Memorandum submitted by the Organisation
for Economic Co-operation and Development (OECD) (CAP 03)
1. The report published recently by the
Department for the Environment, Food and Rural Affairs (DEFRA)
of the United Kingdom "A Vision for the Common Agricultural
Policy" draws extensively on several recent OECD analyses
to develop its arguments for policy reform. While an overall assessment
of the merits of the policy strategy favoured in the report is
a matter of political judgement, the OECD is happy to comment
on the usage of OECD work in the report.
2. The OECD is pleased to see that the work
is useful to Member countries and that, in this case, it is reported
clearly, accurately and to the point, with appropriate nuances.
3. The value of transfers from the Common
Agricultural Policy (CAP) is described using the most recently
published OECD indicators of support in agriculture, mainly the
Producer Support Estimate and the Consumer Support Estimate (OECD,
2005). The terms used to describe transfers are consistent with
OECD definitions and the use to which the indicators are put is
appropriate. In particular, they are, rightly, not used to draw
conclusions on the impact of CAP reform on markets and income.
4. OECD indicators, including the Consumer
Support Estimate, are measured at the farm gate and the consumer
in question is defined as the first-hand user—sometimes
a processor or compounder. This assumption could be made more
clearly in the DEFRA report to avoid misunderstandings about the
size of the impact of market price support on consumer expenditures.
Nevertheless, the argument made that higher domestic prices to
consumers are a burden on poor households is valid.
5. Table 2.1 which reports support estimates,
is accurate and well-documented. It would nevertheless be appropriate
to indicate that the Producer Support Estimate per family of four
is calculated by DEFRA and is not published by the OECD. In general,
when describing the producer support estimate, DEFRA does not
make a distinction between area/headage payments and more decoupled
payments. However, the implementation of the 2003 reform does
not change the argument: after the reform, market price support
is still half of all support and payments based on land, whether
decoupled or not, go to landowners.
6. Another OECD study on the efficiency
of support in transferring income to farmers is used extensively
and accurately. OECD results were published in 2003 (OECD, 2003)
but the nature of the analysis means that they are still valid.
Moreover, they concern categories of measures (market price support,
coupled or decoupled area payments) that will all still be in
place after full implementation of the 2003 reform, even if their
relative importance will change. Similarly, the conclusions of
the OECD 2003 CAP reform analysis (OECD, 2004) on the composition
of support to agricultural producers are still valid.
7. The OECD shares DEFRA's general analysis
of income issues, which reaches similar conclusions as the OECD
Report on Farm Household Income (OECD, 2003). This is a domain
in which it is extremely difficult to obtain recent data. For
example, Table 2.3 on income comparison reports Eurostat data
that are quite old. More recent information available on-line
from Eurostat and quoted in the OECD report could have been used,
although even that information can by no means be called up to
date. In any event, usage of this data does not affect the overall
conclusions on the financial situation of farm households.
8. Overall, the OECD finds this DEFRA report
very clear and well presented and in particular is pleased to
see that the work OECD has undertaken and published is accurately
and appropriately drawn on.
January 2006
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