Domestic Farm Policy Research Articles

When Less Is More: On the Use of Historical Yield Data with Application to Rating Area Crop Insurance Contracts

AbstractCrop insurance is the cornerstone program of domestic farm policy in most developed countries. Although most countries’ rating methodology corrects for time-varying movements in the first two moments, it is unclear whether using the entire yield series remains appropriate. We use distributional tests and an out-of-sample retain-cede rating game to answer whether governments/insurers should historically trim yields in estimating their premium rates. Despite small sample sizes and the need to estimate tail probabilities, the historical data appear to be sufficiently different such that trimming is justified.

Japanese Beef Tariffs: Beef Quality, Farm Programs, and Producer Compensation

Abstract Beef is a highly protected commodity in Japan and the number of studies on the impact of beef import tariff reduction has increased in light of the controversy over the Trans-Pacific Partnership Agreement (TPPA), in which the gains from freer trade in beef was a major point of discussion. We estimate that an 11% tariff reduction for Japanese imports of both Australian and U.S. beef can generate a net welfare gain to Japan of between US$92 million and US$915 million. These results are not overly sensitive to whether beef is treated as homogeneous or heterogeneous. A more significant determinant of welfare gains is the extent to which farm policy would be decoupled along with tariff reductions. Under a decoupled farm program, producer welfare can remain unchanged while the net gain from freer trade is identical to that of complete removal of price supports with no compensation to producers. Therefore, negotiators for U.S. and Australian beef interests should lobby for both lowered tariffs and a decoupling of domestic farm policy within the importing country. This seems to have been the case as Japan was willing to move toward a more decoupled farm program under the TPPA.

US farm bills and the ‘national interest’: an historical research paper

AbstractThis paper is an historical analysis of how global pressures and aspirations have affected US farm bill debates over time, from the first farm bill in 1933 to the current debates over a 2018 farm bill. It focuses in particular on how nationalist and patriotic arguments have been used to support the USA's desired place in global agricultural markets over time. For example, debates over the 2008 farm bill reflected strong international concerns around both trade and energy, with early discussion focusing on keeping the USA ‘competitive’ as an agricultural exporter alongside emerging agricultural powerhouses, and later debates focusing on increasing domestic bioenergy production to ‘protect’ the USA from what were seen as risky energy imports. In other words, debates over trade and energy in 2008 provide insight into how stakeholders positioned the USA with respect to the rest of the world and how that positioning changed over the course of debates. But such questions about the USA's global aspirations—whether to maximize US production for export or protect US agriculture from global rivals—have been part of the farm bill since its earliest days. This analysis will examine how concerns over such national agricultural prominence in a globalizing context have played into and influenced the contours of domestic farm policy over time, with implications for the 2018 farm bill debates.

From supply management to agricultural subsidies—and back again? The U.S. Farm Bill & agrarian (in)viability

Farm subsidies have become increasingly maligned in agricultural policy debates, but the merits of subsidies are a distraction from deeper political, economic, and ecological problems in agriculture. Drawing on a history of the U.S. Farm Bill, this paper argues that a fixation on farm subsidies ignores why they came into being, and more generally glosses over the imperative for modern states to intervene into agricultural economies. Karl Polanyi's 'double movement' framework is used to situate the rise and fall of agricultural supply management within food regime theory. In the second, or surplus food regime, the U.S. government wielded excess commodities as geopolitical tools—even as domestic farm policy labored to contain overproduction, and thus support agrarian viability. In the subsequent corporate food regime, “free market” agriculture displaces and discredits supply management, even as massive government intervention into how food is grown and sold continues. Making space to remember historical price support programs, to situate their accomplishments and limitations, and to recognize residual supply-management mechanisms (such as farm cooperatives and agricultural marketing orders) is crucial for fostering agricultural viability in the US and beyond. Twentieth century supply management had flaws, but it cannot be wholly omitted. This paper highlights key motivations, elements, and contradictions of these policies and programs to begin the process of considering how supply management principles and strategies could be updated and enhanced for 21st century agriculture. Such a framework would need to pay more attention to diversity within domestic and international agricultures, and be more sensitive to the multi-scalar dimensions of food systems.

