Measures of Agricultural Support Policies in Transition Economies: 1994–1997

Abstract

In the pre-reform period, agriculture was heavily subsidized in most Central and Eastern European countries (CEEC's). Around 1989, most CEEC's began to open up their markets, liberalize prices, and reduce subsidies, and the level of support provided to agriculture declined drastically. While not questioning the direction of economic reforms, there was concern that the decline in profitability in farning would slow down the impetus for farm restructuring, in particular, the drive for privatization of land as demanded by potential new farmers. However, after pursuing rather liberal agricultural policies at the beginning of the transition period, some CEEC's in recent years have reintroduced higher levels of support (Stefan Tangerman, 1996). In this paper, based on estimates of various support indicators for the period beginning roughly in 1994, I will address some of the more important questions regarding agricultural support: What has been the impact of trade and price policy interventions on the net income of farmers and government budgets? How level has the playing field been since the reintroduction of support? Does the current economic environment provide an appropriate and sound basis for adjustment toward a more competitive agricultural sector? This analysis is part of a comparative study by the World Bank, which covers Bulgaria, Poland, Romania, Ukraine, and Russia (in progress), plus Germany and Turkey, two reference cases geographically located at the border of the CEEC' s. For each country, employing the same methodology, the study considers approximately eight commodities which are representative of the country's major import-competing and export products.