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Policy Efficiency Concerns Compliance with GATT Comments
Output Price Support Inefficient targeting, resource mis-allocation, can be high cost. Poor: subject to limitations outside of which distorts prices and increases AMS. May be a case for price stabilization involving limited support. Generally regressive in effect . Difficult to target.
Input subsidies Resource mis-allocation, can be high cost. Moderate: may be used under certain conditions. Otherwise contributes to AMS and price distortion. Offers a degree of targeting: marginally preferred to output price support. Distributionally regressive.
Credit subsidy Efficient targeting, relatively efficient resource allocation. Moderate/good: less distorting effect, possibility of exemption. More favoured form of intervention, and potentially easy to target.
Food security stocks Minimum distorting effect when objective of stocks is to eliminate extreme market fluctuations only and not to maintain a narrow market price band. Moderate/good: purchases and sales can be at administered prices, but subsidy to producers must be included in AMS. Such stocks must be integral part of national food security programme. Process of stock accumulation and disposal need to be financially transparent.
Subsidized food distribution Market distortion is minimized when subsidized transfers are well targeted and, in the case of general subsidies, the market is not crowded out by too low and static subsidized prices. Good: eligibility to receive food an/or money to buy food at market or subsidized prices subject to clearly defined criteria. Subsidization of prices on a regular basis also permitted. Food purchases by government to support subsidized programmes shall be at market prices; required financial and administrative transparency.
Non-tariff barriers Inefficient resource allocation; tariffs preferred. Poor: distorts prices and increases AMS, tariffs should replace non-tariff barriers. May need to phase out tariffs slowly.
Direct income payments If feasible might involve excessive cost. Good: no distorting effects, no increase in AMS provided meet criteria. Not feasible in most developing country contexts.
Public investment (extension, research, infra-structure, marketing and storage facilities) Efficient resource allocation with minimum distortion of market activity. Good: in general no distortionary effects or increases in AMS. Results may be too long-term, particularly infrastructure. Investment in marketing and storage most beneficial. Difficult to target.

Source: FAO, 1994. A Preliminary Assessment of the Uruguay Round Agreement on Agriculture, Marrakesh,
12-15 April 1994.


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