RESEARCH REPOR. 1
Developed-Country Agricultural Policies and Developing-Country Supplies: The Case of Wheat
by Timothy Josling
Vo'r4A F%0 P
C /!C DEVELOPED-COUNTRY AGRICULTURAL POLICIES AND DEVELOPING-COUNTRY FOOD SUPPLIES: THE CASE OF WHEAT DEVELOPED- COUNTRY AGRICULTURAL POLICIES AND DEVELOPING-COUNTRY FOOD SUPPLIES: THE CASE OF WHEAT
Timothy Josling
Research Report 14 International Food Policy Research Institute March 1980 Copyright 1980 International Food Policy Research Institute.
All rights reserved. Sections of this report may be reproduced without the express permission of Lut with acknowledgment to the International Food Policy Research Institute.
Library ol Congress Cataloging in Publication Data
Josling, Timothy Edward. Developed-country agricultural policies and developing-country food supplies.
(Research report-Inlernational Food Policy Research Institute; 14) 1. Wheat trade. 2. Underdeveloped areas-Wheal trade. 3, state. 1. Title. II. Series: Agriculture and International Food Policy Research Institute. Research report- Internationjl Food Policy Research Institute; 14. HD9049.W4J67 338. 1'731 I 80-12635 ISBN 0-89629-015-8 CONTENTS
Foreworo
I. Summary 11
2. Introduction 13
3. Developed Countries and the World Wheat Market 15
4. Impact of Developed-Country Policies on Wheat Trade Volume and World Price Levels 22
5. Impact of Developed-Country :olicies on Market Stability 27
6. Responsiveness of Policies to World Market Conditions 32
7. Future Policy Directions 37
8. Implications for Developing Countries 45
Appendix 1: Wheat Policies in Selected Developed Countries 50
Appendix 2: Quantification of Policy Effects in the Wheat Sector of Selected Developed Countries 53 TABLES
I. Wheat producion arid consumption in selected developed countries, 1968/69 to 1977/78 16 2. Ending stocks and stock accumulation of wheat in selected developed countries, 1968/69 to j976/77 17 3. Net export balance of wh-2at in selected developed countries, 1968/69 to 1976/77 17 4. Wh"eat importel by developing market economies, 1968/69 to 1977/78 18
5. Change over previous year of selected variables for wheat, 1969/70 to 1977/78 21 6. Policy-induced increase in wheat outplt of selected de veloped countries, 1969/70 to 1976/77 24
7. Policy-induce(. decrease in wheat consumption of selected developed countries, 1970 to 1977 24 8. Trade volume effect of policy-induced increase in net export uf wheat in salectedl developed countries, 1969/70 to 1976/77 25
9. Changes in wheat stocks of selected developel countries and the U.S.S.R., 1967/68 to 1976/77 28
10. Policy- induced trade volume effects and changes of wheat stocks in selected levelopedl countries (SDCs) and the U.S.S.R., 1969/70 to 1976'77 30
11. Regression of national wheat prices against world price in selected ieveloped countries, 1968/69 to 1975/76 33
12. Regression of trade volume effect of policies against world price and implied trade neutral prices 34
13. Relationship between world price and carry-over stocks of wheat in selected (teveloped countries, 1968/69 to 1975/76 35 14. Implications for policy-induced trade volume and for carry out of an increase of $10 per ton in world wheat price levels 36
15. Wheat producer subsidy equivalents and values for Australia, 1969 to 1977 54
16. Wheat consumer subsidy equivalents and values for Australia, 1969 to 1977 55
17. Wheat producer subsidy equivalents and values for Canada, 1968 to 1976 56
18. Wheat consumer subsidy equivalents and values for Canada, 1968 to 1976 57
19. Wheat producer subsidy equivalents and values for the European Community (6). 1968 to 1976 58
20. Wheat consumer subsidy equi\,alenls and V'alues for the European Community (6). IM8 to 976 59
21. Wheat producer subsidy equivalents and values for Japan, 1968 to 1976 60
22. Wheat consumer subsidy equivalents and values for Japan, 1968 to 1976 61
23. Wheat producer subsidy equivalents and values for the United Kingdom, 1968 to 1976 62
24. Wheat consumer subsidy equivalents and values for the United Kingdom, 1968 to 1976 63
25. Wheat producer subsidy equivalents and values for the United States, 1968 lo 1976 64
26. Wheat consumer subsidy equivalents and values for the United States. 1968 to 1976 65 FOREWORD
A major research thrust of the Inter- stabilized by the developed-country national Food Policy Research Institute n)olicies. This information will serve as a concerns the policy measures needed to basis for analyzing international programs assure adequate food supplies to the low- aimed at mitigating the undesirable effects income people of developing countries, or for determining how the policies them This thrust considers not only how to n- selves might be modified as a contribution courage growth in food production and how to solution of global food problems. The to deal with the corresponding increase in data suggest that these destabilizing forces demand but also how stable supplies can be are substantial and underscore the need for assured in die face of wide, weather- countervailing policies at the national and induced variations in prodluction. In re- international levels. searching these issues, the Institute is Other research at IFPRI has studied studying various international schemes for various insurance and compensatory pay pooling risks allong countries with (lif- ment schemes for (lealing witl fluctuations fering weather patterns and hence differing in sul)plies (see Research Report No. 4, Food fluctuations of suppl,. Because aggregate Security: An Insurance Approach). A con world food production fluctuates much less ference held jointly with the International from year-to-year than that of individual Maize and Wheat Iml)rovement Center countries, such schemes offer opportuni- (CINMY'I) on the subject of Food Security ties for large reductions illthe cost of for l)eveloping Countries, the proceedings supplying sufficient food to developing of which are being l)rel)ared for pl)lication, countries. It is in this context that nimoth i drew together research on national and Josling has undertaken this analysis of the international as)ects oft his issue. Research effects on developing countries of continues aiid will culminate illa series of developed-country wheat policies. region al policy workshops designed to bring The developed coountries as a group togethvr rese-rchers and policymakers produce a Irge portion of internationally comnitted to finding improved means of traded grain.-,. T , m.i;sive )urchasing meeting the pressing food needs of low power of these countries assures the incotne people. Timothy Josling's report stability of their own supplies. Therefore, adds consi 6erahMy to the knowledge re any effective program for developing coun- quired to achieve this goal. tries must take ;nto consideration the powerful market actions of. developed John W. Mellor countries. Josling examines the data on production, consumption, stocks. and prices to deter mine to what extent and how wheat Washington, 1). C, availability in dveloping cotntries is de- February 1980 ACKNOWLEDGMENTS
This report was prepared for the International Food Policy Research based on research Institute undertaken during the summer and fall of 1978. The author would like to thank John Mcilor and Alberto Valdc& of their advice and IFPRI for encouragement during preparation of the report, reviewers who and three made valuable suggesti'ns on a draft. The responsihility contents for the of the report remains, however, with the author. I
SUMMARY
In recent years the agricultural policies current surplus and 23 million toils in net of developed countries have often been trade. In some years, as in 1972/73, the SDC accused of having a potentially destabiliz- and U.S.S.R. trade balances in part offset ing effect on world prices. Wheat is the most each other, but the combined SDC and significant food comutodity exl)orted by the Soviet change in net surplus still amounted developed world to developing nations. It is to I imillion tons. If some part of this therefore iml)ortan' to determline to what varialtion ('all lie attributeed to developed extent the wheat p)licies of the industrial (Oililtr, I)oli(ies, then there is a ipossilhility nations have caused problems for the lhaltsuch policies c'onlributed 1o world developing countres that purchase wheat i,irket instability. ol the world market. Two aslpects oI' policy are considered: This report exam ines tie %%heal eclors the illlpaC Of stpport I)r i(es on I(production of Australia, Canadi, the t-uropeai Con- and consumption and the changes in iunity, Japan, the United Kingdom, and the stocks, whether private or go\ ernment held. United States from 1969/70 to 1977/78. The (In cases where stocks are privatel' held, it changes in )ro(Luctioll, coisumn)tiol, stock is assumed that domestic lii-e supports levels, and trade are discussed in detail, have a,ilnlact on stock behavioi over time. with etnphasis on year-to-year variations in Stock changes would then rellect goverll grain availability. The performance of tihe letllrrice policy.) By calculating.q for each Soviet Union is also examnined because yedr the ,altional effect onl produltion and Soviet demands on \orld grain markets consuilmltion of' price policies it is possihle have had a major impact on the availability to trace the impact of such policies oil of supplies for developing countries. supply availahilil,. A'.',ilabilit also varies Measures of tile effects of developed- frot.N ear-to-, ear. From an increase in aggre country policies are then incorporated into gal net export aailabilit (fromin the SDCs) the analysis to see whether the policies ofalbout 13 million tons in ihe, ears 1969/70 themselves exacerbated tihe plol)lem of to 1972/,73. this policy-induced surpllus supply variability, or whether tlle helped to droppedl o 4.6 million tils ill1974,75. In stabilize world supplies. The ieport dis- other words, availabilit(l decreased because Cusses possible future changes in these price policies held back production and policies and recent international initiatives elcouraged consiumplion. Supplies rose aimed at improving tile performance of the again to 5 million tols by 1976/77. If stock world wheat market, changes are included, price policies causedl Variaticn il tilewheat supply of wheal suppliestorange from asurlhisof31 developed countries is aserious prol)leni for million toins in 1972/73 to a deficit of II developing-country importers. For the million tons in 1976:77. Clearly policy ill selected developed countries (StCs) fllences can be as illporlant as production stludied in the report, the difference be- fluwaltions to importing countries. tween high and low production during the I.inking these fluctuations with events period was 47 million toils, compared with on world markets suggests that domestic less-developed-count ry imports of 20 to 35 pol icies inadvertently, exacerbat edl the prob million tons. The absolute variation in olilt- ]ells arising frotn production variability. put in the U.S.S.R. was about 44 million tons The high prices in 1973 wer3 l caused by during this period. For thle Soviet Union developed-coultr lolicies. it tile change consumlption changes (ampened tile in in pricts would have been nlch less and pact ol current surpls (production less the crisis would not ha e ltsted islong in consulilption) to 32 milion tolls, and the absence of such policies. Stock policies apparent stock changes reduced the net tendl to reinforce the impact of domestic trade variation to 21 million tons. For the price policies rather than to offset them. SDCs the variations were 43 million toils in Stocks were released into world markets to
II export domestic overproduction and were policy, some changes in the operation of accumulated when price policies held pro- domestic policies are needed. Iheally these duction lower and consumption highei than changes ,vould remove the element of in would otherwi;e have been the case. stability in the worhil miaket carised by This analysis suggests that [he root of unresponsive domestic policy prices. the p)roblem lies illthe r,'spolse (ol ],1( Be . of (aduse such policy rhtanges rul coutiiter to response) o! dOilntSti( polic lrices-and the doinestic objectives of developed hence pro:Cthio, COiSll)tion, alnld stock'- countries, they have never hleel the suibject to world market situalions. National price of serious international tnegotiations. As all levels inl IlIly countries adljust slowsl, to dlteriw.tye, stock policies could be revised %%orldmarket developllents. Stock levels in to ensure that the impact oin world markets nlatn of the corintries studied fllow xorld ofshle rtnistic tricc for grain is henign. price movemnents, which helps t, destabilize Iis might reluire stock world markets. h-ortunately, stocks iwi Canada, releases of perhaps 4 million tons of wheat for a $10-per-ton rise the United States, indl Australia a(tI ill a ill%,orld[lices. But negotiations Oin an stahilizing way. I turimg the pieriod sttudied, Intellational Wheit .\grellmmut that n an extra 2.3 million tons of grain \,ere cluded such siock itiles hivec been released Im,the SI)r's for v 12 2 INTRODUCTION The performance of the world's ability of the system to produce food at the agricultural economy must be judged lowest cost. In most developed countries, ultimately by the extent to which government support is concentrated on production increases can meet the needs of those sectors of agriculture that are not a growing population and the demand for a competitive with other countries. Support steady improvement in diets. Government prices for these products are out of line with agricultural policies all impinge upon tile world market conditions when they are achievement of these objectives in some determined primarily by domestic inflation way. Many such policies encourage appro- rates and income trends. Though there are, priate investment decisions and reduce of course, cogent political arguments that uncertainty about agricultural production, encourage such countries to maintain Other policies offset these favorable effects protection for less-than-efficient domnestic by causing investment funds to be mis- farm production, the arguments themselves directed or by increasing market uncertainty, are premised on the lack of competitiveness The charge is often made that developed- of the sectors in question. Thus the cost of country farm policies, by promoting the these policies to national treasuries and to production of high-cost foodstuffs in in- consumers is an indication of the extent to dustrial countries and exacerbating the which governments go to avoid adjustments instability of world markets, make it dif- that would othenvise lower the resource ficult for developing countries (LDCs) to cost of food production. evolve their own food policies. Second, developed-country agricultural This study explores one aspect of this policies can also affect the price and market contention: the impact of the policies instability of the world food system. Policies pursued by a group of industrial countries that fix domestic price levels for consumers on the price and availability ofwheat sold to and producers thrust short-run adjustments developing countries. It identifies certain in the market onto unprotected groups in elements of these policies that have other countries. The mechanism for significance for other countries in general achieving domestic price stability-itself a and for food-importing developing coun- major aim of these policies-varies from tries in particular. The aim is to allow those country to country. In general, whenever interested in the analysis of the food situa- stock adjustments are nut made that are tion in food-deficit developing countries to equivalent to the suppressed changes in understand and to monitor the most signifi- production and consumption (total dotnes cant features of developed-country policy tic Ilse , the country concerned is exacerbating affecting grain supplies. Experiences of the international market instability. past decade are evaluated as a useful per- Uncertainty of a different kind arises spective on these policies, and an attempt is because many world prices for major made to foresee possible policy develop- products are heavily influenced by the ments and indicate their potential impact. marketing policies of governments, not One major impact of developed-country least the storage and export-subsidy pro agricultural policies on the world economic grams pursued by the exporting countries. system is their influence on the location of Even in a period of price stability, un global agricultural production. Though it is certainty may he generated by concern that in the long-run interest of alh countries to price levels are scarcely high enough to use the world's agricultural resources in a cover production costs even in efficient way that minimizes the cost of providing agricultural areas. Developing countries, essential foodstuffs, present patterns of where imports of cereals began to rise agricultural production do not satisfy that rapidly during the 1960s, understood that criterion. Actions of developed countries to the attractive terms under which purchases support farm income tend to distort the were made were only possible as a result of 13 considerable developedount usidies Mlke. Such pe(iods of prive in the forn of fari progralms and Overseas ineN int y aid. resulting from a coni'ltsed interpretation The prce explosion tha t(iul this era of Woild price iio\vetiemilts c'lr involve confirlleI these fears as tIhsIhi(, (1(,st it worlil-wide ((o(t. a policies that hal geerteti sljliuses 'gi,i This repolrt to squeeze WoVI(+lipulies ton'rls Mheat trade ,andl ill rler to stt'l the [policies that the imlact of itlitnle thflat trade, espe harvest sltiills tOlt,I , tMly safes of' itffiatieoi at home. lriln lhehil(,el to tilhvloping touitries. It eallitiis the (cIf(tt o) iolicies Price instalbilit, and ltoluit,t (intwaint (It trlIate vollles and on the lee\(l a ld have serious short- and long-teth imptica- sthltilit, oftxorll prices. It looks tions, for resource use ,and investnelt at the decisions. linkages betxxtel sel poJlicies and %wlrdi The,imipja(t tLit tih dramaitic rise . in .Ke. cunit itions, toncling vith a lis in cereal hrites during 1973 haul on attiMnhes (1t1s"in O te possible rmge of iAp,'mts toward agriculture throughout the xxoroil Onl is (vreloiing tiutnhries 1 hapter still apparent totlan I It)ol-il 3 outlinies o iort ill in- the pli e ofth dustrial coilittlies, le majori leveloped ci uit tries agriutltutral sttpiort ixus iti Seell the orld M hat itllkt tllis inl turn by l ,1Nias it(CSSMAu tu inSure ag,lillst lals t)a dhitailed co sidill ll shortages, vhlttres in exp()tilng o l ilii'iffitIs of iotntries their fart policies on the ,lalli,, the presmtpition gr(x that the higher pri(e tint price Wheat ov(' the past It sears, levels tisheritl illa period of ecoiullolut inld then to a disi ssion of natiotitl am! prosperity ai] sellers' m, iuer rkes Ilismch Il national luolicy deveoinlents atmosphere, rational (d.sittlisolilomg-run that ha1v1,e a direct heal oilnllt( tt ionshiip resource d(hploy unt, bothW gcrlmienuts) betx eerll dexelo(tij os( iitr, j)luIt lli(d developimng and hy individual farners xe\vre iiffi( titl loi i'cotllt,fooi sumpplies, 14 3 DEVELOPED COUNTRIES AND THE WORLD WHEAT MARKET The world wheat market has undergone 1972 to 1974, when world wheat prices a transformation in recent years. Trade has jum)ed and supplies were scarce, ntramat been concentrated increasingly in the ically illustrated the significance of these hands of four exporters, Australia, Canada, policies to the international market and in France, and the United States. Aigentima is l)articular to developing countries, which tile only other country with i consi(lerale, rely ol that market for a vital sup)lement to regular wheat export trade. Anong the domestic food proluciion. imlporters, the old established markets, notably Jal)an and the Unite(l Kingdom, have stagnated while a group) of developing countries have become il)orters on ,, PRODUCTION, CONSUMPTION, steadily increasitg :rale. The Sviet Union and the People's 1e)pphlc of China have AND TRADE LEVELS Also entered the market in all erratic hill consequential way. Wheat, alreadly Ihe major traded foodgrain, has increased its Before examining these policies, and influence as a link between the l)rolilic evaltating their impact on :he level oftrade 'entl)crate-zone farming regions and the atli the stabtlity of prices, it is useful to crowded tropics. The abhility of the world to determine the lplace o1 tfhe dIevelol)ed ctoun feed its growing population andl to upgrade tries in the wheat market balance. In order l)tesent diets rests heavily on international to keep theIllmpirical ualysis within flows of wheat. For gool or ill, (o(ditions in houn(s, no co)prehensive coverage o the wheat market are the most significant developed countries and their policies was single determinant of world food security. ittenlitedl in this study. Instead, a group of File expansion and redlirection of wheat solected developed countries (SDCs) were traf toward greater imports I,y develo)ing ilentifiedl as those likely to have tile most COhities frolm (hetOte(l o(tntries has influence on the world grain trade. These heightened the ilportance of the industrial are Australia, Canada, the European nations' government policies toward their to()totnutltx, (the original six members and farm sectors. These piolicies, larg(ly tini the Ui-id kingdom, which joined in legacy of the Gi; at Depression, influence 1973),Ijapan, the United States, and the the availability of wheat ot world mu kets So\iet Union. Table I shows their levels of and its price. They deterline to an )roduction and( consumption between itul)ort ant extent tie strti(ttre of tlte mark(,t 1968i69 and 1977/78. and hence its behavior as SUl)pJly varies, Becalse the impact of one country's Private andi public institutions in tle, policies on tle fortuines of others is heavily industrial countries play an iml)ortant role influenced by the 1)roduction atlv consttnp in marketing wheat and other agricultural tion of the country, it is worth noting the products. Their actions deserve scrutiny in (lominance of the Soviet Union in tile wheat relation to world food issues. To date, these market. Soviet produ:t iot wasI not far short policies themselves have heen compre- of the combine(l total of Australia, Canada, hensively described and analyzed in the the European ComntunitN, and the United context of their donmestic environment, but States, anti Soviet consumption exceedled attention to their external implications has the total for these countries. The Unite(d been much less thorough. The events of States, with production slightly more than I tBltcause cit tic teric(I ofi tm-ii ( i eri,(i, Illi t ediidictkilngdom vi ill 1he ( n tied el.flp, el I rom theI] -i,l l-cci coilmldiltlil' iroughot thin relport 15 Table I-Wheat production and consumption in selected developed countries, 1968/69 to 1977/78 1968/ 1969/ 1970/ 1971/ Countries 1972/ 1973/ 1974/ 1975f 1976/ 69 70 71 72 1977/ 73 74 75 76 77 78 (million Inetrc I'll") Australia Production 14.8 10.5 7.9 8f.5 6.4 Cdn,ldd 12.o 11.4 11.8 11.7 9.4 17.7 118.6 90 14.4 145 16.2 133 17.1 236 European 19.7 Conunimn (6) 30.0 213.5 26.5 30.5 32.2 ldlpn 32.5 35 0 213.4 33.9 32.5 1.