Getting the agricultural policy mix right

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Efficient agricultural policies are essential to meeting increasing demand for safe and nutritious food in a sustainable way. While growth in demand for food, feed, fuel and fibres presents significant opportunities for agriculture, government policies must address challenges such as increasing productivity growth, enhancing environmental performance and adaptation to climate change, and improving resilience of farm households to market shocks brought on by weather and other unforeseen circumstances.

Policy evaluation provides needed evidence for governments to ensure that their agri-food policies address these challenges well. Efficient policies clearly separate targeted measures that provide income support to farm households in need, from measures that support increased farm productivity, sustainability, resilience and overall profitability.

Domestic support policies have changed over the years
Countries have substantially altered their agricultural trade and domestic support policies over the past two decades. In some countries, support provided to farmers has become more decoupled from production – meaning that many farmers no longer receive payments for producing a specific commodity – and instead has begun to target environmental outcomes. But in some developed countries, support remains high and linked to production, while some emerging economies have also significantly increased policy interventions that distort production decisions. In both cases, support could have been better targeted atpublic services that benefit producers, consumers and society overall.

The OECD monitors the extent to which policies adapt to growth, resilience and sustainability needs
The OECD publishes an annual Agricultural Policy Monitoring and Evaluation report, which provides up-to-date estimates of government support to agriculture for all OECD and the European Union as a whole, plus key emerging economies. The 2018 edition includes Brazil, People’s Republic of China, Colombia, Costa Rica, Kazakhstan, the Philippines, the Russian Federation, South Africa, Ukraine, and Viet Nam; starting in 2019, India and Argentina will be added to the review.

Prior to being included in the annual report, countries generally undergo an in-depth country review which discusses in detail strengths and weaknesses of both the country’s agricultural sector and its agricultural institutions and policy environment. The subsequent partnership for the annual report builds on these studies to follow agricultural policy developments. Countries also provide important peer review of both policy data and analyses in the report.

Data underpinning the report come from the OECD producer and consumer support estimates (PSE and CSE) database. The OECD uses a standardised methodology to create this set of agricultural support indicators that allow for comparison of agricultural support between countries, and over time. This methodology is continuously updated and refined to maintain and improve its relevance in a changing policy environment.

The OECD is also a founding member and partner in the International Organisations Consortium for Measuring the Policy Environment for Agriculture, which is working to develop a harmonised and consolidated database of well-documented agricultural support indicators for an even larger set of countries.

Policymakers need to create a better and more coherent policy environment to meet food demand sustainably
Agricultural policy packages need to be both coherent and efficient to enable the sector to develop its full potential and achieve key public policy objectives. The sector is facing a number of challenges related to meeting future demands for food, fuel, fibre and eco-services in a more sustainable manner in the context of a changing climate.

The latest Agricultural Policy Monitoring and Evaluation report shows that the 51 countries studied provided almost USD 620 billion (EUR 556 billion) annually to support their agricultural sectors during the 2015-17 period. Half of this is still provided via measures that strongly distort farm business decisions.

These policies obstruct efforts to make agriculture more productive, sustainable and resilient. The same study found that almost 80% of the total annual government support to agriculture was provided directly to farmers, while only a small share (14%) went to general services like research and development or infrastructure, which are needed to equip the agricultural sector for future challenges.

Our research and analysis on this subject over past 30 years gives rise to the following key policy recommendations:

Remove existing policy dis-incentives to increasing productivity, sustainability and resilience.
Re-direct agricultural support towards ensuring the availability of public services that benefit producers, consumers and society overall.

Encourage collaboration on knowledge generation and transfer between public and private actors – nationally, regionally and internationally.

Draw on the full range of economic instruments, including information, education, regulation, payments and taxes, in pursuit of environmental and climate change goals.

Streamline risk management policies by clearly defining the limits between normal business risks, risks for which market solutions exist or can be developed, and catastrophic risks requiring public engagement.
Improve understanding of the overall financial and well-being situation of farm households to design farm-income support measures targeting those in need.

Develop coherent policy packages that can address the many opportunities and challenges confronting the sector and farm households.

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