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Identifying, estimating and correcting the biases in WTO rules on public stocks: a proposal for the post-Bali food security agenda

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  • Franck Galtier

    (UMR MOISA - Marchés, Organisations, Institutions et Stratégies d'Acteurs - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - INRA - Institut National de la Recherche Agronomique - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - CIHEAM-IAMM - Centre International de Hautes Etudes Agronomiques Méditerranéennes - Institut Agronomique Méditerranéen de Montpellier - CIHEAM - Centre International de Hautes Études Agronomiques Méditerranéennes - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier, Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement)

Abstract

In this paper, we analyze the WTO rules that specify how to estimate the subsidy provided to farmers by public stocks. We identify three biases in these rules: - Bias B1, resulting from using a fixed past unit value of import or export as external reference price, instead of the current price cost of imports or exports. - Bias B2, resulting from using the procurement price of the public stock instead of the price prevailing on the domestic market to estimate the price support received by the farmers who sell their production on the domestic market. - Bias B3, resulting from using the national production instead of the marketed share of national production, by this way ignoring farmer self-consumption. The effect of these three biases on the estimated subsidy varies with the country but, on average, WTO rules lead to overestimate the subsidy by a factor 2 to more than 300, depending on the modalities of public stock interventions and other parameters. This means that in the most favorable scenarios, the estimated subsidy is (on average) twice the real subsidy. The effect of these biases on country compliance proves to be huge: many countries have an estimated subsidy above their maximum allowed level (even with very light public stock interventions), just because the subsidy provided by public stocks is overestimated by WTO rules. This result challenges the widespread idea that almost all countries comply with WTO rules on public stocks. We also test the effect of correcting only some of the biases. It appears that doing this would not allow eliminating the biases in country compliance. An implication of this is that expressing the fixed external reference price (FERP) in US dollar, correcting it with the country inflation rate or replacing it by the average unit value of imports or exports over the last five years (as proposed by several experts and WTO Members) would not be enough to remove the bias on country compliance. There is therefore a need to correct all the three biases, what can be done in a rather simple way, as is shown at the end of the paper.

Suggested Citation

  • Franck Galtier, 2015. "Identifying, estimating and correcting the biases in WTO rules on public stocks: a proposal for the post-Bali food security agenda," Working Papers hal-01295403, HAL.
    • Handle: RePEc:hal:wpaper:hal-01295403
    Note: View the original document on HAL open archive server: https://hal.science/hal-01295403
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    References listed on IDEAS

    as
    1. Díaz-Bonilla, Eugenio, 2014. "On food security stocks, peace clauses, and permanent solutions after Bali:," IFPRI discussion papers 1388, International Food Policy Research Institute (IFPRI).
    2. Jayne, Thomas S. & Mason, Nicole M. & Myers, Robert J. & Ferris, John N. & Mather, David & Sitko, Nicholas & Beaver, Margaret & Lenski, Natalie & Chapoto, Antony & Boughton, Duncan, 2010. "Patterns and Trends in Food Staples Markets in Eastern and Southern Africa: Toward the Identification of Priority Investments and Strategies for Developing Markets and Promoting Smallholder Productivi," Food Security International Development Working Papers 62148, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    3. Franck Galtier & Hélène David-Benz & Julie Subervie & Johny Egg, 2014. "Agricultural market information systems in developing countries: new models, new impacts [Les systèmes d'information sur les marchés agricoles dans les pays en développement : nouveaux modèles, nou," Post-Print hal-02629892, HAL.
    4. Hélène David-Benz & Franck Galtier & Johny Egg & Frédéric Lançon & G.W. Meijerink, 2012. "Market information systems," Post-Print hal-03079057, HAL.
    5. Houssein Guimbard & Sébastien Jean & Mondher Mimouni & Xavier Pichot, 2012. "MAcMap-HS6 2007, an Exhaustive and Consistent Measure of Applied Protection in 2007," International Economics, CEPII research center, issue 130, pages 99-122.
    6. Brink, Lars, 2014. "Support to Agriculture in India in 1995-2013 and the Rules of the WTO," Working Papers 166343, International Agricultural Trade Research Consortium.
    7. repec:cii:cepiei:2012-q2-130-5 is not listed on IDEAS
    8. Brink, Lars, 2007. "Classifying, Measuring and Analyzing WTO Domestic Support in Agriculture: Some Conceptual Distinctions," Working Papers 7337, Canadian Agricultural Trade Policy Research Network.
    9. Hélène David-Benz & Franck Galtier & Johny Egg & Frédéric Lançon & G.W. Meijerink, 2012. "Market information systems," Working Papers hal-03079057, HAL.
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    Cited by:

    1. Ictsd, 2016. "Evaluating Nairobi: What Does the Outcome Mean for Trade in Food and Farm Goods?," Post-Nairobi WTO Agenda 320180, International Centre for Trade and Sustainable Development (ICTSD).

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    More about this item

    Keywords

    Doha round; world trade organization; organisation mondiale du commerce; domestic support; subsidy; Bali agreement; public stock; cycle de Doha; accord de Bali; stock public; subvention; soutien interne;
    All these keywords.

    JEL classification:

    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • F1 - International Economics - - Trade

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