( 0.11 0. 5 0 4 United 0.3 0.2 02 0.2 0.2 Kingdon 3.5 34 42 411 0.2 4.11 5.0 6.1 4.5 4,7 United Sldes 42,9 397 37.3 5.2 440 42.1) 46.4 48.9 58.' Sublohal 1(9}9 1(01.5 58.3 55.1 115.4 102.6 100.2 1123 114,() U.S.S.R. 934 120.1 1324 122.1 79.9 99.7 110.0 109.8 13 .) 062 rolal 969 100 0 2(3.3 1111.4 1851 201.4 116.2 2221 19811 1116.3 2293 222.1 Auslral i, Consumption 2.3 24 26 2.7 3.2 Canada 3.1 3.0 2 7 21 2.6 4.3 4 6 4.7 411 4.11 4.81 4 6 .48 5 1 5.6 lurol)ea n Coonmmunity (6) 23.2 26.9 25 9 26.3 27.6 26.11 Japan 25.9 23.9 29.9 30.2 5.1 5.2 5 2 United Kingdom 5.2 5.3 5.5 5 5 5.6 7.9 8(.2 94 116 9.2 5.7 5.7 Uniled Stales 11o() 9 3 (I 2 If 2 8.6 2(15 21.5 20.9 234 21.3 ) S blo)101dl 20(6 I1I 19.) 20.7 23.0 63.3 ((ill 68.7 71(0 71 U.S.S.R. 4 6811 67.I O5.1 72.4 75.7 859 93.6 101.0 93.5 98 Totil 3 95 3 ()3.. 1(3 1 (I 4, 97.5 149.2 1624 169 7 104 5 16) 7 104 1 I ,",6J11 48(9 10.)11 173.2 SoUrce: U.S. H rll(en (I l A\ rluiluie., Inreign Aglirltoiil Seri(e, "orign lrodo(lion. SuppI Ind Distrilbtion of Agrmullur,l Cominoditie.s lip,. Vi~shinglon. I)l. M\.i 1978 half that of the U.S.S.R., was followed by tihe countries. Japan, the Unted Kingdom, European Community, which and in tWtrn pro- Ahstralia. The level duced el stocks in the about 70 percent more wheat than European Community was also Canada. On tile constinption low relative side, the Euro- to production and consui.lption pean Community overtook the United States levels. Tile figures for stock accumulation in Table 2 as the second largest market for wheat, with (where the negative figures denote a rundown smaller users, Canada andl Japan, follow- of stocks) ing the indicate that both th- United Unite( Kingdom. Production and States and consumption the U.S.S.R. changed their stock decisions in the United States, levels considerahly the U.S.S.R., andi the European from year to year. By Community, contrast, stocks (1o not and production decisions appear to have inlCanada anl to varied greatly in the impolting a lesser extent, Australia countries clearly have a andl inthe European Community. major impact on the world wheat econonly. The figures for net Table 2 gives exports (Table 3) data on the stocks of wheat indicate that the United held in these countries, though States increased its stock data is dominant position in the wheat not of uniform quality. 2 Throughout market, most of exporting annually about twice as much this period the greatest quantities of as wheat Canada. The European Community was stocks were held b,, the United States, a consistent net exporter, though it fell Canada, and the Soviet Union, with 3 behind Australia. Imports into Japan rose relatively low stocks in the importing over the period, whereas those to the United Stock ligores re notoriousl5 in(Olliplehle the Soviet figores are esOIMhIlilde hN) lT USI)A Himt. ,)'though IroIibly relleci eir- -, lr Ch(ingl's re,isonalllS we'll, mhIl1n(1lccur1te1 strile htealsohoh, relorting periods for slock Ivswels flsoilIkt' hleels Th diiferent ,issesSllenl of 1otalslocks 1t ,l5 plittl i ilme hiz,rdOU.. The Furopean COlnlllli is,isilishlnlid[ iiilt)orler (If leeilgriins Inid I iIdrket or somedri mtirdllndhigh prolein MI\ells: expolts are of sol[ wheat. 16 Table 2-Ending stocks and stock accumulation of wheat in selected developed countries, 1968/69 to 1976/77 1968/ 1969/ 1970/ 1971/ 1972/ 1973/ 1974/ 1975/ 1976/ Countries 69 70 71 72 73 74 75 76 77 (tillin eitric to ls) Ending Stocks Australia 7.6 7.5 3.7 1.6 0.6 2.0 1.7 2.6 2.1 Canada 23.2 27.5 20.0 15.9 9.9 10.1 8.0 8.2 13.3 European Comnmtnity (6) 7.2 3.8 4.1 5.8 5.7 6.0 8.1 6.0 5.7 Japan 1.0 0.9 1.0 1 0 I 2 1.1 1.2 1.5 1.5 tUnited Kingdom 1.3 1.1 1.2 1.0 1.2 1.1 1.5 1.4 1.3 United States 24.6 26.8 22.4 26.1) 16.2 9.3 11.8 18. 1 30.3 Subtotal 6.9 67.6 52.4 52.1 34.11 29.6 32.3 37.8 54.2 U.S.S.R. 31.10 12.0 4.0 7.0 90 23.(1 12.0 4.0 16.0 Total 95.9 79.6 S6.4 59.1 43.8 52.6 44.3 11.11 70.2 Stock Accumulation Austr,.ilia 5.8 0.0 3.9 2.1 1.0 1.4 0.3 1.0 0.6 Canada 4.3 7.5 4.1 5.9 0. 1 2.1 0.2 5.1 ulropean Cotanunity (6) 2.0 3.3 0.3 1.6 0.1 0.2 2 2 2.1 0.3 Japan 0.1 0.1 0.1 O.1 0.2 0.1 00 0,4 0.0 United Kingdomu 0.0 0.I 0.0 0.2 02 00 04 02 0. I United States 7.5 2.2 44 4.4 10.6 7.0 2.6 63 12.2 Sulhtolal 20.1 3.0 15.4 0.3 17.2 5.4 211 5 6 169 U.S.S.R. 2.0 19.0 110 3.10 2.0 140 I 1 0 HI0 12.0 rotal 22.1 160 23.4 2 7 15.2 11.6 112 2 4 211,9 Soutce: U.S. l)iitnient of Agm ultinl Foreign Agi(culuiiral ServiceR,. "Ioregn Iro)dPOtio, S1lpl\ ind listtiln). lion of Agli( ultural Conmmniodities lape." Washington. )C., May 1978. + Note: Positiv iIguIIn , iii tii(,ll.d( 111ildla1i o cI Ohw' ,11i (l 11.11gi )s tldi(ait sto(k iiuito usn\I Kingdom have (,illen somewhat (see Table trade patterns. From 1968/69 to 1971/72. the 4). The U.S.S.R., a consistent exporter at the U.S.S.R. exported about 110 percent more beginning of the period, became a large but wheat than was purchased on the largest erratic importer; in 1972/73 its imports single imporl market, the United Kingdom. almost matched the export volumc of From 1972/73 to 1976/77, the average Canada. This chango had amajor impact or imports to the U.S.S.R. were 41 percent Table 3-Net export balance of wheat in selected developed countries, 1968/69 to 1976/77 1968/ 1969/ 1970/ 1971/ 1972/ 1973/ 1974/ 1975/ 1976/ Countries 69 70 71 72 73 74 75 76 77 (tillion metric tons) Australia 6.7 8A 9.2 7.9 4 2 7.5 8.7 8.1 9.5 Canada 8.5 9.7 11.8 13.7 15.6 11 3 10.11 12.1 13.4 European Community (6) 4.8 49 0.3 2.6 4.7 5.5 6.9 6.6 3.7 Japan 4. 4.3 4.8 4.9 5.2 5.2 53 5.18 5.5 United Kingdom -4.4 4.7 5 2 3.6 46 3.0 36 3 5 3.4 United States 14.9 16.0 20.8 16.2 31 3 32.8 27 2 31 9 25.4 Subtotal 26.4 29.9 32 0 31 8 46(0 48.8 44.7 4i) 5 43.7 U.S.S.R. 5.5 5.3 6.7 2.3 14.3 0.5 I 96 3.5 Total 31.9 35.2 38.7 34 1 31.7 49.3 462 399 40.2 Source: Authors calculations deriveid Iroti iasic data in U.S Dejiartment of .\gric ut i,. Ioreign Agricultural Service. "Foreign Proluclion. Suippl, and Dlistriluint of Agricultmal Colitnoilities Tape. *Washington. D.C.. May 1978. 17 Table 4-Wheat imported by developing market economies, 1968/69 to 1977/78 1968/ 1969/ 1970/ 1971/ 1972/ Regions 1973/ 1974/ 1975/ 1976/ 1977 69 70 71 72 73 74 75 76 77 713 Asia' 1111o 11 t totis3 9.0 9.3 89 8.7 93 Ill Latin America 13 1 147 IIII 11.9 5.7 4 9 5.0 6.1 8.5 7 North Africa' 4 64 13.2 7,1 M I 4.7 60 83 9.3 (18 Africa )3H 122 113 106 130 0.9 12 17 16 l36 17 17 39 23 2.3 Total 284 21-1 23 8f 25 7 26.3 1 )5 331 36.0 31.9 34.9 Source: US )eparlmlt lf.girlculttii e I ort1go ..\gliIltlral ,ixSv . *'t orilgliIrodt iun Stipipl and [)istrihil lion ofAgricuiltural ('oiutiuuli llt3ap."w W slhiilngtn, 1) C, %ai 1978 This inu hides ic iii lk planitdi sirilai Oultio-s Thi. ioiculdes heh iMidleI ,ist higher than sales to the United Khngdonl. production levels was about 21 inillion tons Table 4 shows imports into developing- for the United States and nearly 15 Million country regions during this period. Total toils for Canada, Production was t"ore stable wheat imports increased steadily, parlictL- in Australia and the European Comminunity: larly illAsian narket economnies, North tle difference between high and low produc- Africa, and the Middle East, with total tion levels duriig the decade was a!)otlt 8.5 developing-country ilnporrs ex\ceeding in itnillion tolls for each-despile the ftact that all but two years (1972/73 and 1973,,74) th the level of European production was to3( wheat exports of the United States. In the three tii-s greater than lhal of Australia. earlier years of the period shown in thet, U.S.S.R. production also varied Mstdel frotn table, mitch of tle wheat sold to develo)ing 66.2 tillion totls in 1976/77 to 109.8 iti countries went under concessional pro- 1973,74 for in absolute variation of 43.6 grams, notably the U.S. food-aid progran. tillion tons. A slight upward trend in both By the early I 970s t he tul k of trade was on U.S.S.R. an I(eveloped- country, 5 commercial terms. production implies thlat these absolute (i fferences over a dec~ide overstate Sotilewhal the range of output that Ilight be nticilaled for tie future, but it is dlear that, coipared ih VARIATIONS LDC inports of 20 to 35 million tons, the IN OUTPUT production variations a10 AND TRADE a considerabl)le source of p(otential instability inlhe tiarket, Conisulliilli l it ese de% eloped coutries leided to lie nuch nlore stahle. Production, consuniption, stocks, and For the Sli s ,s a glrolt, 313(hehighest lvel of trade illustrate the dynmic response of consuiption was 33 I1978 and the Im\est wheat trade to changing import re(luire- %\asin 1969, partly rellecling a stronger ments. But the instability of this tiarket is t1)waril tretd that illpro(hiction. This tren( equally significant. Wheat-growing areas s\,s l)ar, icularl\ noticealble ill Canada, the stiffer from unprediclable weather-in(lucel Elrolean (o'lllltlnit . and Jdl)an variations in yield froi year toyear. ' Tis Alstrali'L coIstlllll)t ionlpeake(d in1973 and variability of production is l apparent ftoin that of (he /nilel Kit) 1(oinin tile 1971. In ill(, data in Table 1.It can be seen that the tited Silaes (Otstill,)io)ln %%ashighest i1 SDCs' production varied from 8t5.4 million 1972 and lohest three (,trslater in nletric toils in 1970/71 1975. In ito 132.24 tiillion ie U.S.S.R. it %%as highest tons ill1976/77, it 1971 ,and a difference of 47 inliion lowest in 1976. Thedifferetncel~etwetn tols.'i high The (ifference between high .. id low and low%consui33)lio n tleels illthe decade 4 "OIs"t dello tes1ltii11 tIul, lhioullholl1bisi-pirl For the pirptoses ol thisreport, tht wtrio; Idte)loped co;- ,s aii -SIlls" id, tlt, U.S. SR. 18 was 12.4 million tons in the SDCs as a whole 37.5 million tons for the SDCs and 33.0 and 17.2 mnillion tons in the Soviet Union, million toils for the U.S.S.R. The SDCs with the European Community exhibiting appear to le more flexible with respect to the most variability in constumption (as stock changes, as one woul(l expect from a measured by tile absolute difference group of countries dlominated hy the large between high and low levels) of the wheat exporters. developed-market economics, but still less Whether this variation in :locks adds to than half that of the U.S.S.R.h or detracts from world stability depends on The potential external effects of whether it is a es)onse to orl(I conditions lro(uct;on and consumption instability or a reflection of the lliolest(i(' situations. If depend on whether peaks and troughs of the net trade balance is more stable than tile prodLtction and conSmll1ptioll coincide, current surplus of )roduction less which can be seen by looking at tile current consumption), then stocks probably are surplus (production less consumplition). I.or offsetting dlomiestic market variations. For the SI)Cs this ranged From 60.0 million tons the SI)C's this balance \'aried from 26.4 (1976/77) to 16.7 million tons (1970/7 1), a million toils (1968,69) to 49.5 million tons difference of 43.3 million tols, almost as f1975 76). a diflerence of 23.1 million tons. high as the lroduction variation of 47.0 In teliU.S.S.R. the corresponding figures million tons. Constumlption clianges al)iear were 14.3 million tons (1972:73) and 6.7 to be almost independentt of production million tons, for a diffrence of 21 million variations, thus putting a greater burden oin tons. The Sl)'s effectively depressed a stocks if instability is not to lie exported." dlomestic swing of 43.3 million tons to ati The !;ame measure for the U.S.S.R. shomx ed a external trade imliact of 23.1 million toils. variation of 32.1 million tons-much less The net trade volume of tihe Soviet Union than the absolute variation ill ptroduction ill flctlated by ablt Ihe salle alolllt as that that country-indicating that U.S. S.R. of the SI)ir's as a whol,. hlil this was I consumption was more closely attulled to smaller reduction froll the doilestic production levels. (current suilphls) variation of' 32.1 million Stock variations ma)- lie exatnined either tons than the retduction of the developed as a potential influence oil tic. mardl'ket in market countries. their own| right or as a mo(lifier ofthe itilact Ili sole years Soviet and SlLt' net-trade of consutuliioli intl production variailiy,. vaiiaiions offset each other as in 1972/73 File absolute levels of stocks held il %'.en lhe U.S.S.R. made a large purchase of developed countries ranged from 32.3 to wvestern grai. Biut the net exports of both 67.6 million toils: in the Soviet Union the the U.S.S.R. aid the SDCs also varied from corresponding figures were 4.0 and 31.0 year to year: tie high was 41.3 million tons million tons. This lower proportion of in 1973/74 and the low, 31.7 million tons in production, however, may reflect ill part the 1972/73, a difference of 17.6 million tons. difficulty in obtaining colmlrehensive To soome extent the net exports from these U.S.S.R. stock data. But from the point of countries corresponded to additional view of lhe rest ofth( world, it is the annual requirenlents by the LI)Cs, whose imports accumulation or rundown of stocks that is did indeed var from 20.4 million toils more imlportant than their absolute level. (1968/69) to 36.0 million torts (1975/76). For the SDCs these stock changes ranged Moreover. tl e haltce ov('er and above LDC from ,an accumulation of 20.2 million toils imports also varied from 18.1 million tons in (1968/69) to a rundown of 17.3 million tolls 1973/74 to 3.9 million tons ill 1975/76, it(if (1972/73); for the U.S.S.R. changes ranged ference of 14.9 million tons. From these from art increase of 14.0 million tons figures it is clear that devrioped-couItry (1973/74) to a decrease of 19.0 million tons and Soviet trade does not always act to (1969/70). Thus the differences between stahilize world markets. high and low annual stock chimges were These ahsolte differences among high 1,The question as to whetlier this COls5ttnll)[ltlO Iriatllily contributed to nimrket stathiln is taken p liter ilt the report. 19 and low production, trade, stock, and market economies, consumption levels production and from 1968/69 to consumption most likely 1977/78 may be summarized: would be much less closely correlated from year to vear. To examine these possibilities, tile allt11aI chanlges illthe (million metric tons) production, con sumIption, stock. an(l trade varialbles are presented in Table 5. Such SDC consumption 12.4 a crude hypolhe sis warrants only a simple test. In tihe LDC imports 16.4 developed-inarket U.S.S.R. coiLsumption fcmoinies pro( l(uctioni 17.2 and consuiiption clianges had U.S.S.R. net trade tihe same 21.0 sign in only three of the nine SDC net trade sets of year-on 23.1 year changes shown. By contr.ist, U.S.S.R current surplus in tile 32.1 Soviet Union production and U.S.S.R. stock change consumption 33.0 moved together in six tile SDC stock changes of nine years. 37.5 Theref'ore it appears that the SDC current surplus link between 43.3 domestic )roduction and U.S.S.R. production consmpuit ion is 43.6 weaker in til,Sit's, again indicating SDC production 47.0 a potentially greater dlestaliilizing force in %%orld markets. the altual impact ol other Countries Cun'ent sur)lus is pro(luction minus col- also reflects stock ch,nges. Accordin g to sumption in a particular year and stock the able, stock changes catrrieI the saie cha ges are the accunmulation or rundown sign as piroduction variations in every of stocks, not the difference betwe,,n year high for the SICs. and net exports varied and lOw total stock figures. SDC with constilnli- proctlioil u haiges inl only, two tion, LDC imllorts,anil t..S.S.R. of those consutntl ion eight Nears. :or ile Soviet Ullioll appear as the variables stock %%ith ite least spread changes followed )ro(luct between extremes, whereas ion variations in 51W produc- five ot ot eight ,ears, lereas tion, Soviet pro(cction, the lielIraide ar lhe ibalace balance for wheat varied between lroduction with productiol in and costimption inl seven of these years. the SI)Cs tad the greatest fluctuations. .A\ The picture, th-. is one of de eloped- prima 1'acie case exists for the idea that Market economies stock changes or government poliies eniplo ,ing domestic ill policies that dlanpen l)rice signals developed countries add to the to the instability ill users of wheat, in part world wheat markets, by allowing stock changes o reflect strongly the changes in Of course production, C(onsii tion, l)roduction. Such production variations (O stocks, andl trade all are linked, not only by not appear to be IIIlily iinposed Ol tile workings of the market bul also by the over',eas markets, and these stocks resl)ond policies employed in the various countries, to trade demanls as well as to tile To hypothesize, one light ex )ect in a maillte nailce of cosmtim mnition. The question is coulntr' such as il'Soviet Union, where whether this responsiveness is enouoh to price signals from the \orll market calllot offset irice l)ressuies dnd therfore provide directly affect dlomestic fariliand food a iositive stalilizing infie,ce. Although prices, tile foreign exchange collstraillt likely is th, miount of stocks held It,the U.S.S.R. to dictate the response of' also varies 7 'ith (omestic production, the consumption to production. This a poor Soviets primarily use the trade system to harvest would lead to a decrease in compensate for har% est fluclt consulption. The saie relationship uations. in ight .Moreover, tileSoviet Union imposes exist in more Ilarket-oriented ecoiomies greater variation in availability on i1., consumers through the influence of prices, liit the than dlo the market economies. To explore ability of government policies to these influences further, it is necessary to manipulate domestic price levels through exdilimw the impact ol the llrket blalance trade, stocks, and subsidies %\oibftend to e l)olicies ptrimd affecting price levels mask this effect. Ience, in developed- in Ioimestic malrkets and slock changes. Trdnstiortit i prbl ems Also ilunt vi[.tie (iiill till( btim i ti lilel (ill i(I',lisiillli t ( 1h1 ges 20 Table 5-Change over previous year of selected variables for wheat, 1969/70 to 1977/78 Less Developed Selected Developed Countries US SR Countries Year Production Consumption Stocks Trade Surplus Production Consumption Stocks Trade Surplus Net Trade {milhon metric tols) 1969.70 8.4 5.5 17 4 3 5 13 5 7.7 21 0 0.2 1.0 1970,71 16.1 0 1 180 21 19,8 7.4 11.0 1.4 2.4 1671,72 17.2 2.3 15.1 0.2 0.9 75 11 0 4.4 1.9 1972z73 24 .4 17,0 14.2 128 4.8 1'0 16.6 0.4 1973 74 12.1 2.6 11,9 2.8 238 3.0 12,0 14.8 4.4 197475 2.6 1.4 8 1 4.1 259 1.9 25.0 10 2.9 1975 76 5.2 2.3 2.7 4 8 17.7 9.6 30 7.4 2.6 1976'77 123 7 3 107 58 30.7 4.6 200 6A1 4.1 1977,78 10.3 3.3 .. 3.1 9 1 3.5 3.0 Source: Au! hor's calculations derived lrom Tables 1. 2. and 3.Basic data for these tahls supplied lsxU.S IJepartment of ,Agriculture. Foreign Agricultural Service. "Foreign Production. Supply and Distr'bution of Agricultural Commodities Tape." Washington. 1)C.. May 1978. 4 IMPACt OF DEVELOPED-COUNTRY POLICIES ON WHEAT TRADE VOLUME AND WORLD PRICE LEVELS INTERACTIONS BETWEEN The change -eferred to can he COUNTRIES THROUGH interpreted in a nunber o,',iys, )iear-to- TRADE Near changes can he used to examine questions of stability. Changes over a decade could also he expressed by tile The previous chal)ter discussed the identity where AS Woul tend to equal AD. place of developed countries ill the heat dS ('anI changes Irom week to week, larket and the incidence where of variability in stock changes would le nmuch more signifi the system. Obviously one ('annot h,tl all (hmn.lit A (aln also refer to ('lilges of the changes ol}serxedl dne to in tile market, o er policies-the collipalison o} it situation a long period of time or fromn ,ear to ear, on with and witlhoult a Ilarticular policy policies. inea The process of selarating obser\ ed sure or set of measures. events into those occurring from natural In order to e\,liinne a st (if policies ii) market fluctuations and those resulting onP group (If olilt , tlit,niletitN al be from policy changes requires ftrtdlr disaggregalid and tr,lh intltodluce as analysis. It also moves tile dlscussioin froil sholln illo%% tile firm basis of reported statistics to the Fol ml\ olilr\ I tnore (lel)atlble area of assullitiols abhout S, 'l. ('i 1), . I -I what would have happlened ift ertiin tlhings htlIer sulprscript I refelrs to were different 1;1 givel ((ollittIN ((I gloutlp of c((intries) elglged ill Though a full analysis of the actors i trade, NI is curreint ililports, dld X is current the world market would involve a detailed \ports And aiddig *hvsile relationship economic model oftprivate and goverinlen- ijo (otil 2, tal behavior, a simplified approach is sufficient to bring out ile broad linkages. 1 (S )) (C I1 %)1 ( ,%1 X2 (11 S( Because the world is a closed econom-i K.