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The impacts of a gradual phase-out of agricultural support in OECD countries

World agriculture: towards 2015/2030 An FAO Study. The impacts of a gradual phase-out of agricultural support in OECD countries. AT2015/30. World agriculture: towards 2015/2030 An FAO Study. A quick overview of the presentation. General changes in DCs’ trade patterns

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The impacts of a gradual phase-out of agricultural support in OECD countries

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  1. World agriculture: towards 2015/2030 An FAO Study The impacts of a gradual phase-out of agricultural support in OECD countries AT2015/30

  2. World agriculture: towards 2015/2030 An FAO Study A quick overview of the presentation • General changes in DCs’ trade patterns • Agriculture vs. manufactures • Net flows within agriculture • Impacts of structural change and policy measures on trade flows between ICs and DC/LDCs • Trade flows, level & distribution of OECD agricultural subsidies • How important are subsidies for prices and trade • How has the PSE reduction been modelled? • The main assumptions • The main results • Some first conclusions

  3. World agriculture: towards 2015/2030 An FAO Study The importance of agricultural exports Share in total merchandise trade (DCs and LDCs) 1. Changes in trade patterns

  4. World agriculture: towards 2015/2030 An FAO Study Export dependency: 97/99 1. Changes in trade patterns

  5. World agriculture: towards 2015/2030 An FAO Study Towards growing net imports Developing and Least Developed Countries 1. Changes in trade patterns

  6. World agriculture: towards 2015/2030 An FAO Study LDCs: Rapidly rising agricultural trade deficit 1. Changes in trade patterns

  7. World agriculture: towards 2015/2030 An FAO Study Summary: Shifts in trade patterns • Marked decline in agricultural exports (net) • In absolute terms and relative to manufacturing • Particularly pronounced for LDCs • But some (small) economies remain heavily dependent on agricultural exports • Structural reasons and policy effects • How important are these in relative terms? • What are the likely effects of a removal of OECD subsidies? 1. Changes in trade patterns

  8. World agriculture: towards 2015/2030 An FAO Study A quick overview of the presentation • General changes in DCs’ trade patterns • Agriculture vs. manufactures • Net flows within agriculture • Impacts of structural change and policy measures on trade flows between ICs and DC/LDCs • Trade flows, level & distribution of OECD subsidies 2. Trade flows, levels and distribution of OECD subsidies

  9. World agriculture: towards 2015/2030 An FAO Study Net trade and PSE support levels 2. Trade flows, levels and distribution of OECD subsidies

  10. World agriculture: towards 2015/2030 An FAO Study Headcount: developing countries by agricultural net trade position: temperate-zone commodities 2. Trade flows, levels and distribution of OECD subsidies

  11. World agriculture: towards 2015/2030 An FAO Study Net trade and PSE support levels 2. Trade flows, levels and distribution of OECD subsidies

  12. World agriculture: towards 2015/2030 An FAO Study Headcount: developing countries by agricultural net trade position – competing commodities 2. Trade flows, levels and distribution of OECD subsidies

  13. World agriculture: towards 2015/2030 An FAO Study Net trade and PSE support levels 2. Trade flows, levels and distribution of OECD subsidies

  14. World agriculture: towards 2015/2030 An FAO Study Headcount: developing countries by agricultural net trade position: tropical commodities 2. Trade flows, levels and distribution of OECD subsidies

  15. World agriculture: towards 2015/2030 An FAO Study Summary: Trade, levels and distribution of OECD subsidies • Temperate-zone: (i) high and widening trade deficit, (ii) high OECD subsidies (>50% of the total), (iii) few non-OECD exporters • Competing products: trade is balanced and – c.p. not expected to change dramatically; high OECD subsidies (40% of the total); headcount: broader distribution of exporters and potential for many importers to shift (net) trade position. • Tropical products: DC export surplus to widen, but at a lower rate than in the future, markets saturated in OECD countries, minimal OECD subsidies, developing countries to become the main markets for the future 2. Trade flows, levels and distribution of OECD subsidies

  16. World agriculture: towards 2015/2030 An FAO Study A quick overview of the presentation • General changes in DCs’ trade patterns • Agriculture vs. manufactures • Net flows within agriculture • Impacts of structural change and policy measures on trade flows between ICs and DC/LDCs • Trade flows, level & distribution of OECD agricultural subsidies • How important are subsidies for prices and trade • How has the PSE reduction been modelled? • The main assumptions • The main results 3. Modeling OECD subsidy reductions: the assumptions

