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Why agricultural policy reform is so difficult

Over on the excellent VoxEU site, Thomas Hertel, Roman Keeney and Alan Winters try to answer the question why agricultural policy is so difficult to reform, as illustrated by the way in which difficulties in getting agreement on reduced agricultural support and protection has been one of the factors preventing progress in the Doha Round. They take issue with one justification for preserving rich countries’ agricultural protection that it helps poor farmers in the North while the benefits of liberalisation would go only to rich farmers in the South.

Their findings, based on detailed economic modelling, suggest that the predominant effects would be the opposite. In particular, focusing on the US, they find that the average farm household in the US would be little affected by a Doha Round agreement, not least because US farm housholds’ income sources are so diversified and only about 10% of the total now comes from farming. This is not the case, of course, for specialist producers of highly subsidised crops in the US such as rice, cotton and sugar. Their conclusion is that it is the combination of big subsidies, specialisation and great wealth which has made farm policy reform so difficult in the US. They don’t present comparable data for the EU, but hypothesise that a similar concentration of losses would be experienced also in the EU. However, the greater dependence of farm households on farm income in the EU (at around 60% of the total for the EU25) suggests that reform would potentially hurt farm households further down the distribution than would apparently be the case in the US.

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