Ideational Change in the WTO and its Impacts on EU Agricultural Policy Institutions and the CAP

This paper argues that the Uruguay Round Agreement on Agriculture (URAA) introduced the market liberal paradigm as the ideational underpinning of the new farm trade regime. Though the immediate consequences in terms of limitations on agricultural support and protection were very modest, the Agreement did impact on the way in which domestic farm policy evolves. It forced EU agricultural policy makers to consider the agricultural negotiations when reforming the Common Agricultural Policy (CAP). The new paradigm in global farm trade resulted in a process of institutional layering in which concerns raised in the World Trade Organization (WTO) were gradually incorporated in EU agricultural institutions. This has resulted in gradual reform of the CAP in which policy instruments have been changed in order to make the CAP more WTO compatible. The underlying paradigm, the state‐assisted paradigm, has been sustained though it has been rephrased by introducing the concept of multifunctionality.

Agricultural and Food Policy

Part I Process The Policy Setting Policy Problems of Food and Agriculture The Policy Process Food and Agricultural Policy Interest Groups. Part II International Trade and Macroeconomic Policy The World Food Problems The Role of Trade International Trade and Market Development Policy The Macroeconomics of Agriculture. Part III Domestic Farm and Resource Policy The Farm Problem Domestic Farm Policy Resource Policy The Structure of Agriculture. Part IV Consumers, Rural Development and Agribusiness Food Price Policy Nutrition, Food Safety, and Food Quality Rural Development Policy Impact of Agricultural and Food Policy on Agribusiness National Agricultural and Food Policy.

Japan’s Bilateral FTAs: No Obstacle to Progress in the Doha Round

This paper examines Japan’s FTAs with Mexico and the Philippines in the context of parallel negotiations in the Doha Round. Although the limited results produced by these FTAs represent an inferior outcome to what might be achieved with multilateral trade liberalization, there is no evidence that these agreements have weakened the political will of Japanese export interests to push ahead with trade liberalization in the WTO or increased the leverage of protectionist interests in opposing that goal. The greatest hope for increased Japanese flexibility in WTO agricultural talks lies in accelerated reform of domestic farm policy rather than reduced emphasis on pursuit of FTAs.

Perspectives on Farm Policy Reform

This article begins with a review of what has happened to U.S. domestic farm policies and related agricultural trade policies over the past 10 years. We conclude this review with a brief overview of the policies as they stand today. Then we consider potential outcomes in the 2007 Farm Bill, and their implications for U.S. agriculture and, in particular, for agriculture in the Western states. Finally, we contemplate the longer-term possibilities for meaningful, enduring reform of U.S. farm program policies.

The Asian Crisis and the 1999 WTO Negotiations

It is generally accepted that the Uruguay Round Agreement on Agriculture was an historic achievement o it brought trade in agricultural products under the discipline of world trade rules for the ¢rst time. However, such tari¤cation as did occur often resulted in bound tariis at prohibitively high levels; export subsidies still distort the proper functioning of world markets; and the disciplines imposed on domestic farm policies are weak. Since the end of the Uruguay Round, Australia's food and agriculture industries have been waiting for another opportunity to achieve more meaningful liberalisation of agricultural trade through the WTO. This time around, Australia's farmers and food processors are looking for substantial reforms. But they face some formidable challenges. The environment in which the 1999 negotiations will take place is entirely diierent to the circumstances that prevailed in the 1980s. The Asian ¢nancial crisis is the most distinguishing feature of the late1990s' global environment. The crisis has underlined in a stark and powerful way just how interconnected we are o ¢nancially, socially, politically and economically. It has blurred the distinction between domestic and foreign issues and it has created new pressures for international cooperation (Ruggiero 1998). Global integration, a process driven by technological and economic realities, has been a stimulus to economic growth and rising incomes for over a decade. Yet, paradoxically, at no time during the post-war period has the prospect of further integration generated so much public anxiety, not least within those countries that have built their prosperity on more open trade (OECD 1998).

Familiar Terrain: Domestic Ideology And Farm Policy In Three Women's Novels About The 1980s

Familiar Terrain: Domestic Ideology And Farm Policy In Three Women's Novels About The 1980s

Multilateralism: A Constraint on Unilateralism and Regionalism in Agricultural Trade

