Emerging countries increase trade-distorting farm subsidies

Emerging countries increase trade-distorting farm subsidies
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First Published: Fri, Mar 16 2007. 12 31 AM IST
Updated: Fri, Mar 16 2007. 12 31 AM IST
Emerging economies have increased the amount of trade-distorting subsidies paid to farmers, though their overall level of agricultural support is far less than in rich nations, a study by the Organization for Economic Cooperation and Development (OECD) showed on Thursday.
In a report into farm subsidies in Brazil, India, South Africa, China, Bulgaria, Romania, Russia and Ukraine, the Paris-based organization said their agricultural subsidies were dominated by price supporting policies.
“Support to agriculture is dominated by market price support (MPS) and input subsidies, the least efficient and most distorting ways of providing agricultural assistance. MPS is a relatively inefficient way of delivering support ...but is often attractive in countries with lower incomes, as it does not require the use of scarce budgetary funds,” it said.
It said that while members of OECD had generally cut MPS levels during 2003-2005, the eight countries in the report had increased or at least maintained theirs. OECD comprises 30 rich economies, including France, Germany, Italy, Japan, the UK and the US.
These eight countries account for 44% of the world’s population and 30% of its agricultural output; they produce 40% of the world’s cereals and meat, and more than half of all fruit and vegetables.
Most of their production is consumed domestically, with the group accounting for less than 10% of world agri-food trade. However, countries like Brazil and India wield a lot of power in global trade talks, where farm-support and agricultural market access are key issues. Overall subsidy payments were lower than among OECD members.
OECD countries provide subsidies of 30% of gross farm receipts on average. The study said that in 2003-05, Brazil gave 5% and China and South Africa 8%, whereas Russia was at 17%. Exact estimates for India were not available but appeared just below the OECD average, it added.
“Agricultural policy reforms during the past decade have resulted in levels of government support to producers, as measured by the producer support estimate (PSE), generally well below the OECD average,” the report said.
PSE, the organization’s farm subsidy measure, calculates the monetary transfer to farmers from policies that keep domestic prices artificially high, subsidies based on quantities produced or areas farmed and financial aid that cuts input costs. It said the countries were switching to more targeted forms of support not linked to production. These included specific goals of raising the incomes of poor farm households, promoting rural development and protecting the environment.
OECD urged them to allocate some of the money currently spent on support to fund activities such as research and development and marketing and infrastructure improvements. It also called for measures to help income diversification as it said the long-term future for most semi-subsistence farming households in the countries were outside agriculture.
These included improved access to education in rural areas, better health care, pension and other social-security services, enhanced land property rights and rural tax reforms, it said.
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First Published: Fri, Mar 16 2007. 12 31 AM IST