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CIAO DATE: 4/5/2007
Decoupling Agricultural Support from Production
November 2006
Abstract
A traditional objective of agricultural support policy was to increase production or maintain it at a certain level. Consequently, almost all policies were closely linked to production. Tariffs, export subsidies and other methods were used to support market prices, farmers were given direct payments for boosting production and governments subsidised items such as fertilisers.
Since the mid-1980s there has been a move away from these policies towards providing support on the basis of area, farm income or even per farm. This change has occurred because the production objective has been reached or is no longer valid, other objectives have become more important, and international commitments have required a change. The extent of this reform varies considerably between OECD members and the overall level of support remains high in many countries.
Many of the initiatives have been inspired by the concept of decoupling. Decoupling agricultural support means reforming policies to reduce their interference with production decisions. But how do the different types of agricultural support affect production?
The OECD has been working since 1999 to answer this question and to identify the characteristics that contribute to a more decoupled support policy. Many different methods and tools have been used in the attempt to improve understanding as this aspect of agricultural policy has become increasingly important. Analysis focuses on the arable crop sector, where a significant change in the composition of support has occurred, and where the move to area payments, the basis on which most of the newer forms of support are paid to farmers, has been most pronounced.
This Policy Brief synthesises the results of this major undertaking. Insights have been gained into the general magnitude and nature of the impacts. The production, trade and farm income effects of decoupling have been considered in detail, with relatively less attention given to the possible environmental and overall welfare impacts of reform.
