Transcript 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
• 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
Ag. Policy Distortions Cause World Prices to be
12% Lower Than They Otherwise Would be
Economies Around the World
Contribute to Ag. Price Distortions
Rest of w orld
20%
Australia & New
Zealand
0%
EU
39%
Other Asian
8%
Japan & Korea
13%
U.S.
15%
Latin Am erica
3%
Canada
2%
Estimated annual gain in purchasing power =
$56 billion
Many Countries Would Share Consumer
Purchasing Power Gains From Elimination
of Ag. Tariffs and Subsidies
Rest of w orld
11%
EU
19%
Australia & New
Zealand
6%
Other Asian
13%
U.S.
24%
Canada
2%
Japan & Korea
11%
Latin Am erica
14%
Price Effects of Eliminating Global Agricultural
Policy Distortions
Commodity
Livestock and products
Wheat
Sugar
Coarse grains
Oil and oilseeds
Rice
Vegetables and fruits
Full policy elimination
(percent change from base)
22.3
18.1
16.4
15.2
11.2
10.1
8.2
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
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
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
Percent
Figure 1. AMS ceilings and actual AMS as a
percent of value of production
45
40
35
30
25
20
15
10
5
0
US 1/
EU
98 ceiling % VOP
1/ 1997.
Source: ERS calculations
Japan
Canada 1/ Australia
98 AMS % VOP
U.S. AMS Approaches WTO Ceiling
30
AMS
Unused AMS ceiling
25
$ billion
20
15
10
5
0
86-88
1995
1996
1997
1998 p
1999 p
2000 f
AMS Support (1997)
European Union ($55 billion)
United States ($6.3 billion)
other
44%
wheat total
6%
peanuts
5%
dairy total
72%
dairy total
11%
cotton
7%
sugar
16%
sugar
12%
beef
27%
Japan ($25.8 billion)
other
14%
rice
76%
beef
5%
dairy total
5%
Figure 3 - Export subsidy expenditure by country, 1995-98
($millions)
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
1995
1996
EU
Sw itzerland
1997
U.S.
Norw ay
1998
Rest of World
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
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
Food Aid Needs Decline
Trade Liberalization Effects on Food Gaps
S.S. Africa
Asia
NIS
L. America
N. Africa
0.0
2.0
4.0
6.0
8.0
10.0
Million tons
Price and export grow th
Price effect only
Baseline
Tariffs faced by US ag. exports
Reduction commitments if UR base is lowered an
additional 20 percent
% of WTO ceiling
met in 1998
Australia
Required cut in
AMS
23.4
0.0
8.6
0.0
EU
74.5
-7.1
Japan
77.2
-10.4
Korea
80.1
-13.5
Canada
Mexico
6.6
0.0
Norway
87.8
-21.1
New Zealand
0.0
0.0
Poland
8.3
0.0
Switzerland
71.0
-2.5
United States
44.7
0.0
Source: ERS calculations based on data from OECD and WTO.
Percent Reduction Needed to Keep CommoditySpecific Support Less than 30% of Value of
Production
Wheat
Rice
Oilseed
Sugar Milk
Beef &
Sheep
Australia
0
0
0
0
0
0
Canada
0
0
0
0
-48
0
EU
0
0
0
-28
-44
-15
Japan
-65
-64
-17
-51
-62
-6
Korea
0
-57
-61
0
0
-27
Mexico
0
0
0
-9
-30
0
Norway
-37
0
0
0
-10
0
New Zealand
0
0
0
0
0
0
Poland
0
0
0
-38
0
0
Switzerland
-43
0
-58
-55
-51
-45
U.S.
0
0
0
-19
-49
0
Source: ERS calculations based on data from OECD and WTO.
Effects of AMS Reform on U.S. Trade
Rice
Wheat
Coarse grains
Oilseeds
Sugar
Cotton and fiber
Fruit & vegetables
Other crops
Beef
Other livestock
Dairy Products
Processed foods
Total
Reduce aggregate
AMS 20%
Exports
Imports
23.9
-0.2
140.5
-1.1
136.0
-13.9
222.4
-0.2
1.3
-0.4
1.8
0.0
65.1
7.8
-12.1
11.3
126.0
-13.4
145.0
-0.5
50.5
-0.6
3.3
-7.6
903.5
-18.7
Limit commodity AMS
to 30%
Exports
Imports
263.0
1.6
134.0
3.7
63.4
-25.4
41.6
0.0
4.9
111.3
15.9
-0.1
75.4
-2.1
-20.8
3.7
286.2
-39.0
23.5
-1.6
197.0
173.8
-39.5
18.1
1044.5
244.0
For more information….
www.ers.usda.gov