Governments support of $500 billion may be ineffective and trade-distorting, says OECD
According to an OECD report issued this week, more than $500 billion were directed by 53 governments to farmers as support for their operations. Despite that, the results are not always satisfying, as OECD experts explained.
Farm policies in the 53 countries studied in the report – all OECD and EU countries, plus 12 key emerging economies – provided on average USD 528 billion (EUR 465 billion) per-year of direct support to farmers during the 2016-18 period. At the same time, countries that implicitly taxed farmers through artificially depressed prices reduced farm revenues by USD 83 billion (EUR 73 billion) per-year.
The OECD finds that little progress has been seen this decade in reforming agricultural support policies. Many agricultural policies continue to distort farm production and trade decisions and do not effectively target stated government objectives.
The report shows that 54% of support is provided through policies that artificially maintain domestic farm prices above international levels. This type of support harms consumers – especially poor consumers – while increasing the income gap between small and large farms and reducing the competitiveness of the food industry.
Relatively little of the current policy mix in most countries targets agricultural productivity growth and the sustainable use of land, water and biodiversity resources. The report also highlights large variations in support for different commodities, both within and across countries. This can result in significant price support for some products, while others are artificially depressed, and contributes to distortions in international markets.
"Governments can support farm households and rural communities without negative effects on global markets. By removing the link between support and farm production decisions, and investing instead in needed public services, governments can build an enabling environment in which farmers have the freedom to make business decisions in response to evolving market opportunities at home and abroad. At the same time farm policy should be better targeted, improving access to technologies that will drive both productivity growth and sustainable resource use,” said OECD Director for Trade and Agriculture Ken Ash.
The annual "Agricultural Policy Monitoring and Evaluation" report provides up-to-date estimates of government support to agriculture for all OECD and the European Union as a whole, plus key emerging economies. The 2019 edition includes Brazil, China, Colombia, Costa Rica, Kazakhstan, the Philippines, the Russian Federation, South Africa, Ukraine, Vietnam, and for the first time, both India and Argentina.
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