Ivar Gaasland

Agriculture as a provider of public goods: a case study for Norway

A valid argument for support is that subsidies are remedies for market failures. Agriculture contributes positively to public goods as food security, landscape preservation and maintenance of population in remote areas. Using a numerical model we simulate what Norwegian agriculture would look like if the only purpose of supporting agriculture was to provide such public goods. This is compared to the consequences of the Uruguay round in GATT and possible future EU membership for Norwegian agriculture. Although the GATT agreement will change agriculture in the desirable direction, the agreement puts no substantial pressure on the current agricultural policy. EU membership on the lines laid down by the accession treaty between EU and Norway prior to the referendum in 1994 would have given a stronger impetus towards the optimal solution.

How Effective are WTO Disciplines on Domestic Support and Market Access for Agriculture

A new round of trade negotiations through the World Trade Organization (WTO) was launched in 2001. One of the major aims of the Doha Development Round is to reduce agricultural protection and impose greater discipline on domestic agricultural subsidies, particularly those that are the most trade distorting. In this article, we examine whether the proposed WTO modalities for agriculture will actually achieve this aim in Norway, which ranks among the top providers of government assistance for agriculture. Norway has a complex system of farm subsidies buttressed by substantial import protection. The extent to which its agricultural support policies will have to change in response to new WTO disciplines provides an important indication of how successful these are likely to be. We find that Norway will probably be able to sustain its current agricultural activity and production levels while staying within the new WTO rules. Following recent practice in some other WTO members, Norway will be able to reduce its notified support without making real changes in some of its programmes. However, there will have to be a shift from market price support, which is paid for by consumers through higher food prices, to budgetary support paid by taxpayers. This could generate increased domestic pressure for policy reform.

Optimal Agricultural Policy and PSE Measurement: An Assessment and Application to Norway

The producer support estimate (the successor to the producer support equivalent) calculated by the OECD is widely used as an indicator of distortions created by agricultural policies. In this paper we demonstrate that changes in the relative (percentage) PSE are not an accurate indicator of the implications of policy reform for domestic welfare or for trade distortions. We demonstrate that it is important to consider the implications of changes in both the level and the form of support in evaluating the impact of policy reform. Using a model of Norwegian agriculture we show that reforms indicated towards the provision of public goods, while apparently leading to an increase in relative support, are actually superior to existing agricultural policies or to a policy aimed at eliminating subsidized exports both in terms of reducing trade distortions and increasing domestic economic welfare.

TARIFF OR QUOTA PROTECTION : A CASE STUDY OF THE NORWEGIAN APPLE MARKET

Tariffs and quotas are alternative trade instruments. In most cases it has been shown that the use of tariffs results in a higher national welfare than the use of quotas. Most of the research in this field has been purely theoretical. This paper aims to give an empirical contribution. Referring to the Norwegian apple market, we analyse the effects of tariffs and quotas. A tariff system is estimated to be slightly more efficient than a quota system (+ 2%). However, the distributional effects are substantial. Wholesalers and importers are main gainers in a quota system, while consumers and farmers are losers.

Optimal provision of public goods. Implications for support to agriculture

This paper summarises a decade of research by the authors into the welfare economic foundations for agricultural policy. The main results are that the levels of support to agriculture in rich developed countries like Norway are way out of proportion with what could conceivably be defended by welfare theoretic arguments. However, the present debate on the multifunctional role of agriculture points to valid arguments for agricultural support. In terms of welfare economics these arguments are found in the links between agriculture and public goods like landscape amenities and food security. This paper offers a modest attempt to quantify the Pigouvian subsidies that could be derived from these arguments.