Agricultural support policy as a determinant of international competitiveness: evidence from the EU and US
2018
Pawlak, K., Poznan Univ. of Life Sciences (Poland)
Government policies are more important and pervasive than natural endowments in determining competitiveness of agri-food sector. One of the most important policy areas are agricultural policies. The aim of this paper is to identify the differences in levels and structures of support for agricultural producers in the EU and US over the 1986−2016 period. The study relies on data retrieved from the “Producer and Consumer Support Estimates Database” of the OECD. The following indicators of agricultural support were used: TSE, % TSE, PSE, % PSE, MPS, GSSE, TCT, NAC and NPC. Both the EU and the US still heavily support their agricultural sectors. However, positive developments took place in the structure of support which means a gradual substitution of price support measures with payments having less distortive effects on market and trade processes. Irrespective of changes to the nature of support, which have already taken place, it may be assumed that in the economies considered, there is still a potential to introduce less trade distorting and more market oriented policies. The EU provides the agricultural producers with twice as much support (measured with the % PSE index) as the US, and the EU market is covered by stronger customs protection measures. Having this in mind, it may be assumed that in the context of potential liberalization of the EU-US bilateral trade (and/or world trade) and the progressive reduction of support for the domestic agricultural sector, the expected trade creation effect (stronger in the US than in the EU) could drive the strengthening of the US international competitive position.
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