( 2 system, with no net trade flows, avail able supplies in any given tine period., (oin- %here sUl)erscript 2 refers to the region that prising new production and the carry,-over together with I lnakes ulp tilt, (closed) world from the previous period, muslt all be used ilarket. either as present consunmption (and wvaste) The illpact oftheveloted.counil 1policies or as stocks carried into tile next iune (in be expressed is either A(S D))1 period. This simple I , accountilnp ilentit, is A (" C ) orA (X %I),, %heresulperscript formalized in the equation: I refers to developed countries, anti A to tile S C, change brought about 1by their policies. I) (I ThisI in turn miust induce a correslond where ing Change il dvehlo~inig countries: either A S new supllh, 2 2 (,I X) , or A (1) S) . _,,)2, where D current consutim0ion, sulperscript 2 refers to developing 'ountlries Co the canT-over froit the previous wrixl. ani is the impact of the policies in the and levelopedI countries. C, tile amount left to be carried out to . Aplproching tile lrollenl from this start the next period ing point, otle can either look directly at It follows that changes in these trade imllpacts. A (X NI)I, or at the var llhs lo rents, A (S I)), and A (', C ,),coi In must satisfy the same conditions. Rearrang- discussing the wheat narket in the light ing the terms, the identity of of such changes dolestic farl )oli,ies in iild(istrial Inarket can be written as: econloillies tile litter ctouirse (olln(menls AS AD (C I Co). itself. The !einactIof po{liie(is o l prodh(ction, 22 consumption, and stocks is more directly production and restrict consumption levels measurable. Only where quantitative trade through higher internal prices. The method controls were doninant, as in central-plan of calculation is given in Appendix 2,and countries, might one choose to discuss only a brief summary is given here. trade flow chalnges directly. Oil the olfher Broatdly speaking, ihe subsidy side of the equation, tracing tli' impact to equivalent for produners was eslillled as the sup)ly, consumption, amnd stock le2vels the per-unit subsid'N on production that of other countries might be satislying, hut lxoull give the same level of receipts if tilt requires a formilalle anount of actual price support policies; lxeteremoved inforniation antI detailed analysis. Insteald, and replaced by such a subsidy. Thus a 2 12 A (NI X) call be taken as an indication of' percent producer-subsidy equivalent (PSE) the availability of grain as influencel by would imply that 12 percent of producer developed-country policies. revenue came front the price-support The present study follows these lre- policies of thlat ountry. This istnotthesame cepts. The impact of' developed-country as saying that removal of' It(' support policies on the components of net trade, tIe liOgraun wxtlld have necessarily reduced levels of lroduction, onsumlltion, and the r'tt'ipts lhN 12 l)i'rtt'lit. It lite (seof accumulation or depletion of stocks is (esti- (ountries larg enoligh to) influenc \xmrltd tmat(ed ilnsomthe detail. The influence of the lrices I, their ,ntions, x%\orld prits ,ttulally Soviet Union oin the world market is e\- wtould rise to redItice the impact. Ilreflore amined only through changes in that ll ill),)t of sulbsidy, Mithdral on country's net trade position, whereas the receipts is overstad,. This overstitmeitnt is accumulated impact of all these lactors on done for pur)npose. B(ecoise the procedure developing countries is not quantified for- used requires ,((ll g ll the1 uinlljusled ther than t, imating the implications for loro(lut ion (an(d itolillitli) ill),cts wheat availability aind the consequent ill- d(Atss countries adwt li(e ll(ciiatlng the fluence on plrice levels and variability on resulting imOjitel n worlld pices ,listmig world markes.il e't I sulisid, equivlmit ftor lers of tlade (halIges illthe initial calculation grall comlli'tes the task ot aggregalion. Consumer s ('l)sit), c(liva ,nts ('S ) ,\ere, IMPLICATIONS OF POLICY ca lculat'd Seilparatll . The, "el)resent tile FOR PRODUCTION AND TRADE ltrtiliorlont i hich ilotestic (e\pendilure ()t the lroduct is re'duced isa resultl of the lIr;e stipport schelents a111 are usually In exalining the imlpact of' policies In ieglive illsign,. developed countries on the kxorld Mhea (enet'ldl',. th' suisulv equivalents were market, the first task is to estilate It( uot Ierivt Ir( ltlirisons of worltand influence of such )(jiceis on donu(,stic (hlivttstic Illi(es hut from filtnc'ial consumptiot adI "i)hl( titl m tttlosi' iillfoillati llui'I lh (Ie oil It('policies countries.)( This is no>t ulitull iic(tlilttl\ t(i(Ie('i 1Ius , ittic lar attitlit of levy but entails a numlbei(r (A(,'lulio)ts lias'd levemn' iitli(d an ,iveg lex'., for a on judgment. The Ittlil ((Ilusdilthissitdh lli iulat 'eb'at {I', dixiding reve nue hty is to estito te flrnt ililatmoll int III(' import tolllle andltl xx as s , elll(ito raise individlual ilities tit' rprtduer ait l ,ltf(oloiesi l iiceS I(i' lth t alltiultl. 'Iit('cost to colStmer "sulhsi\ v'(itiix, t'nt' of tlh',,,t c)nsuters is th(n Ih(, ax erag(' levy applied l)olici('s and to ( lte'rt these ti',,,nwan of to all constumltitn and the benefit of' the approxinllate i'laslitit', alu:'s into (t)tluit levy to l)rotuc('rs tlplied over all Itrotuc an( consumpltion chtnges iinti(ie(d Ii, t(' tiln. The policy transfers were added. input policies. Producl;' (uhatges to' UsUiIa s:ulisid', scheulles incorporated, ad the re positive anl cttnslrnpol loln cllUges ,i' stlt coumplirel with ictualiro(uter rt'('il)tS usually mlegative, as most pi()wlit'(; slimllte ,MI (tinstmner spetdinttg to get tle subsidy ' fSu}lli' muuu~llhmllu.t' tlI,I, ,i{11I t t(i \ uth+"( u'i~i~ t' iui i ii"I tl tht'uiiIl+' IIut1 Iiuti'iiiut "l"ui t', uiithlil ihllnq , lll:'1 1 (hIll(I of llh\ tll11hp('lli)il1 l l,!l~hlI2,- lhvlllsck, Into liltur) ')e~el)( ll ( ui I' "s I n(l )llldvd(](' 1i ()111, lh ' l o ll o)t III],i )p"ot1'1', 23 Table 6-Policy-induced increase in wheat output of selected developed countries, 1969/70 to 1976/77 European United United Year Australia Ca radat Cormunity (6) lapan Kingdom States rota (million invtri,'tons) 1969/70 0.485 0.367 6 4.213 05124 0.228 1.253 6. 72 1970,71 0.354 0.563 1.31 I 0.106 0.208 1.6211 7.170 197 1/72 (.360 0457 3.39? 0 Oi7 0.193 I 634 6.103 1972,,73 0.410 0.227 4.941 0 06W 0)341 1.5111 13057 1973/74 0 219) 1 -11 3,743 (0046 0.217 1 7(5 0.347 1974,75 05.372 0019 3 2-12 0)020 0.132 0.8581 2.554 1975.76 o2115 0)023 (13-05 0.026 (1622 (0o00 1 243 1976'77 0 (00( 0 N0 I '(MII 1.1029 o(.264| O151.5 1,670 Souircil: Aulli ,os , lx(I i11 firo,him AI q(ied\ laIl' 15Is lo 20. equivalehts. 'A 'p4' trodluceld i11 11i llrop,,il Comlmlnity 1TaIbles of, slisid,, equivli\vls ,ire given ,as .I resui of price-sUtpport policies. There ill A,ppndi 2. The estilll(' (SUltlli(d Ws ,111 t,(aa iliollll otlit of a1)Olt 1.6 c(OSIimption voluime ('le!s ire sho\n ill Inmillioi !( ils ill lhw, Unlileli States. The lTil)e, 6 1id 7, aidk Tide combinesSt tile c(Oltrilltions of 1111,i(ILi Iwvo to gik( eh heI l ' mind AIstrli) rm!(,IAf(ct of1 the' price tsrought the' toshil ,idhditionSil 15ro5uclion olici(v., the Ilidh vilI:nle ('ff(f('i ( \ '..). Ill iniul(e( (15 l((ic s pplo(((-t 11 I3't W(' ,11 6 an(I c'llciliting tlhis 1l((' ('(efcl 1h' isstimp11)lioll 1 illion lolls. I)c''ils(es ill (oisllli ltlo~ll \a Table 7-Policy-induced decrease in wheat consum)tion of selected developed countries, 1970 to 1977 Ihuropean United Year Atist.alia (ila United d,i (ommtnnit (6) Jdlln Kingdomil Slates tolal 19701 ( 121 O 161 -1592 0112 0(0 I 36,2 6(21 1971 o41 7 (4 134 31115 0 337 (o 1713 5 29 172 (157 0 537 -I 205 (.)1, 8 (i(.4) 1 727 71O) 1973 ( 104 0 308 2,691 3.25 0 164 I 4(11 5 )062 1974 1 7(07 1 279 (4204 0 223 (048 0 t(06,1 4.493 1975 0.427 02(i0 I) ()16 0 72 I 2.12 (((040 24026 1976 0.092 022B1 I 441 41392 ((487 ()43 ( 130 1977 0.062 0.044 OW.N()((44 (( 6)9 (1.)(25 564 Sour(' Auithor's (ci((l,lal(io s Ia4,45d oil dll( 11o(l( l.Ir tl)( lidl\ I,411h4" 15 il 21). 24 Table 8-Trade volume effect of policy-induced increase in net exports of wheat in selected developed countries, 1969/70 to 1976/77 Iuropean United United Year Aistralia (anada oolllll1tlllit (6) Japan Kingdom States Total (ll1i111toll I11 11€ tolls;) 1969/70 00(06 o 531 0 l)r 0 500 O 2211 2 615 13313 1970/71 0 4'12 0 697 !1 120 0 403 11201f 3 71 13.357 1971/72 0 517 0,994 7 597 1)405 o 23() 3 361 13.203 1972/73 05)14 1 035 0-32 o)483 o)507 3,548 13.739 1973,74 of488 0 13B o.47') 0 177 0 21,5 I 37 l.1154 1974,75 0.7 L ) 11212 2 325 0,951 I 110 of8118 4.5110 175176 1377 11214 I15 11410 1 109 0.012 1,012 1976/77 O1-12 0040 5 050 11115 1435 0025 5219 s5uir'e,: Alihol's caI,,iitiols ha-Y',oil datah1twi..ndIw ln\ tahles I S to 26. increase it) ,ggil gate elexports, catlsed lh lehvelo)i1ig-colilry import iceds. As Tahleh policies, of 13 million tons amiuall, from 6 sho1ws, total wheat imports itllth nl1ill 1969/70 to 1972 73, this figurellrolllped to I 1h\velmoitg regions of the world rose 4.6 million-ton decreaise in 1974/75 mid sleadilN during the past diecade. At the 1 then rose again to an in'-reased trade vol- hegitning of theI 1960s, t e 13 million tons tme of 5 million Ions hl, 1976,'77. of "extrl het, expors timi developed lReporting thlise liguies is staiight conlitries correspoldle toinlte th111111h11lf forwarl; i1terpireting their signilic3 e is the ttttal de. cloplilg-collotlr\ wheait more prohleIOatic. Regaiding thic impaict oil il111tnts--ilhl'ded a sigiltita~lt part of those prices, the sie/and illpaiticll tIhet.11t, 111 i0lors was directl, relatel 1( stirlhrls ill+til, nleltradle t],ct during this peliod i.s. genter d~tt(b price supp1orts anli islerrted imrporta,t ,asdiscuissed hetoh%. IBIt do these is ltool aid. Tlt1,sitlatioil hats ch1,11goet results inllical 111t11Ili worhl is relIN cIisidelahl sincwe that time: durling the pasinlg too tnu11h ill rtsotnct, cost hor ifs 1973-75 ,ho~rt-suppll, pe~riod. dlevelollped wheat? (\erlroluctit1 of ill) to It millit c(lII trp pice p)licies oil Ile whole \%ere a toils ill these (le\.elopltd ol)ltrilm s in detriI)3ilt to i.welol)irtg-coullty imports. 1972/73 still replresented onI\ 4 pen cm of B\ 19 7-\ heill s5nl11s prodl'tion begarl their total ':wheat lro(huti(1i3 ill that \ ear. It. to)reliimlrge, I.1)1' imports ha(i growtn to such for examllle. reisoiillr for IuargilHl'l all,\trlit that 11 trade 'ffectof develol)ed ptodu(ctiorl illthese ctillmirit- , cost about c-ltjnr, olce cc tt for orlllal)ot S75 pei ton illthe period 19 )-72 c(millltd 153S ll t of such illiIl)t to a w5(rld price of S60. itcsourcls for an extra 8 million toils \\1ld (osl onI, Ii ad(ditional $60 nllion, I sillltthat (filkl\ IMPLICATIONS FOR PRICE beconmes lost ill il1e billions If 11)llirs that are involved in worle.id, agriculturmll LEVELS IN WORLD MARI(ETS productioll. On the(itler har,1.11,hem 3btrs itidicate th1 at tIleilargil adda3hlitional t(otn lhoes tIle net-trall, inll)al(I as esti3iated of wheat l)rodluce(d ltltller l1ric-slp1port herel)oticeahN affect %,.orld price levels itl lprograms tay cost 25 to 30 percelit motlr gelleral AltlhIugh ,adhetailedlmodel of tile that iiecessar il i151 (If ro'smllrucs. Because \world \\heat il1,1rkt \\otld h, lieeded i:I developed-:o(3tittry wheat otlptpll %\ol1 hc order to gis v pre( ise estimates, the possible almost as high wNithout plrie slilppolts, lhe order of matgnitudes can Ih it3(icated by additionlal s,\heat getlerated h\ the Sllll)ort llakinig s5ln broad assumptionsllt . Sullose )rograms ntIahe I costly solut+c of Iood for t1a inthe atsl11rc 1of price-sIpport policies tile world, ill IlleSl)('s a II) powrlt'ilt prict, ('lcrease ,\tolher perspettive ol the siglificaIrce raises worhl tonsumption i11aerage of 2 of these )1oli(cv impacts Can le gailled h\ )ercentt arndIreldtwts sutlpl ly 3 l+erc tt. relating the volume of pirodict0io3 ,mid This imlplies a price elasticity of denlatll ol consuliiolt indlced Iy s .pporls to 0.2 mtitl f suply (If 0.3. hoh off which are 25 within the range of emlpirical estimates. governments had noi suplp)lolted their Assuming an average worl(I price wheait in the lat,1, sectols is they did. 1960s of just This is aIsignificat11 if' less than $70 per ton mid a not dramatic price, effect, It rIs's the (Iluntity of world consumpioi n '1i)l ultuestion whelher lclice )roduction of ,botit 320 l'els oif, fur inillion tons, these i;taiice. $75 elasticities iilictt that ,dhliti iather than $611 pe toln il Ohw tsll net wor ldl w'h(t market i th exl)orts of 13.3 million tols l(..It \ ('h,tvv i %\heat (as in sivilificantly chaig, 1969/70) through the1 ,ttern ofagrig(tul. rest.icte,(l counopIttl i! or ttrirl increased developlment in other cotllies. lhotllgl piroduction %\otlld led(it-e %\.orld this prices question ciii onl, einswred (in hy $5.,0O per (ton. If. however all I case-ly-case hasis, it seems i countries other l)tmroprit e tlhn those specifhed lir to iut too mut(1ch emphasis on either the had trade-restrictcle hui(vs that rcti,'l disincenlive efTect that develoi)e(.ttCIluttry their own price eisticities ( st d ,mItmil I l i e lolicies mtuight supply \ith 'esies( have had on developing (to c\, ld pli( . , Ic, 1+ csi) itries igrictulture oron the henefils 1hat liices would sdrop to $7.0() ;)(, tlo. the extrem. .%ml. iso (OtDSItne(,I-s in lhose countries if all the p(shimon mil lreuived might have ('OIIstiltiptiol s,.]aesull oflowel iworlpices., On Idjustmeti , d t I uo l sim lis W50 s(1tol 22 muillionI toius withinl he de-elops( ollitrics It lhe (lid themliscl,., of t, I'),NO, their policies tw oct gii to Ih elojuitg xunoll c'atse the ] lu)l to fil (utilli $10.34 s (o ll t lll, of tile ll u dhldtave per ton, to other %\co Is, \,rld 1 c5 lout lot ,, i ,1 10 mtillionn,I $220milliu (uring that period might have Iuisul $5 to each Nic $10 higher per toui if die ilop( l-sr\ 26 5 IMPACT OF DEVELOPED-COUNTRY POLICIES ON MARKET STABILITY ANNUAL CHANGES IN STOCKS The analysis of tile policy effects in AND POLICY EFFECTS followsinfluencing from year-to-yearthat of the previousmarket section.balance For the in(livi(lual developed-market Whatever long-term effects Protection econoulies, the counsulmptioi, production, in developed countries Itay have ot Ill at( net tr"lde eff('t of wheat poliies were wheat market, the dominance of*develope(l (,lcutilate ill each yer. But stock policies countries in wheat trade makes the short- are hy iheir nature oe ditlicultt defile. run ilmlact consitleralbly inilortaiii, TO1 lt soliet countri's Ille goverlilelt holds examine this question it is usehl to most ofthe stocks of wheat itself: others rely reinterpret lhe relationshil) Use(l in the on storage subsidies to influence priv,ve previous disclission. Assume that A (S D), reserve policies. One would expect changes l A (CI CO)and A(X rM)t refer to changes in of private stocks to be related to pri,:e tile impact of' policies from year to year, movemelits on domestic markets, and there rather than to the difference between the fore to he influenced indirectly hy price existence or nonexistence of , policy. Intlhe policies. Althouigh it stretches the neaning present context these annual clhllges call of golllnllllenlt policy, it seems conven ient le called mo(lifications to policy even to call the actual behavior of stocks til, though they frequently arise from a ltolic, impact of stock policy implying that stock that al)pears domestically to he unchanged levels would be constant without such but that is ex)osed to different market policies. I conditions. From the viewpoint of other Table 9 shows the behavior of wheat countries, it isas if' policies had changed. To stocks during this teriod. In addition to the llose outside a country, a policy (loes not level of carry-out stocks and the stock change if it has lhe same effect on net trade accu lahtlionl, as discussed earlier, the from year to year, but to those responsible table shows the annual change in stock inside the country, the task of holding the ( hanges, that is the changes in the rates at effect on Itradie (cOnlstant involves contiithial which stocks were built tip or run do\n. The djusllent of' domestic price policies, greater these figures are, the greater "Policy changes" in the discussion helo\\ potential they have to affect stability. A should be considered ill this light.i positive figuie in tile talle shows enhanced The previous lisctussioni downlhaed pressure on lirices to rise (wholether the the position of setoks in longer-rin policy prices tIhenselves are rising or falling) inl i effects on world markels. It is possible, negative figure indicales an increased though by no mealns -ertain, that tile pressure on prices to fall. For tei SI)Cs this general level of stocks influences average stronger (lownwar(l infhienice isevident ill a world prices. Stocks, however, come into slower luildp in 1969'7(0, ill i change from their own when discussing short-term price buildIlp to runlowin in 1970 7 I, and in a behavior. Iln this chapter (be effects of fasler rundown ill stoctks in 1972/73. Ili policies aind stocks on worli price pressures 1969,,70 and 1970,71, the stock policy from one year to ti Iext are considered, unoioub edly reflected doimtestic pressures - i is leI imoninlog ipp'i.irs sItrllili. ito e,i( lI 1 \i\iisihloIl il t)I 0 tIe, uttlliii tihtllgiu (,is ii\'.si fron ,itro l)" is tl(, vltet1 eo tll( (siioi\, ,is '. i , tleoll %ilho tiltth' oullttX), Ill ihS ftllomi ig (tl~i uissloiln '1This elli;hli' , (,lest ilt- lu (lltf flt,. 1o flelots.iderl " l), ella lo . i lmi ,as itis-,i,10,11e.,I tol [tlibli policy./ is 1hiv ln1,1ilf-1ioll(n of 1 mhlpcli( . A\ polio,, "-(hling"' is thus ,i dlifflenl'vh l of ",loii'1, ,1(( 1tllm 1,11iionl OI (leplction. 27 cTable 9-Changes in wheat stocks of selected developed countries and the U.S.S.R., 1967/68 to 1976/77 Selected Developed Countries" ChangeSok Socs'aCarrD-out Cumula. Carry-out in Rate of tive U.S SR Year Changein Rate of tire Stocks ock Change' Change" Cumula Stocks Stocks' Change' Change 1967/68 (million metric 44.6 50 5.0 tons) 1968/69 29,0 2.0 64.8 20.2 15 2 25 2 -20 1969/70 31.0 2.0 67,6 28 174 280 4.0 0.0 1970,'71 12 0 190 52.3 15.3 18.0 12.7 21.0 190 1971/72 4.0 80 52.1 0.2 151 12.5 11.0 27.0 1972-73 70 3.0 34.8 173 17.0 4.7 1 LO 24.0 1973.74 90 2.0 29.5 5.3 11.9 10.0 1.0 22.0 1974/75 230 14.0 12.0 32.3 2.8 8 1 7.2 8.0 1975 76 12.0 1! 0 37.9 5.5 2.7 1.7 25.0 19.0 1976,77 40 8.0 54.1 16.3 10.7 14.6 3.0 27.0 160 120 20.0 15.0 Source ..\uthor's calculations based on U.S. Department of Agriculture. Foreign Agricultural Ser ce, "Foreign Production- Supply and Distribution of Agricultural Commodities Tape." Washington. D.C. Mav 1978 Australia. Canada. European Commun1tt,. Japan. the United Kingdom. and the United States t. Increases in stock leels from the previous season are shoksn as positive numbers: decreases are sho ,n as negative numbers Positive numbers indicate additional buildup or slo%%er rundon of stocks: negative nimiers dre slo r buildup or faster rundown. Refers to cumulative stocks relatie to 1966 67. Positive numbers indicate stock levels higher than in that ,car and negative numbers indicate lower stocks. to reduce accuntlated surpluses, whereas ability of 38.4 million toils. This does not n 1972/73 the response was Io mean that 38.4 million tons was in tact held extraordinary Soviet delt1d(. In all the off the niarket. Ratlher it toeans tlhat, with no years except 1970171 and 197475, the ln'ice-suippo' policies in these countries So'iet rate of stck chalge intleased or- and with constant stock levels, the price decreased when stocks in il,SI's did. level on world narkets wold have been the Thus eveti when ,ctuiiil stock 'lhiinges wve' same as if 3.4 million more ons of wheat in opposite directions (illse\ en ''s of hi'e Ihld een availble huring these two seasons decalde) the pressirt, on the rate of chalnge Ithough this figure is consilerale when of prices was broadly in sltel. seen in the t'otlte\t of the wheat iiarket in Illthis table, the 'iinlilti\e chalgt in these %ears, it should be interpreted with stocks gives Ile stock 1h,\el in e,,ih -iir,\ of (re. The chrge cannot he sustaitned that the decale relative to ,i ,1ritlrl l\,ise tihe deveoph)ed cotintrie:i create(d the short periotl, 1960 67. Although tlie slon k( tnge age by meins of stock and price-stul))ort figures slil\m thif ti's reliScid sippllies ponlicies. Nevtertheless, ilia market domi onto the market dhuing t Ierilof f )7() 7f- lltCif h these policies, productioln valiahilil 197374, first illl'AKlItItoM Iigi sirpfis- had It Saiue efe o n price'. as a ftrher slorage o(sts mit(1 thei illres)oins' to ithrli of '30.4 moilliot Ions withont these inctea,:'(d foleigl delmlhil itc1 higfl slil'tial factors, prices, the citiniit e lignintos s-,io% thal mote grain may ha'\e heen iualehh' Isa result of stockliolding (relaite' to I %0 o7) in e\veiy year il) to 1971 72. andf less . ,s IMPLICATIONS FOR WORLD ,vaildle from 197273 to 1975 70. If he PRICE VARIABILITY Icti(_lltlll tiOll of Sltocks itself ,lf''ts fili'i' hehavior, then these ctunttictlit' stock figures doculnent tili,t'hlnige in Ole In ile ,ihsen'e (if like aind stock situation in thc'l (' i' market iirinig this pthilitles, it lppealrs thiatieat prices wthlilt periol. By collnst, til'eSic l [7tioin onll la' ieti somwhat higher dluring tihl' regained the level of stocks liel in I900 07 teriiid thtiumgh 1973 74. wien te actuI in one other yeau 1961,09. k\() fd price reachet Ilaverage oifS 170 per Continuing with wtitiliterlir'tol tof ti. Stink i'i',ses aild lrice protection in stock changes as in aslect of go \ineftlll thlt \ ear \ie still g'neraintig aoit 7 policy, either directly or inilire'(l ,.these million tons l hteat iliore thaimight have changes Call Ibe 'om1pared %ilh those been availalde if there were fret' markets resilting from price policies acting on 11 constmil stocks in develtle countries. t)rolli(tiitn and ('tsuitl iott, lale Iit .\fter 1974175 \'hetItrices wvould have Iteei gives the tVl, thn' ihang, Illstocks (,isI solnew,hat lowel \itlhout developed prox, fitr stoc k ioli' , e'f't'ts), ancd the sinit 'otnitrl Ipolicies. Athoigh tih' high price iii of the two. 'ltmgh ite, ire clearly not 1973 uas iiot caused h: the policies as sich, indepenldent lie',mise f their links 'Aitli ti' ch,nge ii prikes it 1)73 wonld have government donestic(prit'e olj't ives, tIlte\ been less e\treto' hecause cirlier prices reinfttrce each othtr rioi ti' \'iet\ittof kit id ,\ie stt I'I Irot a higher iase, not other actors in th' mnrket. 'Itis toital stock- risilt is Iar, ,if the (Iuratiti tf the crisis andl-Itrice-l)olic, impat reac('tl its peak il citolil tlt\' ii'i'in diminished. 1972/73, with anmestitmdld 31 million toils Ihi' Soviet pntchase of 14 million tols of' wheat generated Ity stock rido%%ii and of c,,heat (net of exports) ili 1972,73 catle at price-policy sirl)luses. BN 197475 the a time li'ln stoc ks Xere ai'iiate inld corresponding figure was 7.4 million tons, tir-e-iiUppoltid sorlothses existed. The with price policies redicing net availahility optl tinity iffordet Ihte intelveliont ill and stocks beginning to )e acuinuilateld I', il, ket of thei' tSS..