Agriculture: some primary facts for Seattle

Directorate for Agriculture
Page 31 

Events at Seattle demonstrate that agriculture will figure strongly on the agenda of any new round of multilateral trade negotiations.

In fact, formal negotiations on agriculture shall start from January 1, 2000 anyway, as mandated by the Uruguay Round agreements. Claims and counter claims, even at the highest political level, concerning the level of agricultural support and protection frequently hit the headlines, but rarely is there any attempt to substantiate the different statements.

Yet, authoritative estimates do exist on the level of support to agricultural producers in the OECD countries. Most commonly cited is the Producer Support Estimate (PSE), which is essentially an adding-up of all support to farmers from consumers through higher prices and from taxpayers through budgetary support. Not only are there large differences in the level of support between countries but also between commodities – and these differences have been accentuated in recent years as reform has led to reduced support in some sectors, notably cereals, while others have remained relatively untouched. The persistence of very high levels of support for milk, sugar and rice is particularly striking.

Who gets the support?

Much of the elaborate structure of agricultural policy has been put in place to ensure that farmers have an adequate level of income, although there are many other justifications that relate to production, the environment, employment, rural development and so on. As a lot of the support is based on production, most of the benefits end up in the hands of suppliers of inputs or of the owners of land who are not necessarily those who farm it. In most countries, the smallest farms account for a small share of production and receive a similarly small share of support.

Governments protect farmers from low commodity prices through tariffs and export subsidies, direct income support, and input subsidies. The OECD estimates for 1998 show that gross farm revenue was 59% higher than it would have been in the absence of farm support.

How much does it cost consumers and taxpayers?

Consumers finance the largest share of support in most countries because market price support remains the dominant policy measure. Market price support raises the cost of food. According to OECD estimates, consumption expenditure on domestically produced commodities was 34% higher than at world market prices. Total support to OECD agriculture from consumers and taxpayers (TSE) was estimated at US$362 billion in 1998. Levels of support vary widely across countries, such that total costs to consumers and taxpayers ranged from US$100 to over US$3,500 for an average family of four.

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©OECD Observer No 219, December 1999

Economic data

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