Burden Sharing and Public Good Investments in Policy Reform

Any attempt to reform existing public policies or to implement new policies faces an arduous negotiation process and the tyranny of the status quo. One of the basic premises of the Uruguay Round of the GATT is that the reform of border policies could not be sustained without dramatic modification of internal agricultural policies. In October of 1989, the United States tabled a proposal for reforming internal policies of the agricultural sector throughout GATT signatory countries. In essence, this tabled proposal specified policies in terms of three regimes: red light, green light, and yellow light policies. Red light policies were to be forbidden; green light policies were to be promoted; and yellow light policies were to be treated on a case-by-case basis. Quite obviously, green light policies include public good provisions that promote economic growth and do not involve coupled distortionary transfers.