&,as aii iittorterwas once again. 'Ailcititei ld those i\;i g tttii's with The table also ,hows the auniml changes stocks ,and i,\p'nsi\, tommtistii ptrtlqrals. in these total figures. In1973/74 this change Soviet stocks hatl alrl,l\ lutn rundown in was close to 24 million tons, and during the npevitns Nears. Vithouht th vet'opl two-year period 1972/73 1974/75 the total (- unir, sitk release., nhtark prices it 1972 policy impact was a reduction in net avail- '%otil vlt' risen nttsidheraly. Ilhwev'ei, 29 Table 10-Policy-induced trade volume effects and changes of wheat stocks in selected developed countries (SDCs), and the U.S.S.R., 1969/70 to 1976/77 SDC Trade Change in Total SDC Total Effect Volume SDC Change in in Stock Year Stock and Change From U.S.S.R Total Effect Stocks' b Change In- Change Fronm Policy Effects Previous Year Stocks' cluding U.S.S.R Previous Year Imillion metric tons) 1969/70 13.3 -2.8 0.5 - 1970/71 13.4 15.3 19.0 29.5 28.6 18.'1 8.0 1971/72 13.2 0.2 36.7 7.2 1972/73 13.4 -15.2 13.7 17.2 -3.0 10.4 -26.3 31.0 17.6 -2.0 1973/74 1.9 .53 29.0 18.6 174/75 7.2 -23.8 -4.6 -2.8 -14.0 -6.8 -35.8 1975/76 -7.4 -14.6 11.0 -1.0 --5.6 -6.6 3.6 10.4 1976/77 5.2 1.9 8.0 1.4 -16.3 -11.1 -4.0 -2.2 -12.0 -23.1 -24.5 Sourccs: Trade volume effect calculated by author from data in Table 8. All of the other figures were calculated from data in Table 9. I Positive numbers refer to stock rundown. b Refers to the change in total stock policy effect. Positive numbers indicate an increase in supplies due to stock and policy changes, this action rebounded the next year. The previows yeir as far as other countries were Soviet Union built up stocks from a good concer.,.Il. harvest, more than absorbing the further This leads to the conclusion that stock depletion in the SDCs and their developed-country policies in this period remaining surplus production. The net inadvertently exacerbated the prol)lems that effect of Soviet and SDC stock policies (and arose from production variability. Stock the price-support policies in the SDCs) was policies did not offset the impact of to reduce supplies by nearly 7 million tons (omestic price 1)o1: ies. Instead they in 1973/74. Again, it is the difference reinforced these effe(As, moving in the same between this effect and that in the previous direction in every year from 1970/71 to year that indicates the impact on price 1975/76. This is the heart of the problem. changes This difference amounted to For world price stability, stocks must nearly 36 million tons )etween 1972/73 and accumulate when domestic policies generate 1973/74. Coming at a time when overproduction and must be run down when developing-country production was down domestic price stability objectives dictate (and when the cost of other imports, notibly that an increase in home supplies is reces energy, was sharply up) this squeeze on the sary. During the first half of the decade, market was clearly a major reason why the policies did not respond in this fashion. average exl)ot price increased 70 )ercent Stocks were released onto markets as a way over the year.'2 The impact on prices in of exporting domestic overproduction and 1974/75 would have been worse if the Soviet were accumulated when consumption was Union had not released It million tons from higher and production lower than would stocks. This indicated a combined stock and have been the case under freer markets. This policy effect of an additional 4 million tons, is the major impact of domestic policies on an improvement of 10 million tons over the world market price stability. 12This interpretat ion is consistent with the findings of (tier studies that have exsamined pi ice movements over this period. See, for instance, S1mmn- Yi Shei and Robert L. Thompson. "The Impact of Trade Restrictions on Price Stability in tie World Market," American JournalofAgricultural Economics 59 November 1977): 628-638. 31 6 RESPONSIVENESS OF POLICIES TO WORLD MARKET CONDITIONS WORLD PRICES AND DOMESTIC extent possil)le under domestic SUPPORT PRICES counter- inflation programs. This indirect link is illustrated in the diagram below: The preceding chapter points out domestic tht policy actions and stock manage- Pro(luctionc ment are poorly coordinated with world cnumpt ion market conditios. Domestic developments 1stoks are isolated from world developments in all domestic )rices the developed net trade countries studied here, but not to the same degree. This suggests that one way world to take the analysis further is to prices look directly at how world markets affect domestic policy and stock decisions. The strength of such response is a key in(ication Under free to trade conditions, world prices developing countries of tile extent to directly affect which devoloped-country production, consumt)tion, policies contri- and trade decisions. Under government bute to structural problems ill [he world p)rice-support wheat policies this link is indirect, market, through doinestic 'File discussion previoisly policy price levels. Thus ,a revolved direct comparison of world and (lomestic aroundl the interactions of national price policy l)rices might illuminate this l)rol)lem and stock policies in voltiue terms, with an of linkage, indication and hcnce ia" 't instahility. of their inpact on world prices. The relationship Thc more remote I 2en domestic the link between domestic )rodlucer prices for wh and world market nd world prices prices, the greater the (as given by average unit value imt)act. For if low of exports) is world prices iinl.aed low shown in Table I I. The coefficient domestic prices then production of this would be linear regression indicates the increase (in curtailed, consumption increased, and (ollars stocks per ton) in domestic prices that accumulated. The world price woul( appears to he still associated with a $1 per ton vary with market balance but would increase in world remain within prices. With the excel)tion boundsII ictated by tile price of.Japali, all these coefficients elasticities involved.i are less than If, however, the link unity. Japan apparentIN olverreacted were weak, higher production, to lower higher world wheat prices by instituting consumption, and stock acCIIm1lition large dolnestic )rice increases. OfMe other would push world prices (lown. countries. Canada (0.86) and the United One would expect some connectioin States (0.134) between world experienced domestic price prices and domestic policy increases closest to those prices. Low price levels oti world markets. on world markets Price increases were least responsive increase the cost of' price in supports in France (0.59); thc increases of other exporting countries and l)ut l)ressure ot Eluropean nations an( Australia lay between domestic policy prices. tligh price levels these extiemes. will remove some of this restraint and allow Once againi CdntiOn should donestic policy prices be used to rise in hoth when interpreting the table. First, importing and ex)orting countries all the to the domestic prices are influencedl by the Freet3 trade prvides a dirtect Iink but is not i iiecess 'y omn Iitiloll. t.ixed tlrif Is (rind subsidies) oildasoI the link, as would suffic'ientl, ratidl Sreserve (tiinges in dtninisiered prices in fll estioc prngrodllns, 32 progiess of inflation during the period, Table II-Regression of national wheat though expressing these in dollars at least prices against world price in partly corrects for differential inflation selected developed countries, rates. Because world prices rose rapidly 1968/69 to 1975/76 during the period, some of tie correlation observed might not hold true in a period of tevelof lower inflation or when world prices fell f.i ofh,1 2 steadily. Second, the simple relationship CoItrffin C iotlit 'eiient H IN 100" between wor!d and domestic prices does not do justice to the complexity of the actual ($!ton) linkage, which will bIe:lifferent for each Auslralia 14.13 0.66 0.85 80.8 country. Itisonly tile olbserved implications (Ida 12.80 0.85 0.66 98.8 of world price changes that are lneasured, Euto'l""" not the exact chain of causality. But the ItalN 80 10 062 0,78 142.1 results suggest broadly that domestic policy I-rance 56.26 0 59 0 fill 115.3 prices reflected world market conditions on Nelltirlanos 67.56 il4 0.82 131 6 li'lgiui5t, ayear-to-year basis (luring this period (even [.u,.l()Sog 572 004 0I.8 129t.7 if they were fixed for a particular year) and uierm,, 63 48 0.78 0.113 141 5 therefore preserved an Indirect link.4 1Unilted The table shows two aspects of tile Kingdom -11.70 (.61 (171 I109.7 6611 170 090 236.11 wheal policies of individual .litiOULloht Stlets 1.59 0.1(4 0.74 115.6 domestic ...... governments. The coefficien tof response to wod price changes was mentionled above. Sources: World prices alt. l ed lri average unit Tile higher this coefficient the more the '\ltti vutluts iolioid and Agriculture Organi/ti'irn of tt, .nidNFlions. t977 hurden of adjust ments to world price is FA.o l'rodeYearbook, \(f. 31 (Rlotor:I-AO, being borne internally. Bu.t tile level of I1711). Naliuna prts are de .ed from domestic prices relative to world prices .Spendi\ lalhlesIS io26 gives broad indication of the amount of Note: tsing file eqution tioinl put'c a f I) protection at various price levels. BecaLse It(urlt tice). the constant term inllthe eq(lation, P. w I (e All t Ilicients ,resigttill cltI ifll eret trontl/tro at P%. 0, is of limited interest, the last columin lt, 95 unt,'clit levil. represents another way of ranking t,[his colun lists tte etle.l itinit prite wihen implied I tilt, protection levels. 15 The doinestic price level iorlt price is tqual T $100 per Ioi is that would he implied by a world price of regression equatiot. $100 per ton (P, 100) provides a more intuitive picture of the spread of protection diverse (except for Japan), it is clear that the implications, world prices at which countries would on tile basis of past performance, remove protection (i.e., Po where l1) P )are national prices would likely he set at ahout widely different: S130 per ton ill tihe United $237 per tol in Japan, $142 per ton in Italy, Kingdom. for instance, and $288 per ton in and $141 per to1 in Germany if world prices Germany. were at $100 per ton. Because producers in A combination of the level of domestic exporting countries have not benefite(d prices and their response to world price historically from the full export value of changes indicates that tihe major exporters. wheat in high price periods, and in any case Canada and the United States, are both more transport cost to ports will be deducted from responsive and less protective than the their own returns, the implied prices for other developed countries. Australia is low exporters are below $100. Though these on the scale of protection but is less price levels of domestic price may not look too responsive than Germany and tile United 1.4ThIis re,1.11i oiish~ I 11,1lh) (hI,i11ge v ol '-rIlltI II Iorf \,,Iioh1s o11111r I he III1)1ll li('a1[l, 11 I o ti~tI hII.III I( -sIIIIIIik gtes ar'e Conlstant. bt T1hatill,Ytclallionlihihi'Ix~cel %%oddl and InationaLlJim v+sis I~hl tlln ,lndthallt( hangtes in this relationship' tmttli , hange ' srtc tir' ,rtura lniti.iitor olthe %totrl itth illtirket is B!cauetl ilt, plricesOl,d(are'do li c(p~rodtucer prwlt', O l e.elor prowtion mea',sulred is the'nomllinal]p)Trducer protection. TIs %%Illt1ut torrespoli t o Otw ohtli htrktl itroct nt i cIthi st iket 1111tkit t lte lilmpct ti' constmers is %%elI. lst of iprttlu i'r I ttes iit the tmnseill (t llisI isstltis t1tt t1tutmIs itI toicies aire llllt'dIritllhrily atstpporting farm int:orites 33 Kingdom. Italy, France, and the Benelux Table 12-Regression of countries (Belgium, the Netherlands, trade volume and effect of wheat Luxembourg) appear more protective policies and against world price less responsive to world prices than tile and im plied trade neutral prices other countries-though French lrotection levels are modest compared with those of other member3 of the European Community. Co. Neutral Country 2 ' Constant ellicient R Price Australia 1.3095 0.0115 0.82 !!3117 WORLD C,1 I, 1.2916 0.001 4 0.51 PRICES AND THE Euiropem 153.76 TRADE EFFECTS OF POLICIE'3 'olliiitn 14,3990 0.0189 0.lS 16197 •L1},lo 1.01746 0.0103 0 67 11.104 Unifed The analyses of Kingiltn 0 8 the inlividal policy tited slates 38991 0084 031 I 105 96 effects oil trade voluinles can also he use( 4 0.02'4 042 195 918 to lotil 23,4730 0y.1499 o.77 explore the I 56 59 implications of the price e responsiveness xs}o '. a,loets inl of domestic policies. [nod mul Agrz{c/lture Worldvti.iti5 prites ar. doc(lrii1mrin Organl- Analytically tile imlportance of tlit rage uit lrice hwdli(}n of the United Nations, linkages between world aiid dormestic 1977 FA1o rrade Yeurbooh. vo 31 (Rome. markets is delonstIraite(I by both the soItile FAO. 19711). Trade voltopt, el ict figures are e ffe c t of po lic ies a s sh ow derived n b y ~r oduc tio n Nt sir ngll) l i L 11, a nd cons u tm;)t io n ch a n a 1 1)11%% g e s a nd by Ill .. i, ofukt llIlii influence on stock sm-i-ptI i m e Fu : 0, A. levels. The link between foi tihosi, ii t | tim Sillt o1 itlis oi t 1heUn11iteii tt kligloit iI ir sigtlli. the effects of prices and policies All irefticitS on trade c,1111l\ ililih rti h }it o and ,it t ilt,95 litre ll i-\.(+ world market conditions will be examined first. It is clear that the'I'VE, as defined earlier, The intercept ter) will be closely related to world (wiicn P 0) is again priccs if of minor interest, but the domestic price stability plolicies table shows the are widely level of world price when used. Low world prices will the TVE is zero. correslpond to This trade-neutral price high levels of surp~lus is simply the price generatel by at which a government domestic policy as measured appears oi past by the SUM of evidence to switch production increased from plrotection of farm and consnI)tiotn incomes to reduced by containment of consumer food price supports. Table 12 shows costs. the results A low trade- neutral tprice, as in the of a regression of TVE with world United price Kingdom, Australia, and Japan, levels. A coefficient close to zero implies that tile country is attetmpting indicates little change inl protection levels to control inflation by reducing protection. over a range of world prices. Both Canada Canada an( the European Comntnity and tile United Kingdom have low have somewhat higher trade-i eutral coefficients of TVE with respect to world prices, whereas the United States allpears price, followed in ascending orler by Japall, to lbe willing on balance to switch to Australia, the United States, and (Olsumer the subsidy policies only at extremely European Colmunity. The coefficient high inl world prices. Oil average, protection the case of the European Community will be zero in these countries when world prices appears to le four time, that of tile United are at $157 per ton, but the disparity of States. The overall effect of these policies these trade-neutral prices indicates that may be gauged by looking at tile sun wheat of the policy in different countries coefficients for these serves quite countries. A $10-per- different objectives. ton increase ilworld prices implies a 1.5- 1low does this aslect of million-ton decrease in the impact lolicy of performance square with the protection Oil trade. Thus if under relatively previous discussion of domestic and free maiket conditions all 8- world prices? million- ton One might think that those production decrease caused countries that prices to rise by only remove protection $10 per ton, a 6 .5-million-ton from their farmers shortfall at very high prices would have had might also be those that the same effect under set a high existing policies. and unresponsive lomestic price. This does not appear to be the case. A 34 relationship between (doinestic and world Table 13-Relationship between world prices close to unity implies a relatively price and carry-over stocks fixed level of protectiol, and therefore a lo%% of wheat in selected developed response coefficiefit of the trade volume countries,1968/69 to 1975/76 impact of' policy to worll price and I high trade-neutral price (as inlthe Unitedl States). Similarly, a system that esta)lishes a high I ( onst.?t ('oetlicient R2 ' and relatively unresponsive price sees the level of protection diminish rapidly wshen Aali(',444,dd 28'.802i,5(40 4)I1)02?29)9 0.72) 23 world prices rise and uSually requires iluropeli consumer silusidy ieastlres (such as export Col4nliU4444i\ taxes) to hold that (lomnestic price level BelgiumI44. -European (iolIltlllity). l.144ilihourg 0. It )002" 0.40 steady (as in thei ' Nethe'rlands 0.02 002 069 Thus in view of' world Mlarket pri'e stahilil, 1,111(, 0)71 0.00)7 02() and the i..rests of dleveloJping-co-try (444).4 2.20 0003 0.04 iml)orters, a high degree of doliesticlpolic 1044, OOO1 0)) h price responsiveness and a low degree of .);hd hilIn0K.g(h)m IO) 790 002OO 0lO0.22 ' policy-indtuced trade volume variahility to L)id 5 .t, 30.13 0)07 o)3) world price is the Ilore palalabhle tS s R. 1760 )027 002 colin hiltlaiol. Aggtogaih, e\ (4It(li4gII SS . 72 33 0.250" 065 .\ggregh4, Il ' clu4Ig LS St () 07 442) 0.46 Sor((s. W,5)ll prices ,Itr 4(helI\,dfro4 I,claq' uil4 A N D ,,4)4,,,)4,,,44,l4 444 ,,,,,mid,,,r) t, 44h,,1,,4,,, WO RLD PRIC ES II~lliOII e nit td Na n,Ii. /1977 1'.,40 NATIONAL STOCKS 14,,,1,)h',booh, ,,,4 31 (R44,,,IM). 1974) S(w'ks (1,11,1is th)U4 d h44m i e,)h2 No)e. Using 45Ilwl (?4,l4li)mi il) 5n )?(ks . # 41 If stock policies can either offset or (%%oflI pri,) accentuate tile effect of domestic price All m ii(iills ) to( thos o:, lu UiLtel policies on world markets, stocks should kingdo(l4l 4aw Sgili1(,11ll ,(I('('n4I llll/l lo() it the95 respond to donestic pri(es to he a l)(I'fet h,).,l stabilizing influence oil world prices. Jutls 1 SIgiiIcI,Illll difl ill 11()4n'm 114ile 9-)5 i'rCl as the trade volume effect of policies can he h,(.1 related directly to world prices, so can stock levels. Whereas itis the stock change that is important in ascertaining the impact of on~e satue as the totdl for tihe rest of tile country's policies on market balance, it is developed ('ountries included in tile able. the amount of carry-out that should he This 2.4 million tons more thain offset tile related to price levels. The carry-iln is 1.5- million-ton adverse impact of price already determined in a particular year and l)olicies. Total stock-l)hs-l)rice )olicy becomes a part of availahle su)ply; the effects were henign rath:,r than harnful to carry out lends to he lower the higher th,e 4orld stalhility. current price. The more easily this carry-ou Tihe evidence on tiltcontrilutions of responls to world pice levels, the mhore Australia anl the' U.S.S.R. is not clear. stability a particular stock policy gives to Tfhough exhi)iting negative l)rice coefficients world markets, for carry-out, the l)aramneter s are not signifi A simple regression of c(arr,,-out levels cat at normal levels of probabilily, mid for for wheat against world )rices is shown in both, world price does not seln to he a good Table 13. To cotntTilbute io Staility, the explanatory variahle for stock levels. The coefficient shoulclhe tnegative (and coefficients of world plrice were positive for significan tly different from zero) as was the tapan and the United Kingdom consistent case in Canada and the United States. with their positions as importing :ountries Canada in particular had ( stock policy that concerned with protecting sul))lies in high respondel to price. Together with the price periols. Ilowever, as with price policy United States, the Canadians released about effects, this negative influence on price 2.4 million tons of wheat for each $10-per- stability is small in absolute termns, as one ton increase in world price-altost the would expect from countries that, though 35 significant traders, trade little in compari- Table 14-Implications for policy son with the major 16 producing nations. induced trade volume and A more significant problem for world for carry-out of aa increase price stability regarding the price respon- of $10 per ton in world siveness of wheat stocks lies in the apparent ofe$t behavior pe tniwol of the European Community. The wheat price levels coefficients were all positive, though for France, Germany, and Italy these para- Iraude ('arry- lotdl meters were not significantly different from volumne ouit Effect. zero. There is no evidence countro Effect (11 (2 () f(2) of any stabilizing Country__ ttet__1___2___ 1___2_ influence from stocks. The relative stability (Illiiill uetric tolls) of internal prices undoubtedly inhibits private- Austrdll 0.12 0.27 stock response to world price 0.15 changes. Stock (,Il (),(It1 29 1.21 held by public agencies are regarded more il,,,,n as embarrassing surpluses bearing visible IC,,lllllilti 60) (019 0 15 testament to the weakn esses of 0 10 003 0.13 (lomestic Iu ,Iit Kingl o, 0 (1 0.2 0. 