  17. World agriculture: towards 2015/2030 An FAO Study The scenario assumptions • OECD and transition economies: • Reduction of market price support (PSE-M=MPS) • Reduction of non-market price support (PSE-R) • All other countries • Increase of price transmission ß to 0.6, where ß < 0.6 • Increase of price transmission ß to 0.8, where ß < 0.8 • All policy changes are phased in over a period of 30 years (2000-2030). 3. Modeling OECD subsidy reductions: the assumptions

  18. World agriculture: towards 2015/2030 An FAO Study PSEs as policy wedges 2. PSEm and PSEr as aggregate measures for price and non-price relatedpolicy intervention 3. Modeling OECD subsidy reductions: the assumptions

  19. World agriculture: towards 2015/2030 An FAO Study PSEs as policy wedges 2. PSEm and PSEr as aggregate measures for price and non-price relatedpolicy intervention 3. Modeling OECD subsidy reductions: the assumptions

  20. World agriculture: towards 2015/2030 An FAO Study PSEs as policy wedges 2. PSEm and PSEr as aggregate measures for price and non-price related policy intervention 3. Modeling OECD subsidy reductions: the assumptions

  21. World agriculture: towards 2015/2030 An FAO Study PSEs as policy wedges 2. PSEm and PSEr as aggregate measures for price and non-price relatedpolicy intervention 3. Modeling OECD subsidy reductions: the assumptions

  22. World agriculture: towards 2015/2030 An FAO Study PSEs as policy wedges 1. Initial price levels and relations 3. Modeling OECD subsidy reductions: the assumptions

  23. World agriculture: towards 2015/2030 An FAO Study PSEs as policy wedges 1. Prices after phasing out market price support 3. Modeling OECD subsidy reductions: the assumptions

  24. World agriculture: towards 2015/2030 An FAO Study PSEs as policy wedges 2. Prices after complete reform: PB=PF=PI 3. Modeling OECD subsidy reductions: the assumptions

  25. World agriculture: towards 2015/2030 An FAO Study Average price effects, 2030 3. Modeling OECD subsidy reductions: the results

  26. World agriculture: towards 2015/2030 An FAO Study Prices: FSU-2030 3. Modeling OECD subsidy reductions: the results

  27. World agriculture: towards 2015/2030 An FAO Study The main results: price changes by commodity and policy scenario 3. Modeling OECD subsidy reductions: the results

  28. World agriculture: towards 2015/2030 An FAO Study Welfare gains from agricultural trade liberalisation (per year, in 1995 USD) 3. Modeling OECD subsidy reductions: the results

  29. World agriculture: towards 2015/2030 An FAO Study The main results • The price effects on the world markets are relatively moderate: 2-20%  structural reasons more important for the rising trade gap? • Impacts for individual countries can be more pronounced (e.g. farm incentive price for rice in Japan -85%) • Offsetting effects on production and trade from simultaneous changes in interlinked markets (coarse grains-meat) • Effects on consumer prices much smaller than on the producer side, particularly in OECD countries • The price effects are unlikely to alter the expected developments of trade flows between ICs and DCs significantly, but will impacts markedly on trade flows within the OECD countries and Transition Economies • Removal of support policies is likely to result in a redistribution of market shares within the OECD; Low support countries to capture the market shares of high support countries. • Developing countries gain surprisingly little from OECD policy reform (limited overall supply responsiveness, resource constraints, etc.) 3. Modeling OECD subsidy reductions: the results

  30. World agriculture: towards 2015/2030 An FAO Study Some questions and issues • The costs and benefits have to be looked at on a by country and by commodity basis. • OECD subsidies impose a heavy burden on OECD taxpayers and consumers, they will gain the most from their removal. • The scenario against has been undertaken against a baseline that expects a rising trade gap for DCs. The main reasons for this rising gap are structural. Look at trade liberalization also from a demand side perspective in DCs? • A cut in OECD subsidies may not deliver the benefits for DCs (in some cases it may result in major costs). Few DC and many TC will can. • The headcount shows that the gains in DCs could be concentrated on a very small number of countries. If many stand to lose, how can the majority of DCs be brought/bought back into the negotiations? 4. Conclusions and issues

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