OECD Director encourages reform of agricultural policy

International agricultural policy reform, in the form of reducing trade tariffs and export subsidies, can only be beneficial and should happen now.

That’s the view of the visiting Director of the Agricultural Directorate of the Organisation for Economic Co-operation and Development (OECD), Professor Stefan Tangermann.

Professor Tangermann is a German national and a renowned expert in agricultural economics and trade policy. His academic work, which spans 25 years, has concentrated particularly on the need and options for reforming agricultural policies in OECD countries and on strengthening the rules for agricultural trade.

He is currently on a week-long visit to New Zealand, talking to politicians and agricultural and trade leaders, and promoting agricultural policy reform. He is also visiting universities and farms.

Neil Fraser from the Ministry of Agriculture and Forestry’s International Policy Directorate says it is extremely useful for New Zealand that Professor Tangermann has a full understanding of our agriculture – its setting and policies.

“That understanding is important for the analytical work that the OECD undertakes in agriculture and agricultural trade,” Mr Fraser says.

Professor Tangermann says there is a commonly-held belief that agricultural policy reform puts pressure on farm incomes, threatens non-trade concerns, involves large political costs and serves other countries’ interests.

He argues that on the contrary, reform is in the interests of farmers, helps non-trade concerns, improves the sustainability of policies, is beneficial domestically and reduces trade distortions.

To this end, the OECD has a positive reform agenda and corresponding work programme.

Professor Tangermann says the first priority with reform is to reduce tariffs and export subsidies. While saying this would be of widespread benefit, he concedes not everyone will gain in the short run. “To facilitate adjustment there may be a need for transitional assistance aimed at those who may be negatively affected.”

Increased access to OECD markets would be of great benefit to non-OECD developing countries and Stefan Tangermann says help may also be required in a range of areas including export capacity building and special and differential treatment.

This can be done effectively through targeted payments decoupled from production while dismantling trade distorting border measures and product price support. Professor Tangermann asserts that along with the significant gains from market orientation and open trade, it is possible for OECD countries to, at the same time, address a wide range of domestic objectives such as farm household incomes, the environment, food security, food safety and the viability of rural areas.

Domestic agricultural polices generally fall into two categories: those concerned with correcting market failures and those focused on the incomes of agricultural households.

Professor Tangermann says to a greater extent than is currently the case, market failures could be tackled more efficiently at source, for example by charging for social costs (such as pollution) and by paying for social benefits that the market alone may under-provide (such as a cleaner environment or attractive countryside).

“On the income side, policies not linked to production and consumption decisions can deliver targeted support to households much more efficiently than sectoral solutions such as price support.

“Policies to correct market failure will affect farmers’ incomes, so it makes sense to address any income concerns in the light of these measures. In this context, shocks to income arising from policy reform might warrant transitory decoupled payments, while cases of structurally depressed incomes could be addressed through support along the lines of economy-wide tax and social policies.”

Professor Tangermann is presenting a seminar in Wellington today entitled “Agricultural Policy Reform – Why Wait?” He concludes his address with the statement - “Agricultural Policy Reform – No Reason to Wait!”

“Agricultural policy reform will improve overall economic well-being and open the door for new policy approaches which can underpin a more sustainable global food and agricultural system,” Professor Tangermann concludes.

Professor Tangermann’s seminar is being held today (Wednesday 12 March) in the Featherston Room, Hotel Intercontinental, corner of Featherston and Grey Streets, Wellington. It begins at 5.15pm. Media are most welcome to attend.

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