10 price policy, than as buffers against local utnited Sides 022 o7 0.75 and worldwide shortages.17 Added to I(l,l 1.5(1 2 33 0(3 inflexible domestic price policies, the lack . . . . c..ti. s hI.I.. ..O Il I ,s 12 of responsiveness of European Community S nd. 13.s h l lh stocks is a key aspect of the world wheat market. To summarize the price policy and stock made positive contributions. The two small implications fur the various countries, importers had mildly destabilizing Table 14 shows tie policies. implications ol a $10- Though developing countries may not care per-ton increase in world price. The total who contributes to effect stability-so long as is the impact of price policy on trade someone does-they clearly volumes minus have an the impact on stock carry- interest in the resolution of an imbalance over. The aggregation of this total policy that coo!tl lead to much imp,--,ct more aggressive for the countries considered policies on the part indicates of Canada and the a net contribution to stability of United States it'European domestic 830,000 tons policy of wheat released in response remains in mical to tile interests of to a world price rise of $10 per ton. This release price stability. Because bMrden-sharing was not large compared is with stpply fundamental to international attempts to variations of up to 40 million tons during improve market stability, the the differences decade for this group of countries. But at aiong countries in their reactions to least the effect world was in tie right direction. price changes give a ratioi al (if not l)olitical) The burden-sharing conflicts that arise basis for apportioning til, are revealed costs of stability starkly in the comparison schemes. tie proposition [.iat countries between the Canadian contribution to should at least offset stability tle exte'nal effects of of 1.21 million toils and the their own price policies by more European l(xible Community contri bution of' 1.04 stock ma,nagement seems inhe','ently million. Australia and the United States also reasonable in an inIt erdependent world. iTf e figures it this talle and the listare d(lih xely r presentu , 36 7 FUTURE POLICY DIRECTIONS The examination of the wheat market has not been uiveraily velcomed, over the last decade and tile influence of' particularly by countries with strong trading domestic price-support policies oil that ties to tile Community. but it carries with it market indicates that both resource tie implication that changes in policy in the allocation and management of shrt- term interests of international relationships are crises can be improved. This chapter likely to be made reluctantly.I considers specific implications for the -uropean Community farm policy is in major count ries and for international many respects similar to tile policies of policy. [le intention is not to provide other industrial countries. It aims to specific recommendations for individlual increase and to stabilize the demand for countries or for global agreements, but to domestically produced agricultural goods. indicate what 1.inls of policy modifications The Community policy does,however, have would be (tk+iiable from the viewlpoint of some attributes not common to all (evelo)ing countries. As a reflection of industrial countries, and these peculiarities their importance in the grain tra(Ie, define issues of particular importance in the European Conmunity and U.S. policies will present context. First, trade controls, in receive greater attention than those of other particular the export sulsidy and the developed countries, variable import levy, are used more ex tensively to support and stabilize domestic markets. By implication, less reliance is POLICY CHANGES AT A placed on alternative measures such as NATIONAL LEVEL THE direct payments, quantitative production controls, domestic marketing agencies, and EUROPEAN COMMUNITY stocks and reserve management. For the same level of' protection, border devices have a greater trade impact than direct It is clear that the policies of the domestic market policies. 19 Therefore the European Community have particular price-depressing impact of any given level significance. To recognize this is neither to of' protection is probably greater than if attack the concepts of the Common alternative methods were adopted. Agricultural Policy (CAP),nor to reflect on The secon(d distinguishing feature of the desirability of ecoilonlic and )olitical European Community agricultural )olicy is integration in Europe. Indeed it is precisely the higher general level of l)rotection, a because the CAP has been so successful in distirction it shares with Ja)an, an illneting its own goals that it isa major faclor iml)orter. A link between world market ini world trade. Farm incomes (and conditions and the domestic price level of consumer prices} have been mot e stable as a the major traded products in the European result of this policy, and the levels of rural Community exists trough budgetary incomes have in general kept pace with pressures and consumer indignation, but those in the nonfarm sector, This success (loes not appear strong enough to offset the 18.The,probflemns (it olerpiodumloland h,,thbuldget (ost h1,1%e.oilithe oflhel had.d l-i'llel'1,h or>dollict'icc'tlmerln [1ile C(llUllitN ,|nd ,1[(p-letp, lgteir o%\xlJpolicxntspcusllst I'l loll hvem relates silillNl(o thlee~erlh'll itimact (i (he CAP. 19 Direc~t parillellS to hlmiltrsto Supll~)emlelntI1B1,t' il Oillev,,oulld, for iniamh v~, hellpto milllhll ('01.1tllnp1pionl levels, itis lsseiug iteirade impat LIS polit,,since 1973 has mltade,\wteSi\e lis ol suchpat'iviltsi llltinceol edrlierillstlullivilts sml'11is e\plf l bsulle., (tI,1.llihltj',eprodut'tion(ontiol, agalin ,iIlalmsta of LS polity, liilnits tihe ixorld price itI ' of toilltisittin rkut ti- fsu1it, is does conttoled lii,'elilg through guveliilleiti-stuOlisoreld agencies (usedi i (t' ,i and Attstralia) iR esere ntrt agotiiei t implies ttt f litrage of srfpiuseslit er time, Is opposed, to the disposition of I-orolpean ll llflutliNstluhses d'-'lltel'l flhlough Support buy'inlg. Thlese ae quickly placed ot Ifhewortl market. holev r %%filk.,\itl tfill of,itelslit e\port suhstidi. 37 upward drift of producer prices causedi by rates woul (I iscoturage this. Also of concern inflation ill farlm costs and tilt, desire to is the rise of de facto European Community maintain rural incomes. Ihis drift is protection wilh tile decline of ile dollar especially strong %%here governments, another facet of the telluous link between against the spirit of te CAP. cotnpelisate agricultural Ilrices ill Iiulwl and on world farmers for the el'eclts of exchange ate Ilalkets. ('ontinued weaknss of the dollar appreciation, as il (;ermny anld the Benelux ol 2 stretigth of Olellischiiark to %mild countries. 0 The ' level of' protection andl til' xce('rbat( this nlohul. extent of European agriculture niagnil, the Tbe second issue influences is tlie e ItllvtItwhi( of, policy decisions oil wrl l1ropean prices. ol lnilltuilty policy call Ie mlade kt)lsistelit with Ile opelaliol of The third elevillt attribite of Ilirollelu intertiational coummodity agreetents Comllllity trade and poli(, fill igriculltiial more generally %Nitl the goods is development of the nature of the le',, an e(])t t tlllling(relationshipssfiscuisse]litheGA.IT. subsidy policies ettiploed. Becauise tlw, Il, Colllltllillni, long a prol)onnt block miiaiinx of tli ,idlUsimemts of in cont:iy agretiets to regulate vsorld production, colsuption, and liivate markets, finds domestic stock Iihi,igeillIent itself unable to negotiate 11ia11 %olhl effectively on both sugaranld Mitat, deslite othevise assist ill promoting %orld market its significant self-interest in trade stability, theN tontibutc ill those to short-run comnmolities. The stulng blockhasbeen instability iroblemts Iii llir countries. thit extent to %hich Ioiestic policy c Thus tie emphasis on trtlh tihe milisiires, the timodlified (or he committed in advance level of" protection, and to the use of variahle tllodification) (tider the terits levies and subsidies of' such all a'centiate (le igrtiJAlInts. Ill lt I impact of ill)]ell ase of wlh',l, the "oltitIIIItiitv Pttli, oN (' tnlliinitNm (11ul have beetn world markets, I~ pectedIt dgree iii llvat{c tO tal steps toi(. 'lltitilit The (evhlolilleiit of I uiropealn stooks and ultillhtel limit prodUlictioll ill Community farm policy anditl(e resulling 2 1 periods (f clionic mvc.supplI , Such inlte ilp!ications l le( elopiting c(ltries 1 national olillgations lb not sit ksell %iillthe revolve aroillnd three inill isSiteiS. 'orniost pecei{\id plritliacy ofI dnl estic market conl is the extent to Ilich (i illurolelti sidelratilts and ilie use of international Community is able to cotntrol dollestic I llrkets as saleti valves for the release of prices set under the CAP. Within the lressures generated hy -uropean Comununity there is doliestic policies. grossing Progress in the multilateral trade talks was concern for the financial implications of litnited, as ili previous negotiations, on present high prices. lhe Coliittiutlit, has ltiilih the smnie issues. been through tiso lieriotls of rapil \t effective code of increases (ttduct ol ,\hort subsidies, for isl(.tice, ill farm prices, (le first in tihe mid- I960s to nliies into dirct (()Itlit I\ith thile node ease the formation of of the CAP, anid the operation of til (AP1 second I decadh, liter as a reslponse to The third issitl is tiletholol(If pice domestic inflation. I) betwven l5s a lperiod suppnt used b thi, Cotnniility. Ill the of price stabiliy. Ihis cye could repeat glain seCtol n 0l tttllpf itself, although a lr(ipitate eturl his ien llhIde to illier to shift to a programl (suI as thi Ise uniform prices through the,dismtatling of of theficiel,( ' p)tylllns) that allo\s more the prisrnt exchang,, rate riangtigletnts for price flexihflit;, iti internal markets or agriculture or a furthier inlreas to ill iniflation introttce stpl)ly controls through acreage 'll'is 111S t\,\ o'h'111( I ol Ii l 1 lll Iv Id N' II lit II'h' a ' I'lao'- I litope.1ll 11I(' 's, I hollgh Ithe'll, Ir oll ll I )Is "IlI} h h OptmPi'nf,I.O IIm]) u el f t-(I l (tl lX,Ilmg Nirolg-( I'hlllIngtr , (( ll(iIinIiI/lll(',N1-NIIll IIIllre1 i lti 11 '111( 1 , vlll'lo mil l udhlll-iKlI pin,ilm dInlg hl 1(In' [I(INl~ollNI d sevlo +,l Hwo,!ililtionhddohl 1 )l.tdhttlesllt( es 0l al" Common 'rifs ald hjql, . ,ropl 'ohi-v (I olndil lhidv' Poli N Pe-wanl h I elilv 11178) 2>1 rh e q rf?l cllltl el(w hed InI lhw (wl w%,I. llt,90 lllo lO % \ he'll h l' w r'+ll ilh ['Illh di S~I ' ll '11 l O I Illop]) (ollntllltN ,1lll ,%o llllnot , 1(1 a, 1lhlol Illip~l( I oi111 .lopf-',t , i m K polli wN'of1 oil IIlodtl (tll /tollll rec(ognizing lhi5s I1 ] I'lhp ic dc.lohpl llg I ol)illmII.! 1,111ed( I(IIu d 1'11(],1 h . l'h( 1. 'I ll.h 11(go I IIII! e %('%l ,INhadd o tll-'d ill FebruaryI (77 38 or marketing limitations or by linking POLICY CHANGES AT THE support prices with market conditions. NATIONAL LEVEL THE UNITED Deficiency payments in grain markets would have significant internal advantages STATES but suffer from the so- far decisive drawack of transferring tile massive burden of The United States l',icesproblens very support from users to the budget. The different from those of the E:uropean distributional implications for meltber Community. As a willing rather than a countries are formidable, and if additional reluctant exporter, the United States looks financial transfers were made through upon world markets as a necessar' adjunct Community institutions, it would cause to (omestic demand. Policy pressures political problems. In addition, sul)l)h include the price levels set under domestic control is politically diffictll when supl)ort )olicies, the stock policies pursued significant quantities of hard wheat and under these progrurms, the possilility of feedgrains are imlported into tihe llurol)(ai coordination a'ong exporters, and a related Co1mmultlnity. issue, the extentof governlni e ut control over As happens so often itlh well- marketing. established policies involving complex the increased llexihility provided by the issues, no single develolment illproving 1973 Agricultural Adjustment Act through tile compatahility betweell dolestic and tile aility to set talrget prices with income international aspects of the CAP seems to objectives in mind and loan rates with an have nuch chance of success, but the status e"e to market coinlitions has lessened (11uo seems equlily untenable. The pressures actual or potential conflict between to modify the operation of the policy come doniestic jiolicy and overseas trade. Yet tile largely from within and involve not the (omCTelt of setting the loan rate in th' light indignation of consumers andt taxpayers of world market trends is itself som,'e,vhat with high support costs, but the inequities ambiguous. To a significalt ex(tent the loan of transfers letween the nmemiibers of the rate for grains is ait international lirice, at Community through the Community budget least Mvhen world markets are adequately and the terms of trade. The resolution of sul)l)lied. Other coUlntries know this lrice these issues depends on the extent to which represents a floor )elo\ ,hich U.S. the protectionist policies presently inposed product ilon tenlds to lie aCCLmu1tilated by tile on the Community by the national interests commodity credit Corporation (CCC), which of the exporting members are countered by admi nisters and finIances U.S. farm the reactions of those countries wiihin the programs.22 This underlines the fact that the European C)mmuinity who import 1977 Act specifies a minii min levh lof 115 agricultural products and pWN the costs of percent of the loan ate at which CCC stocks commnlon price-sul)l)ort pregra ins. These can he sold. Indeed when the farmner-owned issues are being brought into focus because reserve program is inopieration, CCC stocks the farm budget is already pushing can only he liquidated at 150 percent of the Community expenditures up to the limit of loan rate. The )reseint legislation puts strict automatically available revenues. More- limits on the extent to which exports from over, the p)ros)ect of further costs arising these stocks can be subsidized, thus from the accession of three new cbiters, implying a commitment to hold stocks Until Greece, Spain, and Portugal, must be faced. prices improve. Under such conditions, Whereas tihe efficiency and stability of world pirices may be expected to remain world markets are not a major internal issue, higher than U.S. loan rates, but Will l)roIbal)l' a period of change in European agricultural not rise much above 150 percent of such policy could provide an opportunity to levels unless supplies are extraordinarily adjust the external as well as the internal short. 2 3 Thus U.S. policy sets a price range aspects of the CAP. for international prices iia real sense. 21'Ali (xport subsidy co u ld still 1bepaid (thlugh not oi ( (A st()(ks)ilsilpl('s ,h(hhhnhhlilduI t thi'loaln1a,. drtling ihuewvorld price stlllIm er. th)t ('\-'r.this r(eStullli'S ill v\vil dlhd t)lriod[ofh\vak lhlt.iirtl. (It'l1,1l1t iI other c t'(httnries. Ii practice it islikel\that CCC stocks ,,uhlt tiot sotloffththhre ithi( r(l,,isvf lI hi( i it r sei\ s th(refoue. til price levelcould riseto l(iOt)Iur( ofi thei lo,iil rl(' under the tIr('sil)plicty 39 U.S. target prices have a different impact grain will effectively (epress inijce on world markets. Though not directly fioventents on internation 2 influencing alrnarkets. The selling prices in any given year, (langer of' destatilizing flows irises more they almost certainly affect lite future from tile temptaition to liquidate all market halance. stocks They (lttermine relative ontto a firll tlrket 1i. order to relieve profitability of grain in th, world's most hudgetary prolific producing pressure, which might leave region, and theref'ore world nmrkets is v ilneralle as thoy were i undenvrite a large part of world trade. itn 1973. international policy tihe level of U.S. target Other pro)lems aie exporter prices is as iplportant iln ihe long run is tle coordinition loan rate is in nd governttent involvement lhe short run. lFuture in imirketing. Alhough it is fair to say lit a administrations will face 1ldilenuim. From rigid exporter cartel is unlikely tile standpoint in w'heat, of prograim costs, there will coordinated marketing amlong tilte major be pressure to keept down target plrices, to exporters has consi derable lomestic ap)eal raise loan rates, or to restrict acreage. artd Soll e previous history. The concet is Moreover, unless inflation is controlled in hased 1)nf two l)remises. First. comtpetiti\e tile future, target prices Ire destined to rise. smlling itto importitg airkets h Indeed the under the clirrerit lw tltey must exhort is lo)rs tilte increase reveltue that ithey ilong with farm costs. This e\ill collectively receive, anId hence agreelrerit bring upward press.ire on loa rates, risking to lessen this conttpetitiont is heneficial I loss of to col[petitiveless to other exl)orters. faritt income aills tderlying Further dontestic acreage limitations would tlten he programns. Second, countries \it necessary, h relatively though these may now be losing rigid driestic price levels invite a some of their higher effectiveness as a/means of selling irice tltereh, capturing for the raising prices, both lhc,tse other exporter reveiiue Iltat olerwise \ould developed counlries can expand their mn i ccrle to the iitportinig ('olittry lS ievN production and because developing- ard receipts. Moreover, iniddle- it(olle Colntry fixeddoinestic-Irice trarkets may hte countries irc also otmmitilitted to tite quite price responsive. aggressive Tihe use of export suhsidies wheit way in which the categories of .S. domItestic surlultises trca telt stocks are ,lmtinistered illitelril price wi!' also aiffect levels, thls lulltig ill douiht their o\\n world markets. Whereas a .retter level of ahilit% to paticipte ill reserves any' pricing than has been held over ilte last agreenertl. lltev benefit firom the reduced few years would tnlt oubtedly add to competitiOl amo11lg other exporters, hut ire stability, too high a carry-over in the United not reliable Ilmrtners in such States coll,lboration, (and otler countries) might itself lead I he importing countries could themselves to a dlestaltilizintg chage in policy. Tle expmd product ion b\ enoigh to offset the daniger exists of a l)recil)itale rundo\n of ldvallge( of higher world prices Io ilte stocks if they are felt to contribiite to lo\ exporter if they are cOticerited domestic with the prices. From the viewpoint of foreign exclitge cost of imtll)rts. world market Without st,lbility, Ilte key relaitiortshi attemlpting to \\eigh ti' e\idelce on is thle flexibility this of (onmestic stocks to world lestion, it is clear Illit dlecisi)ns a)otl prices. A subsidy paid to fariters who hold iepirior- stocks ind inspired pri(ing agreettents 1%ill he a penalty fr the rcht-s,. 'tf suht ,,! ,sid,", l,,ele.,t to those developing stocks I)elo\ a preielermined price level couitries iarlicipating in) the world wheal related to tle lower rate tre Ite ton nmrket. economic provisions of the U.S. farmer- ,.it' agreeiettt anong owned exlporting reserve. The storage sulbsidy rmy not coui itry govern-aelts implies a degree in itself influence of the response to world conlrol over trade far greater than that price, but the penalty provision implies a presently band held b,, lhe U.S. ,aditinistration. over which less stocks will he released Besides the domestic political in response implications to a higher price. Thus it is Of suct 111agreertteit. the interntalional uncertain that this part of U.S. slocks of implications are likely to he significant. The 4 At t)resvii jsIiti lu i oni hall I I' S \ihutI -t-o( ,if t I e i II it r-uui iie i tindit the "lite"sInuks et1m. i Couirse, still re,ict to l . ei i I iu iuiti ikl i li)rl( -s ue i t.Iu iVh el 1\ltutuSti' ih .11 upprtl the uuenlr\ provision %%oulu h iae a re(un ed ip, I onl sTot K beIitl lns 40 impetus to increase domiestic production in holding of stocks, though it s possible that countries with higher costs thlan the United stocks levels could rise ismore long-term States, to guadl ag,,inst th" implied lijiateralI tontracts ar( Ilde, perhalps with hegelony, might he ionsiderafile. Thus ole the People's Relthmlic of ('hin. Austialiati of the forces acting to keep tile ,heat policy is likely to c0ntitme to Ie geared miallrket cotll)etiive Is tlhe (lificulty of to,\ald lolesiic incomite stauility cotilj !e collusioni itself. Tle illahilit, o f lil' ,.ith (il)llltltntti(c Itttltpts to ili ,se ilte European (tollu iit\ to control its surp)s level of tr,(le illwhetl and oller products. prolduction, the feai o)f reactions b\ C(anahda, inl cotlast to i.\ustrli,, has alrealy ilp)orting-counotl go\ erlllments dissipatiig dniltonstrttod a willingness, illfact if not ly the adv'atntages of e'\porter picting Intention, to hold stibilizin stocks to the ,agreetneilts. and the pelilic,l keight of lenclit of other countiews Iherehre, those in the United States% 1h)xould prefe l developitig countries see a risk illm1 the goerlnlmelit tnt to hIcotn'm direcll\ ii,.,ird-lhoking ('hange in(.tnadian plolic, involved in grai inirketing ill e tot1 that .xoiilI!olset this henefit. discoalge, agl(Illl Ifiere is tno indication that .Jaadneltse Ilhin/liortan( C to the U.+.ecolonmy of whet polic, M\illhe liiodilied illthe future regular no t\patiding i'\pilt sales of in a . that would niterihlh, influence a1gricultural produtm 1; siliultes the I\orld nirket hehlavioi. The constrafint lies developilient of the x.orld .heat market, not so much in the \heat market itselfhut inl Besides 1in\l('('itved lisltltll, t of thw links het'\meen wheat ild rice. As long as greater itlmlort dependetc\ h,, developing ihore rice is proi(hti'el than is required, (ttries, dlanger aises tore ftomt the +lapti will ('ncollurage thtlproduction ,Irli wlhctan ot other colttries to take li-oirtltge ,Item coisuIlptoin. Iflllrlus sertinlIS l]ithprobhles oft wheat narkt Ii. meprobh'n' in I,])ll oiitidciles ,\fitl . Whethir U.S. polic\ :aincontitiue to hleild shortage otf wtl inthe wold lhis ,,orks to domestic objectives tillthe needs of the the .1ll\altag,1p of lt'\('Iilllg clontlie's. Yet woihl tikel (ependis crucially oil the chut'ges in .lipuliiesi' .heat polic are ,ibset(c oif ((inflicts, plarticulrIN amiong itlikel\ to nave a tmajor illict on the developed coillitries, '.\Ili h uhld aillt to ,\,Iiklhilil of lfoidgrains to Ie,eloping (ll( stion the pres('nt olientit liotlof t .S. I1tllolls. polic\ to\ard (,\lirts. on the other hatnd, hecise olthe sheer size of Ilt'Sovietl whet scto(r, aln,Soviet polic giving increased l)iioritNto wheat production \Nould soon have a marked POLICY CHANGES AT THE ilipait Oil world irices .AiA shift if, stock NATIONAL LEVEL: OTHER policy, either toward uort, aggressive COUNTRIES internl stabili,ition of constimption or more respOltsi\(e'iss to e.