1. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 1

2. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 2 Indicators to Evaluate Agricultural Policies in OECD Countries Wilfrid Legg Head of Policies and Environment Division, OECD Agriculture Directorate wilfrid.legg@oecd.org

3. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 3 Main Messages OECD indicators of agricultural support are: - internationally recognized as the best measure of transfers associated with agricultural policies - key inputs in monitoring and evaluating policies - regularly refined to reflect changes in agricultural policies - easy to understand and produced at relatively low cost

4. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 4 What is a good policy indicator? - Analytically sound and able to reflect policy change - Able to aid policy evaluation - Able to compare change over time and countries - Transparent, easy to understand and communicate - Able to up-date regularly at low cost

5. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 5 Why monitor and evaluate agricultural policies in OECD countries? - Severe trade problems in world agricultural markets in the early 1980s were due to trade and domestic policies – but no way then to compare policies across countries and time - Main aim of work in the OECD has been to facilitate and underpin multilateral trade negotiations in the GATT (now WTO) - Governments and civil society also want to know the cost of agricultural policies, who receives support, and the impact on production, farm incomes, trade and the environment

6. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 6 What is the OECD contribution? - Developing a consistent and economically sound methodology to measure agricultural support – and agreed among OECD countries - Applying that methodology since the early 1980s to produce annual estimates of farm support to commodities and countries, in monetary terms and as a share of farm receipts - Showing changes in support arising from different types of policy measures and analysing the consequences - Using the support data with other indicators and models to analyse impacts of policy changes - Working closely with countries in collecting data, calculating the indicators, discussing and communicating results and analysis

7. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 7 Which are the key support indicators? - Producer Support Estimate measures transfers (as % of farm receipts) to farmers from agricultural policy measures that - * maintain domestic prices above world prices * provide payments to farmers or lower their costs - Consumer Support Estimate measures transfers (as % of food spent at farm gate) from consumers from agricultural policy measures - Total Support Estimate (TSE): measures total transfers (as % of GDP) to the agricultural sector from agricultural policy measures AGRICULTURAL SUPPORT IS MUCH MORE THAN ONLY BUDGETARY PAYMENTS TO FARMERS!

8. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 8 How much have policies cost? - In 1986-88 support to farmers was $ 241 billion (37% of farm receipts) of which 77% was transferred from consumers and 23% from taxpayers - In 2001-03 support to farmers was $ 257 billion (32% of farm receipts) of which 62% was transferred from consumers and 38% from taxpayers - By commodity, support to rice, sugar and milk is over 50%, while for poultry, pigs, eggs and wool it is below 20% - By country, support varies from 2% in New Zealand to 73% in Switzerland, with the US at 20%, the EU at 35% and Japan at 58% - In 1986-88 over 90% of support to farmers was very closely linked to production. In 2001-03 that share had fallen to around 75%

9. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 9 Who gets the support? - Most support does not end up in raising farm incomes - Large farmers benefit most - Wide variation depending on commodity produced - Poorest consumers pay highest share of their incomes on support Additional data used: FARM INCOMES + POLICY EVALUATION MODEL + STRUCTURES

10. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 10 Does support slow down farm adjustment? - Long term decline in world commodity prices, technological change and smaller share of consumer incomes spent on food - But many farm sectors insulated from world market signals, although rate of agricultural protection has halved in last 15 years - Support keeps more resources in agriculture than would otherwise be the case and locks in technology and structures Additional data used: COMMODITY PRICES + TRADE BARRIERS + FARM STRUCTURES

11. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 11 How does support affect the environment? - Agriculture uses over 40% of land and water in OECD countries so potentially has big impacts on ecosystems and natural resources - Production-linked support encourages more use of chemicals, intensive farm practices, and farming on eco-sensitive land - Agriculture also preserves some landscapes, helps flood control and absorbs carbon, but is not the only activity doing these things - Increasingly, farm support payments are eco-conditional, but can conflict with production-linked support Additional data used: AGRI-ENVIRONMENTAL INDICATORS + POLICIES

12. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 12 What does support do to trade? - Trade policies such as import restrictions and export subsidies insulate domestic markets from world price signals - World prices of farm commodities are lower than would otherwise be the case - Difficult for low cost competitors to enter protected markets, but when protection is lower, non-tariff barriers and agri-food industry restrictions become more significant Additional data used: TRADE POLICIES + MODELS

13. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 13 How are indicators being refined? - Increasing country and commodity coverage over time - Better breakdown of more complex forms of support - Greater integration of support into impact modelling work - Developing indicators to show spread of support - Explaining changes in the level of support - More attention to communicating results

14. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 14 An example to show progress in policy reform - The % PSE shows support as a share of farm receipts - Changes in the % PSE over time is one indicator of showing progress in policy reform - But we can also show changes in farm receipts that result from changes in support - There are sometimes big differences between changes in the % PSE and in resulting changes in farm receipts, as the graph shows…….

15. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 15 Progress in reducing support 1986-88 to 2001-03

16. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 16 And finally, are the indicators of support cost-effective? - relatively high start-up costs but low maintenance costs - raw data mainly from government sources and no modelling involved in calculating indicators - benefits of sharing information across countries and can enter high up on the learning curve when measuring support for non-OECD countries - very timely: indicators produced a few months from the end of the year in question and valued by governments and CSOs