GATT and the 1990 Farm Bill: Comparability or Confrontation?: Discussion

Abstract

I enjoyed this paper very much. Webb, Dixit, and Conley compress a complicated policy problem, the formulation of the 1990 farm bill in a budget-constrained and GATT-influenced atmosphere, into three simply formulated model scenarios offering considerable insight into the implications of several possible policy directions. The paper's strength may also be its weakness in that it is extremely difficult to capture the complexity of the actual policy alternatives in the modeling framework available to them. My comments pertain to the relationship between the model scenarios and the real-world policy setting. My first comment is on the base period chosen for the analysis. Data, particularly the availability of the producer subsidy equivalent (PSE) measures, constrained the authors to a 1986 base. Because this year represents the historical high point of U.S. agricultural support, the Confrontation scenario represents, in the model context, a stay-the-course policy option. In actuality, as the authors note, economic factors and policy developments written into the 1985 legislation have combined to reduce budget support considerably since 1986. In fact, some have referred to the 1985 bill as unilateral liberalization because it set downward trends for loan rates and target prices. Also as U.S. stock levels have come down in the last year, the Export Enhancement Program (EEP) has also been scaled down. The main point is that, realistically, the Confrontation scenario implies a scaling up of U.S. programs which, given current pressures, may be as unlikely as complete unilateral liberalization. This raises the question of what a confrontational farm bill really would look like given current budget constraints and farm program parameters. A second modeling comment relates to the projections mode in which the scenarios are cast. Production and consumption changes over the model's time horizon are based on trends, but the paper gives no information on these movements. These changes must also imply changes in world prices, and changes in prices imply changes in country support levels. Because the authors assume other countries' support levels remain at 1986/87 levels, the implicit assumption is that these countries have made policy adjustments in response to the changed price environment. Furthermore, since the Confrontation option is pursued to force other countries to reduce protection, the assumption of unchanged support in other countries seems to imply that confrontation does not work. The authors might want to think about whether the policy changes that would maintain support levels unchanged are consistent with the expected responses to a confrontation strategy. Third, the design of the scenarios may not reflect the range of options realistically available to policy makers. To some extent, the model characteristics limit the design of the scenarios. For example, the use of summary support measures means that the authors cannot do much tinkering with individual U.S. policy levers. But there are some other possibilities. For example, the Budget scenario involves reductions in direct payments, but this reduction could actually be achieved through either target price reductions or tightened supply controls. Might not these alternatives have differing effects, and could they be explored with the SWOPSIM model? Another way to reduce budget support would be to transfer the cost of producer support from taxpayers to consumers. For example, replacing deficiency payments with export Nicole S. Ballenger is an agricultural economist, Economic Research Service, U.S. Department of Agriculture and a resident fellow at the National Center for Food and Agricultural Policy, Resources for the Future.