Wednesday, June 29, 2005

No change in subsidy level since mid 1990s

There has been little change in the level of producer support to farmers in developed countries since the mid 1990s, according to the OECD. It is below the level of 37 per cent of farm receipts recorded in the mid 1980s, but the current level of 30 per cent had already been reached in the mid 1990s. Farmers across the OECD countries received €226 billion in subsidies in 2004, a massive amount which could surely be better used.

The OECD notes the shift towards new policy measures that are not directly linked with production. Nevertheless, 'While this shift may well continue over the coming years, production-linked measures still dominate producer support in most countries, encouraging output, distorting trade, and contributing to lower world prices of agricultural commodities.' The OECD also notes, 'Despite the move away from production-linked support, there is only a very modest move to policies targeted to clearly defined objectives and beneficiaries.'

At 34 per cent the level of support in the EU was above the OECD average of 30 per cent. This is an improvement on the 41 per cent level recorded in 1986-8.

Rice (75 per cent), sugar (58 per cent) and milk (38 per cent) remain the most highly supported commodities across the OECD. The largest decreases in both absolute and relative terms have occurred in grains apart from rice, sheepmeat and eggs and milk (where support was measured at 61 per cent in 1986-88).

The OECD emphasises the need for further reform. 'Government intervention continues to be significant, creating important spill-over effects on production, trade and the environment. Although some progress has been made since 1986-88, the current level, composition and spread in support levels across commodities in OECD countries still create distortions that demand further attention from policy makers.' The OECD notes that over 60 per cent of support to producers continues to be provided through policies generating higher producer prices.

OECD governments are increasingly focusing on environmental performance, rural development, animal welfare and food safety and quality issues, what is known in the EU as 'multifunctionality'. However, 'very little support is being channelled to these areas compared to the level linked to production.' Much remains to be done.

1 comment:

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