It turns out that "major commodity programs are highly regressive in the US"

Hertel, Keeney, Ivanic and Winters look at Distributional effects of WTO agricultural reforms in rich and poor countries (World Bank Policy Research Working Paper 4060, Nov 2006), and find:

Rich countries' agricultural trade policies are the battleground on which the future of the WTO's troubled Doha Round will be determined. Subject to widespread criticism, they nonetheless appear to be almost immune to serious reform, and one of their most common defenses is that they protect poor farmers. The authors' findings reject this claim.

The analysis uses detailed data on farm incomes to show that major commodity programs are highly regressive in the United States, and that the only serious losses under trade reform are among large, wealthy farmers in a few heavily protected subsectors. In contrast, analysis using household data from 15 developing countries indicates that reforming rich countries' agricultural trade policies would lift large numbers of developing country farm households out of poverty. In the majority of cases these gains are not outweighed by the poverty-increasing effects of higher food prices among other households.

Agricultural reforms that appear feasible, even under an ambitious Doha Round, achieve only a fraction of the benefits for developing countries that full liberalization promises, but protect U.S. large farms from most of the rigors of adjustment. Finally, the analysis indicates that maximal trade-led poverty reductions occur when developing countries participate more fully in agricultural trade liberalization.

Reform impacts on aggregate farm household welfare in the U.S. would be small:

Our findings highlight the fact that wealthy farmers are the main beneficiaries of current trade policies aimed at protecting agriculture in the rich countries. Furthermore, these benefits tend to be concentrated in a few products that receive very high levels of support presently. In the United States, rice stands out – followed by cotton, sugar and dairy. When we look at aggregate farm household welfare in the United States, it is little affected by agricultural trade policy reforms. This is because many of the farm products receive little or no support and improved market access in other countries benefits exportoriented producers. Indeed, this is why the average farm household in Australia, Canada and New Zealand is expected to gain from rich country agricultural trade reforms. A second reason why the average farm household in the US is not more severely affected by trade policy reform stems from the degree of earnings diversification in that country.  On average, only 8% of farm household income in the US is derived from farming. This income diversification is also critical in Japan where just 12% of farm income is obtained from on-farm earnings. As a consequence, while Doha trade reforms cause on-farm incomes to drop by 16% in Japan, the average farm household impact is just 1.4%.

Note that:

The dampening factor is less prevalent in Europe, where the role of off-farm income is much more modest than in Japan and US.

In poor countries (as noted above, the authors look at household data in 15 developing countries):

In the poorest countries, we find that, with one minor exception, rich country agriculture reforms benefit low-income farm households. Regardless of the poverty line considered, the poverty headcount in this part of the developing world falls. However, the impact on non-farm population groups is mixed. In those countries where agriculture makes up a large share of the unskilled labor force, rich country reforms tend to increase the demand for labor sufficiently to benefit unskilled workers throughout the economy.  However, self-employed households in the non-agricultural economy, as well as those dependent on transfer payments, systematically lose. Therefore the national poverty outcome inevitably depends on the relative weights of these different groups in the national poverty picture. Since a large share of the poor reside in agriculture, national poverty falls in two-thirds of the focus countries in the wake of rich country agricultural liberalization.

Comments

[Peter Gallagher]

Thanks for the pointer and summary, Ben. Best wishes, Peter