(irli condlitions ,,.oul Ilkes,ise he siglilic,Ut.ltarket Inl Policy ilirectiois ii tiet(ither tnajor other \ords, Soviet proiltntioim %aritions wheat trilding coitries %%illlie largely' affect intt'rinl c(iisulptionillore than in (letermlinied Il,the act ions of th lI iirnl)i'atlmost other (ouitri(,s, r'I,Iiurchises of (Ollillltllity and the +:Ill('flStates. (Ilhada l\hwat ill1972 lia it buei interliretei as I and Australia ( ai. of (cours(, Wt shift ill p)l ic\ to%,ard maintlining indpeleientl.N, and iltIced their ittitudes cOistiiljitiill le\els, vhet'er for food or tow,1rld such illto)es Is the si(ting iif ,inhil f'ed." As. a consequen'e greater Conmon e\plort prices tir' riil. But h\ stock \ariahilit, is reqiuireid ifdie imlpact is their nature u'S. and iirtola'u policii's not to le traitiited to i\.orld mtarkets. But provid' the itolte\t illMhich tli(other the record of stock chatiges intticates that countrits ait. ..istrili,t. a r('tivei, stoall Soviet policy ha cilltierlot atffected or extporter, is milik(,Iy to atteplt to smabflite shightl, ilpro,.ed liie stahili ,. Sot\iet prices on ,,orld iairkets b incre,,sing its polic, it\,ard (r&(, consumlption, x 1;lhi,)l,1i1 Ipolli% \,Itill k h] ' lli fi]l9w] ) h lt,st wL I moll bou1g1h ~ t Igmlmli111,111(11eol('1 1d ia4ll di I p +l, l It'alth-11 .dw r 1 l gmRIv 111111clll 111t11', tllolv huill 11hlpo1ll i11 ( o.rl Ihlw hl ,m'st sho~rtfll 41 production, and stocks of wheat is clearly of countries themselves can afford the pur major importance in international markets, The absence of adequate chases. informat ion al)out Several approaches how suich decisions to these problems are made is a serious have been gap in tile discussed ill recent years. One utnderstan(ling of world prain aplproach trade, to stahility woul(I attell)t to increase tile level andllpric( respolnsiveness of stocks held in developed couturies This plan has taken INTERNATIONAL INITIATIVES several forms, including IN coordination of stock mhailgnent THE GRAIN MARKET aimong governinents and Ill(, owviership of reserves by an international body. Another approach would increase tilevariability of consunmp In agricultural trade the primary task of international tion in develo)ed countries by neans discussions is t) establlish ranging market from encotlrgi/g aIbstinence dur conditions that are considered ing reliable s( arcity to reformti of domnestic farm iand and fair bt the major tralding food-lrice nations. policies. Regarling dtevelopiig I'Ihe reward is a trading sy/stem that country )urchasing e)r, so)lle actively encourages low-cost production, have suggested tackling the prollemn from reasonable stability, and a degree a of financial viewpoint, advocating some security in food supplies essential forl if other of payments aid to alleviate economic andl social objectives foreign ex are to he (lhnge problems, whereas tmore easily reached. l)eveloping others would countries rely Ol the improvetnenI of' would like to be able to pllan food-aid pro their own grains. 1, ch of' these strategies development with has sole reasonable asSuran(e ,ldVltahges of political that the international food altractivelless, of' systemn will not tc'onoinic ilmpact. ,d of unexpectedly turn tl,fl distribut ion of against their interests costs, hill +rogless Exporters should oil allthese plol[elils be alhle to anticij)ate needs has been so%%. and develop As with domestic Iolicies, markels without fear of change cOwP'os arbitrary closures, unreaisollable rehlchantly. competi- the stock Imethod tion from heavily subsidized was the basis for the surpluses, or nugoliaioils o1 discriminatory trade d lnw international Wheat policies introduced for Agreement. under short-term political I coordinated reserve gain. Importers press scle, both ilmtptorting for assurances that temptations and exporting coul to exploit tries would agree to market shortages will iccutlate reserves be resisted and that when world prices world market conditions fall to certail) levels and will provide I reli- to release tlem when able basis for doinmctic higher trigger-prices resourc(-tuse decisions.' are reached. Such The performance a schelle would have of Ill, food-trade teconomnic '(osts, system needs two compounding the p~olitical improvenments, both of' difficulties ofreaching which would be to 111 acc'ord.l'he slock the advantage of holding profits for developing countries. in Individuall importing The first is more (oullitrv, l)articulrly stal,le .vorld market if' its mlrket is small, prices. This would \ould lmbsiclly, influence the ability from sleculatinlg of' developing thin- aboutl world ma1,r1-ket tries to pursue trade-oriented plice (Itlges. 1-e% lood policies countries have and would diinnish been willing to take the risks. the disrupt ive implact of' o reach domestic sudden changes narket stability other in import prices. 'lie policy lterlativ'es second is a system allowing re avalilalde giving the inividual coun- :.;,line degree of security tries to purchase foodstuffs at a lower cost. The on world markets large imlorter of when their own production grailin light feel conl is deficient. This strained to carry reserves means that such imports if there was the must b, available, likelihood that greater-than-average not locked into hilateral trade agreements pur ('ases would push up the ii))porl price with other countries, and that the importing 2 considerably. 7 ;encrall,,. imi)tiers are not A s u(th o n dl(i t i ( i s O d ulei m Iur.p rl ii ii li i ltl l :l t oSI m. 11i 1 1 ' p .11 .tt , tit t t 1 wir t ' I ri'lt ' IS i ,1 rewairds for secrtry lluim sh [hvui ight atsi issules Suc(h 'Is theS[IIR{ h t [() di i i ,g.ugi iInlhiltt ihde s t l~se O loo){d cy%[ s1{111l ede 42 likely to be keen participants in schemes expected to allow price changes to stimulalte imposing target levels of stocks. consumption adIlistinlelts (lirecttly. 29 Grain exl)orters have their own motives The pirolblem with this al)roach is th, it for hol(ling rcserves, in particular to retain c'l,lslles with strong stahility lotives ill cre(libility as i supply source, Stock these countrie.:. not only coincerning the coor(lination schelles ailIong counltries a(e COlnsulIlfiler price level Lll also the c,tlicalI designe(d to reluice thelbuirden reserves liehavior of lhe livestock sector. Neverlue place on exporters. For any given set (f less, this ,ip)l)roach hs the nijor ilvmitaig(e trading conlitions the lility of importing of1 bringing iltt tihe o(pen the interreI,lionl countries to use tradt flows rather than ship hem eein Ile\lop)ilg-cttilntry ,inl domestic stoc'ks to offset production developed- colltll' )olicies ill the Norld variahility rests inothe existe~nce of' viahle food ecoiioil,. 'lhw deglree to which this stocks elsewhere ini theiorld l[.(sl)cialll, ,approachcal reconcile policies determines in the exporting cluintries. Allteliits to th, need for otlieir IedSres Stich is stock redress this appaent iinhalauce e\pose 111,iilgeicin aid foreign elhlange facilities. direct conflicts of' interest ,Uliolig he Initiutives tlhlt Iddress ile foreign nations colluterned a1nd hlve, so far not beenl (t hlgt irolhims of dek elopiig-coiultr " bhlessed with sluitss. lfood itliporters and suggest direct Ictionl to The uidelrlyiing qtuestioin is whether ilie lea t,with ten Ihave re( eived increising internationil coordination of stock lolicies ,ItleltiOl ill r(t loliitils. Solle of thest brings greater henefits than those "ising s'lillits relate ign-e\llgeassistance from tile exis(ence of stoc ks field imi(tr dlirtctly to de',lopi 1ing-ro tily im)ort pat national initiative. Ther is i str ig terns. I Ill,' ei\'visilge(ithfrl set oif financial piresumlption iiiong troiponlents of' stock ti iftnIrs linked to the ,1ilahiliiN of' food sclvmies tiat just ,is -i' ate slocks hitlin I ilmpourt (osts. lesignul to UIlprove tHi country lwN be iiltlimltlit" lot,that co)iiII,( l hdlant of palh lieltls of Ilit,illpoiler ,lan niatiollal sltocks uIthmhe il elitefor lIht it-dol that collimillllll bdgetoi htuden, (it ii world. A risk slued is a risk r'edun'ed. It ld(lihttll lint oIf cuedil to eiildht oln apl)ears thit ill the lliti'al in d fill tloss of urcial thtOlt-),,l t 1atla-llrdate. (titOllillIN o evi'r iiitiCili ptliicits Ih s Ihis kinlof stI ttitnl pih lill'i, i Irt)I1 tl ost out\eighe(d iiy gliltral ltiitfiis It ii, ulvolxiluig swtt'k alld c('llositil I adjust take (mother shock Ii tI (\mirld grami uiitlts It Itits nit ill itstll ,Ilress the e(clOlml\t 1() rtosl\r't this issue. At a time of ptltleill of Il inig\i ilt rlhuittill %a hthhilil , seilligl\ Idcqluntt- slots. hnrt- is til]c I) thet\llli tnt it illhmxs (l(Uilti'Ils ill incentike Ito hind ,I.gleellnc~lt t)I such Itoillin llan(i relligl/ l po~licie's im l, o( iiiliters. 0-ct It lil tit tllslimlfititon, it mi/t ieises ill(, The second nhlil clss luf sollititlis to itd foi ('111d tlt, lrflitllilNIO olff htling) iliista ilily issies 'ttm er( t2,rtls (tr' llsuill)- sl cks, It iggm,lmes tlie global ,ljustillent tioll tiljlistlliiiis ill l\'tlut(vel t'lili plrolfilut eit(,d amui. v ithli ulifildh stocks 'he alhillytiu'll secttiol of this rel ltutposes ol ht'\thtid - u lt\ (olstluillitilun aIdjust this (is I direct .1tel( ]lit i) thcl 1iiimiiui ll-ints. Ihestiltili/tcs hints ,I oiil etd x\itli latioii of' slo( ks ill o l'.i to slt olhtit o fIllot- sit k lht\iluilit\ oi i\ill (htelh ttd pirou cti( lonvariabilil,. SIt'-Ir dini illl t t l\ t ' lt - litllit in listlot S. sit" 'hiii cenltril-illl COLIIitis ('ill ddjuSt \to lld- ,l[ li) .ItI I ilt\', I)t1 hotlh Iiiel1hill Iill iarket ptl( hmses, should they %\ish,toi si lltilit, ,Itt ollitttsti t Ifo d t,( llit \ltone, avoid straining a\ailitlh sli lllies i, Iislroilnotespt tlht IlIttti ,it l(, ex-ls, tf' the of' shortage. Tl'l,\ (ii ill( re'l( ituiorts folrilll , wheli supplies (Ire llort t1ii .dlehtt1ll,. lh itiitw- ti,ilitlil Ipplrth to Countries that rely mllre oii lt lri(i- jiUirhlising-p ll\ter p lodiltis is to lel, on Inechiiisil. whtletlr tir lilt 1is tdltetl h,, (litessioiuil terms lor food sales, lothl trade barilitirs, foi (ht.u'idiig (Ii itlltis Ire hilateral aitI nilili, ttiiDiscussions 21 I) pv' a l~lll(( , lw 'l It lll Oll 1 tvoli ",l k pll, it- i , id [Ulldcli~ i kIIJol(I , ll~o " dW,{lll'r )1 [M ell o I ll1 \,(rl Ioo ,,lTI .IlIlI ' I lP,,t7-4, dovt" il hI" ill I 1.1 ' llt ,)).)li ,III)tI10i V '"Voll/,i3 of adjustlig dve,. pdeh Illl n l lp o~l l(i 43 about these schemes have emphasized the tile concessional markets. As with more desirability of weakening the connection direct import-assistance schemes, the that has existed between food-,aid flows and greater level of consumption stability domestic farm policies. Food aid that is engendere(d )y the policy, or the reduction dependent upon erratic surpluses in in recil)ient stock-level changes, would developed countries is generalli not impose a greater burden on the rest of lhe considered to be a souid basis for food tra(li ng system either ill constimiplion )lanning in developing countries. To le adjustment or in siock managemient. 'The more reliable, food aid should be made objective, to make thedeveloping countries more directly a ftunction of' develolping- more secure, must be met by assumiig cnuntry needs, such as those that result corresponding resl)onsi li lit ies elsewhere in from domestic harvest fluctuations. A tie market. 3° guarantee of supplies to cover such nee(ls As this discussion indicates, there has would ensure that developing coountries been no lack of concern for lprolleis in the avoid holding large domestic reserves, wheat narket. Progress has been limited in either of' grain or of foreign exchange. part because easier market conditions have Tile stocks necessari to underwrite such diilished the sense of urgency apparent an insurance policy would l)resumal)ly be five years tgo. The problems are still there. held by the exporter. 'The imI)act on price rlIey stem from the struIC,,1re of' a iarket stability would depend on whether tile lnet dominnated by iinwari-looking domestic change in stock- flexihility was adequate to )olicies, lartico larlv iin(,Aveloped coon allow greater consumption stability. A tries. Itis difficult to see hc(w these realities policy of this kind therefore has can be modifiedl by anything other than implications for tile commercial as well as coor(linate(l action itthe international level. Aful Ier discuss ion of reserve schemes, iisurance proI)osal s, aol toreign exchinge fci Iitos for foot imports isIo te found n a report ot the IPRI-CIMMYT IniernationalI Conference. Al erto Vatles, ed.,'Food Security for Developing Countries," forthcoming, ii I d det ildTeviei\of intern.1tionl l it', regarding these issues is contained inthe Food \Vortl council report, Towu(s a world tithomt ttu4!iQvr Proress aurd Prospectsfor ('ofph'tingthe Unfinished Agenda of the World Food Confi'o'n(e (Rome: World Food ('ouncil, 1979) 44 8 IMPLICATIONS FOR DEVELOPING COUNTRIES THE NATURE OF limited way to interpret the empirical results INTERDEPENDENCE in this broader context. It seems appropriate in defining the IN WHEAT MARKETS nature of this interdependence to view the combined wheat (or agricultural) policies as part of a system with certain characteristics. Devoloped-country price policies have Wheat producers, widely scattered through evolved in resl)onse to internal pressures the temperate and tropical zones, rely and with rather limited concern for external largely on sales either to government market developments. These policies do agencies or to markets where prices are change hut are broadlv nonnegotiable controlled by public lpolicy. The prices l)aid internationally. Trheir impact on world to l)roducers tend to he higher in develope(! markets and on deve!oping countries is countries, es)ecially in those where wheat largely incidental to their main purpose. production requires price-supl)orts to This does not imply, however, that compete with other crops. Producers in knowledge of the external effects of' developing countries commonly receive few developed-country policies is of little use, price incentives, and often find themselves An understanding of the wheat market may taxed to pay for social programs.3 1 There be essential to good commercial decisions. fore the evidence may be interl)reted as Moreover, the actions of' developing showing a bias toward stimulating produc countries can have a profound long-run tion in high-income countries at the impact on agricultural decisions in expense of farmers elsewhere. Whether this developed countries. Particularly in tile bias affects the Ol)timum location of whe, market, where the importance of the production is a coml)lex matter: not enough developing-country market is already is known about relative costs to be certain of widely recognized, the way develoj)ing its impact. But it undoubtedly influences countries view the reliability of the trading the magnitude and direction of trade and system has an important bearing on the the context in which policies operate. direction of farm policy in industrial On the consumption side the incentives countries, are largely reversed. High-income con This interdependence among policies is sumers usually pay more, in part to maintain an important facet of the world food system. the income levels of farmers in developed Besides acting as a caution against too countries. Developing-country consumers simple a definition of the interests of often benefit from fixed prices and from developing countries, it emphasizes the subsidies that reduce the cost of basic dynatmtic nature of policy decisions. foodstuffs. In addition they profit from the Although it is much easier to estimate the lower world p.ices resulting from developed impact of policies in the short run-on country farm programs, including the effect prices or trade-the long-run picture is also of concessional sales. 32 Taxpayers in necessary to give perspective. The following developed countries often supplement the discussion attempts in a (qLualitative and implicit transfers from consumers by under i if one illois for it ofien highe pric(s of imports such as ter liter, this difference in pIc' letels among countries is even more nirkeil. For an dttelitpt at ititerittional price (tolpaisoin (not restricted to %%heat, see Willis L. Peterson, "Interntional Farot Prices and the Social CosI o Ih ap Food Policies." Ai.nerici Joijrntalof,.Ignctuitiiro! Economics. 61 (Fehrtary 1979), pp. 11-21. ,taiy of Ito policies used in deelplng countries. ,aod the reason, for such policies, are discussed in the tOnrihotionS to Ileodore Shultz, ed., Iistortions of A,cultural Incentives (IBloomingion: Inoima Universit, Press, 1978). 12Food aid is coneniently considered in this contest as a prl of trmde, inut hence as part of the ssten. Food-aid flows were, of course. intutdett is tride in the earlier, empirica.I sections of this report. 45 writing foreign sales and domestic storage. prevent such fluctuations from imparting Il developing Countries tile tax burden is costly shocks to the domestic economy. In more likely to he for consumer rather than Many countries the internal domestic nar producer suhsidies. ket is not closely linked to world price it such a system the internal transters develolpments; their infl(t ne ia' not have external effects. Iligher prices to extend heyorld ports anditlmljol cities. developed-cotnitr farners iii effect lower Moreover, itlany develoing c(ountries lso consumer prices and lower the tax burdens have policies that effectively separate of developing, cowntr, iplorters. Consutmer domestic and interinationtal markets. lii subsidies in low-in(ionie countries sitttilnhlI these cases the imipact of world prices on tend to exliand Ill( inarket for developed- dotestic agriculture ina he indire(t, country farmers atid relieve their tLtxpa,,s ( domoinated hy tlfte influence on governmritent of some of il, burden of' price supptlls. jiltmining and oil the ilportation of other Other linkages could also be adduced. the prod(ucts. When wheat prices rise at tile Outcotmte is tht decisions ill one part o! the sale ti aIs those of other cormirmodities, as systrln affect other larts, iinfltueliing the in the early 1970s. the iliact on developing decisions of )ther individuals and countries is reduced. A price lise o'curting governmiterts. %tll coff(e, cOId, tea, ald sluga pies It iay lie useful to idnliif, \ t, sets (if are depressed could lt, e tmtIt more influences Ithat ianhIufest Ite linkages seriois relercussions. among policies: (ieritingthrough the Thehteoseimpact of eells ill tlte' orld %%heat terils (f tra(le, those related to iooitiet, ntrket n)it incoime distrihutn ~it thin distrihution and eutplo'nte nt tlevel". those ilevlopitig (ultries is lIOre ('OlIle\ but influencing resource allocation, ltse eqitall ililittllt. St(h it itipact lly he working through li ,itets iiltbalaces, idi ,a)Iiareit itt any developing econln, those affecting go(e'nilllniI hudgetl cists. ()f rig rdless of its til trade iositi(il. It Iltay lie these, the terirns of trade influences iR, especially impor(iantt wlererunal unttiplo perhaps th ie ost direut. IIteeliped- coluntily titent i, a severe proulem that iii tuin iia\ lie wheat poliuies have generallN, favored, b\ rel,ated to a lack of purchasing power that neans of l, er internlotioal prices, those li\es lirlill(ictive i-apiacity idle. (overn coulntrie~s thalt iprt 'itls frontl it"e worl ment policy night cill for the injection of market. li iddition, food aid Iroides a tiinds into agriculture not oily to generate further subsidy to (recipietts tlhat lria hri more oulput hut to s-timlulate the nonagri included as a (liret a fiafrli ithflellunc( cultural economy. Such policies are similar on the terms of trade. Graiin ixlyiltN's, to those usel to support rural inc(oine in particularly in Argentina. la,.e correspond- developed countries during the depression ingly suffered from lower prices oni world Of the 1930s. They are a stimulus for markets as a result Of developed-count', itinial and regional ecoinmolic develop- policies, anti possihly front loss of itarkets Ilent, lHtwever, these efforts Itnay lie caused by food aid. Becatise developing lhunhed if'not entirely thwarted Ib'ystisthtn countries as a whole are net imol)orters of tiii transfers to developed-coilry fariners. wheat, it seems likely that thil,lerlus oftride It s(elms unlikely thatIt, I, adlitional food for develolting (ounlries have been ilt- c'onsumlption thus generated would he prove] hy develo)ed-counry lrice I)olities aideiuate to absorb the extra production over the years. fron susidized agriculture iin hoth devel It follows from consideration of the (illeil and develoiping countries. li this terms of trade impact of developed-cotintry sense agiicultural policy in iindlustrial areas farm protection that n additional vari- man preemlpt the transfer of rural income ability in international prices for these transfers, which might othierwise he con products generated by such protective siulered desirable develotimtent policy. policies destahilizes these ternis if trade. A simiilar ci()It ision iluerges from The result is a more or less arhitrary re(listri- comisidhratimn nf the mtore trdiiinal hution of purchasing power, accentuating qesli(in of resource allocation. Un(der the natural shortages andi surpluses. This un- holi assumnption that lahor withiti countries doubtedly impairs the ability of developing- is lntobile and eilployniiint is reasonably country governments to manage their on high, overpiloduction in high-cost areas, food policies and strains their capacity to SliOnsoteil Ii' gener'(ius tprice sulports, 46 implies a high total resource cost in world producers. Higher grain prices oil world agriculture and reduces the total output of markets reduce some of this budgetary nonagricultural goods. Because price pressure. On the other hand, high world protection for agriculture appears to he a cereal prices add to the financial hurden on luxury enjoyed mainly by tile developed developing countries, leading either to in industrial nations, the implication is that creases in domestic food prices or further such subsidies reduce world income and taxation of the agricultural hase. In other add to overall food costs even though they words, there is a strong possibility that lower put the major burden on their own world agricultural prices lenefit the fiscal consumers an(l taxpayers and relieve their lolicy of (evelo)ing countries and restrain counterl)arts illthe nonindustrial world, farm policies in developed countries. This conclusion is reinforced hy the In summary, developed-country farm notion of social resource cost, which la,, policy, by depressing world trade prices for differ from Ill ivte (pirodtcer) 'ost products Such as wheat, might harm particularly in the presence of lnemii)lo,- developing countries (both importing and ment. Such unemploymennt is likely to he exporting) if their develol)ment is greater in developing countries, where the constrained by a lack of agricultural industrial sector cannot handle the pre- purchasing power: it might reduce total vailing degree of excess labor capacity from nonagricultural outlpult h, ininsalloc,iting agriculture. The social cost of agricultural resources, keeping food costs high, even outpLut might be lowered stillfurther hV though developing country too(d con- maintaining higher prices or other incen- Sulners might benefit; it might help tives to produce in developing countries developing- country importers to finance than in industriafized nations. Once lgin llthe purchase of other products, but cor the present pattern of world agricultur,il respollingly injure the aims of exporters; policies may be against the leveloping- and it might facilitate *he subsidizition of country interest. food for consumiers hy developing-country These conclusions ire modified hy governments. By destahilizing world lrices, emliphasizing foreigl)-exChllamge rather thatn the potent;al henefits are reduced and the resource-cost con;_Jderations. Balance-of- injuries are itiade more aplparent. This broad payments constrainits, for illhlstaie, suggest assessment of the impact of developed that low prices for wheal md other hasic country policies in the wheat market should foods help to relieve the Third World of a he interpreted in this light: the actual effects halance-of-trade hurlen, at least if will, of course, vary widely from country to governments call control import quantities country. and thus take tlhe terms of trade benefit directly in the form of lower import costs. With this interpretation there is litt-l doubt that developed areas have contributed CONCLUSIONS something to the economic Mhanagement of nonindustrial nations by easing financial constraints, though they have Aso added to With these linkages in mind, the their difficulties hyimeans of' policies following conclusions may he put forth with tending to destabilize world )ric(-s. varying degrees of certaintly. Looking at the financial cost of govern- Production fluctuations in%wheat in merit agricultural policies and considering developed countries call be a potential that administrators, constrained hy the size tproblem for the rest of the world. Price and of the taxation base and the political income-support policies may in themselves acceptability of tax levels, cain inlect only reduce such instahility', hut some changes limited amounts of subsidy into the food inl production directly reflect policy de and agricultural system, lower world prices cisions. Greater stahility in production again seem to benefit developing countries, levels would be to tile advantage of The size of the developed-country tax lIr- developing countries in planniing their food, den (made up of subsidies on exports and supplies. Policies designed to this end could any direct payments to farmers over and more directly henefit decveIoping countries above their returns from market sales), acts than the various stock and trade poicie¢ to limit the level of prices granted to domestic commonly discussed at international gather 47 ings. Reducing tile absolute variations in The implications for domestic production may require developmllents price in ioll( y are clear. 