Use of the Producer Subsidy Equivalent as a Measure of Support to Agriculture in Transition Economies

Abstract

Measurements of total support or assistance to agriculture using the Producer Subsidy Equivalent (PSE) have become a standard tool of policy analysts in the last decade. From its initial use by Josling at the Food and Agriculture Organization (FAO) (Josling, FAO), the PSE grew in popularity in parallel with the GATT Uruguay Round agricultural trade negotiations. Failure in previous GATT rounds to bring agriculture adequately within GATT rules and disciplines had been attributed in particular to difficulties in capturing the effects of the multiplicity of domestic measures and nontariff barriers to trade in agricultural products (Grogan, pp. 297-306). A common yardstick capturing the effects of all these policy measures was needed. The Organization for Economic Cooperation and Development (OECD) developed the methodology and applied it progressively to all OECD countries and recently to economies in transition (see OECD 1994, 1995c, and 1995d).