Why market access is the most important of agriculture's "three pillars" in the Doha negotiations

Abstract

Limiting trade-distorting domestic support to farmers, and phasing out agricultural export subsidies are important and necessary disciplines. However, the potential income gains from abolishing these measures are much smaller than those from eliminating tariffs. The OECD's producer support estimates (PSE) is intended to provide a summary measure of the producer subsidy that would be equivalent to all the forms of support provided to farmers, including direct farm subsidies that may or may not encourage production domestically, market price support provided by import tariffs, and assistance provided by export subsidies. All three of those components of government assistance to farmers are disciplined under the Uruguay Round Agreement on Agriculture, and have become known as the "three pillars." The results on the relative importance of market access, domestic support, and export subsidies as sources of global economic costs of agricultural protection are important to understand, because they can influence the weight of effort trade negotiators put into liberalizing the three "pillars". The intuition behind the model results is straightforward. Agricultural market access barriers are much more important than domestic subsidies because: the amounts of support provided through market access barriers - to primary and processed agriculture - in developed (and even more so in developing) countries are much greater than the supports provided through subsidies; trade barriers distort both production and consumption whereas domestic support only distorts production (and less so the more those measures are decoupled); and, market access barriers vary much more across countries and commodities, and hence generate larger costs, than do domestic support measures. These results point to the importance of ensuring that market access is high on the Doha Development Agenda's agricultural negotiations.