Future Challenges in Agricultural Economics: OECD Insights & Policy Priorities

1. Future Challenges for Agricultural Economics Wilfrid Legg OECD Trade and Agriculture Belgian Association of Agricultural Economics 30th Anniversary, Brussels, 1 April2010

2. Presentation • OECD and agricultural policy issues • Agriculture Ministerial meeting 2010 • Policy priorities • Implications for agricultural economics • Some conclusions 2

3. OECD and agricultural policy issues 3

4. The OECD The Organisation for Economic Cooperation and Development is an inter-governmental organisation financed by its 31 member countries with increasing outreach to other countries Aim is to foster sustainable green growth and prosperity and act as a hub for globalisation Addresses common policy issues through dialogue among countries, based on analysis and comparative statistics

5. Work on agriculture in the OECD Economic analysis of agricultural policy issues and advice to help governments design and implement effective and efficient policies

6. Bridge between research and government • OECD has increasingly forged links with academics and the research community to support policy analysis • Researchers have been particularly helpful in developing or outlining relevant theories, concepts, methods and analytical frameworks, conducting literature reviews, and in preparing case studies • They have also acted as reviewers of OECD studies • A notable example of the contribution has been in the development of the Producer Support Estimate

7. OECD methods • OECD Committee for Agriculture mandates work, details are scoped out by the Secretariat in conjunction with working parties, studies are prepared by the Secretariat – with input from ministries in OECD (and non-OECD countries) and academics – and are ultimately approved by the Committee • The Secretariat participates in conferences and seminars with researchers, commissions consultancies and offers possibilities for experts to work with the Secretariat in Paris on short-term contracts

8. Agriculture Ministerial meeting 2010 8

9. Ministerial meetings in OECD • Meetings of OECD Agriculture Ministers have been rare in the OECD • Origins of the agricultural policy reform and agricultural trade agendas in the OECD were mandated by the annual meeting of OECD Finance and Trade Ministers in 1982 and 1987 • Agriculture Ministerial meetings were held in 1992 and 1998 – the latter being a milestone event – and then in February 2010, in which key non-OECD countries also participated

10. Agriculture Ministerial February 2010 • Theme: • Food and Agricultural Policies for a Sustainable Future – responding to global challenges and opportunities • Focus: • Food security • Green growth • Climate change

11. Policy priorities 11

12. Agriculture Ministerial: policy goals • Governments should ensure that: • Farmers can respond to demand • Markets can function • Agri-food sector can manage risk • Policies are coherent • Trade plays a market clearing role • Natural resources are well managed • Right signals can improve environmental performance • Supportive investment climate is in place • Innovation is fostered • Science-based food safety standards are implemented • Policies are targeted, monitored and evaluated

13. Agriculture Ministerial: guidance for OECD • Ministers requested OECD work to: • Distinguish between farmer actions and government responses • Harness OECD expertise to explore food security policy options • Identify policy and market options for green growth • Analyse agriculture’s role in addressing climate change • Identify options to reflect social/environmental costs/benefits • Analyse market functioning, define risk management responses • Explore actions to improve productivity and reduce waste • Explore role of trade policy to contribute to food security • Address institutional and governance aspects of policy reform • Provide a platform for policy dialogue • Ensure Codes and Schemes and CRP ontribute to policy work • Ensure effective communication

14. Implications for agricultural economics 14

15. Where can agricultural economics help (1)? • Focus in the following slides is on areas where agricultural economics can contribute to designing and implementing agricultural policies that can best meet objectives in cost-effective ways • Suggestions below are not comprehensive and do not necessarily reflect those of the OECD or its member countries • It would also be helpful to hear from Belgian agricultural economists as to where they think they can contribute to helping the development of policy

16. Where can agricultural economics help (2)? • Agricultural policy: OECD has a long history in monitoring and evaluating agricultural policy reform, but gaps remain • Distributional and transaction cost implications of targeting policies to specific outcomes (policy targeting) • Costs and benefits of alternative policy delivery mechanisms (policy evaluation) • Institutional arrangements that can help or hinder agricultural policy reform (political economy) • Impacts of agricultural policy reform (decoupling, SFP etc) on land values, farm household welfare, risk management, and structural adjustment in farming

17. Where can agricultural economics help (3)? • Agricultural trade: The core work in OECD has been to analyse the impacts of “traditional” domestic and trade policies on trade and welfare, but new policies and issues have arisen • Measuring the transfers associated with agriculture non-tariff barriers and constructing trade distortion indices • Trade, production and farm income impacts of alternative trade liberalisation scenarios – including bilateral agreements • Incorporating market failure into agriculture supply response models, especially in developing countries • Drivers and impediments to reaping comparative advantage

18. Where can agricultural economics help (4)? • Agri-food supply chain: There is increasing interest in the linkages between agriculture and the other actors in the agri-food chain and the role of policies • Farm-household data and models, in light of policies moving away from market support and towards farm households • Risk management strategies by farmers (to reduce, transfer, and cope with risk) and actors in the agri-food chain • Share of consumer food expenditure that is retained by farmers and why this varies across countries and commodities • Role of speculation in commodity and food price variability

19. Where can agricultural economics help (5)? • Agricultural sustainability: agriculture has an important role in contributing to sustainability and green growth but there are methodological and data challenges • Defining “low carbon” agriculture, measuring natural resource productivity, and constructing scenarios of alternative environmental and food production futures • Multi-disciplinary work integrating economic and biophysical models in view of natural resource (land, water) pressures • Design of information-revealing mechanisms (to determine the full cost of compliance with environmental etc regulations) • Measuring the demand for, cost of and alternative mechanisms to deliver public goods from agriculture

20. Environmental targets and reference levels How are environmental reference levels and targets determined so as to distinguish between who should pay for environmental harm and be paid for the provision of environmental public goods?

21. Where can agricultural economics help (6)? • Agriculture and rural development: agriculture is a small part of the rural economy but a large user of rural natural resources; however, there could be a bigger role for farming in rural areas to provide food, feed, fibre, fuel and leisure space in the future • Developing methodologies and indicators to evaluate the cost-effectiveness of achieving rural development programme goals • Scenarios for agriculture in rural areas to meet future demands from the agri-food sector, given demographic and technological changes and societal concerns • Do rural areas need specific policies – or space-targeted economy-wide policies and market approaches to enhance their economic and social viability?

22. Some conclusions 22

23. Conclusions • Agricultural economics – among the oldest and most robust areas of applied economics – will have a continuing role in contributing to the understanding of policy problems and solutions • Increasingly the policy issues and solutions lie outside of agricultural policy as such and agricultural economists need to engage with other disciplines and understand linkages with for example energy and financial markets, and other policies • A mixture of tools – not only modelling – are needed

24. OECD Trade and Agriculture Thank You! www.oecd.org/agriculture Contact wilfrid.legg@oecd.org