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The Challenge of Decoupling Agricultural Support

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  • Jesús Antón
  • Paolo Sckokai

Abstract

The Challenge of Decoupling Agricultural Support Decoupling agricultural support has become a central feature of reforms in most OECD countries due to international and domestic constraints. There is evidence that this movement can reduce economic inefficiencies and contribute to improving policy design. Not all the characteristics, however, of recent new support programmes, reduce their impact on production. Moving from price support to area payments and granting more freedom in the use of the supported resources makes programmes more decoupled, but making payments counter‐cyclical based on current production or market variables tends to exacerbate the production response of risk averse farmers. When all the effects are taken into consideration ‐ relative prices, risk and dynamic effects ‐ all agricultural support programmes have some impact on production and thus the degree of decoupling needs to be estimated empirically. Recent studies have expanded our scarce knowledge of these issues. They confirm the partial decoupling of area payments, like those in the EU after 1992, as well as the larger degree of decoupling that results from more production freedom, as in the Production Flexibility Contract payments in the US and the recent Single Farm Payment in the EU. But the total magnitude of the production effects depends on policy design and ‘size’, since high levels of partially decoupled support can have potentially significant effects on production. La difficulté de découpler les soutiens à l'agriculture Du fait des contraintes tant internationales qu'intérieures, le découplage des aides à l'agriculture est devenu une caractéristique centrale des politiques agricoles de la plupart des pays de l'OCDE. Il existe des raisons de penser que cela réduit les inefficacités, et contribue à accroitre la qualité des politiques économiques. Cependant, les caractéristiques des programmes d'aide récemment conçus ne sont pas toutes de nature à réduire leur impact sur la production. Remplacer le soutien par des prix par des aides à‘la surface’ et donner plus de liberté dans l'utilisation des ressources soutenues va dans le sens du découplage, mais instituer des soutiens contra‐cycliques sur la base des productions en place et de la situation du marché conduit a accentuer les réactions à ces mesures des agriculteurs qui ne souhaitent pas prendre de risques. Lorsqu'on tient compte des tous les effets de ces programmes sur les prix relatifs, la dynamique, le risque, etc., on se rend compte de ce qu'ils ont tous des effets plus ou moins importants sur la production. Cela implique qu'il conviendrait de mesurer le degré de découplage de chaque mesure. Des études récentes ont amélioré notre faible connaissance de ces mécanismes. Elles confirment que les aides à la surface, comme celles qui ont été instituées dans la CEE après 1992, sont partiellement découplées, de même que la plus grande flexibilité laissée aux bénéficiaires des aides, comme dans le cas des contrats de production flexible aux USA ou des DPU dans l'UE. Cependant, l'effet total dépend beaucoup des détails des mesures mises en œuvre, ainsi que de leur volume : car en effet, des niveaux élevés de soutien faiblement couplés peuvent à la longue avoir des effets significatifs sur la production. Die Herausforderung, die Agrarstützung zu entkoppeln Die Entkopplung der Agrarstützung spielt mittlerweile in den meisten OECD‐Ländern auf Grund von internationalen und nationalen Beschränkungen eine zentrale Rolle bei den Reformen. Es gibt Belege dafür, dass diese Entwicklung ökonomische Ineffizienzen verringern und zu einem verbesserten Politikentwurf beitragen kann. Nicht jede Eigenschaft der jüngeren neuen Programme zur Agrarstützung führt jedoch zwangsläufig zu einer verringerten Produktionswirkung. Die Entwicklung weg von der Preisstützung hin zu Flächenzahlungen und die Gewährung größerer Freiheiten hinsichtlich der Verwendung von subventionierten Ressourcen tragen zu einer Entkopplung der Programme bei. Die antizyklische Ausgestaltung von Zahlungen basierend auf der aktuellen Produktion oder Marktvariablen führt jedoch in der Tendenz zu einer verschärften Reaktion bei risikoaversen Landwirten. Werden alle Effekte berücksichtigt—relative Preise, Risiko und dynamische Effekte—wirkt sich jedes Programm zur Agrarstützung auf die Produktion aus, daher muss das Maß der Entkopplung empirisch geschätzt werden. Kürzlich durchgeführte Studien haben unser geringes Wissen hinsichtlich dieser Fragen erweitert. Sie bestätigen die partielle Entkopplung von Flächenzahlungen wie jene in der EU nach 1992 sowie das höhere Maß an Entkopplung, welches sich aus der erhöhten Produktionsfreiheit ergibt, wie bei den vom Marktpreis unabhängigen Zahlungen (PFC) in den USA und der kürzlich eingeführten einheitlichen Betriebsprämie in der EU. Das gesamte Ausmaß der Produktionseffekte hängt jedoch vom Politikentwurf und von der “Größenordnung” ab, da der Gesamteffekt von partiell entkoppelten Zahlungen auf die Produktion potenziell signifikant sein kann.

Suggested Citation

  • Jesús Antón & Paolo Sckokai, 2006. "The Challenge of Decoupling Agricultural Support," EuroChoices, The Agricultural Economics Society, vol. 5(3), pages 13-19, December.
  • Handle: RePEc:bla:eurcho:v:5:y:2006:i:3:p:13-19
    DOI: 10.1111/j.1746-692X.2006.00038.x
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    References listed on IDEAS

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    1. Oecd, 2006. "Decoupling: Policy Implications," OECD Papers, OECD Publishing, vol. 5(11), pages 1-29.
    2. Barry K. Goodwin & Ashok K. Mishra, 2006. "Are “Decoupled” Farm Program Payments Really Decoupled? An Empirical Evaluation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 73-89.
    3. Paolo Sckokai & Jesús Antón, 2005. "The Degree of Decoupling of Area Payments for Arable Crops in the European Union," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(5), pages 1220-1228.
    4. Thia Hennessy & Fiona Thorne, 2005. "How Decoupled Are Decoupled Payments? The Evidence from Ireland," Working Papers 0501, Rural Economy and Development Programme,Teagasc.
    5. Joe Dewbre & Jesús Antón & Wyatt Thompton, 2001. "The Transfer Efficiency and Trade Effects of Direct Payments," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1204-1214.
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    2. Lobianco, Antonello & Esposti, Roberto, 2010. "The Regional Multi-Agent Simulator (RegMAS): an open-source spatially explicit model to assess the impact of agricultural policies," MPRA Paper 25817, University Library of Munich, Germany.

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