It would be difficult to imagine a more interesting time to be considering the mix of multilateral, regional, and unilateral elements that make up the international agricultural trade regime. It has been assumed until recently, with full justification, that multilateral rules are an ineffective constraint on domestic farm policies and hence on the conditions governing world trade in temperate zone commodities. The wellknown exceptions in the GATT have made it a weak rod with which to beat protectionist domestic policies. Article XI of the GATT, which establishes the tariffs only principle, allows quantitative restrictions on imports where domestic agricultural policies control supplies. This exception has, for example, allowed Canada to keep tight restrictions on trade in dairy and poultry products. Article XVI, though banning most export subsidies, admits their use in primary products under certain (so far unenforceable) conditions. As a result, EC export restrictions have for twenty years depressed world markets for wheat and dairy products. The United States managed to get a waiver in 1955 exempting it from even the modest constraints of Article XI, thus allowing quantitative import constraints on a number of products. The EC went one better, choosing in 1961 a variable for its main import barrier. Such a levy was neither a tariff, which could have been bound, nor a quota, which would have been subject to Article XI.' As a grey measure, its place in the GATT has been in dispute ever since. With US and EC policies essentially beyond GATT scrutiny, other countries could hardly be made to toe the line. Japan was persuaded to replace many of its quantitative restrictions by tariffs, but chose to keep them in place for the most sensitive commodities. Regional rules on agricultural trade have not effectively curbed unilateral tendencies to subjugate trade relations to domestic policy requirements. In most free-trade areas, as discussed below, agriculture has been treated as an exception. The EC, determined to go beyond the free-trade area model toward a common market, translated domestic policy objectives to the Community level. This decision resulted not in a modest, liberal regime emphasizing free trade and competition in global markets, but in an obtrusive protectionist policy designed to seal off EC agriculture from the cold winds of outside com-

Protectionism in agriculture: Slow progress towards freer trade in agricultural products

Protectionism is widespread in agricultural trade. As a consequence, world markets are distorted and unstable. Earlier attempts to negotiate commodity agreements have failed to address the root problem: the domestic farm policies in industrial and middle-income countries. Constraints on these policies are now openly being discussed in the GATT Uruguay Round. Regional trade blocs are also coming to terms with the problems of agricultural trade. And a number of countries are unilaterally liberalizing agricultural trade as a part of their economic reform program. Despite this activity, high protection levels are still evident in the middle-income developed countries.

Agricultural and food policies in a United States-Mexico free trade area

This paper analyzes the effects of a U.S.-Mexico free trade agreement (FTA) on agriculture. We use a 28-sector, three-country computable general equilibrium (CGE) model in which we explicitly model agricultural and food policies in both countries, and differentiate land types. Agricultural policies include tariffs, quotas, input subsidies to farm and food processing sectors, targeted producer prices, fixed retail food prices and deficiency payments. Subsidies to Mexico's food processing industries and deficiency payments are endogenous, rather than fixed, ad valorem price wedges. We use the model to explore the effects of full and partial liberalization of agriculture in an FTA, a restructuring of Mexican domestic farm policies in conjunction with an FTA, and the effects of an increase in the Mexican capital stock. We find that there is potential for Mexican farm program changes to assist agriculture's transition to a free trade environment, and that in the long term, increased capital investment will enable Mexican agriculture to benefit from free trade.

Farm Policy Reform and the Environment

U.S. farm policy in the 1980s was marked by three significant developments: the international farm policy reform movement, the active participation by environment interests in the writing of the 1985 and 1990 farm bills, and the federal budget constraint. These developments raise new questions for farm policy. What are the environmental implications of domestic and international farm policy reform? Can both agricultural and environmental policy objectives be met in one piece of legislation? How does the federal budget constraint affect the feasible set of policy options? The goal of this paper is to outline an analytical framework that integrates technological, economic, and political factors for analysis of agricultural-environmental policy and to draw some preliminary conclusions about the environmental implications of the 1990 farm bill and trade liberalization

Domestic Farm Policy and the Gains from Trade: Comment

Schmitz, Sigurdson, and Doering (SSD) (1986) consider whether gains from trade necessarily exist when an economy is distorted with programs. Their answer (p. 820) is that farm programs, such as production subsidies, in the presence of international trade barriers can completely eliminate any trade gains. Anania and Bohman (AB), while critical of some of the SSD analysis, agree (p. 739) that increasing the volume of trade through subsidies can lead to negative gains from trade. The authors of the original article summarize and extend some of their analysis using general equilibrium techniques in SSD (1988). In this note I show that trade gains remain despite the existence of the agricultural policies examined by SSD and AB. To allow a straightforward comparison to the SSD and AB papers, this question of trade policy is first analyzed from the perspective of standard economic objectives. The issue of noneconomic objectives is addressed later; in an example, I illustrate the point that optimal policy is dependent on the policy goal. Therefore, progress on the agricultural policy debate requires a clear statement of these goals and of the perceived market breakdowns which the policies are meant to redress. Trade economists have identified several distor-

