock and meat products, diversification of rural income, enhancement of rural development and institutionalisation of the precautionary principle in food production.
Turkey For the first time, sugar beet growers received a payment to compensate for losses associated with production quota. Input subsidies that in 2002 were about three-quarters lower than in 1999, increased by over one-third in the following two years. The financial support to Agricultural Sales Co-operatives (ASC) and their unions (ASCU) was reduced by over three-quarters. Efforts to converge agricultural policy with that of the European Union were accelerated.
United States In 2004, a six fold increase in payments under the marketing loan and counter-cyclical programmes was triggered by lower crop prices. Some environmental and rural development initiatives established by the 2002 Farm Act began, including the Conservation Security Program. Additional emergency payments and a new trade related price-linked payment were given, but mandatory country-of-origin labelling was postponed. Production quotas for tobacco will be terminated in 2005, compensated by new term-limited payments.
Summary Tables of Estimates of Support for OECD countries
Summary Tables of Estimates of Support for Estonia, Latvia, Lithuania and Slovenia
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