'roducter (am consuniel) technology and llsbal) '. Flinilating Ilhe prices must hel able to (,lll it policy-indlced variations slock changes is 1miillil)Oltalllt ite to play a hill 'olv ill priority for the interiionill stll)ili/ing wollo ('Otlillllllity. lmarlkets. Willi atl uniderlyiig In developed balance in countries, (onsuimption world Iiirikels. variations slock (h.llg¢'s (,ll ofset are generallI less thin produc- yrn' d IslIllardsurao's Wilhoutl such at tion variations as i r¢stilt of sto'k and trade bllnce tlle' cil deshlbili/i the Iuhirkits variability. the tmor, aggressively as de- tle, ame designed to ( ll(I plice-polic, velolped Coutntries 1t) tot s1,l)iIit/e errors. If prices (ould ise. lirhaps ConsLtlII)tiOl, 1t mOre stokst a(, e1 to) i' tleililiji)l during sholtges (])0an('lly, held to counter their illpl ()n Irade, i Col- it the sliortige persiss), the ',xould reIlieve sulniptioln varies lilu Mlll th(l' is I I'li( slock policies ill high-price market for wheat is aUnimal periods from Iec esdi,(idllit \ gain hi, ing to rescue il Eiirope domtenslic price 11u(d the U.SS..R I('edgl,il ()liI'Itix kc.- policies lhilisel\'s li''l to i(,Sio to WVilhilit siil i'-olti-', conlitions ill the x.x ll iket to flixihilit, ,ix)io stock (higes ,illx livi' to ltohe' en gl't'r undue [ihitutatiohlis ill th lixeslock s((t(ol tllhlll ill filtl list ucrot' his illiplie's More nuoveiment ill iterIlaie price I ot hiihl ,ixiaige hxel of stocks a greater wheal. iI illier grinls iax hc Iocesa'., ill (' ,it \ti(il hi this regalrd. Ili th ll. n1lt I ' ltel sosl(ise to u)li( hi(igesh tis itcrease ill totll slock-tlin\ thilg( S, ilmoling stocks could ITTem hio ed it those ()llnll(s those (illS,( i',plice ,(-iatges otl)hwli to no) n)N hoildiiig pim (-w(spl)nsixi' s)o(ks offset te impaltlof liicepolicies on x\(oI'- (ite im)pt l ( ()IilllllllfI l\ and hapan in lie iarket smahit lt',,bittthis ippea s i' t - ',a ' oIo xhill) k\\ Ii' ill 'Islli o largely to price-fleili' (,ain ,m and (to aI sch i('sl)l s ibili tis It IT (' poi w.,I( (lllli(' lesser ('tett)U.S st(cks (se I,ildhe 14) 'Is ii lii' p st btl ) iitr1llll ,s-, Iml,, ,1id Although this r('sp(inse to xorld Ii(, Iniiig, sl)(ks ill ,uo x,, a, aI to olklt chalge's se(lis to iAimx ,itheI ch '(t, oul ll i('illp(t" of tih's' llh i's oi1 Iiid', price policies arc liirtiall\, ihsoil'dt in li n It'tutul iwotiiltll )ts (iko'h',asd slock-level Ile'(isiills, oitiel e'i hltc'e il)(1i- MiI .1 ili- (l-lon iiu i,,ls iiT\xx htllt plic's iught cates that this (flect is not str)ng m'lt)uigi iti l',(h 38 iiilliion tons u.1tii'r counter the underlying thin 018 el,iionship bll,- millioi loni. ltis ihi'x,'lipuit'i\iould tween stock chltng,'s tilt lirice-pltli ill ii ii1'111h'1(' i to'te (i(ilftl o such impacts (set' Fable IO). Ii most ,m',ts, sto(k 1hinges in \olhil I h',-, (sc tilde rundown iccoiiams price-oilii.', stir- 14) pluses 110stick .1('( 1iiuulaltiR)Ii ' I(()oili t ( ,s, shortages. Ihei sit('tiii I s' ,iti'm II t' k' ii\iill is i(iitisid'l ill xxiii it i prox i'd .issisSilig ,\ ii'tl if', xVwith poll( \ hx v'lililUtlts in it'slla(iii'(O ()l 'l l'sVlist) i i 'ss ofl ii)tilstiitl ii(tllillum" t'(isitilx( ' iix stocks to xirld priiis stiiks( ,hlto- us toS ouild Also hi- mlll'iits xxill Im [ O ()llillu, the( ,llu l Hll pm( I )1 (Ii h11(h, imiflll(ntl of l l(u li()ll \,t l lonl. gluh'le I1'po)(Ins of policies. ullsllllt iii ll I ( tu hIT11 jii1il lThe 'fr'' , ( 'tt'.I' m' itcI ( ' illgi's, i' ttit s'- t stiii ks io xxili pi1 'es. ,t t iin ' " I, '7, %( ts ':,I e r nIItd ,ni dll( itiiii' Iltsistetut ,Ih.,(l of slocks ill l i\ prmce ollof.) iioi'N l'riodis-xii ii Inudiii'd ,u lis's ill stwiks. Iollt(lslic Iiroduliiotx li',uiig ill lurn up'il(l s to xxdlrdl l t )iiiliix 1ti1igvs this-tand ( Ii oisil ttiiisi' siiltiis(', folgi Ii rllii iti ,iase(ot sloiks , lPrii('e ioliii's shilh ,lliix\ Jis( to liillii %hlen pricis are ei--i'x, tihough lirihl( wilhl pli(v trlls i'x.n Mihnu l(ls ar.' tion Ievls arc high n'lnu)ugh to ,ltoxx filt ii\'ii xithitl I lttakel ing seiIsu I It lla h' stock rebuildtitg. li the list d (ide' i,, ll('c(,ssuxiii\ to ( luhiltiue "lock p(lic-ies to foriner sitiitiOl(I( irr('i il ] ()71) 71 ind i l l' thu ill (com 1972,.73, midn o'.ls uist' sti k (uliutg's the lller ill 1974 75 mdi all ttr ill"ii()l 1975/76. lI listliitix('\ xxay. N pgtIx, v hx i ('l t ' , Iximiilii iticlud , i t tioo t s ,( I ll (If kxl ot,,]iu II ('' It lIII i" , t -dI 1 ', \ ,t1 j mi il t sulll Ilhtin, o Iu I l ioodgil-I ' ti11 d](II1,u'im ( 'l dimiu i. 1 I ii u)I [oll in"li helllhii i',p' ll{' (it 't ), ii) i1 i, uilhig t1tiiin' i '' -mu%hmm el -- teii t S5 iiitliill iitl' pin 0 piit (, i11mi i. , 48 further isolation of prices, such as arise importing countries when prices are high from renewed use of export subsidies to (unless consumption was also reduced in move surpluses and bilateral trade deals to the exporting nations). maintain consumption in developed 49 APPENDIX I WHEAT POLICIES IN SELECTED DEVELOPED COUNTRIES This appendix briefly introduces the prices by attempting, policies of o fhe one hand, to tile countries discussed in the maintain and expand text. It does not export markets and, go into detail about their on the other, to avoid administration or operation, pricing domestic but illustrates output too high relative to market their nature as they affect world markets. demand. Canadian policy has had to keep in step U.S. policies are tcrived from the with its Agricultural neighbor and trading partner to the Adjustment Act of i933 and the south. The substantial modifications Canadians are even more con to it enacled cerned with overseas cereal since it was passed. markets, but the They represent an methods they have attempt to employed have differed reconcile the desire for from those of lle individual and corporate United States. Acreage economic IiI)erty control has only been attetuptel with the overriding concern of successive once for the major arable crops crops in theI.1i " administrations with the health of, the program agriculture of 1970. Instead I cotnprehetnsive industry. The sector is to he system of delivery saved from itself qotas, by farm, has heen but not actively planned or in operation since 1940. regulated. A major innovation allowing Canadian in early U.S. wheat producers in the Prairie Provinces policy was control of the supply of significant most little choice in their farming patterns. Ii commodities through acreage return farm output allotments and marketing is marketed with the quotas. Much of weight of the Canadian Wheat this legislation remains today. Board (CWB). Two federal Set up in 1936, the (TViB can agencies, the Agricultural Stahilization adjust and deliveries to meet anticipatedl domestic anto Conservation Services (ASCS) and the Coln- modify export outlets. Il general the CMBI has been Credit Corporation (CCC). are self- financing; responsil)le it is relieved of the "residual for admninistering and financing buyer" obligations farm programs. of the (C in the United St ates and tile intervention Price-suplport agencies ill the schemnes are man(latory 1turopean Comtununity. for the basic commo(lities, including wheat. Australian Supply has been policy resembles Canadian controlled during much of policy, though modified the period to regulate by a Iore distant output to ineet relationship with the United domestic and foreign demand. States. The wheat market is (lominate( by a federal Another outlet, food aid, was adhde( in agency, the 1950s the Australian \Vheat Board (1948), to relax the pressure on a, C11(11- which has only lated surpluses recenlly, instittled indivi an( for more altruistic (ual farm (luotas (1970). motives. The surpluses themselves It is "grower indica- controlled" to a greater exwnt than ted the failure of supply control the to limit ('WB, the (CC. or the :-uropern community Output. As a conseqlence support prices iltr\vntiort agelci,s. It was inteniletl (limited to those farmers who participated to I)e in self-financing, like the CW\V. but has relied acreage reduction schenies) vere lomered on gov'rnment fulds during periods of low and partially replaced wilh direct paynents. world prices. l)orlestic and overseas ituar Acreage controls for cereals were relaxed to kets are separated to enhance earlings fron meet shortages in 1967 and 1968, (Luced reinlro- sales of the crop. in 1969, made more flexible (the,.set The policies aside" arringelents) of the E-uropean Corn in 1971-73. dropped 1inutlity have a simplicity again when world markets of form based on a Iecame firmer in relatively short history and a ('01tplexity 1973, and revived in 1977. of Policy changes motive accounted for hy their reflected export-dernand developments intergovern and miental rhatUrre. The Inain difference )etweern the associated burdgetary costs inIcurred in the instrutnentals of Lrzropean Colmnnity n'ice-support payments , ex port subsidies, policy and storage charges. In amd Ifose of other countries is that recent years the the E-uropean Cotunutity emphasizes primary bor airn has been to control such costs der controls arising from the obligation to support because its imports of rnajor farm products are of much greater significance. A 50 comlrehensive system of threshold prices production. Constiumption of ri'e has de backed by vriable hevies to prevent direct c'lined markedly in f'avor of wheat in recent price competition by ovTrseis Stipllit'r5 yers. ('(ltritilling to the ,il(ilwliillitioll of from0 weakening domesti( miirkets has been l.lrg(' surllises of tIlt' 11o0' trjditiolla, crop, the ornlerslle of the (omilion A tgr il iFhe wi+et nlrk(t pro\ idt's ain interest- Policy • (CAP) Wlere such liorde rottt'til)l Ing (rtss. coUllllr I olllprisoll of Ohw way is inleffective, as it is for wheat, sllport pIlaticillar pltohell hle,.' dtl 't(illilei ioli buying o8 tie internal market guarantees I c'ie.. Th1e l)robheitt s ifed i, thetUllited floor plrice. Prod,wce so awquired is tsualh Staltes,, ("l'ida, 'Ind Austtala are lt,,l.illy exported with the aid of* subsidies (('\t.>lt simil;. Vheat nirket, ,e sulbject to restitiitiolsl finamiced h% Ie lllrll f1ids. ilst,ltbilities iisiig iioiin\ 1t1e 1c ilftu ,llrketinf.g igenc'ies at a Iitill(Ill ie\el a' ete (f til %weiltlir. but they are also not all Ireselt I lj)rf Jeltlrt' t)fl lpi, and1 ,ilt tde h\ c'halges ill eediig l)tlterlns, 10o('oninl:llity-wxide, ktt..ting hulit' t',,is+t \,VI',W' ll' as th'le % ith]'s 1llijol trath,(d P'rott''tion for graint'd iiv.'stotk ipiod i is, toodtiff iuil-ts relm ed( ill p.111 to Ihle altilitlal obliiatitil tit +i/c o)Illth eh\\ onl 11,t101 P'\t)ollels' s,',, I s eq elit e( politi(,s 1,1|11ifro iii a . o;it I lil t lt'rel,,,+, k\gl it ,i+1. 1 '+, in'i\, lit l wtd to k tt.('t I m ltiniir of nIll e rv'lm ed oil , 111It ll as, I)(o w " (m il )))()(It ( frs ttlI , ( st, l thtI)ot. Iepeliell e (Itr ill Ingr 11 c( rle't ,pot idt' Iolill tli,.J It'tel . 1ll ilsli(outlut if esp<'t'll de'lsuppo)(rt (he' ( M,,oiie tm ,nwiketM ,is,+,,, %I\tt ',I ,t ,,tr1 m tlh ic'ien , l, tmlil help Io, Imittttlillthe he col +iit(,tlt m ith tht, m e;'ll,tion..,,' demn aid5ds~.'olfto ilc ic((oII' ( ( 1111ttIll ;,'.fit,il I o)tdtil ,I .t(.'i <'I(,I( " liol i( ,. Bt-,ulse %\,hemt Limr is- ill .. U l"Ii ve sectionSI I o()I ( t h l..u¢ w),ill A,\gli+ Owhe (oulllliles ,me¢ tusl,l\ o it)I ll,lb, l]e I ultur.1] ( tujd.( I, i1(l (] l iltllce h.indt s+I/v Illd{ tl:-;t itlodeti w ('ltlll)oo , the Ipr(h (F1 ()(6A) is i-'spOiisileh tot e",t.wiid mm-s le t m I tsoklleth 1,11r1 In(m llc 'os not incurr~ed i (( su l l t o l+li>o ,dnll\ m ,tt Ill Flltop,, 1)\ (o iit.a:++ , 1a l i t ( ) )t oill l i l l o tihe h ' l-o c 'l m~ ( o ln s c aIl e Mih', H I mllli l n g h a,s Ipb e- II ] l e ' r\ke'( , ' , t i 'it", thle l iltedl King ol lcmtedr, t< Iltide't Im itiull Ill (Wi'lm lk, l) 1,lik,I't Mid tlle ,I diffew<,nt s-'+tslll lhe lt l itv, to) M+\h,, Nethvi'rlmds. lhc e ll l)()Ii(, ofthe I~uro ta, is+1'%%ere'' , lifted to t gumhl,mi1ecld pm ei pc]H,Ill ('[)11111tllil\ It t( hl () o[< ih ](xI ,]eh) 1teIdc I(,'tli\ II\ il, t ',h if I lk.. I k'llhimltl s+-mi 'l to (1 slh,ne+ ' t' Is do lrice s x.' hlm% 111,1 lt , t 1111,1 19t04t). those ofI ile ll,\\ (colitilleull ;. but prlice'(s se t imports ente.ted Ow¢ Unliwd King.dom+ wI,& tIllh, ile¢ C'AP hl,lkv tlh' ,d antd( ell ttl,<'I\ 111hittdc, l ffl ]+ 11h,1 Hlira m tmt t €ulltd ' ltic( ,eU, '',llk hligthelt cost.s- of iltl[ II I( I )l~lprlices"%\'resei't\ithl ]tl dgwc . ~l of loducIt tioxl. .1,11hill's ' lltills ilsot aIe smi+LlI. m aj o)r St u pp li el'+ t o hl lit (th(, it + + hll ,11-c o s t )of hi l ',wt pl j 51 probably come from orderly marketing of reserve policy. The policy of the Wheat the domestic crop, rather than from the Board is to maintain working stocks, but manipulation of output quantity. Ill both there are no guvernment-owned reserves the as United States and the European Coin- such. On-farm storage is not as prevalent in munity, state buying agencies impose a Australia as in Canada or tile United floor States. on prices and as a consequence European Community storage policy is accumulate stocks when world prices are essentially a by-product of the intervention low. Direct export subsidies are then needed buying system. File intervention agencies to sell unwanted reserves on overseas com- have to accept grain offered to theml, subject mercial (and concessional) markets. The to quality and other standards. They may United States uses acreage controls with dispose of this grain on tender to exporters significant payments to induce farmer parti- who benefit from a subsidy. It would cipation be to limit wheat outplut ill surplus possible to regulate stock holdings by vary periods. Although they effectively control ing this sul)sidy. but this is not done. One the or costs of storage and export sul)sidy two individual member countries are re programs, these land-diversion policies have ported to have their own emergency stocks, lprolbablh' not kept world prices up ill the but these have no importance for market long run. Any firming of the price of U.S. stability. wheat encourages additional outputt in The United States employs a more other countries. sophsticated stock system, with payments The stock policies of these countries for on-farm storage and administration b,,y have not been noted for their consistency tile CCC of grain stocks purchased under and articulation. Wheat accumulates on price-support programs. In recent years the farms in Canada if harvests are good in volume of commercial stocks has increased comparison to CWB delivery quotas. The compared with government stocks, and there government pays ccitain storage costs, and has been a reluctance to incur the costs farmers adjust their next year's production involved m extensive storage programs. to account for the stock they carried over. There aplpears to be no storage policy Though such a system isolates farm income articulated for wheat in Japan. Rice stocks from fluctuations of domestic yield, it is not and a healthy foreign exchange position are certain that it is effective enough to be the two possible reasons for this. Nevertheless, stock instrument an internationally coordi- as a major importer Japan has recently been nated set of reserves might re(qliire. reconsidering its vlnerability 1o uncertain Similarly, Australia pursues no active outside Supplies. 52 APPENDIX 2 QUANTIFICATION OF POLICY EFFECTS IN THE WHEAT SECTOR OF SELECTED DEVELOPED COUNTRIES This appendix describes briefly the financial data related to trade taxes, levy method used to estimate the impact of the receipts, for example, then it was first major farm-policy instruments used in converted to a per-unit figure by relating it Australia, Japan, the luropean Community, to trade volume and applying the procedure Canada, and the United States on the level explained above. of trade in wheat.34 If the policy involved price discrimina For each country the level of production tion, such as the maintenance of higher and the average producer price are domestic than export prices through mar assembled for the years 1968/69 to 1976/77 keting control, then the price difference was The addition of any direct payments (or calculated. This was then multiplied by subtraction of taxes) not already included in production (consumption) in the high price the product price gives the total producer market and allocated to producer(consumer) value. The corresponding wholesale price transfer. and consumption volume are combined to If the policy involved trade quotas, then give an estimate of consumer expenditure the difference between internal and on wheat. The policy effects are then external prices was calculated, and treated estimated as transfers in the sense that part accordingly. This was the only case where of both total producer value and total world prices were used explicitly in the consumer expenditure on wheat are calculations. accounted for by the policies. An input subsidy was allocated directly The policy-transfer volumes themselves to producers, as for a price subsidy. are derived by examining the major effects The impact of the transfers was of the policies under consideration, accumulated to give the total producer Because qualitative information on policies (consumer) subsidy value. To estimate comes in different forms, the transfer the trade impacts, the transfers w2re element was calculated using one of several converted to a percentage base, rela procedures. tive to toted actual revenue from or ex If the policy involved a per-unit penditure on wheat. This percentage payment, then the impact of the policy was was then applied to the elasticity esti applied over the relevant volume of output. mates, as indicated in the text, to get Thus a per-unit producer subsidy was the policy-induced production and multiplied by production and the total listed consumption changes: and the production as a transfer to producers. For a tariff or levy, and consumption impacts were added. the per-unit figure was applied to The production effect was lagged by pro:iuction to give the transfer to producers, one year to indicate the slower adjust and to consumption to give the transfer to ment to policy changes. A set of tables consumers, follows, showing the steps in calcu If the data were more conveniently lations for each county. Further infor recorded as financial totals such as the cost mation on the method used is available of subsidies on a particular product, then from the author on request. this was allocated directly, but where the 14 A previous attempt to make such estimates was reported in Food and Agriculture Organization of the United Nat ions, Agricultural Protection and Stabulization Policies. A Framework of Measurement in the Context of Agricultural Adjustment, C75/LIM/2 (Rome: FAO, October 1975). The estimates reported here have been updated and revised for this stu dV. The earlier stud,' incdi(ed estimates for maize, harleV, dairT products, ann( sugar, as wel Ias for wheat, and shoul be consulted for det ails of the calculations employed. 