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International Comparisons of Agricultural Support

Agriculture Support in the EU Budget

The EU Budget for 2009 made total commitments for payments of over €123 billion. Approximately 46% of this expenditure was in respect of agriculture and rural development related activities. This overall level of agriculture and rural development related expenditure is expected to remain broadly consistent in 2011.

International Comparisons of Agricultural Support The Organisation for Economic Co-operation and Development (OECD) has since the mid 1980's measured the value of gross transfers from consumers and taxpayers to support agricultural producers in the form of both the producer support estimate (PSE) and the consumer support estimate (CSE). Support is expressed in both monetary terms and as a percentage of gross farm receipts.

Producer Support Estimate (PSE)
The PSE is an indicator of the annual monetary value of gross transfers from consumers and taxpayers to producers, measured at farm gate level, arising from policy measures that support agriculture. In 2009 the PSE for all OECD countries was estimated at €182 billion, which was slightly higher than in 2008, but this was the first increase in support levels after a steady decline since 2004. Interestingly the %PSE has declined to some extent over the period analysed in all OECD countries except Turkey, where in % PSE terms it now exceeds the OECD average.

The PSE does highlight the fact that the EU is the largest supporter of agriculture in terms of total expenditure, providing €87 billion in 2009, which equates to 24% of gross farm receipts. While the EU's percentage PSE has reduced over the period analysed, it remains slightly above the OECD average. Switzerland, Korea and Japan have lower absolute PSEs than the EU, however their PSE as a % of gross farm receipts is significantly higher. On the other hand, both New Zealand and Australia have very low PSEs, in both monetary and % terms, reflecting their lack of CAP type agricultural support.

Table7.4 

The structure of support varies considerably too among countries, with the most distorting policies representing around 90% of producer support in Japan and Korea, while only approximately 30% in the EU, in the period 2007-09.

Consumer Support Estimate (CSE) The CSE indicates the value of gross monetary transfers from (to) consumers of agricultural commodities, measured at farm gate level, arising from policy measures that support agriculture. It is expressed in both monetary terms and as a percentage of consumer expenditure on domestically produced output. It measures how much domestic price is inflated by agriculture policy. When negative, as it is for most regions, the amounts represent an implicit tax on consumers.

In line with the trend since 1986, Japan and the EU have the highest levels of CSE expenditure. However, in CSE % terms Switzerland, Korea and Japan have the highest CSE %, of the regions listed, while Australia and New Zealand have the lowest negative values. It is worth noting though that the US figure is positive in recent years representing the fact that the monetary transfers are to and not from consumers.

Since 1986 the % CSE support provided by the EU has fallen significantly to its 2009 level of 7%. This is down from a yearly average of 36% in the period 1986-88. This is in contrast to Turkey where the % CSE support has increased over the period.

Table7.5 

Total Support Estimate (TSE)
The TSE calculates the annual monetary value of all gross transfers from taxpayers and consumers arising from policy measures that support agriculture, net of the associated budgetary receipts. The % TSE measures the overall transfers from agricultural policy as a percentage of GDP.

The EU and the US have the highest TSE expenditure at €100 billion and €90 billion respectively in 2009. In % terms of GDP, Turkey at 4% is significantly higher than all the other regions and is the only country that has increased in % terms over the period. The % TSE provided by the EU has fallen from an average of 2.6% of GDP in the period 1986-88 to an average of 0.9% in the most recent period of 2007-09.

Table7.6