New Indicators of How Much Agricultural Policies Restrict Global Trade

Abstract

Despite recent reforms, world agricultural markets remain highly distorted by government policies. Traditional indicators of agricultural and food price distortions such as producer and consumer support estimates (PSEs and CSEs) can be poor guides to the policies’ trade effects. Two recent studies provide much better indicators of trade (and welfare)-reducing effects of farm price and trade policies, but they provide somewhat differing numbers. This article explains why those estimates differ and how they might be improved for use in ongoing annual monitoring of the trade restrictiveness of agricultural policies in both high-income and developing countries.