Disciplining Agricultural Support through Decoupling

Agricultural protection, particularly in high income countries, have induced overproduction, thereby depressing world commodity prices and reducing export shares of countries which do not support agriculture. One-and perhaps the only-effective way to bring a socially acceptable and politically feasi...

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Bibliographic Details
Main Authors:	Baffes, John, De Gorter, Harry
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING AGRICULTURAL PRODUCTION AGRICULTURAL PRODUCTS AGRICULTURAL PROTECTION AGRICULTURAL SCHOOLS AGRICULTURAL TRAINING AGRICULTURE BIOLOGICAL DIVERSITY BONDS BUDGETARY SUPPORT COAL COMPARATIVE ADVANTAGE COMPETITIVENESS CONSUMERS CROPS DEVELOPED COUNTRIES DIVERSIFIED OWNERSHIP DRAFTS ECONOMIC ACTIVITY ECONOMIC COOPERATION ECONOMIC COSTS ECONOMIC RESEARCH ECONOMIC WELFARE ECONOMICS ECONOMISTS ELASTICITY ELASTICITY OF SUBSTITUTION ELASTICITY OF SUPPLY ENTITLEMENTS ENVIRONMENTAL IMPROVEMENT EXCHANGE RATE EXCHANGE RATE SYSTEMS EXPENDITURES FARMERS FARMS FINANCIAL MARKETS FOOD POLICY RESEARCH FREE MARKET PRICES FREE TRADE GDP GROSS DOMESTIC PRODUCT IMPORT BARRIERS IMPORTS INCOME INCOME INEQUALITIES INCOMES INEFFICIENCY INPUT USE INSURANCE INTEREST SUBSIDIES INTERNATIONAL TRADE LEASING LIVESTOCK MARKET FAILURES MARKETING MULTILATERAL TRADE NEGATIVE EXTERNALITIES OUTPUTS OVERVALUED EXCHANGE RATES POLICY MAKERS POLLUTION PRESENT VALUE PRICE VARIATIONS PRODUCERS PRODUCTION PROCESS PRODUCTIVITY PUBLIC GOODS RURAL COMMUNITIES RURAL DEVELOPMENT SAFETY SAFETY NET SAFETY NETS SETTLEMENT STRUCTURAL ADJUSTMENT TECHNICAL ASSISTANCE TOTAL COSTS TRADE NEGOTIATIONS TRADE POLICIES UNEMPLOYMENT URUGUAY ROUND WEALTH WTO
Online Access:	http://documents.worldbank.org/curated/en/2005/03/5643490/disciplining-agricultural-support-through-decoupling http://hdl.handle.net/10986/8883

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Summary:	Agricultural protection, particularly in high income countries, have induced overproduction, thereby depressing world commodity prices and reducing export shares of countries which do not support agriculture. One-and perhaps the only-effective way to bring a socially acceptable and politically feasible reform is to replace payments linked to current production levels, input use, and prices by payments which are decoupled from these measures. Overall, the experience with decoupling agricultural support has been mixed while the switch to less distortive support has been uneven across commodities and countries. Rules have changed with new decoupling programs added so expectations about future policies affect current production decisions. Time limits were not implemented and if so, were overruled. Ideally, compensation programs would be universal (open to all sectors in the economy, not just agriculture) or at least non-sector-specific within agriculture. A simple and minimally distorting scheme would be a one-time unconditional payment to everyone engaged in farming or deemed in need of compensation that is nontransferable, along the lines of one-time buyouts without remaining subsidies. To maintain government credibility and reduce uncertainty, eligibility rules need to be clearly defined and not allowed to change. The time period on which payments are based, the level of payments, and the sectors covered should all remain fixed. Support to specific sectors within agriculture should be in the form of taxpayer-funded payments. There should be no requirement of production. Land, labor, and any other input should not have to be in "agricultural use."

Disciplining Agricultural Support through Decoupling

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