53 Table 15-Wheat producer subsidy equivalents and values for Australia 1969 to 1977 Policy Transfers Producer Producer Total Guaranteed Domestic Devaluation Subsidy Subsidy Producer Expo t Price Compen- Year Production Price' Price' Receipts FertilizeS Per Equiv- Price Support sation Subsidy Total Transfers Unit alent nlelt1n (AUSItAl (L' S S (L' S illeti i metric Iti(tO (Australian (U S. Iu S S tonI toll) toni t million) tAustrahan S metric S million) nllOil) million) 1969 148 4546 toni (percent) 5(192 3..5 290 34 5 1970 105 4385 105 (125) 865 96,9 -19 11 515,7 27.5 23.6 6.6 12.9 1971 79 4630 11 2) 62.3 52 50 4148 32 1 267 698 67 135 1972 8 5 48 50 (771 66.5 75.4 57 81 491 4 40 1 31 5 9.6 182 1973 64 4986 (80) 796 94.9 7095 4541 124 223 11 2 193 1974 120 10435S (89) 436 62.0 10537 1.804 4 167 5 9.7 137 1975 114 10461 111.3) 1557 224.4 13704 1.5623 1i87 187 124 1976 118 9665 1187 155 5 11840 i.3971 306 136 10.0 19-7 117 83 42 92 5: 1.0824 306 37.5 32 2.7 241 2.2 SoITrs Figurs",TItor,, Sars 1968-.4 ls re tak,.n irom Food and .-\gricultIire Org,m/ation ofthe United Nations AgnculgturalPr areo enr ;n Contelr ef.. uwi. orcon andSrabilzatonPolicies . Frameworkof C-5uLI.. 2 (Roc-e F..L2October 97 5,.p A 10. ,alates tar the .vars197S-77 ),Iere Iupdatedon the data of that replort + Nat..- Yetars lh.-g!:i (;:[),.('i , Prodiule pr ,- I ' TI"'.ilnt distrihuted !(I !io%.rss 'Prior to 19-5 It .,s Iermed ,he as .'tn, :-iurn i ar0,,rs, Represents o rt ln it i. oitO Austrahan i s'rnlileret. it) tht sia lllzt l prI oimi d 1 order it sIupplortr ?le i itrlt'- ItrJrl'r ' l Ilt tMl- l i. e ;,,srepla i.Il'o, ii,- sitlIa itaiinot %ler 1974 5 the guaranteed pri e ind for :Lt 1975 76-.easoi. latt isere si tlS IThe difference itIf ,Tei thItised .T home onsrop"itot Irn:(ot,idtheoas rage e.port return iitd.t tS1 producers in llipllid l. iotd (ituo es t1c conslimption gi.es the u Cdlto dtlinlsor the ear, 1970-73 hase been adusted transf.-r from consumer to Estim ates -re. to take into --- ount the lor consuinpion la sed or a rate otA 5 12 9 per m etri( ton o superphosphates prife li tiolfr l heat going intononfood used annual, %tthe lheat mlusn rrr use -Theses s id es I .%erdis ontinued after Januan I . 1975. Table 16-Wheat consumer subsidy equivalents and values for Australia. 1969 to 1977 Policy Transfers Total Domestic Subsidy Subsidy Consumption Consumption Consumer Price Year Consumption Price Per Equiv- Price Costs Support" Total Transfers Unit alent oimllion itistraihai U.S s (US iAtustralian (Australian (U'S U.S. S iHeIrI- 5 niriI fl01 ri c S S S Intetric i0lton tll) ton) t11ilh1on) m oillion) 1itillioni t1iot t01Ton percent) 1969 2,3 62 83 70,37 161.9 34.5 34.5 38.6 16.30 24.0 1970 24 5843 6544 15- 1 23.6 23.6 26.4 1.01 16.8 1971 26 5844 66 2 172.3 26.7 26.7 303 I 1.65 -17.6 1972 2.7 59 97 -L48 193.0 31,5 31,5 37 5 13.89 19.4 1973 3 2 64 6 92.)2 294.5 22 3 223 31,7 9 91 10.8 1974 3 1 71 Itf 10246 317 6 167.5 167 5 241.5 77 87 76.0 1975 "30 8340 109,21 327 8 118,7 1187 155 5 51 83 47.4 1976 27 09 32 121 6- 328 5 306 30.6 37 3 1388 11.4 (977 2 8 105 40 1i689 32- 3 24 74 Sources Figures for lie ears I969-7.; 1,ere jtakek 1!i);. Food antd Agrr( ulture Orgaization of the United Nations. .. o-ncultaralJroecrwn and StubiI/r:on Aleastrment Pohtci5 s .1From ework of in the ('cont'it of,.tgrmuluruil.tdlustrnent.i-5 1.1%12 [Roie -AO. October 1975i. p A I I Figures for ihe ,ears 1975-77 ,ere ipdatei based on the data of that ifport li"ed hone prices lii the eats 1969. 1970. and 1975-7 appl, to all diiesil cotsuinptioi, vhereas prices for thetour Years, 1970-3. hax e been neiwhted to reflect the different prices for heat tisel as fo'u( anifd ih-al usid as f eid and other nonlood uses toThe difference bet%..een the fixed hoite (consoitiption price nil the a%'-rage ei.port return trinltipied bs total dotoesitc CO s-itiI (i gies the transfer from consumers to Irod ucCrs. Calciulat ons Ior the eats 1971-74 h,%e ben adiusted to take into account ihi. loer conslniption price fisedi for 2tat :o"o nofood uses. Li fJn M Table 17- Wheat producer subsidy equivalents and values for Canada, 1968 to 1976 Policy Trznsfers Domestic Total Feed Producer Producer Produce, Wheat Food Year Production Freight Export Reserves Subsidy Subsidy Price' Price' Receipts' Assistance Price Per Credit' Act Maintained' Equiv- Total Transfers Unit alent (rnl1;on (Caiadlian JU.S 5 (U.S. (Canadian metric S metric S (U.S. (US. S, tons) bushel) ton1) S million) (Canadian S million) S IUetric 1968 mlinnon) milion) 17.7 1,70 5796 900.7 tol) (percent) 1969 2.1 6.0 55.9 18.6 L57 53 59 865.0 16.8 80,8 75 1 4 24 1970 5.1 8.7 71.3 8.3 9.0 1 67 58.85 463.6 27.8 112.9 104.9 5.64 1971 6.6 86 62.1 12.1 144 1 60 58 20 7294 20.7 98.0 94.0 1044 1972 5.5 8.9 30.8 20.3 14.5 2 I5 82.00 1.077 3 103.9 149 I 147.6 10.25 1973 6.0 8.0 17.5 91.2 20.2 162 458 171 O0 2.641 8 122.7 123.9 8.54 11.5 1974 133 6.0 50 42.3 447 168.0 2,128! 4.7 313 31.3 1 93 1975 17.1 2.0 22.0 1.2 375 13540 2,138.5 2.9 15.3 15.7 1 18 0.7 1976 23.6 319 111 72 2.636 6 2.3 29 2 9 0.17 0.1 ... . 2.3 2.2 0.09 0.1 Sources: Figures br the ,ears I 968-74 , ere taken from Food and Agriculture Organization of the United Nations..tgncultural Measurementin the Contrt f.Ignrultural.-Idlustment Protection andPSobllizatonPolcies- C75 LI1:2 (Rome FAO. October 1975). .4 Framewor of p. A. 20 Figures for the ,ears 1975-77 oere updated that report. based on the data of The total prices ret ei. ed for slaes to the ainadian , heat Board iare gi en for 1968 to 1975. 1976 Deductions for is based on lis.e months tratlsportamn and handling iharges of (S 7 62 per million melrm tons (1968-72). C-S6 8 1 per million metric tons 1973-74). and CS 10.52 per million S1975-76) are incorporated metric tons These are estimataed figures Wheat Reseres Act isas terininaed during fie 1973 74 season. d Calculaed as the difference between the export price of isheat for flour and the fixed domestic price to get a subsidN per unit. Table 18-Wheat consumer subsidy equivalents and values for Canada. 1968 to 1976 Policy Transfers Domestic Total Food Subsidy Subsidy Consumption Consumption Consumer Expo ' Price Per Equiv- Year Consumption Price' Price, Costs Credit Nlaintained Total Transfers Unit alent (million Canadian (US. S' (US. (Canadian (U.S, (U.S. $: metric $, metric S S S metric tons) bushel) ton) million) (Canadian S million) million) million) ton) (percent) 1968 4.3 1 95 64.79 278.7 6.0 16.8 22.8 21.2 -4.93 1969 4.6 1.81 o: 78 284.2 8.7 27 8 36 5 33.9 737 1970 4.7 1.79 63.08 296.5 8.6 20.7 293 28. 1 -5.98 1971 48 1.69 61.48 295.1 89 103.9 -112.5 111.4 23.20 1972 4.8 2.63 97.60 468.5 8.0 91,2 99.2 100.2 20.97 1973 48 5.50 201 89 969.1 5.0 193.3 188.3 188.1 39.20 1974 4 6 5.26 197,69 909.4 2.0 170.1 168 A 172,0 37.39 1975 4.8 4.68 169.02 811.3 130.2 130.2 128.0 26.67 1976 5.1 3.25 11980 610.9 31.0 31.0 30.0 . . . Source: Figures for the vears 1968-74 were taken from Food and Agriculture Organization of the United Nations. AgriculturalProtectionand Stabilization Policies.A Frameworkof Measurementin the Contert ofAgriculturalAdjustment.C75,LIM,2 (Rome: FAO. October 1975), p. A. 21. Figures for the ,ears 197 -77 sere updated based on the data of that report. Prices given for 1968 to 1972 are for No. I Manitoba Northern %heat. Those for 1973 to 1976 are No. I Canadian Western Red Spring wheat. b These are estimated figures. I-f !4 w Table 19-Wheat producer subsidy equivalents and values for the European Community (6), 1968 to 1976 Policy Transfers CAP Total CAP Production Production Producer Export Year Production" Price' Import Levies/ Subsidy Subsidy Price" Receipts Levies Per Subsidies Total Transfers Equiv- (unit Unit alent of (million account, (U,S (U S milhon (US. (U.S. mnetictons) Mietric metric S toni) !on) million unit of 1968 (11n1lioi unit of account) I metric 30.0 95.20 dC(-ount) mill;on) ton) 95 20 2.8560 1.603 (percent) 1969 28.5 96.10 5 1,604 96 10 2.660.6 1.6566 1 604 57.47 56.2 1970 26 5 100.40 1,657 10040 2.6606 1.362.7 1.657 S8 14 60.5 1971 30.5 98.80 1.363 1972 99.10 3.J22 6 1.496.5" 1.363 51 43 512 32.2 10095 101 89 455.8 .952 .958 1973 3.2809 984.1 5290 6420 64.8 32.5 110 39 131.58 1,513 1.527 47.42 1974 4,276.4 138 46.5 35.0 112.94 1.446.5 1,433 1.708 141.85 4.9648 514 -52.55 -39.9 7 687 8 173 1975 217 620 .4 28.4 (123.10) 162.49 1976 4.614 65.4 323.4 974 1.286 4528 SourcesSourcs.FiuresforMeisure men the ears 1968-74ofAnutrl.llsm 27.9 %%eretaken fromn Foodn -id AgriciultureR me /a Ih .11eusurernent Orgarn ttion of the U'nite(' Nationis. ..gnctrali rwons,.t Frme n5ofM in the (onteirof.;gncurul.(;dj., n rote(-tior, undSraiorinPlce 1Fae' 0 5 I ' (Rome. FAO, October 1975). p A. 30. Figures for the %ears(975-76 iere updated that rep)ort. base on the data of This is produttion of soft i%,heat and e\clu(es production ii! durutnl ihe,!t. This is the average of the six uii f.idual (countries -prices receied h' [ariners." Table 20-Wheat consumer subsidy equivalents and values for the European Community (6). 1968 to 1976 Policy Transfers Total Subsidy Subsidy Consumption Cons umtion Consumer Import Export Denaturing Per Equiv- Year Consumption' Price" Price Costs Levies' Levies" Premiums Total Transfers Unit alent (unit of (million account, (U.S. S (U.S. (million (U.S. (U.S. 5, metric metric inetric $ unit of $ metric tons) ton) ton) million) (millinn unit of acco" nt) account) million) ton) (percent) 1968 23.2 100.8 100.80 2.339 1,240.1 1.240 1.240 53.45 53.0 1969 26.q 102.7 10270 2.763 1.570.9 •!.571 1.57 i 58.40 56.9 1970 25.9 105.2 10550 2,732 1.337.7 ... 1.338 1.342 51.8l -49.1 1971 26.3 105.5 10645 2.800 1.5490 ... 69.8 1.479 1,493 56.77 53.3 1972 27.6 111.6 133.03 3.672 1.122.9 . 121.1 1.002 1.194 43.26 1973 26.8 116.6 146.40 3.925 32.5 14.2 1.267.1 17 3 1.270 1,595 59.51 40.6 1974 25.9 120.3 158.80 4.113 513 5 770.4 0.4 257 340 13.13 8.3 1975 239 136.1 188 36 4.502 736.0 57.5 0.6 678 938 39.25 20.8 1976 Sources: Figures for the years 1968-74 .ere taken from Food and Agriculture Organization of the United Nations. ,tgncultural Prorc:tonandStabizationPolicies. A Frumeworh of .leasuremeat in the Contect of,-tgncultura! ,tdjustmner. C75 LIM, 2 (Rome. FAO. October 1975), p. A. 31. Figures for the 5ears 1975-76 were updated based on the data of that report. This is consumption of soft o heat for total domestic use. Represents the average of markeit prices. Represents iiport levies multiplied b, consumption. d Represents export levies multiplied b, consumption. to o Table 21 -Wheat producer subsidy equivalents and values for Japan. 1968 to 1976 Policy Transfers Total Wheat Food Agency Subsidy Subsidy Producer Producer Producer Productiop Marketing Production Per Equiv- Year Production Price' Price' Receipts Subsidies" Control Effect Total Transfers Unit alent (million Yenr (U.S. & (U.S. (U.S. (U.S. S/ metric metric metric S (Yen S metric tons) ton) ton) million) (Yen billion) billion) million) ton) (percent) 1968 1.0 54,850 152.37 154.2 . . . 22.8 4.7 27.5 76.4 76.40 49.5 1969 0.8 56,466 156.86 118.9 18.4 4.3 22.7 63.1 78.88 1970 0.5 59.200 164.46 78.0 ... 53.1 12.7 2.3 150 41.6 83.20 53.5 1971 0.4 63.133 482.64 80.4 ... 13.5 2.8 16.3 46.5 116.25 57.8 1972 0.3 65,517 21293 60.5 ... 9.6 1.7 11.3 36.7 122.33 1973 0.2 74.433 273.17 60.7 55.2 ... 6.2 0.1 6.3 1974 0.2 94.750 324.99 98.3 23.1 115.50 41.8 9.7 12.0 -7.0 14.7 50.4 252.00 1975 0.2 105.000 353.75 51.3 104.5 10.0 14.3 6.3 18.0 60.6 1976 0.2 303.00 58.0 ...... 1107 ...... 70.8 Source: Figures for the 'ears 1968-74 ere taken from Food antd agriculture Organization of the United Nations. .4griculturalProtectionand StabtlmzartonPolicies .4 Frameworkof Measurementin the Context ofAgncutrural.4dustment.C75, LIM. 2 (Rotne: FAO. October 1975). p. A. 42. Figures for the Nears 1975-76 were updated based on the data of that report. j Denotes government purchasing price to producers, including packing charge, but excluding t)onuses. b These measures, introduced in 1973. combine a contract bonus, a production bonus, and, beginning in 1976. diversion paments made on paddy fields sown to wheat- These payments are also included in total producer value. I Calculated as the difference between the government purchase price and the government selling price of domestic nheat. multiplied b% total domestic production. d Calculated ,s the dilference between the government selling price of domestic wheat and the go%ernment purchasing price of imported wheat. multiph-, .jy domestic production. Table 22-Wheat consumer subsidy equivalents and values for Japan, 1968 to 1976 Policy Tranifers Total Subsidy Subsidy Consumption Consumption Consumer Protectin Year Consumption Price' Price Per Equiv- Costs Effects Total Transfers Unit alent (million (Yen/ S/ (U.S. (U.S. (U.S. (U.S. S/ metric metric metric s (Yen S metric tons) ton) ton) million) (Yen billion) billion) million) ton) (percent) 1968 5.1 34.838 96.78 493.6 -3Q.3 -39.3 -102.18 -20.03 -20.7 1969 5.2 34.617 96.17 500.1 -44.1 44.1 -122.51 -23.56 -24.5 1970 5.2 35.143 97.63 507.7 -41.9 -41.9 -116.40 -2238 -22.9 1971 5.2 35.278 100.58 523.0 -49.2 -49.2 140.27 -26.98 --26.8 1972 5.3 34.347 111.52 591.1 -48.6 -48.6 157.80 -29.77 -26.7 1973 5.5 38.222 140.43 772.4 -28.2 28.2 103.61 18.84 13.4 1974 5.5 45.572 156.31 859.7 152.5 151.5 523.08 95.11 1975 5.6 46.124 155.39 870.2 144.0 144.0 485.14 86.63 1976 5.7 65.050 ...... Source: Figures for the years 1968-74 were taken from Food and Agriculture Organization of the United Nations. Agricultural Protectionand StabilizationPolicies'A Frameworkof Measurementin the Context ofAgncultural Adustrment. C76/L!M/2 (Rome: FAO. October 1975). p A. 43. Figures for the years 1975-76 were updated based on the data of that report. a Calculated as the weighted average of the government's wholesale selling price of domestical, produced wheat and the government resale price of imported wheat. bCalculated as the difference between the government selling price of domestic wheat and the government purchasing price of imported wheat, multiplied by consumption. Table 23-Wheat producer subsidy equivalents and values for the United Kingdom. 1968 to 1976 Policy Transfers Total U K. CAP Producer Producer Producer Subsidy Subsidy Deficiency Fertilizer Import Import Year Production Price' Price' Receipts Per Equiv Payments Subsidy" Levies Levies Total Transfers Unit alent (million (U.S. S/ (U.S , metric ([,metric metric S tons) ton) ton) million) S metric (E million) (E million) 1968 3.5 26.99 million) ton) (percent) 64.78 227 17.7 6.8 1969 3.4 28 246 59 54 68.50 233 17.4 63 16.86 26.0 1970 4.2 30.76 23.7 5 73.82 310 14.9 98 16.76 24.5 1971 4.8 32.09 ... 23.7 57 13.57 18.4 78.62 377 34.5 88 0.5 1972 4.8 34.50 ... 43.8 107 22.29 86.32 414 12.3 71O2 10.229.9 28.4 1973 5.0 45.23 100.90 555 75 15.63 18.1 • 39. 20.1 1974 6.1 61.16 14305 873 24.0 59 11.80 10.6 1.9L • 154.0 1975 4.5 60.86 13523 609 152.1 356 58.36 40.8 ... 64.5 1976 4.8 7336 3249 636 64.5 143 31.78 23.5 -22.2 222 40 -8.33 -6.3 Source: Figures for the ears 1968-74 %ere taken from Food and Agriculture Or gazationNofte United itions. Measurementin the Conertrof.-gnrculural.Adlustment. Agncultu ralProteconandStabilizaion Poltces .tFramework C75 LIM. 2 (Rome FAO.October 1975). p.A.50. Figures of for theyears 1975-76 were updated based on the data that report of Uses guaranteed pruce 1968 to 1971. market price. 1972. and anerage producer returns. 1973 to 1976 b Allocated in proportion to annual %, heat tillage This pohcs oas termintated in 1974 Represets total levNreceipts under 1971 polic, di ided b% import .olume,and multplied b% production. d Represents ap,'ication of CAP levies, modified bh accession and monetar compensatins, to total production. Table 24-Wheat consumer subsidy equivalents and values for the United Kingdom. 1968 to 1976 Policy Transfers Total UK. CAP Subsidy Subsidy Consumqtion Consuml~tion Consumer Import lmpo Denaturing Fer Equiv. Year Consumption' Price Price' Costs Levies Lelies Premiums Total Transfers Unit alent (million (I (US 5 U S. IL S (U.S. S metric metric metric S S metric tons) tn) toll) million) (f million) (f million) million) ton) (percent) 1968 7.9 22.51 54.02 427 1969 82 23 31 55 94 459 1970 9.4 27 20 65 28 614 1971 8.6 23,72 58 110( 3.8 ... . 38 9 105 1.8 1972 9,2 34.50 86.32 794 19.1 . 19.' 48 5.22 6.0 1973 8.0 58.54 143 54 1.148 .. 21.3 32 I 10.8 26 3.25 2 3 1974 9.3 57.61 134 75 1.253 . 2347 234.7 549 5903 438 1975 82 65.40 14532 1.192 . 1176 1176 261 31.83 21.9 1976 8.5 84,50 152,61 1.297 . . 39.4 39.4 71 8 35 5 5 Source Figures for the ears 1968-74 re taken from Food and Agriculture Organization of the United Natiorst.egnculrral Protec68onandStabiratnonPchces A Frameworhof Measurement n the Contekt of .4,nculrral. djusrment. C75 LIM 2 (Rome: FAO. 7 October 1975. p .A 5 1 Figures for the , ears 19 5--6tere updated based on the data of that report. Represents total neis suppl, 1production - imports exports) This is the market price. Represents le%T receipts under 1971 poihcv (,,ided 1l, volume. Represents application of CAP levies. modiftied b, accessmonarv and monetar compensations to total consumption. Table 25-Wheat producer subsidy equivalents and values for the United States, 1968 to 1976 Policy Transfers Total Subsidy Producer Producer Propor- Year Marketing Export Total Per Production rice' Receipts Diversion" tional Certificates' Subsidy' Transfers Unit Subsidy (million (U S. 5" (U.S IU S. (U.S. $I metric metric $ S metric tons) ton) million) (US S million) million) ton) (prcent) 1968 42.9 4556 2.700.5 746.0 5.1 789,1 18.39 1969 39.7 45.56 2,664.5 29.2 71 6 784.3 188.2 1.0930 27.53 1970 37.3 49.24 2.707.5 41.0 62.5 808.5 276.8 .187.2 1971 44.0 31.83 43.8 4887 3.036,0 885.7 177.8 1972 42.0 1.090,5 2478 35.9 64.67 3.574.8 132 2 726 1973 5 591.4 1.450 1 34.53 40.6 46.4 145 14 7.212.8 103 1 375 2 53.8 532 1 If 47 7.4 1974 48.9 14845 7.259 2 1975 581 129 34 7.514.7 ... 1976 58.3 101.9 5.9408 Source: Figures fcr the /ears 1968-74 %ere taken from Food and Agriulture Organization of the United Nations..Agncultaral Measurement Protection and Stabilization Policies A Framework of in the Conteat ofAgculuratlAdustment C75,LIM2 (Rome: I-AO. October 1975). p A. 59. Figures for the ,ears 1975-76 %%ereupdated based on the data of that report. A This is the a%erage producer price. excluding gox-'rnment pd\ mls 1970 isthe a' erage of ele%en months %ta\to %larch 1977 b The producer receipts for 1968 to 1973 %ere made up of the iie..rslon a)d nents anu the markting (enificates In 1074 these xxere abandoned in faxor of a new voluntary program and target prices. No pax menis base et been mnade The value of export paments on commercial exports (made hx the Comnmuldr, redt Corpor,mon) dIx idedb%the total export alue gixes the average subsid, per metric ton. This multiplied b ,total production equals the producer suhsid, equixalent These paxm.ts hase been suspended or sharpl, curtailed since mid-1972. Table 26-Wheat consumer subsidy equivalents and values for the United States. 1968 to 1976 Policy Transfers Total Subsidy Subsidy Consumption Consumer Milling Export Domestic Total Per Equiv- Year Consumption FriceI Costs Certificates' Subsidy' Donationsd Transfers Unit alent (million (U.S S (US. (U.S. (U.S. S/ metric metric S S metric tons) ton million) (US S million) million) ton) (percent) 1968 20.5 64.67 1,715.7 3900 2.5 25.7 -366.8 17.89 -21.4 1969 21.5 67.24 1.835.7 3900 101.9 27.5 -464.4 21.60 -25.3 1970 20.9 69.81 1,849.1 390.0 155.1 30.2 514.9 -24.64 -27.b 1971 23.4 60.99 2.817.3 390.0 937 36.6 -447.1 - 19 11 24.6 1972 21.3 8194 2.135.3 390.0 301 3 33.8 657.5 30.87 30.8 1973 20.6 167.92 3.459.2 . . 23.9 394 15.5 1 91 1.1 1974 19.1 165.35 3.158.2 .... 7.9 7.9 1.13 0.3 1975 19.9 137.42 2.734.7 . .... 4.5 4.5 0.18 0.2 1976 20.7 110.50 2.287.4 ... 9.8 9.8 ... 0.4 Sources: Figures for the years 1968-74 were taken from Food and Agriculture Organization of the United Nations..Agnrcalrural Protectncn and Stabihzation PoliciesA Framework of Measurement in the Context ofAgncultural.4djustment. C75 LIM,'2 (Rome: FAO. October 1975). p A. 61. Figures for the vears 1975-77 were updated based on the data of that report. Price given is otr U.S. Minneapolis No I Dark Northern Spring %%heatlordinam protein). The milling tax of 75 cents per bushel (U.S 527.5 per metric ton( %vasmultiplied bv I., million metric tons, the approximate level of %%heatconsumed as human food in these Nears tc arrive at the transfer from consumers This was revoked in July 1973. The value ofexport payment on commercial exports (made by. the Commodittv Credit Corporation) di ided byrthe total export volume gives the average subsidy per metricton. This multiplied by consumption gives the consumer subsidy equixalent. d Represents the sum of donati',nTs and payments in kind. BIBLIOGRAPHY Food and Agriculture Org,mizationl of the Ltnied Nations. Agricultural Protection Stabilization Policies: A and .raneworh o/ Measurement in the Conteyt Adjustment. of Agricultural C75/1N/2. Rome: FA(, ()Ctolohe 1975. 1977 FA 0 Trade Yearbook Vol. 31. Rome: lAO, 1978. "Production Yertrhook lape, 1977.- Rome, 1978. Heidhites, heodor, osling. Tim otht, Rilsoti, (hristopher; ('ommon and Tangermann, Stephen. ilric.. und Flrope's ainn I'ohlc''. I.otdon: trade Policy Research Centre, 1978. Peterson, Willis . lnt(rmtation'l I-rm Prices ,1(I the S,(cial (Ost of (hea I-tool Policies" American ltt7(1l o/:itQ.rtultjrrl lconomnis 61 ( tbrun, 1979): 12-20 Schultz, Theodore ed. l)tstorttons o/'..lruultuNral lnttns tflootmingror lnldind University Press, 1978. Sheli, Shumn-yi, and Thompson, Roberl . "The Impwc of in trade Restrilills on P1rice Stability the World Markel." .Imencan JournalolAptcultural lconomcs 59 (Noveilher 1977): 628-638. U.S. [)eparttnenll of Agriculture, Foreign Agri'ultolril Sei-\ ic. "l+(reign trodultiol Supply m l)istrilbtion of Agriculturad (ommoclities lipe, 1978," Washington, 1) '., May 19711. Valdes, Alberto, ed.('()ttrieps. "Foo0l Security for l):'vehoping eporto on the II:FlRI-CIMMYT International Conference. forthcouing. World Food Conncil, bowards a I'l'orld lithout !Hunger lroqress and Prospects for Conpletin the Unfinished ,,'nda of the IIorld Iood Con'ference Rome: Worhl Food (otncil, 1979. 66 International Food Policy Research Institute Board of Trustees Samar R. Sen Chairman, India Ralph Kirby Davidson Vice Chairman, U.S.A. Ojetunji Aboyade Nigeria Nicolas Ardito Barletta Panama Norman E. Borlaug Mexico Sir John Crawford Australia Mohamed El- Khash Syria Lowell S. Hardin U.S.A. Ivan L. Head Canada Nurul Islam Bangladesh Lucio G. Reca Argentina Roger Savary France Snoh Unakul Thailand VS. Vyas India John W. Mellor, Director Ex Officio, U.S.A.