Domestic Farm Policy and the Gains from Trade: Reply

A general equilibrium model is used to demonstrate that, in the presence of domestic subsidies, trade can be welfare reducing relative to autarky. McDonald's comment claims that trade is always welfare improving with domestic production subsidies. He states that, when deriving a no-gains-from-trade point with production subsidies, Schmitz, Sigurdson, and Doering (SSD) (1986, 1988) and Anania and Bohman (AB) mistakenly confuse the overall welfare effects of a production subsidy with the welfare effects of free trade. First, we show that AB made the correct welfare comparison using a partial equilibrium model and then extend the results using a general equilibrium model.

Agricultural policy making under international pressures: The case of South Korea, a newly industrialized country

The article examines the hypothesis that domestic farm politics determines the nation's trade policy, not vice versa. In the context of South Korea, a newly industrialized country, it is found that the international political economy significantly dictates the formulation of its domestic farm policy. This is due mainly to Korea's export-dependent economy. Korea's dilemma is that while international pressures are mounting for agricultural import liberalization, particularly from the USA, with which it has accumulated a large payment imbalance, its domestic farm interests (which are increasingly independent of government supervision) exert powerful protectionist pressures on government. Caught between the two antagonistic forces, Korean policy makers are seeking ways to scale down their rural economy in order to make it competitive on the one hand, and to make room for increased imports on the other.

Gatt and Agriculture: The Role of Special Interest Groups

(a) The 1980s have been a decade of crisis for much of world agriculture. Following a period of unusual growth in world demand and trade, the 1980s have witnessed a decline in exports, plummeting agricultural prices, widespread economic distress in farming and associated industries, and rising trade tensions as nations have sought to protect their farmers (Institute for International Economics, p. 1). (b) The playing field in world agricultural trade is uneven. Some countries subsidize their exports; some tax imports; others tax exports. Most nations try to help their farmers through domestic farm programs. All these influences converge to distort the price signals that would otherwise govern supply and demand in a freer trade environment. The resulting hodgepodge has disadvantaged many producers in the United States and other countries, even though their farm products are among the least expensive to produce (Ballenger, Dunmore, and Lederer, p. 1). (c) The problems of agriculture have engaged the attention of world leaders and have become a major issue in the Uruguay Round of multilateral trade negotiations under the General Agreement on Tariffs and Trade (GATT). . . . A number of fora, including the GATT Ministerial Meeting at Punta del Este in September 1986 that launched the Uruguay Round, the Organization for Economic Cooperation and Development (OECD) Ministerial Meeting in May 1987, and the Venice Summit of industrial country leaders in June 1987, have issued declarations which support liberalization of agricultural trade and reform of domestic farm policies. . . . Trade Ministers of the GATT countries will also meet in December 1988 in

Domestic Farm Policy and the Gains from Trade: Comment

Schmitz, Sigurdson, and Doering (SSD) argue that domestic and trade policies can lead to negative gains from trade. They derive the no-gains from trade position when the importing country restricts trade and the exporter seeks to maintain its volume of exports by subsidizing production. They extend their results to the case where the exporter imposes production subsidies, a price support, and a setaside program. SSD analyze the world wheat market and argue that current programs in wheatexporting countries may cause negative gains from trade.

Domestic Farm Policy and the Gains from Trade: Reply

The points raised by Anania and Bohman are interesting and are generally correct. One important extension is the derivation of the linkages between production subsidies and the world market. They show, using partial analysis, that the existence of a no-gains from trade point does not depend on importers' policies nor maintaining the free trade export volume. One can show this result using general equilibrium analysis where the excess supply and demand framework of partial analysis is not needed. Consider figure 1, where there is a production surface representing the output of agriculture and manufacturing available from existing resources. At no trade, production and consumption are at N. With free trade, the terms of trade line becomes P2 where ab represents exports of agricultural products. The gains from trade can easily be measured using compensating or equivalent variation measures. Now consider domestic distortions only (i.e., there are no distortions introduced by the nation importing agricultural products). A production distortion which moves production to A and consumption to C for a price line P, increases the volume of trade, but there are no longer any gains from trade. Consumers are indifferent between trade and no trade if distortions are to remain.