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Disciplining agricultural support through decoupling

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  • Baffes, John
  • De Gorter, Harry

Abstract

Agricultural protection, particularly in high income countries, have induced overproduction, thereby depressing world commodity prices and reducing export shares of countries which do not support agriculture. One-and perhaps the only-effective way to bring a socially acceptable and politically feasible reform is to replace payments linked to current production levels, input use, and prices by payments which are decoupled from these measures. Overall, the experience with decoupling agricultural support has been mixed while the switch to less distortive support has been uneven across commodities and countries. Rules have changed with new decoupling programs added so expectations about future policies affect current production decisions. Time limits were not implemented and if so, were overruled. Ideally, compensation programs would be universal (open to all sectors in the economy, not just agriculture) or at least non-sector-specific within agriculture. A simple and minimally distorting scheme would be a one-time unconditional payment to everyone engaged in farming or deemed in need of compensation that is nontransferable, along the lines of one-time buyouts without remaining subsidies. To maintain government credibility and reduce uncertainty, eligibility rules need to be clearly defined and not allowed to change. The time period on which payments are based, the level of payments, and the sectors covered should all remain fixed. Support to specific sectors within agriculture should be in the form of taxpayer-funded payments. There should be no requirement of production. Land, labor, and any other input should not have to be in"agricultural use."

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3533.

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Date of creation: 01 Mar 2005
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Handle: RePEc:wbk:wbrwps:3533

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Keywords: TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Access to Markets; Environmental Economics&Policies; Economic Theory&Research; Agricultural Knowledge&Information Systems;

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Cited by:
  1. Brink, Lars, 2007. "Classifying, Measuring and Analyzing WTO Domestic Support in Agriculture: Some Conceptual Distinctions," Working Papers 14581, International Agricultural Trade Research Consortium.
  2. Orden, David, 2005. "Can U.S. Farm Subsidies Be Bought Out?," 2005 Annual meeting, July 24-27, Providence, RI 19233, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  3. Sahrbacher, Christoph, 2011. "Regional structural change in European agriculture: Effects of decoupling and EU accession," Studies on the Agricultural and Food Sector in Central and Eastern Europe, Leib­niz Institute of Agricultural Development in Central and Eastern Europe (IAMO), volume 60, number 60.

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